**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

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FORM 10-K

**ANNUAL REPORT PURSUANT TO SECTION 13 OR15(d)OF THE SECURITIES EXCHANGE ACT OF 1934**

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| **For the fiscal year ended December 31, 2004** | **Commission  File Number: 1-6862** |
|------------------------------------------------------|-------------------------------------|

 

**Credit Suisse First Boston (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)

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Reduced Disclosure Format

**TheRegistrant meets the conditions set forth in General Instruction I (1) (a) and(b) of Form 10-K and is therefore filing this Form 10-K with thereduced disclosure format.**

Securities registeredpursuant to Section 12(b) of the Act:

|                                                                                                                    | **Title of each class:**     | ** ** | ** ** | **Name of each exchange on which registered:** | ** ** |
|--------------------------------------------------------------------------------------------------------------------|------------------------------|------------|------------|------------------------------------------------|------------|
| **6****1****¤****8%  Notes due 2011**                                                                         | **New  York Stock Exchange** |
| **Five-Year  Contingent Protection Securities due September 30, 2008 Linked to the  S&P 500® Index** | **American  Stock Exchange** |
| **Five-Year  Contingent Protection Securities due November 26, 2008 Linked to the  S&P 500® Index**  | **American  Stock Exchange** |

 

Securities registered pursuant to Section 12(g) ofthe Act:

**None**

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

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K isnot contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K:  x

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2of the Act): Yes o  No x

Because the registrant isan indirect wholly owned subsidiary of Credit Suisse Group, none of theregistrant’s outstanding voting stock is held by nonaffiliates of theRegistrant. As of the date hereof, 1,100 shares of the Registrant’s CommonStock, $.10 par value, were issued and outstanding and held by Credit SuisseFirst Boston, Inc.

Documents Incorporated by Reference: **None**

 

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**CREDIT SUISSE FIRST BOSTON (USA), INC.Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2004**
|                                                                                        | ** ** | ** **                                                                                                         | **Page No.** |
|----------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------|--------------|
| Cautionary  Statement Pursuant to The Private Securities Litigation Reform Act of 1995 |       | i                                                                                                                  |         |
| Form 10-K Item  Number:                                                                |       |                                                                                                               |         |
| PART I                                                                                 |       |                                                                                                               |         |
| Item 1:                                                                                |       | Business                                                                                                           |         | 1 |   |
| Item 2:                                                                                |       | Properties                                                                                                         |         | 18 |   |
| Item 3:                                                                                |       | Legal Proceedings                                                                                                  |         | 18 |   |
| Item 4:                                                                                |       | Omitted Pursuant to General  Instruction I                                                                         |         | 24 |   |
| PART  II                                                                               |       |                                                                                                               |         |
| Item 5:                                                                                |       | Market for Registrant’s Common  Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |         | 25 |   |
| Item 6:                                                                                |       | Selected Financial Data                                                                                            |         | 25 |   |
| Item 7:                                                                                |       | Management’s Discussion and  Analysis of Financial Condition and Results of Operations                        |         | 26 |   |
| Item  7A:                                                                              |       | Quantitative and Qualitative Disclosures  About Market Risk                                                        |         | 58 |   |
| Item 8:                                                                                |       | Financial Statements and  Supplementary Data                                                                       |         | 69 |   |
| Item 9:                                                                                |       | Changes in and Disagreements with  Accountants on Accounting and Financial Disclosure                              |         | 69 |   |
| Item  9A:                                                                              |       | Controls and Procedures                                                                                            |         | 69 |   |
| Item  9B:                                                                              |       | Other Information                                                                                                  |         | 69 |   |
| PART  III                                                                              |       |                                                                                                               |         |   |   |
| Item  10:                                                                              |       | Directors and Executive Officers  of the Registrant                                                                |         | 70 |   |
| Item  11:                                                                              |       | Omitted Pursuant to General  Instruction I                                                                         |         | 71 |   |
| Item  12:                                                                              |       | Omitted Pursuant to General  Instruction I                                                                         |         | 71 |   |
| Item  13:                                                                              |       | Omitted Pursuant to General  Instruction I                                                                         |         | 71 |   |
| Item  14:                                                                              |       | Principal Accountant Fees and  Services                                                                            |         | 72 |   |
| PART  IV                                                                               |       |                                                                                                               |         |
| Item  15:                                                                              |       | Exhibits  and Financial Statement Schedule                                                                         |         | 73 |   |
| Index to Financial  Statements and Financial Statement Schedule                        |       | F-1                                                                                                                |         |
| Signatures                                                                             |       | II-1                                                                                                               |         |
| Index to Exhibits                                                                      |       | E-1                                                                                                                |         |

 

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***CautionaryStatement Pursuant***to The Private SecuritiesLitigation Reform Act of 1995

We have made in this Annual Report on Form 10-K,including, without limitation, in “Legal Proceedings” in Part I, Item 3and in “Management’s Discussion and Analysis of Financial Condition and Resultsof Operations” in Part II, Item 7, and from time to time may otherwisemake in our public filings, press releases or other statements, forward-lookingstatements concerning our operations, economic performance and financial condition,as well as our future plans and strategic objectives. Such forward-lookingstatements are subject to various risks and uncertainties, and we claim theprotection afforded by the safe harbor for forward-looking statementscontained in the Private Securities Litigation Reform Act of 1995. Actualresults could differ materially from those anticipated herein or in any suchother filings, releases or statements because of a number of factors,including, without limitation, those detailed in “Business—Certain Factors ThatMay Affect Our Results of Operations” in Part I, Item 1, thosediscussed elsewhere herein, and in other public filings and press releases.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 updateor revise any forward-looking statements except as otherwise required byapplicable law.

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**PART I**

***Item 1****:**                         Business*

**OVERVIEW**

We are a leadingintegrated investment bank, serving institutional, corporate, government andhigh-net-worth clients as a financial intermediary. We provide a broadrange of products and services, including:

·       securitiesunderwriting, sales and trading;

·       financialadvisory services;

·       privateequity investments;

·       fullservice brokerage;

·       derivativesand risk management products;

·       assetmanagement; and

·       research.

We are the product of a business combination. On November 3,2000, our indirect parent, Credit Suisse Group, or CSG, acquired Donaldson,Lufkin & Jenrette, Inc., or DLJ. CSG is a global financialservices company providing a comprehensive range of banking, investmentbanking, asset management and insurance products and services. Credit SuisseFirst Boston LLC, CSG’s principal U.S. registered broker-dealersubsidiary, became a subsidiary of DLJ and DLJ changed its name to CreditSuisse First Boston (USA), Inc. When we use the terms “we,” “our,” and the“Company,” we mean, after the DLJ acquisition, Credit Suisse First Boston (USA), Inc.and its consolidated subsidiaries and, prior to the DLJ acquisition, DLJ andits consolidated subsidiaries.

CSG operates through three business units, the CreditSuisse business unit, the Winterthur business unit and the Credit Suisse FirstBoston business unit, or CSFB. Credit Suisse First Boston, a Swiss bank, is ourindirect parent and consists principally of CSFB. We are a part of CSFB, whichhas two segments, Institutional Securities and Wealth & AssetManagement. In 2004, CSFB reorganized its operations by transferring theprivate equity and private funds group activities previously in theInstitutional Securities segment to the CSFB Financial Services segment, whichwas renamed Wealth & Asset Management. CSFB also reorganized thebusinesses within the Institutional Securities segment along the lines of itsinvestment banking and trading businesses and realigned the businesses withinthe Wealth & Asset Management segment to bring together itsalternative investment activities, including the private equity and privatefunds groups. CSG conducts its investment banking and wealth and assetmanagement businesses under the Credit Suisse First Boston legal entity. The****Institutional Securities segment providesfinancial advisory and capital raising services and sales and trading forglobal users and suppliers. The Wealth & Asset Management****segment provides international assetmanagement services to institutional, mutual fund and private investors, makesprivate equity investments and manages private equity funds, and providesfinancial advisory services to high-net-worth individuals and corporateinvestors.

For the year ended December 31,2004, the Institutional Securities businesses of CSFB ranked:

·       eleventhin global mergers and acquisitions advisory services in U.S. dollar volume ofannounced transactions;

·       sixthin global mergers and acquisitions advisory services in number of transactions;

·       fifthin U.S. dollar value of global debt underwriting;

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·       secondin U.S. dollar value of global high-yield debt underwriting;

·       eighthin U.S. dollar value of global equity and equity-linked underwriting;

·       thirdin U.S. dollar value of global asset-backed financing; and

·       firstin Swiss franc-denominated international debt issuances.

On December 7, 2004, CSG announced its plans tointegrate fully its banking units and to create distinct lines of businessdedicated to private clients, corporate and investment banking clients andasset management by the end of 2006. The first step in the integration is themerger of CSG’s two Swiss banks, Credit Suisse and Credit Suisse First Boston.The merger is expected to be completed in the second quarter of 2005 subject tofinal internal and regulatory approvals.

We file annual, quarterlyand current reports and other information with the Securities and ExchangeCommission, or SEC. Our SEC filings are available to the public on the SEC’swebsite at *www.sec.gov.*You mayalso view our annual, quarterly and current reports on our website at *www.csfb.com* (under “Company Information”)as soon as is reasonably practicable after the report is electronically filedwith, or furnished to, the SEC. The information on our website is notincorporated by reference into this Annual Report.

**STRATEGY**

CSFB seeks to build on its improved financial resultswhile maintaining a high priority on controls, risk management and the firm’sreputation. CSFB’s strategy is geared towards winning where it chooses tocompete by delivering a more focused franchise. CSFB expects to achieve this byidentifying and allocating resources to its most valuable clients and pursuingexcellence in select high-margin and strategically important services such asleveraged finance, mergers and acquisitions, initial public offerings, or IPOs,derivatives and mortgage securitization, which are areas in which it hascompetitive strengths and attractive growth opportunities. CSFB believesincreased earnings and a stronger capital base will allow it to capture tradingopportunities through extended, disciplined and diversified risk taking. InstitutionalSecurities and Wealth & Asset Management will also make a number ofstructural changes within their various businesses to promote greaterbottom-line accountability, improve cost discipline and capitalize on theintegration with CSG’s other banking businesses. CSFB intends to build astrong, performance-based ownership culture with a structured approach toattracting, developing and retaining talent.

Consistent with this strategy, InstitutionalSecurities will provide differentiated, full-service coverage to a smallernumber of clients who value more service, establish more unified offeringsacross certain fixed income and equity products and build on existing leadershippositions in select areas. Key initiatives include the formation of a unifiedglobal proprietary trading group under a single management structure acrossequity and fixed income and the creation of a consolidated derivativesstructuring group. Institutional Securities intends to grow its leadingleveraged finance business and commercial mortgage franchises by expanding intoEurope. Institutional Securities also plans to build a commodities unit,continue to grow its mortgage securitization business and add seniorcross-product resources to top clients. In Investment Banking, InstitutionalSecurities will adjust its coverage model to meet client needs better, pursue adisciplined, client-centric approach to its product offering and improveexecution and client management. Specific coverage initiatives include flexibleclient coverage with product coverage where appropriate, vertical integrationof financial institutions coverage and increased share in a targeted subset oflarge-capitalization clients. In the Investment Banking products area,Institutional Securities will focus on its high-margin, strategic products andcreate an integrated capital markets group to deliver solutions to clients moreeffectively.

In Wealth & Asset Management, CSFB will buildon its leading alternative capital franchise and leverage existing strengths topromote growth in Credit Suisse Asset Management and Private Client Services. InAlternative Capital, CSFB expects to build on a broad diversity of funds, focuson international 

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markets, such as Asia,that display strong secular growth, spin out funds that could benefit from anindependent platform and establish a new services platform for limited partners.Credit Suisse Asset Management will seek to grow European distribution, expandglobal product offerings, restore profitability to its U.S. franchise andstreamline its Asia presence. Key initiatives in Private Client Servicesinclude leveraging a strong global brand and investment banking franchise, andbuilding upon a leading position in volatility management.

In Europe, CSFB intends to strengthen its position byexporting successful products such as leveraged finance and commercialmortgage-backed securities. In Asia, Institutional Securities and Wealth andAsset Management will build on an already strong platform to capture businessin a growth market. Initiatives in Asia will include exploration of acquisitionand joint venture opportunities, expanded derivatives capabilities throughoutthe region and strengthened positions in select markets.

CSFB is committed tocomplying fully with laws and regulations and continues to review vigorouslyways to enhance professionalism and integrity in the conduct of its businesses.CSFB remains committed to adhering to the highest professional standards andproviding top quality execution and investment performance, while developingand retaining outstanding investment professionals.

**OPERATIONALSTRUCTURE**

We operate and manage our business through twosegments: the Institutional Securities segment, which provides financialadvisory and capital raising services and sales and trading for users andsuppliers of capital, and the Wealth & Asset Management****segment, which invests in and managesprivate equity and other alternative investments and provides financialadvisory services to high-net-worth individuals and corporate investors.

InstitutionalSecurities includes:

·       Trading,which includes sales and trading in equity and debt securities and derivatives,and other related activities; and

·       InvestmentBanking, which raises and invests capital, provides financial and otheradvisory services, manages and underwrites securities offerings and arrangesprivate placements.

Wealth &Asset Management includes:

·       AlternativeCapital, which makes investments in, manages and provides capital raising andother services to, hedge funds, private equity funds and other alternativeinvestment vehicles; and

·       Private Client Services, afinancial advisory business that serves high-net-worth individuals andcorporate investors with a wide range of CSFB and third-party investmentmanagement products and services.

**PRODUCTS ANDSERVICES**

**InstitutionalSecurities**

Institutional Securities provides financial advisoryand capital raising services and sales and trading for users and suppliers ofcapital. The operations of Institutional Securities include debt and equityunderwriting and financial advisory services and the equity and fixed incometrading businesses. Institutional Securities’ clients demand high qualityproducts and services for their funding, investing, risk management andfinancial advisory needs. In response to these needs, Institutional Securitieshas developed a global product-based structure delivered through regionalteams.

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The following are theprincipal products and activities of Institutional Securities.

***Trading***

·       Creditproducts, including investment-grade debt securities and credit derivatives

·       Equitysecurities and equity derivatives, including convertible bonds

·       Foreignexchange services, including currency derivatives

·       Indexarbitrage and other program-trading activities, including advanced executionservices

·       Interestrate products, including global government securities and interest ratederivatives

·       Leveragedfinance, including high-yield and distressed debt

·       Marginlending

·       Marketmaking in securities and options

·       Matchedbook activities, in which the firm acts as an intermediary between borrowersand lenders of short-term funds, mainly through repurchase and resaleagreements, to earn a positive spread between interest rates and to fundinventory positions

·       Moneymarket instruments

·       Primeservices, including dealer-to-dealer financing, covering proprietary and clientshort positions through securities borrowing and lending arrangements, marginlending, prime brokerage to attract client borrowings of cash and securities,the facilitation of financing, clearance, settlement and custody of securitiestransactions and the provision of flexible solutions for clients to enable themto use more than one broker for execution of trading strategies but one primebroker for efficient margining and consolidated position reporting

·       Proprietarytrading

·       Riskarbitrage in the equity securities of companies involved in publicly announcedcorporate transactions

·       Securitieslending

·       Securities,futures and options clearing services

·       Structured products,including structuring and trading of asset-backed securities, such ascollateralized debt obligations, and origination, structuring and trading ofcommercial and residential mortgage-backed securities and mortgages

***Investment Banking***

·       Mergersand acquisitions and other advisory services, including corporate sales andrestructuring, divestitures and take-over defense strategy

·       Capital raising services,including equity and debt underwriting

***Other***

Other products and activities of InstitutionalSecurities that are not part of Trading or Investment Banking are legacyprivate equity investments, including real estate and distressed assetportfolios.

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In addition, CSFBsyndicates loans and enters into commitments to extend credit toinvestment-grade and non-investment-grade borrowers through branches of CreditSuisse First Boston.

***Global investmentresearch***

CSFB provides in-depthresearch on companies and industries, macroeconomics and debt strategy globally.The core strengths of CSFB research include focused company and business modelanalysis and customized client service. Equity analysts perform differentiatedinformation gathering and value-added information processing and providehigh-quality investment recommendations. CSFB’s equity research also includesextensive data resources, analytical frameworks and methodologies that leveragethe firm’s global platform and enable its analysts to customize their product forinstitutional customers. CSFB’s fixed income research provides clients withcredit portfolio strategies and analysis, forecasts of swaps and generic spreadmovements and outstanding credit strategy research for both high-grade andhigh-yield products. CSFB analysts’ in-depth understanding of markets,companies, investment instruments and local, regional and global economiesforms a strong foundation for the firm’s innovative web-based analytical toolsand technology.

**Wealth & Asset Management**

Wealth & AssetManagement makes investments in, manages and provides capital raising and otherservices to, hedge funds, private equity funds and other alternativeinvestments through its Alternative Capital business and serves high-net-worthand corporate investors with significant financial resources and specializedinvestment needs through its Private Client Services business. Private ClientServices had 246 investment advisors and managed or advised clients onapproximately $61.0 billion in assets as of December 31, 2004.

The following is adiscussion of the key products and services of Wealth & AssetManagement and the businesses through which they are delivered.

***Alternative Capital***

The Alternative Capitalbusiness makes investments in, manages and provides capital raising and otherservices to, hedge funds, private equity funds and other alternative investmentvehicles. Alternative Capital includes the private equity group and the privatefunds group.

*Private equity group.*   Theprivate equity group manages a wide array of private equity funds includingleveraged buyout funds, mezzanine funds, real estate funds, secondary funds andfunds of funds. The private equity group invests primarily in unlisted orilliquid equity or equity-related securities in privately negotiatedtransactions, making investments across the entire capital structure, fromventure capital equity to investments in the largest leveraged buyouts. Inaddition to debt and equity investments in companies, the private equity groupinvests in real estate and third-party-managed private equity funds.Investments are made directly or through a variety of investment vehicles.

*Private funds group.*   Theprivate funds group raises capital for hedge funds, private equity funds andreal estate funds.

The strategic objectivesof Alternative Capital include creating and growing a portfolio of investmentmanagement businesses for alternative assets (including private equity and realestate funds) that generate attractive returns on capital and provide a fullarray of product offerings to alternative asset investors. Alternative Capitalintends to launch new businesses and expand its capabilities globally. AlternativeCapital also intends to spin out certain funds that could benefit from anindependent platform. Alternative Capital has also determined that certaininvestment professionals from the private equity business will establishindependent private equity firms to provide certain consulting services to theMerchant Banking Partners funds, which Alternative Capital will continue tomanage as general partner of the funds. 

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Followingthese transactions, Alternative Capital intends to maintain significant investmentcommitments and financial interests in, and strategic relationships with, eachof these funds.

***Private Client Services***

The Private ClientServices business offers a range of services, including single stock brokerage,hedging and sales of restricted securities. Private Client Services also offersits clients a wide range of investment management products, includingthird-party-managed accounts and alternative investments.

**OPERATINGENVIRONMENT AND COMPETITION**

**Operatingenvironment**

The operating environment for Institutional Securitiesis expected to remain challenging in the near term, reflecting expectedcontinued slow securities market growth in developed countries, fee compressionand commoditization across products, and the ongoing importance of balancesheet commitments for clients. In addition, the regulatory environment remainsdifficult with significant new reporting requirements and increasing complexityin managing potential conflicts of interest across its evolving businesses. CSFBis well positioned to benefit from a number of trends in the industry. The movetoward electronic execution plays to the firm’s strengths in technology and itsadvanced execution services platform. CSFB is also likely to continue tobenefit from leveraging its leadership position with financial sponsors andalternative investments, both of which are expected to gain greater importancein the market.

The operating environmentfor asset management improved somewhat during the last year as equity indicesgenerally posted gains and interest rates remained low, particularly in theUnited States. The demographic profile of most developed countries suggestsmedium-term growth opportunities as aging populations seek to invest forretirement. Nevertheless, the continuing development of markets makes itincreasingly difficult for active asset managers to outperform, and theregulatory environment for mutual funds remains uncertain. Structured andalternative investments are expected to continue to grow in importance.

**Competition**

CSFB faces intense global competition across each ofits businesses. Institutional Securities competes with investment andcommercial banks, broker-dealers, and other firms offering financial services. Newentrants into the financial services and execution markets, such as commercialbanks and technology companies, have contributed to further marketfragmentation, fee and spread compression and product commoditization. Inaddition, CSFB faces continued competitive pressure to make loans or commitcapital to clients.

In asset management, CSFB****faces competition primarily from retailand institutional fund managers. Passive investment strategies are gainingshare at the expense of active managers as markets develop, and a larger shareof new investment flows are being directed to a small number of fund managers. Competitionfor attractive alternative investments, including private equity investments,will likely remain intense and contribute to increasingly large private equityinvestments.

**FINANCE, ADMINISTRATIONAND OPERATIONS**

Included within finance, administration and operationsare various support departments, including treasury, controllers, credit, riskmanagement, corporate services, information technology, tax, legal andcompliance, human resources and operations. These departments support ourbusinesses through the processing of securities, derivatives, foreign exchangeand commodities transactions; receipt and delivery of funds and securities;safeguarding of customers’ securities; internal financial controls, including 

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management of globalexpenses, capital structure and funding; and our efforts at ensuring compliancewith regulatory and legal requirements. Certain of these areas also assist inthe management and monitoring of the risks associated with our businessactivities.

Credit Suisse First Bostonfully recognizes the importance of maintaining a comprehensive business continuity plan in anintegrated financial services business environment. CSFB has anestablished business continuity plan that includes systems and procedures forback up and recovery of mission critical systems and data, alternatecommunications with customers and employees and alternate physical locationsfor employees.

**EMPLOYEES**

As of December 31,2004, we had 8,930 employees based in the United States and 414 employees basedoutside the United States. These figures include contractors as well asemployees.

**U.S. REGULATION ANDSUPERVISION**

Our business is, and the securities and commodityfutures and options industries generally are, subject to extensive regulationin the United States and elsewhere. As a matter of public policy, regulatorybodies in the United States and the rest of the world are charged withsafeguarding the integrity of the securities and other financial markets andwith protecting the interests of customers participating in those markets.

In the United States, the SEC is the federal agencyprimarily responsible for the regulation of broker-dealers, investmentadvisers and investment companies, and the Commodity Futures TradingCommission, or the CFTC, is the federal agency primarily responsible for, amongother things, the regulation of futures commission merchants and commoditytrading advisers. In addition, the Department of the Treasury has the authorityto promulgate rules relating to U.S. Treasury and government agencysecurities, and the Municipal Securities Rulemaking Board has the authority topromulgate rules relating to municipal securities. The Board of Governorsof the Federal Reserve System, or the Board, promulgates regulations applicableto certain securities credit transactions. In addition, broker-dealersare subject to regulation by industry self-regulatory organizations, includingNASD, Inc., or the NASD, and the New York Stock Exchange, Inc., orthe NYSE, and by state authorities. Because we are also engaged in futuresactivities, our U.S. broker-dealer affiliates are subject to industryself-regulatory organizations such as the National Futures Association, or theNFA.

Credit Suisse FirstBoston LLC, or CSFB LLC, our principal wholly owned subsidiary, is a broker-dealerregistered with the SEC, all fifty states, the District of Columbia and PuertoRico and with the CFTC as a futures commission merchant and commodity tradingadvisor. As a result of these registrations, and memberships in self-regulatoryorganizations such as the NASD, the NYSE and the NFA, our business is subjectto overlapping regulation covering all aspects of its securities, commoditiesand futures activities. Such regulations cover matters including:

·       capitalrequirements;

·       theuse and safekeeping of customers’ funds and securities;

·       recordkeepingand reporting requirements;

·       supervisoryand organizational procedures intended to ensure compliance with securities andcommodities laws and the rules of the self-regulatory organizations;

·       supervisoryand organizational procedures intended to prevent improper trading on materialnon-public information;

·       employee-relatedmatters;

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·       limitationson extensions of credit in securities transactions;

·       requiredprocedures for trading on securities and commodities exchanges and in the over-the-counter,or OTC, market;

·       anti-moneylaundering procedures;

·       proceduresrelating to research analyst independence; and

·       proceduresrelating to the clearance and settlement of trades.

A particular focus of the applicable regulationsconcerns the relationship between broker-dealers and their customers. Asa result, U.S. broker-dealers may be required in some instances to makesuitability determinations as to certain customer transactions, are limited inthe amounts that they may charge customers, generally cannot trade ahead ofcustomer orders and may not engage in other activities deemed to beinconsistent with just and equitable principles of trade. U.S. broker-dealersmust also make certain required disclosures to their customers.

As a registered futures commission merchant, ourbroker-dealer is subject to the requirements of the CFTC under theCommodity Exchange Act. These requirements include the provision of certaindisclosure documents, generally impose prohibitions against trading ahead ofcustomer orders and other fraudulent trading practices, and include provisionsas to the handling of customer funds and reporting and recordkeeping requirements.

Our businesses include legal entities registered andregulated as investment advisers under the U.S. Investment Advisers Act of1940, as amended, and the SEC’s rules and regulations thereunder. CSFBprovides asset management services primarily to individuals, corporations andpublic pension funds. For pension fund clients, we are subject to the EmployeeRetirement Income Security Act of 1974, as amended, and similar state statutes.These regulations provide, among other things, for the way in which clientassets should be managed. In addition, these regulations impose limitations onthe ability of investment advisors to charge performance-based ornon-refundable fees to clients, recordkeeping and recording requirements,disclosure requirements and limitations on principal transactions between anadviser or its affiliates and advisory clients, as well as general anti-fraudprohibitions. Finally, because some of the investment vehicles we advise arecommodity pools, we are subject to the Commodity Exchange Act for such clients.

Our operations may be materially affected not only byregulations applicable to them as financial market intermediaries, but also byregulations of general application. For example, the volume of our underwritingbusiness could be affected by, among other things, existing and proposed taxlegislation, antitrust policy and other governmental regulations and policies(including the interest rate policies of the Board) and changes ininterpretation and enforcement of various laws that affect the business andfinancial communities. From time to time, various forms of anti-takeoverlegislation and legislation that could affect the benefits associated withfinancing leveraged transactions with high-yield securities have been proposedthat, if enacted, could adversely affect the volume of merger and acquisitionand private equity businesses, which in turn could adversely affect ourunderwriting, advisory and trading revenues.

In 2002 and 2003, the NASD, the NYSE and the SECadopted rules relating to the independence of research and researchanalysts. The NASD and NYSE rules are intended to address a number ofpotential conflicts of interest relating to equity research. Regulation AnalystCertification, adopted by the SEC, applies to research reports involving equityor debt securities and requires research analysts to make specificcertifications in connection with both research report issuances and publicappearances.

As part of changing practices in the investmentbanking industry and CSFB’s commitment to ensuring the independence of itsresearch, CSFB has voluntarily made a number of changes in its equity researchactivities, including realigning its research department to report to theExecutive Vice Chairman and 

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Global General Counsel ofCSFB, adopting new rules on securities ownership by analysts andimplementing new procedures for communication between analysts and investmentbankers. ** **Further, pursuant to a settlementwith various U.S. regulators regarding, among other things, research analystindependence, CSFB adopted internal structural and operational reforms thataugment the steps it had already taken to ensure research analyst independence.See “Legal Proceedings” in Part I, Item 3.

In 2001, the U.S. Congress enacted the USA PATRIOTAct, or the Patriot Act. The Patriot Act required the Department of Treasury todevelop and adopt final regulations that impose anti-money-launderingcompliance obligations on financial institutions. Treasury delegated thisauthority to the Financial Crimes Enforcement Network, or FinCEN, one of itsbureaus. Pursuant to the InternationalBanking Act of 1978, or IBA, CSFB was previously subject toanti-money-laundering compliance obligations arising from the Bank Secrecy Act,or BSA.

The Patriot Act and the BSA have several corecomponents. First, financial institutions, as defined by the Patriot Act, mustimplement an anti-money-laundering compliance program that: (1) includespolicies, procedures and controls designed to detect and prevent moneylaundering or other suspicious activity; (2) designatesanti-money-laundering compliance officers; (3) providesanti-money-laundering training to staff; and (4) ensures that anindependent audit of the anti-money-laundering program is conducted on anannual basis. Second, financial institutions must implement a customeridentification and verification program. For foreign bank clients, financialinstitutions are required to gather certain additional information about theforeign bank, including its agent for service of process in the United States. Third,financial institutions must conduct enhanced due diligence, where appropriate,for correspondent accounts for foreign financial institutions and privatebanking accounts for non-U.S. persons. Fourth, financial institutions must filesuspicious activity reports regarding potential money laundering or othersuspicious activity. Fifth, the Patriot Act created new rights and obligationspertaining to information sharing between financial institutions and thegovernment and between and among financial institutions.

CSFB is subject to similar compliance obligations inother countries in which it operates and has implemented a globalanti-money-laundering compliance program.

In addition, because we are an indirect wholly ownedsubsidiary of each of CSG and Credit Suisse First Boston, our activities aresubject to significant bank regulatory restrictions on our operations. Theserestrictions are imposed pursuant to, among other enactments, the IBA, the BankHolding Company Act of 1956, or BHCA, the Gramm-Leach-Bliley Act of1999, or GLBA, and the regulations and interpretations of the Board and otherapplicable regulators. For example, pursuant to the IBA, the BHCA imposessignificant restrictions on our operations and on our worldwide holdings ofequity in companies operating in the United States. Historically, ouractivities were principally limited to activities that the Board found to be aproper incident to banking or managing or controlling banks or an exemptionapplied (such as certain “grandfather rights” accorded to segments withinCredit Suisse First Boston pursuant to the IBA). Moreover, prior Board approvalwas generally required to engage in new activities and to make non-bankingacquisitions in the United States.

The GLBA, which was signed into law in 1999 andbecame effective in most respects in 2000, significantly modified theserestrictions. Once the GLBA took effect, qualifying bank holding companies andforeign banks qualifying as “financial holding companies” were permitted toengage in a substantially broader range of non-banking activities in the UnitedStates, including insurance, securities, private equity and other financialactivities, in many cases without prior notice to, or approval from, the Boardor any other U.S. banking regulator. The GLBA does not authorize banks or theiraffiliates to engage in commercial activities that are not financial in natureor incidental thereto without other specific legal authority or exemption.

Certain provisions of the BHCA governing theacquisition of U.S. banks were not affected by the GLBA. Accordingly, as wasthe case prior to enactment of the GLBA, CSG is required to obtain the prior 

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approval of the Boardbefore acquiring, directly or indirectly, the ownership or control of more than5% of any class of voting shares of any U.S. bank or bank holding company.

Under GLBA and related Board regulations, CSG became afinancial holding company effective March 23, 2000. To qualify as afinancial holding company, CSG was required to certify and demonstrate thatCredit Suisse First Boston was “well capitalized” and “well managed.” Thesestandards, as applied to us, are comparable to the standards U.S. domesticbanking organizations must satisfy to qualify as financial holding companies.In particular, Credit Suisse First Boston is required to maintain capitalequivalent to that of a U.S. bank, including a Tier 1 risk-based capital ratioof at least 6% and a total risk-based capital ratio of at least 10%. If in thefuture CSG ceases to be well capitalized or well managed, or otherwise fails tomeet any of the requirements for financial holding company status, then,depending on which requirement CSG fails to meet, CSG may be required todiscontinue newly authorized financial activities or terminate CSG’s New YorkBranch. CSG’s ability to undertake acquisitions permitted by financial holdingcompanies could also be adversely affected.

The GLBA and the regulations issued thereunder containa number of other provisions that could affect our operations and theoperations of all financial institutions. One such provision relates to thefinancial privacy of consumers. In addition, the so-called “push-out”provisions of GLBA have narrowed and, when fully implemented, will furthernarrow the exclusion of banks from the definitions of “broker” and “dealer”under the Securities Exchange Act of 1934, or Exchange Act. The SEC granted aseries of temporary exemptions that delayed the required implementation ofthese push-out provisions. The narrowed “dealer” definition took effect in September 2003,and the narrowed “broker” definition is currently expected to take effect in March 2005.As a result, it is likely that certain securities activities currentlyconducted by Credit Suisse First Boston’s New York branch will need to berestructured or transferred to one or more U.S. registered broker-dealeraffiliates.

We believe that we havebeen in compliance in all material respects with the regulations describedherein.

**CapitalRequirements**

As a registered broker-dealerand member firm of various self-regulatory organizations, CSFB LLC is subjectto the uniform net capital rule, Rule 15c3-1 of the Exchange Act.This rule requires broker-dealers to maintain a specified level ofminimum net capital in relatively liquid form. Our OTC derivatives dealersubsidiary, Credit Suisse First Boston Capital LLC, or CSFB Capital LLC, isalso subject to the uniform net capital rule but calculates its netcapital requirements based on value at risk pursuant to Appendix F of Rule 15c3-1.CSFB LLC is also subject to the net capital requirements of the CFTC andvarious commodity exchanges. See Note 12 of the consolidated financialstatements in Part II, Item 8.

The SEC and various self-regulatory organizationsimpose rules that require notification when net capital falls belowcertain criteria, dictate the ratio of subordinated debt to equity in theregulatory capital composition of a broker-dealer and constrain theability of a broker-dealer to expand its business under certaincircumstances. Additionally, the SEC’s uniform net capital rule imposescertain requirements that may have the effect of prohibiting a broker-dealerfrom distributing or withdrawing capital and requiring prior notice to the SECfor certain withdrawals of capital.

Compliance with net capital requirements of these andother regulators could limit those operations of our subsidiaries that requirethe intensive use of capital, such as underwriting and trading activities andthe financing of customer account balances, and also could restrict our abilityto withdraw capital from our regulated subsidiaries, which in turn could limitour ability to pay dividends and make payments on our debt obligations.

As of December 31,2004, our subsidiaries complied with all applicable regulatory capital adequacyrequirements.

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**CERTAIN FACTORSTHAT MAY AFFECT OUR RESULTS OF OPERATIONS**

Our businesses arematerially affected by conditions in the financial markets and economicconditions generally. In addition, our businesses are exposed to a variety ofrisks that could materially affect our results of operations, including thosedescribed below. See “Quantitative and Qualitative Disclosures about MarketRisk” in Part II, Item 7A for a description of how CSFB manages risk.

**Market Risk**

As an integratedinvestment bank, we are materially affected by conditions in the financialmarkets and economic conditions generally in the United States and around theworld. In addition, our results of operations in the past have been, and in thefuture may continue to be, materially affected by other factors of a globalnature.

***Trading and Investment Activities***

Our large trading andinvestment (other than trading) positions in the debt and equity markets, andin private equity, mortgage and other assets, can be adversely affected byvolatility in the financial markets, that is, the degree to which pricesfluctuate over a particular period in a particular market, regardless of marketlevels. Such volatility can also lead to losses relating to our trading andhedging products, including swaps, futures, options and structured products. Tothe extent that we own assets, or have net long positions, in any of thosemarkets, a downturn in those markets could result in losses from a decline inthe value of our net long positions. Conversely, to the extent that we havesold assets that we do not own, or have net short positions, in any of thosemarkets, an upturn in those markets could expose us to potentially unlimitedlosses as we attempt to cover our net short positions by acquiring assets in arising market. We may from time to time have a trading strategy of holding along position in one asset and a short position in another, from which weexpect to earn revenues based on changes in the relative value of the twoassets. If, however, the relative value of the two assets changes in adirection or manner that we did not anticipate or against which we are nothedged, we might realize a loss in those paired positions. Such losses, ifsignificant, could adversely affect our results of operations.

***Adverse Market Conditions***

Market and economic conditions continued to improve in2004, with increased equity underwriting volumes and mergers and acquisitionsand with fixed income markets generally remaining favorable. Geopoliticaluncertainties continued in 2004 but overall market conditions improved and theeconomy continued to recover. Adverse market or economic conditions couldreduce the number and size of investment banking transactions in which weprovide underwriting, mergers and acquisitions advice and other services andtherefore adversely affect our financial advisory fees and underwriting fees.Market declines in the United States and elsewhere would likely lead to adecline in the volume of securities trades that we execute for customers and,therefore, have an adverse effect on the revenues we receive from commissionsand spreads. Certain of our businesses, particularly structured and creditproducts, high-yield and fixed income trading, have benefited in recent yearsfrom low or declining interest rates, and increasing or high interest rates mayhave an adverse effect on the results of these businesses. In addition, adversemarket or economic conditions could negatively affect our private equityinvestments. If a privateequity investment in a company or an investment fund substantially declines invalue, we may potentially lose some management or similar fees, may not receiveany increased share of the income and gains from such investment (to which weare entitled when the return on such investment exceeds certain thresholdreturns), may be obligated to return to investors previously received excesscarried interest payments and may lose our *prorata* share of the capital invested in that company and othercompanies in the same fund. Further, it may become more difficult to dispose ofthe investment. Even investments that are performing well may prove difficultto exit in weak IPO markets. In certain circumstances, depending on the size ofthe 

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investment,the nature of the company’s problems or other factors, we may become involvedin disputes or legal proceedings relating to the investment, and our reputationor our ability to sponsor private equity investment funds in the future couldbe adversely affected.

Our results could also be adversely affected by adownturn in particular sectors. In the real estate sector, we finance andacquire principal positions in a number of real estate and real estate-relatedproducts for major participants in the commercial and residential real estatemarkets, and we securitize and trade in a wide range of real estate and realestate-related products, including agency mortgage-backed securities. Inaddition, in the past we have made, and in the future we may make, significantcommitments to provide investment banking advisory and underwriting services tocertain sectors such as technology and telecommunications, and decreasingeconomic growth generally with respect to these sectors has negatively affectedour revenues and may continue to do so in the future.

Terrorist attacks, militaryconflicts and economic or political sanctions could continue to have a materialadverse effect on economic and market conditions, market volatility andfinancial activity, including in businesses in which we operate.

***Large and Concentrated Positions***

We could be exposed toincreased losses in activities such as arbitrage, market-making, blockand proprietary trading, private equity and underwriting. We have committedsubstantial amounts of capital to these businesses, which may require us totake large positions in the securities of a particular company or companies ina particular sector, country or region. The trend in all major capital marketsis toward larger and more frequent commitments of capital. These concentrationsof risk could increase our losses due to our sizable securities holdings.

***Hedging Strategies***

If any of the instrumentsand strategies we use to hedge our exposure to various types of risk is noteffective, we may incur losses. Many of our strategies are based on historicaltrading patterns and correlations, and unexpected market developments mayaffect our hedging strategies in all market environments or against all typesof risk. We may only be partially hedged or our hedging strategies may not befully effective in mitigating our risk. In addition, gains and losses resultingfrom ineffective hedges are recorded in principal transactions-net in ourconsolidated statements of operations, and this may lead to volatility in ourreported earnings.

***Increases to Other Risks***

In addition to the potentiallyadverse effects on our businesses described above, market risk could exacerbatethe other risks that we face. For example, if we were to incur substantialtrading losses, our need for liquidity could rise sharply while access toliquidity could be impaired. In conjunction with a market downturn, ourcustomers and counterparties could also incur substantial losses of their own,thereby weakening their financial condition and increasing our credit risk tothem.

**Credit Risk**

We are exposed to the risk that third parties that oweus money, securities or other assets will not perform their obligations. Thisrisk may arise, for example, from holding securities of third parties ascollateral, entering into swap or other derivative contracts under which counterpartieshave long-term obligations to make payments to us and extending credit to ourclients through margin loans or other arrangements.

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In recent years, we have significantly expanded ouruse of swaps and other derivatives and we may continue to do so, both in typesof products and in volume of transactions, in particular through our OTCderivatives dealer subsidiary. As a result, our credit exposures haveincreased, and may continue to increase, in amount and duration. In addition,we have experienced, due to competitive factors, pressure to assume longer-termcredit risk, to extend credit against less liquid collateral and to pricederivatives instruments more aggressively based on the credit risks that wetake.

Although we regularly review credit exposure tospecific clients and counterparties and to specific industries, countries andregions that we believe may present credit concerns, default risk may arisefrom events or circumstances that are difficult to foresee or detect, such asfraud. We may also fail to receive full information with respect to the tradingrisks of a counterparty. In addition, concerns about, or a default by, oneinstitution could lead to significant liquidity problems, losses or defaults byother institutions because the commercial soundness of many financialinstitutions may be closely related as a result of credit, trading, clearing orother relationships between institutions. This risk is sometimes referred to as“systemic risk” and may adversely affect financial intermediaries, such asclearing agencies, clearinghouses, banks, securities firms and exchanges withwhich we interact on a daily basis, and could adversely affect us.

Country, regional andpolitical risks are components of market risk as well as credit risk. Financialmarkets and economic conditions generally in the United States and around theworld have in the past been, and in the future may continue to be, materiallyaffected by such risks. Economic or political pressures in a country or region,including those arising from local market disruptions, currency crises andmonetary controls, may adversely affect the ability of clients orcounterparties located in that country or region to obtain foreign exchange orcredit and, therefore, to perform their obligations to us. The political,economic or other circumstances of the countries in which we operate may havean adverse impact on our results of operations.

**Liquidity Risk**

Liquidity, or readyaccess to funds, is essential to our businesses. We depend on continuous accessto the debt capital and money markets to finance day-to-day operations. Aninability to raise money in the long-term or short-term debt capital markets,or an inability to access the repurchase and securities lending markets, couldhave a substantial negative effect on our liquidity. Our ability to borrow inthe debt markets could be impaired by factors that are not specific to us, suchas severe disruption of the financial markets or negative views about thefinancial services industry generally. In addition, lenders could develop anegative perception of our long-term or short-term financial prospects if, forexample:

·       weincurred large trading losses;

·       thelevel of our business activity decreased;

·       regulatoryauthorities took significant action against us; or

·       wediscovered serious employee misconduct or illegal activity.

If we were unable to borrow in the debt capitalmarkets, and access the repurchase and securities lending markets, we wouldlikely need to liquidate assets, such as our investment and trading portfolios,to meet maturing liabilities. Our ability to liquidate portfolios could beadversely affected by a market downturn. In certain market environments, suchas when there is market volatility or uncertainty, overall market liquidity maydecline. In a time of reduced liquidity, we may be unable to sell some of ourassets, or we may have to sell assets at depressed prices, either of whichcould adversely affect our results of operations. In addition, our ability tosell assets may be impaired if other market participants are seeking to sellsimilar assets at the same time.

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Regulatory and other legal restrictions may limit ourability to transfer funds freely, either to or from our indirect parent, CreditSuisse First Boston, our subsidiaries and other affiliates of those companies. Inparticular, a substantial number of those entities, including our broker-dealersubsidiaries, are subject to laws and regulations that authorize regulatorybodies to block or reduce the flow of funds to us, or that prohibit suchtransfers altogether in certain circumstances. These laws and regulations mayhinder our ability to access funds that we need to make payments on ourobligations.

Our borrowing costs and our access to the debt capitaland money markets depend significantly on our credit ratings. These ratings areassigned by ratings agencies, which may reduce or withdraw their ratings orplace us on “credit watch” with negative implications at any time. Creditratings are important to us when competing in certain markets and when seekingto engage in longer-term transactions, including OTC derivatives. A reductionin our credit ratings could increase our borrowing costs and limit our accessto capital markets. This, in turn, could reduce our liquidity and negativelyimpact our operating results.

Our liquidity and fundingpolicies have been conservatively designed to ensure we maintain sufficientliquid financial resources to continue to conduct our business for an extendedperiod in a stressed liquidity environment. See “Management’s Discussion andAnalysis of Results of Operations—Liquidity and Capital Resources”in Part II, Item 7 for a discussion of how we monitor and manage liquidityrisk.

**Operational Risk**

Operational risk is the risk of adverse effects uponour businesses as a consequence of conducting operations in an improper orinadequate manner, or as a result of external factors. In general, ourbusinesses face a wide variety of operational risks. We face risk arising fromorganizational factors, such as change of management and other personnel, dataflow, communication, coordination and allocation of responsibilities. Policyand process risk arises from weakness in or non-compliance with policies andcritical processes involving documentation, due diligence, settlement andpayment. Technology risk stems from dependencies on information technology andthe telecommunications infrastructure and risks arising from e-commerceactivities. We face risks arising from human error and external factors such asfraud. Finally, we face risks from physical threats to our or our third-partysuppliers’ facilities or employees and business disruption. In particular, ifthere is a disruption in the infrastructure supporting our businesses and/orthe areas in which they or third-party suppliers are situated, such asinterruptions in electrical, communications, transportation or other services,our ability to conduct our operations may be negatively affected. Any of suchrisks could have an adverse effect on our results of operations.

Our businesses are exposed to risk from potentialnon-compliance with policies on securities transactions and settlements andpayment processes. There have been a number of highly publicized cases involvingfraud or other misconduct by employees in the financial services industry inrecent years, and we run the risk that employee misconduct could occur.Misconduct by employees could include engaging in unauthorized activities orbinding us to transactions that exceed authorized limits or presentunacceptable risks, which, in either case, may result in unknown and unmanagedrisks or losses. Employee misconduct could also involve the improper use ordisclosure of confidential information, which could result in regulatorysanction and serious reputational or financial harm. It is not always possibleto deter employee misconduct, and the precautions we take to prevent and detectthis activity may not be effective in all cases.

We also face operationalrisk from potential losses caused by a breakdown in information, communication,transaction settlement, clearance and processing procedures. As an integratedinvestment bank, we rely heavily on our financial, accounting and other dataprocessing systems, which are varied and complex. If any of these systems doesnot operate properly or is disabled, including as a result of terrorist attacksor other unforeseeable events, we could suffer financial loss, a disruption ofour businesses, liability to our clients, regulatory intervention orreputational damage. The inability of our systems to 

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accommodatean increasing volume of transactions could also constrain our ability to expandour businesses.

**Legal andRegulatory Risks**

We face significant legal risks in our businesses, andthe volume and amount of damages claimed in litigation, regulatory proceedingsand other adversarial proceedings against financial services firms areincreasing. These risks include disputes over the terms of transactions inwhich we act as principal, disputes concerning the adequacy or enforceabilityof documents relating to our transactions, potential liability under securitiesor other laws for materially false or misleading statements made in connectionwith securities and other transactions in which we act as underwriter,placement agent or financial advisor, potential liability for the “fairnessopinions” and other advice we provide to participants in corporatetransactions, and disputes over the terms and conditions of complex tradingarrangements. We also face the possibility that counterparties in complex orrisky trading transactions will claim that we improperly failed to tell them ofthe risks or that they were not authorized or permitted to enter into thesetransactions with us and that their obligations to us are not enforceable.

We face risks relating to investment suitabilitydeterminations, disclosure obligations and performance expectations withrespect to the products or services we provide, which could lead to significantlosses or reputational damage. We have in place policies and practices tomonitor and, to some extent, control the risks that may arise in deliveringproducts or services to clients. We attempt to ensure that any investment orrisk management product or service we provide to our clients is appropriatebased on our relationship with that client.

We are also subject to claims arising from disputeswith employees for, among other things, alleged discrimination or harassment.These risks often may be difficult to assess or quantify and their existenceand magnitude often remain unknown for substantial periods of time.

As a participant in the financial services industry,we are subject to extensive regulation by governmental agencies, supervisoryauthorities and self-regulatory organizations. Such regulation is becomingincreasingly more extensive and complex. The requirements imposed by ourregulators are designed to ensure the integrity of the financial markets and toprotect customers and other third parties who deal with us. These regulationsoften serve to limit our activities, including through net capital, customerprotection and market conduct requirements, and restrictions on the businessesin which we may operate or invest. Despite our best efforts to comply withapplicable regulations, there are a number of risks, particularly in areaswhere applicable regulations may be unclear. The authorities have the power tobring administrative or judicial proceedings against us that could result,among other things, in suspension or revocation of our licenses, cease anddesist orders, fines, civil penalties, criminal penalties or other disciplinaryaction that could materially harm our results of operations. Such proceedingscould also result in serious reputational harm. Such authorities have increasedresources and are choosing to bring more enforcement actions against companiesin our industry.

It is inherently difficult to predict the outcome ofmany of the litigations, regulatory proceedings and other adversarial proceedingsinvolving our businesses, 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 ourconsolidated financial statements, management makes estimates regarding theoutcome of legal, regulatory and arbitration matters and takes a charge toincome when losses with respect to such matters are probable and can bereasonably estimated. Charges, other than those taken periodically for costs 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 not limitedto, the type and nature of the 

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litigation, claim orproceeding, the progress of the matter, the advice of legal counsel and otheradvisers, our defenses and our experience in similar cases or proceedings.

In addition, the SEC and otherfederal and state regulators are increasingly scrutinizing complex,structured finance transactions and have brought enforcement actions against anumber of financial institutions in connection with such transactions. In someof those actions, clients of the financial institutions are alleged to haveengaged in accounting, disclosure or other violations of the securities laws,and the financial institutions are alleged to have facilitated theseimproprieties by entering into transactions with the clients. While CSFB has policiesand procedures intended to ensure that all transactions, including structuredtransactions, into which we enter comply with applicable laws and regulations,it is possible that certain of these transactions could give rise to litigationor enforcement actions.

Changes in laws, rules or regulations affectingour operations, or in the interpretation or enforcement of such laws, rules andregulations, may adversely affect our results. We may be materially affectednot only by regulations applicable to us as an integrated investment bank, butalso by regulations of general application. For example, our businesses havebeen, and are likely to continue to be, affected by, among other things,existing and proposed tax legislation, adoption of new accounting standards,antitrust and competition policies, corporate governance initiatives and othergovernmental regulations and polices and changes in the interpretation orenforcement of existing laws and rules that affect the business andfinancial communities. These new laws and initiatives affect us directly andindirectly through their effect on the activities of our clients. Inparticular, the Sarbanes-Oxley Act of 2002 and rules of the SEC, theNYSE and the Nasdaq National Market, or NASDAQ, have significantly altered theduties and obligations relating to, among other things, corporate governanceand financial disclosure for SEC reporting companies. To the extent thatprivate companies elect not to engage in IPOs in order to avoid being subjectto these provisions, our equity new issuances business and our potential forexiting certain private equity investments may be adversely affected. Inaddition, these requirements have diverted and may continue to divert the focusof some companies from capital markets transactions, such as securitiesofferings and acquisition or disposition transactions, and as long as suchdiversion exists, our investment banking business may be adversely affected.

For a description of thelegal proceedings and regulatory examinations to which we are subject, see “LegalProceedings” in Part I, Item 3.

**Competition andConflicts of Interest**

We face intense competition that could affect ourbusiness and results of operations. Consolidation, both in the form of mergersand acquisitions and by way of alliances and cooperation, is increasingcompetition. New competitors, including internet-based financial servicesproviders and non-financial companies, are entering the market. Competition inthis environment is based on many factors, including the products and servicesoffered, pricing, distribution systems, customer service, brand recognition,perceived financial strength and the willingness to use capital to serve clientneeds. Consolidation has created a number of firms that, like us, have theability to offer a wide range of products. Some of these firms may be able tooffer a broader range of products than we do, or offer such products at morecompetitive prices. U.S. federal financial reform legislation significantlyexpands the activities permissible for financial services firms in the UnitedStates. This legislation may accelerate consolidation, increase the capitalbase and geographic reach of our competitors and increase competition in thefinancial services industry, which could adversely affect our results ofoperations. For further information relating to the regulation of ourbusinesses, see “—U.S. Regulation and Supervision.”

In the highly competitive environment arising fromglobalization and convergence in the financial services industry, a reputationfor financial strength and integrity is critical to our ability to attract and 

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maintain customers. Ourreputation could be harmed if we fail adequately to promote and market ourproducts and services. Our reputation could also be damaged if, as we increaseour client base and the scale and scope of our businesses, our comprehensiveprocedures and controls dealing with conflicts of interest fail, or appear tofail, to address conflicts of interest. The SEC and state regulators have increasedtheir review of potential conflicts of interest. Furthermore, our reputationcould in the future be damaged as a result of, among other things, employeemisconduct, a decline in results, adverse legal or regulatory action against usor a downturn in financial markets or the financial services industry ingeneral.

Our performance is largely dependent on the talentsand efforts of highly skilled individuals. Competition in the financialservices industry for qualified employees is intense. We also compete foremployees with companies outside the financial services industry. Competitionwith non-financial services companies in particular may intensify whencompensation within our industry decreases in adverse markets or economies. Wehave devoted considerable resources to recruiting, training and compensatingemployees. Our continued ability to compete effectively in our businessesdepends on our ability to attract new employees and to retain and motivate ourexisting employees.

We compete with brokers and dealers in securities andcommodities, investment banking firms, commercial banks and other firmsoffering financial services. Investment banking has also experiencedsignificant price competition in certain of its businesses, which has reducedprofit margins on certain products or in certain markets. In addition, asprivate equity funds grow and proliferate, competition to raise private capitaland to find and secure attractive investments is accelerating.

We face competitivechallenges from new trading technologies. Securities and futures transactionsare now being conducted through the internet and other alternative,non-traditional trading systems, and it appears that the trend towardalternative trading systems will continue and probably accelerate. A dramaticincrease in computer-based or other electronic trading may adverselyaffect our commission and trading revenues, exclude our businesses from certaintransaction flows, reduce our participation in the trading markets and theassociated access to market information and lead to the creation of new andstronger competitors. We may also be required to make additional expendituresto develop or invest in new trading systems or otherwise to invest intechnology to maintain our competitive position.

**Acquisition Risk**

Acquisition of financialservices businesses has been an important element of CSFB’s strategy, and, whenappropriate, CSFB expects to consider additional acquisitions in the future.Even though CSFB reviews the records of companies it plans to acquire, suchreviews are inherently incomplete and it is generally not feasible for CSFB toreview in detail all such records. Even an in-depth review of records may notreveal existing or potential problems or permit CSFB to become familiar enoughwith a business to assess fully its capabilities and deficiencies. As a result,CSFB may assume unanticipated liabilities, or an acquisition may not perform aswell as expected. CSFB faces the risk that the returns on acquisitions will notsupport the expenditures incurred to acquire such businesses, or the capitalexpenditures needed to develop such businesses.

**Integration Risk**

We and CSFB face the risk that we will not be able tointegrate acquisitions into our existing operations effectively. Integrationmay be hindered by, among other things, differing procedures, businesspractices and technology systems, and difficulties in adapting an acquiredcompany into our organizational structure. If we are unable to address thesechallenges effectively, our results of operations could be adversely affected.

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***Item 2****:**                         Properties*

Our principal offices consist of the followingproperties: 
| **Location**             | ** ** | ** ** | ** ** | **Owned/Leased** | ** ** | **Lease Expiration** | ** ** | **Approximate  Square Feet** | ** ** |
|--------------------------|------------|------------|------------|------------------|------------|---------------------------|------------|-----------------------------------|------------|
| New York City,  New York |       |       |       |             |       |                      |       |                              |       |   |   |   |   |
| Eleven Madison Avenue(1) |       |       | Leased     |             |       |                      | 2017       |                              |       |   | 1,488,000 |   |   |
| One Madison Avenue       |       |       | Leased     |             |       |                      | 2020       |                              |       |   | 1,173,000 |   |   |
| 315 Park Avenue  South   |       |       | Leased     |             |       |                      | 2017       |                              |       |   | 220,000 |   |   |

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(1)      Our principal executive offices.

In addition, we leaseapproximately 910,000 square feet for our other offices in the United States.The leases for these properties expire at various dates through 2025. Foradditional information on our leases, see Note 9 of the consolidated financialstatements in Part II, Item 8. Webelieve that our existing facilities are adequate for our current and futureneeds.

***Item 3****:**                         LegalProceedings*

We are involved in anumber of judicial, regulatory and arbitration proceedings (including thosedescribed below) concerning matters arising in connection with the conduct ofour businesses. Some of these actions have been brought on behalf of variousclasses of claimants and seek damages of material and/or indeterminate amounts.We believe, based on currently available information and advice of counsel,that the results of such proceedings, in the aggregate, will not have amaterial adverse effect on our financial condition but might be material tooperating results for any particular period, depending, in part, upon theoperating results for such period.

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

Since November 1998, several lawsuits have beenfiled in the U.S. District Court for the Southern District of New York againstCSFB LLC, Donaldson, Lufkin & Jenrette Securities Corporation, orDLJSC, and numerous other brokerage firms, alleging that the defendant broker-dealersconspired to fix the “fee” paid for underwriting certain IPO securities bysetting the underwriters’ fee or “spread” at 7%, in violation of the federalantitrust laws. The lawsuits purport to be class actions brought on behalf ofclasses of persons and entities that purchased and issued securities in thoseIPOs.

In February 1999, the district court consolidatedthe various cases in a single litigation, captioned *In re Public Offering Fee AntitrustLitigation*. On April 29, 1999, the defendant underwriters fileda motion to dismiss the complaint as a matter of law.

Meanwhile, beginning in August 2000, severalother complaints were filed on behalf of issuers of stock in IPOs containingthe same allegations of an industry-wide conspiracy to fix IPO underwritingfees. By order, dated April 10, 2001, the district court consolidated theissuer complaints.

On February 14, 2001, the district courtdismissed the purchaser plaintiffs’ claims on the ground that those plaintiffslacked legal standing to assert antitrust claims. By order, dated December 13,2002, the U.S. Court of Appeals for the Second Circuit vacated the districtcourt’s decision and remanded the action to the district court forconsideration of the additional grounds for dismissal asserted in the motion todismiss.

On July 6, 2001, the issuer plaintiffs filed aconsolidated issuer complaint, naming numerous defendants, including CSFB LLCand the Company, under the caption *In re Issuer PlaintiffInitial Public Offering Fee Antitrust Litigation*. On September 28,2001, the defendants moved to dismiss the consolidated issuer complaint. On September 25,2002, the district court denied the defendants’ motion to dismiss and 

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defendants sought leave tofile an interlocutory appeal of that decision. On January 17, 2003, thedistrict court issued an order deferring a ruling on the defendants’ motionuntil the district court reached a decision, upon remand, of the motion todismiss the consolidated purchaser complaint.

On March 26, 2003,defendants filed a motion to dismiss on the grounds of implied immunity in boththe consolidated issuer and consolidated purchaser cases. The district courtdenied that motion in an order, dated June 26, 2003. In September 2004,the plaintiffs in both the consolidated issuer and consolidated purchaser casesfiled motions for class certification.

**Litigation Relatingto IPO Allocation/Research-related Practices**

Since January 2001, CSFB LLC, an affiliate andseveral other investment banks have been named as defendants in a large numberof putative class action complaints filed in the U.S. District Court for theSouthern District of New York concerning IPO allocation practices. On April 19,2002, the plaintiffs filed consolidated amended complaints alleging variousviolations of the federal securities laws resulting from alleged materialomissions and misstatements in registration statements and prospectuses for theIPOs and, in some cases, follow-on offerings, and with respect to transactionsin the aftermarket for those offerings. The complaints contain allegations thatthe registration statements and prospectuses either omitted or misrepresentedmaterial information about commissions paid to investment banks and aftermarkettransactions by certain customers that received allocations of shares in theIPOs. The complaints also allege that misleading analyst reports were issued tosupport the issuers’ allegedly manipulated stock price and that such reportsfailed to disclose the alleged allocation practices or that analysts wereallegedly subject to conflicts of interest. On July 1, 2002, CSFB LLC, anaffiliate and other defendants moved to dismiss the consolidated class actioncomplaints. On February 19, 2003, the district court denied the motion asto CSFB LLC, an affiliate and the other defendant investment banks, as well aswith respect to certain issuer and individual defendants. On September 2, 2003, theplaintiffs filed an omnibus motion for class certification in all of theseactions. By agreement among the parties and the district court, six cases wereselected as focus cases for class certification purposes. The underwriterdefendants opposed class certification in the six focus cases on February 24,2004. On October 13, 2004, the district court issuedan order granting in substantial part plaintiffs’ motion for classcertification in each of the six focus cases. The district court stated thatthe order “is intended to provide strong guidance, if not dispositive effect,to all parties when considering class certification in the remaining actions.”****On October 27, 2004, the underwriter defendants in the six focuscases filed a petition for review of the class certification order in the U.S.Court of Appeals for the Second Circuit. That petition remains pending anddiscovery is proceeding in the case. Separately, in June 2003, theplaintiffs announced a proposed settlement of their claims against the issuerdefendants and the issuers’ officers and directors. In June 2004, theplaintiffs and settling issuer and individual defendants moved for preliminaryapproval of the settlement. In an order, dated February 15, 2005, thedistrict court preliminarily approved the settlement.

Since March 2001, CSFB LLC and several otherinvestment banks have been named as defendants in a number of putative classactions filed with the U.S. District Court for the Southern District of NewYork, alleging violations of the federal and state antitrust laws in connectionwith alleged practices in allocation of shares in IPOs in which such investmentbanks were a lead or co-managing underwriter. The amended complaint in theselawsuits, which have now been consolidated into a single action, alleges thatthe underwriter defendants have engaged in an illegal antitrust conspiracy torequire customers, in exchange for IPO allocations, to pay non-competitivelydetermined commissions on transactions in other securities, to purchase anissuer’s shares in follow-on offerings, and to commit to purchase other lessdesirable securities. The complaint also alleges that the underwriterdefendants conspired to require customers, in exchange for IPO allocations, toagree to make aftermarket purchases of the IPO securities at a price higherthan the offering price, as a precondition to receiving an allocation. Thesealleged “tie-in” 

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arrangements are furtheralleged to have artificially inflated the market price for the securities. On May 24,2002, CSFB LLC and the other defendants moved to dismiss the amended complaint.On November 3, 2003, the district court granted the motion to dismiss anddismissed the action with prejudice as to all defendants. The plaintiffssubsequently appealed that decision to the U.S. Court of Appeals for the SecondCircuit. Oral argument on that appealwas held on December 13, 2004, and a decision remains pending.

On November 15, 2002, the Company was sued in theU.S. District Court for the Southern District of New York on behalf of aputative class of issuers in IPOs for which its affiliate, DLJSC, acted asunderwriter. The complaint alleges that the issuers’ IPOs were underpriced, andthat DLJSC allocated the underpriced IPO stock to certain of its favoredclients and subsequently shared in portions of the profits of such favoredclients pursuant to side agreements or understandings. This purported conductis alleged to have been in breach of the underwriting agreements between DLJSCand those issuers. On September 12, 2003, the Company filed a motion todismiss the complaint. By order dated March 9, 2004, the district courtdenied the motion to dismiss as to three of plaintiff’s claims, but granted themotion as to plaintiff’s claim for unjust enrichment, dismissing that claim. OnFebruary 28, 2005, the Company served plaintiff with a summary judgmentmotion seeking to dismiss the plaintiff’s remaining claims in the complaint.

Putative class action lawsuits have been filed againstCSFB LLC in the wake of publicity surrounding the industry-wide governmentaland regulatory investigations into research analyst practices and certain IPOallocation practices. Cases are pending against CSFB LLC in the U.S. DistrictCourts for the Southern District of New York and the District of Massachusettson behalf of purchasers of shares of Atmel Corporation, Agilent Technologies, Inc.,AOL Time Warner Inc., Razorfish, Inc., Lantronix, Inc., Synopsys, Inc.and Winstar, Inc. The complaints generally assert claims under Section 10(b) ofthe Exchange Act and Rule 10b-5 promulgated thereunder, and Section 20(a) ofthe Exchange Act. The actions relating to AOL Time Warner Inc., AgilentTechnologies, Inc., Razorfish, Inc., Synopsys, Inc., and Winstar, Inc.,have all been separately consolidated in the U.S. District Court for theDistrict of Massachusetts, and motions to dismiss have been filed in allactions. On July 27, 2004, the Synopsys action was voluntarily dismissedwhile CSFB LLC’s motion to dismiss was pending. CSFB LLC’s motion in theWinstar action was denied on August 12, 2004, and CSFB LLC’s motion in theRazorfish action was denied on September 21, 2004. The actions relating toAtmel and Lantronix have been stayed pending an appellate ruling in anothermatter with issues relevant to these actions.

CSFB LLC has been named as a defendant in a classaction filed in California state court on behalf of residents of California whoheld shares in certain issuers for which CSFB LLC had issued research reports. OnMarch 2, 2004, CSFB LLC’s motion to dismiss was granted. The plaintiffshave appealed this decision.

CSFB LLC also has filedmotions to dismiss in a class action filed in Missouri state court and aseparate consumer fraud action brought by the West Virginia Attorney General,both relating to analyst research. Plaintiff in the Missouri action voluntarilydismissed its complaint and refiled a similar action in the U.S. District Courtfor the Southern District of New York on September 20, 2004. CSFB LLCfiled its motion to dismiss that complaint on January 14, 2005. CSFB LLC’smotion to dismiss the West Virginia action was denied on July 23, 2004;however, a controlling question of law was immediately certified to the WestVirginia Supreme Court of Appeals, which accepted the question on January 19,2005.

**Enron-relatedlitigation and inquiries**

Numerous actions have been filed against CSFB LLC andcertain affiliates relating to Enron Corp. or its affiliates, or Enron. On April 8,2002, CSFB LLC and its affiliates and certain other investment banks were namedas defendants along with, among others, Enron, Enron executives and directors,and external law and accounting firms in a putative class action complaintfiled in the U.S. District Court for the Southern District of Texas (*Newby, et al. v. Enron, et al.*)*.*The *Newby*action was filed by purchasers of 

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Enron securities andalleges violations of the federal securities laws. A motion by CSFB LLC and itsaffiliates to dismiss the *Newby*complaint was denied in December 2002, and CSFB LLC and its affiliatesanswered the complaint, denying all liability. On May 14, 2003, the leadplaintiff in *Newby* filed anamended complaint that, among other things, named as defendants additional CSFBentities, expanded the putative class to include purchasers of certainEnron-related securities, and alleged additional violations of the federalsecurities laws. OnMarch 31, 2004, CSFB LLC and its affiliates’ motion to dismiss the newclaims and new entities asserted in the amended complaint was granted as tocertain claims that were based on the Securities Act of 1933, but denied in allother respects. On May 28, 2003, the lead plaintiff in *Newby* filed an amended motion for class certification of amore broadly defined class based on the amended complaint. On April 30,2004, CSFB LLC and its affiliates answered the amended complaint, denying allliability. Lead plaintiff’s motion for class certification in *Newby* is pending.

Several other actions filed against CSFB LLC and itsaffiliates and other parties have been consolidated or coordinated with the *Newby* action and stayed as to the filingof amended or responsive pleadings pending the district court’s decision onclass certification in *Newby*. Similarlyconsolidated or coordinated with *Newby*and stayed have been several actions against Arthur Andersen, LLP, in whichAndersen brought claims for contribution against CSFB LLC and its affiliatesand other parties as third-party defendants.

Additional Enron-related actions have been filed invarious state courts against CSFB LLC and its affiliates and other parties,including: (i) a complaint by two investment funds that purchased certainEnron-related securities alleging insider trading and other violations ofCalifornia law; (ii) a complaint by investment funds or fund owners thatpurchased senior secured notes issued by Osprey Trust and Osprey Trust Ialleging violations of California law and fraud, deceit and negligentmisrepresentation; (iii) an action by AUSA Life Insurance Company, Inc.and eleven other insurance company plaintiffs alleging violations of statesecurities laws, common law fraud and civil conspiracy in connection withsecurities offerings by certain Enron-related entities; and (iv) acomplaint by purchasers of Enron, Marlin, Osprey, and Montclare Trustsecurities alleging violations of state securities laws, fraud, deceit, andcivil conspiracy.

In addition, several new actions were filed inNovember, 2004, against CSFB LLC and its affiliates and other parties in bothfederal and state court, including: (i) a complaint in Texas federal courtbrought by purchasers of Enron debt securities alleging that CSFB LLC and itsaffiliates and certain other investment banks engaged in negligence, fraud,civil conspiracy, and violations of the Texas Securities Act in connection withan Enron debt securities offering; (ii) complaints in Washington andNevada federal court brought by electrical utility companies alleging thatdefendants aided and abetted fraud, engaged in civil conspiracy andmisrepresentation by participating in schemes to misrepresent the financialcondition of Enron, which in turn permitted Enron to enter into electricitycontracts with the plaintiffs and manipulate prices in the electricity market;and (iii) a complaint in Texas state court brought by various insurersalleging that defendants engaged in civil conspiracy and fraud in violation ofthe Texas Business and Commerce Code and the Texas Securities Act. These casesare in the process of being consolidated or coordinated with the *Newby* action.

On July 16, 2004, CSFB LLC and its affiliates andcertain other investment banks were also sued in Texas state court by asub-group of the limited partners that had invested in LJM2 Co-Investment,L.P., or LJM2, a now bankrupt limited partnership formed by Enron’s formerChief Financial Officer, Andrew Fastow. The plaintiffs allege, among otherthings, that the defendants breached their fiduciary duties, were unjustlyenriched, engaged in a civil conspiracy, aided and abetted a violation of theTexas Securities Act, aided and abetted fraud, and aided and abetted breachesof fiduciary duty.

A putative class action was also brought against CSFBLLC and its affiliates and other defendants on behalf of purchasers of thecommon stock of New Power Holdings, Inc. alleging violations of thefederal 

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securities laws. In September 2004,CSFB LLC and its affiliates and the other underwriter defendants reached asettlement agreement with the plaintiffs. The terms of the settlement wereapproved by the court during a fairness hearing held November 30, 2004. Inaddition, CSFB LLC and its affiliates and other underwriter defendants soughtto recover a portion of the settlement by filing an indemnification claimagainst NewPower in NewPower’s bankruptcy proceedings in the U.S. BankruptcyCourt for the District of Delaware. On January 10, 2005, an order wasentered approving a settlement of the indemnification claim.

In December 2001, Enron filed a petition forChapter 11 relief in the U.S. Bankruptcy Court for the Southern District of NewYork. On November 4, 2003, a court-appointed bankruptcy examiner filed afinal report that contained the examiner’s conclusions with respect to severalparties, including CSFB LLC and its affiliates. Enron has brought fouradversary proceedings against CSFB LLC and its affiliates (the principaladversary proceeding has been amended several times as recently as January 10,2005), seeking avoidance and recovery of various alleged preferential, illegaland fraudulent transfers; disallowance and equitable subordination of CSFB LLCand its affiliates’ claims in the bankruptcy proceedings; recharacterization ofone transaction as a loan and related declaratory relief, avoidance of securityinterests, and turnover and recovery of property; and damages, attorneys’ feesand costs for alleged aiding and abetting of fraud and breaches of fiduciaryduty by Enron employees and civil conspiracy.

CSFB LLC and itsaffiliates received periodic requests for information and/or subpoenas fromcertain governmental and regulatory agencies, including the Enron Task Force (ajoint task force of the U.S. Department of Justice and the SEC), regardingEnron and its affiliates. CSFB LLC and its affiliates have cooperated with suchinquiries and requests.

**NCFE-relatedLitigation**

Since February 2003,lawsuits have been filed against CSFB LLC with respect to services that itrendered to National Century Financial Enterprises, Inc. and itsaffiliates, or NCFE. From January 1996 to May 2002, CSFB LLC acted asa placement agent for bonds issued by NCFE that were to be collateralized byhealth-care receivables, and in July 2002, as a placement agent for a saleof NCFE preferred stock. NCFE filed for bankruptcy protection in November 2002.

In theselawsuits, which were filed in (or removed to) federal courts in Arizona, Ohio,New Jersey and New York, investors in NCFE’s bonds and preferred stock havesued numerous defendants, including the founders and directors of NCFE, thetrustees for the bond issuances, NCFE’s auditors and law firm, the ratingagencies that rated NCFE’s bonds, and NCFE’s placement agents, including CSFBLLC. The allegations include claims for breach of contract, negligence, fraud,and violation of federal and state securities laws. By orders dated November 13,2003, January 5, 2004, and March 3, 2004, the Judicial Panel onMultidistrict Litigation, or MDL, consolidated the matters and transferred themto the U.S. District Court for the Southern District of Ohio for pre-trialpurposes. CSFB LLC has filed motions to dismiss in each of these cases. Thosemotions remain pending before the district courts.

In addition, in November 2004,the trust created through NCFE’s confirmed bankruptcy plan commenced twoactions in federal court in Ohio against CSFB LLC and certain affiliates. Thetrust filed an action in the U.S. District Court for the Southern District ofOhio asserting common law claims similar to those asserted in the MDL casesagainst several of the same defendants, and it also alleged statutory claimsunder the Ohio corrupt practices act, claims for professional negligence andclaims under the U.S. Bankruptcy Code. The trust also filed an action in theU.S. Bankruptcy Court for the Southern District of Ohio objecting to the proofsof claim filed by CSFB LLC and its affiliates in NCFE’s bankruptcy and seekingdisgorgement of amounts previously distributed to CSFB LLC and its affiliatesunder the bankruptcy plan.

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**U.K. InsuranceLitigation**

On August 7, 2003, asyndicate of insurance companies filed Consolidated Particulars of Claimsagainst CSG, CSFB LLC and the Company in the London Commercial Court allegingthat certain excess liability insurance policies provided to these entitiesshould be invalidated. These insurance policies are intended to providecoverage for damages, expenses, or settlements in excess of designateddeductibles and below designated caps resulting from certain legal proceedingsinvolving CSG or its subsidiaries. The insurance syndicate alleges that theseinsurance policies should be invalidated based on certain purportedmisrepresentations and misleading statements made by the CSG defendants to theinsurance syndicate in connection with the underwriting of the policies. On June 11,2004, the court ordered a stay of the proceedings on the terms of a stayagreement between the parties.

**AdelphiaCommunications Corporation Litigation**

The Company and certain affiliates have been named ineight civil actions brought by investors in Adelphia CommunicationsCorporation, orAdelphia, debt and/orequity securities concerning alleged misstatements in certain Adelphiasecurities offerings and in the merger of Century Communications Corporationwith Adelphia in October 1999. These complaints have been consolidated inthe U.S. District Court for the Southern District of New York. The Company andits affiliates have filed, or expect to file, motions to dismiss in each of thesecases.

Additionally, on July 6,2003, a creditors’ committee filed a bankruptcy adversary proceeding on behalfof Adelphia, against certain lenders and investment banks, including CSFB LLCand its affiliates. The complaint asserts claims against CSFB LLC and itsaffiliates and numerous other defendants under state law, bankruptcy law andthe Bank Holding Company Act. The complaint against CSFB LLC and its affiliatesseeks the disallowance and/or subordination of claims or liens against Adelphia(and its assets) in its bankruptcy proceedings, and an unspecified amount ofcompensatory and punitive damages. The equity committee in the Adelphiabankruptcy has also filed a motion for leave to intervene in the adversaryproceeding to join in many of the claims asserted by the creditors’ committeeand assert additional state law claims against CSFB LLC and its affiliates andother defendants. CSFB LLC and its affiliates have moved to dismiss both thecreditors’ committee and equity committee claims and those motions remainpending.

**Mutual FundInvestigation**

CSFB LLC and certain ofits current and former affiliates, including Pershing LLC, which was sold toThe Bank of New York Company, Inc. in May 2003, have receivedsubpoenas and/or requests for information from the New York Attorney General’sOffice and the SEC, as part of the industry-wide investigation relating to thepractices of mutual funds and certain of their customers. These requests arefocused on the practices of market timing and late trading. CSFB LLC and itsaffiliates are cooperating with these requests.

**IndemnificationClaim Relating to Sale of Pershing**

The Company understandsthat an SEC investigation focused on possible market-timing transactionscleared by Pershing for Mutuals.com and other introducing brokers is ongoing. Inaddition, the Company has been informed by Pershing that it is defending threeputative class action lawsuits, filed in the U.S. District Court for theDistrict of Maryland and naming the Company as defendant, that seek unspecifieddamages relating to alleged mutual fund market-timing transactions clearedthrough Pershing. The Bank of New York Company, Inc. has made a claim forindemnification against the Company relating to these lawsuits under thePershing sale agreement on the basis that the conduct at issue is alleged tohave 

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occurredlargely during the period that Pershing was owned by CSFB. CSFB is disputingthis claim for indemnification.

**AmeriServe FoodDistribution Inc. Litigation**

On or about January 31, 2000, AmeriServe FoodDistribution, Inc., or AmeriServe, its parent company, Nebco Evans HoldingCompany, and related corporations filed Chapter 11 petitions in the U.S.Bankruptcy Court for the District of Delaware. The Company and certain of itsaffiliates have been involved in litigation relating to AmeriServe.

On December 27, 2000,GSC Recovery, Inc., or GSC, filed a complaint in the Superior Court of NewJersey, Law Division, Morris County, against DLJSC, certain of its affiliates,and certain officers, directors and other individuals and entities. GSC’sclaims arise out of alleged misrepresentations and omissions relating to GSC’spurchases of certain unsecured AmeriServe notes issued in 1997 and 1998. In June 2003,the defendants moved for summary judgment on all claims, and on October 7,2004, the court denied that motion.

***Item 4****:**                         Submissionof Matters to a Vote of Security Holders*

Pursuant to General Instruction I of Form 10-K,the information required by Item 4 is omitted.

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**PART II**

***Item 5****:**                         Marketfor Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities.*

All of our common equitysecurities are owned indirectly by CSG.

***Item 6****:**                         SelectedFinancial Data*

The Selected Consolidated Financial Data table is setforth on the following page.

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***Item 7****:**                         Management’sDiscussion and Analysis of Financial Condition and Results of Operations*

**SELECTEDCONSOLIDATED FINANCIAL DATA(1)Credit Suisse First Boston (USA), Inc. and Subsidiaries**
| ** **                                                                                                                                                                                                                 | ** ** | **As of and for the Year Ended December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                 | ** ** | **2004**                                                                              | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** | **2000** | ** ** |
| ** **                                                                                                                                                                                                                 | ** ** | **(In millions)**                                                                | ** ** |
| **Consolidated Statements of  Operations Data:**                                                                                                                                                                           |       |                                                                                  |       |   |   |   |   |   |   |   |   |
| Revenues:                                                                                                                                                                                                                  |       |                                                                                  |       |   |   |   |   |   |   |   |   |
| Total net  revenues                                                                                                                                                                                                        |       | $                                                                                     | 6,341      |   | $ | 4,997 |   | $ | 4,963 |   | $ | 6,506 |   | $ | 4,895 |   |
| Expenses:                                                                                                                                                                                                                  |       |                                                                                  |       |   |   |   |   |   |   |   |   |
| Employee compensation and benefits                                                                                                                                                                                         |       | 3,335                                                                                 |       | 2,740 |   | 2,997 |   | 4,347 |   | 3,936 |   |
| Other expenses                                                                                                                                                                                                             |       | 1,180                                                                                 |       | 1,688 |   | 2,447 |   | 2,623 |   | 2,745 |   |
| Total expenses                                                                                                                                                                                                             |       | 4,515                                                                                 |       | 4,428 |   | 5,444 |   | 6,970 |   | 6,681 |   |
| Income (loss)  from continuing operations before provision (benefit) for income taxes,  minority interests, discontinued operations, extraordinary item and  cumulative effect of a change in accounting principle(2) |       | 1,826                                                                                 |       | 569 |   | (481 | ) | (464 | ) | (1,786 | ) |
| Provision  (benefit) for income taxes                                                                                                                                                                                      |       | 397                                                                                   |       | 244 |   | (135 | ) | (155 | ) | (539 | ) |
| Minority  interests                                                                                                                                                                                                        |       | 642                                                                                   |       | — |   | — |   | — |   | — |   |
| Income (loss)  from continuing operations before discontinued operations, extraordinary item  and cumulative effect of a change in accounting principle(2)                                                  |       | 787                                                                                   |       | 325 |   | (346 | ) | (309 | ) | (1,247 | ) |
| Net income (loss)                                                                                                                                                                                                          |       | $                                                                                     | 787        |   | $ | 1,192 |   | $ | (257 | ) | $ | (217 | ) | $ | (1,034 | ) |
| **Consolidated Statements of  Financial Condition Data:**                                                                                                                                                             |       |                                                                                  |       |   |   |   |   |   |   |   |   |
| Total assets                                                                                                                                                                                                               |       | $                                                                                     | 275,813    |   | $ | 241,566 |   | $ | 236,455 |   | $ | 220,065 |   | $ | 215,170 |   |
| Long-term  borrowings                                                                                                                                                                                                      |       | 28,941                                                                                |       | 24,321 |   | 23,094 |   | 15,663 |   | 11,258 |   |
| Redeemable trust  securities                                                                                                                                                                                               |       | —                                                                                |       | — |   | — |   | — |   | 200 |   |
| Total stockholder’s  equity                                                                                                                                                                                           |       | $                                                                                     | 11,064     |   | $ | 9,641 |   | $ | 8,089 |   | $ | 7,480 |   | $ | 7,173 |   |

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(1)      We are part of CSFB and CSG, but our results do notreflect their overall performance.

Prior-period financial data have been restated toreflect the contribution by Credit Suisse First Boston, Inc., or CSFBI,the Company’s immediate parent and an indirect wholly-owned subsidiary of CSG,of Credit Suisse First Boston Management LLC, or Management LLC, to us in March 2003.The transfer was accounted for at historical cost in a manner similar topooling-of-interest accounting because Management LLC and we were under thecommon control of CSFBI at the time of the transfer. We have restated ourfinancial information to reflect the contribution of Management LLC as if wehad acquired it on November 3, 2000, the date that we were acquired byCSFBI. Such restated information as of December 31, 2001 and 2000 and forthe year ended December 31, 2000 is unaudited.

Prior period financial data have also been restated toreflect the contribution by CSFBI of the high-net-worth business, or HNWBusiness, of Credit Suisse Asset Management LLC, or CSAM, to the Company as acapital contribution of $221 million on March 31, 2004. The transferof this business was accounted for at historical cost in a manner similar topooling-of-interest accounting because CSAM and we were under the commoncontrol of CSFBI at the time of transfer. Accordingly, the Company has restatedits financial information to reflect the contribution of the CSAM HNW Businessas if the Company had acquired it on November 3, 2000, the date that wewere acquired by CSFBI. Such restated information as of December 31, 2001and 2000 and for the year ended December 31, 2000 is unaudited.

The consolidated statement of operations data for theyear ended December 31, 2000 represent the results of operations of DLJonly for the period from January 1, 2000 to November 2, 2000 and DLJ,CSFB LLC, Management LLC and the HNW Business of CSAM for the period from November 3,2000 to December 31, 2000 and the years ended December 31, 2001,2002, 2003 and 2004. The consolidated statements of financial condition datafor all periods presented represent the data of DLJ, CSFB LLC, Management LLCand the HNW Business. Due to the exclusion of CSFB LLC, Management LLC and theHNW 

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business data prior to November 2, 2000, ourconsolidated statement of operations data for the year ended December 31,2000 may not be fully comparable with subsequent periods.

(2)      On May 1, 2003, we sold Pershing to The Bank ofNew York Company, Inc. and recorded a pre-tax gain of approximately$1.3 billion and an after-tax gain of $852 million. The operatingresults of Pershing for the years ended December 31, 2003, 2002, 2001 and2000 are included in discontinued operations.

**MANAGEMENT’S DISCUSSIONAND ANALYSIS OFFINANCIAL 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, alternativeinvestments, full-service brokerage services, derivatives and risk managementproducts and investment research. We are part of the Credit Suisse First Bostonbusiness unit, which we call CSFB, of Credit Suisse Group, or CSG, and ourresults do not reflect the overall performance of CSFB or CSG.

When we use the terms “we,” “our,” “us” and the “Company,”we mean Credit Suisse First Boston (USA), Inc., a Delaware corporation,and its consolidated 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 wealth and asset management,are, by their nature, highly competitive and subject to general marketconditions that include volatile trading markets, fluctuations in the volume ofnew issues, mergers and acquisitions activities and the value of securities.Consequently, our results have been, and are likely to continue to be, subjectto wide fluctuations 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.

Despite geopolitical uncertainties, higher commodityprices and a moderation in growth during the second half of the year, the U.S.economy expanded at a healthy pace in 2004. The U.S. equity markets advanced atthe end of the year, reflecting improved corporate earnings and outlook, whichproduced higher transaction volumes and customer activity. In 2004, both equityunderwriting and mergers and acquisitions activity increased and interest ratesremained low, relative to historic rates, despite interest rate increases bythe Federal Reserve Board during the second half of 2004.

The stock market posted gains for the secondconsecutive year as steady economic growth and stronger than expected corporateearnings outweighed concerns over rising oil prices, soft employment data andincreases in short-term interest rates. For the year ended December 31,2004, the Dow Jones Industrial Average, the Standard & Poor’s 500stock index and the NASDAQ composite index increased 3%, 9% and 9%, respectively.

The federal funds rate was 2.25% as of December 31,2004 compared to 1% as of December 31, 2003 as the Federal Reserve Boardincreased the federal funds rate five times during 2004. These well-telegraphedand measured rate increases along with demand for U.S. treasuries by foreigncentral banks, especially China and Japan, kept bond yields stable. For theyear ended December 31, 2004, treasury securities, mortgages and corporatebonds all performed well.

The dollar value of U.S.debt underwriting was flat for the year ended December 31, 2004 comparedto the year ended December 31, 2003, as mortgage-backed new issuesdeclined while asset-backed underwriting increased to record levels. The dollarvalue of U.S. equity and equity-related underwriting increased for the yearended December 31, 2004 compared to the year ended December 31, 2003,as 

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increasesin primary and secondary offerings of common stock were partially offset bydecreases in convertible securities issuances. The dollar value of completedmergers and acquisitions in the United States increased for the year ended December 31,2004 compared to the year ended December 31, 2003 reflecting the improvedcorporate earnings and equity prices in 2004.

**MANAGEMENT OVERVIEW**

In 2004, the Company continued to improve itsfinancial results from continuing operations despite challenging economic andmarket conditions and competitive pressures. Although revenues grew, certain ofCSFB’s market share and rankings declined in 2004, including global mergers andacquisitions advisory services, global high yield debt underwriting and globalasset-backed financing. In 2004, the Company and CSFB pursued revenue growthopportunities, particularly in proprietary trading of equity and fixed incomesecurities, prime services, derivatives and structured and alternativeinvestments. The Company and CSFB continued to place a high priority oncontrols, risk management and CSFB’s reputation and on developing an ownershipculture.

The Company’s net revenue in 2004 increased 27%compared to 2003 as a result of increases in trading revenues, gains fromcertain private equity investments and the consolidation, primarily under FinancialAccounting Standards Board, or FASB, Interpretation, or FIN, No. 46 “Consolidationof Variable Interest Entities,” or FIN 46R, of certain private equityfunds, offset in part by decreases in investment banking and advisory fees andother revenues. Operating expenses increased 2% in 2004 due to higher employeecompensation and benefits expenses partially offset by a decline in otheroperating expenses. Income from continuing operations more than doubled in 2004compared to 2003. Net income declined in 2004 primarily due to the substantialafter-tax gain from the sale of Pershing in 2003.

The operating environment is expected to remainchallenging in the near term reflecting slow securities market growth indeveloped countries, fee compression and commoditization across products andthe importance of balance sheet commitments for clients. In addition, theregulatory environment remains difficult, and there is increasing complexity inmanaging potential conflicts of interest.

After a comprehensivestrategy review, CSFB announced in December 2004 that its strategy will begeared toward winning where it chooses to compete by delivering a more focusedfranchise. CSFB expects to achieve this by identifying and allocating resourcesto its most valuable clients and pursuing excellence in select high-margin andstrategically important services such as leveraged finance, mergers andacquisitions, IPOs, derivatives and mortgage securitization. CSFB expects tocapture trading opportunities through extended, disciplined and diversifiedrisk taking. CSFB expects to make a number of structural changes within variousbusinesses to promote greater bottom line accountability, further improved costdiscipline and capitalize on the integration with CSG’s other bankingbusinesses. See “Business—Strategy” in Part I, Item for more information onCSFB’s strategy.

**CRITICAL ACCOUNTINGPOLICIES AND ESTIMATES**

In order to prepare the consolidated financialstatements in accordance with accounting principles generally accepted in theUnited States of America, or U.S. GAAP, we must make estimates and assumptionsbased on judgment and available information. The reported amounts of assets andliabilities and revenues and expenses are affected by these estimates andassumptions. Actual results could differ from these estimates, and thedifferences 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.We believe that the critical accounting policies discussed below involve themost complex judgments and assessments. We believe that the estimates andassumptions used in the preparation of the consolidated financial statementsare prudent, reasonable and consistently applied.

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**Fair Value**

As is the normal practice in our industry, the valueswe report in the consolidated financial statements with respect to financialinstruments owned and financial instruments sold not yet purchased are in mostcases based on fair value, with related unrealized and realized gains or lossesincluded in the consolidated statements of operations. Commercial mortgagewhole loans are carried at the lower of aggregate cost or fair value andcertain residential mortgage whole loans held for sale are carried at the lowerof cost or fair value.

Fair value may beobjective, as is the case for exchange-traded instruments, for whichquoted prices in price-efficient and liquid markets generally exist, oras is the case where a financial instrument’s fair value is derived fromactively quoted prices or pricing parameters or alternative pricing sourceswith a reasonable level of price transparency. For financial instruments thattrade infrequently and have little price transparency, fair value may besubjective and require varying degrees of judgment depending on liquidity,concentration, uncertainty of market factors, pricing assumptions and otherrisks affecting the specific instrument. In such circumstances, valuation isbased on management’s best estimate of fair value. In addition, valuation offinancial instruments ordinarily based on quoted prices may be distorted intimes of market dislocation.

***Controls Over Fair Valuation Process***

Control processes are applied to ensure that the fairvalue of the financial instruments reported in our consolidated financial statements,including those derived from pricing models, are appropriate and measured on areliable basis. The Company bases fair value on observable market prices ormarket-based parameters whenever possible. In the absence of observable marketprices or market-based parameters in an active market or from comparable markettransactions, or other observable data supporting fair value based on a modelat the inception of a contract, fair value is based on the transaction price. Controlprocesses are designed to ensure that the valuation approach is appropriate andthe assumptions are reasonable.

Control processes include the approval of newproducts, review of profit and loss, risk monitoring and review, priceverification procedures and reviews of models used to price financialinstruments by senior management and personnel with relevant expertise who areindependent of the trading and investment 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 the Company’s derivatives contracts valuations. As part of theCompany’s OTC derivatives business, the Company and other participants providepricing information to aggregation services that compile this data and providethis information to subscribers. This information is considered in thedetermination of fair value for certain OTC derivatives.

For further discussion ofour risk management policies and procedures, see “Quantitative and QualitativeDisclosures About Market Risk” in Part II, Item 7A.

***Valuation***

Forpurposes of valuation, we categorize our financial instruments as cashproducts, derivatives contracts and private equity and other long-terminvestments. The table below presents the carrying value of our cash products,derivatives contracts and private equity and other long-term investments as of December 31,2004 and 2003. Included in the table are commercial mortgage whole loans whichare 

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carried at the lower of the aggregate cost or fairvalue and certain residential mortgage whole loans which are carried at thelower of the cost or fair value.
| ** **                                      | ** ** | **As of December 31,**                     | ** ** |
|-------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                      | ** ** | **2004**                                                  | ** ** | **2003** | ** ** |
| ** **                                      | ** ** | **Financial    instruments    owned** | ** ** | **Financial  instruments  sold not yet  purchased** | ** ** | **Financial  instruments  owned** | ** ** | **Financial  instruments  sold not yet  purchased** | ** ** |
| ** **                                      | ** ** | **(In millions)**                                    | ** ** |
| Cash products                                   |       |                                                      | $          | 96,097 |   |   |   | $ | 28,402 |   |   |   | $ | 73,210 |   |   |   | $ | 31,790 |   |   |
| Derivatives  contracts                          |       |                                                      | 3,663      |   |   |   | 2,295 |   |   |   | 5,573 |   |   |   | 3,955 |   |   |
| Private equity  and other long-term investments |       |                                                      | 3,127      |   |   |   | — |   |   |   | 1,123 |   |   |   | — |   |   |
| Total                                           |       |                                                      | $          | 102,887 |   |   |   | $ | 30,697 |   |   |   | $ | 79,906 |   |   |   | $ | 35,745 |   |   |

 

*Cash Products*

The vast majority of our financial instruments ownedand financial instruments sold not yet purchased are considered cash tradinginstruments. The fair value of the vast majority of these financial instrumentsis based on quoted market prices in active markets or observable marketparameters or is derived from such prices or parameters. These include U.S.government and agency securities, commercial paper, most investment-gradecorporate debt, most high-yield debt securities, most mortgage-backedsecurities and listed equities.

In addition, we hold positions in cash products thatare thinly traded or for which no market prices are available, and which havelittle or no price transparency. These products include certain high-yield debt securities, distresseddebt securities, mortgage loans, certain mortgage-backed and asset-backedsecurities, certain collateralized debt obligations, or CDOs, and equitysecurities that are not publicly traded. The techniques used todetermine fair value for these instruments are based on the type of product.Some of these valuation techniques require us to exercise a substantial amountof judgment, for example, in determining the likely future cash flows ordefault recovery on distressed debt instruments or asset-backed obligations orthe likely impact of country or market risk on various investments. Valuationtechniques for certain of these products are described more fully below.

For certain high-yield debt securities that are thinlytraded or for which market prices are not available, valuation is based onrecent market transactions, taking into account changes in the creditworthinessof the issuer, and pricing models to derive yields reflecting the perceivedrisk of the issuer or country rating and the maturity of the security. Suchvaluation may involve judgment.

Financial instruments held in the distressed portfolioare typically issued by private companies under significant financial burdenand/or near bankruptcy. Because of the less liquid nature of these financialinstruments, valuation techniques often include earnings-multipleanalyses, similar market transactions and default recovery analyses. Thesefactors contribute to significant subjectivity in the valuation of thesefinancial instruments.

The mortgage loan portfolio primarily includesresidential and commercial mortgage loans that are either purchased ororiginated with the intent to securitize. For residential mortgage loans,valuations are based on pricing factors specific to loan level attributes, suchas loan-to-value ratios, current balance and liens. The commercial real estateloans are valued using origination spreads, incorporating loan-to-value ratios,debt service coverage ratios, geographic location, prepayment protection andcurrent yield curves. In addition, current written offers or contract pricesare considered in the valuation process.

Values of residential and commercial mortgage-backedsecurities and other asset-backed securities that are not based on quoted marketprices or prices at which similarly structured and collateralized 

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securities trade betweendealers and to and from customers are valued using pricing models employingprepayment scenarios and Monte Carlo simulations.

CDOs arestructured securities based on underlying portfolios of asset-backedsecurities, certain residential and commercial mortgage securities, high-yieldand investment grade corporate bonds, leveraged loans and other debtobligations. These instruments are split into various structured tranches, andeach tranche is priced based upon its individual rating and the value or cashflow of the underlying collateral supporting the structure. Values are derivedusing pricing models that involve projected cash flows, default recoveryanalysis and other assumptions, and such valuations involve judgment.

For convertible securitiesthat are thinly traded or for which no market prices are available, internalmodels are used to derive fair value. The terms and conditions of the securityare factored into the model, along with market inputs such as underlying equityprice, equity price volatility and credit spread. Certain adjustments are madeto the derived theoretical values for high concentration levels and low tradingvolumes.

*DerivativesContracts*

Ourderivatives contracts consist of exchange-traded and OTC derivatives, and thefair value of these as of December 31, 2004 and 2003 was as follows:
| ** **      | ** ** | **As of December 31,** | ** ** |
|-----------------|------------|---------------------------------------|------------|
| ** **      | ** ** | **2004**                              | ** ** | **2003** | ** ** |
| ** **      | ** ** | **Assets**                            | ** ** | **Liabilities** | ** ** | **Assets** | ** ** | **Liabilities** | ** ** |
| ** **      | ** ** | **(In millions)**                | ** ** |
| Exchange-traded |       | $                                     | 695        |   |   | $ | 598 |   |   | $ | 2,552 |   |   | $ | 2,292 |   |   |
| OTC             |       | 2,968                                 |       |   | 1,697 |   |   | 3,021 |   |   | 1,663 |   |   |
| Total           |       | $                                     | 3,663      |   |   | $ | 2,295 |   |   | $ | 5,573 |   |   | $ | 3,955 |   |   |

 

The fair value of exchange-tradedderivatives is typically derived from the observable exchange price and/orobservable market parameters. Our primary exchange-traded derivativesinclude certain option agreements. OTC derivatives include forwards, swaps andoptions on foreign exchange, interest rates, equities and credit products. Fairvalues for OTC derivatives are determined using internally developedproprietary models using various input parameters. The input parameters includethose characteristics of the derivative that have a bearing on the economics ofthe instrument and market parameters. In well-established derivatives markets,the use of a particular model may be widely accepted. For example, the Black-Scholesmodel is widely used to calculate the fair value of many types of options.These models are used to calculate the fair value of OTC derivatives and tofacilitate the effective risk management of the portfolio. The determination ofthe fair value of many derivatives involves only limited subjectivity becausethe required input parameters are observable in the marketplace. For other morecomplex derivatives, subjectivity relating to the determination of inputparameters reduces price transparency. Specific areas of subjectivity includelong-dated volatilities on OTC option transactions and recovery rateassumptions for credit derivatives transactions. Uncertainty of pricingassumptions and liquidity are also considered as part of the valuation process.Because of these uncertainties, we do not recognize a dealer profit orunrealized gain at the inception of a derivatives transaction unless thevaluation underlying the unrealized gain is evidenced by quoted market pricesin an active market, observable prices of other current market transactions orother observable data supporting a valuation technique in accordance withEmerging Issues Task Force Issue No. 02-3, “Issues Involved in Accountingfor Derivative Contracts Held for Trading Purposes and Contracts Involved inEnergy Trading and Risk Management Activities.” As of December 31, 2004and 2003, most of the replacement values reported in our consolidated statementsof financial condition were derived using observable input parameters. Forfurther information on the fair 

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value ofderivatives as of December 31, 2004 and 2003, see “—Derivatives—Sourcesand Maturities of OTC Derivatives” and Note 6 of the consolidated financialstatements in Part II, Item 8.

*Private equity andother 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. Private equityinvestments and other long-term investments consist of both publicly tradedsecurities and private securities. Publicly traded investments are valued basedupon readily available market quotes with appropriate adjustments for liquidityas a result of holding large blocks and/or having trading restrictions. Privatesecurities, which generally have no readily available market or may beotherwise restricted as to resale, are valued taking into account a number of factors,such as the most recent round of financing involving unrelated new investors,earnings-multiple analyses using comparable companies or discounted cash flowanalysis, and have little or no price transparency.

TheCompany categorizes its private equity investments into three categories:CSFB-managed funds (which include certain funds consolidated primarily underFIN 46R), funds managed by third parties and direct investments. The followingtable sets forth the fair value of our private equity investments by categoryas of December 31, 2004 and 2003:
|                                                                                                                                        | ** ** | **As of December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                                                             | ** ** | **2004**                              | ** ** | **2003** | ** ** |
| ** **                                                                                                                             | ** ** | **Fair value**                   | ** ** | **Percent  of total** | ** ** | **Fair value** | ** ** | **Percent  of total** | ** ** |
| ** **                                                                                                                             | ** ** | **(In millions)**                | ** ** | ** ** | ** ** | **(In millions)** | ** ** | ** ** | ** ** |
| CSFB-managed funds (which  includes $1,947 related to funds consolidated primarily under FIN 46R(1) as of December 31, 2004) |       |                                  | $          | 2,670 |   |   |   | 85 | % |   |   | $ | 839 |   |   |   | 74 | % |   |
| Funds managed by  third parties                                                                                                        |       |                                  | 442        |   |   |   | 14 |   |   |   | 279 |   |   |   | 25 |   |   |
| Direct investments                                                                                                                     |       |                                  | 15         |   |   |   | 1 |   |   |   | 5 |   |   |   | 1 |   |   |
| Total                                                                                                                                  |       |                                  | $          | 3,127 |   |   |   | 100 | % |   |   | $ | 1,123 |   |   |   | 100 | % |   |
|                                                                                                                                   |       |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

(1)      For more information on the funds consolidatedprimarily under FIN 46R as of December 31, 2004, see Note 4 of theconsolidated financial statements in Part II, Item 8.

*CSFB-Managed Funds.  *CSFB-managedfunds are partnerships and related “side-by-side” direct investments made byour subsidiaries for which CSFB acts as the fund’s advisor and makes investmentdecisions. As of December 31, 2004 and 2003, approximately 10% and 20%,respectively, of CSFB-managed fund investments, excluding private equity fundsthat were consolidated primarily under FIN 46R, were in public securities.The fair value of our investments in CSFB-managed funds is based on ourvaluation or, in the case of funds of funds, valuations received from theunderlying fund manager and reviewed by us.

*Funds Managed by Third Parties.  *Fundsmanaged by third parties are investments by CSFB as a limited partner in a fundmanaged by an external fund manager. The fair value of these funds is based onthe valuation received from the general partner of the fund and reviewed by us.

*DirectInvestments.  *Direct investments are generally debt andequity securities that are not made through or “side-by-side” with CSFB-managedfunds and consist of public and private securities. These investments arepriced in accordance with the procedures for CSFB-managed funds. As of December 31,2004 and 2003, approximately 22% and 18%, respectively, of direct investmentswere in public securities.

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**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 bases 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, if any.Periodically, management evaluates whether deferred tax assets can be realized.If management considers it more likely than not that all or a portion of adeferred tax asset will not be realized, a corresponding valuation allowance isestablished. In evaluating whether deferred tax assets can be realized,management considers projected future taxable income, the scheduled reversal ofdeferred tax liabilities 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 control. Substantial variance of actual results fromestimated future taxable profits, or changes in our estimate of future taxableprofits, could lead to changes in deferred tax assets being realizable orconsidered realizable, and would require a corresponding adjustment to thevaluation allowance.

Due to uncertaintyconcerning our ability to generate the necessary amount and mix of state andlocal taxable income in future periods, we maintained a valuation allowanceagainst our deferred state and local tax assets in the amount of$32 million and $36 million as of December 31, 2004 and 2003,respectively. As of December 31, 2004 and 2003, we had deferred tax assetsresulting from temporary differences that could reduce taxable income in futureperiods. The consolidated statements of financial condition as of December 31,2004 and 2003 include deferred tax assets of $1.6 billion and$1.7 billion, respectively, and deferred tax liabilities of $438 millionand $375 million, respectively. For further information on the temporarydifferences that generate deferred tax assets, see Note 17 of theconsolidated financial statements in Part II, Item 8.

***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 for income taxes. Althoughthe outcome of any dispute is uncertain, management believes that it hasappropriately accrued for any unfavorable outcome.

**LitigationContingencies**

From time to time, we areinvolved in a variety of legal, regulatory and arbitration matters inconnection with the conduct of our business. It is inherently difficult topredict the outcome of many of these matters, particularly those cases in whichthe matters are brought on behalf of various classes of claimants, seek damagesof unspecified or indeterminate amounts or involve novel legal claims. Inpresenting our consolidated financial statements, management makes estimatesregarding the outcome of legal, regulatory and arbitration matters and takes acharge to income when losses with respect to such 

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mattersare probable and can be reasonably estimated. Charges, other than those takenperiodically for cost of defense, are not established for matters when lossescannot be reasonably estimated. Estimates, by their nature, are based onjudgment and currently available information and involve a variety of factors,including, but not limited to, the type and nature of the litigation, claim orproceeding, the progress of the matter, the advice of legal counsel and otheradvisers, our defenses and our experience in similar cases or proceedings. Fora discussion of legal proceedings, see “Legal Proceedings” in Part I, Item3.

**RECENT DEVELOPMENTS**

Alternative Capital intendsto spin out certain funds that could benefit from an independent platform. AlternativeCapital has determined that certain investment professionals from the privateequity business will establish independent private equity firms to provideconsulting services to the Merchant Banking Partners funds, which AlternativeCapital will continue to manage as general partner of the funds. Followingthese transactions, Alternative Capital intends to maintain significantinvestment commitments and financial interests in, and strategic relationshipswith, each of these funds. We recognized $82 million of severance expenses inconnection with the spin outs, but these severance expenses were charged to CSGaffiliates outside of the Company, and are reflected as a reduction of ourother operating expenses, since they relate to business activities conducted byCompany employees on behalf of these affiliates.

**RESULTS OFOPERATIONS**

Thefollowing table sets forth a summary of our financial results:
| ** **                                                                                                                                                                                      | ** ** | **For the Year Ended December 31,**         | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                                                                                                                                                      | ** ** | **     2004     ** | ** ** | **     2003     ** | ** ** | **     2002     ** | ** ** |
| ** **                                                                                                                                                                                      | ** ** | **(In millions)**                                               | ** ** |
| Total net  revenues                                                                                                                                                                             |       |                                                                 | $          | 6,341 |   |   |   | $ | 4,997 |   |   |   | $ | 4,963 |   |   |
| Total expenses                                                                                                                                                                                  |       |                                                                 | 4,515      |   |   |   | 4,428 |   |   |   | 5,444 |   |   |
| Income (loss)  from continuing operations, before provision (benefit) for income taxes,  minority interests, discontinued operations and cumulative effect of a change  in accounting principle |       |                                                                 | 1,826      |   |   |   | 569 |   |   |   | (481 | ) |   |
| Provision  (benefit) for income taxes                                                                                                                                                           |       |                                                                 | 397        |   |   |   | 244 |   |   |   | (135 | ) |   |
| Minority  interests                                                                                                                                                                             |       |                                                                 | 642        |   |   |   | — |   |   |   | — |   |   |
| Income (loss)  from continuing operations before discontinued operations and cumulative  effect of a change in accounting principle                                                             |       |                                                                 | 787        |   |   |   | 325 |   |   |   | (346 | ) |   |
| Income from  discontinued operations, net of income tax provision of $485 and $47 in 2003  and 2002, respectively                                                                               |       |                                                                 | —     |   |   |   | 876 |   |   |   | 89 |   |   |
| Cumulative effect  of a change in accounting principle, net of income tax benefit of $5 in 2003                                                                                                 |       |                                                                 | —     |   |   |   | (9 | ) |   |   | — |   |   |
| Net income (loss)                                                                                                                                                                               |       |                                                                 | $          | 787 |   |   |   | $ | 1,192 |   |   |   | $ | (257 | ) |   |
|                                                                                                                                                                                            |       |                                                                 |       |   |   |   |   |   |   |   |   |   |   |

 

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Substantially all of our inventory is marked to marketdaily and, therefore, the value of such inventory and our net revenues aresubject to fluctuations based on market movements. In addition, net revenuesderived from our less liquid assets may fluctuate significantly depending onthe revaluation or sale of these investments in any given period. We alsoregularly enter into large transactions as part of our proprietary and othertrading businesses, and the number and size of such transactions may subject ournet 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 difference between interest income andexpense accrued at the stated coupon rate and interest income and expensedetermined on an effective yield basis is included in principaltransactions-net in the consolidated statements of operations.

We use derivatives and cash instruments to mitigatethe interest rate exposure associated with commercial mortgage whole loans andresale and repurchase agreements. These derivatives and cash instruments arecarried at fair value, while the commercial mortgage whole loans are carried atthe lower of aggregate cost or fair value and the resale and repurchaseagreements are carried at contract amounts. As a result, decreases in the valueof the derivatives and cash instruments, if any, are not offset by increases inthe value of the commercial mortgage whole loans until the loans are sold andincreases and decreases in the value of the derivatives and cash instruments,if any, are not offset by decreases and increases in the value of the resaleand repurchase agreements until the securities are sold or repurchased. Commercialwhole loans and resale and repurchase agreements can be a significant part of ourstatement of financial condition. Therefore, our net revenues are subject tovolatility 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 and may in the futureadversely affect our results of operations. See “Business—Certain Factors That May AffectOur Results of Operations” in Part I, Item 1.

**Year Ended December 31,2004 Compared to Year Ended December 31, 2003**

The Company recorded net income of $787 million forthe year ended December 31, 2004 compared to net income of $1.2 billionfor the year ended December 31, 2003. The decrease reflects the after-taxgain of $852 million from the sale of Pershing, included in income fromdiscontinued operations, and an after-tax gain of $74 million on the saleof our 50% stake in a Japanese online broker, offset in part by the$130 million after-tax loss relating to the write-down of intangibleassets from the HNW business, in 2003. Excluding these items, net incomeincreased $391 million, reflecting both higher net revenues and higherexpenses.

Total net revenues increased $1.3 billion, or27%, to $6.3 billion for the year ended December 31, 2004, asprincipal transactions, investment banking and advisory, commissions and netinterest revenues improved compared to the year ended December 31, 2003,partially offset by a decrease in other revenues. The significant increase inprincipal transactions revenue was primarily due to the consolidation ofcertain private equity funds in 2004, which increased principal transactions by$643 million and increased net revenues by $649 million, significant gainsfrom certain private equity investments and increases in revenues fromstructured products. Net income was unaffected by the consolidation of suchprivate equity funds as offsetting minority interests of $642 million andrelated operating expenses of $7 million were recorded in the consolidatedstatements of operations. See Note 4 of the consolidated financial statementsin Part II Item 8 for more information. Investment banking andadvisory fees increased primarily due to higher equity underwriting fees andhigher placement fees from our private funds business. Commissions were higherprimarily as a result of increased trading activity from fixed income listedderivatives. Net 

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interest revenuesincreased due to higher net interest from prime services. The decline in otherrevenues reflects the pre-tax gain of $115 million from the sale of theJapanese online broker in 2003.

Total expenses increased$87 million, or 2%, to $4.5 billion for the year ended December 31, 2004compared to the year ended December 31, 2003, as increases in employeecompensation and benefits expenses were partially offset by lower otheroperating expenses and merger-related costs. Other operating expenses for theyear ended December 31, 2003 included the $200 million pre-tax loss relating to the write-down of intangibleassets from the HNW Business. Included in employee compensation and benefitsexpense is $289 million and $88 million for the years ended December 31,2004 and 2003, 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 inour other operating expenses. See “—Expenses.”

**Year Ended December 31,2003 Compared to Year Ended December 31, 2002**

The Company recorded net income of $1.2 billionfor the year ended December 31, 2003 compared to a net loss of$257 million in 2002. The significant improvement in net income reflectedthe after-tax gain of $852 million from the sale of Pershing, included inincome from discontinued operations, and an after-tax gain of $74 million onthe sale of the Japanese online broker, offset in part by a $130 millionafter-tax loss relating to the write-down of intangible assets from the HNWBusiness, in 2003. The 2002 net loss included an after-tax loss of $514 million and a pre-tax loss ofapproximately $786 million from Management LLC, including pre-tax lossesof $550 million on interest rate swaps that hedged certain securitiespositions and resale and repurchase agreements held by CSFB LLC andapproximately $330 million in pre-tax losses from certain legacy private equityand distressed assets. Also included in the 2002 results is an after-taxgain of $330 million from the sale of three broker-dealers, CSFB*direct* LLC, DLJ*direct* Ltd. and Autranet, LLC, an after-tax charge of$124 million for the agreement in principle with various U.S. regulatorsrelating to research analyst independence and the allocation of IPO shares tocorporate executives and directors, an after-tax charge of $293 millionfor private litigation involving research analyst independence, certain IPOallocation practices, Enron and other related litigation and an after-taxcharge of $98 million for severance as part of a CSFB cost-reductioninitiative.

Total net revenues increased $34 million, or 1%,to $5.0 billion for the year ended December 31, 2003, as principaltransactions and net interest revenues were higher than in 2002. Principaltransactions improved primarily due to gains on interest rate swaps that hedgedcertain securities positions and resale and repurchase agreements compared tosignificant losses on these swaps in 2002. Principal transactions also improvedas a result of increased revenues from OTC equity derivatives, convertiblesecurities and private equity and decreased write-downs on legacy assets. Netinterest income benefited from decreased financing costs, reflecting the lowinterest rates in the period. These increases were partially offset byinvestment banking and advisory, commissions and fees and other revenues, allof which declined compared to 2002. The decline in investment banking andadvisory revenues reflected the industry-wide reduction in completed mergersand acquisitions and reduced IPO activity, particularly in the first half of2003. Commissions and fees declined primarily as a result of lower single-stocktrading volumes and competitive pricing pressure in equity cash products. Otherrevenues for 2003 included a pre-tax gain of $115 million from the sale of theJapanese online broker, while other revenues for 2002 reflected a pre-tax gainof $528 million from the sale of the three broker-dealers. Net revenuesexcluding these gains increased 10% for the year ended December 31, 2003compared with 2002.

Total expenses decreased$1.0 billion, or 19%, to $4.4 billion for the year ended December 31,2003 compared to the year ended December 31, 2002. The decrease wasprincipally due to reduced litigation charges, lower compensation expenses andsubstantial completion of retention awards, partially offset by the$200 million pre-tax loss relating to the write-down of intangible assetsfrom the HNW Business. 

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Excludingthe 2003 write-down of intangible assets and the 2002 litigation charges of$600 million, expenses declined 13%. See “—Expenses.”

**Results by Segment**

As of January 1, 2004, we transferred the privateequity and private funds businesses from the Institutional Securities segmentto the Financial Services segment, which was renamed Wealth & AssetManagement. In addition, we changed the presentation of the InstitutionalSecurities and Wealth & Asset Management segment results. Theoperations of the Institutional Securities segment include: Investment Banking,which includes debt and equity underwriting and financial advisory services;and Trading, which includes our debt and equity sales and trading and otherrelated activities. The Institutional Securities segment also includes theresults from legacy private equity and distressed assets. The operations of theWealth & Asset Management segment include: Alternative Capital, whichincludes the results of the private equity and private funds businesses, andPrivate Client Services. Prior period segment numbers have been changed toconform to the new segment reporting structure. These segment changes did notaffect our previously reported consolidated results of operations.

Our segments are managed based on types of productsand services offered and their related client bases. We evaluate the performanceof our segments based primarily on income from continuing operations before theprovision for income taxes and discontinued operations.

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 broadlysimilar to that of the Company as a whole, and, consequently, the discussion ofexpenses is presented on a company-wide basis. The Company allocates to itssegments a *pro rata* share ofcertain centrally managed costs, such as leased facilities and equipment costs,employee benefits and certain general overhead expenses based upon specifiedamounts, usage criteria or agreed rates, and allocates interest expense basedupon the particular type of asset. The allocation of some costs, such asincentive bonuses, has been estimated.

Beginning in 2004, CSFBIallocated to the Company’s segments certain interest expense relating to thegoodwill and intangible assets from the acquisition of DLJ, which is recordedin the financial statements of CSFBI. There is an offsetting credit in other revenuesof the segments.

***Institutional Securities***

The Institutional Securities segment includes theTrading and Investment Banking businesses and the results from legacy privateequity and distressed assets. Trading consists of sales and trading in equity securities,equity-related derivatives, fixed income financial instruments and fixedincome-related derivatives, and other related activities. InvestmentBanking raises capital and provides financial advice to companies throughoutthe United States and abroad. Through Investment Banking, we manage andunderwrite offerings of securities, arrange private placements and providefinancial advisory and other services.

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Thefollowing table sets forth certain financial information of the Company’sInstitutional Securities segment:
| ** **                                      | ** ** | **For the Year Ended December 31,**                                 | ** ** |
|-------------------------------------------------|------------|----------------------------------------------------------------------------------------------|------------|
| ** **                                      | ** ** | **       2004       ** | ** ** | **       2003       ** | ** ** | **       2002       ** | ** ** |
| ** **                                      | ** ** | **(In millions)**                                                                       | ** ** |
| Revenues:                                       |       |                                                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Principal transactions—net                 |       |                                                                                         | $          | (295 | ) |   |   | $ | (826 | ) |   |   | $ | (1,356 | ) |   |
| Investment banking and advisory                 |       |                                                                                         | 1,639      |   |   |   | 1,654 |   |   |   | 2,010 |   |   |
| Commissions                                     |       |                                                                                         | 1,014      |   |   |   | 971 |   |   |   | 1,091 |   |   |
| Interest and dividends, net of interest expense |       |                                                                                         | 2,435      |   |   |   | 2,342 |   |   |   | 2,018 |   |   |
| Other                                           |       |                                                                                         | 67         |   |   |   | 95 |   |   |   | 47 |   |   |
| Total net revenues                              |       |                                                                                         | 4,860      |   |   |   | 4,236 |   |   |   | 3,810 |   |   |
| Total expenses                                  |       |                                                                                         | 3,970      |   |   |   | 3,678 |   |   |   | 4,762 |   |   |
| Income (loss)(1)                                |       |                                                                                         | 890        |   |   |   | 558 |   |   |   | (952 | ) |   |
| Minority  interests(2)                          |       |                                                                                         | 79         |   |   |   | — |   |   |   | — |   |   |
| Income (loss) after  minority interests(3)      |       |                                                                                         | $          | 811 |   |   |   | $ | 558 |   |   |   | $ | (952 | ) |   |
|                                            |       |                                                                                         |       |   |   |   |   |   |   |   |   |   |   |

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(1)      Income (loss) from continuing operations beforeprovision (benefit) for income taxes, minority interests, discontinuedoperations and cumulative effect of a change in accounting principle.

(2)      Represents minority interest revenues related to theCompany’s consolidation of certain private equity funds primarily under FIN46R, net of related operating expenses.

(3)      Income (loss) from continuing operationsbefore provision (benefit) for income taxes, discontinued operations andcumulative effect of a change in accounting principle.

*Year Ended December 31,2004 Compared to Year Ended December 31, 2003*

The InstitutionalSecurities segment recorded income after minority interests of $811 millionfor the year ended December 31, 2004 compared to $558 million for theyear ended December 31, 2003. Total net revenues increased$624 million, or 15%, to $4.9 billion for the year ended December 31,2004, reflecting improved results in net trading revenues, consisting ofprincipal transactions, commissions and net interest, partially offset bydecreases in investment banking and advisory fees and other revenues. Excluding$82 million of revenues from the consolidation of certain legacy private equityfunds, total net revenues increased $542 million, or 13%.

*Year Ended December 31,2003 Compared to Year Ended December 31, 2002*

The InstitutionalSecurities segment recorded income after minority interests of$558 million for the year ended December 31, 2003 compared to a lossof $952 million for the year ended December 31, 2002. Total netrevenues increased $426 million, or 11%, to $4.2 billion for the yearended December 31, 2003, reflecting increases in net trading revenuesoffset in part by decreases in investment banking and advisory revenues. Theloss in 2002 primarily reflected the losses from Management LLC interest rateswaps and legacy private equity and distressed assets, as well as significantlegal charges and severance costs.

***Trading***

In evaluating the performance of its Tradingactivities, the Company aggregates principal transactions, commissions and netinterest as net trading revenues. Changes in the composition of tradinginventories and hedge positions can cause principal transactions and netinterest income to vary from period to period.

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Thefollowing table sets forth net Trading revenues of the Institutional Securitiessegment:
| ** **    | ** ** | **For the Year Ended  December 31,** | ** ** |
|---------------|------------|----------------------------------------------------------|------------|
| ** **    | ** ** | **2004**(1)                                              | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **    | ** ** | **(In millions)**                                   | ** ** |
| Fixed Income  |       | $                                                        | 1,711      |   | $ | 1,418 |   | $ | 1,124 |   |
| Equity        |       | 1,064                                                    |       | 1,034 |   | 1,093 |   |
| Total Trading |       | $                                                        | 2,775      |   | $ | 2,452 |   | $ | 2,217 |   |

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(1)      Revenues reflect the allocation of certain interestexpense in the amount of $189 million to Trading. See “—Resultsby Segment” above.

*Year Ended December 31,2004 Compared to Year Ended December 31, 2003*

Total net Trading revenues for the InstitutionalSecurities segment increased $323 million, or 13% to $2.8 billion for theyear ended December 31, 2004 compared to the year ended December 31,2003, due to significant increases in fixed income net trading revenues and amodest increase in equity net trading revenues.

Fixed income net trading revenues increased 21% to$1.7 billion reflecting significantly improved results in structuredproducts. The increase in structured products net trading revenues was dueprimarily to higher revenues from trading and securitizing residentialmortgages as a result of improved market conditions and lower write-downs.Revenues from trading and securitizing commercial mortgages were also higher,reflecting favorable market conditions, while revenues from interest rateproducts increased modestly primarily due to listed derivatives trading. Theseincreases were partially offset by lower revenues from credit products,primarily high-yield, and an increase in interest expense allocated to ourTrading businesses.

Equity net tradingrevenues increased 3% to $1.1 billion due to higher revenues from certainarbitrage strategies, growth in our advanced execution services and primeservices businesses and improved results from options and structured products.These improvements were offset by declines in revenues from convertiblesecurities, reflecting lower trading volumes which reduced liquidity andwidened spreads, declines in revenues from listed and OTC trading due tocommission compression and increases in interest expense allocated to ourTrading businesses.

*Year Ended December 31,2003 Compared to Year Ended December 31, 2002*

Total net trading revenues for the InstitutionalSecurities segment increased $235 million, or 11%, to $2.5 billionfor the year ended December 31, 2003 compared to $2.2 billion for the yearended December 31, 2002, as increased fixed income net trading revenueswere partially offset by a decrease in equity net trading revenues.

Fixed Income net trading revenues increased 26%**to $1.4 billion, driven by lowinterest rates and interest rate volatility. This increase resulted in partfrom gains on interest rate swaps that hedged certain securities positions andresale and repurchase agreements compared to significant losses on these swapsin 2002. In addition, listed derivatives net revenues increased as a result ofhigher volumes. Secondary asset-backed securities trading revenues improvedbecause 2002 reflected the loss of $106 million due to the write-down ofasset-backed notes issued by affiliates of NCFE. Distressed debt tradingresults were higher, reflecting investor demand for higher-yielding securities.Investment-grade debt trading was strong but down from the very high levels in2002 when many investors moved to higher-credit quality issuers in the wake ofseveral corporate scandals. Trading revenues from residential mortgagesdecreased. High-yield secondary trading revenues remained strong but were lowerthan in 2002.

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Equity net tradingrevenues decreased 5% to $1.0 billion, primarily because of reducedrevenues from our listed and OTC customer business as a result of lower volumesdue to market uncertainty in the first quarter of 2003 and lower tradingrevenues from proprietary equity derivatives. These decreases were partiallyoffset by increased revenues from convertible securities due to higher volumewhich tightened credit spreads and higher trading revenues from our OTC equityderivatives customer business as a result of improved market conditions andincreased transaction flows for derivatives products beginning in the secondquarter of 2003.

***Investment Banking***

Thefollowing table sets forth the Investment Banking revenues for theInstitutional Securities segment:
| ** **                | ** ** | **For the Year Ended  December 31,** | ** ** |
|---------------------------|------------|----------------------------------------------------------|------------|
| ** **                | ** ** | **2004**(1)                                              | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                | ** ** | **(In millions)**                                   | ** ** |
| Debt underwriting         |       | $                                                        | 683        |   | $ | 734 |   | $ | 543 |   |
| Equity  underwriting      |       | 423                                                      |       | 383 |   | 632 |   |
| Total underwriting        |       | 1,106                                                    |       | 1,117 |   | 1,175 |   |
| Advisory and  other fees  |       | 533                                                      |       | 537 |   | 835 |   |
| Total Investment  Banking |       | $                                                        | 1,639      |   | $ | 1,654 |   | $ | 2,010 |   |

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(1)      Revenues reflect the allocation of certain interestexpense in the amount of $83 million to Investment Banking. See “—Resultsby Segment” above.

*Year Ended December 31,2004 Compared to Year Ended December 31, 2003*

Investment Bankingrevenues decreased 1% to**$1.6billion, reflecting a decline in debt underwriting offset by an increase inequity underwriting. For the year ended December 31, 2004, debtunderwriting revenues decreased 7% compared to the year ended December 31,2003 to $683 million, primarily due to lower underwriting revenues fromcommercial mortgage-backed securities reflecting the industry-wide decline inmortgage-backed new issues. Underwriting revenues from high-yield debt andinvestment grade new issuance revenues also declined significantly due to lowervolume and smaller deal sizes. These declines were partially offset byincreases in debt underwriting revenue from residential mortgage-backedsecurities. Equity underwriting revenues increased 10% to $423 milliondespite a decline in convertible securities issuances, as our IPO and secondarynew issuance volumes increased compared to the weak volumes in 2003. Advisoryand other fees decreased less than 1% to $533 million reflecting lowerfees from restructurings, private placements and structured products and flatmergers and acquisition fees.

*Year Ended December 31,2003 Compared to Year Ended December 31, 2002*

Total Investment Bankingrevenues for the Institutional Securities segment decreased 18% to$1.7 billion, reflecting the industry-wide reduction in completed mergersand acquisitions and equity new issuances compared to 2002. The decrease inmergers and acquisitions revenues was offset in part by higher fees fromrestructuring and other advisory activities. The decline in equity underwritingwas partially offset by improved debt underwriting revenues from high-yield newissuances, as industry-wide high-yield underwriting activity increased,increased origination and securitization of commercial mortgage-backedsecurities and asset-backed securities.

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***Other Institutional Securities***

*Year Ended December 31,2004 Compared to Year Ended December 31, 2003*

Other InstitutionalSecurities revenues primarily consist of revenues from legacy private equityand distressed assets and reflects a credit that offsets certain allocations ofinterest expense to our Institutional Securities businesses. Total revenuesfrom Other Institutional Securities increased $316 million to$446 million for the year ended December 31, 2004, primarilyreflecting a credit that offsets certain allocations of interest to ourInstitutional Securities businesses and an increase in legacy private equityrevenues of $82 million as a result of our consolidation, primarily underFIN 46R, of certain private equity funds. Net income was unaffected by theconsolidation of private equity funds as offsetting minority interests andrelated operating expenses were recorded in the consolidated statements ofoperations. See Note 4 of the consolidated financial statements in Part II,Item 8 for more information.

*Year Ended December 31,2003 Compared to Year Ended December 31, 2002*

Totalrevenues from Other Institutional Securities were $130 million for theyear ended December 31, 2003 compared to a loss of $417 million for theyear ended December 31, 2002, primarily reflecting write-downs taken in2002 related to legacy private equity and distressed assets.

***Wealth & Asset Management***

The Wealth & Asset Management segmentconsists of Alternative Capital, which includes the private equity and privatefunds businesses, and Private Client Services. The private equity business makes privately negotiated investments and actsas an investment advisor for private equity funds. The private funds businessraises private capital, primarily from institutional investors, for directinvestment by venture capital, management buyout and other investment firms ina variety of fund types. Private Client Services is a financial advisorybusiness serving high-net-worth individuals and corporate investors with a widerange of CSFB and third-party investment management products and services.

Thefollowing table sets forth certain financial information of the Company’sWealth & Asset Management segment:
| ** **                                      | ** ** | **For the Year Ended December 31,**                                 | ** ** |
|-------------------------------------------------|------------|----------------------------------------------------------------------------------------------|------------|
| ** **                                      | ** ** | **  **     2004        | ** ** | **    **   2003        | ** ** | **    **   2002        | ** ** |
| ** **                                      | ** ** | **(In millions)**                                                                       | ** ** |
| Revenues:                                       |       |                                                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Principal transactions—net                 |       |                                                                                         | $          | 952 |   |   |   | $ | 184 |   |   |   | $ | 60 |   |   |
| Investment banking and advisory                 |       |                                                                                         | 132        |   |   |   | 99 |   |   |   | 144 |   |   |
| Asset management and other fees                 |       |                                                                                         | 328        |   |   |   | 322 |   |   |   | 414 |   |   |
| Interest and dividends, net of interest expense |       |                                                                                         | 48         |   |   |   | 50 |   |   |   | 40 |   |   |
| Other                                           |       |                                                                                         | 21         |   |   |   | 106 |   |   |   | 495 |   |   |
| Total net revenues                              |       |                                                                                         | 1,481      |   |   |   | 761 |   |   |   | 1,153 |   |   |
| Total expenses                                  |       |                                                                                         | 545        |   |   |   | 750 |   |   |   | 682 |   |   |
| Income(1)                                       |       |                                                                                         | 936        |   |   |   | 11 |   |   |   | 471 |   |   |
| Minority  interests(2)                          |       |                                                                                         | 563        |   |   |   | — |   |   |   | — |   |   |
| Income after minority  interests(3)             |       |                                                                                         | $          | 373 |   |   |   | $ | 11 |   |   |   | $ | 471 |   |   |

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(1)      Income from continuing operations before provision forincome taxes, minority interests, discontinued operations and cumulative effectof a change in accounting principle.

(2)      Represents minority interest net revenues related tothe Company’s consolidation of certain private equity funds primarily under FIN46R, net of related operating expenses.

(3)      Income from continuing operations before provision forincome taxes, discontinued operations and cumulative effect of a change inaccounting principle.

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*Year Ended December 31,2004 Compared to Year Ended December 31, 2003*

The Wealth &Asset Management segment recorded income after minority interests of$373 million for the year ended December 31, 2004 compared to $11million for the year ended December 31, 2003. Total net revenues increased$720 million to $1.5 billion for the year ended December 31, 2004,reflecting $567 million of revenues as a result of our consolidation,primarily under FIN 46R, of certain private equity funds and increases in netinvestment gains from certain private equity investments. Net income wasunaffected by the consolidation of private equity funds as offsetting minorityinterests and related operating expenses were recorded in the consolidatedstatements of operations. See Note 4 of the consolidated financial statementsin Part II, Item 8 for more information. The2003 results included a pre-tax gain of $115 million from the sale of theJapanese online broker and a pre-tax loss of $200 million relating to the write-down ofintangible assets from the HNW business, which was reflected as an increase inexpenses for the year ended December 31, 2003. Excluding theeffects of the consolidation of certain private equity funds and the gain onthe sale from the Japanese online broker, total net revenues increased $268million, or 41%, reflecting net investment gains from certain private equityinvestments and increased placement fees from our private funds business.

*Year Ended December 31,2003 Compared to Year Ended December 31, 2002*

The Wealth &Asset Management segment recorded income after minority interests of$11 million for the year ended December 31, 2003 compared to$471 million for the year ended December 31, 2002 as revenues decreased $392 million, or 34%,to $761 million primarily due to the pre-taxgain in 2002 of $528 million from the sale of the three broker-dealers.The 2003 results included a pre-tax gain of $115 million from the sale of theJapanese online broker. Excluding the gain from the sale of the Japanese onlinebroker in 2003 and the gain on the sale of the three broker-dealers in 2002,total net revenues for the Wealth & Asset Management segmentincreased 3%, primarily reflecting increased private equity revenues, offset inpart by decreased revenues from Private Client Services and private funds. The results for the Wealth & AssetManagement segment include the pre-tax loss of $200 million relating tothe write-down of intangible assets from the HNW Business, which was reflectedas an increase in expenses for the year ended December 31, 2003.

***Alternative Capital, Private Client Services and Other***

The following table setsforth the Alternative Capital, Private Client Services and Other revenues forthe Wealth & Asset Management segment:
| ** **                               | ** ** | **For the Year Ended  December 31,** | ** ** |
|------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                               | ** ** | **2004**(1)                                              | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                               | ** ** | **(In millions)**                                   | ** ** |
| Alternative Capital                      |       | $                                                        | 1,240      |   | $ | 426 |   | $ | 346 |   |
| Private Client Services                  |       | 219                                                      |       | 232 |   | 312 |   |
| Other                                    |       | 22                                                       |       | 103 |   | 495 |   |
| Total Wealth & Asset Management |       | $                                                        | 1,481      |   | $ | 761 |   | $ | 1,153 |   |

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(1)      Revenues reflect the allocation of certain interestexpense in the amount of $12 million to Alternative Capital and PrivateClient Services. See “—Results bySegment” above.

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*Year Ended December 31,2004 Compared to Year Ended December 31, 2003*

Revenues forAlternative Capital consist of management and placement fees, netinvestment gains and losses, which include realized and unrealized gains andlosses, including carried interest, net interest and other revenues fromprivate equity and private funds. Revenues for Alternative Capital increased$814 million to $1.2 billion, primarily reflecting$567 million of revenues as a result of our consolidation, primarily underFIN 46R, of certain private equity funds. Net income was unaffected by theconsolidation of private equity funds as offsetting minority interests andrelated operating expenses were recorded in the consolidated statements ofoperations. See Note 4 of the consolidated financial statements in Part II,Item 8 for more information. Excluding the effect of the consolidation ofcertain private equity funds, total net revenues increased $247 million, or58%, reflecting net investment gains from certain private equity investmentsand increased placement fees from our private funds business.

Revenues for Private Client Services decreased 6% to$219 million, primarily reflecting lower net interest income as a resultof increases in allocated interest expense. The decrease was partially offsetby a modest increase in fee revenue from assets under management.

Other revenues decreased79% to $22 million compared to 2003, reflecting the pre-tax gain of$115 million from the sale of the Japanese online broker in 2003.

*Year Ended December 31,2003 Compared to Year Ended December 31, 2002*

Revenues for AlternativeCapital for the year ended December 31, 2003 were $426 million, anincrease of 23% compared to 2002 net revenues of $346 million, primarilyreflecting increases in net investment gains on private equity investments.

Revenues for Private Client Services decreased 26% forthe year ended December 31, 2003 to $232 million, reflecting declinesin new issuance revenues from equity capital markets and lower commissionrevenues as a result of lower transaction volumes and reduced fee revenue dueto a decline in assets under management.

Other revenues decreased79% to $103 million compared to 2002, primarily due to the pre-tax gain in 2002of $528 million from the sale of the three broker-dealers. The 2003 resultsincluded a pre-tax gain of $115 million from the sale of the Japanese onlinebroker.

**Expenses**

The normal operating cost structure of each of oursegments is broadly similar to that of the Company as a whole. For this reason,the discussion of expenses is presented on a company-wide basis.

Thefollowing table sets forth employee compensation and benefits expenses, otherexpenses and total expenses of the Company:
| ** **                          | ** ** | **For the Year Ended  December 31,** | ** ** |
|-------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                          | ** ** | **2004**                                                 | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                          | ** ** | **(In millions)**                                   | ** ** |
| Employee  compensation and benefits |       | $                                                        | 3,335      |   | $ | 2,740 |   | $ | 2,997 |   |
| Other expenses                      |       | 1,180                                                    |       | 1,688 |   | 2,447 |   |
| Total expenses                      |       | $                                                        | 4,515      |   | $ | 4,428 |   | $ | 5,444 |   |

 

As is normal in thefinancial services industry, a significant portion of compensation expense is abonus amount awarded shortly after year end. Our bonuses are based upon anumber of factors, including the profitability of each business segment andmarket conditions. From time to time, we guarantee certain minimum compensationlevels to attract new employees or to retain existing employees. A portion ofour 

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bonus isin the form of non-cash incentive compensation, which may include awards of CSGshares under a CSG share plan, options to acquire shares and ROE units tied toCSFB’s return on equity, generally over a three-year period. In the thirdquarter of 2003, we introduced a general three-year vesting period for shareawards, in line with our long-term service and retention strategy and industrypractice, and we increased the amount of compensation in the form of sharesrather than options. For additional information on our share-basedcompensation, see Notes 1, 3 and 15 of the consolidated financial statements inPart II, Item 8.

***Year Ended December 31, 2004 Compared to YearEnded December 31, 2003***

Total expenses increased $87 million, or 2%, to $4.5billion for the year ended December 31, 2004 compared to the year ended December 31,2003. The increase was principally due to higher employee compensation andbenefits expenses, which increased $595 million, or 22%, reflecting the changein vesting of share awards in 2003 and increases in incentive compensation dueto improved net revenues, higher severance expenses, primarily related to therestructuring of the Alternative Capital business, and increased base salaryexpenses, offset in part by decreases in accruals for certain deferredcompensation plans. Compensation expense in 2003 would have been$406 million higher if we had not changed the vesting for share awards in2003. Included in compensation and benefits expense is $289 million and $88million for the year ended December 31, 2004 and 2003, respectively,related to business activities conducted by Company employees on behalf of CSGaffiliates outside of the Company and includes most of the severance costsrelated to the restructuring of the Alternative Capital business in 2004. Theseexpenses were charged to these affiliates and are reflected as a reduction ofour other operating expenses. Excluding these expenses, compensation andbenefits expense increased $394 million, or 15%.

Other expenses consistprincipally of occupancy and equipment rental; brokerage, clearing and exchangefees; communications; professional fees; merger-related costs ofretention awards and all other operating expenses. Other expenses decreased 30%for the year ended December 31, 2004 compared to the year ended December 31,2003, primarily as a result of reductions in other operating expenses andmerger-related costs. The decrease in other operating expenses reflects higheraffiliate service fees that are treated as a reduction in other operatingexpenses, the $200 million pre-tax loss relating to the write-down ofintangible assets from the HNW business in 2003 and lower litigation chargesreflecting receipt of an insurance settlement in 2004. The decline inmerger-related costs reflects the completion of the retention awards in 2004.

***Year Ended December 31, 2003 Compared to YearEnded December 31, 2002***

Total expenses decreased $1.0 billion, or 19%, to $4.4billion for the year ended December 31, 2003 compared to the year ended December 31,2002. The decrease was principally due to reduced litigation charges, lowercompensation expenses and substantial completion of retention awards, partiallyoffset by the $200 million pre-tax loss relating to the write-down ofintangible assets from the HNW Business. Excluding this write-down and $600million of litigation charges in 2002 relating to the agreement in principlewith U.S. regulators and private litigation involving research analystindependence and other matters discussed below, expenses declined 13%.

Employee compensation and benefits declined 9% for theyear ended December 31, 2003 compared to the year ended December 31,2002 due to reduced headcount resulting in lower salary and incentivecompensation expense and the effect of the change in vesting for share awards. Ifwe had not changed the vesting, compensation expense for 2003 would have been$406 million higher. Employee compensation and benefits expenses for 2002included a charge in the fourth quarter of $150 million for severance inconnection with a CSFB cost-reduction initiative. The declines were partiallyoffset by increases in employee-elected deferred compensation tied to certainequity indices and ROE units, both of which increased during 2003. No liabilitywas accrued for ROE units for the year ended December 31, 2002. Includedin compensation and benefits expense is $88 million and $109 million for theyear ended 

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December 31, 2003 and2002, respectively, related to business activities conducted by CSG affiliatesoutside of the Company. These expenses were charged to these affiliates and arereflected as a reduction of our other operating expenses.

Other expenses decreased31% for the year ended December 31, 2003 compared to the year ended December 31,2002, primarily as a result of lower litigation charges, reduced headcount andreduced merger-related costs, reflecting the substantial completion ofretention awards in the second quarter of 2003. The reduction in litigationcharges reflects a release of reserves related to the settlement of certainAmeriserve litigation in 2003 and the fourth quarter 2002 charges of$150 million for the agreement in principle with various U.S. regulatorsrelating to research analyst independence and the allocation of IPO shares tocorporate executives and directors and $450 million for private litigationinvolving research analyst independence, certain IPO allocation practices,Enron and other related litigation. These decreases were partially offset bythe $200 million pre-tax loss relating to the write-down of intangible assetsfrom the HNW Business in 2003.

**Provision for Taxes**

***Year Ended December 31, 2004 Compared to YearEnded December 31, 2003***

The provision for income taxes from continuingoperations for the years ended December 31, 2004 and 2003 was$397 million and $244 million, respectively. Excluded from theprovision for income taxes for the year ended December 31, 2003 was aprovision of $485 million from discontinued operations and a benefit of$5 million for the year ended December 31, 2003 related to thecumulative effect of a change in accounting principle as a result of ouradoption of FIN 46. See Note 4 of the consolidated financial statements in Part II,Item 8.

The effective tax ratefrom continuing operations changed from a provision of 43.0% in 2003 to aprovision of 21.8% in 2004. The change in the effective tax rate was dueprimarily to non-taxable revenues from certain private equity fundsconsolidated primarily under FIN 46R and lower state and local income taxexpense. See Note 17 of the consolidated financial statements in Part II,Item 8.

***Year Ended December 31, 2003 Compared to YearEnded December 31, 2002***

The provision (benefit) for income taxes fromcontinuing operations for the years ended December 31, 2003 and 2002 was$244 million and $(135) million, respectively. Excluded from theprovision (benefit) for income taxes for the years ended December 31, 2003and 2002 was a provision of $485 million and $47 million,respectively, from discontinued operations and a benefit of $5 million forthe year ended December 31, 2003 related to the cumulative effect of achange in accounting principle as a result of our adoption of FIN 46. See Note4 of the consolidated financial statements in Part II, Item 8.

The effective tax ratefrom continuing operations changed from a benefit of 28.2% in 2002 to aprovision of 43.0% in 2003. The change in the effective tax rate was dueprimarily to operating losses in 2002. See Note 17 of the consolidatedfinancial statements in Part II, Item 8.

**Employee BenefitPlan**

We participate in a non-contributory defined benefitpension plan for certain individuals employed on or before December 31,1999. For the years ended December 31, 2004, 2003 and 2002, we contributed$220 million, $38 million and $41 million, respectively, to the definedbenefit pension plan. In 2003, 2002 and 2001, the Company had an unfundedaccumulated benefit obligation in this pension plan and recorded after-tax minimumpension liability adjustments in accumulated other comprehensive loss in theconsolidated statements of financial condition. As of September 30, 2004,the valuation date of the pension plan, the fair value of the plan assets wasgreater than the accumulated benefit obligation. Accordingly, we 

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reversed the minimumpension liability adjustments recorded in 2003, 2002 and 2001 resulting in anincrease to stockholder’s equity of $150 million.

To determine ourobligations with respect to the pension plan, we are required to make certainactuarial assumptions and estimates, including the expected rate of return onplan assets and the discount rate. The assumption of the expected long-termrate of return on plan assets is based on historical real rates of return of thevarious asset classes, weighted based on the target asset allocationpercentages for each major category of plan assets. The expected long-term rateof return on plan assets was 8.5% for 2004 and 2003. The discount rate is usedto discount the liability for expected future benefit payments and isdetermined using certain AA and AAA bond indices. The discount rate used indetermining the projected benefit obligation for the defined benefit pensionplan was 6.00% for 2004 and 2003. See Note 16 of the consolidated financialstatements in Part II, Item 8 for additional information, includingquantitative data and recent changes relating to the defined benefit pensionplan and other plans.

**LIQUIDITY ANDCAPITAL RESOURCES**

**LiquidityManagement Oversight**

We believe thatmaintaining access to liquidity is fundamental for firms operating in thefinancial services industry. We have therefore established a comprehensiveprocess for the management and oversight of our capital, liquidity and fundingstrategies. CSFB’s Capital Allocation and Risk Management Committee, or CARMC,has primary oversight responsibility for these functional disciplines. CARMCperiodically reviews and approves our liquidity management policies and targetsand reviews our liquidity position and other key risk indicators. The CorporateTreasury department is responsible for the management of capital, liquidity,long-term funding and a portion of the Company’s short-term funding, as well asrelationships with creditor banks and fixed income investors. It also maintainsregular contact with rating agencies and regulators on these and other issues.See “Liquidity Risk” in “Business—Certain Factors That May Affect OurResults of Operations” in Part I, Item I.

**LiquidityManagement Organization**

We are an indirect subsidiary of Credit Suisse FirstBoston, a Swiss bank. Consequently, our liquidity management structure operatesat two levels, the “Non-Bank Franchise” and the “Bank Franchise”.

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, CSFB LLC and CSFB Capital LLC, whichhold over 85% of our consolidated assets.

Second, our regulatedsubsidiaries have access to unsecured funding from Credit Suisse First Boston,the “Bank Franchise”, as well as secured funding via the repurchase andsecurities lending markets. Historically, Credit Suisse First Boston’s bankdeposit base has proven extremely stable and is comprised of a diversifiedcustomer base, including retail deposits, accessed via its sister Swiss bank,Credit Suisse, as well as wholesale and institutional deposits accesseddirectly by Credit Suisse First Boston. In a stressed liquidity environment,our broker-dealers would directly access the secured funding markets to replaceunsecured borrowings from Credit Suisse First Boston.

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**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 InstitutionalSecurities 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 First Boston,the central funding entity of the Bank Franchise. Significant portions of ourassets held in the Bank Franchise are highly liquid, with the majorityconsisting of securities inventories and collateralized receivables, whichfluctuate depending 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 primarilysecured by U.S. government and agency securities and marketable corporate debtand equity 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 First Boston’s borrowings in the wholesale andinstitutional deposit markets, as well as from its Swiss bank affiliate, CreditSuisse, which has access to retail deposits.

Assets not funded by CSFB’s Bank Franchise includeless liquid assets such as certain mortgage whole loans, distressed securities,high-yield debt securities, asset-backed securities and private equityinvestments. These less liquid assets are principally held in the Non-BankFranchise. These assets may be relatively illiquid at times, especially duringperiods of market stress. Mortgage whole loans, 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, LIBOR or other money market indices, whilelong-term funding is generally obtained at fixed and floating rates related toU.S. Treasury securities or LIBOR, depending upon prevailing market conditions.We continually aim to broaden our funding base by geography, investor andfunding 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 December 31, 2004 and 2003, ourtotal assets were $275.8 billion and $241.6 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 

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plus a conservativeforecast of anticipated contingent commitments. Our objective, as mandated byCARMC, is to ensure that the liquidity barometer for each of the fundingfranchises is maintained at a sufficient level so as to ensure that, in theevent we are unable to access unsecured funding, we will have sufficientliquidity for an extended period. We believe this will enable us to carry outour 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 highlyliquidity event sensitive such that we believe access to these markets could bequickly diminished. Conversely, the Bank Franchise’s retail and institutionaldeposit base is measured using contractual maturities that have been adjustedto reflect behavioral stability. Historically, this core deposit base hasproven extremely stable, even in stressed markets. The conservative parameterswe use in establishing the time horizons in the funding franchises assume thatassets will not be sold to generate cash, that no new unsecured debt can beissued, and that funds that are assumed to be trapped because of regulatoryrestrictions are not available to be distributed upstream in a stressedliquidity environment. The adjusted market value of unencumbered assetsincludes a conservative reduction from market value, or “haircut,” reflectingthe amount 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 notmaterially impact the liquidity planning at the Company or Non-Bank Franchise,as these are incurred by other CSFB affiliated operating entities that are notconsolidated under the Company. These items, which are taken into account inour liquidity planning for the Bank Franchise, include:

·       creditrating-related collateralization requirements (CSFB’s derivatives business isprimarily conducted in Credit Suisse First Boston International);

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

·       committedcredit facilities to clients that are currently undrawn (CSFB’s corporatelending business is conducted in Credit Suisse First Boston).

The Bank Franchise maintains a large secondary sourceof liquidity, principally through CSFB’s principal broker-dealers andother regulated operating entities. The Bank Franchise has historically beenable to access significant liquidity through the secured funding markets(securities sold under agreements to repurchase, securities loaned and othercollateralized financing arrangements), even in periods of market stress. Wecontinually monitor overall liquidity by tracking the extent to whichunencumbered marketable assets and alternative unsecured funding sources exceedboth contractual obligations and anticipated contingent commitments.

As of December 31, 2004, we estimate that theNon-Bank Franchise held cash, other liquidity reserves and marginable assets,net of haircuts, of approximately $5.8 billion versus estimated maturingobligations and commitments out to one year of $5.3 billion. Also, as of December 31,2004, we estimate that the Bank Franchise held cash, other liquidity reservesand marginable assets, net of haircuts, of approximately $102 billion versusestimated maturing obligations, commitments and contingent funding requirementsout to 120 days of $80 billion.

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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 Corporate Treasury to activate the contingency plan. The Liquidity CrisisCommittee’s membership includes senior business line, funding and financedepartment management, and this committee would meet frequently throughout thecrisis to ensure our plans are executed.

**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 First Boston), property, goodwill andintangibles, deferred tax assets, private equity and other long-terminvestments.

Our cash capital at December 31,2004 totaled $36.9 billion compared with $31.7 billion at December 31,2003. The increase in cash capital of $5.2 billion was primarily due to anincrease in long-term debt and higher stockholder’s equity from retainedearnings. At December 31, 2004, cash capital was substantially in excessof our cash capital requirements.

**ContractualObligations and Commitments**

Thefollowing table sets forth future cash payments on our contractual obligationspursuant to long-term borrowings and operating leases as of December 31,2004: 
| ** **                     | ** ** | **Contractual Obligations Expiration Per Period** | ** ** |
|--------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                     | ** ** | **Less than  1 year**                                       | ** ** | **1-3  years** | ** ** | **4-5  years** | ** ** | **Over  5 years** | ** ** | **Total** | ** ** |
| ** **                     | ** ** | **(In millions)**                                                | ** ** |
| Long-term  borrowings          |       |                                                                  | $          | 3,137 |   |   | $ | 6,950 |   | $ | 5,801 |   | $ | 13,053 |   | $ | 28,941 |   |
| Operating leases               |       |                                                                  | 154        |   |   | 287 |   | 261 |   | 1,078 |   | 1,780 |   |
| Total contractual  obligations |       |                                                                  | $          | 3,291 |   |   | $ | 7,237 |   | $ | 6,062 |   | $ | 14,131 |   | $ | 30,721 |   |

 

Our long-term borrowings are unsecured. As of December 31,2004, the weighted average maturity of our long-term borrowings wasapproximately 5.4 years. Our lease obligations are primarily for our principaloffices in New York City and other locations. The operating lease obligationsin the table above include $6 million in contractual obligations relatedto certain information technology, equipment leases and software licenses andexclude $330 million in sublease revenue and executory costs such asinsurance, maintenance and taxes of $553 million. We had no capital leaseor purchase obligations as of December 31, 2004.

Wehave commitments under a variety of arrangements that are not recorded asliabilities in our consolidated statements of financial condition. Thesecommitments are in addition to guarantees and 

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other arrangements discussed in “—Off-Balance Sheet Arrangements.”The following table sets forth certainof our long-term commitments, including the current portion as of December 31,2004:
| ** **                        | ** ** | **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 |   |   |   | $ | — |   |   |   | $ | — |   |   |   | $ | 25 |   |   |
| Private equity(2)                 |       |                                                    | 170        |   |   |   | 171 |   |   |   | 95 |   |   |   | 608 |   |   |   | 1,044 |   |   |
| Forward  agreements(3)            |       |                                                    | 7,437      |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 7,437 |   |   |
| Unfunded mortgage  commitments(4) |       |                                                    | 10         |   |   |   | 56 |   |   |   | — |   |   |   | — |   |   |   | 66 |   |   |
| Total commitments                 |       |                                                    | $          | 7,617 |   |   |   | $ | 252 |   |   |   | $ | 95 |   |   |   | $ | 608 |   |   |   | $ | 8,572 |   |   |

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(1)      In the ordinary course of business, we maintain certainstandby resale agreement facilities that commit us to enter into resaleagreements with customers at current market rates.

(2)      Represents commitments to invest in various partnershipsthat make private equity and related investments in various portfolio companiesor other private equity funds.

(3)      Represents commitments to enter into forward resaleagreements for securities purchased under agreements to resell and forwardagreements to borrow securities.

(4)      We enter into commitments to extend credit,predominantly at variable interest rates, in connection with certain commercialmortgage activities.

For information on theseand other material commitments, see Notes 5, 8, 9 and 10 of the consolidatedfinancial statements in Part II, Item 8. For information on commitmentsunder our pension arrangements, see Note 16 of the consolidated financialstatements in Part II, Item 8.

Thefollowing table sets forth our commercial paper and other short-term unsecuredborrowings:
| ** **                | ** ** | **December 31,  2004** | ** ** | **December 31,  2003** | ** ** |
|---------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                | ** ** | **(In millions)**      | ** ** |
| Bank loans                |       |                        | $          | 350                         |       |   |   | $ | 450 |   |   |
| Commercial paper          |       |                        | 1,249      |                        |       |   | 1,052 |   |   |
| Loans from  affiliates(1) |       |                        | 20,085     |                        |       |   | 14,482 |   |   |
| Total                     |       |                        | $          | 21,684                      |       |   |   | $ | 15,984 |   |   |

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(1)      We have significant financing transactions with CreditSuisse First Boston and certain of its subsidiaries and affiliates. See “—RelatedParty Transactions”and Note 3 of the consolidated financial statements in Part II, Item 8.

**Credit Facilities**

As part of our liquiditymanagement strategy, we moved from syndicated unsecured facilities to bilateralsecured facilities. As of December 31, 2004, Credit Suisse First BostonLLC, or CSFB LLC, maintained with third parties four 364-day committedsecured revolving credit facilities totaling $1.5 billion, with twofacilities totaling $450 million maturing in February 2005, onefacility for $500 million maturing in July 2005 and one facility for $500 millionmaturing in November 2005. We renewed the two facilities that matured in February 2005and increased the total of these facilities to $500 million, and we expect torenew the other facilities as they mature. In March 2005, we entered intoa facility totaling $500 million maturing in March 2006. Thesefacilities require CSFB LLC to pledge unencumbered marketable securities tosecure any borrowings. Borrowings under each facility would bear interest atshort-term rates related to either the Federal Funds rate or LIBOR and can beused for general corporate purposes. The facilities contain customary covenantsthat we believe will not impair our ability to obtain funding. As of December 31,2004, no borrowings were outstanding under any of the facilities. We may fromtime to time enter into additional secured revolving credit facilities as partof our liquidity management.

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**Long-term Funding**

We issue long-term debtthrough U.S. and Euromarket medium-term note programs, as well as syndicatedand privately placed offerings around the world.

Under our currentlyeffective $15.0 billion shelf registration statement on file with the SEC,which was established in June 2004 and allows us to issue from time totime senior and subordinated debt securities and warrants to purchase suchsecurities, we had as of March 16, 2005 $11.5 billion available forissuance.

Under our$5.0 billion Euro Medium-term Note program, which was established in July 2001and allows us to issue from time to time notes, we had as of March 16,2005 $1.2 billion available for issuance.

For the year ended December 31,2004, in order to extend the maturity profile of our debt we issued $1.1billion in medium-term notes, $1.0 billion of 5.125% notes due 2014 and $1.4billion of 4.7% notes due 2009 off of our then-existing $10.0 billion shelfregistration statement. In addition we issued $500 million of floatingrate notes due 2010, $1.0 billion of 4.125% notes due 2010 and$2.0 billion of 4.875% notes due 2015 under our $15.0 billion shelf registrationstatement.

During the year ended December 31,2004, we repaid approximately $2.2 billion of medium-term notes and$68 million of structured notes.

**Credit Ratings**

Our access to the debt capital markets and ourborrowing costs depend significantly on our credit ratings. These ratings areassigned by agencies, which may raise, lower or withdraw their ratings or placeus on “credit watch” with positive or negative implications at any time. Creditratings are important to us when competing in certain markets and when seekingto engage in longer-term transactions, including OTC derivatives. We believeagencies consider several factors in determining our credit ratings, includingearnings performance, business mix, market position, financial strategy, levelof capital, risk management policies and practices and management team, and ouraffiliation with CSFB and CSG, in addition to the broader outlook for thefinancial services 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 December 31,2004.

As of March 16,2005, 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        |   |   | Stable |   |

 

In October 2004,Fitch Ratings changed our ratings outlook, as well as the ratings outlook forCredit Suisse First Boston and CSG, from negative to stable.

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**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, CSFB LLC, is a registered broker-dealer, registered futurescommission merchant and member firm of the NYSE. Accordingly, CSFB LLC issubject to the minimum net capital requirements of the SEC and the CFTC. Underthe alternative method permitted by SEC Rule 15c3-1, the required netcapital 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 non-customeraccounts. At December 31, 2004, the CFTC’s minimum net capital requirementwas greater than the SEC’s minimum net capital requirement. As of December 31,2004, CSFB LLC’s net capital of approximately $3.2 billion was 60.5% ofaggregate debit balances and in excess of the CFTC’s minimum requirement byapproximately $3.0 billion.

Our OTC derivatives dealer subsidiary, CSFB CapitalLLC, is also subject to the uniform net capital rule, but computes its netcapital requirements based on value at risk pursuant to Appendix F of Rule 15c3-1.As of December 31, 2004, CSFB Capital LLC’s net capital of$326 million, allowing for market and credit risk exposure of$59 million and $41 million, respectively, was in excess of theminimum net capital requirement by $306 million. CSFB Capital LLC operatespursuant to the (k)(2)(ii) exemptive provisions of Rule 15c3-3 of theExchange Act, and, accordingly, all customer transactions are cleared throughCSFB LLC on a fully disclosed basis.

As of December 31,2004, our subsidiaries complied with all applicable regulatory capital adequacyrequirements.

**Cash Flows**

Our consolidated statements of cash flows classifycash flows into three broad categories: cash flows from operating activities,investing activities and financing activities. These statements should be readin conjunction with “—Related Party Transactions”as well as Note 3 of the consolidated financial statements in Part II,Item 8.

We present the consolidated statements of cash flowsfor the years ended December 31, 2003 and 2002 as if Pershing were part ofour continuing operations until its sale in May 2003 and the assets andliabilities of Pershing as of December 31, 2002 were not presented asassets held for sale and liabilities held for sale.

Our cash flows are complexand frequently bear little relation to our net income and net assets,particularly because the Company is a wholly owned subsidiary of CSG, a globalfinancial institution that may choose to allocate cash among its subsidiariesfor reasons independent of the Company’s activities. As a result, we believethat traditional cash flow analysis is not a particularly useful method toevaluate our liquidity position as discussed above. Cash flow analysis may,however, assist in highlighting certain macro trends and strategic initiativesin our business.

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***For the Year Ended December 31, 2004***

Cash and cash equivalents increased $393 million to$727 million as of December 31, 2004. Cash used in operating activitieswas $5.9 billion. The change in cash used in operating activitiesreflected a net increase in operating assets and operating liabilities of$7.7 billion, which occurred in the normal course of operations as aresult of changes in customer needs, market conditions and proprietary tradingand other strategies.

Cash of $3.3 billion was used for investingactivities. The Company provided funding to its affiliates, resulting inincreases in receivables from parent and affiliates of $3.2 billion.

Cash provided by financingactivities was $9.6 billion. The changes are due to decreases in netcollateralized financing arrangements of $759 million and increases of$5.7 billion in short-term borrowings and an increase of $7.0 billionin long-term borrowings used primarily to fund normal operating activities,provide funding to affiliates as part of the Company’s investing activities andrepay $2.2 billion in long-term borrowings.

***For the Year Ended December 31, 2003***

Cash and cash equivalents decreased $146 million to$334 million as of December 31, 2003. Cash used in operating activitieswas $8.8 billion. The change in cash used in operating activitiesreflected a net increase in operating assets and operating liabilities of$9.5 billion, which occurred in the normal course of operations as a resultof changes in customer needs, market conditions and proprietary trading andother strategies.

Cash of $1.1 billion was used for investingactivities. The Company provided funding to its affiliates, resulting inincreases in receivables from affiliates of $3.5 billion. We received $2.0billion in cash as a result of the Pershing sale, $500 million in cash as aresult of the sale of DLJ International Group Limited and $170 million in cashas a result of the sale of our Japanese online broker.

Cash provided by financingactivities was $9.7 billion. The changes are due to increases in netcollateralized financing arrangements of $4.1 billion, an increase of$4.1 billion in short-term borrowings used primarily to fund normaloperating activities and an increase of $5.0 billion in long-termborrowings to meet cash needs of operating activities, to provide funding toaffiliates as part of the Company’s investing activities and to repay$3.6 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) under material variableinterests in unconsolidated entities for the purpose of providing financing,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 we may have an indirect guarantee of theindebtedness of others. Guarantees we provide include customaryindemnifications to 

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purchasers in conjunctionwith the sale of assets or businesses; to investors in private equity fundssponsored by the firm regarding potential obligations of employees to returnamounts previously paid as carried interest; and to investors in our securitiesand other arrangements to provide “gross up” payments if there is a withholdingor deduction because of a tax assessment or other governmental charge. Fromtime to time, we also guarantee the obligations of subsidiaries of CSG that arenot our consolidated subsidiaries, and these guarantees are included in thescope of the disclosure requirements of FIN No. 45, “Guarantor’sAccounting and Disclosure Requirements for Guarantees, Including IndirectGuarantees of Indebtedness 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 for the fair value of guaranteed obligations for guarantees issued oramended after December 31, 2002. The recognition of these liabilities didnot have a material effect on our financial position or results of operations.For disclosure of our estimable maximum payment obligations under certainguarantees and related information, see Note 10 of the consolidated financialstatements in Part II, Item 8.

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

We originate and purchase commercial and residentialmortgages and purchase other debt obligations such as automobile loans andstudent loans and sell these assets directly or through affiliates to specialpurpose entities that are, in most cases, qualified special purpose entities,or QSPEs. These QSPEs issue securities that are backed by the assetstransferred to the QSPEs and pay a return based on the returns on those assets.Investors in these mortgage-backed and asset-backed securities typically haverecourse to the assets in the QSPE. The investors and the QSPEs have norecourse to our assets.

These QSPEs are generally sponsored by our subsidiaries.Our principal broker-dealer subsidiary, CSFB LLC, underwrites and makesmarkets in these mortgage-backed and asset-backed securities. Under SFAS No. 140,“Accounting for Transfers and Servicing of Financial Assets and Extinguishmentsof Liabilities, a replacement of FASB Statement No. 125,” orSFAS 140, a QSPE is not required to be consolidated with the transferor.Our mortgage-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.

We may retain interests inthese securitized assets if CSFB LLC holds the assets in connection with itsunderwriting or market-making activities. Retained interests insecuritized financial assets are included at fair value in the consolidatedstatements of financial condition. Any changes in the fair value of theseretained interests are recognized in the consolidated statements of operations.We engage in these securitization activities to meet the needs of clients aspart of our fixed income activities, to earn fees and to sell financial assets.These securitization activities do not provide a material source of ourliquidity, capital resources or credit risk or market risk support. See Note 4of the consolidated financial statements in Part II, Item 8, whichincludes quantitative information on our securitization activities and retainedinterests.

**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 transferred by us directly, or indirectly throughaffiliates, to QSPEs or to VIEs that issue CDOs. CDOs are securities backed bythe assets transferred to the VIE and pay a return based on the returns onthose assets. Investors typically have recourse to the assets in the CDO VIE. Theinvestors and the CDO VIE have no recourse to the Company’s assets. CSFB 

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LLC structures,underwrites and makes a market in these CDOs, and we may have retainedinterests in these CDOs in connection with CSFB LLC’s underwriting and market-makingactivities. We engage in these CDO transactions to meet the needs of clients,to earn fees and to sell financial assets. These CDO transactions do notprovide a material source of our liquidity, capital resources or credit risk ormarket risk support.

FIN 46 requires us to consolidate all VIEs for whichwe are the primary beneficiary which is defined as the entity that will absorba majority of expected losses, receive a majority of the expected residualreturns, or both. In December 2003, the FASB modified FIN 46, through theissuance of FIN 46R, to address various implementation issues that had arisensince the issuance of FIN 46 and to provide companies the option to defer theadoption of FIN 46 for certain VIEs to periods ending after March 15, 2004.As of December 31, 2004 and 2003, we consolidated CDO VIEs for which weare the primary beneficiary. We also have interests in CDO VIEs that are notrequired to be consolidated because we are not the primary beneficiary.

As of January 1, 2004,the Company consolidated primarily under FIN 46R certain private equity fundsthat are managed by the Company. SeeNotes 1 and 4 of the consolidated financial statements in Part II,Item 8.

**RELATED PARTYTRANSACTIONS**

CSG, through CSFBI, owns all of our outstanding votingcommon stock. We are involved in significant financing and other transactions,and have significant related party balances, with Credit Suisse First Bostonand certain affiliates. We generally enter into these transactions in the ordinarycourse of business and believe that these transactions are on market terms thatcould be obtained from unrelated third parties. See “—Derivatives” and Notes 3and 6 of the consolidated financial statements in Part II, Item 8 for moreinformation.

Certain of our directors,officers and employees and those of our affiliates and their subsidiariesmaintain margin accounts with CSFB LLC 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 variousprivate 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. CSFB LLC and other affiliated broker-dealers,from time to time and in the ordinary course of business, enter into, asprincipal, transactions involving the purchase or sale of securities from or tosuch directors, officers and employees and members of their immediate families.

**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 and investmentsin partnerships that make private equity and related investments in variousportfolio companies and funds. These investments are primarily in unlisted orilliquid equity or equity-related securities and are carried at fairvalue based on a number of factors. As of December 31, 2004 and 2003, wehad investments in private equity and other long-term investments of$3.1 billion and $1.1 billion, 

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respectively,and we had commitments to invest up to an additional $1.0 billion as of December 31,2004. The increase in private equity and other long-term investments reflectsour consolidation primarily under FIN 46R of certain private equity funds. See “Business—Productsand Services—Wealth & Asset Management—Alternative Capital—Privateequity group” in Part I, Item 1, “—Critical Accounting Policies andEstimates—Fair Value” in Part II, Item 7 and Notes 1 and 5 of theconsolidated financial statements in Part II, Item 8 for more information.

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

Weunderwrite, trade and hold high-yield debt, which includes distressed debt,mortgage whole loans, loan participations, legacy distressed financialinstruments and other non-investment-grade financial instruments. Due to creditconsiderations, liquidity of secondary trading markets and vulnerability togeneral economic conditions, these financial instruments and loans generallyinvolve greater risk than investment-grade financial instruments. We recordhigh-yield debt, residential mortgage whole loans and legacy distressedfinancial instruments at fair value, with the exception of certain residentialmortgage whole loans and loan participations that are held for sale and arecarried at the lower of cost or fair value. We record commercial mortgage wholeloans held for sale at the lower of aggregate cost or fair value. Timing of thesecuritization of our mortgage whole loan inventory will affect the size of ourpositions at any given time. The following table sets forth our positions inthese instruments as of December 31, 2004 and 2003:
| ** **                               | ** ** | **December 31, 2004** | ** ** | **December 31, 2003** | ** ** |
|------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                               | ** ** | **Assets**                      | ** ** | **Liabilities**                 | ** ** | **Assets** | ** ** | **Liabilities** | ** ** |
| ** **                               | ** ** | **(In millions)**          | ** ** |
| High-yield and  distressed debt          |       | $                               | 2,152      |                            |       | $ | 709 |   |   | $ | 1,551 |   |   | $ | 675 |   |   |
| Mortgage whole  loans                    |       | 14,987                          |       |                            | —     |   |   | 9,101 |   |   | — |   |   |
| Loan  participations                     |       | 17                              |       |                            | —     |   |   | 70 |   |   | — |   |   |
| Legacy distressed  financial instruments |       | 185                             |       |                            | —     |   |   | 171 |   |   | — |   |   |
| Total                                    |       | $                               | 17,341     |                            |       | $ | 709 |   |   | $ | 10,893 |   |   | $ | 675 |   |   |

 

**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 derivatives transactions are considered tradingpositions. See Note 6 of the consolidated financial statements in Part II,Item 8 for more information.

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**Sources andMaturities of OTC Derivatives**

Thefollowing table sets forth the distributions, by maturity, of substantially allof our exposure with respect to OTC derivatives as of December 31, 2004.Fair values were determined on the basis of pricing models and other valuationmethods. See “—Critical Accounting Policies and Estimates—Fair Value” in Part II,Item 7 and Notes 1, 6 and 10 of the consolidated financial statements in Part II,Item 8 for more information.
| ** **                            | ** ** | **Assets  Maturity Distribution as of December 31, 2004** | ** ** |
|---------------------------------------|------------|-----------------------------------------------------------------------------------------|------------|
| ** **                            | ** ** | **Less than  1 year**                                                         | ** ** | ** 1-3 years ** | ** ** | **4-5 years** | ** ** | **Over 5 years** | ** ** | **Total fair  value** | ** ** |
| ** **                            | ** ** | **(In millions)**                                                                  | ** ** |
| Interest rate and  credit spread risk |       |                                                                                    | $          | 329 |   |   |   | $ | 440 |   |   |   | $ | 138 |   |   |   | $ | 1,004 |   |   |   | $ | 1,911 |   |   |
| Equity price risk                     |       |                                                                                    | 101        |   |   |   | 687 |   |   |   | 39 |   |   |   | 146 |   |   |   | 973 |   |   |
| Foreign exchange  risk                |       |                                                                                    | 17         |   |   |   | 28 |   |   |   | 39 |   |   |   | — |   |   |   | 84 |   |   |
| Total                                 |       |                                                                                    | $          | 447 |   |   |   | $ | 1,155 |   |   |   | $ | 216 |   |   |   | $ | 1,150 |   |   |   | $ | 2,968 |   |   |

 
| ** **                            | ** ** | **Liabilities  Maturity Distribution as of December 31, 2004** | ** ** |
|---------------------------------------|------------|----------------------------------------------------------------------------------------------|------------|
| ** **                            | ** ** | **Less than  1 year**                                                              | ** ** | ** 1-3 years ** | ** ** | **4-5 years** | ** ** | **Over 5 years** | ** ** | **Total fair  value** | ** ** |
| ** **                            | ** ** | **(In millions)**                                                                       | ** ** |
| Interest rate and  credit spread risk |       |                                                                                         | $          | 380 |   |   |   | $ | 297 |   |   |   | $ | 112 |   |   |   | $ | 257 |   |   |   | $ | 1,046 |   |   |
| Equity price risk                     |       |                                                                                         | 111        |   |   |   | 123 |   |   |   | 43 |   |   |   | 339 |   |   |   | 616 |   |   |
| Foreign exchange  risk                |       |                                                                                         | 19         |   |   |   | — |   |   |   | 16 |   |   |   | — |   |   |   | 35 |   |   |
| Total                                 |       |                                                                                         | $          | 510 |   |   |   | $ | 420 |   |   |   | $ | 171 |   |   |   | $ | 596 |   |   |   | $ | 1,697 |   |   |

 

Thefollowing table sets forth as of December 31, 2004 substantially all ofour exposure with respect to OTC derivatives, by counterparty credit rating andwith affiliates.
| **Credit Rating**(1)    | ** ** | ** **             | ** ** | **December 31,  2004** | ** ** |
|------------------------------|------------|------------------------|------------|-----------------------------|------------|
| ** **                   | ** ** | **(In millions)** | ** ** |
| AA+/AA                       |       |                   | $          | 1,293                       |       |   |
| AA–                     |       |                   | 8          |                        |       |
| A+/A/A–                 |       |                   | 126        |                        |       |
| BBB+/BBB/BBB–           |       |                   | 1          |                        |       |
| BB+ or lower                 |       |                   | 16         |                        |       |
| Unrated                      |       |                   | 124        |                        |       |
| Derivatives with  affiliates |       |                   | 1,400      |                        |       |
| Total                        |       |                   | $          | 2,968                       |       |   |

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(1)      Credit ratings are determined by external ratingagencies or by our credit risk management department.

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**Derivatives WithRelated Parties**

We enter into asubstantial number of derivatives transactions with related parties. Thefollowing table sets forth derivatives transactions with related partiesconsisting primarily of interest rate swaps, credit default swaps and foreignexchange forward contracts. The fair values of derivatives contractsoutstanding with related parties as of December 31, 2004 and 2003 were asfollows.
| ** **                            | ** ** | **December 31, 2004** | ** ** | **December 31, 2003** | ** ** |
|---------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                            | ** ** | **Assets**                      | ** ** | **Liabilities**                 | ** ** | **Assets** | ** ** | **Liabilities** | ** ** |
| ** **                            | ** ** | **(In millions)**          | ** ** |
| Interest rate and credit  spread risk |       | $                               | 1,346      |                            |       | $ | 616 |   |   | $ | 1,860 |   |   | $ | 794 |   |   |
| Equity price risk                     |       | 9                               |       |                            | 61         |   |   | 12 |   |   | 29 |   |   |
| Foreign exchange risk                 |       | 45                              |       |                            | 18         |   |   | 38 |   |   | 1 |   |   |
| Total                                 |       | $                               | 1,400      |                            |       | $ | 695 |   |   | $ | 1,910 |   |   | $ | 824 |   |   |

 

See Notes 3 and 6 of theconsolidated financial statements in Part II, Item 8 for more information.

***Item 7A****:**                 Quantitative andQualitative Disclosures About Market Risk*

**GENERAL**

We are part of CSFB and our risks are managed as partof the global CSFB business unit. The CSFB risk management process is designedto ensure that there are sufficient independent controls to measure, monitorand control risks in accordance with CSFB’s control strategy and inconsideration of industry best practices. The primary responsibility for riskmanagement lies with CSFB’s senior business line managers. They are heldaccountable for all risks associated with their businesses, includingcounterparty risk, market risk, liquidity risk, legal risk, operating risk andreputational risk.

CSFB believes that it haseffective procedures for measuring and managing the risks associated with itsbusiness activities. CSFB cannot completely predict all market developments andCSFB’s risk management cannot fully protect against all types of risks.Unforeseen market developments or unexpected movements or disruption in one ormore markets can result in losses due to events such as adverse changes ininventory values, a decrease in liquidity of trading positions, greaterearnings volatility or increased credit risk exposure. Such losses could have amaterial adverse effect on our and CSFB’s results of operations and financialcondition.

**RISK MANAGEMENT**

CSFB pursues a comprehensive approach to riskmanagement. The primary objectives of its risk management strategy are topreserve its capital base, to optimize the allocation of capital, to foster aproactive risk culture and to protect CSFB’s reputation. Significant personneland technological resources are used to support experienced decision-makers andto ensure that CSFB remains a leader in risk management. CSFB is exposed tomany types of risks, and many businesses present more than one risk.

The Board of Directors of Credit Suisse First Boston,the Swiss bank, is ultimately responsible for the determination of general riskpolicy and risk management organization and for approving the overall marketrisk limit as recommended by CARMC. CARMC is responsible for formulating andimplementing risk management strategies, allocating risk capital, approvingmarket risk management policies and procedures, establishing, recommending andapproving certain market risk limits (depending on level) and approving limitexcesses within its own authority, and approving stress tests and scenarioanalysis definitions. CARMC meets on a monthly basis and on an *ad hoc* basis as needed. The Board ofDirectors of Credit Suisse First Boston established a Risk Committee in 2003.The Risk Committee provides additional oversight and has responsibility forapproving certain limits.

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Strategic Risk Management, orSRM, acts as the independent “risk conscience” of CSFB and is chargedwith approving the risk methodology, framework and limit structure. SRMassesses the overall risk profile of CSFBglobally and recommends corrective action where appropriate to CARMC.

Risk Measurement and Management, or RMM, isresponsible for the measurement and reporting of all credit risk and marketrisk data and the coordination of operational risk management for CSFB. RMMconsolidates exposures arising from all trading portfolios and geographiccenters on a daily basis.

Credit RiskManagement, or CRM, is responsible for approving all credit risk assumed byCSFB. This includes the credit analysis of counterparties and issuers,the setting and approval of credit limits, the approval of transactions, theassessment and management of impaired assets and the establishment of CSFB’spolicies and strategy on counterparty and country credit risk. In addition, CRM has oversightresponsibility for concentrated positions in trading inventory. Unusual risksand specific policies and procedures are reviewed and approved by CARMC.

CRM’s responsibilities are carriedout by senior officers within the CRM function who provide dedicated coverageto each of CSFB’s major businesses. Each of these CRM units is organized alongregional lines, and in some cases further organized along industry or otherlines of specialty, such as leveraged and project finance.

CRM, SRM and RMM are all independentof the front office. CRM and SRM report to the Executive Vice Chairman of CSFB.RMM reports to SRM.

Other business-specific risks are managedprimarily through designated groups and committees within the differentoperating divisions. Before any new activity is undertaken, the New BusinessCommittee is required to review the proposed business, its structure and itsinfrastructure requirements and ensure that all material risks are identifiedand addressed appropriately. This committee is composed of the senior managersresponsible for the Finance, Administration and Operations functions of CSFB.

To supplement its control environment, CSFB has anoversight function with (a) selected executive officers who have overallresponsibility for oversight in their respective regions, (b) regionaloversight managers who assist the executive officers with this responsibilityand (c) a country manager in each country to manage local oversightissues. Management at the regional oversight and country levels concentrates onregulatory and reputational issues, supervising legal entities and supportingmanagement in its efforts to improve the control environment.

The Corporate Treasury Department of CSFB isresponsible for managing CSFB’s liquidity risk. See “Management’s Discussionand Analysis of Results of Operations—Liquidity and Capital Resources” in Part II, Item7 for a discussion of how we monitor liquidity risk.

For further information onthe risks we face in our business, see “Business—Certain Factors That May AffectOur Results of Operations” in Part I, Item 1 of this Annual Report.

**Market Risk**

Market risk can be described as the potential changein the value of a trading portfolio resulting from the movement of marketrates, prices and volatilities. A typical transaction or position may beexposed to a number of different market risks. Types of market risks includeinterest rate risk, foreign currency exchange rate risk, equity risk andcommodity price risk. Interest rate risk can arise from changes in the level,slope and curvature of the yield curve; changes in the implied volatility ofinterest rate derivatives; changes in the rate of mortgage prepayments; andchanges in credit spreads. Foreign currency exchange rate risk can arise fromchanges in spot prices and the implied volatility of currency derivatives.Equity risk can arise from changes in the price of individual equity securitiesand equity indices, changes in the implied volatility of equity derivatives anddividend risk. We do not have material commodity price risk.

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CSFB devotes considerableresources to ensuring that market risk is comprehensively captured, accuratelymodeled and effectively managed. The RMM department consolidates exposuresarising from all trading portfolios in all geographic centers and calculatesand reports CSFB’s global aggregate risk exposure on a daily basis. To achievethis, RMM uses a number of complementary risk measurement techniques, includingvalue-at-risk, or VAR, scenario analysis and economic risk capital, or ERC. VARis a statistical estimate of the potential loss arising from a portfolio usinga predetermined confidence level and holding period, using market movementsdetermined from historical data. Scenario analysis estimates the potentialimmediate loss from significant changes in market parameters that are modeledon past extreme events and hypothetical scenarios. ERC estimates the impact ofsevere market movements and attributes internal capital usage. As markets havegrown more complex, sophisticated modeling has become increasingly importantfor sound risk assessment and risk/return analysis.

***Value at Risk***

CSFB has used a VAR methodology to model market risksince 1995. The CSFB VAR methodology uses assumptions and estimates that CSFBbelieves are reasonable, but different assumptions or estimates could result indifferent estimates of VAR.

CSFB’s VAR is defined as the 99th percentile greatestloss that may be expected in a portfolio over a ten-day holding period. Ingeneral, a rolling two-year period of historical data is used to derive themarket movements used for this calculation. These parameters and procedurescurrently meet the quantitative and qualitative requirements prescribed by theBasel Committee on Banking Supervision, the Swiss Federal Banking Commissionand other leading banking regulators. The methodology is subject to continuousreview to ensure that it remains relevant to the business being conducted,captures all significant trading risks, is consistent across risk types andmeets or exceeds regulatory and industry standards.

VAR as a risk measurequantifies the loss on a portfolio under normal market conditions and is notintended to measure risk associated with unusually severe market moves. The VARmethodology also assumes that past data can be used to predict future events.VAR calculated for a ten-day period does not fully capture the market risk oftrading positions that cannot be liquidated or hedged within ten days. Duringperiods of pronounced market disruption outside the 99th percentile,other techniques, such as scenario and ERC analysis, become more importanttools than VAR for monitoring risk exposures.

***Market Risk Limits***

Market risk limits can be expressed in terms of VAR,scenario analysis, market value, sensitivity and exposure. At CSFB, market risklimits are structured at three levels: an overall market risk limit for CSFB asa whole; market risk limits by division (such as the fixed income business);and market risk limits by risk type within a business (such as foreign exchangerisk within the fixed income business). Asset class VAR limits may also be usedto control exposure within a particular risk type.

The three-level limitstructure described above represents CSFB’s official limit framework. Limits atlower levels (such as by region, business line, trading desk or trader) aresometimes imposed by trading management and are used to assist tradingmanagement to identify potential risk concentrations. RMM monitors and reportscompliance with the official limit framework and also provides assistance toensure compliance with lower level risk flags, as required.

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***Market Risk Exposures***

**Trading Portfolios**

The VAR data presentedbelow has been scaled down using a one-day holding period. The one-day VAR databelow shows the market risk exposures of our trading positions as of December 31,2004 and December 31, 2003. Due to the benefit of diversification, totalVAR is less than the sum of the individual components. The table below presentsminimum, maximum, average and total VAR.

**Marketrisk exposures in trading portfolios**
| ** **                           | ** ** | ** **  | ** ** | ** **            | ** ** | ** **            | ** ** | **As of** | ** ** | **As of** | ** ** | ** **  | ** ** |
|--------------------------------------|------------|-------------|------------|-----------------------|------------|-----------------------|------------|----------------|------------|----------------|------------|-------------|------------|
| ** **                           | ** ** | **2004**    | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **2003**       | ** ** |
| ** **                           | ** ** | **Minimum** | ** ** | **Maximum**           | ** ** | **Average**           | ** ** | **2004**       | ** ** | **2003**       | ** ** | **Average** | ** ** |
| 99%, one-day VAR, in $ millions |       |        |       |                  |       |                  |       |           |       |           |       |        |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate risk                   |       |        | 25         |                  |       |                  | 55         |           |       |           | 39         |        |       |   | 34 |   |   |   | 49 |   |   |   | 42 |   |   |
| Equity risk                          |       |        | 12         |                  |       |                  | 32         |           |       |           | 19         |        |       |   | 15 |   |   |   | 14 |   |   |   | 16 |   |   |
| Foreign currency exchange risk       |       |        | —     |                  |       |                  | 4          |           |       |           | 1          |        |       |   | 1 |   |   |   | — |   |   |   | — |   |   |
| Subtotal                             |       |        | —     | (1)                   |       |                  | —     | (1)            |       |           | 59         |        |       |   | 50 |   |   |   | 63 |   |   |   | — | (2) |   |
| Diversification benefit              |       |        | —     | (1)                   |       |                  | —     | (1)            |       |           | (14        | )           |       |   | (13 | ) |   |   | (14 | ) |   |   | — | (2) |   |
| Total                                |       |        | 27         |                  |       |                  | 69         |           |       |           | 45         |        |       |   | 37 |   |   |   | 49 |   |   |   | 46 |   |   |

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(1)      Because the minimum and maximum VAR for different risktypes may occur at different times during the year, it is not meaningful topresent a subtotal and a diversification benefit.

(2)      Because the average VAR in 2003 for different risktypes was calculated based on quarter end values and total average VAR wascalculated based on daily values, no diversification benefit is presented.

The Company’s one-day, 99% VAR decreased $12 million,or 25%, as of December 31, 2004 from December 31, 2003. The decreasein VAR was primarily caused by a reduction in the interest rate exposure and ageneral reduction in market volatility observed over the last two years, as2002 data has been replaced by more benign 2004 data in the rolling two yearunderlying data set used to compute VAR.

We do not have material commodity price risk on ourtrading portfolio.

The comparison of daily revenue fluctuations with thedaily VAR estimate is the primary method used to test the accuracy of the VARmodel. Backtesting is performed at various levels of the trading portfolio,from CSFB down to more specific business lines. A backtesting exception occurswhen the daily loss exceeds the daily VAR estimate. Results of the process atthe aggregate level demonstrated zero exceptions when comparing the 99% one-dayVAR with the backtesting profit and loss in 2004. An accurate model for theone-day, 99% VAR should have between zero and four backtesting exceptions on anannual basis.****Backtesting profitand loss is a subset of actual trading revenue and includes only the profit andloss effects relevant to the VAR model, excluding fees, commissions, certainprovisions and any trading subsequent to the previous night’s positions. It isappropriate****to compare thismeasure with VAR for backtesting purposes because VAR assesses only thepotential change in position value due to overnight movements in financialmarket variables such as prices, interest rates and volatilities. The graph 

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below illustrates the relationship between dailybacktesting profit and loss and daily VAR for the Company in 2004.

**RELATIONSHIPBETWEEN BACKTESTING P&L AND VARESTIMATE FOR CSFB (USA) Inc DURING 2004**

****

The average daily tradingrevenue was a $13.7 million gain in 2004 ($12.1 million gain in 2003), theminimum daily trading revenue level was a loss of $16.8 million in 2004 ($41.1million loss in 2003) and the maximum daily trading revenue level was a gain of$67.3 million in 2004 ($112.3 million gain in 2003). Trading revenue used inthe histogram below is the actual daily trading revenue, which includes notonly backtesting profit and loss but also fees, commissions, certain provisionsand the profit and loss effects associated with any trading subsequent to theprevious night’s positions. The histogram below shows the distribution of dailytrading revenue for substantially all of the Company’s trading activities.

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**2004 vs 2003 DISTRIBUTIONOF CSFB (USA) INC’S DAILY TRADING REVENUEin millions**

****

**Non-trading Portfolios**

CSFB uses sensitivityanalysis as a risk measurement tool supporting the management of non-tradingportfolios. It is generally defined as a measure of the potential changes in aportfolio’s fair value created by changes in one or multiple financial marketrates or prices, including interest rates, foreign exchange rates and equityand commodity prices. The results can be focused to show the impact of anadverse shift in a single interest rate or to show the effects of manysimultaneous changes. We have equity risk on our non-trading financialinstruments portfolio, which consists of our private equity investments. Wemeasure equity risk on our private equity investments using a sensitivityanalysis that estimates the potential decline in the recorded value of theinvestments resulting from a 10% decline in the equity markets of developednations and a 20% decline in the equity markets of emerging market nations. Asof December 31, 2004, the estimated impact on pre-tax income as a resultof the decline was a decrease of approximately $118 million compared to adecrease of approximately $112 millionas of December 31, 2003.

We measure interest raterisk on non-trading positions using sensitivity analysis that estimates thepotential change in the value of the non-trading portfolio resulting from a 50basis points decline in the interest rates of developed nations and a 200 basispoints decline in the interest rates of emerging market nations. Due to thecurrent low levels of U.S. interest rates, the calculation of non-tradingportfolio interest rate risk was changed from a 100 basis points decline to a50 basis points decline in interest rates for developed nations during thesecond quarter of 2003. As of December 31, 2004, the estimated impact onpre-tax income as a result of the decline was a decrease of approximately $12million compared to an increase of approximately $55 million as of December 31,2003. This decrease is due to the reclassification of certain positions intothe trading portfolio.

The foreign exchange riskon non-trading positions is measured using sensitivity analysis that estimatesthe potential change in the value of the non-trading portfolio resulting from a10% strengthening of the U.S. dollar against developed currencies and a 20%strengthening of the U.S. dollar against emerging market currencies. The estimated impact of foreign exchange riskon the value of the non-trading portfolio wouldbe a decrease of approximately$1 million as of December 31, 2004 and December 31, 2003.

We do not have material commodity price risk on ournon-trading portfolio.

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***Scenario Analysis***

VAR is designed to measure market risk in normalmarket environments. CSFB complements this with a scenario-based risk measurethat examines the potential effects of changes in market conditions,corresponding to exceptional but plausible events, on its financial condition. Theresults of the analysis are used to manage exposures on a CSFB-wide basis, aswell as at the portfolio level. Scenario analysis involves the revaluation ofmajor portfolios to arrive at a measure of the profit or loss that CSFB maysuffer under a particular scenario. Scenario analysis is therefore an essentialcomponent of CSFB’s market risk measurement framework for both trading andnon-trading portfolios.

Global scenarios aim tocapture the risk of severe disruption to all major markets and are related tohistoric events such as those involving the equity markets in 1987, the U.S.real estate market in 1990, the bond markets in 1994 and the credit markets in1998. Business level scenarios aim to capture portfolio-specific risks byemploying scenarios based on non-parallel yield curve shifts, changes incorrelations and other pricing assumptions.

***Economic Risk Capital***

ERC is designed asa consistent and comprehensive risk evaluation model across the whole of CSFBand CSG. ERC is defined as the amount of economic capital required to remainsolvent and in business under extreme market, business and operationalconditions. ERC is calculated separately for position risk, business risk andoperational risk. These three risk categories measure very different types ofrisk.

·       Positionrisk ERC—the level of unexpected loss in economic value on the Group’sportfolio of positions over a one-year horizon that is exceeded with a given,small probability (1% for risk management purposes; 0.03% for capitalmanagement purposes).

·       Operationalrisk ERC—the level of loss resulting from inadequate or failed internalprocesses, people and systems or from external events over a one-year horizonthat is exceeded with a small probability (0.03%). Estimating this type of ERCis inherently more subjective, and reflects both quantitative tools as well assenior management judgements;

·       Businessrisk ERC—the difference between expenses and revenues in a severe market event,exclusive of the elements captured by position risk ERC and operational riskERC.

**Credit Risk**

**Definition ofcredit risk**

Credit risk is the possibility of loss incurred as aresult of a borrower or counterparty failing to meet its financial obligations.In the event of a default, a creditor generally incurs a loss equal to theamount owed by the debtor, less any recovery amount resulting from foreclosure,liquidation of collateral or the restructuring of the debtor company.

Credit risk exists withinlending products, commitments and letters of credit, and receivables underderivatives, foreign exchange contracts and other transactions.

**Credit riskmanagement approach**

Effective credit risk management is a structuredprocess to assess, quantify, price, monitor and manage risk on a consistentbasis. This requires a careful consideration of proposed extensions of credit,the setting of specific limits, diligent ongoing monitoring during the life ofthe exposure, active use of credit mitigation tools and a disciplined approachto recognizing credit impairment. All of these elements are integral parts ofCSFB’s approach.

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This credit riskmanagement framework is regularly refined and covers all businesses that areexposed to credit risk. The framework comprises seven core components:

·       anindividual counterparty and country rating system;

·       atransaction rating system;

·       acounterparty credit limit system;

·       countryand regional concentration limits;

·       arisk-based pricing methodology;

·       activecredit portfolio management; and

·       acredit risk provisioning methodology.

CSFB evaluates credit risk through a credit requestand approval process, ongoing credit and counterparty monitoring and a creditquality review process. Experienced credit officers approve credit requests andassign internal ratings based on analysis and evaluation of the client’screditworthiness and the type of credit transaction. CSFB has established acounterparty credit risk classification system where counterparties are ratedand classified on a regular basis. This system affords consistency instatistical and other credit risk analysis, credit risk monitoring,risk-adjusted performance measurement and economic risk capitalusage/allocation.

Each counterparty thatgenerates a potential or actual credit risk exposure is assigned a risk rating.Additionally, CSFB assigns an estimate of the expected loss on a transaction inthe event of a counterparty default, based on the transaction structure. Thecounterparty credit rating is used in combination with credit (or credit equivalent)exposure and the expected loss assuming a default in order to estimate thepotential credit loss.

***Credit Analysis Methodology***

All counterparties are assigned a credit rating. Theintensity and depth of analysis is related to the amount, duration and level ofrisk being proposed together with the perceived credit quality of thecounterparty or issuer in question. Analysis consists of a quantitative andqualitative portion and strives to be forward looking, concentrating oneconomic trends and financial fundamentals. In addition, analysts make use ofpeer analysis, industry comparisons and other quantitative tools. Any finalrating requires the consideration of qualitative factors relating to thecompany, its industry and management.

In addition to the aforementionedanalysis, all counterparty ratings are subject to the rating of the country inwhich the counterparty is domiciled. Analysis of key sovereign and economicissues for all jurisdictions is undertaken and these are considered whenassigning the rating and risk profile for individual counterparties.

***Credit Authority***

Credit authority is delegated by the Chief CreditOfficer to specific senior CRM personnel based on each person’s knowledge,experience and capability. These delegations of credit authority are reviewedperiodically. Credit authorization is separated from line functions. CARMC, inaddition to its responsibilities for market risk, is also responsible forevaluating country, counterparty and transaction risk issues, applying seniorlevel oversight for the credit review process and ensuring global consistencyand quality of the credit portfolio. CARMC regularly reviews credit limitsmeasuring country, geographic region and product concentrations, as well asimpaired assets and recommended loan loss provisions.

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A system of individual credit limits is used to manageindividual counterparty credit risk. Certain other limits are also establishedto address concentration issues in the portfolio, including a comprehensive setof country and regional limits. Credit exposures to individual counterpartiesor segments and adherence to the related limits are monitored by creditofficers, industry analysts and other relevant specialists. CSFB regularlyanalyzes its industry diversification and concentration in selected segments.

A rigorous credit quality review process has beenestablished to provide an early identification of possible changes in thecreditworthiness of clients and includes regular asset and collateral qualityreviews, business and financial statement analysis and relevant economic andindustry studies. Other key factors considered in the review process includebusiness and economic conditions, historical experience, regulatoryrequirements and concentrations of credit volume by industry, country, productand counterparty rating. Regularly updated watch-lists and review meetings areused for the identification of counterparties where adverse changes increditworthiness could occur due to events such as announced mergers, earningsweakness and lawsuits. In addition, credit protection, such as creditderivatives, is used to mitigate some exposures.

The review processculminates in a quarterly determination of the appropriateness of allowancesfor credit losses. A systematic provisioning methodology is used to identifypotential credit risk related losses. Impaired transactions are classified aspotential problem exposures, non-performing exposures, or non-interest earningexposures and the exposures are generally managed within the Global RecoveryManagement team. The Chief Credit Officer and Head of Global RecoveryManagement Group determine the adequacy of allowances, taking intoconsideration whether the levels are sufficient for credit losses and whetherallowances can be released or if they should be increased.

***Credit Risk Arising from Trading Positions andDerivative Transactions***

Credit risk associated with CSFB’s trading andderivatives business is measured against counterparty limits on at least adaily basis. Credit risk is defined in terms of mark-to-market replacementvalue and potential exposure to maturity. The latter is based on the volatilityof the underlying market factors such as interest and foreign exchange rates.

To minimize credit risk,CSFB may enter into master netting agreements, which reduce risk by permittingthe closeout and netting of transactions with the same counterparty upon theoccurrence of certain events. In addition, CSFB may reduce credit risk byobtaining collateral based upon an individual assessment of counterparties.Generally, CSFB accepts collateral in the form of cash, treasury instrumentsissued by G-7 countries and other marketable securities.

**Country Risk**

Country risk is the risk of a substantial, systemicloss of value in the financial assets of a country or group of countries, whichmay be caused by dislocations in the credit, equity and/or currency markets.CSFB’s major operating divisions all assume country risk in a variety of ways.The setting of limits for this risk is the responsibility of CARMC based onrecommendations from CRM, SRM and CSFB’s economists.

Country limits foremerging markets are approved annually by the Board of Directors of CSG,following recommendations from CARMC. The measurement of exposures againstcountry limits is undertaken by RMM, with weekly reports to senior managementand monthly reports to CARMC. For tradingpositions, country risk is a function of the mark-to-market exposure andcurrency of the position, while for loans and related facilities, country riskis a function of the amount and currency that CSFB has lent or committed tolend. The day-to-day management of country exposure is assigned to each of thecore businesses in accordance with its business authorizations and limitallocations. RMM and CRM provide independent oversight to ensure that the corebusinesses operate within their limits. CRM is responsible for periodicallyadjusting these limits to reflect changing credit fundamentals and businessvolumes.

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**Operational Risk**

The definition of operational risk used by CSG is “therisk of loss resulting from inadequate or failed internal processes, people andsystems or from external events.” Business and strategic risk are specificallyexcluded from this definition.

Operational risk is inherent in many aspects of CSFB’sactivities and comprises a large number of disparate risks. While market orcredit risk is often chosen for the prospect of gain, operational risk is notnormally chosen willingly, but is accepted as a necessary consequence of doingbusiness. In comparison with market or credit risk, the sources of operationalrisk are difficult to identify comprehensively and the amount of risk is alsointrinsically difficult to measure. CSFB therefore manages operational riskdifferently from market or credit risks. Operational risk is controlled througha network of controls, procedures, reports and responsibilities.

CSG uses a group-wide framework to monitor and controlsuch risks. CSFB operates within this framework. CSFB has longstandingresources in place to deal with the many aspects of operational risk control(such as a substantial internal audit function, reporting to the CSG AuditCommittee, and specialist operational risk functions covering CSFB’s keyprocess-dependent departments such as operations, product control, informationtechnology and financial control). CSFB’s primary aim is the earlyidentification, assessment, prevention and mitigation of operational risks, aswell as timely and meaningful management reporting.

CSFB continues to developand enhance its operational risk framework. The key initiatives have includedfurther enhancement of the global and regional governance structure formanaging operational risk; further development of global and regional key riskindicators reporting; and the continued further development of a centralizedoperational risk loss database and enhanced collection processes. Also, inconjunction with CSG, CSFB continues to refine its ERC and allocationmethodologies for operational risk. During the year, CSFB has continued toprepare its operational risk management and measurement framework forcompliance with the requirements of the Advanced Measurement Approach of BaselII.

**Settlement Risk**

Settlement risk arises whenever the settlement of atransaction results in timing differences between the disbursement of cash orsecurities and the receipt of countervalue from the counterparty. This riskarises whenever transactions settle on a “free of payment” basis and isespecially relevant when operating across time zones.

In many instances we arenow able to utilize the services of a central counterparty who takes onresponsibility within a particular market for netting off settlement exposurebetween the counterparties, leaving only a net settlement outstanding. Wherethis is not applicable and in those instances where market convention and/orproducts preclude a value-for-value exchange, CSFB manages its risk throughconfirmation and affirmation of transaction details with counterparties. Inaddition, CSFB also proactively seeks to manage the timing of settlementinstructions to its agents and the reconciliation of incoming payments in orderto reduce the window of exposure. CRM considers these factors in decidingcounterparty risk limits.

**Legal Risk**

CSFB faces significant legal risks in its businesses.Legal risks in the investment banking business include, among other things,disputes over the terms of trades and other transactions in which CSFB acts asprincipal; securities law disclosure and other liability in connection withtransactions pursuant to which CSFB acts as underwriter, placement agent orfinancial adviser; the unenforceability or inadequacy of the documentation forsome of the transactions in which CSFB participates; investment suitabilityconcerns; 

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compliance with the lawsand regulations (including change in laws or regulations) of the many countriesin which CSFB does business; and disputes with its employees. Some of thesetransactions or disputes result in potential or actual litigation andarbitration that CSFB must incur legal expenses to defend.

The investment bankingbusiness is subject to extensive regulation by governmental and self-regulatoryorganizations around the world. A failure to comply with these regulationscould result in regulatory investigations, fines, and restrictions on some ofCSFB’s business activities or other sanctions. CSFB seeks to minimize legalrisk through the adoption of compliance and other policies and procedures,continuing to refine controls over business practices and behavior, extensiveemployee training sessions, the use of appropriate legal documentation, and theinvolvement of the Legal and Compliance Department, outside legal counsel andthe CSFB Global Compliance Committee, made up of some of the firm’s most seniorofficers. See “Business—Certain Factors That May Affect Our Results ofOperations—Legal and Regulatory Risks” in Part I, Item 1.

**Reputational Risk**

CSFB’s policy is to avoid any action or transactionthat brings with it a potentially unacceptable level of risk to CSFB’sreputation.

Reputational risk mayarise from a variety of sources, including the nature or purpose of a proposedtransaction, the identity or nature of a potential client, the regulatory orpolitical climate in which the business will be transacted or significantpublic attention surrounding the transaction itself. Where the presence ofthese or other factors gives rise to potential reputational risk for CSFB, therelevant business proposal is required to be submitted to CSFB’s reputationalrisk review process. This involves a vetting of the proposal by senior businessmanagement, and its subsequent referral to a reputational risk approver, who isindependent of CSFB’s business divisions and who has authority to approve,reject, or impose conditions on CSFB’s participation.

**Liquidity Risk**

Our liquidity risk ismanaged as a part of CSFB’s global liquidity policy. CSFB’s liquidity policyfocuses on the proven stability of its unsecured funding sources, which includeCSFB-sourced deposits as well as access to customer funds sourced byaffiliates. The deposit base provides CSFB with substantial sources ofliquidity that are well diversified and primarily driven by customerrelationships rather than price. These deposits provide a stable source offunds. We also regularly access the capital markets through our commercialpaper program, medium-term note programs and issues of senior debt and othersecurities. We and CSFB also have access toadditional liquidity through our subsidiary broker-dealers, which havethe capacity to increase their funding through the secured funding markets(repurchase agreements and other collateralized arrangements). These securedfunding markets have proven reliable in high stress conditions. This secondarysource of liquidity is potentially available as alternative funding to meetbusiness plans and commercial commitments. CSFB LLC also has access on acommitted basis to secured lending facilities with various banks. CSFBregularly stress tests its liquidity using scenarios designed to representhighly adverse conditions. See “Management’s Discussion and Analysis of Resultsof Operations—Liquidity and Capital Resources—Liquidity Measurement andPlanning” in Part II, Item 7 fora discussion of how we monitor our liquidity position.

**Business Continuity**

CSFB’s business continuity plan is designed to addressthe effects of various internal or external significant business disruptionsthat may be caused by a number of foreseeable scenarios. An internalsignificant business disruption, such as fire, flood or power failure within aCSFB building would likely affect only CSFB’s ability to communicate and dobusiness. An external significant business disruption, 

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such as a terroristattack, natural disaster or other wide-scale or regional disruption wouldlikely prevent the operation of the securities markets or a number of firms.CSFB’s business continuity plan includes a crisis management framework as wellas a number of contingency sites and plans to address both internal andexternal significant business disruptions.

CSFB’s policy is torespond to all significant business disruptions by focusing on:

·       safeguardingemployees’ lives, customer assets and firm property,

·       makingtimely and prudent financial and operational assessments,

·       quicklyrecovering and resuming operations,

·       protectingthe firm’s books and records, and

·       allowingCSFB customers to transact business.

CSFB’s actual response toan external significant business disruption would rely more heavily on otherorganizations and systems. As such, the availability of physical and marketinfrastructure from other parties would affect CSFB’s ultimate response in awide-scale or market-wide disruption.

***Item 8:****                         FinancialStatements and Supplementary Data*

Our consolidated financialstatements, together with the notes thereto and the Independent Auditor’sreport thereon, are set forth on pages F-1 to F-54 of thisAnnual Report on Form 10-K. In addition, the supplementary financialinformation on selected quarterly financial data is set forth on page F-54of this Annual Report.

***Item 9****:**                         Changesin and Disagreements with Accountants on Accounting and Financial Disclosure*

There were no changes inor disagreements with accountants on accounting and financial disclosure.

***Item 9A****:**                 Controls andProcedures*

As of the end of theperiod covered by this report, an evaluation was carried out under thesupervision and with the participation of our management, including our ChiefExecutive Officer and Chief Financial and Accounting Officer, of the effectivenessof the design and operation of our disclosure controls and procedures. Thereare inherent limitations to the effectiveness of any system of disclosurecontrols and procedures, including the possibility of human error and thecircumvention or overriding of the controls and procedures. Accordingly, eveneffective disclosure controls and procedures can only provide reasonableassurance of achieving their control objectives. Based upon and as of the dateof the evaluation, our Chief Executive Officer and Chief Financial andAccounting Officer concluded that the design and operation of these disclosurecontrols and procedures were effective in all material respects to providereasonable assurance that information required to be disclosed in the reports wefile and submit under the Exchange Act is recorded, processed, summarized andreported as and when required. There were no changes in our internal controlover financial reporting that occurred during the quarter ended December 31,2004 that materially affected, or are reasonably likely to materially affect,our internal control over financial reporting.

***Item 9B****:**                 Other Information*

None.

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**PART III**

***Item 10:****                  Directorsand Executive Officers of the Registrant*

Pursuant to General Instruction I of Form 10-K,the Company is not required to provide the information required by Item 10.

Setforth below is information as of March 17, 2005 with respect to ourdirectors and executive officers.
| **Name**         | ** ** | ** ** | ** ** | **Age**                                          | ** ** | **Position** | ** ** | ** ** |
|------------------|------------|------------|------------|--------------------------------------------------|------------|--------------|------------|------------|
| Brian D. Finn    |       | 44         |       | Director, President and  Chief Executive Officer |
| Paul C. Wirth    |       | 47         |       | Chief Financial and  Accounting Officer          |
| Neil Moskowitz   |       | 46         |       | Director, Managing  Director                     |
| Eileen K. Murray |       | 47         |       | Director, Managing  Director                     |
| Brady W. Dougan  |       | 45         |       | Managing Director                                |
| Gary G. Lynch    |       | 54         |       | Managing Director and  General Counsel           |
| Lewis H. Wirshba |       | 48         |       | Managing Director and Treasurer                  |

 

**BRIAN D. FINN.  **Mr. Finnis a member of the CSG Executive Board and is President of CSFB, a position hehas held since July 2004. He is also the Head of Alternative Capital ofCSFB effective January 2005. He is a member of the most senior executiveboard of CSFB, which we refer to as the CSFB Executive Board. Prior to assuminghis current roles, Mr. Finn was Co-President of Institutional Securitiesof CSFB beginning November 2002 and before that a member of the Office ofthe Chairman of CSFB. Mr. Finn joined CSFB in April 2002 fromClayton, Dubilier & Rice. Before joining Clayton, Dubilier &Rice in 1997, he was a Managing Director and Co-Head of Mergers &Acquisitions at CSFB. 

**PAUL C. WIRTH.  **Mr. Wirthis Global Controller and Chief Accounting Officer of CSFB. Mr. Wirthjoined CSFB in February 2004 from Deloitte & Touche where he wasthe National Managing Partner for the Banking & Finance Practice and amember of Deloitte & Touche’s Global Banking & SecuritiesLeadership Group from July 2000 through January 2004. Previously, hespent 21 years at KPMG, 11 years as an assurance partner in its New YorkFinancial Services Practice. 

**NEIL MOSKOWITZ.  **Mr. Moskowitzis Chief Financial Officer of CSFB, a position he has held since July 2004,and a member of the CSFB Executive Board. Prior to assuming these roles, Mr. Moskowitzserved as Chief Operating Officer for Institutional Securities of CSFB. He joinedthe Firm in 1994 as Head of European Operations and subsequently spent eightyears as the Chief Operating Officer for the Equities Division. Prior tojoining CSFB, Mr. Moskowitz spent ten years at Goldman Sachs where he heldvarious positions including manager of U.S. and European equity operations,manager of European stock lending and manager of European funding andrepurchase finance.

**EILEEN K. MURRAY.  **Ms. Murraywas appointed the Head of Global Technology and Operations of CSFB in February 2002and Head of Product Control in November 2002. Ms. Murray is also amember of the CSFB Executive Board. Ms. Murray joined CSFB in February 2002from Morgan Stanley, where she was Chief Administrative Officer for theInstitutional Securities Group. Ms. Murray joined Morgan Stanley in 1984as a Senior Analyst in the Controllers Department. Prior to the merger ofMorgan Stanley and Dean Witter, she was Controller and Treasurer. 

**BRADY W. DOUGAN.  **Mr. Douganis a member of the CSG Executive Board and is Chief Executive Officer of CSFB,a position he has held since July 2004, and is a member of the CSFBExecutive Board. Prior to assuming his current roles, Mr. Dougan wasCo-President of Institutional Securities of CSFB beginning in November 2002and before that he was Global Head of the Securities Division of CSFB from 2001to 2002. Mr. Dougan was Head of the Equities Division of CSFB from 1996 to2001. Mr. Dougan served as Co-Head of the Global Debt Capital MarketsGroup at CSFB and Co-Head of the Credit Suisse 

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Financial Productsmarketing efforts in the Americas from 1993 to 1996. Mr. Dougan joinedCSFB in 1990 from Bankers Trust Corporation.

**GARY G. LYNCH.  **Mr. Lynchis a member of the CSG Executive Board and is Executive Vice-Chairman andGlobal General Counsel of CSFB. Mr. Lynch also is a member of the CSFBExecutive Board. Mr. Lynch joined CSFB in October 2001 from DavisPolk & Wardwell, where he had been a partner since 1989. Mr. Lynchwas Director of the Enforcement Division at the SEC from 1985 to 1989. 

**LEWIS H. WIRSHBA.  **Mr. Wirshbais Corporate Treasurer of CSFB, a position he has held since 1996, and hasserved as Global Head of CSFB’s New Business Department since March 2000. Hejoined CSFB in 1986 from the Treasurer’s office of General Motors. 

Effective March 18,2005, David C. Fisher will replace Paul C. Wirth as Chief Financial andAccounting Officer of the Company. From early 2004 until early 2005, Mr. Fisherserved as a member of the Institutional Securities Infrastructure and Supportgroup in a project management role for the CSFB Product Control and Operationsdepartments. Prior to that, Mr. Fisher was the Global Head of FinancialControl of CSFB from 1999 to 2004 and the Chief Financial and AccountingOfficer of the Company from March 2002 to March 2004. Mr. Fisherjoined CSFB from Bankers Trust Corporation, where he was Controller from 1998to 1999. From 1985 to 1998, Mr. Fisher worked for Salomon Brothers Inc,where he was Controller for the majority of his tenure. Prior to that, Mr. Fisherwas an audit partner with Arthur Andersen LLP.

**Code of Conduct**

CSG has adopted a code ofconduct that governs our directors, officers and employees, including our ChiefExecutive Officer and our Chief Financial and Accounting Officer. You may request a copy of the code of conduct, atno cost, by writing us at One Madison Avenue, New York, NY 10010, Attention:Corporate Secretary, or by telephoning the Corporate Secretary at (212) 3252000.

***Item 11****:**                  ExecutiveCompensation*

Pursuant to GeneralInstruction I of Form 10-K, the information required by Item 11 is omitted.

***Item 12****:**                  SecurityOwnership of Certain Beneficial Owners and Management and Related StockholderMatters*

Pursuant to GeneralInstruction I of Form 10-K, the information required by Item 12 isomitted.

***Item 13****:**                  CertainRelationships and Related Transactions*

Pursuant to GeneralInstruction I of Form 10-K, the information required by Item 13 is omitted.

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***Item 14****:**                  PrincipalAccountant Fees and Services*

The following tablepresents fees billed to the Company by KPMG LLP for the years ended December 31,2004 and 2003:
| ** **                    | ** ** | **December 31, 2004** | ** ** | **December 31, 2003** | ** ** |
|-------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                    | ** ** | **(In thousands)**         | ** ** |
| Audit fees(1)                 |       |                            | $          | 3,511                           |       |   |   | $ | 4,640 |   |   |
| Audit-related fees(2)         |       |                            | 235        |                            |       |   | 620 |   |   |
| Audit and audit-related  fees |       |                            | 3,746      |                            |       |   | 5,260 |   |   |
| Tax fees(3)                   |       |                            | 1,746      |                            |       |   | 1,016 |   |   |
| All other fees(4)             |       |                            | 153        |                            |       |   | 300 |   |   |
| Total fees                    |       |                            | $          | 5,645                           |       |   |   | $ | 6,576 |   |   |

----

(1)      Includes: (i) the audit of our consolidatedfinancial statements included in our Annual Report on Form 10-K andservices pursuant to, or required by, statute or regulation; (ii) reviewsof the condensed interim consolidated financial statements included in ourQuarterly Reports on Form 10-Q; (iii) comfort letters, consentsand other services related to SEC and other regulatory filings; and (iv) accountingconsultations relating to the audit. Audit fees include an amount allocated tothe Company as part of the audit of CSG.

(2)      Includes: (i) audits of private equity funds andemployee benefit plans; (ii) certain agreed-upon procedures engagements; (iii) accountingadvice; and (iv) assessment and testing of internal controls.

(3)      Includes fees for tax consultation, tax complianceservices and the termination of a prior period findings-based fee arrangementfor tax account review which was restructured into a fixed fee arrangement in2004. A fee of $551 thousand was paid in 2004 in accordance with the newfee arrangement. A fee of $99 thousand was paid in 2003 pursuant to theoriginal agreement.

(4)      Includes fees for non-audit-related accountingconsultations.

**Pre-approval Policy**

We are not subject to a requirement to maintain anaudit committee. CSG’s audit committee has adopted a pre-approval policy thatapplies to all of its subsidiaries, including the Company. The audit committee’spolicy limits the scope of services that may be provided to the Company by KPMGLLP, its independent auditor, to pre-approved audit and certain permissiblenon-audit services, including audit-related services, tax services and otherservices. The audit committee may also approve particular services on acase-by-case basis. The independent auditor and management are required toperiodically report to the audit committee regarding the extent of servicesprovided by the independent auditor and the fees for the services performed todate.

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**PART IV**

***Item 15:****                  Exhibitsand Financial Statement Schedule*

(a)    Documentsfiled as part of this Report

1.                ConsolidatedFinancial Statements

The consolidated financial statements required to befiled in this Annual Report are listed on page F-1 hereof.

2.                FinancialStatement Schedule

The financial statement schedule required to be filedin this Annual Report is listed on page F-1 hereof. The requiredschedule appears on pages F-55 through F-59 hereof.

3.                Exhibits

An exhibit list has been filed as part of this AnnualReport beginning on page E-1 and is incorporated herein byreference.

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**INDEX TO FINANCIALSTATEMENTS**AND FINANCIAL STATEMENT SCHEDULE
|                                                                                         | ** ** | ** **                                                       | ** ** | ** **                                                          | **Page** |
|-----------------------------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|---------------------------------------------------------------------|----------|
| **CONSOLIDATED FINANCIAL STATEMENTS**                                                   |       |                                                             |       |
| **Credit Suisse First Boston (USA), Inc. and  Subsidiaries**                       |       |                                                             |       |
|                                                                                    |       | Report  of Independent Registered Public Accounting Firm         |       | F-2                                                                 |     |
|                                                                                    |       | Consolidated Statements of Financial Condition                   |       | F-3                                                                 |     |
|                                                                                    |       | Consolidated  Statements of Operations                           |       | F-5                                                                 |     |
|                                                                                    |       | Consolidated  Statements of Changes in Stockholder’s Equity |       | F-6                                                                 |     |
|                                                                                    |       | Consolidated  Statements of Cash Flows                           |       | F-7                                                                 |     |
|                                                                                    |       | Notes  to Consolidated Financial Statements                      |       |                                                                |     |
|                                                                                    |       | 1.                                                               |       | Summary  of Significant Accounting Policies                         |     | F-8 |   |
|                                                                                    |       | 2.                                                               |       | Discontinued  Operations                                            |     | F-18 |   |
|                                                                                    |       | 3.                                                               |       | Related Party  Transactions                                         |     | F-18 |   |
|                                                                                    |       | 4.                                                               |       | Transfers  and Servicing of Financial Assets                        |     | F-21 |   |
|                                                                                    |       | 5.                                                               |       | Private Equity and Other  Long-Term Investments                     |     | F-26 |   |
|                                                                                    |       | 6.                                                               |       | Derivatives  Contracts                                              |     | F-27 |   |
|                                                                                    |       | 7.                                                               |       | Goodwill and  Identifiable Intangible Assets                        |     | F-29 |   |
|                                                                                    |       | 8.                                                               |       | Borrowings                                                          |     | F-30 |   |
|                                                                                    |       | 9.                                                               |       | Leases and  Commitments                                             |     | F-33 |   |
|                                                                                    |       | 10.                                                              |       | Guarantees                                                          |     | F-34 |   |
|                                                                                    |       | 11.                                                              |       | Concentrations  of Credit Risk                                      |     | F-37 |   |
|                                                                                    |       | 12.                                                              |       | Net Capital  Requirements                                           |     | F-38 |   |
|                                                                                    |       | 13.                                                              |       | Cash and  Securities Segregated Under Federal and Other Regulations |     | F-38 |   |
|                                                                                    |       | 14.                                                              |       | Stockholder’s Equity                                           |     | F-39 |   |
|                                                                                    |       | 15.                                                              |       | Share-Based  Compensation                                           |     | F-40 |   |
|                                                                                    |       | 16.                                                              |       | Employee Benefit  Plans                                             |     | F-42 |   |
|                                                                                    |       | 17.                                                              |       | Income Taxes                                                        |     | F-48 |   |
|                                                                                    |       | 18.                                                              |       | Legal Proceedings                                                   |     | F-50 |   |
|                                                                                    |       | 19.                                                              |       | Industry  Segment and Geographic Data                               |     | F-50 |   |
|                                                                                    |       | 20.                                                              |       | Quarterly Data (Unaudited)                                          |     | F-54 |   |
| **FINANCIAL STATEMENT SCHEDULE**                                                        |       |                                                             |       |
| **Schedule 1—Condensed  Financial Statements of Registrant (Parent Company Only)** |       |                                                             |       |
|                                                                                    |       | Condensed  Statements of Financial Condition                     |       | F-55                                                                |     |
|                                                                                    |       | Condensed  Statements of Operations                              |       | F-56                                                                |     |
|                                                                                    |       | Condensed  Statements of Cash Flows                              |       | F-57                                                                |     |
|                                                                                    |       | Notes to Condensed  Financial Statements                         |       | F-58                                                                |     |
|                                                                                         |            |                                                                  |            |                                                                     |          |  |  |  |  |

 

F-1

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**Reportof Independent Registered Public Accounting Firm**

The Board of Directors andStockholderCredit Suisse First Boston (USA), Inc.

We have audited the accompanying consolidatedstatements of financial condition of Credit Suisse First Boston (USA), Inc.and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and therelated consolidated statements of operations, changes in stockholder’s equity,and cash flows for each of the years in the three-year period ended December 31,2004, and the related financial statement schedule. These consolidatedfinancial statements and related financial statement schedule are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these consolidated financial statements and related financialstatement schedule based on our audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects, the financialposition of the Company as of December 31, 2004 and 2003, and the resultsof their operations and their cash flows for each of the years in thethree-year period ended December 31, 2004, in conformity with U.S.generally accepted accounting principles. Also in our opinion, the relatedfinancial statement schedule, when considered in relation to the basicconsolidated financial statements taken as a whole, presents fairly, in all materialrespects, the information set forth therein.

Asdiscussed in Note 1 to the consolidated financial statements, in 2003 theCompany changed its method of accounting for variable interest entities andshare-based compensation.
| /s/ KPMG LLP        |
|---------------------|
| New York, New York  |
| March 17, 2005 |

 

F-2

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Consolidated Statements of Financial Condition (In millions)**
| ** **                                                                                                      | ** ** | **December 31,  2004** | ** ** | **December 31,  2003** | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                      |       |                        |       |                        |       |   |   |   |   |
| Cash and cash equivalents                                                                                       |       |                        | $          | 727                         |       |   |   | $ | 334 |   |   |
| Collateralized  short-term financings:                                                                          |       |                        |       |                        |       |   |   |   |   |
| Securities purchased under agreements to resell                                                                 |       |                        | 48,887     |                        |       |   | 50,388 |   |   |
| Securities borrowed                                                                                             |       |                        | 82,912     |                        |       |   | 77,999 |   |   |
| Receivables:                                                                                                    |       |                        |       |                        |       |   |   |   |   |
| Customers                                                                                                       |       |                        | 3,307      |                        |       |   | 2,871 |   |   |
| Brokers, dealers and other                                                                                      |       |                        | 11,094     |                        |       |   | 6,661 |   |   |
| Financial instruments  owned (includes securities pledged as collateral of $54,663 and $47,565,  respectively): |       |                        |       |                        |       |   |   |   |   |
| U.S. government and agencies                                                                                    |       |                        | 32,841     |                        |       |   | 31,781 |   |   |
| Corporate debt                                                                                                  |       |                        | 14,721     |                        |       |   | 12,761 |   |   |
| Mortgage whole loans                                                                                            |       |                        | 14,987     |                        |       |   | 9,101 |   |   |
| Equities                                                                                                        |       |                        | 28,712     |                        |       |   | 15,161 |   |   |
| Commercial paper                                                                                                |       |                        | 1,171      |                        |       |   | 641 |   |   |
| Private equity and other long-term investments                                                                  |       |                        | 3,127      |                        |       |   | 1,123 |   |   |
| Derivatives contracts                                                                                           |       |                        | 3,663      |                        |       |   | 5,573 |   |   |
| Other                                                                                                           |       |                        | 3,665      |                        |       |   | 3,765 |   |   |
| Net deferred tax  asset                                                                                         |       |                        | 1,103      |                        |       |   | 1,283 |   |   |
| Office facilities  at cost (net of accumulated depreciation and amortization of $913 and $865,  respectively)   |       |                        | 420        |                        |       |   | 468 |   |   |
| Goodwill                                                                                                        |       |                        | 527        |                        |       |   | 532 |   |   |
| Loans receivable  from parent and affiliates                                                                    |       |                        | 22,692     |                        |       |   | 19,481 |   |   |
| Other assets and  deferred amounts                                                                              |       |                        | 1,257      |                        |       |   | 1,643 |   |   |
| Total assets                                                                                                    |       |                        | $          | 275,813                     |       |   |   | $ | 241,566 |   |   |

 

See accompanying notes to consolidated financial statements.

F-3

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Consolidated Statements of Financial Condition (Continued) (In millions, except share date)**

 
| ** **                                                                                      | ** ** | **December 31,  2004** | ** ** | **December 31,  2003** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| **LIABILITIES  AND STOCKHOLDER’S EQUITY**                                                  |       |                        |       |                        |       |   |   |   |   |
| Commercial paper and short-term borrowings                                                      |       |                        | $          | 21,684                      |       |   |   | $ | 15,984 |   |   |
| Collateralized  short-term financings:                                                          |       |                        |       |                        |       |   |   |   |   |
| Securities sold under agreements to repurchase                                                  |       |                        | 108,407    |                        |       |   | 110,667 |   |   |
| Securities loaned                                                                               |       |                        | 45,148     |                        |       |   | 27,708 |   |   |
| Payables:                                                                                       |       |                        |       |                        |       |   |   |   |   |
| Customers                                                                                       |       |                        | 6,767      |                        |       |   | 5,602 |   |   |
| Brokers, dealers and other                                                                      |       |                        | 10,277     |                        |       |   | 4,086 |   |   |
| Financial instruments  sold not yet purchased:                                                  |       |                        |       |                        |       |   |   |   |   |
| U.S. government and agencies                                                                    |       |                        | 20,154     |                        |       |   | 23,700 |   |   |
| Corporate debt                                                                                  |       |                        | 2,842      |                        |       |   | 2,523 |   |   |
| Equities                                                                                        |       |                        | 5,245      |                        |       |   | 5,231 |   |   |
| Derivatives contracts                                                                           |       |                        | 2,295      |                        |       |   | 3,955 |   |   |
| Other                                                                                           |       |                        | 161        |                        |       |   | 336 |   |   |
| Obligation to  return securities received as collateral                                         |       |                        | 4,980      |                        |       |   | 1,955 |   |   |
| Accounts payable  and accrued expenses                                                          |       |                        | 3,327      |                        |       |   | 2,836 |   |   |
| Other liabilities                                                                               |       |                        | 4,521      |                        |       |   | 3,021 |   |   |
| Long-term  borrowings                                                                           |       |                        | 28,941     |                        |       |   | 24,321 |   |   |
| Total liabilities                                                                               |       |                        | 264,749    |                        |       |   | 231,925 |   |   |
| Stockholder’s  Equity:                                                                     |       |                        |       |                        |       |   |   |   |   |
| Common stock  ($0.10 par value; 50,000 shares authorized; 1,100 shares issued and  outstanding) |       |                        | —     |                        |       |   | — |   |   |
| Paid-in capital                                                                                 |       |                        | 8,538      |                        |       |   | 8,012 |   |   |
| Retained earnings                                                                               |       |                        | 2,534      |                        |       |   | 1,787 |   |   |
| Accumulated other  comprehensive loss                                                           |       |                        | (8         | )                           |       |   | (158 | ) |   |
| Total stockholder’s equity                                                                 |       |                        | 11,064     |                        |       |   | 9,641 |   |   |
| Total liabilities  and stockholder’s equity                                                |       |                        | $          | 275,813                     |       |   |   | $ | 241,566 |   |   |

 

See accompanying notes to consolidated financial statements.

F-4

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**CREDIT SUISSE FIRSTBOSTON (USA), INC. AND SUBSIDIARIESConsolidated Statements ofOperations(In millions)**
| ** **                                                                                                                                                                                     | ** ** | **For the Year Ended December 31,**         | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                                                                                                                                                     | ** ** | **     2004     ** | ** ** | **     2003     ** | ** ** | **     2002     ** | ** ** |
| Revenues:                                                                                                                                                                                      |       |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Principal transactions—net                                                                                                                                                                |       |                                                                 | $          | 657 |   |   |   | $ | (642 | ) |   |   | $ | (1,296 | ) |   |
| Investment banking and advisory                                                                                                                                                                |       |                                                                 | 1,771      |   |   |   | 1,753 |   |   |   | 2,154 |   |   |
| Commissions and fees                                                                                                                                                                           |       |                                                                 | 1,342      |   |   |   | 1,293 |   |   |   | 1,505 |   |   |
| Interest and dividends, net of interest expense of  $5,731, $4,447 and $5,436, respectively                                                                                                    |       |                                                                 | 2,483      |   |   |   | 2,392 |   |   |   | 2,058 |   |   |
| Other                                                                                                                                                                                          |       |                                                                 | 88         |   |   |   | 201 |   |   |   | 542 |   |   |
| Total net revenues                                                                                                                                                                             |       |                                                                 | 6,341      |   |   |   | 4,997 |   |   |   | 4,963 |   |   |
| Expenses:                                                                                                                                                                                      |       |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Employee compensation and benefits                                                                                                                                                             |       |                                                                 | 3,335      |   |   |   | 2,740 |   |   |   | 2,997 |   |   |
| Occupancy and equipment rental                                                                                                                                                                 |       |                                                                 | 483        |   |   |   | 478 |   |   |   | 502 |   |   |
| Brokerage, clearing and exchange fees                                                                                                                                                          |       |                                                                 | 298        |   |   |   | 289 |   |   |   | 241 |   |   |
| Communications                                                                                                                                                                                 |       |                                                                 | 129        |   |   |   | 119 |   |   |   | 171 |   |   |
| Professional fees                                                                                                                                                                              |       |                                                                 | 304        |   |   |   | 276 |   |   |   | 331 |   |   |
| Merger-related costs                                                                                                                                                                           |       |                                                                 | 8          |   |   |   | 122 |   |   |   | 338 |   |   |
| Other operating expenses                                                                                                                                                                       |       |                                                                 | (42        | ) |   |   | 404 |   |   |   | 864 |   |   |
| Total expenses                                                                                                                                                                                 |       |                                                                 | 4,515      |   |   |   | 4,428 |   |   |   | 5,444 |   |   |
| Income (loss)  from continuing operations before provision (benefit) for income taxes,  minority interests, discontinued operations and cumulative effect of a change  in accounting principle |       |                                                                 | 1,826      |   |   |   | 569 |   |   |   | (481 | ) |   |
| Provision  (benefit) for income taxes                                                                                                                                                          |       |                                                                 | 397        |   |   |   | 244 |   |   |   | (135 | ) |   |
| Minority  interests                                                                                                                                                                            |       |                                                                 | 642        |   |   |   | — |   |   |   | — |   |   |
| Income (loss)  from continuing operations before discontinued operations and cumulative effect  of a change in accounting principle                                                            |       |                                                                 | 787        |   |   |   | 325 |   |   |   | (346 | ) |   |
| Discontinued  operations:                                                                                                                                                                      |       |                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Income from discontinued operations                                                                                                                                                            |       |                                                                 | —     |   |   |   | 1,361 |   |   |   | 136 |   |   |
| Provision for income taxes                                                                                                                                                                     |       |                                                                 | —     |   |   |   | 485 |   |   |   | 47 |   |   |
| Income from discontinued operations, net of income  taxes                                                                                                                                      |       |                                                                 | —     |   |   |   | 876 |   |   |   | 89 |   |   |
| Income (loss)  before cumulative effect of a change in accounting principle                                                                                                                    |       |                                                                 | 787        |   |   |   | 1,201 |   |   |   | (257 | ) |   |
| Cumulative effect  of a change in accounting principle, net of income tax benefit of $5 in 2003                                                                                                |       |                                                                 | —     |   |   |   | (9 | ) |   |   | — |   |   |
| Net income (loss)                                                                                                                                                                              |       |                                                                 | $          | 787 |   |   |   | $ | 1,192 |   |   |   | $ | (257 | ) |   |
|                                                                                                                                                                                           |       |                                                                 |       |   |   |   |   |   |   |   |   |   |   |

 

See accompanying notes to consolidated financial statements.

F-5

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**CREDIT SUISSE FIRSTBOSTON (USA), INC. AND SUBSIDIARIESConsolidated Statements of Changesin Stockholder’s EquityFor the Years Ended December 31, 2004, 2003 and 2002(In millions)**
| ** **                                                                             | ** ** | **Preferred  Stock** | ** ** | **Common  Stock** | ** ** | **Paid-in  Capital** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  (Loss)** | ** ** | **Total** | ** ** |
|----------------------------------------------------------------------------------------|------------|----------------------|------------|-------------------|------------|----------------------|------------|------------------------|------------|-----------------------------------------------|------------|-----------|------------|
| Balances as of  December 31, 2001                                                 |       |                 | $          | 5                 |       |                 |       | $                      | —     |                                          |       | $         | 6,693      |   | $ | 854 |   |   | $ | (72 | ) |   | $ | 7,480 |   |
| Net loss                                                                               |       |                 | —     |              |       |                 | —     |                   |       | —                                        |       | (257      | )          |   | — |   |   | (257 | ) |
| Foreign currency  translation adjustment                                               |       |                 | —     |              |       |                 | —     |                   |       | —                                        |       | —    |       |   | 6 |   |   | 6 |   |
| Minimum pension liability  adjustment, net of income tax benefit of $49                |       |                 | —     |              |       |                 | —     |                   |       | —                                        |       | —    |       |   | (90 | ) |   | (90 | ) |
| Total comprehensive loss                                                               |       |                 |       |              |       |                 |       |                   |       |                                          |       |      |       |   |   |   |   | (341 | ) |
| Capital  contribution by CSFBI                                                         |       |                 | —     |              |       |                 | —     |                   |       | 300                                           |       | —    |       |   | — |   |   | 300 |   |
| Redemption of  Series B preferred stock                                           |       |                 | (1         | )                 |       |                 | —     |                   |       | —                                        |       | —    |       |   | — |   |   | (1 | ) |
| CSG share plan  activity, including tax charge of $7                                   |       |                 | —     |              |       |                 | —     |                   |       | 653                                           |       | —    |       |   | — |   |   | 653 |   |
| Preferred stock  dividends                                                             |       |                 | —     |              |       |                 | —     |                   |       | —                                        |       | (2        | )          |   | — |   |   | (2 | ) |
| Balances as of  December 31, 2002                                                 |       |                 | 4          |              |       |                 | —     |                   |       | 7,646                                         |       | 595       |       |   | (156 | ) |   | 8,089 |   |
| Net income                                                                             |       |                 | —     |              |       |                 | —     |                   |       | —                                        |       | 1,192     |       |   | — |   |   | 1,192 |   |
| Foreign currency  translation adjustment                                               |       |                 | —     |              |       |                 | —     |                   |       | —                                        |       | —    |       |   | 2 |   |   | 2 |   |
| Minimum pension  liability adjustment, net of income tax benefit of $2                 |       |                 | —     |              |       |                 | —     |                   |       | —                                        |       | —    |       |   | (4 | ) |   | (4 | ) |
| Total comprehensive income                                                             |       |                 |       |              |       |                 |       |                   |       |                                          |       |      |       |   |   |   |   | 1,190 |   |
| Capital  contribution by CSFBI                                                         |       |                 | —     |              |       |                 | —     |                   |       | 75                                            |       | —    |       |   | — |   |   | 75 |   |
| Redemption of  Series B preferred stock                                           |       |                 | (4         | )                 |       |                 | —     |                   |       | —                                        |       | —    |       |   | — |   |   | (4 | ) |
| CSG share plan  activity, including tax charge of $27                                  |       |                 | —     |              |       |                 | —     |                   |       | 325                                           |       | —    |       |   | — |   |   | 325 |   |
| Tax charge  associated with an investment previously recorded through equity and other |       |                 | —     |              |       |                 | —     |                   |       | (34                                           | )          | —    |       |   | — |   |   | (34 | ) |
| Balances as of  December 31, 2003                                                 |       |                 | —     |              |       |                 | —     |                   |       | 8,012                                         |       | 1,787     |       |   | (158 | ) |   | 9,641 |   |
| Net income                                                                             |       |                 | —     |              |       |                 | —     |                   |       | —                                        |       | 787       |       |   | — |   |   | 787 |   |
| Minimum pension  liability adjustment, net of income tax charge of $80                 |       |                 | —     |              |       |                 | —     |                   |       | —                                        |       | —    |       |   | 150 |   |   | 150 |   |
| Total comprehensive income                                                             |       |                 |       |              |       |                 |       |                   |       |                                          |       |      |       |   |   |   |   | 937 |   |
| CSG share plan activity, including tax benefit of  $131                                |       |                 | —     |              |       |                 | —     |                   |       | 526                                           |       | —    |       |   | — |   |   | 526 |   |
| Common stock  dividend                                                                 |       |                 | —     |              |       |                 | —     |                   |       | —                                        |       | (40       | )          |   | — |   |   | (40 | ) |
| Balances as of  December 31, 2004                                                 |       |                 | $          | —            |       |                 |       | $                      | —     |                                          |       | $         | 8,538      |   | $ | 2,534 |   |   | $ | (8 | ) |   | $ | 11,064 |   |
|                                                                                   |       |                 |       |              |       |                 |       |                   |       |                                          |       |      |       |   |   |   |   |   |   |

 

 

See accompanying notes to consolidated financial statements.

F-6

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**CREDIT SUISSE FIRSTBOSTON (USA), INC. AND SUBSIDIARIESConsolidated Statements of Cash FlowsFor the Years Ended December 31, 2004, 2003 and 2002(In millions)**
| ** **                                                                                               | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Cash flows from operating activities:                                                                    |       |     |       |     |       |     |       |
| Net income (loss)                                                                                        |       | $        | 787        |     | $          | 1,192    |       | $ | (257 | ) |
| Adjustments to reconcile  net income (loss) to net cash (used in) provided by operating activities:      |       |     |       |     |       |     |       |
| Net pre-tax gain  on sale of broker-dealer subsidiaries                                                  |       | —   |       | —   |       | (528     | )          |
| Pre-tax gain on  sale of Pershing                                                                        |       | —   |       | (1,324   | )          | —   |       |
| Pre-tax gain on  sale of DLJ*direct* SFG  Securities Inc.                                                |       | —   |       | (115     | )          | —   |       |
| Depreciation and  amortization                                                                           |       | 196      |       | 234      |       | 208      |       |
| Write-down of  intangible assets                                                                         |       | —   |       | 200      |       | —   |       |
| Non-cash CSG share  plan activity                                                                        |       | 415      |       | 352      |       | 660      |       |
| Tax benefit on CSG  share plan activity                                                                  |       | 131      |       | —   |       | —   |       |
| Deferred taxes                                                                                           |       | 71       |       | 244      |       | 284      |       |
| Other, net                                                                                               |       | 150      |       | (63      | )          | (91      | )          |
| Change in operating  assets and operating liabilities:                                                   |       |     |       |     |       |     |       |
| Securities  borrowed                                                                                     |       | (4,913   | )          | (6,703   | )          | (3,058   | )          |
| Receivables from  customers                                                                              |       | (436     | )          | (1,753   | )          | 491      |       |
| Receivables from  brokers, dealers and other                                                             |       | (4,433   | )          | 337      |       | 5,192    |       |
| Financial  instruments owned                                                                             |       | (21,190  | )          | (8,107   | )          | (2,338   | )          |
| Other assets and  deferred amounts and Other liabilities, net                                            |       | 52       |       | 1,105    |       | 30       |       |
| Securities loaned                                                                                        |       | 17,440   |       | 3,530    |       | (4,514   | )          |
| Payables to  customers                                                                                   |       | 1,165    |       | 1,777    |       | (799     | )          |
| Payables to  brokers, dealers and other                                                                  |       | 6,191    |       | (3,706   | )          | (3,906   | )          |
| Financial  instruments sold not yet purchased                                                            |       | (5,048   | )          | 3,371    |       | 2,134    |       |
| Obligation to  return securities received as collateral                                                  |       | 3,025    |       | 1,059    |       | (138     | )          |
| Accounts payable  and accrued expenses                                                                   |       | 491      |       | (397     | )          | (2,790   | )          |
| Net cash used in  operating activities                                                                   |       | (5,906   | )          | (8,767   | )          | (9,420   | )          |
| Cash flows from investing activities:                                                                    |       |     |       |     |       |     |       |
| Net (payments for)  proceeds from:                                                                       |       |     |       |     |       |     |       |
| Loans receivable  from parent and affiliates                                                             |       | (3,211   | )          | (3,538   | )          | (7,756   | )          |
| Sale of  broker-dealer subsidiaries                                                                      |       | —   |       | —   |       | 674      |       |
| Sale of Pershing                                                                                         |       | —   |       | 2,000    |       | —   |       |
| Sale of DLJ  International Group Limited                                                                 |       | —   |       | 500      |       | —   |       |
| Sale of DLJ*direct* SFG Securities Inc.                                                                  |       | —   |       | 170      |       | —   |       |
| Office facilities,  net                                                                                  |       | (106     | )          | (178     | )          | (134     | )          |
| Purchase of Holt  Value Associates, LP, net of cash                                                      |       | —   |       | (8       | )          | (80      | )          |
| Purchase of  Volaris Advisors, net of cash                                                               |       | —   |       | (16      | )          | —   |       |
| Purchase of  Investment Property Mortgage, LLC and related assets, net of cash                           |       | —   |       | (34      | )          | —   |       |
| Net cash used in  investing activities                                                                   |       | (3,317   | )          | (1,104   | )          | (7,296   | )          |
| Cash flows from financing activities:                                                                    |       |     |       |     |       |     |       |
| Net proceeds from  (payments for):                                                                       |       |     |       |     |       |     |       |
| Commercial paper  and short-term borrowings                                                              |       | 5,700    |       | 4,051    |       | 2,897    |       |
| Redemption of  Series B preferred stock                                                             |       | —   |       | (4       | )          | (1       | )          |
| Capital  contribution by CSFBI                                                                           |       | —   |       | 75       |       | 300      |       |
| Securities sold  under agreements to repurchase, net of securities purchased under agreements  to resell |       | (759     | )          | 4,139    |       | 6,956    |       |
| Dividend  equivalents on CSG share plan activity                                                         |       | (20      | )          | —   |       | —   |       |
| Cash dividends                                                                                           |       | (40      | )          | —   |       | (2       | )          |
| Issuances of long-term  borrowings                                                                       |       | 6,974    |       | 5,029    |       | 10,363   |       |
| Redemptions and  maturities of long-term borrowings                                                      |       | (2,239   | )          | (3,565   | )          | (3,852   | )          |
| Net cash provided  by financing activities                                                               |       | 9,616    |       | 9,725    |       | 16,661   |       |
| Increase  (decrease) in cash and cash equivalents                                                        |       | 393      |       | (146     | )          | (55      | )          |
| Cash and cash  equivalents included in assets held for sale                                              |       | —   |       | —   |       | (1,218   | )          |
| Cash and cash  equivalents as of the beginning of year                                                   |       | 334      |       | 480      |       | 1,753    |       |
| Cash and cash  equivalents as of the end of year                                                         |       | $        | 727        |     | $          | 334      |       | $ | 480 |   |
| SUPPLEMENTAL DISCLOSURES                                                                                 |       |     |       |     |       |     |       |
| Cash payments for  interest                                                                              |       | $        | 5,686      |     | $          | 4,741    |       | $ | 4,915 |   |
| Cash payments for  income taxes, net of refunds                                                          |       | $        | 76         |     | $          | 161      |       | $ | 155 |   |

 

See accompanying notes to consolidated financial statements.

F-7

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements  December 31, 2004**

**1. Summary of Significant AccountingPolicies**

**The Company**

The consolidated financial statements include CreditSuisse First Boston (USA), Inc., formerly known as Donaldson, Lufkin andJenrette, Inc. (“DLJ”), and its subsidiaries (the “Company”). The Companyis a leading integrated investment bank serving institutional, corporate,government and high-net-worth individual clients. The Company’s products andservices include securities underwriting, sales and trading, financial advisoryservices, private equity investments, full service brokerage services,derivatives and risk management products and investment research. The Companyis an indirect wholly owned subsidiary of Credit Suisse Group (“CSG”), whichacquired DLJ on November 3, 2000. Any unexercised or unvested shareoptions of DLJ as of the closing date were converted into CSG share options.After the acquisition, DLJ changed its name to Credit Suisse First Boston (USA), Inc.All significant intercompany balances and transactions have been eliminated.

CSG accounted for the acquisition using the purchasemethod of accounting. However, because the Company had significant preferredstock and public debt outstanding at the time of the acquisition, noadjustments of the historical carrying values of the Company’s assets andliabilities to reflect the acquisition were recorded in the Company’shistorical financial statements. Similarly, although the acquisition gave riseto goodwill and intangible assets, none of the goodwill and intangible assetswere “pushed down” to the Company. The goodwill and intangible assetsassociated with the acquisition were recorded in the financial statements ofCSG and the Company’s parent companies, Credit Suisse First Boston, Inc. (“CSFBI”)and Credit Suisse First Boston, and do not affect the Company’s results ofoperations.

On November 3, 2000, in conjunction with theclosing of the acquisition, the Company’s immediate parent, CSFBI, transferredall of the outstanding shares of Credit Suisse First Boston LLC (“CSFB LLC”),formerly Credit Suisse First Boston Corporation, a U.S. registered broker-dealerthat was a direct wholly owned subsidiary of CSFBI, to the Company in exchangefor newly issued shares of the Company. CSFB LLC became a direct wholly ownedsubsidiary of the Company. Because the transfer of CSFB LLC was betweenentities under common control, it has been accounted for at historical cost inthe accompanying consolidated financial statements. Accordingly, the operatingresults of CSFB LLC have been included in the Company’s consolidated financialstatements from November 3, 2000, the date of the transfer.

The Company’s immediate parent company, CSFBI,transferred the high-net-worth business (“HNW Business”) of Credit Suisse AssetManagement, LLC (“CSAM”), a wholly owned subsidiary of CSFBI, to the Company asa capital contribution of $221 million on March 31, 2004. Thetransfer of this business was accounted for at historical cost in a mannersimilar to pooling-of-interest accounting because CSAM and the Company were underthe common control of CSFBI at the time of transfer. Accordingly, the Companyhas restated its financial information for all periods presented to reflect thefinancial condition, results of operations, cash flows and changes instockholder’s equity of the CSAM HNW Business as if the Company had acquired iton November 3, 2000, the date that the Company was acquired by CSFBI. Thetransferred assets of this business consist principally of goodwill andintangible assets relating primarily to CSAM’s acquisition of Warburg PincusAsset Management in 1999. In December 2003, CSAM wrote down the value ofits high-net-worth intangible assets, resulting in a pre-tax loss of$200 million and an after-tax loss 

F-8

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements  (Continued) December 31, 2004**

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

of $130 million. Theloss is reflected in these consolidated financial statements and restatedaudited consolidated financial statements filed by the Company on June 4,2004 on Form 8-K.

As of January 1, 2004, the Company transferredthe private equity and private funds businesses from the InstitutionalSecurities segment to the Financial Services segment, which has been renamedthe Wealth & Asset Management segment. As a result, the Companychanged the presentation of the Institutional Securities and Wealth &Asset Management segment results. In addition, the Company allocated to thesegments merger-related costs and certain other costs and revenues, previouslyexcluded from its reportable segments. For comparative purposes, prior periodsegment numbers have been changed to conform to the new segment reportingstructure. These segment changes did not affect the Company’s previouslyreported consolidated results of operations.

On May 1, 2003, the Company sold its Pershingunit (“Pershing”) to The Bank of New York Company, Inc. and recorded apre-tax gain of approximately $1.3 billion and an after-tax gain of$852 million in the second quarter of 2003. The Pershing operations arepresented as discontinued operations in the consolidated statements ofoperations for the years ended December 31, 2003 and 2002. Pershing’sassets and liabilities were classified as assets held for sale and liabilitiesheld for sale as of December 31, 2002. The consolidated statements of cashflows present the Company’s cash flows as if the assets and liabilities ofPershing were not assets held for sale and liabilities held for sale.Therefore, the cash flows pertaining to discontinued operations have not beenreported separately in the consolidated statements of cash flows.

On March 20, 2003, CSFBI transferred its whollyowned subsidiary Credit Suisse First Boston Management LLC (“Management LLC”)to the Company as a capital contribution of $75 million. The transfer ofManagement LLC has been accounted for at historical cost in a manner similar topooling-of-interest accounting because Management LLC and the Company wereunder the common control of CSFBI at the time of the transfer. The Company’sfinancial information reflects the financial condition, results of operations,cash flows and changes in stockholder’s equity as if the Company had acquiredManagement LLC on November 3, 2000, the date that the Company was acquiredby CSFBI.

***Basis of financial information.  ***Toprepare consolidated financial statements in accordance with accountingprinciples generally accepted in the United States of America, management mustmake estimates and assumptions. The reported amounts of assets and liabilitiesand revenues and expenses are affected by these estimates and assumptions, themost significant of which are discussed in the notes to the consolidatedfinancial statements. Estimates, by their nature, are based on judgment andavailable information. Therefore, actual results could differ materially fromthese estimates.

The Company consolidates all entities in which it hasa controlling financial interest, which is typically all, or a majority of, thevoting interests. The Company alsoconsolidates entities that are variable interest entities (“VIEs”) when it isdetermined to be the primary beneficiary under Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46,“Consolidation of Variable Interest Entities” (“FIN 46”) and the subsequentmodifications of FIN 46 under FIN 46R. See Notes 4 and 5 for more information. Entitiesin which the Company holds 20% to 50% of the voting rights or has the abilityto exercise significant influence, other than private equity investments whichare consolidated primarily under FIN 46R, are accounted for underAccounting Principles Board (“APB”) Opinion No. 18, “The Equity 

F-9

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements  (Continued) December 31, 2004**

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

Method of Accounting forInvestments in Common Stock.” In cases where the Company has a voting interestof less than 20% and does not have significant influence, the investment iscarried at cost. Where an investment is treated as financial instruments ownedin its broker-dealers, the Company does not apply the cost or equity method andcarries the investment at fair value.

Certain reclassificationshave been made to prior year consolidated financial statements to conform tothe 2004 presentation.

**SignificantAccounting Policies**

***Cash and cashequivalents.  ***Cash and cash equivalents include alldemand deposits held in banks and certain highly liquid investments withoriginal maturities of 90 days or less, other than those held for sale inthe ordinary course of business.

***Collateralizedshort-term financings.  ***The Company enters intotransactions involving securities sold under agreements to repurchase (“repurchaseagreements”) and securities purchased under agreements to resell (“resaleagreements”) and securities borrowed and securities loaned transactions as partof the Company’s matched-book activities to accommodate clients, finance theCompany’s trading inventory, obtain securities for settlement and earn interestspreads.

Repurchase agreements and resale agreements aretreated as collateralized financing arrangements and are carried at contractamounts that reflect the amounts at which the securities will be subsequentlyrepurchased or resold. Interest on such contract amounts is accrued and isincluded in the consolidated statements of financial condition in receivablesfrom and payables to brokers, dealers and other. The Company takes possessionof the securities purchased under resale agreements and obtains additionalcollateral when the market value falls below the contract value. The Companynets certain repurchase agreements and resale agreements with the samecounterparty in the consolidated statements of financial condition when therequirements of FIN No. 41, “Offsetting of Amounts Relating to CertainRepurchase and Reverse Repurchase Agreements,” are satisfied.

The Company uses derivatives to mitigate the interestrate exposure associated with certain resale and repurchase agreements. Thesederivatives are carried at fair value, with the change in fair value recordedin the consolidated statements of operations, while the resale and repurchaseagreements are carried at contract amounts, with interest income (expense)accruing over the term of the agreement in receivables from and payables tobrokers, dealers and other in the consolidated statements of financialcondition. As a result, increases and decreases in the value of the derivativesare not offset by decreases and increases in the value of the resale andrepurchase agreements until the securities are repurchased or sold. Therefore,the Company’s net revenues are subject to volatility from period to period.

Securities borrowed and securities loaned transactionsare recorded at the amount of cash collateral advanced or received. Forsecurities borrowed, the Company deposits cash, letters of credit or othercollateral with the lender. For securities loaned, the Company receives cash orother collateral from the borrower generally in excess of the market value ofsecurities loaned. Interest on such transactions is accrued and is included inthe consolidated statements of financial condition in receivables from and 

F-10

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements  (Continued) December 31, 2004**

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

payables to brokers,dealers and other. The Company monitors the market value of securities borrowedand loaned daily and obtains or refunds collateral as necessary.

***Receivables fromcustomers/Payables to customers*.  **Receivables fromand payables to customers include amounts due on regular-way securitiestransactions, margin transactions and commodities futures. Securities owned bycustomers, including those that collateralize margin or similar transactionsare not reflected in the consolidated statements of financial condition.

***Receivables frombrokers, dealers and other/Payables to brokers, dealers and other*.  **Receivablesfrom brokers, dealers and other include amounts receivable for securities notdelivered by the Company to a purchaser by the settlement date (“fails todeliver”), accrued dividends and interest, margin due on futures contracts andomnibus receivables. Payables to brokers, dealers and other include amountspayable for securities not received by the Company from a seller by thesettlement date (“fails to receive”) and accrued dividends and interest. Inaddition, the net receivable or payable arising from unsettled regular-waytrades is included in receivables from brokers, dealers and other or payablesto brokers, dealers and other.

***Fair value offinancial instruments.  ***Substantially all of theCompany’s financial instruments, as well as financial instruments withoff-balance sheet risk (with the exception of commercial mortgage loans andcertain residential mortgages that are held for sale), are carried at fairvalue. Fair value is estimated as of the date of the statement of financialcondition, based on relevant market information or the value of the underlyingfinancial instrument. Financial instruments are recorded on a trade date basis,with the exception of mortgage whole loans which are recorded on a settlementdate basis.

The determination of fair value is fundamental to theCompany’s financial condition and results of operations and, in certaincircumstances, requires management to make complex judgments. Fair value isbased generally on listed market prices or broker or dealer price quotations.If prices are not readily determinable or if liquidating the Company’spositions is reasonably expected to affect market prices, fair value is basedon either internal valuation models or management’s estimate of amounts thatcould be realized under current market conditions. Certain financialinstruments, including over-the-counter (“OTC”) derivatives contracts, arevalued using pricing models that consider, among other factors, contractual andmarket prices, correlations, time value, credit, yield curve, volatilityfactors and/or prepayment rates of the underlying positions. The use ofdifferent pricing models and assumptions could produce materially differentestimates of fair value.

***Mortgage wholeloans.  ***Residential mortgage whole loans aregenerally carried at fair value with the changes in fair value included inprincipal transactions-net in the consolidated statements of operations withthe exception of residential mortgage whole loans that are originated by theCompany, which are carried at the lower of cost or fair value. Commercialmortgage whole loans are carried at the lower of aggregate cost or fair value.The amount by which aggregate cost exceeds fair value is reflected in principaltransactions-net in the consolidated statements of operations. Managementdetermines fair value by taking into consideration, among other things, the useof discounted cash flows or model pricing. Purchases and sales of mortgagewhole loans are recorded on a settlement date basis. Interest is accrued on allmortgage whole loans with the exception of those that are delinquent 90 days,as reported by the servicer.

F-11

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements  (Continued) December 31, 2004**

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

***Securitization.  ***TheCompany securitizes commercial and residential mortgages, which it originatesand purchases, and loans and other debtobligations, which it purchases from third parties. The Company accountsfor the transfers of financial assets in accordance with Statement of FinancialAccounting Standards (“SFAS”) No. 140, “Accounting for Transfers andServicing of Financial Assets and Extinguishments of Liabilities” (“SFAS 140”).The company records a loan securitization as a sale when the transferred loansare legally isolated from the Company’s creditors and the accounting criteriafor a sale are met. The Company may retaininterests in these securitized assets in connection with its underwriting andmarket-making activities. Retained interests in securitized financial assetsare included at fair value in financial instruments owned in the consolidatedstatements of financial condition. Any changes in the fair value of theseretained interests are recognized in the consolidated statements of operations.The fair values of retained interests are determined using present value ofestimated future cash flows valuation techniques that incorporate assumptionsthat market participants customarily use in their estimates of values includingpayment speeds, credit losses and discount rates. See Note 4 for moreinformation.

***Derivativescontracts—trading.  ***All trading derivativescontracts are carried at fair value with realized and unrealized gains andlosses and interest flows included in principal transactions-net in the consolidatedstatements of operations. Cash flows from these derivatives contracts areincluded as operating activities in the consolidated statements of cash flows.See Note 6 for more information.

***Derivativescontracts—nontrading.  ***The Company manages its interestrate exposure on its long-term fixed rate debt by using interest rate swapsthat qualify for hedge accounting under SFAS No. 133, “Accounting forDerivative Instruments and Hedging Activities” as amended (“SFAS 133”).These financial instruments are accounted for as fair value hedges, withchanges in the fair value of both the derivative and the hedged item includedin principal transactions—net in the consolidated statements of operations.Interest flows on both the Company’s borrowings and the related fair valuehedges are included in interest income (expense) in the consolidated statementsof operations. Other derivatives contracts used for hedging purposes that donot qualify as hedges under SFAS 133 are carried at fair value withrealized and unrealized gains and losses and interest flows included inprincipal transactions-net in the consolidated statements of operations. Cashflows from these derivatives instruments are included in operating activitiesin the consolidated statements of cash flows. See Note 6 for moreinformation.

***Variableprepaid forwards.  ***Variableprepaid forward contracts (“VPFs”) are a form of OTC hybrid transactionpursuant to which the Company purchases a variable number of shares of commonstock from a customer on a forward basis. At inception, the Company pays thecustomer a dollar amount based on the underlying value of the common stock. Atthe maturity of the transaction, the Company receives a variable number ofshares (or an amount in cash equal to the value of such variable number ofshares, with a maximum share cap) from the customer based on the market priceof the shares at maturity. VPFs allow customers to monetize their stockposition and provide market risk protection through an equity collar that,among other things, protects the customer against decreases in the value of theunderlying common stock. The VPFs are generally long-dated and have maturitiesof three to ten years. In accordance with SFAS No. 149, “Amendment ofStatement 133 on Derivative Instruments and Hedging Activities” (“SFAS 149”),all VPFs entered into prior to July 1, 2003 and VPFs entered into after June 30,2003 that do not meet the definition of a derivative are included in otherfinancial instruments owned in the consolidated statements of financialcondition and had a fair value of $2.4 billion and $3.1 billion as of 

F-12

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements  (Continued) December 31, 2004**

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

December 31, 2004 and2003, respectively. VPFs entered into after June 30, 2003 that meet thedefinition of a derivative are reported as derivative contracts in theconsolidated statements of financial condition and had a fair value of$757 million and $470 million as of December 31, 2004 and 2003,respectively. All VPFs are carried at fair value.

***Private equity andother long-term investments.  ***Private equity andother long-term investments generally have no readily available market or maybe otherwise restricted as to resale under the Securities Act of 1933;therefore, these investments are carried at amounts which approximate fairvalue. Fair value for private equity and other long-term investments is basedupon a number of factors, including readily available market quotes withappropriate adjustments for liquidity due to holding large blocks and/or havingtrading restrictions, the most recent round of financings, earnings-multipleanalyses using comparable companies, discounted cash flow analysis orvaluations received from the general partner of a third-party managed fund. Changesin net unrealized appreciation/depreciation arising from changes in fair valueand gains and losses realized upon sale are reflected in principaltransactions-net in the consolidated statements of operations. The Company’ssubsidiaries manage many private equity partnerships. When the investmentperformance on CSFB-managed private equity partnerships exceeds specificthresholds, the Company may be entitled to receive a carried interestdistribution. Carried interest gains are based on the cumulative investmentperformance over the life of each partnership and are recognized in theconsolidated statements of operations when the underlying investments are sold.The Company may be required to return carried interest gains previouslydistributed by the partnership if the partnership underperforms following thedistribution of carried interest gains. See Notes 5 and 10 for moreinformation.

***Office facilities.  ***Officefacilities are carried at cost and are depreciated on a straight-line basisover their estimated useful life of two to seven years. Leasehold improvementsare amortized over the lesser of the useful life of the improvement or term ofthe lease.

***Goodwill andidentifiable intangible assets*.  **Goodwill representsthe amount by which the purchase price exceeds the fair value of the nettangible and intangible assets of an acquired company on the date ofacquisition. Goodwill and indefinite-lived intangible assets are reviewedannually for impairment. Based on the results of the Company’s annual review itwas determined that no impairment charge was required. Intangible assets thatdo not have indefinite lives, principally software and customer lists, are amortizedover their useful lives and reviewed for impairment. Intangible assets areincluded in other assets and deferred amounts in the consolidated statements offinancial condition. See Note 7 for more information.

***Principaltransactions—net.  ***Principalsecurities transactions are recorded on a trade date basis. Realized andunrealized gains and losses on trading in financial instruments, includingsecurities, private equity investments, derivatives contracts, carried interestfrom private equity investments and interest flows on the Company’s tradingderivatives contracts are reflected in principal transactions-net in theconsolidated statements of operations.

***Loan originationfees.  ***Loan origination fees and direct originationcosts are deferred until the time of securitization and are included inprincipal transactions-net in the consolidated statements of operations.

F-13

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements  (Continued) December 31, 2004**

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

***Investment bankingunderwriting revenues and fees.  ***Investment bankingunderwriting revenues and fees, net of syndicate expenses, arising fromsecurities offerings in which the Company acts as an underwriter or agent, arerecorded in investment banking and advisory in the consolidated statements ofoperations. Investment banking revenues from fees earned for providing mergerand acquisition and other advisory services are also recorded in investmentbanking and advisory in the consolidated statements of operations. In addition,placement fees earned by the Company’s private funds group are also included ininvestment banking and advisory revenues. Investment banking and advisoryrevenues are recorded at the time the transactions are substantially completed.

***Commissions.  ***Commissionsprimarily include fees from executing and clearing customer transactions onstock, options and futures markets. Commissions are recorded in theconsolidated statements of operations on a trade date basis. Commissions alsoinclude management fees earned by the Company from managing private equityfunds and are recorded in the consolidated statements of operations whenearned.

***Interest income(expense)****.  *Interestincome (expense) includes interest income (expense) on the Company’s financialinstruments owned and financial instruments sold not yet purchased, exceptinterest flows on the Company’s trading derivatives, and interest income(expense) on short-term and long-term borrowings, including interest income(expense) on resale and repurchase agreements and securities borrowed andsecurities loaned transactions.

Interest income (expense) is accrued at the statedcoupon rate for coupon-bearing financial instruments, and fornon-coupon-bearing financial instruments, interest income is recognized by accretingthe discount over the life of the instrument. For coupon-bearing financialinstruments purchased at a discount or premium, the difference between interestincome (expense) accrued at the stated coupon rate and interest income(expense) determined on an effective yield basis is included in principaltransactions-net in the consolidated statements of operations.

***Merger-relatedcosts.  ***Merger-related costs represent retentionawards related to the DLJ acquisition. These costs were expensed over thevesting period, which ended in 2004.

***Share-based Compensation.  ***InAugust 2003, the Company adopted the fair value recognition provisions of SFASNo. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148,“Accounting for Stock-Based Compensation—Transition and Disclosure,” (“SFAS123”) using the prospective method. Under the prospective method, the Companyrecognizes compensation expense over the vesting period for all share optionand share awards granted under the Credit Suisse Group International Share Plan(the “Plan”) for services provided after January 1, 2003.

Share option awards granted in or before January 2003for services provided before January 1, 2003, if not subsequentlymodified, were and will continue to be accounted for under the recognition andmeasurement provisions of APB Opinion No. 25, “Accounting for Stock Issuedto Employees” (“APB 25”), and therefore no compensation expense has beenrecognized for those option awards, which had no intrinsic value on the date ofgrant. Share awards with no vesting requirements granted in or before January 2003for services provided in prior years were expensed during the year the serviceswere provided. For share awards granted with vesting requirements, compensationexpense is recognized over the vesting period.

F-14

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements  (Continued) December 31, 2004**

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

If the Company had applied the fair-value based methodunder SFAS 123 to recognize expense over the relevant serviceperiod for share options that had future vesting requirements granted in orbefore January 2003, net income (loss) would have decreased (increased)for the years ended December 31, 2004, 2003 and 2002. The following tablereflects this pro forma effect:
| ** **                                                                                                                                   | ** ** | **For the Year Ended  December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                                                                                                                   | ** ** | **2004**(1)                                              | ** ** | **2003**(1) | ** ** | **2002** | ** ** |
| ** **                                                                                                                                   | ** ** | **(In millions)**                                   | ** ** |
| Net income  (loss), as reported                                                                                                              |       |                                                     | $          | 787 |   |   | $ | 1,192 |   | $ | (257 | ) |
| Add: Share-based  employee compensation expense, net of related tax effects, included in  reported net income                           |       |                                                     | 264        |   |   | 208 |   | 404 |   |
| Deduct: Share-based  employee compensation expense, net of related tax effects, determined under  the fair-value based method for all awards |       |                                                     | 269        |   |   | 228 |   | 548 |   |
| Pro forma net income  (loss)                                                                                                                 |       |                                                     | $          | 782 |   |   | $ | 1,172 |   | $ | (401 | ) |
|                                                                                                                                         |       |                                                     |       |   |   |   |   |   |   |

----

(1)      Compensation expense for the years ended December 31,2004 and 2003 reflected the change in vesting discussed below.

In September 2003, CSG amended the Credit SuisseGroup International Share Plan and introduced three-year vesting for shareoption and share awards granted as part of incentive compensation. Theimposition of three-year vesting is intended to improve employee retention andlong-term performance. For additional information on share-based compensation,see Note 15.

***Income taxes.  ***TheCompany is included in the consolidated federal income tax return filed byCSFBI and certain state and local income tax returns filed by CSFBI. CSFBIallocates federal income taxes to its subsidiaries on a separate return basis,and any state and local income taxes on a *prorata* basis, pursuant to a tax sharing arrangement.

The Company uses the assetand liability method in providing for income taxes, which requires thatdeferred income taxes be recorded and adjusted for the future tax consequencesof events that have been recognized in the financial statements or tax returns,based upon enacted tax laws and rates. Deferred tax assets are recognizedsubject to management’s judgment that realization is more likely than not. SeeNote 17 for more information.

**New AccountingPronouncements**

In January 2003, the FASB issued FIN 46, whichrequires the Company to consolidate all VIEs for which it is the primarybeneficiary, defined as the entity that will absorb a majority of expectedlosses, 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 December 31, 2003, with the exception of certain private equity fundsthat were a subject of the deferral, the Company consolidated all VIEsunder FIN 46 

F-15

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements  (Continued) December 31, 2004**

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

for which it is theprimary beneficiary, all of which were related to its CDO activities. The cumulative effect of the Company’sadoption of FIN 46 for VIEs created before February 1, 2003, the effectivedate of FIN 46, was an after-tax loss of $9 million reported in theconsolidated statement of operations as cumulative effect of a change inaccounting principle. The cumulative effect was determined by recording theassets, liabilities and non-controlling interests in the VIE at their carryingamounts as of the date of consolidation. The difference between the net amountadded to the consolidated statement of financial condition and the amount ofpreviously recognized interest represents the cumulative effect. The effect ofthe Company’s adoption of FIN 46 for VIEs created after January 31, 2003is included in the consolidated statement of operations in income (loss) fromcontinuing operations before provision (benefit) for income taxes, discontinuedoperations and cumulative effect of a change in accounting principle. OnJanuary 1, 2004, upon adoption of FIN 46R, the Company consolidatedcertain private equity funds that are managed by the Company. As of December 31,2004, the Company recorded $1.9 billion of private equity and otherlong-term investments, increased other assets by $2 million and recorded $1.9 billionof minority interests and other liabilities in other liabilities in theconsolidated statement of financial condition through the consolidation ofcertain private equity funds primarily under FIN 46R. Similarly, for the yearended December 31, 2004, the Company recorded an increase of$649 million in net revenues and an increase of $7 million inexpenses as a result of the consolidation of these private equity funds. Netincome was unaffected as minority interests of $642 million for the yearended December 31, 2004, were recorded in the consolidated statement ofoperations. See Note 4for more information.

In December 2003, the American Institute ofCertified Public Accountants issued Statement of Position (“SOP”) 03-3, “Accountingfor Certain Loans or Debt Securities Acquired in a Transfer” (“SOP 03-3”).SOP 03-3 provides guidance on the accounting for differences betweencontractual and expected cash flows from the purchaser’s initial investment inloans or debt securities acquired in a transfer, if those differences areattributable, at least in part, to credit quality. Among other things, SOP03-3: prohibits the recognition of the excess of contractual cash flows as anadjustment of yield, loss accrual or valuation allowance at the time of purchase;requires that subsequent increases in expected cash flows be recognizedprospectively through an adjustment of yield; and requires that subsequentdecreases in expected cash flows be recognized as an impairment. In addition,SOP 03-3 prohibits the creation or carrying over of a valuation allowance inthe initial accounting of all loans within its scope that are acquired in atransfer. SOP 03-3 becomes effective for loans or debt securities acquired infiscal years beginning after December 15, 2004. The adoption of SOP 03-3is not expected to have a material impact on the Company’s financial position,results of operations or cash flows.

In May 2004, the FASB issued FASB Staff Position(“FSP”) 106-2, “Accounting and Disclosure Requirements Related to the MedicarePrescription Drug, Improvement and Modernization Act of 2003” (“Medicare Act”)which supersedes FSP 106-1 issued in January 2004 with the same title (“FSP106-2”). FSP 106-2 provides guidance on the accounting for the Medicare Act andis effective for the first interim or annual period beginning after June 15,2004. The Medicare Act became law in December 2003 and introduced both aMedicare prescription drug benefit and a federal subsidy to sponsors of retireehealth-care plans that provide a benefit that is at least “actuariallyequivalent” to the Medicare benefit. The Company adopted FSP 106-2 on July 1,2004 and has determined that its retiree health-care plans provide a benefitthat is “actuarially equivalent” to the Medicare benefit. The effect ofadopting FSP 106-2 did not 

F-16

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements  (Continued) December 31, 2004**

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

have a material impact onthe Company’s financial condition, results of operations or cash flows. SeeNote 16 for more information.

In July 2004, the FASB ratified the EmergingIssues Task Force (“EITF”) consensus on Issue 02-14, “Whether the Equity Methodof Accounting Applies When an Investor Does Not Have an Investment in VotingStock of an Investee but Exercises Significant Influence through Other Means” (“EITF02-14”). The consensus concludes that an investor should apply the equitymethod of accounting when it can exercise significant influence over an entitythrough a means other than holding voting rights. The consensus is effectivefor reporting periods beginning after September 15, 2004. The adoption of EITF 02-14did not have an impact on the Company’s financial position, results ofoperations or cash flows.

In December 2004, the FASB issued SFAS No. 123(Revised 2004), “Share-Based Payment” (“SFAS 123R”). SFAS 123R iseffective for interim or annual reporting periods beginning after June 15,2005. The Company had previously adopted the recognition provisions of SFAS 123.Under SFAS 123R, a company that has previously adopted the recognitionprovisions of SFAS 123 must adopt the revised standard using the modifiedprospective method, and may also choose to apply the modified retrospectivemethod to prior reporting periods. The Company has chosen to adopt early thenew standard as of January 1, 2005, using the modified prospective method.

The mostsignificant accounting implications of the adoption of SFAS 123R for theCompany are as follows:

·       Inclusionof forfeitures in the estimate of compensation expense determined at the grantdate rather than as they occur. The Company will record a cumulative adjustmenton January 1, 2005 to reverse the expense previously recognized on alloutstanding unvested awards that are not expected to vest. The estimatedcumulative effect of this change will be an after-tax net income benefit ofapproximately $8 million, and will be recorded in the first quarter of 2005.For new grants after January 1, 2005, forfeitures will be included in theinitial estimation of the compensation expense at the grant date.

·       Recognitionof compensation cost for all outstanding unvested awards as of January 1,2005 that were previously accounted for under APB 25 and for which no expensewas previously recognized, based on the original grant-date fair value of eachaward over the remaining requisite service period of the respective award. Theeffect of this change is not expected to have a material impact on the Company’sfinancial condition, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 153,“Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29” (“SFAS153”). SFAS 153 eliminates the exception from fair value measurement fornonmonetary exchanges of similar productive assets in paragraph 21(b) ofAPB Opinion No. 29, “Accounting for Nonmonetary Transactions,” andreplaces it with an exception for exchanges that do not have commercialsubstance. SFAS 153 specifies that a nonmonetary exchange has commercial substanceif the future cash flows of the entity are expected to change significantly asa result of the exchange. SFAS 153 is effective for transactions occurring inreporting periods beginning after June 15, 

F-17

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements  (Continued) December 31, 2004**

**1. Summaryof Significant Accounting Policies (Continued)**

2005. The adoption of SFAS153 is not expected to have a material impact on the Company’s financialcondition, results of operations or cash flows.

In December 2004, theFASB released FASB Staff Position (“FSP”) 109-1, “Application of FASB StatementNo. 109, Accounting for Income Taxes, to the Tax Deduction on QualifiedProduction Activities Provided by the American Jobs Creation Act of 2004” (“FSP109-1”) and FSP 109-2, “Accounting and Disclosure Guidance for the ForeignEarnings Repatriation Provision within the American Jobs Creation Act of 2004”(“FSP 109-2”). The requirements of FSP 109-1 and 109-2 became effective on December 21,2004 and did not have an impact on the Company’s financial position, results ofoperations or cash flows.

**2. Discontinued Operations**

On May 1, 2003, the Company sold Pershing to TheBank of New York Company, Inc. and recorded a pre-tax gain ofapproximately $1.3 billion and an after-tax gain of $852 million inthe second quarter of 2003. The operating results of Pershing, including thegain on the sale, are presented as discontinued operations in the consolidatedstatements of operations.

Thefollowing table summarizes the results of operations of Pershing, excluding thegain on the sale, for the years ended December 31, 2003 and 2002:
| ** **                                               | ** ** | **For the Year Ended  December 31,** | ** ** |
|----------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                               | ** ** | **2003**                                                 | ** ** | **2002** | ** ** |
| ** **                                               | ** ** | **(In millions)**                                   | ** ** |
| Total net  revenues                                      |       |                                                     | $          | 256 |   |   |   | $ | 822 |   |   |
| Total expenses                                           |       |                                                     | 219        |   |   |   | 686 |   |   |
| Income from  discontinued operations before income taxes |       |                                                     | $          | 37 |   |   |   | $ | 136 |   |   |

 

**3. Related Party Transactions**

CSG, through CSFBI, owns all of the Company’soutstanding voting common stock. The Company is involved in significantfinancing and other transactions, and has significant related party balances,with CSG affiliates, primarily with Credit Suisse First Boston, a Swiss banksubsidiary of CSG and an indirect parent of the Company, and certain of itssubsidiaries and affiliates. The Company generally enters into thesetransactions in the ordinary course of business and believes that thesetransactions are generally on market terms that could be obtained fromunrelated third parties.

F-18

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**3. Related PartyTransactions (Continued)**

Thefollowing table sets forth the Company’s related party assets and liabilitiesas of December 31, 2004 and 2003:
| ** **                                              | ** ** | **December 31,  2004** | ** **         | **December 31,  2003** | ** ** |
|---------------------------------------------------------|------------|-----------------------------|--------------------|-----------------------------|------------|
| ** **                                              | ** ** | **(In millions)**      | ** **         |
| **ASSETS**                                              |       |                        |               |                        |       |   |   |   |   |
| Securities  purchased under agreements to resell        |       |                        | $  6,685 |                        |       |   | $  8,071 |   |   |
| Securities  borrowed                                    |       |                        | 1,861              |                        |       |   | 1,688 |   |   |
| Receivables from  customers                             |       |                        | 379                |                        |       |   | 297 |   |   |
| Receivables from  brokers, dealers and other            |       |                        | 1,893              |                        |       |   | 1,168 |   |   |
| Derivatives  contracts                                  |       |                        | 1,400              |                        |       |   | 1,910 |   |   |
| Net deferred tax  asset                                 |       |                        | 1,103              |                        |       |   | 1,283 |   |   |
| Loans receivable  from parent and affiliates            |       |                        | 22,692             |                        |       |   | 19,481 |   |   |
| Total assets                                            |       |                        | $36,013            |                        |       |   | $33,898 |   |   |
| **LIABILITIES**                                         |       |                        |               |                        |       |   |   |   |   |
| Short-term  borrowings                                  |       |                        | $20,085            |                        |       |   | $14,482 |   |   |
| Securities sold  under agreements to repurchase         |       |                        | 22,317             |                        |       |   | 16,651 |   |   |
| Securities loaned                                       |       |                        | 34,056             |                        |       |   | 16,425 |   |   |
| Payables to  customers                                  |       |                        | 1,054              |                        |       |   | 721 |   |   |
| Payables to  brokers, dealers and other                 |       |                        | 1,300              |                        |       |   | 581 |   |   |
| Derivatives  contracts                                  |       |                        | 695                |                        |       |   | 824 |   |   |
| Obligation to  return securities received as collateral |       |                        | 1,252              |                        |       |   | 751 |   |   |
| Taxes payable  (included in Other liabilities)          |       |                        | 484                |                        |       |   | 311 |   |   |
| Intercompany  payables (included in Other liabilities)  |       |                        | 191                |                        |       |   | 211 |   |   |
| Total liabilities                                       |       |                        | $81,434            |                        |       |   | $50,957 |   |   |

 

Included in the consolidated statements of operationsare 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 variousservice agreements. The Company incurs commission expenses during the normalcourse of business for securities transactions conducted with affiliates. Otheroperating expenses include affiliate service fees that are treated as areduction in other operating expenses in the consolidated statements of operations.These fees include compensation and benefits expense relating to businessactivities conducted by Company employees on behalf of CSG affiliates outsidethe Company.

F-19

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

The following table setsforth the Company’s related party revenues and expenses, excluding transactionswith Pershing, for the years ended December 31, 2004, 2003 and 2002:
| ** **                                               | ** ** | **For the Year Ended  December 31,** | ** ** |
|----------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                               | ** ** | **2004**                                                 | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                               | ** ** | **(In millions)**                                   | ** ** |
| Principal transactions—net  (derivatives contracts) |       | $                                                        | 360        |   | $ | 515 |   | $ | (649 | ) |
| Commissions                                              |       | (13                                                      | )          | (44 | ) | (43 | ) |
| Net interest  expense                                    |       | (445                                                     | )          | (111 | ) | (244 | ) |
| Total net revenues                                       |       | $                                                        | (98        | ) | $ | 360 |   | $ | (936 | ) |
| Other operating expenses                                 |       | $                                                        | (394       | ) | $ | (229 | ) | $ | (149 | ) |
| Total expenses                                           |       | $                                                        | (394       | ) | $ | (229 | ) | $ | (149 | ) |
|                                                     |       |                                                     |       |   |   |   |   |

 

Thefollowing table sets forth revenues and expenses of Pershing with respect torelated party transactions with the Company for the years ended December 31,2003 and 2002. The operating results of Pershing for these periods arepresented as discontinued operations in the consolidated statements ofoperations.
| ** **                       | ** ** | **For the Year Ended  December 31,** | ** **     |
|----------------------------------|------------|----------------------------------------------------------|----------------|
| ** **                       | ** ** | **2003**                                                 | ** **     | **2002** | ** ** |
| ** **                       | ** ** | **(In millions)**                                   | ** **     |
| Commissions                      |       |                                                     | $  2 |   |   |   | $ | 6 |   |   |
| Net interest  revenues (expense) |       |                                                     | (1             | ) |   |   | 18 |   |   |
| Total net  revenues (expense)    |       |                                                     | $  1 |   |   |   | $ | 24 |   |   |

 

For the year ended December 31, 2003, Pershinghad no revenues from CSG, its subsidiaries and affiliates outside the Company. Forthe year ended December 31, 2002, Pershing had revenues of$17 million from CSG, its subsidiaries and affiliates outside the Company.For the years ended December 31, 2003 and 2002, Pershing had no expenseswith respect to related party transactions with CSG, its subsidiaries andaffiliates outside the Company.

During the years ended December 31, 2004 and2003, the Company sold at cost to CSFBI, the right, title and interest incertain assets with an aggregate value of $316 million and$303 million as of December 31, 2004 and 2003, respectively.

As of December 31, 2004, certain CSAM privateequity funds of funds with approximately $4.1 billion of committed capital andcertain CSAM hedge funds, hedge funds of funds and CDO VIEs with aggregateassets under management of approximately $15.9 billion are managed by theCompany’s Alternative Capital division. CSAM reimburses the Alternative Capitaldivision for all costs and expenses incurred by the Company in connection withmanaging these assets.

Beginning in April 2004, the Company entered intohedging arrangements with respect to deferred compensation obligations payableto its employees and to employees of affiliates, whose deferred 

F-20

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

compensation is not recordedin the Company’s consolidated financial statements. These hedging arrangementswill result in the Company recognizing gains or losses with respect to thehedge of the deferred compensation obligation of such affiliates. For the yearended December 31, 2004, the loss from the hedging arrangements withrespect to these affiliate obligations was $1 million.

In December 2003, as part of the continuingeffort to rationalize the organizational structure since the DLJ acquisition,the Company sold DLJ International Group Limited, an indirect subsidiary of theCompany, to Credit Suisse First Boston (International) Holding AG at fairmarket value of $500 million.

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. CSFBI purchases shares from CSG to satisfy these awards, but CSFBI doesnot require reimbursement from the Company; therefore, amounts are considered acapital contribution to the Company and credited to paid-in-capital. Amountscontributed by CSFBI relating to compensation expense for the years ended December 31,2004, 2003 and 2002 were $415 million, $352 million and $660 million,respectively. See Notes 1 and 15 for further information on the Company’sshare-based compensation.

Certain of the Company’s directors, officers andemployees and those of its affiliates and their subsidiaries maintain marginaccounts with CSFB LLC 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 privatefunds. The Company makes loans to directors and executive officers on the sameterms as are generally available to third parties or otherwise pursuant towidely available employee benefit plans. CSFB LLC and other affiliated broker-dealers,from time to time and in the ordinary course of business, enter into, asprincipal, transactions involving the purchase or sale of securities from or tosuch directors, officers and employees and members of their immediate families.

In connection with its derivatives activities, theCompany enters into OTC derivatives contracts with related parties thatcontingently require the Company, as guarantor, to make payments based onchanges in an underlying financial instrument. See Note 10 for moreinformation.

The Company is included inthe consolidated federal income tax return filed by CSFBI and certain state andlocal income tax returns filed by CSFBI. See Note 17 for more information.

**4. Transfers and Servicing of FinancialAssets**

As part of the Company’s financing and securities settlementactivities, the Company uses securities as collateral to support varioussecured financing sources. If the counterparty does not meet its contractualobligation to return securities used as collateral, the Company may be exposedto the risk of reacquiring the securities at prevailing market prices tosatisfy its obligations. The Company controls this risk by monitoring themarket value of financial instruments pledged each day and by requiringcollateral levels to be adjusted in the event of excess market exposure.

As of December 31, 2004 and 2003, the fair valueof assets that the Company pledged to counterparties was $199.3 billionand $174.8 billion, respectively, of which $54.7 billion and$47.6 billion, 

F-21

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

respectively, are includedin financial instruments owned in the consolidated statements of financialcondition.

The Company has alsoreceived similar assets as collateral that the Company has the right tore-pledge or sell. The Company routinely re-pledges or lends these assets tothird parties. As of December 31, 2004 and 2003, the fair value of theassets pledged to the Company was $182.3 billion and $166.7 billion,respectively, of which $180.6 billion and $154.3 billion,respectively, was sold or repledged.

**SecuritizationActivities**

The Company originates and purchases commercial andresidential mortgages for the purpose of securitization. The Company sellsthese mortgage loans to qualified special purpose entities (“QSPEs”) or otherVIEs. These QSPEs issue securities that are backed by the assets transferred tothe QSPEs and pay a return based on the returns on those assets. Investors inthese mortgage-backed securities typically have recourse to the assets in theQSPE. The investors and the QSPEs have no recourse to the Company’s assets. CSFBLLC is an underwriter of, and makes a market in, these securities.

The Company purchases loans and other debt obligationsfrom clients for the purpose of securitization. The loans and other debtobligations are sold by the Company directly, or indirectly through affiliates,to QSPEs or other VIEs that issue CDOs. CSFB LLC structures, underwrites andmakes a market in these CDOs. CDOs are securities backed by the assetstransferred to the CDO VIEs and pay a return based on the returns on thoseassets. Investors typically have recourse to the assets in the CDO VIEs. Theinvestors and the CDO VIEs have no recourse to the Company’s assets.

Thefollowing table presents the proceeds and gains or losses related to thesecuritization of commercial mortgage loans, residential mortgage loans, CDOsand other asset-backed loans for the years ended December 31, 2004, 2003and 2002:
| ** **                                        | ** ** | **Commercial  mortgage  loans** | ** ** | **Residential  mortgage  loans** | ** ** | **Collateralized  debt  obligations** | ** ** | **Other  asset-  backed**(1) | ** ** |
|---------------------------------------------------|------------|---------------------------------|------------|----------------------------------|------------|---------------------------------------|------------|------------------------------|------------|
| ** **                                        | ** ** | **(In millions)**          | ** ** |
| **For the Year Ended****December 31,  2004** |       |                            |       |                             |       |                                  |       |                         |       |   |   |   |   |   |   |   |   |
| Proceeds from new  securitizations                |       |                            | $          | 8,712                            |       |                                  |       | $                            | 43,383     |   |   |   | $ | 5,618 |   |   |   | $ | 7,883 |   |   |
| Gain on  securitizations(2)                       |       |                            | $          | 230                              |       |                                  |       | $                            | 58         |   |   |   | $ | 68 |   |   |   | $ | 4 |   |   |
| **For the  Year Ended****December 31, 2003** |       |                            |       |                             |       |                                  |       |                         |       |   |   |   |   |   |   |   |   |
| Proceeds from new  securitizations                |       |                            | $          | 7,024                            |       |                                  |       | $                            | 67,427     |   |   |   | $ | 6,729 |   |   |   | $ | 5,220 |   |   |
| Gain (loss) on  securitizations(2)                |       |                            | $          | 244                              |       |                                  |       | $                            | (90        | ) |   |   | $ | 67 |   |   |   | $ | 41 |   |   |
| **For the  Year Ended****December 31, 2002** |       |                            |       |                             |       |                                  |       |                         |       |   |   |   |   |   |   |   |   |
| Proceeds from new  securitizations                |       |                            | $          | 5,082                            |       |                                  |       | $                            | 22,875     |   |   |   | $ | 8,101 |   |   |   | $ | 1,258 |   |   |
| Gain (loss) on  securitizations(2)                |       |                            | $          | 145                              |       |                                  |       | $                            | (139       | ) |   |   | $ | 68 |   |   |   | $ | 19 |   |   |

----

(1)      Primarily includes home equity loans.

(2)      Includes underwriting fees and retained interest gainsand losses but excludes all gains or losses, including net interest revenues,on assets prior to securitization.

F-22

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

Included in residential mortgage loans in the tableabove are proceeds of $14.8 billion and $40.3 billion related to thesecuritization of agency mortgage-backed securities for the years ended December 31,2004 and 2003, respectively. For the year ended December 31, 2004 and2003, the Company realized gains of $5 million and $45 million,respectively, from these securitizations.

The Company may retain interests in these securitizedassets in connection with its underwriting and market-making activities. TheCompany’s exposure in its securitization activities is limited to its retainedinterests. Retained interests in securitized financial assets are included atfair value in financial instruments owned in the consolidated statements offinancial condition. Any changes in the fair value of these retained interestsare recognized in the consolidated statements of operations. The fair values ofretained interests are determined using present value of estimated future cashflows valuation techniques that incorporate assumptions that marketparticipants customarily use in their estimates of values. As of December 31,2004 and 2003, the fair value of the interests retained by the Company was$2.0 billion and $2.9 billion, respectively.

Keyeconomic assumptions used in measuring at the date of securitization the fairvalue of the retained interests resulting from securitizations completed duringthe years ended December 31, 2004 and 2003 were as follows:
| ** **                                                              | ** ** | **For the Year Ended  December 31, 2004** | ** ** | **For the Year Ended  December 31, 2003** | ** ** |                                     |
|-------------------------------------------------------------------------|------------|------------------------------------------------|------------|------------------------------------------------|------------|------------------------------------------|
| ** **                                                              | ** ** | **Commercial  mortgage  loans**(1)             | ** ** | **Residential  mortgage  loans**               | ** ** | **Collateralized  debt  obligations**(2) | ** ** | **Other  asset-  backed** | ** ** | **Commercial  mortgage  loans**(1) | ** ** | **Residential  mortgage  loans** | ** ** | **Collateralized  debt  obligations**(2) | ** ** | **Other  asset-  backed** | ** ** |   |
| Weighted-average life  (in years)                                  |       |                                           | 4.0        |                                           |       | 3.6                                      |   |   | 17.3 |   |   | 2.2 |   |   | 2.8 |   |   | 4.5 |   |   | 8.7 |   |   |   | 3.1 |   |   |
| Prepayment speed  assumption (“PSA”)  (in rate per  annum)(3) |       |                                           | N/A        |                                           |       | 187% to 500                              | % |   | N/A |   |   | 417% to 500 | % |   | N/A |   |   | 200% to 1167 | % |   | N/A |   |   |   | 583 | % |   |
| Cash flow discount  rate (in rate per  annum)(4)                   |       |                                           | 7.3        | %                                              |       | 2.8-39.5                                 | % |   | 4.8-6.7 | % |   | 11.1-15.0 | % |   | 7.8-12.8 | % |   | 11.9-38.9 | % |   | 2.9-5.9 | % |   |   | 2.3-10.4 | % |   |
| Expected credit  losses  (in rate per annum)                       |       |                                           | 0.2-19.3   | %                                              |       | 0.1-39.9                                 | % |   | 0.2-16.3 | % |   | 0.4-11.6 | % |   | 1.1-23.3 | % |   | 0.2-30.6 | % |   | 0.1-29.4 | % |   |   | 1.2-7.7 | % |   |
|                                                                         |            |                                                |            |                                                |            |                                          |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

F-23

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

The following table setsforth the fair value of retained interests from securitizations as of December 31,2004, key economic assumptions used to determine the fair value and thesensitivity of the fair value to immediate adverse changes in thoseassumptions:
| ** **                                             | ** ** | **As of December 31, 2004** | ** ** |
|--------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                             | ** ** | **Commercial  mortgage  loans**(1)              | ** ** | **Residential  mortgage  loans** | ** ** | **  Collateralized    debt  obligations**(2) | ** ** | **Other  asset-  backed** | ** ** |
| ** **                                             | ** ** | **(Dollars in millions)**             | ** ** |
| Carrying amount/fair  value of retained interests |       |                                            | $          | 17 |   |   | $ | 1,702 |   |   | $ | 203 |   |   | $ | 59 |   |
| Weighted-average life  (in years)                      |       |                                            | 3.4        |   |   | 3.7 |   |   | 12.1 |   |   | 2.2 |   |
| PSA (in rate per annum)(3)                             |       |                                            | N/A        |   |   | 17% to 2,381 | % |   | N/A |   |   | 300% to 900 | % |
| Impact on fair value of  10% adverse change       |       |                                            | N/A        |   |   | $ | (6 | ) |   | N/A |   |   | $ | — |   |
| Impact on fair value of  20% adverse change       |       |                                            | N/A        |   |   | $ | (9 | ) |   | N/A |   |   | $ | — |   |
| Cash flow discount rate  (in rate per annum)(4)        |       |                                            | 9.6        | % |   | 5.5 | % |   | 9.7 | % |   | 13.5 | % |
| Impact on fair value of  10% adverse change       |       |                                            | $          | — |   |   | $ | (26 | ) |   | $ | (9 | ) |   | $ | (1 | ) |
| Impact on fair value of  20% adverse change       |       |                                            | $          | (1 | ) |   | $ | (51 | ) |   | $ | (19 | ) |   | $ | (2 | ) |
| Expected credit losses  (in rate per annum)            |       |                                            | 5.4        | % |   | 2.0 | % |   | 5.7 | % |   | 9.3 | % |
| Impact on fair value of  10% adverse change       |       |                                            | $          | — |   |   | $ | (6 | ) |   | $ | (4 | ) |   | $ | (1 | ) |
| Impact on fair value of 20% adverse change        |       |                                            | $          | — |   |   | $ | (12 | ) |   | $ | (9 | ) |   | $ | (1 | ) |

----

(1)      To deter prepayment, commercial mortgage loans typicallyhave prepayment protection in the form of prepayment lockouts and yieldmaintenances.

(2)      CDO deals are generally structured to be protected fromprepayment risk.

(3)      PSA is an industry standard prepayment speed metricused for projecting prepayments over the life of a residential mortgage loan.PSA utilizes the Constant Prepayment Rate (“CPR”) assumptions. A 100%prepayment assumption assumes a prepayment rate of 0.2% per annum of theoutstanding principal balance of mortgage loans in the first month. Thisincreases by 0.2% thereafter during the term of the mortgage loan, leveling offto a CPR of 6.0% per annum beginning in the thirtieth month and each monththereafter during the term of the mortgage loan. 100% PSA equals 6 CPR.

(4)      The rate is based on the weighted average yield on theretained interest.

These sensitivities arehypothetical and do not reflect the benefits of hedging activities andtherefore should be used with caution. Changes in fair value based on a 10% or20% variation in assumptions generally cannot be extrapolated because therelationship of the change in assumption to the change in fair value may not belinear. Also, the effect of a variation in a particular assumption on the fairvalue of the 

F-24

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

retainedinterests is calculated without changing any other assumption. In practice,changes in one assumption may result in changes in other assumptions (forexample, increases in market interest rates may result in lower prepayments andincreased credit losses), which may magnify or counteract the sensitivities.

**Variable Interest Entities**

The Company has variableinterests in several CDO VIEs. As described under “—Securitization Activities,”in the normal course of its business, the Company purchases loans and otherdebt obligations from and on behalf of clients primarily for the purpose ofsecuritization. These assets are sold to and warehoused by affiliates and, atthe end of a warehousing period, the assets are sold to VIEs or QSPEs forsecuritization. The Company engages in these transactions to meet the needs ofclients, to earn fees and to sell financial assets. The purpose of these CDOVIEs is to provide investors a return based on the underlying debt instrumentsof the CDO VIEs. In connection with its underwriting and market-makingactivities, the Company may retain interests in the CDO VIEs. The CDO entitiesmay have 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 hasconsolidated all CDO VIEs for which it is the primary beneficiary. As of December 31,2004 and 2003, the Company recorded $291 million and $901 million,respectively, the carrying amount of the consolidated assets of these CDO VIEsthat are collateral for the VIE obligations. The beneficial interests of theseconsolidated CDO VIEs are payable solely from the cash flows of the relatedcollateral, and the creditors of these VIEs do not have recourse to the Companyin the event of default.

The Company retainssignificant debt and equity interests in open CDO VIEs that are notconsolidated because the Company is not the primary beneficiary. The totalassets in these CDO VIEs as of December 31, 2004 and 2003 were$4.5 billion and $3.6 billion, respectively. The Company’s maximumexposure to loss as of December 31, 2004 and 2003 was $62 million and$165 million, respectively, which was the amount of its retainedinterests, carried at fair value, in financial instruments owned.

Certain of the Company’sprivate equity funds are subject to FIN 46R. In the normal course of itsprivate equity activities, the Company is typically the general partner andinvestment adviser to private equity funds. Limited partners of these fundstypically have recourse to the funds assets but have no recourse to the Company’sassets. The Company did not consolidate these private equity funds as of December 31,2003 in accordance with the effective date and transition provisions of FIN 46R.During 2004, the Company consolidated certain private equity funds that aremanaged by the Company. As of December 31, 2004, the Company recorded$1.9 billion of private equity and other long-term investments, increasedother assets by $2 million and recorded $1.9 billion of minority interestsand other liabilities in other liabilities in the consolidated statement offinancial condition through the consolidation of certain private equity fundsprimarily under FIN 46R. Similarly, for the year ended December 31, 2004,the Company recorded an increase of $649 million in net revenues and anincrease of $7 million in expenses as a result of the consolidation ofthese private equity funds. Net income was unaffected as minority interests of$642 million for the year ended December 31, 2004 were recorded inthe consolidated statements of operations.

F-25

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**5. 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: CSFB-managed funds, which include funds consolidated primarilyunder FIN 46R, direct investments and funds, managed by third parties. Theseinvestments generally have no readily available market or may be otherwiserestricted as to resale under the Securities Act of 1933; therefore, theseinvestments are carried at amounts which approximate fair value.

As of December 31, 2004 and 2003, the Company hadinvestments in private equity and other long-term investments of$3.1 billion, including $1.9 billion in private equity investmentsconsolidated primarily under FIN 46R, and $1.1 billion, respectively, andhad commitments to invest up to an additional $1.0 billion. The cost ofthese investments, excluding the private equity investments consolidatedprimarily under FIN 46R, was $1.5 billion as of December 31, 2004 and2003. Changes in net unrealized appreciation/depreciation arising from changesin fair value and the gain or loss realized upon sale are reflected inprincipal transactions-net in the consolidated statements of operations. SeeNotes 1 and 4 for more information.

The Company’s subsidiaries managemany private equity partnerships (the “Funds”). When the investment performanceon CSFB-managed Funds exceeds specific thresholds, the Company and certainother general partners (the “GPs”) may be entitled to receive a carriedinterest distribution under the governing documents of the Funds. Carriedinterest distributions are based on the cumulative investment performance ofeach Fund at the time the distribution is made. As a result, the Company may beobligated to return to investors in the Funds all or a portion of the carriedinterest distributions the Company has received if the Company has receivedexcess carried interest payments over the life of the Funds. The Company alsoguarantees the obligation of certain other general partners to return excesscarried interest payments. The amount of such contingent obligations is basedupon the performance of the Funds but cannot exceed the amount of carriedinterest received by the GPs. As of December 31, 2004 and 2003, themaximum amount of such contingent obligations was $439 million and$252 million, respectively, assuming the Funds’ remaining investments wereworthless. Assuming the Funds’ remaining investments were sold at their currentcarrying values as of December 31, 2004 and 2003, the contingentobligations would have been $9 million and $6 million, respectively.As of December 31, 2004 and 2003, the Company withheld cash fromdistributions on prior realizations to the general partners, and recordedcorresponding liabilities of $75 million and $25 million,respectively, in connection with the Company’s guarantee to return priorcarried interest distributions to third party 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 December 31, 2004 and 2003, the maximumamount of such contingent obligations was $65 million and$46 million, respectively, assuming the Funds’ remaining investments wereworthless. Assuming the Funds’ remaining investments were sold at their currentcarrying values as of December 31, 2004 and 2003, there would have been nocontingent obligation. 

F-26

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**6. Derivatives Contracts**

The Company usesderivatives contracts for trading and hedging purposes and to provide productsfor clients. These derivatives include options, forwards, futures and swaps.

**Non-tradingDerivatives**

The Company hedges its fixed rate debt by usinginterest rate swaps. These swaps are considered hedging instruments and qualifyas fair value hedges under SFAS 133. For qualifying fair value hedges, thechanges in fair value of both the hedging instrument and the underlying debtare included in principal transactions-net and the interest flows are includedin interest and dividends, net of interest expense in the consolidatedstatements of operations.

The effectiveness of a qualifying hedging relationshipis evaluated using quantitative measures of correlation. If a hedgerelationship is not found to be highly effective, the hedge relationship nolonger qualifies for hedge accounting under SFAS 133. As such, any subsequentgains or losses attributable to the hedged item cease to be recognized, whilethe subsequent changes in the derivatives instrument’s fair value arerecognized in earnings, in each reporting period. In addition, the fair valueadjustment of the debt due to hedge accounting is amortized over the remaininglife of the debt as a yield adjustment.

The gains and losses related to the ineffectivecomponent of the fair value hedges were not significant for the years ended December 31,2004, 2003 and 2002.

Other derivatives used tohedge the Company’s long-term borrowings that do not qualify as hedges underSFAS 133 are carried at fair value with changes in value and interestflows included in principal transactions-net in the consolidated statements ofoperations. For the years ended December 31, 2004, 2003 and 2002, theCompany recognized a pre-tax gain of $6 million, $1 million and$4 million, respectively, for these derivatives.

**Trading Derivatives**

The Company enters intovarious transactions using derivatives for trading purposes, to hedge tradingexposures or to provide products to its clients. These derivatives includeoptions, forwards, futures and swaps. Trading derivative contracts are carriedat fair value with unrealized and realized gains and losses and interest flowsincluded in principal transactions-net in the consolidated statements ofoperations.

***Options***

The Company writes option contracts specificallydesigned to meet customer needs, for trading purposes or for hedging purposes.The options do not expose the Company to credit risk because the Company, notits counterparty, is obligated to perform. At the beginning of the contractperiod, the Company receives a cash premium. During the contract period, theCompany bears the risk of unfavorable changes in the value of the financialinstruments underlying the options. To manage this market risk, the Companypurchases or sells cash or derivative financial instruments on a proprietarybasis. Such purchases and sales may include debt and equity securities, forwardand futures contracts, swaps and options.

The Company also purchasesoptions to meet customer needs, for trading purposes or for hedging purposes.With purchased options, the Company gets the right, for a fee, to buy or sellthe underlying 

F-27

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**6.Derivatives Contracts (Continued)**

instrumentat a fixed price on or before a specified date. The underlying instruments forthese options include fixed income securities, equities, foreign currencies andinterest rate instruments or indices. The counterparties to OTC optioncontracts are reviewed to determine whether they are creditworthy.

***Forwards and Futures***

In the normal course of business, the Company’scustomer and trading activities include executing, settling and financingvarious securities and financial instrument transactions. To execute thesetransactions, the Company purchases and sells (including “short sales”)securities, and purchases and sells forward contracts primarily for U.S.Government and agencies, corporate debt, mortgage-backed securities and foreigncurrencies. In addition, the Company enters into futures contracts onequity-based indices and other financial instruments, as well as options on futurescontracts. 

Because forward contracts are subject to the financialreliability of the counterparty, the Company is exposed to credit risk. Tomitigate this credit risk, the Company limits transactions with specificcounterparties, reviews credit limits, requirescertain customers and counterparties to maintain margin collateral andadheres to internally established credit extension policies. 

For futures contracts andoptions on futures contracts, the change in the market value is settled with anexchange or a clearing broker in cash each day. As a result, the credit riskwith the clearing broker is limited to the net positive change in the marketvalue for a single day, which is recorded in receivables (payables) from (to)brokers, dealers and others in the consolidated statements of financialcondition.

***Swaps***

The Company’s swapagreements consist primarily of interest rate, equity and credit default swaps.Interest rate swaps are contractual agreements to exchange interest ratepayments based on agreed notional amounts and maturity. Equity swaps arecontractual agreements to receive the appreciation or depreciation in valuebased on a specific strike price on an equity instrument in exchange for payinganother rate, which is usually based on index or interest rate movements.Credit default swaps are contractual agreements in which one counterparty paysa periodic fee in return for a contingent payment by the other counterpartyfollowing a credit event of a reference entity. A credit event is commonly definedas bankruptcy, insolvency, receivership, material adverse restructuring ofdebt, or failure to meet payment obligations when due. Swaps are reported atfair value.

F-28

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**6.Derivatives Contracts (Continued)**

**QuantitativeDisclosures for All Derivatives**

Thefair values of all derivatives contracts outstanding as of December 31,2004 and 2003 were as follows: 
| ** **        | ** ** | **December 31, 2004** | ** ** | **December 31, 2003** | ** **       |
|-------------------|------------|---------------------------------|------------|---------------------------------|------------------|
| ** **        | ** ** | **Assets**                      | ** ** | **Liabilities**                 | ** **       | **Assets** | ** ** | **Liabilities** | ** ** |
| ** **        | ** ** | **(In millions)**          | ** ** |
| Options           |       | $ 1,001                    |       |                            | $  879 |   |   | $ 2,892 |   |   | $ 2,756 |   |   |
| Forward contracts |       | 1,206                           |       |                            | 355              |   |   | 695 |   |   | 257 |   |   |
| Swaps             |       | 1,456                           |       |                            | 1,061            |   |   | 1,986 |   |   | 942 |   |   |
| Total             |       | $ 3,663                    |       |                            | $ 2,295     |   |   | $ 5,573 |   |   | $ 3,955 |   |   |

 

These assets andliabilities are included as derivatives contracts in financial instrumentsowned/sold not yet purchased, respectively, in the consolidated statements offinancial condition.

**7. Goodwill and Identifiable Intangible Assets**

The Company allocated goodwill to its reporting units,completed the transitional impairment test of goodwill as of January 1,2002 and determined that there was no impairment to goodwill. Subsequentgoodwill impairment testing showed no impairment and had no effect on theCompany’s consolidated financial condition or results of operations as of December 31,2004 and 2003. There have been no events or circumstances occurring subsequentto these impairment tests that would more likely than not have resulted in thefair values of the Company’s reporting units being below the carrying values.

As of December 31, 2004 and2003, the Company had $527 million and $532 million, respectively, ofgoodwill. For the year ended December 31, 2004, the reportedgoodwill includes $194 million related to the transfer by CSFBI of the HNW Business on March 31,2004. In 2004, the Company reduced its interest in PM Realty Group, LP,a real estate management company, resulting in a decrease in goodwill of $5million.

In November 2003, the Company’s subsidiary,Column Financial, Inc. acquired a majority interest in Investment PropertyMortgage, L.L.C. and certain assets and liabilities of Standard MortgageCorporation, which assets and liabilities were contributed to InvestmentProperty Mortgage, L.L.C. Investment Property Mortgage, L.L.C was convertedinto a Delaware limited liability company and was renamed Column GuaranteedLLC. The acquisition was accounted for as a purchase and the Company recordedapproximately $13 million of goodwill and approximately $10 million ofintangible assets, primarily related to licenses.

In June 2003, the Company completed itsacquisition of Volaris Advisors, a New York-based equity-options strategiesfirm providing yield-enhancement and volatility management services, to enhancethe services of the Private Client Services business. In connection with theacquisition, the Company recorded approximately $14 million of goodwilland approximately $2 million of intangible assets, primarily related tocomputer software, trade names and trademarks.

F-29

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**7. Goodwilland Identifiable Intangible Assets (Continued)**

As of December 31,2004 and 2003, the Company had identifiable intangible assets of$39 million and $46 million, respectively, net of accumulated amortizationof $53 million and $47 million, respectively, which are included inother assets and deferred amounts in the consolidated statements of financialcondition. Intangible assets include $16 million of indefinite-livedintangible assets for the years ended December 31, 2004 and 2003. For theyear ended December 31, 2004, the reported intangible assets include$8 million related to the transfer by CSFBI of the HNW Business.Identifiableintangible assets consist primarily of internally developed software andcustomer lists which are amortized over useful lives ranging from 3 to 21years. Intangible amortization expense for the years ended December 31,2004, 2003 and 2002 was $5 million, $5 million and $2 million,respectively. In December 2003, CSAMwrote down the value of certain intangible assets transferred to the Company onMarch 31, 2004, resulting in a pre-tax loss of $200 million and anafter-tax loss of $130 million. See Note 1 for more information.

**8. Borrowings**

Short-term borrowings are generally demand obligationswith interest approximating the federal funds rate, LIBOR or other money marketindices. Such borrowings are generally used to facilitate the securitiessettlement process, finance financial instruments owned and finance securitiespurchased by customers on margin. As of December 31, 2004 and 2003, therewere no short-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  December 31,** | ** ** | **Weighted  average  interest ratesDecember 31,** | ** ** |
|-------------------------------------------------|------------|-----------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                      | ** ** | **2004**                                      | ** ** | **2003**                                                    | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                      | ** ** | **(In millions)**                        | ** ** | ** **                                                  | ** ** | ** ** | ** ** |
| Bank loans,  including loans from affiliates(1) |       | $ 20,435                                 |       | $ 14,932                                               |       | 2.65 | % | 1.31 | % |
| Commercial paper                                |       | 1,249                                         |       | 1,052                                                       |       | 2.11 | % | 1.08 | % |
| Total short-term  borrowings                    |       | $ 21,684                                 |       | $ 15,984                                               |       |   |   |   |   |

----

(1)      Includes $20.1 billion and $14.5 billion inloans from affiliates as of December 31, 2004 and December 31, 2003,respectively.

The Company has two commercial paper programs exemptfrom registration under the Securities Act of 1933 that allow the Company toissue up to $7.0 billion in commercial paper. As of December 31, 2004and 2003, $1.2 billion and $1.1 billion, respectively, of commercialpaper was outstanding under these programs.

In June 2004, the Company filed with theSecurities and Exchange Commission (“SEC”) a shelf registration statement thatallows the Company to issue from time to time up to $15.0 billion ofsenior and subordinated debt securities, and warrants to purchase suchsecurities. Under that shelf registration statement, the Company had, as of March 16,2005, approximately $11.5 billion available for issuance.

F-30

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**8.Borrowings (Continued)**

In July 2001, the Company established a EuroMedium-Term Note program, which enables it to issue up to $5.0 billion ofnotes. Under this program, the Company had, as of March 16, 2005approximately $1.2 billion available for issuance.

Thefollowing table sets forth the Company’s long-term borrowings as of December 31,2004 and 2003:
| ** **                                                              | ** ** | **December 31,  2004** | ** **    | **December 31,  2003** | ** ** |
|-------------------------------------------------------------------------|------------|-----------------------------|---------------|-----------------------------|------------|
| ** **                                                              | ** ** | **(In millions)**      | ** **    |
| Senior notes  2.403%-8.0%, due various dates through 2032          |       |                        | $ 22,485 |                        |       |   | $ 16,791 |   |   |
| Medium-term notes  2.028%-7.528%, due various dates through 2032   |       |                        | 6,387         |                        |       |   | 7,391 |   |   |
| Structured  borrowings 5.7%-16.06%, due various dates through 2014 |       |                        | 69            |                        |       |   | 139 |   |   |
| Total long-term borrowings                                              |       |                        | $ 28,941 |                        |       |   | $ 24,321 |   |   |
| Current maturities of  long-term borrowings                             |       |                        | $ 3,137  |                        |       |   | $ 2,239 |   |   |

 

As of December 31, 2004 and 2003, long-termborrowings included unrealized appreciation of approximately $624 millionand $808 million, respectively, associated with fair value hedges under SFAS133. As of December 31, 2004 and 2003, the Company had entered into interestrate swaps, with a notional amount of $21.8 billion and$16.6 billion, respectively, on the Company’s long-term borrowings forhedging purposes. Substantially all of these swaps qualified as fair valuehedges under SFAS 133. See Note 6 for more information.

The following table sets forth scheduled maturities ofall long-term borrowings as of December 31, 2004 and 2003:
| ** ** | ** ** | **December 31,  2004** | ** **                                        | **December 31,  2003** | ** ** |
|------------|------------|-----------------------------|---------------------------------------------------|-----------------------------|------------|
| ** ** | ** ** | **(In millions)**      | ** **                                        |
| 2004       |       |                        | $       — |                        |       |   | $ 2,239 |   |   |
| 2005       |       |                        | 3,137                                             |                        |       |   | 3,134 |   |   |
| 2006       |       |                        | 3,723                                             |                        |       |   | 3,174 |   |   |
| 2007       |       |                        | 3,227                                             |                        |       |   | 2,499 |   |   |
| 2008       |       |                        | 3,442                                             |                        |       |   | 3,388 |   |   |
| 2009       |       |                        | 2,359                                             |                        |       |   | 998 |   |   |
| 2010-2032  |       |                        | 13,053                                            |                        |       |   | 8,889 |   |   |
| Total      |       |                        | $ 28,941                                     |                        |       |   | $ 24,321 |   |   |

 

F-31

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**8.Borrowings (Continued)**

The following table setsforth scheduled maturities of the current portion of long-term borrowings as ofDecember 31, 2004:
| **Three months ended** | ** ** | ** ** | ** **   | **(In millions)** | ** ** |
|----------------------------------|------------|------------|--------------|------------------------|------------|
| March 31,  2005             |       |       | $ 1,587 |                   |       |
| June 30,  2005              |       |       | 900          |                   |       |
| September 30,  2005         |       |       | 151          |                   |       |
| December 31,  2005          |       |       | 499          |                   |       |
| Total                            |       |       | $ 3,137 |                   |       |

 

As of December 31,2004, CSFB LLC maintained with third parties four 364-day committed securedrevolving credit facilities totaling $1.5 billion, with two facilities totaling$450 million maturing in February 2005, one facility for$500 million maturing in July 2005 and one facility for$500 million maturing in November 2005. These facilities require CSFBLLC to 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 the Company believes will notimpair its ability to obtain funding. As of December 31, 2004, noborrowings were outstanding under any of the facilities.

**2004 Financings:**

In the year ended December 31, 2004, the Companyissued longer-dated fixed income securities to extend the maturity profile ofthe Company’s debt. For the year ended December 31, 2004, the Companyissued $1.1 billion in medium-term notes, $1.0 billion of 5.125% notes due2014 and $1.4 billion of 4.7% notes due 2009 under its then-existing $10.0billion shelf registration statement. In addition, the Company issued$500 million of floating rate notes due 2010, $1.0 billion of 4.125%notes due 2010 and $2.0 billion of 4.875% notes due 2015 under its$15.0 billion shelf registration statement.

During the year ended December 31,2004, the Company repaid approximately $2.2 billion of medium-term notesand $68 million of structured notes.

**2003 Financings:**

In the year ended December 31, 2003, the Companyissued both medium-term notes and longer-dated fixed income securities toextend the maturity profile of the Company’s debt. For the year ended December 31,2003, the Company issued $1.2 billion in medium-term and index-linkednotes, $1.0 billion of 3.875% notes due 2009, $1.0 billion of 5.5%notes due 2013 and $300 million of 6.125% notes due 2011 under its thenexisting $10.0 billion shelf registration statement established in April 2002and $1.5 billion in medium-term notes under its $5.0 billionEuromarket program established in July 2001. 

During the year ended December 31,2003, the Company repaid approximately $3.5 billion of medium-term notesand $23 million of structured notes.

F-32

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**9. Leases and Commitments**

Thefollowing table sets forth the Company’s minimum operating lease commitments asof December 31, 2004:
| **Period** | ** ** | ** ** | ** ** | **(In millions)** | ** ** |
|------------|------------|------------|------------|------------------------|------------|
| 2005       |       |       | $          | 154                    |       |   |
| 2006       |       |       | 146        |                   |       |
| 2007       |       |       | 141        |                   |       |
| 2008       |       |       | 132        |                   |       |
| 2009       |       |       | 129        |                   |       |
| 2010-2025  |       |       | 1,078      |                   |       |
| Total(1)   |       |       | $          | 1,780                  |       |   |

----

(1)      Includes contractual obligations related to certaininformation technology, equipment leases and software licenses of $6 millionand excludes sublease revenue of $330 million and executory costs such as insurance, maintenance and taxes of$553 million.

Thefollowing table sets forth certain of the Company’s long-term commitments,including the current portion as of December 31, 2004:
| ** **                        | ** ** | **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 |   |   | $ | — |   |   |   | $ | — |   |   |   | $ | 25 |   |   |
| Private equity(2)                 |       |                                                | 170        |   |   | 171 |   |   | 95 |   |   |   | 608 |   |   |   | 1,044 |   |   |
| Forward  agreements(3)            |       |                                                | 7,437      |   |   | — |   |   | — |   |   |   | — |   |   |   | 7,437 |   |   |
| Unfunded mortgage  commitments(4) |       |                                                | 10         |   |   | 56 |   |   | — |   |   |   | — |   |   |   | 66 |   |   |
| Total commitments                 |       |                                                | $          | 7,617 |   |   | $ | 252 |   |   | $ | 95 |   |   |   | $ | 608 |   |   |   | $ | 8,572 |   |   |

----

(1)      In the ordinary course of business, the Companymaintains certain standby resale agreement facilities that commit the Companyto enter into securities purchased under agreements to resell with customers atcurrent market rates.

(2)      Represents commitments to invest in variouspartnerships that make private equity and related investments in variousportfolio companies or other private equity funds.

(3)      Represents commitments to enter into forward securitiespurchased under agreements to resell and forward agreements to borrowsecurities.

(4)      The Company enters into commitments to extend credit,predominantly at variable interest rates, in connection with certain commercialmortgage activities.

The Company used $60 million in outstandingstandby letters of credit as of December 31, 2004, in order to satisfycounterparty collateral requirements.

The Company had no capitallease or purchase obligations as of December 31, 2004. For informationabout certain of the Company’s additional commitments, see Notes 5 and 10.

F-33

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**10. Guarantees**

In the ordinary course of business, the Company entersinto guarantee contracts as guarantor. FIN No. 45, “Guarantor’s Accountingand Disclosure Requirements for Guarantees, Including Indirect Guarantees ofIndebtedness of Others” (“FIN 45”), requires disclosure by a guarantor of itsmaximum potential payment obligations under certain of its guarantees to theextent that it is possible to estimate them. FIN 45 also requires a guarantorto recognize, at the inception of a guarantee, a liability for the fair valueof the obligations undertaken in issuing such guarantee, including its ongoingobligation to stand ready to perform over the term of the guarantee in theevent that certain events or conditions occur. With certain exceptions, theseliability recognition requirements apply to any new guarantees entered into, orcurrent guarantees that are 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 liability andcarrying amount associated with guarantees covered by FIN 45 as of December 31,2004 by maturity:
| ** **                | ** ** | **Guarantee of Commitment  Expiration Per Period** | ** ** |
|---------------------------|------------|------------------------------------------------------------------------|------------|
| ** **                | ** ** | **Less than 1  year**                                        | ** ** | **1-3  years** | ** ** | **4-5  years** | ** ** | **Over 5  years** | ** ** | **Total  guarantees** | ** ** | **Carrying  amount** | ** ** |
| ** **                | ** ** | **(In millions)**                                                 | ** ** |
| Credit guarantees         |       |                                                                   | $          | — |   |   | $ | 22 |   | $ | 41 |   | $ | 379 |   |   | $ | 442 |   |   |   | $ | 11 |   |   |
| Performance  guarantees   |       |                                                                   | 107        |   |   | 289 |   | — |   | — |   |   | 396 |   |   |   | 6 |   |   |
| Derivatives               |       |                                                                   | 3,276      |   |   | 2,094 |   | 197 |   | 1,101 |   |   | 6,668 |   |   |   | 136 |   |   |
| Related party  guarantees |       |                                                                   | —     |   |   | — |   | — |   | 1 |   |   | 1 |   |   |   | — |   |   |
| Indemnifications          |       |                                                                   | —     |   |   | — |   | — |   | 6 |   |   | 6 |   |   |   | — |   |   |
| Total guarantees          |       |                                                                   | $          | 3,383 |   |   | $ | 2,405 |   | $ | 238 |   | $ | 1,487 |   |   | $ | 7,513 |   |   |   | $ | 153 |   |   |

 

**Credit Guarantees**

In the ordinary course of business the Company entersinto contracts that would require it, as the guarantor, to make payments to theguaranteed party if a third party fails to pay under a credit obligation. As ofDecember 31, 2004, the Company recorded liabilities of $11 millionand had a maximum contingent liability of $442 million under credit guarantees.These credit guarantees are described below.

As part of the Company’s residential mortgageactivities, the Company sells to the Federal National Mortgage Association (“FNMA”)certain residential mortgages that it has purchased and agrees to bear a 

F-34

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**10.Guarantees (Continued)**

percentage of the lossesshould the borrowers fail to perform. In accordance with FIN 45, the Companydid not recognize a liability for these guarantees because they were issuedprior to December 31, 2002 and have not been modified. The Company’smaximum potential exposure related to these guarantees, assuming all the borrowersfailed to perform, was $146 million as of December 31, 2004.

As part of the Company’s commercial mortgageactivities, the Company sells to FNMA certain commercial mortgages that it hasoriginated and agrees to bear a percentage of the losses should the borrowersfail to perform. As of December 31, 2004, in accordance with FIN 45, theCompany recorded liabilities of $11 million related to these guarantees.The Company’s maximum potential exposure related to these guarantees, assumingall the borrowers failed to perform, was $282 million as of December 31, 2004.

During 2000 the Companyissued a guarantee covering amounts due from one of its subsidiaries inconnection with its loan obligations. The subsidiary was subsequently sold to athird party but the Company agreed to continue to guarantee the formersubsidiary’s performance on the loan obligations. The Company did not recognizea liability for this guarantee because it was issued prior to December 31,2002 and has not been modified. As of December 31, 2004, the Company’smaximum exposure under this guarantee, assuming that the former subsidiaryfailed to pay its obligations, was $14 million.

**PerformanceGuarantees**

In the ordinary course of business, the Company entersinto contracts that would require it, as the guarantor, to make payments to theguaranteed party based on a third party’s failure to perform under an agreement.As of December 31, 2004, the Company had a maximum contingent liability of$396 million under performance guarantees.

As part of the Company’s residential mortgagesecuritization activities, the Company at times guarantees the collection bythe servicer and remittance to the securitization trust of prepaymentpenalties. As of December 31, 2004, the Company recorded liabilities of $6 millionrelated to these guarantees. As of December 31, 2004, the Company’smaximum exposure under the guarantees, assuming that every mortgage holderprepays and the servicers fail to collect and remit the prepayment penalties,was $396 million; however, the Company has recourse against the servicer.

In addition, the Companyat times guarantees any increases in servicing fees in connection with thereplacement of the existing servicer that would otherwise be borne by thesecuritization trust. The Company did not record a liability because it hasdetermined that is it not possible to estimate the fair value and the maximumamount of its obligations under these guarantees as of December 31, 2004.

**Derivatives**

In the ordinary course of business, the Company entersinto OTC contracts that meet the definition of a guarantee under FIN 45.Included in this category are certain written OTC put option contracts,pursuant to which the counterparty can potentially force the Company to acquirethe underlying financial instrument or require the Company to make a cashpayment in an amount equal to the decline in value of the financial instrumentunderlying the OTC put option. Also included in this category are credit 

F-35

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**10. Guarantees(Continued)**

derivatives that maysubject the Company to credit spread or issuer default risk because the changein credit spreads or the credit quality of the underlying financial instrumentmay obligate the Company to make a payment. The Company seeks to manage theseOTC derivatives exposures by engaging in various hedging strategies to reduceits exposure.

FIN 45 does not require disclosures about derivativesinstruments if they can be cash settled and the Company has no basis toconclude that it is probable that the counterparties held the underlyinginstruments related to the derivatives instrument at the inception of thecontract. Derivatives meeting both of these criteria are not disclosed in thetable above.

As of December 31,2004, the Company recorded $136 million in derivatives that met thedefinition of a guarantee under FIN 45. These are reflected as derivativescontracts in the consolidated statements of financial condition. The maximumgross contingent liability, excluding any potential offset from hedgingactivities related to these contracts, was $6.7 billion, of which$3.8 billion was with CSG affiliates. These amounts were determined byusing notional values and represent the obligations of the Company in the eventthat all the underlying financial instruments are worthless, the likelihood ofwhich the Company believes is remote. For more information on derivatives, seeNote 6.

**Related PartyGuarantees**

For purposes of FIN 45, related party guarantees referto any guarantees issued by the Company for obligations of any company (“affiliates”)controlled by CSG, the Company’s ultimate parent, unless it is one of theCompany’s consolidated subsidiaries. Guarantees issued by the Company for theobligations of its consolidated subsidiaries are excluded because they do notcreate any incremental liability.

The Company issuesguarantees to customers with respect to certain obligations of its affiliatesin the ordinary course of business, including, but not limited to, certainderivatives transactions. Failure to perform by an affiliate would require theCompany to perform under the guarantee. The maximum contingent liability offuture payments of guarantees issued to counterparties of affiliates as of December 31,2004 was $1 million. Excluded from the maximum contingent liability arecertain guarantees for which an estimate cannot be made because the exposure isunlimited and therefore impossible to estimate. While the maximum contingentliability represents possible future payments under the guarantees, the Companybelieves that the likelihood of nonperformance by these affiliates is remote.

**Guarantees Relatedto Private Equity Activities**

As part of its privateequity activities, the Company provides guarantees related to carried interestand performance thresholds. The amounts of such guarantees are included in thecontingent obligations disclosed in Note 5.

**Other Guarantees**

The Company has certainguarantees for which its maximum contingent liability cannot be quantified.These guarantees are not reflected in the table above and are discussed below.

F-36

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**10.Guarantees (Continued)**

***Indemnifications Issued in Connection with Asset Sales***

In connection with salesof certain assets or businesses, the Company has provided purchasers customaryindemnification provisions based on changes in an underlying asset or liabilityrelating to the assets sold. These indemnification provisions are negotiatedwith the purchaser of the assets or businesses and vary in their scope andduration. These indemnification provisions generally shift the risk of certainunquantifiable and unknowable loss contingencies (e.g., relating to litigation,tax and intellectual property matters) from the purchaser to the seller, asknown or quantifiable loss contingencies generally are reflected in the valueof the assets or businesses being sold. The Company has determined that it isnot possible to make an estimate of the maximum contingent liability underthese indemnification provisions. To date, the Company’s actual paymentsarising from these indemnification provisions have been in connection withlitigation matters and have not been material.

***Tax Gross-up Arrangements***

As a normal part ofissuing its own securities, the Company typically agrees to reimburse holdersfor additional tax withholding charges or assessments resulting from changes inapplicable tax laws or the interpretation of those laws. Securities thatinclude these agreements to pay additional amounts generally also include a relatedredemption or call provision if the obligation to pay the additional amountsresults from a change in law or its interpretation and the obligation cannot beavoided by the issuer taking reasonable steps to avoid the payment ofadditional amounts. Since such potential obligations are dependent on futurechanges in tax laws, the related liabilities the Company may incur as a resultof such changes cannot be reasonably estimated. In light of the related callprovisions typically included, the Company does not expect any potentialliabilities in respect of tax gross-ups to be material.

***Exchange and Clearinghouse Memberships***

The Company is a member ofnumerous securities exchanges and clearinghouses, and may, as a result of itsmembership arrangements, be required to perform if another member defaults. TheCompany has determined that it is not possible to estimate the maximum amountof these obligations and believes that any potential requirement to makepayments under these arrangements is remote.

**11. Concentrations of Credit Risk**

The Company is engaged in various securities tradingand brokerage activities servicing a diverse group of domestic and foreigncorporations, governments and institutional and individual investors. Asubstantial portion of the Company’s transactions are executed with and onbehalf of institutional investors, including other brokers and dealers,mortgage brokers, commercial banks, U.S. agencies, mutual funds, hedge fundsand other financial institutions. These transactions are generallycollateralized. Credit risk is the potential for loss resulting from thedefault by a counterparty of its obligations. Exposure to credit risk isgenerated by securities and currency settlements, contracting derivatives andforward transactions with customers and dealers, and the holding in inventoryof bonds and/or loans. The Company uses various means to manage its creditrisk. The creditworthiness of all counterparties is analyzed at the outset of acredit relationship with the Company. These counterparties are subsequentlyreviewed on a 

F-37

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**11.Concentrations of Credit Risk (Continued)**

periodic basis. TheCompany sets a maximum exposure limit for each counterparty, as well as forgroups or classes of counterparties. Furthermore, the Company enters intomaster netting agreements when feasible and demands collateral from certaincounterparties or for certain types of credit transactions. As of December 31,2004, the Company did not have any significant concentrations of credit risk.

The Company’s customersecurities activities are transacted either in cash or on a margin basis, inwhich the Company extends credit to the customer. The Company seeks to controlthe risks associated with its customer activities by requiring customers tomaintain margin collateral to comply with various regulatory and internalguidelines. The Company monitors required margin levels each day and requirescustomers to deposit additional collateral, or reduce positions, when necessary.

**12. Net Capital Requirements**

The Company’s principalwholly owned subsidiary, CSFB LLC, is a registered broker-dealer,registered futures commission merchant and member firm of the New York StockExchange Inc. (“NYSE”). Accordingly, the Company is subject to the minimum netcapital requirements of the Securities and Exchange Commission (“SEC”) and theCommodities Futures Trading Commission (“CFTC”).   Under the alternative method permitted by SECRule 15c3-1, the required net capital may not be less than the greater of2% of aggregate debit balances arising from customer transactions or 4% of thefunds required to be segregated pursuant to the Commodity Exchange Act less themarket value of certain commodity options, all as defined. Under CFTCRegulation 1.17, the required minimum net capital requirement is 8% of thetotal risk margin requirement (as defined) for all positions carried incustomer accounts plus 4% of the total risk margin requirement (as defined) forall positions carried in non-customer accounts. At December 31,2004, the CFTC’s minimum net capital requirement was greater than the SEC’sminimum net capital requirement. As of December 31, 2004, CSFB LLC’s netcapital of approximately $3.2 billion was 60.5% of aggregate debitbalances and in excess of the CFTC’s minimum requirement by approximately$3.0 billion.

The Company’s OTC derivatives dealer subsidiary,Credit Suisse First Boston Capital LLC (“CSFB Capital LLC”), 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 Securities ExchangeAct of 1934. As of December 31, 2004, CSFB Capital LLC’s net capital of$326 million, allowing for market and credit risk exposure of$59 million and $41 million, respectively, was in excess of theminimum net capital requirement by $306 million. CSFB Capital LLC is incompliance with the exemptive provisions of Rule 15c3-3 because theCompany does not carry securities accounts for customers or perform custodialfunctions relating to customer securities.

As of December 31,2004, the Company and its subsidiaries complied with all applicable regulatorycapital adequacy requirements.

**13. Cash and Securities Segregated UnderFederal and Other Regulations**

In compliance with the Commodity Exchange Act, CSFBLLC segregates funds deposited by customers and funds accruing to customers asa result of trades or contracts. As of December 31, 2004 and 2003, cashand securities aggregating $3.1 billion and $2.6 billion,respectively, were segregated or secured by CSFB LLC in separate accountsexclusively for the benefit of customers.

F-38

----

**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**13. Cashand Securities Segregated Under Federal and Other Regulations(Continued)**

In accordance with the SEC’s no-action letter dated November 3,1998, CSFB LLC computed a reserve requirement for the proprietary accounts ofintroducing broker-dealers. As of December 31, 2004 and 2003, CSFB LLCsegregated securities aggregating $1.5 billion and $196 million,respectively, on behalf of introducing broker-dealers.

In addition, CSFB LLCsegregated U.S. Treasury securities with a market value of $4.4 billionand $3.3 billion as of December 31, 2004 and 2003, respectively, in aspecial reserve bank account exclusively for the benefit of customers asrequired by Rule 15c3-3 of the Exchange Act.

**14. Stockholder’sEquity**

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, share or other equity-based awards as compensation for servicesperformed. CSFBI purchases shares from CSG to satisfy these awards, but CSFBIdoes not require reimbursement from the Company; therefore, amounts areconsidered a capital contribution to the Company and credited to paid-in-capital.Amounts contributed by CSFBI relating to compensation expense for the yearsended December 31, 2004, 2003 and 2002 were $415 million, $352million and $660 million, respectively. See Notes 1 and 15 for furtherinformation on the Company’s share-based compensation.

On November 30, 2004, the Company paid a$40 million dividend to CSFBI.

The Company had an unfunded accumulated benefitobligation in both of its pension plans as of the valuation date in 2003, 2002and 2001. In accordance with SFAS No. 87, “Employers’ Accounting forPensions,” (“SFAS 87”) the Company recorded an after-tax minimum pensionliability adjustment of $4 million, $90 million and $63 million for theyears ended December 31, 2003, 2002 and 2001, respectively, in accumulatedother comprehensive loss in the consolidated statements of financial conditionas a result of the unfunded accumulated benefit obligation in these pensionplans. The Company had a fully funded accumulated benefit obligation in one ofits pension plans as of the valuation date in 2004 and reversed the minimumpension liability adjustments resulting in an after-tax increase in stockholder’sequity of $150 million. See note 16 for more information.

On March 31, 2004, the Company’s immediate parentcompany, CSFBI, transferred the HNW Business of CSAM, a wholly owned subsidiaryof CSFBI, to the Company as a capital contribution of $221 million. Thetransfer of this business was accounted for at historical cost in a mannersimilar to pooling-of-interest accounting because CSAM and the Company wereunder the common control of CSFBI at the time of transfer. The Company hasrestated its financial information for all periods presented to reflect thefinancial condition, results of operations, cash flows and changes instockholder’s equity of the CSAM HNW Business as if the Company had acquired iton November 3, 2000, the date that the Company was acquired by CSFBI. Forinformation regarding the transfer, see Note 1.

On March 20, 2003, the Company’s immediate parentcompany, CSFBI, transferred Management LLC to the Company as a capitalcontribution of $75 million. The transfer of Management LLC has beenaccounted for at historical cost in a manner similar to pooling-of-interestaccounting because Management LLC and the Company were under the common controlof CSFBI at the time of the transfer.

F-39

----

**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**14.Stockholder’s Equity (Continued)**

On February 28, 2003, the Company redeemed theremaining 88,500 shares of its Fixed/Adjustable Rate Cumulative PreferredStock, Series B (liquidation preference of $50.00 per share) at par plusaccrued and unpaid dividends.

In 2002, CSFBI contributed $300 million to ManagementLLC.

On September 30, 2002, CSFBI contributed all ofthe issued and outstanding shares of Madison Purchasing Corp. (“MMP”) to theCompany in order to achieve certain administrative efficiencies. Simultaneouswith the contribution of MMP to the Company, MMP was merged with DonaldsonLeasing Corp., a subsidiary of the Company. MMP is the surviving entity. Theeffect of this contribution on stockholder’s equity was an increase of$14 thousand in paid-in capital.

On July 3, 2002, theCompany purchased 1,500 shares of its Fixed/Adjustable Rate CumulativePreferred Stock, Series B (liquidation preference of $50.00 per share) for$50.00 per share plus accrued and unpaid dividends.

**15. Share-Based Compensation**

The Company participates in the Credit Suisse GroupInternational Share Plan (the “Plan”). The Plan provides for share option andshare awards to be granted to certain employees based on the fair market valueof CSG shares at the time of grant.

In August 2003, theCompany adopted the fair value recognition provisions of SFAS 123 to accountfor its share-based compensation with an effective date of January 1,2003. For additional information see Note 1.

**Option ReductionProgram**

In September 2003,CSG completed its option reduction program, which entitled employees toexchange on a value-for-value basis certain existing share option awards fornew share option or share awards. In accordance with SFAS 123, the Companydid not recognize any compensation expense as a result of that exchange. Thenew share option and share awards have a one-year service period and theoptions expire seven years from the grant date.

**Share Awards**

In September 2003, CSG amended the Plan andintroduced three-year vesting for share awards granted as part of incentivecompensation. Compensation expense is recognized over the vesting period. Forshare awards not granted as part of incentive compensation, compensationexpense is recognized over a vesting period of one to five years. Share awardsgranted in or before January 2003 for services provided in prior yearswere expensed during the year services were provided if there were no vestingrequirements. For share awards not granted as part of incentive compensationwith future service requirements, compensation expense is recognized over theservice period, which ranges from one to five years. For additionalinformation, see Note 1.

F-40

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**15.Share-Based Compensation (Continued)**

The following tablereflects the weighted-average fair value at the grant date:
| ** **                                 | ** ** | **2004** | ** ** | **2003** | ** ** | **2002**(1) | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|-------------|------------|
| Weighted-average  fair value at grant date |       | $        | 37.26      |     | $          | 28.00       |       | $ | 32.08 |   |
|                                            |            |          |            |          |            |             |            |  |  |  |

----

(1)      Weighted-average calculation includes shares granted aspart of financial year compensation subsequent to the financial year-end.

The number of share awardsgranted during the years ended December 31, 2004, 2003 and 2002 was21 million, 28 million, of which 11 million were granted as partof the option reduction program in 2003, and 8 million, respectively. Thenumber of share awards outstanding as of December 31, 2004, 2003 and 2002was 46 million, 48 million and 30 million, respectively.

**Share Option Awards**

In September 2003, CSG also amended the Plan andintroduced three-year vesting for share option awards granted as part ofincentive compensation. For share option awards that are not part of incentivecompensation, compensation expense is recognized over the service period, whichranges from two to four years. These awards expire ten years from the grantdate.

Share option awards issued prior to January 2003for service provided in prior years were accounted for under the provisions ofAPB 25, therefore no compensation expense was recognized for these awards. Theseshare option awards have a service period of one to four years and expire fromseven to ten years from the grant date.

The Company did not grant any share option awardsduring 2004. The number of share option awards granted for the years ended December 31,2003 and 2002 was 172 thousand and 4 million, respectively. The number of shareoption awards outstanding as of December 31, 2004, 2003 and 2002 was28 million and 33 million, of which 1 million relate to theoption reduction program in 2003, and 46 million, respectively. The numberof share option awards exercisable as of December 31, 2004, 2003 and 2002was 20 million, 21 million and 10 million, respectively.

Thefollowing table reflects the weighted-average fair values of share optionawards at the grant date, including options granted as part of the optionreduction program in 2003:
| ** **                                                 | ** ** | **2004**(1) | ** ** | **2003** | ** ** | **  2002**(2)   | ** ** |
|------------------------------------------------------------|------------|-------------|------------|----------|------------|-------------------------------------|------------|
| Weighted-average  fair values of options at the grant date |       |        | $          | —   |       |                                | $          | 10.44 |   |   | $ | 8.67 |   |   |
|                                                            |            |             |            |          |            |                                     |            |  |  |  |  |  |  |  |

----

(1)      The Company did not grant any share option awardsduring 2004. The number of share option awards granted for the years ended December 31,2003 and 2002 was 172 thousand and 4 million, respectively.

(2)      Weighted-average calculation includes options grantedas part of financial year compensation subsequent to the financial year end.

F-41

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**15.Share-Based Compensation (Continued)**

The fair value of shareoption awards was estimated using the Black-Scholes option pricing model. Thefollowing table reflects the weighted-average assumptions for the calculationof the fair value of the share option awards granted, including share optionawards granted as part of the option reduction program in 2003:
| ** **                | ** ** | **2004**(1) | ** ** | **2003** | ** ** | **2002**(2) | ** ** |
|---------------------------|------------|-------------|------------|----------|------------|-------------|------------|
| Expected dividend  yield  |       |        | —     |     |       | 0.54        | %          | 1.88 | % |
| Expected life of  options |       |        | —     |     |       | 4 years     | 5 years    |
| Expected  volatility      |       |        | —     |     |       | 48.00       | %          | 44.34 | % |
| Risk-free interest rate   |       |        | —     |     |       | 1.28        | %          | 1.86 | % |

----

(1)      The Company did not grant any share option awardsduring 2004. The number of share option awards granted for the years ended December 31,2003 and 2002 was 172 thousand and 4 million, respectively.

(2)      Weighted-average calculation includes options grantedas part of financial year compensation subsequent to the financial year-end.

**16. Employee Benefit Plans**

The Company providesretirement and postretirement benefits to its U.S. and certain non-U.S.employees through participation in defined benefit and defined contributionpension plans and other plans. The Company’s measurement date is September 30for its pension and other postretirement benefit plans.

**Pension Plans**

The Company participates in a non-contributory definedbenefit pension plan (the “Qualified Plan”) available to individuals employedbefore January 1, 2000. Effective January 1, 2004, compensation andcredited service for benefit purposes were frozen for certain participants.Employees who no longer accrue benefits in the Qualified Plan participate in asavings and retirement plan similar to employees hired on or after January 1,2000. 

Contributions to the Qualified Plan are made asrequired by the Internal Revenue Code and applicable law but not in excess ofthe amounts deductible by the Company for income tax purposes. Companycontributions to the Qualified Plan were $220 million, $38 millionand $41 million for the years ended December 31, 2004, 2003 and 2002,respectively. 

The Company also sponsors a savings and retirementplan, which is a defined contribution plan, with both a savings and aretirement component. All employees are eligible to participate in the savingscomponent whereby the Company matches employee contributions. In addition,individuals employed before January 1, 2000 who do not accrue benefitsunder the Qualified Plan and employees hired on or after January 1, 2000participate in the retirement component and receive a retirement contributionthat is linked to the return on equity of the Credit Suisse First Bostonbusiness unit. The Company has contributed $32 million, $55 million and$59 million to the savings and retirement plan for the years ended December 31,2004, 2003 and 2002, respectively. 

F-42

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

The Company also providesa non-contributory, non-qualified, unfunded plan (the “Supplemental Plan”),which provides benefits to certain senior employees and Qualified Planparticipants whose benefits may be limited by tax regulations. Benefits underthese pension plans are based on years of service and employee compensation.

**Other Postretirement Plans**

In addition, the Company provides certain subsidizedunfunded health-care benefits for eligible retired employees (the “Other Plans”).Employees hired prior to July 1, 1988 become eligible for these benefitsif they meet minimum age and service requirements. The plan sponsor has theright to modify or terminate these benefits. Asof December 31, 2004 and 2003, the aggregate accumulated postretirementbenefit obligation was $62 million and $67 million, respectively.

In May 2004, the FASBissued FSP 106-2. The Medicare Act became law in December 2003 andintroduced both a Medicare prescription drug benefit and a federal subsidy tosponsors of retiree health-care plans that provide a benefit that is atleast “actuarially equivalent” to the Medicare benefit. The Company adopted FSP106-2 on July 1, 2004 and has determined that its retiree health-careplans provide a benefit that is “actuarially equivalent” to the Medicarebenefit. The effect of adopting FSP 106-2 was not material.

**Net Periodic Benefit Cost**

The following tablepresents the pension expense by component for the Qualified Plan for the yearsended September 30, 2004, 2003 and 2002:
| ** **                                     | ** ** | **For the Year Ended  September 30,** | ** ** |
|------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                     | ** ** | **2004**                                                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                     | ** ** | **(In millions)**                                    | ** ** |
| **Components of Net Periodic  Benefit Cost:**  |       |                                                      |       |   |   |   |   |
| Service cost                                   |       | $                                                         | 19         |   | $ | 27 |   | $ | 24 |   |
| Interest cost                                  |       | 33                                                        |       | 32 |   | 28 |   |
| Expected return on plan  assets                |       | (48                                                       | )          | (37 | ) | (36 | ) |
| Amortization of  unrecognized transition asset |       | (2                                                        | )          | (2 | ) | (2 | ) |
| Amortization of prior  service cost            |       | —                                                    |       | 1 |   | — |   |
| Recognized net actuarial  loss                 |       | 17                                                        |       | 10 |   | 1 |   |
| Recognized curtailment  loss                   |       | 3                                                         |       | — |   | — |   |
| Net periodic  benefit cost                     |       | $                                                         | 22         |   | $ | 31 |   | $ | 15 |   |

 

F-43

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

The following tablepresents the pension expense for the Supplemental Plan and postretirementhealth-care expense for the Other Plans by component for the years ended September 30,2004, 2003 and 2002:
| ** **                                           | ** ** | **For the Year Ended  September 30,** | ** ** |
|------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                           | ** ** | ** 2004 **                                      | ** ** | ** 2003 ** | ** ** | ** 2002 ** | ** ** |
| ** **                                           | ** ** | **(In millions)**                                    | ** ** |
| **Components of Net Periodic  Benefit Cost:**        |       |                                                      |       |   |   |   |   |   |   |   |   |   |   |
| Service cost                                         |       |                                                      | $          | 3 |   |   |   | $ | 3 |   |   |   | $ | 2 |   |   |
| Interest cost                                        |       |                                                      | 6          |   |   |   | 6 |   |   |   | 4 |   |   |
| Amortization of  unrecognized transition obligations |       |                                                      | 1          |   |   |   | 1 |   |   |   | 1 |   |   |
| Amortization of prior  service cost                  |       |                                                      | (1         | ) |   |   | (1 | ) |   |   | (1 | ) |   |
| Recognized net actuarial  loss                       |       |                                                      | 2          |   |   |   | 3 |   |   |   | 4 |   |   |
| Net periodic benefit cost                            |       |                                                      | $          | 11 |   |   |   | $ | 12 |   |   |   | $ | 10 |   |   |

 

**Benefit Obligation andPlan Assets**

The following table reconcilesthe changes in the projected benefit obligation and the fair value of the planassets and summarizes the funded status for the Qualified Plan, theSupplemental Plan and the Other Plans. Amounts shown are as of the measurementdate, which is September 30, 2004 and 2003:
| ** **                                              | ** ** | **Qualified**          | ** ** | **Supplemental  and Other** | ** ** |
|---------------------------------------------------------|------------|------------------------|------------|----------------------------------|------------|
| ** **                                              | ** ** | **2004**               | ** ** | **2003**                         | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                              | ** ** | **(In millions)** | ** ** |
| **Change in Benefit Obligation**                        |       |                   |       |                             |       |   |   |   |   |
| Projected benefit  obligation as of beginning of period |       | $                      | 575        |                             | $          | 517 |   | $ | 104 |   | $ | 77 |   |
| Service cost                                            |       | 19                     |       | 27                               |       | 3 |   | 3 |   |
| Interest cost                                           |       | 33                     |       | 32                               |       | 6 |   | 6 |   |
| Participant contributions                               |       | —                 |       | —                           |       | 1 |   | 1 |   |
| Amendments                                              |       | 2                      |       | 2                                |       | — |   | — |   |
| Actuarial (gain)/loss                                   |       | (7                     | )          | 14                               |       | 8 |   | 21 |   |
| Benefits paid                                           |       | (17                    | )          | (17                              | )          | (5 | ) | (4 | ) |
| Curtailments                                            |       | (15                    | )          | —                           |       | — |   | — |   |
| Adoption of FSP106-2                                    |       | —                 |       | —                           |       | (11 | ) | — |   |
| Projected benefit  obligation as of the end of period   |       | $                      | 590        |                             | $          | 575 |   | $ | 106 |   | $ | 104 |   |
| **Change  in Plan Assets**                              |       |                   |       |                             |       |   |   |   |   |
| Fair value of assets as  of the beginning of period     |       | $                      | 385        |                             | $          | 313 |   | $ | — |   | $ | — |   |
| Actual return on plan  assets                           |       | 37                     |       | 51                               |       | — |   | — |   |
| Participant contributions                               |       | —                 |       | —                           |       | 1 |   | 1 |   |
| Employer contributions                                  |       | 220                    |       | 38                               |       | 4 |   | 3 |   |
| Benefits paid                                           |       | (17                    | )          | (17                              | )          | (5 | ) | (4 | ) |
| Fair value of assets as  of the end of period           |       | $                      | 625        |                             | $          | 385 |   | $ | — |   | $ | — |   |
| **Funded  Status**                                      |       |                   |       |                             |       |   |   |   |   |
| Funded status—funded  (underfunded)                |       | $                      | 35         |                             | $          | (190 | ) | $ | (106 | ) | $ | (104 | ) |
| Unrecognized transition  (asset) obligation             |       | —                 |       | (2                               | )          | 1 |   | 1 |   |
| Unrecognized prior  service cost                        |       | 4                      |       | 5                                |       | — |   | (1 | ) |
| Unrecognized net  actuarial loss                        |       | 239                    |       | 268                              |       | 28 |   | 32 |   |
| Net amount recognized                                   |       | $                      | 278        |                             | $          | 81 |   | $ | (77 | ) | $ | (72 | ) |
|                                                    |       |                   |       |                             |       |   |   |   |   |

 

F-44

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

Amounts recognized in theconsolidated statements of financial condition as of December 31, 2004 and2003 were as follows:
| ** **                            | ** ** | **Qualified**          | ** ** |
|---------------------------------------|------------|------------------------|------------|
| ** **                            | ** ** | **2004**               | ** ** | **2003** | ** ** |
| ** **                            | ** ** | **(In millions)** | ** ** |
| Prepaid asset                         |       | $                      | 278        |   | $ | — |   |
| Intangible asset                      |       | —                 |       | 5 |   |
| Accrued benefit  liability            |       | —                 |       | (148 | ) |
| Accumulated other  comprehensive loss |       | —                 |       | 224 |   |
| Net amount recognized                 |       | $                      | 278        |   | $ | 81 |   |

 

As of December 31, 2004 and 2003, the Company hadrecognized liabilities of $77 million and $72 million, respectively,for the Supplemental and Other Plans in the consolidated statements offinancial condition.

The Company had an unfunded accumulated benefitobligation in both the Qualified Plan and Supplemental Plan as of the valuationdate in 2003, 2002 and 2001. In accordance with SFAS 87, the Company recordedafter-tax minimum pension liability adjustments of $4 million, $90 million and$63 million for the years ended December 31, 2003, 2002 and 2001,respectively, in accumulated other comprehensive loss related to the Qualifiedand Supplemental Plans in the consolidated statements of financial condition. TheCompany had a fully funded accumulated benefit obligation in the Qualified Planas of the valuation date in 2004 and reversed the minimum pension liabilityadjustments applicable to the Qualified Plan resulting in an after-tax increasein stockholder’s equity of $150 million. 

The accumulated benefitobligation for the Qualified Plan was $564 million and $533 million as of September 30,2004 and 2003, respectively. The accumulated benefit obligation for theSupplemental Plan was $41 million and $33 million as of September 30, 2004and 2003, respectively. 

**Estimated Future Benefit Payments**

The estimated futurebenefit payments expected to be made by the Qualified, Supplemental and Otherplans are as follows: 
| ** **      | ** ** | **Qualified**          | ** ** | **Supplemental  and Other** | ** ** |
|-----------------|------------|------------------------|------------|----------------------------------|------------|
| ** **      | ** ** | **(In millions)** | ** ** |
| 2005            |       |                   | $          | 8                                |       |   |   | $ | 4 |   |   |
| 2006            |       |                   | 9          |                             |       |   | 4 |   |   |
| 2007            |       |                   | 10         |                             |       |   | 5 |   |   |
| 2008            |       |                   | 11         |                             |       |   | 5 |   |   |
| 2009            |       |                   | 14         |                             |       |   | 5 |   |   |
| Years 2010-2014 |       |                   | 110        |                             |       |   | 32 |   |   |

 

F-45

----

**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

**Assumptions Used inDetermining Costs and Obligations**

The following tablepresents on a weighted average basis the assumptions used in determining thenet periodic benefit costs for the Qualified Plan, the Supplemental Plan andthe Other Plans for the years ended September 30, 2004, 2003 and 2002:
| ** **                                | ** ** | **For the Year Ended  September 30,** | ** ** |
|-------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                | ** ** | **2004**                                                  | ** ** | **2003** | ** ** | **2002** | ** ** |
| **Qualified Plan and Supplemental  Plan** |       |                                                      |       |   |   |   |   |
| Discount rate                             |       | 6.00                                                      | %          | 6.25 | % | 7.00 | % |
| Rate of compensation  increase            |       | 4.00                                                      | %          | 4.00 | % | 5.50 | % |
| Expected rate of return(1)                |       | 8.50                                                      | %          | 8.50 | % | 9.00 | % |
| **Other Plans**                           |       |                                                      |       |   |   |   |   |
| Discount rate                             |       | 6.00                                                      | %          | 6.25 | % | 7.00 | % |
| Rate of compensation  increase            |       | 5.50                                                      | %          | 4.00 | % | 5.50 | % |
| Expected rate of return(1)                |       | N/A                                                       |       | N/A |   | N/A |   |

----

(1)      The expected long-term rate of return on plan assetsassumption is based on historical real rates of return of the various assetclasses, weighted based on the target asset allocation percentages for eachmajor category of plan assets. The anticipated inflation rate is added to thesehistorical real rates of return to arrive at the expected long-term rate ofreturn on plan assets assumption.

The assumptions used indetermining the projected benefit obligation for the Qualified and SupplementalPlans and the projected health-care postretirement benefit obligation for theOther Plans as of September 30, 2004 and 2003 were:
| ** **                                                   | ** ** | **2004**   | ** ** | **2003**   | ** ** |
|--------------------------------------------------------------|------------|------------|------------|------------|------------|
| **Projected benefit obligation**                             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Discount rate                                                |       | 6.00       | %          | 6.00       | %          |
| Rate of compensation  increase                               |       | 3.75       | %          | 4.00       | %          |
| **Projected health-care  postretirement benefit obligation** |       |       |       |       |       |
| Discount rate                                                |       | 6.00       | %          | 6.00       | %          |
| Rate of compensation  increase                               |       | 5.50       | %          | 5.50       | %          |

 

In determining theaccumulated postretirement health-care benefit obligation and the net periodicpostretirement costs for 2004, the Company assumed the following:
| ** **                              | ** ** | **Cost**   | ** ** | **Obligation** | ** ** |
|-----------------------------------------|------------|------------|------------|----------------|------------|
| Health-care rate  increases             | ** ** | ** ** | ** ** |           | ** ** |   |   |
| 2004                                    |       | 6.50       | %          |           | N/A        |   |   |
| 2005                                    |       | 6.00       | %          |           | 8.00       | % |   |
| Ultimate trend rate  increase           |       | 4.75       | %          |           | 4.75       | % |   |
| Ultimate trend expected  to be achieved |       | 2008       |       |           | 2010       |   |   |

 

F-46

----

**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

Assumed health-care costtrend rates have a significant effect on the amounts reported for the health-carebenefits. A 1% change in assumed health-care cost trend rates would have thefollowing effects:
| ** **                                              | ** ** | **1% increase**   | ** ** | **1% decrease** | ** ** |
|---------------------------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                                              | ** ** | **(In millions)** | ** ** |
| Effect on benefit  obligation at end of year            |       |                   | $          | 8                    |       |   |   | $ | (7 | ) |   |
| Effect on total of  service and interest costs for year |       |                   | $          | 1                    |       |   |   | $ | — |   |   |

 

**Investments**

The investment policies and strategies of theQualified Plan are determined by a committee made up of the Company’s seniormanagement. The policy is based on long-term goals and is therefore notfrequently revised.****The investmentgoal is to create an asset mix that is adequate for future benefit obligationsby creating a diversified investment portfolio, while managing various riskfactors and maximizing the Qualified Plan’s investment returns through use ofrelated party and external fund managers and clearly defined strategies. Seniormanagement regularly monitors actual allocation compared to the policy. Thecurrent asset allocation goal is to achieve an asset mix of approximately 35%in domestic equities; 20% in international equities; 24% in fixed incomesecurities, including 0% to 20% in high-yield securities; 10% in real estate;10% in alternate investments (primarily hedge funds); and 1% in cash. Contributions to the Qualified Plan are made asrequired by the Internal Revenue Code and applicable law but not in excess ofthe amounts deductible by the Company for income tax purposes.

Thefollowing table presents the percentage of the fair value of the Qualified Planassets as of September 30, 2004 and 2003 by type of asset:
| ** **                                                 | ** ** | **Qualified** | ** ** |
|------------------------------------------------------------|------------|---------------|------------|
| ** **                                                 | ** ** | **2004**      | ** ** | **2003** | ** ** |
| **Asset  Allocation:**                                     |       |          |       |   |   |
| Equity securities                                          |       | 43            | %          | 41 | % |
| Fixed income  securities (including high-yield securities) |       | 21            |       | 33 |   |
| Real estate                                                |       | 3             |       | 9 |   |
| Cash and other                                             |       | 33            |       | 17 |   |
| Total                                                      |       | 100           | %          | 100 | % |
|                                                       |       |          |       |   |   |

 

**Employee Loans andDeferred Compensation Arrangements**

Certain key employees ofthe Company also participate in the following compensation and otherarrangements: investments in selected private equity activities of the Companyfunded by deferred compensation and recourse and non-recourse leveraged loansprovided by the Company; non-qualified deferred compensation plans that includemanaged investments; and other non-qualified plans that are funded by theCompany with insurance contracts. The investments, including the leveragefactor, and the amounts accrued by the Company under these plans are includedin the consolidated statements of financial condition. The employee-relatedassets were $549 million and $1.1 billion as of December 31,2004 and 2003, respectively, and are included in other assets and deferredamounts in the consolidated 

F-47

----

**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

statementsof financial condition. Related liabilities for deferred compensation planswere $1.2 billion and $1.3 billion, respectively, as of December 31,2004 and 2003 and are included in other liabilities in the consolidatedstatements of financial condition. Gains and losses on these assets andliabilities are recorded in the consolidated statements of operations.

**17. IncomeTaxes**

The Company is included in the consolidated federalincome tax return filed by CSFBI and certain state and local income tax returnsfiled by CSFBI. CSFBI allocates federal income taxes to its subsidiaries on aseparate return basis, and any state and local income taxes on a *pro rata* basis, pursuant to a tax sharingarrangement.

Includedin the consolidated statements of operations for the years ended December 31,2004, 2003 and 2002 are current and deferred provisions (benefits) for incometaxes from continuing operations that were allocated to the Company by CSFBI asfollows:
| ** **                                                       | ** ** | **For the Year Ended December 31,** | ** ** |
|------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                                       | ** ** | **    2004    **     | ** ** | **    2003    ** | ** ** | **    2002    ** | ** ** |
| ** **                                                       | ** ** | **(In millions)**                                       | ** ** |
| Current:                                                         |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |
| U.S. federal                                                     | ** ** |                                                         | $          | 316 |   |   |   | $ | (71 | ) |   |   | $ | (460 | ) |   |
| State and local                                                  |       |                                                         | 3          |   |   |   | 70 |   |   |   | 37 |   |   |
| Foreign                                                          |       |                                                         | 7          |   |   |   | 1 |   |   |   | 4 |   |   |
| Total current                                                    |       |                                                         | 326        |   |   |   | — |   |   |   | (419 | ) |   |
| Deferred:                                                        |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |
| U.S. federal                                                     |       |                                                         | 71         |   |   |   | 244 |   |   |   | 284 |   |   |
| Total deferred                                                   |       |                                                         | 71         |   |   |   | 244 |   |   |   | 284 |   |   |
| Provision (benefit) for  income taxes from continuing operations |       |                                                         | $          | 397 |   |   |   | $ | 244 |   |   |   | $ | (135 | ) |   |
|                                                             |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |

 

Excluded from the table above is a provision forincome taxes for the years ended December 31, 2003 and 2002 of$485 million and $47 million, respectively, related to discontinuedoperations; an income tax benefit of $5 million for the year ended December 31,2003, related to the cumulative effect of a change in accounting principle; anincome tax benefit of $131 million, an income tax charge of $27 million and anincome tax charge of $7 million for the years ended December 31, 2004,2003 and 2002, respectively, related to CSG share plan activity, and an incometax charge of $80 million, an income tax benefit of $2 million and anincome tax benefit of $49 million for the years ended December 31,2004, 2003 and 2002, respectively, related to minimum pension liabilityadjustments.

F-48

----

**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**17.Income Taxes (Continued)**

The following tablesummarizes the difference between the federal statutory tax rate and theeffective tax rate related to continuing operations for the years ended December 31,2004, 2003 and 2002:
| ** **                                                       | ** ** | **For the Year Ended December 31,** | ** ** |
|------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                                       | ** ** | **2004**                                                     | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                       | ** ** | **Amount**                                                   | ** ** | **Percent of  Pre-tax  Income** | ** ** | **Amount** | ** ** | **Percent  of Pre-tax   (Loss)** | ** ** | **Amount** | ** ** | **Percent of  Pre-tax  (Loss)** | ** ** |
| ** **                                                       | ** ** | **(In millions)**                                       | ** ** | ** ** | ** ** | **(In millions)** | ** ** | ** ** | ** ** | **(In millions)** | ** ** | ** ** | ** ** |
| U.S. federal  statutory income tax provision (benefit)           |       |                                                         | $          | 639 |   |   |   | 35.0 | % |   |   | $ | 199 |   |   |   | 35.0 | % |   |   | $ | (168 | ) |   |   | (35.0 | )% |   |
| Increase  (decrease) due to:                                     |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Minority interests(1)                                            |       |                                                         | (225       | ) |   |   | (12.3 | ) |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Dividend exclusion                                               |       |                                                         | (36        | ) |   |   | (2.0 | ) |   |   | (11 | ) |   |   | (2.0 | ) |   |   | (28 | ) |   |   | (5.9 | ) |   |
| Entertainment expense                                            |       |                                                         | 5          |   |   |   | 0.3 |   |   |   | 4 |   |   |   | 0.8 |   |   |   | 7 |   |   |   | 1.4 |   |   |
| State and local taxes, net of federal income tax  effects        |       |                                                         | 2          |   |   |   | 0.1 |   |   |   | 45 |   |   |   | 8.0 |   |   |   | 23 |   |   |   | 4.8 |   |   |
| Other                                                            |       |                                                         | 12         |   |   |   | 0.7 |   |   |   | 7 |   |   |   | 1.2 |   |   |   | 31 |   |   |   | 6.5 |   |   |
| Provision (benefit) for  income taxes from continuing operations |       |                                                         | $          | 397 |   |   |   | 21.8 | % |   |   | $ | 244 |   |   |   | 43.0 | % |   |   | $ | (135 | ) |   |   | (28.2 | )% |   |
|                                                             |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

(1)      Represents the effect of non-taxable revenues andexpenses from private equity funds consolidated primarily under FIN 46R. Netincome was unaffected as offsetting minority interests were recorded in theconsolidated statements of operations. See Note 4 for more information.

Deferredtax assets and deferred tax liabilities are generated by the followingtemporary differences:
| ** **                                                                   | ** ** | **December 31,  2004** | ** ** | **December 31,  2003** | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                                                   | ** ** | **(In millions)**      | ** ** |
| Deferred tax  assets:                                                        |       |                        |       |                        |       |   |   |   |   |
| Inventory                                                                    |       |                        | $          | 147                         |       |   |   | $ | 171 |   |   |
| Investments                                                                  |       |                        | 300        |                        |       |   | 267 |   |   |
| Other liabilities and accrued expenses, primarily  compensation and benefits |       |                        | 1,094      |                        |       |   | 1,220 |   |   |
| State and local taxes                                                        |       |                        | 32         |                        |       |   | 36 |   |   |
| Total deferred tax assets                                                    |       |                        | 1,573      |                        |       |   | 1,694 |   |   |
| Deferred tax  liabilities:                                                   |       |                        |       |                        |       |   |   |   |   |
| Inventory                                                                    |       |                        | 62         |                        |       |   | 55 |   |   |
| Investments                                                                  |       |                        | 285        |                        |       |   | 228 |   |   |
| Other                                                                        |       |                        | 91         |                        |       |   | 92 |   |   |
| Total deferred tax liabilities                                               |       |                        | 438        |                        |       |   | 375 |   |   |
| Deferred tax assets net of deferred tax liabilities                          |       |                        | 1,135      |                        |       |   | 1,319 |   |   |
| Valuation  allowance for state and local taxes                               |       |                        | (32        | )                           |       |   | (36 | ) |   |
| Net deferred tax asset                                                       |       |                        | $          | 1,103                       |       |   |   | $ | 1,283 |   |   |

 

F-49

----

**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**17.Income Taxes (Continued)**

Due to uncertaintyconcerning the Company’s ability to generate the necessary amount and mix ofstate and local taxable income in future periods, the Company maintains avaluation allowance against its deferred state and local tax asset in theamount of $32 million and $36 million as of December 31, 2004 and2003, respectively. The Company has determined that the realization of theremaining recognized deferred tax assets as of December 31, 2004 is morelikely than not based on anticipated future taxable income. In addition, forfederal income tax purposes, the Company has planning strategies available thatenhance its ability to utilize these tax benefits.

**18.**Legal Proceedings

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 such proceedings,in the aggregate, will not have a material adverse effect on its financialcondition but might be material to operating results for any particular period,depending, in part, upon the operating results for such period.

It is inherently difficultto predict the outcome of many of these matters. In presenting the consolidatedfinancial statements, management makes estimates regarding the outcome of thesematters and records a reserve and takes a charge to income when losses withrespect to such matters are probable and can be reasonably estimated. Estimates,by their nature, are based on judgment and currently available information andinvolve a variety of factors, including, but not limited to, the type andnature of the litigation, claim or proceeding, the progress of the matter, theadvice of legal counsel, the Company’s defenses and its experience in similarcases or proceedings. In 2003, the Company paid approximately $150 millionwith respect to the agreement with the U.S. regulators relating to researchanalyst independence and the allocation of IPO shares to corporate executivesand directors. The Company recorded a $450 million reserve in 2002 related toprivate litigation involving research analyst independence, certain IPOallocation practices, Enron and other related litigation. Management’s bestestimate of the potential exposure pursuant to SFAS 5 related to this privatelitigation has not changed except that $15 million of the reserve has beenapplied to settlements of claims covered by such reserve through December 31,2004.

**19. Industry Segment and Geographic Data**

As of January 1, 2004, the Company transferredthe private equity and private funds businesses from the InstitutionalSecurities segment to the Financial Services segment, which has been renamedthe Wealth & Asset Management segment. As a result, the Companychanged the presentation of the Institutional Securities and Wealth &Asset Management segment results. The HNW Business is included in the resultsof the Wealth & Asset Management segment in Private Client Services. In addition, the Company allocated to the segmentsmerger-related costs and certain other costs and revenues, previously excludedfrom its reportable segments. These costs and revenues include certainsignificant legal and regulatory charges; severance and other costs from theCompany’s cost-reduction initiatives; gains on the sales of businesses andassignments of leases; and the results from legacy private equity anddistressed assets. Prior period segment numbers have been changed to conform tothe new segment reporting structure.

F-50

----

**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**19. Industry Segment andGeographic Data (Continued)**

The Company operates and manages its businessesthrough two operating segments: the Institutional Securities segment,consisting primarily of Investment Banking and Trading; and the Wealth &Asset Management segment, consisting of Alternative Capital, which includes theresults of the private equity and private funds businesses, and Private ClientServices.

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) fromcontinuing operations before provision for income taxes, discontinuedoperations and cumulative effect of a change in accounting principle but excludingminority interests.

The Institutional Securities 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 Institutional Securitiessegment also includes the results from legacy private equity and distressedassets.

The Wealth &Asset Management segment consists of:

·       AlternativeCapital, which includes the private equity and private funds businesses. Theprivate equity business makes privately negotiated investments and acts as aninvestment advisor for private equity funds. The private funds business raisesprivate capital, primarily from institutional investors, for direct investmentby venture capital, management buyout and other investment firms in a varietyof fund types; and

·       PrivateClient Services, which is a financial advisory business serving high-net-worthindividuals and corporate investors with a wide range of CSFB and third-partyinvestment management products and services.

The Company allocates to its segments a pro rata shareof certain centrally managed costs, such as leased facilities and equipmentcosts, employee benefits and certain general overhead expenses based uponspecified amounts, usage criteria or agreed rates, and allocates interestexpense based upon the type of asset. The segmental allocation of some costs,such as incentive bonuses, is estimated.

F-51

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**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

The following table setsforth the net revenues excluding net interest, net interest revenue, total netrevenues, total expenses and income (loss) from continuing operations beforeprovision (benefit) for income taxes, discontinued operations and cumulative effectof a change in accounting principle and assets of the Company’s segments.
| ** **                                              | ** ** | **Institutional  Securities** | ** ** | **Wealth & Asset  Management** | ** ** | **Total Segments** | ** ** |
|---------------------------------------------------------|------------|-------------------------------|------------|----------------------------------------------|------------|-------------------------|------------|
| ** **                                              | ** ** | **(In millions)**        | ** ** |
| **For the year ended  December 31, 2004:**         | ** ** |                          | ** ** | ** **                                   |       |                    | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Net revenues excluding  net interest                    |       |                          | $          | 2,425                                        | ** ** |                    |       | $ | 1,433 | ** ** |   |   | $ | 3,858 | ** ** |   |
| Net interest revenue                                    |       |                          | 2,435      | ** **                                   |       |                    | 48         | ** ** |   |   | 2,483 | ** ** |   |
| Total net revenues(1)                                   |       |                          | 4,860      | ** **                                   |       |                    | 1,481      | ** ** |   |   | 6,341 | ** ** |   |
| Total expenses                                          |       |                          | 3,970      | ** **                                   |       |                    | 545        | ** ** |   |   | 4,515 | ** ** |   |
| Income(2)                                               |       |                          | 890        | ** **                                   |       |                    | 936        | ** ** |   |   | 1,826 | ** ** |   |
| Minority interests(3)                                   |       |                          | 79         | ** **                                   |       |                    | 563        | ** ** |   |   | 642 | ** ** |   |
| Income after minority  interests(4)                     |       |                          | $          | 811                                          | ** ** |                    |       | $ | 373 | ** ** |   |   | $ | 1,184 | ** ** |   |
| **For the  year ended December 31, 2003:**         |       |                          |       | ** **                                   |       |                    |       | ** ** |   |   |   | ** ** |   |
| Net revenues excluding  net interest                    |       |                          | $          | 1,894                                        | ** ** |                    |       | $ | 711 | ** ** |   |   | $ | 2,605 | ** ** |   |
| Net interest revenue                                    |       |                          | 2,342      | ** **                                   |       |                    | 50         | ** ** |   |   | 2,392 | ** ** |   |
| Total net revenues(1)(5)                                |       |                          | 4,236      | ** **                                   |       |                    | 761        | ** ** |   |   | 4,997 | ** ** |   |
| Total expenses(6)                                       |       |                          | 3,678      | ** **                                   |       |                    | 750        | ** ** |   |   | 4,428 | ** ** |   |
| Income(2)(5)(6)                                         |       |                          | 558        | ** **                                   |       |                    | 11         | ** ** |   |   | 569 | ** ** |   |
| Minority interests(3)                                   |       |                          | —     | ** **                                   |       |                    | —     | ** ** |   |   | — | ** ** |   |
| Income after minority  interests(4)(5)(6)               | ** ** |                          | $          | 558                                          | ** ** |                    |       | $ | 11 | ** ** |   |   | $ | 569 | ** ** |   |
| **For the  year ended December 31, 2002:**         |       |                          |       | ** **                                   |       |                    |       | ** ** |   |   |   | ** ** |   |
| Net revenues excluding  net interest                    | ** ** |                          | $          | 1,792                                        | ** ** |                    |       | $ | 1,113 | ** ** |   |   | $ | 2,905 | ** ** |   |
| Net interest revenue                                    |       |                          | 2,018      | ** **                                   |       |                    | 40         | ** ** |   |   | 2,058 | ** ** |   |
| Total net revenues(1)(5)(7)                             |       |                          | 3,810      | ** **                                   |       |                    | 1,153      | ** ** |   |   | 4,963 | ** ** |   |
| Total expenses(8)                                       |       |                          | 4,762      | ** **                                   |       |                    | 682        | ** ** |   |   | 5,444 | ** ** |   |
| Income(2)(5)(7)(8)                                      |       |                          | (952       | )                                            |       |                    | 471        | ** ** |   |   | (481 | ) |   |
| Minority interests(3)                                   |       |                          | —     | ** **                                   |       |                    | —     | ** ** |   |   | — | ** ** |   |
| (Loss) income after  minority interests(4)(5)(7)(8)     | ** ** |                          | $          | (952                                         | )          |                    |       | $ | 471 | ** ** |   |   | $ | (481 | ) |   |
| **Segment  assets as of December 31, 2004****(9)** | ** ** |                          | $          | 271,203                                      | ** ** |                    |       | $ | 4,610 | ** ** |   |   | $ | 275,813 | ** ** |   |
| **Segment  assets as of December 31, 2003**        | ** ** |                          | $          | 239,733                                      | ** ** |                    |       | $ | 1,833 | ** ** |   |   | $ | 241,566 | ** ** |   |
| **Segment assets as of December 31, 2002****(10)** | ** ** |                          | $          | 223,269                                      | ** ** |                    |       | $ | 13,186 | ** ** |   |   | $ | 236,455 | ** ** |   |

----

(1)         Interest income and expense is accrued atthe stated coupon rate for coupon-bearing financial instruments, and fornon-coupon-bearing financial instruments, interest income is recognized byaccreting the discount over the life of the instrument. For coupon-bearingfinancial instruments purchased at a discount or premium, the differencebetween interest income and expense accrued at the stated coupon rate andinterest income and expense determined on an effective yield basis is includedin principal transactions-net in the Company’s consolidated statements ofoperations and in net revenues excluding net interest above.

(2)         Income (loss) from continuing operations beforeprovision (benefit) for income taxes, minority interests, discontinuedoperations and the cumulative effect of a change in accounting principle.

(3)         Related to the Company’s consolidation of certainprivate equity funds. See Note 4 for more information.

(4)         Income (loss) from continuing operations beforeprovision (benefit) for income taxes, discontinued operations and thecumulative effect of a change in accounting principle.

F-52

----

**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

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

(5)         The results for the Wealth & Asset Managementsegment for the year ended December 31, 2003 and 2002 include the resultsfor the Company’s 50% stake in a Japanese online broker, DLJ*direct* SFG Securities Inc., up to thetime of, and the gain resulting from, its sale in the fourth quarter of 2003.

(6)         The Wealth & Asset Management segment resultsfor the year ended December 31, 2003 include the pre-tax loss of $210 millionof the HNW Business, of which $200 million related to a write-down ofintangible assets by CSAM in December 2003.

(7)         The results for the Wealth & Asset Managementsegment for the year ended December 31, 2002 include the results for thebroker-dealers, CSFB*direct* LLC,DLJ*direct* Ltd. and Autranet,LLC, up to the time of, and the gain resulting from, their sale in the firstquarter of 2002.

(8)         The results for the Institutional Securities segmentfor the year ended December 31, 2002 include:

·     a fourth quarter 2002 charge of $150 million forthe agreement in principle with various U.S. regulators involving researchanalyst independence and the allocation of initial public offering (“IPO”)shares to corporate executive officers and an additional charge of$450 million for private litigation involving research analystindependence, certain IPO allocation practices, Enron and other relatedlitigation; and

·     a fourth quarter 2002 charge of approximately$150 million for severance, including bonus and retention awards, inconnection with a CSFB cost-reduction initiative.

(9)         The Institutional Securities and Wealth &Asset Management segment assets as of December 31, 2004 include $494million and $1.5 billion, respectively, related to the Company’s consolidationof certain private equity funds.

(10)       Segment assets for the Wealth & AssetManagement segment for the year ended December 31, 2002 include the assetsof the Pershing unit, which was sold to The Bank of New York, Inc. on May 1,2003.

Thefollowing are net revenues from continuing operations by geographic region:
| ** **    | ** ** | **For the Year Ended December 31,**         | ** ** |
|---------------|------------|----------------------------------------------------------------------|------------|
| ** **    | ** ** | **     2004     ** | ** ** | **     2003     ** | ** ** | **     2002     ** | ** ** |
| ** **    | ** ** | **(In millions)**                                               | ** ** |
| United States |       |                                                                 | $          | 6,311 |   |   |   | $ | 4,983 |   |   |   | $ | 4,960 |   |   |
| Foreign       |       |                                                                 | 30         |   |   |   | 14 |   |   |   | 3 |   |   |
| Total         |       |                                                                 | $          | 6,341 |   |   |   | $ | 4,997 |   |   |   | $ | 4,963 |   |   |

 

F-53

----

**CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) December 31, 2004**

**20. QuarterlyData (Unaudited)**

The following tablepresents total net revenues, income before provision for income taxes, and netincome (loss): 
| ** **                             | ** ** | **2004 Fiscal Quarter** | ** ** | **For the Year  Ended  December 31,** | ** ** |
|----------------------------------------|------------|-----------------------------------|------------|------------------------------------------------------|------------|
| ** **                             | ** ** | **First**                         | ** ** | **  Second  **                   | ** ** | **  Third  ** | ** ** | **  Fourth  ** | ** ** | **2004** | ** ** |
| ** **                             | ** ** | **(In millions)**            | ** ** |
| Total net  revenues                    |       | $                                 | 1,580      |                                                 |       | $ | 1,967 |   |   |   | $ | 1,183 |   |   |   | $ | 1,611 |   |   |   | $ | 6,341 |   |   |
| Income from  continuing operations(1)  |       | 327                               |       |                                                 | 805        |   |   |   | 61 |   |   |   | 633 |   |   |   | 1,826 |   |   |
| Income from discontinued operations(2) |       | —                            |       |                                                 | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Net income                             |       | $                                 | 167        |                                                 |       | $ | 292 |   |   |   | $ | 19 |   |   |   | $ | 309 |   |   |   | $ | 787 |   |   |

 
| ** **                             | ** ** | **2003 Fiscal Quarter** | ** ** | **For the Year   Ended  December 31,** | ** ** |
|----------------------------------------|------------|-----------------------------------|------------|------------------------------------------------------------|------------|
| ** **                             | ** ** | **First**                         | ** ** | **  Second**(3)                        | ** ** | **  Third**(4)   | ** ** | **  Fourth**(5)   | ** ** | **2003** | ** ** |
| ** **                             | ** ** | **(In millions)**            | ** ** |
| Total net  revenues                    |       | $                                 | 1,201      |                                                       |       | $ | 1,446 |   |   |   | $ | 1,063 |   |   |   | $ | 1,287 |   |   |   | $ | 4,997 |   |   |
| Income from  continuing operations(1)  |       | 87                                |       |                                                       | 156        |   |   |   | 184 |   |   |   | 142 |   |   |   | 569 |   |   |
| Income from discontinued operations(2) |       | 37                                |       |                                                       | 1,324      |   |   |   | — |   |   |   | — |   |   |   | 1,361 |   |   |
| Net income                             |       | $                                 | 81         |                                                       |       | $ | 978 |   |   |   | $ | 131 |   |   |   | $ | 2 |   |   |   | $ | 1,192 |   |   |

----

(1)      Income from continuing operations before provision forincome taxes, minority interests, discontinued operations and cumulative effectof a change in accounting principle.

(2)      Income from discontinued operations before provision(benefit) for income taxes.

(3)      In the second quarter of 2003, the Company soldPershing to The Bank of New York Company, Inc. and reported a pre-tax gainof approximately $1.3 billion and an after-tax gain of $852 million.The operating results of Pershing, including the gain on the sale, have beenpresented as Discontinued operations for all periods presented.

(4)      In early 2004, management identified erroneous profitrecorded on certain intercompany residential mortgage securitization-relatedforward transactions related to 2003. For the third quarter of 2003, each oftotal net revenues and income from continuing operations has been reduced by$37 million and $24 million, respectively, from that previously filedwith the SEC on November 10, 2003 on Form 10-Q for the quarterlyperiod ending September 30, 2003.

(5)      The fourth quarter of 2003 includes the pre-tax loss of$200 million and the after-tax loss of $130 million on the write-downof the intangible assets related to the HNW Business.

F-54

----

**SCHEDULEI**CREDIT SUISSE FIRST BOSTON (USA), INC.(Parent Company only)Condensed Statements of FinancialCondition(In millions, except share data)
| ** **                                                                                      | ** ** | **December 31,  2004** | ** ** | **December 31,  2003** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                      | ** ** |                        | ** ** | ** **                  |       |   | ** ** | ** ** |   |
| Cash and cash  equivalents                                                                      |       |                        | $          | 1                           | ** ** |   |   | $ | 1 | ** ** |   |
| Receivables from  brokers, dealers and other                                                    |       |                        | 305        | ** **                  |       |   | 99 | ** ** |   |
| Derivatives  contracts                                                                          |       |                        | 1,052      | ** **                  |       |   | 1,124 | ** ** |   |
| Private equity  and other long-term investments                                                 |       |                        | 33         | ** **                  |       |   | 32 | ** ** |   |
| Receivables from  parent and affiliates                                                         |       |                        | 23,970     | ** **                  |       |   | 20,551 | ** ** |   |
| Receivables from  subsidiaries                                                                  |       |                        | 11,324     | ** **                  |       |   | 10,513 | ** ** |   |
| Investment in  subsidiaries, at equity                                                          |       |                        | 8,667      | ** **                  |       |   | 6,654 | ** ** |   |
| Net deferred tax  asset                                                                         |       |                        | 345        | ** **                  |       |   | 302 | ** ** |   |
| Goodwill                                                                                        |       |                        | 60         | ** **                  |       |   | 59 | ** ** |   |
| Other assets and  deferred amounts                                                              |       |                        | 284        | ** **                  |       |   | 698 | ** ** |   |
| Total assets                                                                                    |       |                        | $          | 46,041                      | ** ** |   |   | $ | 40,033 | ** ** |   |
| **LIABILITIES AND STOCKHOLDER’S EQUITY**                                                   | ** ** |                        | ** ** | ** **                  |       |   | ** ** | ** ** |   |
| Commercial paper and short-term borrowings                                                      |       |                        | $          | 4,192                       | ** ** |   |   | $ | 4,243 | ** ** |   |
| Payables to  brokers, dealers and other                                                         |       |                        | 411        | ** **                  |       |   | 325 | ** ** |   |
| Derivatives  contracts                                                                          |       |                        | 156        | ** **                  |       |   | 72 | ** ** |   |
| Accounts payable  and accrued expenses                                                          |       |                        | 865        | ** **                  |       |   | 859 | ** ** |   |
| Other liabilities                                                                               |       |                        | 480        | ** **                  |       |   | 682 | ** ** |   |
| Long-term  borrowings                                                                           |       |                        | 28,873     | ** **                  |       |   | 24,211 | ** ** |   |
| Total liabilities                                                                               |       |                        | 34,977     | ** **                  |       |   | 30,392 | ** ** |   |
| Stockholder’s  Equity:                                                                     |       |                        |       | ** **                  |       |   |   | ** ** |   |
| Common stock  ($0.10 par value; 50,000 shares authorized; 1,100 shares issued and  outstanding) |       |                        | —     |                        |       |   | — |   |   |
| Paid-in  capital                                                                                |       |                        | 8,538      |                        |       |   | 8,012 |   |   |
| Retained earnings                                                                               |       |                        | 2,534      |                        |       |   | 1,787 |   |   |
| Accumulated other  comprehensive loss                                                           |       |                        | (8         | )                           |       |   | (158 | ) |   |
| Total stockholder’s equity                                                                 |       |                        | 11,064     |                        |       |   | 9,641 |   |   |
| Total liabilities  and stockholder’s equity                                                |       |                        | $          | 46,041                      |       |   |   | $ | 40,033 |   |   |

 

See accompanying notes to condensed financial statements.

F-55

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**CREDIT SUISSE FIRSTBOSTON (USA), INC.(Parent Company only)Condensed Statements of Operations(In millions)**
| ** **                                                                                     | ** ** | **For the Year Ended December 31,** | ** ** |
|------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                                                                     | ** ** | **2004**                                                     | ** ** | **2003** | ** ** | **2002** | ** ** |
| Revenues:                                                                                      |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Principal transactions—net                                                                |       |                                                         | $          | 26 |   |   |   | $ | (3 | ) |   |   | $ | (20 | ) |   |
| Investment banking and advisory                                                                |       |                                                         | —     |   |   |   | (5 | ) |   |   | — |   |   |
| Interest and dividends, net of interest expense of  $713, $476 and $628, respectively     |       |                                                         | (203       | ) |   |   | (144 | ) |   |   | (208 | ) |   |
| Other                                                                                          |       |                                                         | 18         |   |   |   | 29 |   |   |   | 41 |   |   |
| Total net revenues                                                                             |       |                                                         | (159       | ) |   |   | (123 | ) |   |   | (187 | ) |   |
| Expenses:                                                                                      |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Employee compensation and benefits                                                             |       |                                                         | 22         |   |   |   | 93 |   |   |   | 34 |   |   |
| Merger-related costs                                                                           |       |                                                         | —     |   |   |   | 6 |   |   |   | — |   |   |
| Other operating expenses                                                                       |       |                                                         | 49         |   |   |   | 3 |   |   |   | 33 |   |   |
| Total expenses                                                                                 |       |                                                         | 71         |   |   |   | 102 |   |   |   | 67 |   |   |
| Loss before  income tax benefit and equity in undistributed net income (loss) of  subsidiaries |       |                                                         | (230       | ) |   |   | (225 | ) |   |   | (254 | ) |   |
| Income tax  benefit                                                                            |       |                                                         | (108       | ) |   |   | (111 | ) |   |   | (100 | ) |   |
| Loss before equity in undistributed net income  (loss) of subsidiaries                         |       |                                                         | (122       | ) |   |   | (114 | ) |   |   | (154 | ) |   |
| Equity in  undistributed net income (loss) of subsidiaries                                     |       |                                                         | 909        |   |   |   | 1,306 |   |   |   | (103 | ) |   |
| Net income (loss)                                                                              |       |                                                         | $          | 787 |   |   |   | $ | 1,192 |   |   |   | $ | (257 | ) |   |
|                                                                                           |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |

 

See accompanying notes to condensed financial statements.

F-56

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**CREDIT SUISSE FIRSTBOSTON (USA), INC.(Parent Company only)Condensed Statements of Cash Flows(In millions)**
| ** **                                             | ** ** | **For the Years Ended December 31,** | ** ** |
|--------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                             | ** ** | **2004**                                                      | ** ** | **2003** | ** ** | **2002** | ** ** |
| Net cash provided  by operating activities             |       | $                                                             | 1,599      |   | $ | 592 |   | $ | 1,666 |   |
| Cash flows from investing  activities:                 |       |                                                          |       |   |   |   |   |
| Net proceeds from  (payments for):                     |       |                                                          |       |   |   |   |   |
| Receivable from parent and affiliates                  |       | (3,419                                                        | )          | (2,370 | ) | (11,516 | ) |
| Receivables from subsidiaries                          |       | (811                                                          | )          | (1,894 | ) | 2,278 |   |
| Investment in subsidiaries, at equity                  |       | (2,013                                                        | )          | (400 | ) | (103 | ) |
| Purchase of subsidiary                                 |       | —                                                        |       | — |   | (70 | ) |
| Net cash used in  investing activities                 |       | (6,243                                                        | )          | (4,664 | ) | (9,411 | ) |
| Cash flows from  financing activities:                 |       |                                                          |       |   |   |   |   |
| Net proceeds from  (payments for):                     |       |                                                          |       |   |   |   |   |
| Commercial paper and short-term borrowings             |       | (51                                                           | )          | 2,161 |   | (118 | ) |
| Issuance  (repayments) of:                             |       |                                                          |       |   |   |   |   |
| Series B preferred stock                          |       | —                                                        |       | (4 | ) | (1 | ) |
| Issuance of long-term borrowings                       |       | 6,973                                                         |       | 5,029 |   | 10,474 |   |
| Redemptions/maturities of long-term borrowings         |       | (2,238                                                        | )          | (3,542 | ) | (3,842 | ) |
| Subordinated loan from subsidiaries                    |       | —                                                        |       | — |   | 332 |   |
| Dividends from affiliates                              |       | —                                                        |       | 350 |   | 600 |   |
| Dividends to CSFBI                                     |       | (40                                                           | )          | — |   | — |   |
| Capital contribution by CSFBI                          |       | —                                                        |       | 75 |   | 300 |   |
| Net cash provided  by financing activities             |       | 4,644                                                         |       | 4,069 |   | 7,745 |   |
| Decrease in cash  and cash equivalents                 |       | —                                                        |       | (3 | ) | — |   |
| Cash and cash  equivalents as of the beginning of year |       | 1                                                             |       | 4 |   | 4 |   |
| Cash and cash  equivalents as of the end of year       |       | $                                                             | 1          |   | $ | 1 |   | $ | 4 |   |

 

See accompanying notes to condensed financial statements.

F-57

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**CREDIT SUISSE FIRST BOSTON (USA), INC. (Parent Company only) Notes to Condensed Financial Statements December 31, 2004**

**1. Basis of Presentation**

The condensed financialstatements of Credit Suisse First Boston (USA), Inc. (the “Parent Company”)should be read in conjunction with the consolidated financial statements ofCredit Suisse First Boston (USA), Inc. and subsidiaries (the “Company”)and the notes thereto. Investments in subsidiaries are accounted for under theequity method.

**2. Related PartyTransactions**

As of December 31, 2004 and 2003, the ParentCompany had receivables from subsidiaries of $11.3 billion and $10.5 billion,respectively. The receivables arose in the ordinary course of business. Changesin this balance are due to changes in the size and timing of transactions.Substantially all receivables from subsidiaries provide for interest based onfederal funds rates.

As of December 31,2004 and 2003, the Parent Company had receivables from its parent (CSFBI) andaffiliates that are outside the Company of $24.0 billion and$20.6 billion, respectively. Prior to the acquisition of DLJ, CSFBI issuedits own debt to fund its operations. There were no dividends declared to theParent Company by its consolidated subsidiaries in the year ended December 31,2004. Dividends declared to the Parent Company by its consolidated subsidiarieswere $350 million for the year ended December 31, 2003. There are norestrictions on the payment of dividends, except for those stipulated incertain debt agreements and those applicable to brokers and dealers, whichprovide for certain minimum amounts of capital to be maintained to satisfy regulatoryrequirements in the Company’s broker-dealer subsidiaries. Under certaincircumstances, the amount of excess capital that can be withdrawn is limited.The regulatory requirements are designed to measure the general financialintegrity and liquidity of broker-dealers and provide minimum acceptablenet capital levels to satisfy commitments to customers. Unless an adequatelevel of capital is maintained, regulated broker-dealer subsidiarieswould be prohibited from paying dividends to the Parent Company.

**3. Guarantees**

In the ordinary course of business, the Parent Companyenters into guarantee contracts as guarantor. 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 ready to perform over the term of theguarantee in the event that certain events or conditions occur. With certainexceptions, these liability recognition requirements apply to any newguarantees entered into, or existing guarantees that are modified, after December 31,2002.

Guarantees issued by theParent Company are disclosed in the consolidated financial statementdisclosures (see Note 10 to the consolidated financial statements) exceptfor guarantees issued by the Parent Company on behalf of its consolidated subsidiaries,which are included in the Parent Company only disclosures.

F-58

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**CREDIT SUISSE FIRST BOSTON (USA), INC. (Parent Company only) Notes to Condensed Financial Statements (Continued) December 31, 2004**

**3.Guarantees (Continued)**

***Related Party Guarantees***

For purposes of Parent Company only condensedfinancial statements, related party guarantees include guarantees issued by theParent Company for obligations of its consolidated subsidiaries. Guaranteesissued by the Parent Company for the obligations of companies controlled byCSG, the Parent Company’s ultimate parent, excluding the Company that are notconsolidated subsidiaries are disclosed in the notes to the Company’sconsolidated financial statements.

The Parent Company issues guarantees to customers withrespect to certain obligations of its consolidated subsidiaries in the ordinarycourse of business, including, but not limited to, certain derivativestransactions. Failure to perform by a consolidated subsidiary would require theParent Company to perform under the guarantee. The maximum contingent liabilityof future payments of guarantees issued to counterparties of consolidatedsubsidiaries as of December 31, 2004 was $4.2 billion. While themaximum contingent liability may be indicative of the extent to which suchguarantees are used, the Parent Company believes that the likelihood of nonperformanceby these consolidated subsidiaries is remote. Excluded from the maximumcontingent liability are certain guarantees for which an estimate cannot bemade because the exposure is unlimited and therefore impossible to estimate.

F-59

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, hereunto duly authorized, on the 17th day of March,2005.
|        | CREDIT SUISSE FIRST BOSTON (USA), INC. |
|--------|---------------------------------------------|
|   | By:                                         | /s/ PAUL C. WIRTH |
|   |                                        | Name: Paul C. Wirth |
|   |                                        | Title:*Chief Financial and  Accounting Officer* |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.
|                       | **Name** | ** **                                       | ** ** | ** **           | **Title** | ** ** | ** ** | ** ** | **Date** | ** ** |
|-----------------------|----------|--------------------------------------------------|------------|----------------------|-----------|------------|------------|------------|----------|------------|
| /s/  BRIAN D. FINN    |     | Director, President and  Chief Executive Officer |       | March 17,  2005 |
| Brian D. Finn         |     | (Principal  Executive Officer)                   |       |                 |
| /s/  PAUL C. WIRTH    |     | Chief Financial and  Accounting Officer          |       | March 17,  2005 |
| Paul C. Wirth         |     | (Principal  Financial and Accounting Officer)    |       |                 |
| /s/  NEIL MOSKOWITZ   |     | Director                                         |       | March 17,  2005 |
| Neil Moskowitz        |     |                                             |       |                 |
| /s/  EILEEN K. MURRAY |     | Director                                         |       | March 17,  2005 |
| Eileen K. Murray      |     |                                             |       |                 |

 

II-1

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**INDEX TO EXHIBITS**
| Exhibit Number                                                          | ** ** | **Description**                                                                                                                                                                                                                                                                                                                   |
|------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              3.1 |       | Amended  and Restated Certificate of Incorporation of Registrant (incorporated by  reference to Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-  Q for the period ended June 30, 2004).                                                                                                                         |
|              3.2 |       | By-laws  of the Registrant (incorporated by reference to Exhibit 3.2 of the  Registrant’s Quarterly Report on Form 10- Q for the period ended June  30, 2004).                                                                                                                                                               |
|              4   |       | The  instruments defining the rights of holders of long-term debt securities  of the Registrant and its subsidiaries are omitted pursuant to Section  (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Registrant hereby  agrees to furnish copies of these instruments to the Securities and Exchange  Commission upon request. |
|           10.1                  |       | Agreement  of Lease, dated July 28, 1995, between Metropolitan Life Insurance Company  and CSFB LLC, as tenant, on Eleven Madison Avenue, New York, New York  (incorporated by reference to Exhibit 10.28 of the Registrant’s Annual Report  on Form 10-K for the fiscal year ended December 31, 2000).                      |
|           10.2                  |       | Amendment  of Lease, dated May 17, 1996, between Metropolitan Life Insurance Company and  CSFB LLC, as tenant, on Eleven Madison Avenue, New York, New York  (incorporated by reference to Exhibit 10.29 of the Registrant’s Annual Report  on Form 10-K for the fiscal year ended December 31, 2000).                       |
|           10.3                  |       | Agreement  of Lease, dated September 10, 1997, between Metropolitan Life Insurance  Company and CSFB LLC, as tenant, on Eleven Madison Avenue, New York, New York  (incorporated by reference to Exhibit 10.30 of the Registrant’s Annual Report  on Form 10-K for the fiscal year ended December 31, 2000).                 |
|           10.4                  |       | Modification  of Lease, dated February 5, 1998, between Metropolitan Life Insurance Company  and CSFB LLC, as tenant, on Eleven Madison Avenue, New York, New York  (incorporated by reference to Exhibit 10.31 of the Registrant’s Annual Report  on Form 10-K for the fiscal year ended December 31, 2000).                |
|           10.5                  |       | Second  Modification of Lease, dated June 12, 2000, between Metropolitan Life  Insurance Company and CSFB LLC, as tenant, on Eleven Madison Avenue, New  York, New York (incorporated by reference to Exhibit 10.32 of the  Registrant’s Annual Report on Form 10-K for the fiscal year ended  December 31, 2000).           |
|           10.6                  |       | Third  Modification of Lease, dated September 18, 2000, between Metropolitan Life  Insurance Company and CSFB LLC, as tenant, on Eleven Madison Avenue, New  York, New York (incorporated by reference to Exhibit 10.33 of the  Registrant’s Annual Report on Form 10-K for the fiscal year ended  December 31, 2000).       |
|           10.7                  |       | Fourth  Modification of Lease, dated November 13, 2000, between Metropolitan Life Insurance  Company and CSFB LLC, as tenant, on Eleven Madison Avenue, New York, New York  (incorporated by reference to Exhibit 10.34 of the Registrant’s Annual Report  on Form 10-K for the fiscal year ended December 31, 2000).        |
|           10.8                  |       | Agreement  of Sublease, dated August 31, 1999 between GFT Apparel Corp. and CSFB LLC, as  subtenant, on Eleven Madison Avenue, New York, New York (incorporated by  reference to Exhibit 10.35 of the Registrant’s Annual Report on Form 10-K  for the fiscal year ended December 31, 2000).                                 |

E-1

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|           10.9  |   | Lease dated as of October 30,  2001, between Registrant, as landlord, and The Port Authority of New York and  New Jersey, on One Madison Avenue (incorporated by reference to Exhibit 10.16  of the Registrant’s Annual Report on Form 10-K for the fiscal year  ended December 31, 2001).                                 |
|--------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           10.10 |   | Lease  dated as of March 14, 2002, between Registrant, as landlord, and Standard  Chartered Bank, on One Madison Avenue (incorporated by reference to Exhibit  10.15 of the Registrant’s Annual Report on Form 10-K for the fiscal  year ended December 31, 2002).                                                         |
|           10.11 |   | Lease  dated as of April 26, 2002, between Registrant, as landlord, and Marsh, Inc.,  on One Madison Avenue (incorporated by reference to Exhibit 10.16 of the  Registrant’s Annual Report on Form 10-K for the fiscal year ended  December 31, 2002).                                                                     |
|           10.12 |   | Amended  and Restated Lease, dated as December 17, 2003, between Metropolitan Life  Insurance Company and the Registrant, as tenant, on One Madison Avenue, New  York, New York (incorporated by reference to Exhibit 10.12 of the  Registrant’s Annual Report on Form 10-K for the fiscal year ended  December 31, 2003). |
|           10.13 |   | Agreement  of Lease, dated August 15, 2000, between TM Park Avenue Associates and CSFB  LLC, as tenant, on 315 Park Avenue South, New York, New York (incorporated by  reference to Exhibit 10.63 of the Registrant’s Annual Report on Form 10-K  for the fiscal year ended December 31, 2000).                            |
|           10.14 |   | First  Amendment to the Lease between CSFB LLC, as tenant, and TM Park Avenue  Associates dated August 16, 2000, on 315 Park Avenue South, New York, New  York (incorporated by reference to Exhibit 10.35 of the Registrant’s Annual  Report on Form 10-K for the fiscal year ended December 31, 2001).                   |
|           12    |   | Computation  of ratio of earnings to fixed charges.*                                                                                                                                                                                                                                                                            |
|           21    |   | Pursuant  to General Instruction I of Form 10-K, the list of subsidiaries of the  Company is omitted.                                                                                                                                                                                                                           |
|           23    |   | Consent  of KPMG LLP.*                                                                                                                                                                                                                                                                                                          |
|           24    |   | Power  of Attorney.*                                                                                                                                                                                                                                                                                                            |
|           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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*                    Filedherewith.

E-2

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