SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September 30, 2004~~March 31, 2005

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

For the transition period from to

Commission File Number: 1-6862

Credit Suisse First Boston (USA), Inc.

(Exact name of registrant as specified in its charter)

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

(212) 325-2000

(Registrant’s telephone number, including area code)

The Registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No o

Indicated by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

All of the outstanding shares of common stock of the registrant, $0.10 par value, are held by Credit Suisse First Boston, Inc.

CREDIT SUISSE FIRST BOSTON (USA), INC.
Quarterly Report on Form 10-Q for the Quarter Ended ~~September 30, 2004~~March 31, 2005

PART I
FINANCIAL INFORMATION

ITEM 1:
Financial Statements

Condensed Consolidated Statements of Financial Condition (Unaudited) as of September 30, 2004 and December 31, 2003
2

Condensed Consolidated Statements of Income (Unaudited) for the three and nine months ended September 30, 2004 and 2003
4

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the nine months ended September 30, 2004 and 2003
5

Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2004 and 2003
6

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.
Summary of Significant Accounting Policies
7

2.
Share-Based Compensation
10

3.
Discontinued Operations
10

4.
Related Party Transactions
10

5.
Income Taxes
13

6.
Transfers and Servicing of Financial Assets
15

7.
Borrowings
21

8.
Private Equity and Other Long-Term Investments
22

9.
Net Capital
23

10.
Cash and Securities Segregated Under Federal and Other Regulations
24

11.
Derivatives Contracts
24

12.
Employee Benefit Plans
27

13.
Commitments
28

14.
Guarantees
29

15.
Industry Segment and Geographic Data
33

16.
Goodwill and Identifiable Intangible Assets
35

17.
Legal Proceedings
35

Report of Independent Registered Public Accounting Firm
37

ITEM 2:
Management’s Discussion and Analysis of Financial Condition and Results of Operations
38

ITEM 3:
Quantitative and Qualitative Disclosures About Market Risk
64

ITEM 4:
Controls and Procedures
66

PART II
OTHER INFORMATION

ITEM 1:
Legal Proceedings
67

ITEM 5:
Other Information
68

ITEM 6:
Exhibits and Reports on Form 8-K
68

Signature
69

PART I	FINANCIAL INFORMATION
	ITEM 1:	Financial Statements
		Condensed Consolidated Statements of Financial Condition (Unaudited) as of March 31, 2005 and December 31, 2004	2
		Condensed Consolidated Statements of Income (Unaudited) for the three months ended March 31, 2005 and 2004	4
		Condensed Consolidated Statements of Changes in Stockholder’s Equity (Unaudited) for the three months ended March 31, 2005 and 2004	5
		Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2005 and 2004	6
		Notes to Condensed Consolidated Financial Statements (Unaudited)	7
		1. Summary of Significant Accounting Policies	7
		2. Related Party Transactions	8
		3. Transfers and Servicing of Financial Assets	11
		4. Private Equity and Other Long-Term Investments	15
		5. Derivatives Contracts	16
		6. Borrowings	17
		7. Leases and Commitments	19
		8. Guarantees	20
		9. Net Capital Requirements	21
		10. Cash and Securities Segregated Under Federal and Other Regulations	22
		11. Share-Based Compensation	22
		12. Employee Benefit Plans	23
		13. Legal Proceedings	24
		14. Industry Segment and Geographic Data	24
		Report of Independent Registered Public Accounting Firm	26
	ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	ITEM 3:	Quantitative and Qualitative Disclosures About Market Risk	53
	ITEM 4:	Controls and Procedures	55
PART II	OTHER INFORMATION
	ITEM 1:	Legal Proceedings	56
	ITEM 6:	Exhibits	56
	Signature		57

AVAILABLE INFORMATION

We file annual, quarterly and current reports and other information with the Securities and Exchange Commission, or SEC. Our SEC filings are available to the public over the internet on the SEC’s website at www.sec.gov. You may also 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 filed with, or furnished to, the SEC. The information on our website is not incorporated by reference into this Quarterly Report.

PART I
FINANCIAL INFORMATION
Item 1: Financial Statements

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
(Unaudited)
(In millions)

	September 30, 2004			December 31, 2003			March 31, 2005		December 31, 2004
ASSETS
Cash and cash equivalents		$	373		$	334	$	465		$	727
Collateralized short-term financings:
Securities purchased under agreements to resell		51,048			50,388		50,661			48,887
Securities borrowed		83,454			77,999		79,383			82,912
Receivables:
Customers		1,391			2,859		3,025			3,307
Brokers, dealers and other		9,205			6,673		21,865			11,094
Financial instruments owned (includes securities pledged as collateral of $52,895 and $47,565, respectively):
Financial instruments owned (includes securities pledged as collateral of $70,075 and $54,663, respectively):
U.S. government and agencies		35,044			31,781		36,876			32,841
Corporate debt		13,706			12,761		15,981			14,721
Mortgage whole loans		14,636			9,101		17,380			14,987
Equities		22,573			15,161		26,181			28,712
Commercial paper		2,495			641		2,197			1,171
Private equity and other long-term investments		2,615			1,123		3,119			3,127
Derivatives contracts		5,508			5,573		4,348			3,663
Other		3,960			3,765		3,564			3,665
Net deferred tax asset		1,250			1,283		1,005			1,103
Office facilities and property at cost (net of accumulated depreciation and amortization of $882 and $865, respectively)		504			468
Office facilities at cost (net of accumulated depreciation and amortization of $710 and $913, respectively)							413			420
Goodwill		527			532		530			527
Loans receivable from parent and affiliates		21,304			19,481		20,749			22,692
Other assets and deferred amounts		1,134			1,643		1,703			1,257
Total assets		$	270,727		$	241,566	$	289,445		$	275,813

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

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

	September 30, 2004				December 31, 2003				March 31, 2005		December 31, 2004
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDER’S EQUITY
Commercial paper and short-term borrowings		$	18,131			$	15,984		$ 15,742			$ 21,684
Collateralized short-term financings:
Securities sold under agreements to repurchase		113,356				110,667			116,421			108,407
Securities loaned		36,088				27,708			49,122			45,148
Payables:
Customers		5,408				4,278			8,036			6,767
Brokers, dealers and other		5,039				5,410			8,769			10,277
Financial instruments sold not yet purchased:
U.S. government and agencies		29,680				23,700			25,402			20,154
Corporate debt		3,156				2,523			3,635			2,842
Equities		6,661				5,231			10,495			5,245
Derivatives contracts		4,149				3,955			2,840			2,295
Other		206				336			277			161
Obligation to return securities received as collateral		5,132				1,955			4,027			4,980
Accounts payable and accrued expenses		2,898				2,836			1,869			3,327
Other liabilities		4,130				3,021			4,606			4,521
Long-term borrowings		26,219				24,321			26,849			28,941
Total liabilities		260,253				231,925			278,090			264,749
Stockholders’ Equity:
Stockholder’s Equity:
Common stock ($0.10 par value; 50,000 shares authorized; 1,100 shares issued and outstanding)		—				—			—			—
Paid-in capital		8,366				8,012			8,656			8,538
Retained earnings		2,265				1,787			2,710			2,534
Accumulated other comprehensive loss		(157		)		(158		)	(11	)		(8	)
Total stockholders’ equity		10,474				9,641
Total liabilities and stockholders’ equity		$	270,727			$	241,566
Total stockholder’s equity									11,355			11,064
Total liabilities and stockholder’s equity									$ 289,445			$ 275,813

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

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(In millions)

	Three Months Ended September 30,						Nine Months Ended September 30,					For the Three Months Ended March 31,
	2004			2003			2004		2003			2005				2004
Revenues:
Principal transactions-net	$	(174	)	$	(537	)	$	500	$	(585	)		$	367			$	63
Investment banking and advisory	482			529			1,346		1,382				321				474
Commissions and fees	304			345			1,011		995				351				374
Interest and dividends, net of interest expense of $1,512, $1,036, $3,983 and $3,359, respectively	554			710			1,825		1,853
Interest and dividends, net of interest expense of $2,147 and $1,198, respectively													577				647
Other	17			16			48		65				17				22
Total net revenues	1,183			1,063			4,730		3,710				1,633				1,580
Expenses:
Employee compensation and benefits	744			505			2,532		2,058				947				963
Occupancy and equipment rental	123			119			354		356				120				114
Brokerage, clearing and exchange fees	88			76			241		223				77				72
Communications	32			24			96		95				36				32
Professional fees	74			72			195		209				67				55
Merger-related costs	—			4			8		125				—				4
Other operating expenses	61			79			111		217				(5		)		13
Total expenses	1,122			879			3,537		3,283				1,242				1,253
Income from continuing operations before provision for income taxes, minority interests and discontinued operations	61			184			1,193		427
(Benefit) provision for income taxes	(7		)	53			220		113
Income before provision for income taxes, minority interests and cumulative effect of a change in accounting principle													391				327
Provision for income taxes													66				79
Minority interests	49			—			495		—				155				81
Income from continuing operations	19			131			478		314
Discontinued operations:
Income from discontinued operations	—			—			—		1,361
Provision for income taxes	—			—			—		485
Income from discontinued operations, net of income taxes	—			—			—		876
Income before cumulative effect of a change in accounting principle													170				167
Cumulative effect of a change in accounting principle, net of income tax expense of $3													6				—
Net income	$	19		$	131		$	478	$	1,190			$	176			$	167

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

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in ~~Stockholders’~~Stockholder’s Equity
~~(Unaudited)~~
For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2005 and 2004 ~~and 2003~~
(Unaudited)
(In millions)

Preferred
Stock

Common
Stock

Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
(Loss) Income

Total

Balances as of December 31, 2002

$
4

$
—

$
7,646

$
595

$
(156
)

$
8,089

Net income

—

—

—

1,190

—

1,190

Foreign currency translation adjustment

—

—

—

—

(1
)

(1
)
Total comprehensive income

1,189

Redemption of Series B preferred stock

(4
)

—

—

—

—

(4
)
Capital contribution by CSFBI

—

—

75

—

—

75

CSG share plan activity, net of tax charge of $28

—

—

250

—

—

250

Balances as of September 30, 2003

$
—

$
—

$
7,971

$
1,785

$
(157
)

$
9,599

Balances as of December 31, 2003

$
—

$
—

$
8,012

$
1,787

$
(158
)

$
9,641

Net income

—

—

—

478

—

478

Decrease in pension liability

—

—

—

—

1

1

Total comprehensive income

479

CSG share plan activity, including tax benefit of $99

—

—

354

—

—

354

Balances as of September 30, 2004

$
—

$
—

$
8,366

$
2,265

$
(157
)

$
10,474

	Common Stock			Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss)				Total
Balances as of December 31, 2003		$	—		$	8,012		$	1,787		$	(158	)	$	9,641
Net income		—			—			167			—			167
Decrease in pension liability		—			—			—			1			1
Total comprehensive income														168
CSG share plan activity, including tax charge of $10		—			90			—			—			90
Balances as of March 31, 2004		$	—		$	8,102		$	1,954		$	(157	)	$	9,899
Balances as of December 31, 2004		$	—		$	8,538		$	2,534		$	(8	)	$	11,064
Net income		—			—			176			—			176
Net change in cash flow hedge, including tax benefit of $2		—			—			—			(3		)	(3		)
Total comprehensive income														173
CSG share plan activity, including tax charge of $11		—			118			—			—			118
Balances as of March 31, 2005		$	—		$	8,656		$	2,710		$	(11	)	$	11,355

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

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In millions)

	For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2004			2003			2005			2004
Cash flows from operating activities:
Net income	$	478		$	1,190		$	176		$	167
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Pre-tax gain on sale of Pershing	—			(1,324		)
Depreciation and amortization	133			122			33			47
CSG share plan activity	277			278
Non-cash CSG share plan activity							129			100
Deferred taxes	26			114			85			61
Other, net	99			(29		)	(14		)	(9		)
Change in operating assets and operating liabilities:
Securities borrowed	(5,455		)	1,292			3,529			(2,187		)
Receivables from customers	1,468			(430		)	282			365
Receivables from brokers, dealers and other	(2,532		)	(4,860		)	(10,771		)	338
Financial instruments owned	(19,045		)	(10,844		)	(5,403		)	(22,157		)
Other assets and Other liabilities, net	39			1,416
Other assets and deferred amounts and Other liabilities, net							(2,177		)	(89		)
Securities loaned	8,380			4,263			3,974			441
Payables to customers	1,130			1,570			1,269			690
Payables to brokers, dealers and other	(371		)	2,831			(1,508		)	128
Financial instruments sold not yet purchased	8,107			6,718			11,952			3,799
Obligation to return securities received as collateral	3,177			444			(953		)	2,868
Accounts payable and accrued expenses	62			(698		)	(1,458		)	(721		)
Net cash (used in) provided by operating activities	(4,027		)	2,053
Net cash used in operating activities							(855		)	(16,159		)
Cash flows from investing activities:
Net (payments for) proceeds from:
Loans receivable from parent and affiliates	(1,823		)	(1,267		)	1,943			(174		)
Proceeds from Pershing sale	—			2,000
Office facilities	(152		)	(80		)
Net cash (used in) provided by investing activities	(1,975		)	653
Office facilities, net							(30		)	(97		)
Net cash provided by (used in) investing activities							1,913			(271		)
Cash flows from financing activities:
Net proceeds from (payments for):
Commercial paper and short-term borrowings	2,147			3,274			(5,942		)	8,021
Repurchase of Series B preferred stock	—			(4		)
Capital contribution by CSFBI	—			75
Securities sold under agreements to repurchase, net of securities purchased under agreements to resell	2,029			(7,034		)	6,240			8,634
Issuances of long-term borrowings	3,483			4,083			3			996
Redemptions and maturities of long-term borrowings	(1,618		)	(3,125		)	(1,621		)	(626		)
Net cash provided by (used in) financing activities	6,041			(2,731		)
Increase (decrease) in cash and cash equivalents	39			(25		)
Net cash (used in) provided by financing activities							(1,320		)	17,025
(Decrease) increase in cash and cash equivalents							(262		)	595
Cash and cash equivalents as of the beginning of period	334			480			727			334
Cash and cash equivalents as of the end of period	$	373		$	455		$	465		$	929
SUPPLEMENTAL DISCLOSURES:
SUPPLEMENTAL DISCLOSURES
Cash payments for interest	$	3,929		$	3,566		$	2,001		$	1,244
Cash payments for income taxes, net of refunds	$	64		$	121		$	6		$	8

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

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
~~September 30, 2004~~March 31, 2005

1.Summary of Significant Accounting Policies

The Company

Credit Suisse First Boston (USA), Inc. and its subsidiaries (the “Company”) is a leading integrated investment bank serving institutional, corporate, government and ~~high-net worth~~high-net-worth individual clients. The ~~Company provides clients with a broad range of~~Company’s products and services ~~that includes~~include securities underwriting, sales and trading, financial advisory services, private equity investments, ~~full-service~~full service brokerage services, derivatives and risk management products and investment research.

Basis of Presentation

The condensed consolidated financial statements include Credit Suisse First Boston (USA), Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated. The Company is a wholly owned subsidiary of Credit Suisse First Boston, Inc. (“CSFBI”).

Certain financial information that is normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America but not required for interim reporting purposes has been condensed or omitted. These condensed consolidated financial statements reflect, in the opinion of management, all adjustments (consisting of normal, recurring accruals) that are necessary for a fair presentation of the condensed consolidated statements of financial condition and income for the interim periods presented.

On June 4, 2004, the Company filed on Form 8-K (the “June 4 Form 8-K”) audited consolidated statements of financial condition as of December 31, 2003 and 2002 and the related audited consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the three years ended December 31, 2003, 2002 and 2001 and related notes, restated to reflect the transfer of the high-net-worth business discussed below and containing updated segment information to reflect the segment changes discussed both below and in Note 15 ~~of the condensed consolidated financial statements.~~

The results of operations for interim periods are not necessarily indicative of results for the entire year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the ~~June 4~~Company’s Annual Report on Form ~~8-K.~~10-K for the year ended December 31, 2004.

To prepare condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, management must make estimates and assumptions. The reported amounts of assets and liabilities and revenues and expenses are affected by these estimates and assumptions, the most significant of which are discussed in the notes to the condensed consolidated financial statements. Estimates, by their nature, are based on judgment and available information. Therefore, actual results could differ materially from these estimates. For a description of the Company’s significant accounting policies, see Note 1 of the consolidated financial statements in ~~the June 4 Form 8-K.~~

~~Prior period numbers have been restated to reflect the transfer by CSFBI,~~Part II, Item 8 in the Company’s immediate parent, of the high-net-worth business of Credit Suisse Asset Management, LLC (“CSAM”), a wholly owned subsidiary of CSFBI, to the Company as a capital contribution of $221 million on March 31, 2004. The transfer of this business was accounted for at historical cost in a manner similar to pooling-of-interest accounting because CSAM and the Company were under the common control of CSFBI at the time of transfer. Accordingly, the Company has restated its financial information for all periods presented to

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

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

reflect the results of operations, financial condition, cash flows and changes in stockholders’ equity of the CSAM high-net-worth business as if the Company had acquired it on November 3, 2000, the date that the Company was acquired by CSFBI. The transferred assets of this business consist principally of goodwill and intangible assets relating primarily to CSAM’s acquisition of Warburg Pincus Asset Management in 1999. In December 2003, CSAM wrote down the value of its high-net-worth intangible assets, resulting in a pre-tax loss of $200 million and an after-tax loss of $130 million. The loss is reflected in the restated audited consolidated financial statements included in the June 4 Form 8-K. For the three and nine months ended September 30, 2003, the CSAM high-net-worth business had net revenues of $1 million and $3 million, respectively. For the three and nine months ended September 30, 2003, the high-net-worth business had a net loss of $2 million and $6 million, respectively.

As of January 1, 2004, the Company transferred the private equity and private fund businesses from the Institutional Securities segment to the Financial Services segment, which has been renamed the Wealth & Asset Management segment. As a result, the Company changed the presentation of the Institutional Securities and Wealth & Asset Management segment results. In addition, the Company allocated to the segments merger-related costs and certain other costs and revenues, previously excluded from its reportable segments, which the Company believed did not represent normal operating costs and revenues. For comparative purposes, prior period segment numbers have been changed to conform to the new segment reporting structure. These segment changes did not affect the Company’s previously reported consolidated results of operations.

In early 2004, management identified erroneous profit recorded in the three and nine months ended September 30, 2003 on certain intercompany residential mortgage securitization-related transactions. The Company has restated total net revenues, income from continuing operations and net income from that filed with the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 2003. For the three and nine months ended September 30, 2003, each of total net revenues and income from continuing operations has been reduced by $37 million and net income has been reduced by $24 million as previously disclosed in the Annual Report on Form 10-K for the year ended December 31, ~~2003 and the June 4 Form 8-K.~~

On May 1, 2003, the Company sold its Pershing unit (“Pershing”) to The Bank of New York Company, Inc. and recorded a pre-tax gain of approximately $1.3 billion and an after-tax gain of $852 million in the second quarter of 2003. The Pershing income is presented as discontinued operations for all periods presented in the condensed consolidated statements of income. The condensed consolidated statements of cash flows present the Company’s cash flows as if the assets and liabilities of Pershing were not presented as assets held for sale and liabilities held for sale in the condensed consolidated statement of financial condition as of December 31, 2002 used to prepare the condensed consolidated statement of cash flows for the nine months ended September 30, 2003. Therefore, the cash flows pertaining to discontinued operations have not been reported separately in the condensed consolidated statements of cash flows.2004.

Certain ~~other~~ reclassifications have been made to prior year condensed consolidated financial statements to conform to the ~~2004~~2005 presentation.

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

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

New Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which requires the Company to consolidate all variable interest entities (“VIEs”) for which it is the primary beneficiary, defined as the entity that will absorb a majority of expected losses, receive a majority of the expected residual returns, or both. In December 2003, the FASB modified FIN 46, through the issuance of FIN 46R, to address various implementation issues that had arisen since the issuance of FIN 46 and to provide companies the option to defer the adoption of FIN 46 for certain VIEs to periods ending after March 15, 2004. As of December 31, 2003, with the exception of certain private equity funds that were a subject of the deferral, the Company consolidated all VIEs under FIN 46, for which it is the primary beneficiary, all of which were related to its collateralized debt obligations (“CDO”) activities. During 2004, the Company consolidated certain private equity funds that are managed by the Company. As of September 30, 2004, the Company recorded $1.6 billion of additional private equity and other long-term investments, reduced other assets and other liabilities by $167 million and $79 million, respectively, and recorded $1.5 billion of minority interests in other liabilities in the condensed consolidated statement of financial condition through the consolidation of certain private equity funds primarily under FIN 46R. Similarly, for the three and nine months ended September 30, 2004, the Company recorded an increase of $55 million and $501 million, respectively, in net revenues and an increase of $6 million in expenses as a result of the consolidation of these private equity funds. Net income was unaffected as minority interests of $49 million and $495 million for the three and nine months ended September 30, 2004, respectively, were recorded in the condensed consolidated statements of income. See Note 6 for more information.

In May 2004, the FASB issued FASB Staff Position (“FSP”) 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (“Medicare Act”) which supersedes FSP 106-1 issued in January 2004 with the same title (“FSP 106-2”). FSP 106-2 provides guidance on the accounting for the Medicare Act and is effective for the first interim or annual period beginning after June 15, 2004. The Medicare Act became law in December 2003 and introduced both a Medicare prescription drug benefit and a federal subsidy to sponsors of retiree health-care plans that provide a benefit that is at least “actuarially equivalent” 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 benefit that is “actuarially equivalent” to the Medicare benefit. The effect of adopting FSP 106-2 was not significant. See Note 12 for more information.

On July 16, 2004, the FASB ratified the Emerging Issues Task Force (“EITF”) consensus on Issue 02-14, “Whether the Equity Method of Accounting Applies When an Investor Does Not Have an Investment in Voting Stock of an Investee but Exercises Significant Influence through Other Means” (“EITF 02-14”). The consensus concludes that an investor should apply the equity method of accounting when it can exercise significant influence over an entity through a means other than holding voting rights. The consensus is effective for reporting periods beginning after September 15, 2004. The adoption of EITF 02-14 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

~~2. Share-Based Compensation~~

In August 2003, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based ~~Compensation” (“SFAS 123”),~~Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure,” (“SFAS 123”) using the prospective method. Under the prospective method, the Company ~~recognizes~~recognized compensation expense over the vesting period for all share option and share awards granted ~~or modified~~ 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 2003~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
March 31, 2005

1. Summary of Significant Accounting Policies (Continued)

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123R”). In April 2005, the Securities and Exchange Commission (the “SEC”) deferred the effective date of SFAS 123R, which is now effective for ~~services provided in prior~~fiscal years ~~if not subsequently modified, will continue to be accounted for under~~beginning after June 15, 2005. Under SFAS 123R, a company that has previously adopted the recognition ~~and measurement~~ provisions of ~~Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued~~SFAS 123 must adopt the revised standard using the modified prospective method, and may also choose to ~~Employees” (“APB 25”), and no compensation expense~~apply the modified retrospective method to prior reporting periods. The Company has ~~been or will be recognized for those option awards, which had no intrinsic value on~~early adopted the ~~date~~new standard as of ~~grant. Share awards with no vesting requirements granted in or before~~ January ~~2003 for services provided in prior years were expensed during~~1, 2005, using the ~~year~~modified prospective method. During the ~~services were provided. For share awards granted with vesting requirements, compensation expense is recognized over the vesting period.~~

Ifthree months ended March 31, 2005, the Company had applied the fair-value based method under SFAS 123 to recognize expense over the relevant service period for share options that had future vesting requirements granted in or before January 2003, net income would have decreased for the three and nine months ended September 30, 2004 and 2003. The following table reflects this pro forma effect:

For the Three
Months Ended
September 30,

For the Nine
Months Ended
September 30,

2004

2003

2004

2003

(In millions)

Net income, as reported

$
19

$
131

$
478

$
1,190

Add: Share-based employee compensation expense, net of related tax effects, included in reported net income

57

29

175

169

Deduct: Share-based employee compensation expense, net of related tax effects, determined under the fair-value based method for all awards

58

34

180

183

Pro forma net income

$
18

$
126

$
473

$
1,176

3. ~~Discontinued Operations~~

~~In accordance with SFAS 144, “Accounting for Impairment or Disposal~~recorded an after-tax gain of ~~Long-lived Assets”, the operating results of Pershing are presented as discontinued operations~~$6 million in the condensed consolidated ~~statements~~statement of ~~income.~~ income as cumulative effect of a change in accounting principle to reverse the expense previously recognized on all outstanding unvested awards that are not expected to vest. For new grants after January 1, 2005, forfeitures will be included in the ~~three months ended September 30, 2003,~~initial estimate of compensation expense at the ~~Company had no income or loss from discontinued operations.~~ grant date.

For ~~the nine months ended September 30, 2003, the Company had income from discontinued operations of $37 million, excluding the gain~~further information on ~~the sale.~~share-based compensation, see Note 11.

4.2. Related Party Transactions

Credit Suisse Group (“CSG”), through CSFBI, owns all of the Company’s outstanding voting common stock. The Company is involved in significant financing and other transactions, and has significant related

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

4. ~~Related Party Transactions (Continued)~~

party balances, with CSG affiliates, primarily with Credit Suisse First Boston, a Swiss bank subsidiary of CSG and an indirect parent of the Company, and certain of its subsidiaries and affiliates. The Company generally enters into these transactions in the ordinary course of business and believes that these transactions are generally on market terms that could be obtained from unrelated third parties.

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
March 31, 2005

2. Related Party Transactions (Continued)

The following table sets forth the Company’s related party assets and liabilities as of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003.~~2004:

	As of September 30, 2004			As of December 31, 2003			March 31, 2005			December 31, 2004
	(In millions)						(In millions)
ASSETS
Securities purchased under agreements to resell		$	6,710		$	8,071		$	6,787		$	6,685
Securities borrowed		1,797			1,688			2,701			1,861
Receivables from customers		261			297			395			379
Receivables from brokers, dealers and other		3,555			1,168			4,381			1,893
Derivatives contracts		1,582			1,910			1,300			1,400
Net deferred tax asset		1,250			1,283			1,005			1,103
Loans receivable from parent and affiliates		21,304			19,481			20,749			22,692
Total assets		$	36,459		$	33,898		$	37,318		$	36,013
LIABILITIES
Short-term borrowings		$	16,593		$	14,482		$	13,983		$	20,085
Securities sold under agreements to repurchase		25,137			16,651			25,512			22,317
Securities loaned		28,008			16,425			36,466			34,056
Payables to customers		893			721			1,542			1,054
Payables to brokers, dealers and other		1,726			581			3,182			1,300
Derivatives contracts		800			824			946			695
Obligation to return securities received as collateral		3,250			751			1,335			1,252
Taxes payable (included in Other liabilities)		401			311			452			484
Intercompany payables (included in Other liabilities)		160			211			330			191
Total liabilities		$	76,968		$	50,957		$	83,748		$	81,434

Included in the condensed consolidated statements of income are revenues and expenses resulting from various securities trading and financing activities with certain affiliates, as well as fees for administrative services performed by the Company under the terms of various service agreements. ~~Service~~The Company incurs commission expenses during the normal course of business for securities transactions conducted with affiliates. Other operating expenses include affiliate service fees ~~earned~~that are treated as a reduction ofin other operating expenses in the condensed consolidated statements of income. These fees include compensation and benefits expense relating to business activities conducted by Company employees on behalf of CSG affiliates outside the Company.

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
~~September 30, 2004~~March 31, 2005

4.2. Related Party Transactions (Continued)

The following table sets forth the Company’s related party revenues and expenses ~~excluding transactions with Pershing, for the three and nine months ended September 30, 2004 and 2003:~~

For the Three
Months Ended
September 30,

For the Nine
Months Ended
September 30,

    2004

   2003

    2004

   2003

(In millions)

Principal transactions-net (derivatives contracts)

$
(124
)

$
216

$
406

$
268

Commissions

10

(2
)

29

(16
)

Net interest expense

(119
)

(36
)

(262
)

(97
)

Total net revenues

$
(233
)

$
178

$
173

$
155

Other operating expenses

$
(88
)

$
(27
)

$
(212
)

$
(55
)

Total expenses

$
(88
)

$
(27
)

$
(212
)

$
(55
)

~~There were no revenues and expenses of Pershing with respect to related party transactions with the Company~~ for the three months ended ~~September 30, 2003. Revenues~~March 31, 2005 and ~~expenses of Pershing with respect~~2004:

	For the Three Months Ended March 31,
	2005			2004
	(In millions)
Principal transactions-net (derivatives contracts)	$	474		$	60
Commissions	(7		)	(8		)
Net interest expense	(196		)	(59		)
Total net revenues	$	271		$	(7	)
Other operating expenses	$	(84	)	$	(44	)
Total expenses	$	(84	)	$	(44	)

From time to ~~related party transactions with~~time the Company for the nine months ended September 30, 2003 were not material. The operating results of Pershing for the nine months ended September 30, 2003 are presented as discontinued operations in the condensed consolidated statements of income.

~~The Company sold~~sells at cost to CSFBI the right, title and interest in certain ~~assets with an aggregate~~assets. For the three months ended March 31, 2005 the value of ~~$443 million and $303 million as~~the assets sold was not significant.

As of ~~September 30, 2004 and December~~March 31, ~~2003, respectively.~~

~~Certain CSAM~~2005, certain private equity funds of funds, with approximately $4.1 billion of committed capital, and certain ~~CSAM~~ hedge funds, hedge funds of funds and ~~CDO VIEs~~variable interest entities (“VIEs”) that issue collateralized debt obligations (“CDOs”), with aggregate assets under management of approximately ~~$15.0~~$15.5 billion, of CSFB Alternative Capital, Inc., an indirect wholly owned subsidiary of CSFBI, are managed by the Company’s Alternative Capital division. ~~CSAM~~CSFB Alternative Capital, Inc. reimburses the Alternative Capital division for all costs and expenses incurred by the Company in connection with managing these assets.

InBeginning in April 2004, the Company entered into economic hedging arrangements with respect to deferred compensation obligations payable to its employees and to employees of affiliates, ~~that are~~whose deferred compensation is not ~~part of its~~recorded in the Company’s condensed consolidated ~~group.~~financial statements. These hedging arrangements will result in the Company recognizing gains or losses with respect to the hedge of the deferred compensation obligation of such affiliates. For the three ~~and nine~~ months ended ~~September 30, 2004,~~March 31, 2005, the gain from the economic hedging arrangements with respect to these affiliate obligations was $1 ~~million and $2 million, respectively.~~million.

The Credit Suisse Group International Share Plan provides for the grant of equity-based awards to Company employees based on CSG shares pursuant to which employees of the Company may be granted, as compensation, ~~share~~shares or other equity-based awards as compensation for services performed. CSFBI purchases shares from CSG to satisfy these awards, but CSFBI does not require reimbursement from the Company; therefore, amounts are considered a capital contribution to the Company and credited to paid-in-capital. Amounts contributed by CSFBI relating to compensation expense for the ~~nine~~three months ended ~~September 30,~~March 31, 2005 and 2004 ~~and 2003~~ were ~~$354~~$129 million and ~~$250~~$100 million, ~~respectively, net of taxes.~~respectively. See Note 211 for further information on the Company’s share-based compensation.

Certain of the Company’s directors, officers and employees and those of its affiliates and their subsidiaries maintain margin accounts with Credit Suisse First Boston LLC (“CSFB LLC”) and other affiliated broker-dealers in the ordinary course of business. In addition, certain of such directors, officers

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
~~September 30, 2004~~March 31, 2005

4.2. Related Party Transactions (Continued)

~~Certain of the Company’s directors, officers~~ and employees and those of the Company’s affiliates and their subsidiaries maintain margin accounts with Credit Suisse First Boston LLC (“CSFB LLC”), a direct wholly owned subsidiary of the Company, in the ordinary course of business. In addition, certain of such directors, officers and employees hadhave investments or commitments to invest in various private ~~equity funds sponsored by~~funds. The Company makes loans to directors and executive officers on the ~~Company,~~same terms as are generally available to third parties or otherwise pursuant to ~~which the Company has made loans to such directors, officers~~widely available employee benefit plans. CSFB LLC and ~~employees, to the extent permitted by law. CSFB LLC,~~other affiliated broker-dealers, from time to time and in the ordinary course of business, ~~enters~~enter into, as principal, transactions involving the purchase or sale of securities from or to such directors, officers and employees and members of their immediate families.

In connection with its derivatives activities, the Company enters into over-the-counter (“OTC”) derivatives contracts with related parties that contingently require the Company, as guarantor, to make payments based on changes in an underlying financial instrument. See Note 8 for more information.

The Company is included in the consolidated federal income tax return filed by CSFBI and ~~combined~~certain state and local income tax returns filed by CSFBI. ~~See Note 5 for more information.~~

5. ~~Income Taxes~~

The Company is included in the consolidated federal income tax return and combined state and local income tax returns filed by CSFBI. CSFBI allocates federal income taxes to its subsidiaries on a separate return basis, and current state and local income taxes on a ~~pro rata~~ basis, pursuant to a tax sharing agreement. Included in the condensed consolidated statements of income for the nine months ended September 30, 2004 and 2003, are current and deferred provisions (benefits) for income taxes from continuing operations that were allocated to the Company by CSFBI as follows:

For the Nine Months Ended
September 30,

2004

2003

(In millions)

Current:

U.S. federal

$
187

$
(3
)

State and local

3

1

Foreign

4

1

Total current

194

(1
)

Deferred:

U.S. federal

26

114

Total deferred

26

114

Provision for income taxes from continuing operations

$
220

$
113

~~Excluded from the table above is a provision for income taxes that CSFBI allocated to the Company for the nine months ended September 30, 2003 of $485 million related to discontinued operations.~~

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

5. ~~Income Taxes (Continued)~~

~~The following table summarizes the difference between the federal statutory tax rate and the effective tax rate related to continuing operations for the nine months ended September 30, 2004 and 2003:~~

For the Nine Months Ended September 30,

2004

2003

Amount

Percent of
Pre-tax Income

Amount

Percent of
Pre-tax Income

(In millions)

(In millions)

Computed “expected” tax provision

$
417

35.0
%

$
149

35.0
%

Increase (decrease) due to:

Minority interests(1)

(173
)

(14.5
)

—

—

Dividend exclusion

(28
)

(2.4
)

(20
)

(4.8
)

Entertainment expense

4

0.3

3

0.8

State and local taxes, net of federal income tax effects

2

0.2

1

0.2

Other

(2
)

(0.3
)

(20
)

(4.7
)

Provision for income taxes from continuing operations

$
220

18.3
%

$
113

26.5
%

(1) Represents the effect of non-taxable revenues and expenses from private equity funds consolidated primarily under FIN 46R. Net income was unaffected as offsetting minority interests were recorded in the condensed consolidated statements of income. See Note 6 for more information.

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

5. ~~Income Taxes (Continued)~~

~~Deferred tax assets and deferred tax liabilities are generated by the following temporary differences:~~

As of September 30,
2004

As of December 31,
2003

(In millions)

Deferred tax assets:

Inventory

$
198

$
171

Investments

273

267

Other liabilities and accrued expenses, primarily compensation and benefits

1,073

1,196

Office facilities

25

24

Net operating loss carryforward

57

—

State and local taxes

35

36

Total deferred tax assets

1,661

1,694

Deferred tax liabilities:

Inventory

57

55

Investments

231

228

Office facilities

19

51

Other

69

41

Total deferred tax liabilities

376

375

Deferred tax assets net of deferred tax liabilities

1,285

1,319

Valuation allowance for state and local taxes

(35
)

(36
)

Net deferred tax asset

$
1,250

$
1,283

Management has determined that the realization of the recognized gross deferred tax assets of $1.7 billion as of September 30, 2004 and December 31, 2003 is more likely than not based on anticipated future taxable income. In addition, for federal income tax purposes, the Company has tax planning strategies available that enhance its ability to utilize these tax benefits. However, if estimates of future taxable income are reduced, the amount of the deferred tax assets considered realizable could also be reduced. Further, due to uncertainty concerning the Company’s ability to generate the necessary amount and mix of state and local taxable income in future periods, the Company maintains a valuation allowance against its deferred state and local tax asset in the amount of $35 million and $36 million as of September 30, 2004 and December 31, 2003, respectively.

6.3. Transfers and Servicing of Financial Assets

As part of ~~September 30, 2004~~the Company’s financing and securities settlement activities, the Company uses securities as collateral to support various secured financing sources. If the counterparty does not meet its contractual obligation to return securities used as collateral, the Company may be exposed to the risk of reacquiring the securities at prevailing market prices to satisfy its obligations. The Company controls this risk by monitoring the market value of financial instruments pledged each day and by requiring collateral levels to be adjusted in the event of excess market exposure.

As of March 31, 2005 and December 31, ~~2003,~~2004, the fair ~~market~~ value of assets that the Company pledged to counterparties was ~~$216.8~~$213.4 billion and ~~$174.8~~$199.3 billion, respectively, of which ~~$52.9~~$70.1 billion and ~~$47.6~~$54.7 billion, respectively, was included in financial instruments owned in the condensed consolidated statements of financial condition.

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

6. ~~Transfers and Servicing of Financial Assets (Continued)~~

The Company has also received similar assets as collateral that the Company has the right to re-pledge or sell. The Company routinely re-pledges or lends these assets to third parties. As of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003,~~2004, the fair ~~market~~ value of the assets pledged to the Company was ~~$205.0~~$192.6 billion and ~~$166.7~~$182.3 billion, respectively, of which ~~$186.8~~$191.8 billion and ~~$154.3~~$180.6 billion, respectively, was sold or repledged.

Securitization Activities

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

The Company purchases loans and other debt obligations from clients for the purpose of securitization. The loans and other debt obligations are sold by the Company directly, or indirectly through affiliates, to QSPEs or other VIEs that issue CDOs. CSFB LLC structures, underwrites and makes a market in these CDOs. CDOs are securities backed by the assets transferred to the CDO VIEs and pay a

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
March 31, 2005

3. Transfers and Servicing of Financial Assets (Continued)

return based on the returns on those assets. Investors typically have recourse to the assets in the CDO VIEs. The investors and the CDO VIEs have no recourse to the Company’s assets.

The following table presents the proceeds and gains related to the securitization of commercial mortgage loans, residential mortgage loans, CDOs and other asset-backed loans for the three months ended March 31, 2005 and 2004:

	Commercial mortgage loans			Residential mortgage loans			Collateralized debt obligations			Other asset-backed loans(1)
	(In millions)
For the Three Months Ended March 31, 2005
Proceeds from new securitizations		$	1,357		$	11,755		$	1,320		$	1,908
Gain on securitizations(2)		$	39		$	12		$	10		$	15
For the Three Months Ended March 31, 2004
Proceeds from new securitizations		$	1,299		$	8,714		$	401		$	744
Gain on securitizations(2)		$	63		$	27		$	5		$	4

(1) Primarily includes home equity loans.

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

Included in residential mortgage loans in the table above are proceeds of $4.4 billion and $3.4 billion related to the securitization of agency mortgage-backed securities for the three months ended March 31, 2005 and 2004, respectively. For the three months ended March 31, 2005 and 2004, the Company recognized losses of $4 million and gains of $2 million, respectively, from these securitizations.

The Company may retain interests in these securitized assets in connection with its underwriting and market-making activities. The Company’s exposure in its securitization activities is limited to its retained interests. Retained interests in securitized financial assets are included at fair value in financial instruments owned in the condensed consolidated statements of financial condition. Any changes in the fair value of these retained interests are recognized in the condensed consolidated statements of income. The fair values of retained interests are determined using present value of estimated future cash flows valuation techniques that incorporate assumptions that market participants customarily use in their estimates of values. As of March 31, 2005 and December 31, 2004, the fair value of the interests retained by the Company was $2.9 billion and $2.0 billion, respectively.

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
~~September 30, 2004~~March 31, 2005

6. ~~Transfers and Servicing of Financial Assets (Continued)~~

The following table presents the proceeds and gain or loss related to the securitization of commercial mortgage loans, residential mortgage loans, CDOs and other asset-backed loans for the nine months ended September 30, 2004 and 2003:

Commercial
mortgage
loans

Residential
mortgage
loans

Collateralized
debt
obligations

Other
asset-backed(1)

(In millions)

For the Nine Months Ended
September 30, 2004

Proceeds from new securitizations

$
5,287

$
32,626

$
3,729

$
5,079

Gain (loss) on securitizations(2)

$
185

$
26

$
44

$
(1
)

For the Nine Months Ended
September 30, 2003

Proceeds from new securitizations

$
4,756

$
51,426

$
4,044

$
3,648

Gain (loss) on securitizations(2)

$
203

$
(69
)

$
36

$
38

~~(1) Primarily includes home equity loans.~~

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

Included in residential mortgage loans in the table above are proceeds of $11.9 billion and $32.3 billion, respectively, related to the securitization of agency mortgage-backed securities for the nine months ended September 30, 2004 and 2003. For the nine months ended September 30, 2004 and 2003, the Company realized gains of $12 million and $20 million, respectively, from these securitizations.

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

6.3. Transfers and Servicing of Financial Assets (Continued)

Key economic assumptions used in measuring at the date of securitization the fair value of the retained interests resulting from securitizations completed during the ~~nine~~three months ended ~~September 30, 2004 and 2003~~March 31, 2005 were as follows:

	Commercial mortgage loans(1)		Residential mortgage loans		Collateralized debt obligations(2)			Other asset-backed		For the Three Months Ended March 31, 2005
For the Nine Months Ended September 30, 2004
										Commercial mortgage loans(1)		Residential mortgage loans		Collateralized debt obligations(2)			Other asset-backed loans
Weighted-average life (in years)	3.4		4.2			11.6		1.5			N/A	4.6			6.8			3.5
Prepayment speed assumption (“PSA”) (in rate per annum)(3)	N/A		150 PSA to 1,570% PSA			N/A		467 PSA to 733% PSA
Cash flow discount rate (in rate per annum)(4)	3.6%-10.6	%	5.4%-6.5	%		4.7%-9.6	%	11.1%-11.9	%
Prepayment rate (in rate per annum)(3)											N/A	11%-25	%		N/A			25	%
Cash flow discount rate (in rate per annum)(4)											N/A	3.7%-39.5	%		9.2	%		4.8	%
Expected credit losses (in rate per annum)	6.4	%	3.5	%		6.4	%	7.8	%		N/A	0.1%-34.9	%		5.1	%		0.7	%
For the Nine Months Ended September 30, 2003
Weighted-average life (in years)	3.0		4.6			8.0		3.5
Prepayment speed assumption (“PSA”) (in rate per annum)(3)	N/A		200 PSA to 325% PSA			N/A		200 PSA to 325% PSA
Cash flow discount rate (in rate per annum)(4)	7.8%-12.8	%	11.9%-38.9	%		2.9%-5.9	%	9.2%-221.2	%
Expected credit losses (in rate per annum)	9.4	%	6.7	%		4.0	%	3.2	%

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

6. ~~Transfers and Servicing of Financial Assets (Continued)~~

The following table sets forth the fair value of retained interests from securitizations as of ~~September 30, 2004,~~March 31, 2005, key economic assumptions used to determine the fair value and the sensitivity of the fair value to immediate adverse changes in those assumptions:

	As of September 30, 2004														As of March 31, 2005
	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 loans
	(Dollars in millions)														(Dollars in millions)
Carrying amount/fair value of retained interests		$	3		$	1,000			$	217		$	132			$	3			$	2,691			$	140			$	54
Weighted-average life (in years)		0.9			3.1				11.6			2.2				0.4				2.6				11.4				1.6
PSA (in rate per annum)(3)		N/A			150 PSA to 1,570% PSA				N/A			467 PSA to 733% PSA
Prepayment rate (in rate per annum)(3)																N/A				3%-53		%		N/A				21%-51		%
Impact on fair value of 10% adverse change		N/A			$	(3	)		N/A			—				N/A				$	(4	)		N/A				$	—
Impact on fair value of 20% adverse change		N/A			$	(6	)		N/A			—				N/A				$	(8	)		N/A				$	—
Cash flow discount rate (in rate per annum)(4)		10.6		%	6.5		%		9.6		%	11.9		%
Cash flow discount rate (in rate per annum)(4)																19.5		%		6.2		%		11.9		%		16.3		%
Impact on fair value of 10% adverse change		$	—		$	(12	)		$	(9	)	—				$	—			$	(34	)		$	(7	)		$	—
Impact on fair value of 20% adverse change		$	—		$	(24	)		$	(18	)	(1		)		$	—			$	(68	)		$	(14	)		$	(1	)
Expected credit losses (in rate per annum)																15.0		%		2.3		%		7.8		%		11.8		%
Impact on fair value of 10% adverse change		$	—		$	(3	)		$	(4	)	—				$	—			$	(7	)		$	(3	)		$	—
Impact on fair value of 20% adverse change		$	—		$	(6	)		$	(8	)	(1		)		$	—			$	(15	)		$	(6	)		$	—

(1) To deter prepayment, commercial mortgage loans typically have prepayment protection in the form of prepayment lockouts and yield maintenances.

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

(3) ~~PSA is an industry standard prepayment speed metric used for projecting prepayments over the life of a residential mortgage loan. PSA~~The Company utilizes the Constant Prepayment Rate ~~(“CPR”)~~ assumptions. A 100% prepayment assumption assumes a prepayment rate of 0.2% per annum of the outstanding principal balance of mortgage loans in the first month. This increases by 0.2% thereafter during the term of the mortgage loan, leveling off to a CPR of 6.0% per annum beginning in the thirtieth month and each month thereafter during the term of the mortgage loan. 100% PSA equals 6 CPR.

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

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

6. ~~Transfers and Servicing of Financial Assets (Continued)~~

These sensitivities are hypothetical and do not reflect the benefits of hedging activities and therefore should be used with caution. Changes in fair value based on a 10% or 20% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
March 31, 2005

3. Transfers and Servicing of Financial Assets (Continued)

retained interests is calculated without changing any other assumption. In practice, changes in one assumption may result in changes in other assumptions (for example, increases in market interest rates may result in lower prepayments and increased credit losses), which may magnify or counteract the sensitivities.

Variable Interest Entities

The Company has variable interests in several CDO VIEs. InAs described under “—Securitization Activities,” in the normal course of its business, the Company purchases loans and other debt obligations from and on behalf of clients primarily for the purpose of securitization. These assets are sold to and warehoused by affiliates and, at the end of a warehousing period, the assets are sold to VIEs or QSPEs for securitization. The Company engages in these transactions to meet the needs of clients, to earn fees and to sell financial assets. The purpose of these CDO VIEs is to provide investors a return based on the underlying debt instruments of the CDO VIEs. In connection with its underwriting and market-making activities, the Company may retain interests in the CDO VIEs. The CDO entities may 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 has consolidated all CDO VIEs for which it is the primary beneficiary. As of ~~September 30,~~March 31, 2005 and December 31, 2004, the Company recorded ~~$458~~$282 million and $291 million, respectively, representing the carrying amount of the consolidated assets of these CDO VIEs that are collateral for the VIE obligations. The beneficial interests of these consolidated CDO VIEs are payable solely from the cash flows of the related collateral, and the creditors of these VIEs do not have recourse to the Company in the event of default.

The Company retains significant debt and equity interests in open CDO VIEs that are not consolidated because the Company is not the primary beneficiary. The total assets in these CDO VIEs as of ~~September 30,~~March 31, 2005 and December 31, 2004 were ~~$1.0 billion.~~$5.0 billion and $4.5 billion, respectively. The Company’s maximum exposure to loss as of ~~September 30,~~March 31, 2005 and December 31, 2004 was $9$194 million and $62 million, respectively, which was the amount of its retained interests, carried at fair value, in financial instruments owned.

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
March 31, 2005

3. Transfers and Servicing of Financial Assets (Continued)

Certain of the Company’s private equity funds are subject to FASB Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities” (“FIN ~~46R.~~46”) and the subsequent modifications of FIN 46 (“FIN 46R”). In the normal course of its private equity activities, the Company is typically the general partner and investment adviser to private equity funds. ~~The Company did not consolidate~~Limited partners of these ~~private equity~~ funds ~~as of December 31, 2003 in accordance with~~typically have recourse to the ~~effective date and transition provisions of FIN 46R.~~funds assets but have no recourse to the Company’s assets. During 2004, the Company consolidated certain private equity funds that are managed by the Company. AsThe following table presents the impact on the condensed consolidated statements of ~~September 30, 2004,~~financial condition of the Company’s consolidation of these private equity funds primarily under FIN 46R, as of March 31, 2005 and December 31, 2004:

	March 31, 2005				December 31, 2004
	(In millions)
Private equity and other long-term investments		$	1,825			$	1,947
All other assets, net		(87		)		2
Total assets		$	1,738			$	1,949
Minority interests (included in other liabilities)		$	1,884			$	1,978
All other liabilities, net (excluding minority interests)		(146		)		(29		)
Total liabilities		$	1,738			$	1,949

The following table presents the impact on the condensed consolidated statements of income of the Company’s adoption of FIN 46R, for the three months ended March 31, 2005 and 2004:

	For the Three Months Ended March 31,
	2005			2004
	(In millions)
Net revenues		$	157		$	81
Expenses		2			—
Minority interests		$	155		$	81

4. Private Equity and Other Long-Term Investments

Private equity and other long-term investments include direct investments and investments in partnerships that make private equity and related investments in various portfolio companies and funds. The Company ~~recorded $1.6 billion of additional~~categorizes its private equity and other long-term investments ~~reduced other assets~~into three categories: CSFB-managed funds, which include funds consolidated primarily under FIN 46R, funds managed by third parties and direct investments. These investments generally have no readily available market or may be otherwise restricted as to resale under the Securities Act of 1933; therefore, these investments are carried at amounts which approximate fair value.

As of March 31, 2005 and December 31, 2004, the Company had investments in private equity and other ~~liabilities by $167 million~~long-term investments of $3.1 billion, including $1.8 billion and ~~$79 million,~~$1.9 billion, respectively, ~~and recorded $1.5 billion of minority interests~~ in ~~other liabilities in the condensed consolidated statement of financial condition through the consolidation of certain~~ private equity ~~funds~~investments consolidated primarily under FIN 46R. ~~Similarly, for the three and nine months ended September 30, 2004,~~As of March 31, 2005 the Company ~~recorded~~had commitments to invest up to an ~~increase~~additional $936 million. The cost of ~~$55 million and~~these investments, excluding the private equity investments consolidated primarily under FIN 46R, was $1.6 billion as of March 31, 2005

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
~~September 30, 2004~~March 31, 2005

6.4. ~~Transfers~~Private Equity and ~~Servicing~~Other Long-Term Investments (Continued)

and $1.5 billion as of ~~Financial Assets (Continued)~~

~~$501 million, respectively,~~December 31, 2004. Changes in net ~~revenues~~unrealized appreciation/depreciation arising from changes in fair value and ~~an increase of $6 million~~the gain or loss realized upon sale are reflected in expenses as a result of the consolidation of these private equity funds. Net income was unaffected as minority interests of $49 million and $495 million for the three and nine months ended September 30, 2004, respectively, were recordedprincipal transactions-net in the condensed consolidated statements of income. See Note 3 for more information.

The Company’s subsidiaries manage many private equity partnerships (the “Funds”). When the investment performance on CSFB-managed Funds exceeds specific thresholds, the Company and certain other partners (the “GPs”) may be entitled to receive a carried interest distribution under the governing documents of the Funds. Carried interest distributions are based on the cumulative investment performance of each Fund at the time the distribution is made. As a result, the Company may be obligated to return to investors in the Funds all or a portion of the carried interest distributions the Company has received if the Company has received excess carried interest distributions over the life of the Funds. The Company also guarantees the obligation of the other partners to return excess carried interest payments. The amount of such contingent obligations is based upon the performance of the Funds but cannot exceed the amount of carried interest received by the GPs. As of March 31, 2005 and December 31, 2004, the maximum amount of such contingent obligations was $462 million and $439 million, respectively, assuming the Funds’ remaining investments were worthless. Assuming the Funds’ remaining investments were sold at their current carrying values as of March 31, 2005 and December 31, 2004, the contingent obligations would have been $5 million and $9 million, respectively. As of March 31, 2005 and December 31, 2004, the Company withheld cash from distributions on prior realizations to the partners, and recorded corresponding liabilities of $93 million and $75 million, respectively, in connection with the Company’s guarantee to return prior carried interest distributions to third party investors in the Funds.

In addition, pursuant to certain contractual arrangements, the Company is obligated to make cash payments to certain investors in certain Funds if specified performance thresholds are not met. As of March 31, 2005 and December 31, 2004, the maximum amount of such contingent obligations was $65 million assuming the Funds’ remaining investments were worthless. Assuming the Funds’ remaining investments were sold at their current carrying values as of March 31, 2005 and December 31, 2004, there would have been no contingent obligation.

7.5. Derivatives Contracts

The Company uses derivatives contracts for trading and hedging purposes and to provide products for clients. These derivatives include options, forwards, futures and swaps. For more information on the Company’s derivatives, see Note 6 of the consolidated financial statements in Part II, Item 8 in the Annual Report on Form 10-K for the year ended December 31, 2004.

The fair values of all derivatives contracts outstanding as of March 31, 2005 and December 31, 2004 were as follows:

	March 31, 2005					December 31, 2004
	Assets		Liabilities			Assets		Liabilities
	(In millions)
Options	$	811		$	694	$	1,001		$	879
Forward contracts	2,017			882		1,206			355
Swaps	1,520			1,264		1,456			1,061
Total	$	4,348		$	2,840	$	3,663		$	2,295

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
March 31, 2005

5. Derivatives Contracts (Continued)

These assets and liabilities are included as derivatives contracts in financial instruments owned/sold not yet purchased, respectively, in the condensed consolidated statements of financial condition.

6. Borrowings

Short-term borrowings are generally demand obligations with interest approximating the federal funds rate, LIBOR or other money market indices. Such borrowings are generally used to facilitate the securities settlement process, finance financial instruments owned and finance securities purchased by customers on margin. As of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003,~~2004, there were no short-term borrowings secured by Company-owned securities.

The following table sets forth the Company’s short-term borrowings and their weighted average interest rates:

	Short-term borrowings						Weighted average interest rates						Short-term borrowings						Weighted average interest rates
	As of September 30, 2004			As of December 31, 2003			As of September 30, 2004			As of December 31, 2003			As of March 31, 2005			As of December 31, 2004			As of March 31, 2005			As of December 31, 2004
	(In millions)												(In millions)
Bank loans, including loans from affiliates(1)		$	16,860		$	14,932		1.96	%		1.31	%
Bank loans, including loans from affiliates(1)														$	14,371		$	20,435		3.24	%		2.65	%
Commercial paper		1,271			1,052			1.62	%		1.08	%		1,371			1,249			2.82	%		2.11	%
Total short-term borrowings		$	18,131		$	15,984								$	15,742		$	21,684

(1) Includes ~~$16.6~~$14.0 billion and ~~$14.5~~$20.1 billion in loans from affiliates as of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003,~~2004, respectively.

The Company has two commercial paper programs exempt from registration under the Securities Act of 1933 that allow the Company to issue up to $7.0 billion in commercial paper. As of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003, $1.3~~2004, $1.4 billion and ~~$1.1~~$1.2 billion, respectively, of commercial paper was outstanding under these programs.

In June 2004, the Company filed with the ~~Securities and Exchange Commission (“SEC”)~~SEC a shelf registration statement that allows the Company to issue from time to time up to $15.0 billion of senior and subordinated debt securities, and warrants to purchase such securities. Under that shelf registration statement, the Company had, as of ~~November 8, 2004, $15.0~~May 10, 2005, approximately $11.5 billion available for issuance.

In July 2001, the Company established a Euro Medium-Term Note program that allows the Company to issue up to $5.0 billion of notes. Under this program, the Company had, as of May 10, 2005, approximately $1.2 billion available for issuance.

The following table sets forth the Company’s long-term borrowings as of March 31, 2005 and December 31, 2004:

	March 31, 2005			December 31, 2004
	(In millions)
Senior notes 2.66%-7.13%, due various dates through 2032		$	21,523		$	22,485
Medium-term notes 2.14%-7.53%, due various dates through 2032		5,310			6,387
Structured borrowings 5.7%-16.06%, due various dates through 2007		16			69
Total long-term borrowings		$	26,849		$	28,941
Current maturities of long-term borrowings		$	1,647		$	3,137

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
~~September 30, 2004~~March 31, 2005

7.6. Borrowings (Continued)

~~The following table sets forth the Company’s long-term borrowings as~~As of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003:~~

As of September 30,
2004

As of December 31,
2003

(In millions)

Senior notes 3.875%-8.00%, due various dates through 2032

$
19,164

$
16,791

Medium-term notes 1.60%-7.528%, due various dates through 2032

6,988

7,391

Structured borrowings 7.06%-16.06%, due various dates through 2014

67

139

Total long-term borrowings

$
26,219

$
24,321

Current maturities of long-term borrowings

$
3,263

$
2,239

~~As of September 30,~~ 2004, ~~and December 31, 2003,~~ long-term borrowings included ~~unrealized appreciation~~an increase of approximately ~~$798~~$154 million and ~~$808~~$624 million, respectively, associated with fair value hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended (“SFAS 133”). As of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003,~~2004, the Company had entered into interest rate swaps, with a notional amount of ~~$18.9~~$21.3 billion and ~~$16.6~~$21.8 billion, respectively, on the Company’s long-term borrowings for hedging purposes. Substantially all of these swaps qualified as fair value hedges under SFAS 133. See Note 115 for more information.

The following table sets forth scheduled maturities of all long-term borrowings as of March 31, 2005:

	Twelve Months Ended March 31,
	(In millions)
2006		$	1,647
2007		3,966
2008		4,999
2009		2,194
2010		2,777
2011-2032		11,266
Total		$	26,849

The following table sets forth scheduled maturities of the current portion of long-term borrowings as of March 31, 2005:

	Three Months Ended
	(In millions)
June 30, 2005		$	900
September 30, 2005		149
December 31, 2005		498
March 31, 2006		100
Total		$	1,647

As of ~~September 30, 2004,~~ March 31, 2005, Credit Suisse First Boston LLC (“CSFB ~~LLC~~LLC”) maintained with third parties four 364-day committed secured revolving credit facilities totaling ~~$1.2~~$2.0 billion, with one facility ~~totaling $250~~for $500 million maturing in July 2005, one facility for $500 million maturing in November ~~2004, two facilities~~2005, one facility for ~~$450~~$500 million maturing in February ~~2005~~2006 and one facility for $500 million maturing in ~~July 2005.~~March 2006. These facilities require CSFB LLC to pledge unencumbered marketable securities to secure any borrowings. Borrowings under each facility would bear interest at short-term rates related to either the federal funds rate or LIBOR and can be used for general corporate purposes. The facilities contain customary covenants that the Company believes will not impair its ability to obtain funding. As of ~~September 30, 2004,~~March 31, 2005, no borrowings were outstanding under any of the facilities.

~~2004 Financings:~~

In the nine months ended September 30, 2004, the Company issued longer-dated fixed income securities to extend the maturity profile of the Company’s debt. For the nine months ended September 30, 2004, the Company issued $1.1 billion in medium-term notes, $1.0 billion of 5.125% notes due 2014 and $1.4 billion of 4.7% notes due 2009 under its then-existing $10.0 billion shelf registration statement.

~~During the nine months ended September 30, 2004, the Company redeemed approximately $1.6 billion of medium-term notes and $68 million of structured notes.~~

8. ~~Private Equity and Other Long-Term Investments~~

~~Private equity and other long-term investments include direct investments and investments in partnerships that make private equity and related investments in various portfolio companies and funds.~~

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
~~September 30, 2004~~March 31, 2005

8. ~~Private Equity and Other Long-Term Investments (Continued)~~

The Company categorizes its private equity and other long-term investments into three categories, CSFB-managed funds, direct investments and funds managed by third parties. These investments generally have no readily available market or may be otherwise restricted as to resale under the Securities Act of 1933; therefore, these investments are carried at amounts which approximate fair value.

The Company’s subsidiaries manage many private equity partnerships (the “Funds”). When the investment performance of CSFB-managed Funds exceeds specific thresholds, the Company and certain other general partners (the “GPs”) may be entitled to receive a carried interest distribution. Carried interest distributions are based on the cumulative investment performance of each Fund at the time the distribution is made. As a result, the Company, in its capacity as a GP (or general partner or managing member of a GP), may be obligated to return to investors in the Funds all or a portion of the carried interest distributions received by the GPs if the GPs have received excess carried interest payments over the life of the Funds under the governing documents of the Funds. The amount of such contingent obligation is based upon the performance of the Funds but cannot exceed the amount of carried interest received by the GPs. As of September 30, 2004 and December 31, 2003, the maximum amount of such contingent obligations was $444 million and $252 million, respectively, assuming the Funds’ remaining investments were worthless. Assuming the Funds’ remaining investments were sold at their current carrying values, as of September 30, 2004 and December 31, 2003, the contingent obligations would have been $8 million and $6 million, respectively. As of September 30, 2004 and December 31, 2003, the Company has recorded liabilities of $70 million and $25 million, respectively, in connection with the contingent obligation to return prior carried interest distributions to third party investors in the Funds.

In addition, pursuant to certain contractual arrangements, the Company is obligated to make cash payments to certain investors in certain Funds if specified performance thresholds are not met. As of September 30, 2004 and December 31, 2003, the maximum amount of such contingent obligations was $61 million and $46 million, respectively, assuming the Funds’ remaining investments were worthless. Assuming the Funds’ remaining investments were sold at their current carrying values as of September 30, 2004 and December 31, 2003, there would have been no contingent obligations.

As of September 30, 2004 and December 31, 2003, the Company had investments in private equity and other long-term investments of $2.6 billion and $1.1 billion, respectively, and had commitments to invest up to an additional $1.0 billion and $1.3 billion as of September 30, 2004 and December 31, 2003, respectively. The cost of these investments, excluding the private equity investments consolidated primarily under FIN 46R, was $1.4 billion and $1.5 billion as of September 30, 2004 and December 31, 2003, respectively. Changes in net unrealized appreciation/depreciation arising from changes in fair value and the gain or loss realized upon sale are reflected in principal transactions-net in the condensed consolidated statements of income. The increase in the private equity and other long-term investments was principally related to the Company’s adoption of FIN 46R and the consolidation of certain private equity funds. See Notes 1 and 6 for more information.

9.6. ~~Net Capital~~Borrowings (Continued)

~~The Company’s principal wholly owned subsidiary, CSFB LLC, is a registered broker-dealer, registered futures commission merchant and member firm of the New York Stock Exchange, Inc.~~

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~2005 Financings:

9. ~~Net Capital (Continued)~~

~~(“NYSE”). As such, it is subject to~~During the ~~NYSE’s net capital rule, which conforms to~~three months ended March 31, 2005, the ~~uniform net capital rule pursuant to Rule 15c3-1~~Company issued $3 million in structured notes and repaid approximately $1.1 billion of ~~the Securities Exchange Act~~medium-term notes, $500 million of 1934, as amended (the “Exchange Act”). Under the alternative method permitted by this rule, the required net capital may not be less than two percent of aggregate debit balances arising from customer transactions or four percent of segregated funds, whichever is greater. If a member firm’s net capital is less than four percent of aggregate debit balances, the NYSE may require the firm to reduce its business. If a member firm’s net capital is less than five percent of aggregate debit balances, the NYSE may prevent the firm from expanding its business and declaring cash dividends. As of September 30, 2004, CSFB LLC’s net capital of approximately $2.6 billion was 63% of aggregate debit balances and in excess of the minimum requirement by approximately $2.5 billion.

The Company’s over-the-counter (“OTC”) derivatives dealer subsidiary, Credit Suisse First Boston Capital LLC (“CSFB Capital LLC”), is also subject to the uniform net capital rule, but calculates its net capital based on value at risk under Appendix F of Rule 15c3-1 under the Exchange Act. As of September 30, 2004, CSFB Capital LLC’s net capital of $180 million, allowing for market and credit risk exposure of $41 millionsenior notes and $55 million ~~respectively, was in excess~~ of the minimum net capital requirement by $160 million. CSFB Capital LLC operates pursuant to the (k)(2)(ii) exemptive provisions of Rule 15c3-3 of the Exchange Act, and, accordingly, all customer transactions are cleared through CSFB LLC on a fully disclosed basis.

Certain other subsidiaries are subject to capital adequacy requirements. As of September 30, 2004, the Company and its subsidiaries complied with all applicable regulatory capital adequacy requirements.structured notes.

~~10.~~7. Leases and Commitments ~~Cash and Securities Segregated Under Federal and Other Regulations~~

In compliance with the Commodity Exchange Act, CSFB LLC segregates funds deposited by customers and funds accruing to customers as a result of trades or contracts. As of September 30, 2004 and December 31, 2003, cash and securities aggregating $2.9 billion and $2.6 billion, respectively, were segregated or secured by CSFB LLC in separate accounts exclusively for the benefit of customers.

In accordance with the SEC’s no-action letter dated November 3, 1998, CSFB LLC computed a reserve requirement for the proprietary accounts of introducing broker-dealers. As of September 30, 2004 and December 31, 2003, CSFB LLC segregated securities aggregating $234 million and $196 million, respectively, on behalf of introducing broker-dealers.

In addition, CSFB LLC segregated U.S. Treasury securities with a market value of $4.2 billion and $3.3 billion as of September 30, 2004 and December 31, 2003, respectively, in a special reserve bank account exclusively for the benefit of customers as required by Rule 15c3-3 of the Exchange Act.

~~11.~~ ~~Derivatives Contracts~~

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

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

~~11.~~ ~~Derivatives Contracts (Continued)~~

~~Non-trading Derivatives~~

The Company hedges its fixed rate debt by using interest rate swaps. These swaps are considered hedging instruments and qualify as fair value hedges under SFAS 133. For qualifying fair value hedges, the changes in fair value of both the hedging instrument and the underlying debt are included in principal transactions-net and the interest flows are included in interest and dividends, net of interest expense in the condensed consolidated statements of income.

The effectiveness of a qualifying hedging relationship is evaluated using quantitative measures of correlation. If a hedge relationship is not found to be highly effective, the hedge relationship no longer qualifies for hedge accounting under SFAS 133. As such, any subsequent gains or losses attributable to the hedged item cease to be recognized, while the subsequent changes in the derivatives instrument’s fair value are recognized in earnings, in each reporting period. In addition, the fair value adjustment of the debt due to hedge accounting is amortized over the remaining life of the debt as a yield adjustment.

~~The gains and losses related to the ineffective component of the fair value hedges were not material for the nine months ended September 30, 2004 and 2003.~~

Other derivatives used for hedging purposes that do not qualify as hedges under SFAS 133 are carried at fair value with changes in value and interest flows included in principal transactions-net in the condensed consolidated statements of income. For the nine months ended September 30, 2004 and 2003, the Company recognized a pre-tax gain of $1 million and $3 million, respectively, for these derivatives.

~~Trading Derivatives~~

The Company enters into various transactions using derivatives for trading purposes, to hedge trading exposures or to provide products to its clients. These derivatives include options, forwards, futures and swaps. Trading derivative contracts are carried at fair value with changes in unrealized and realized gains and losses and interest flows included in principal transactions-net in the condensed consolidated statements of income.

~~Options~~

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

The Company also purchases options 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 sell the underlying instrument at a fixed price on or before a specified date. The underlying instruments for these options include fixed income securities, equities, foreign currencies and interest rate instruments or indices. The counterparties to these option contracts are reviewed to determine whether they are creditworthy.

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

~~11.~~ ~~Derivatives Contracts (Continued)~~

~~Forwards and Futures~~

The Company enters into forward purchases and sales contracts for U.S. government and agencies, corporate debt, mortgage-backed securities and foreign currencies. In addition, the Company enters into futures contracts on equity-based indices and other financial instruments, as well as options on futures contracts.

Because forward contracts are subject to the financial reliability of the counterparty, the Company is exposed to credit risk. To mitigate this credit risk, the Company limits transactions with specific counterparties, reviews credit limits and adheres to internally established credit extension policies.

For futures contracts and options on futures contracts, the change in the market value is settled with a clearing broker in cash each day. As a result, the credit risk with the clearing broker is limited to the net positive change in the market value for a single day, which is recorded in receivables (payables) from (to) brokers, dealers and others in the condensed consolidated statements of financial condition.

~~Swaps~~

The Company’s swap agreements consist primarily of interest rate, equity and credit default swaps. Interest rate swaps are contractual agreements to exchange interest rate payments based on agreed notional amounts and maturity. Equity swaps are contractual agreements to receive the appreciation or depreciation in value based on a specific strike price on an equity instrument in exchange for paying another rate, which is usually based on an index or interest rate movements. Credit default swaps are contractual agreements in which one counterparty pays a periodic fee in return for a contingent payment by the other counterparty following a credit event of a reference entity. A credit event is commonly defined as bankruptcy, insolvency, receivership, material adverse restructuring of debt, or failure to meet payment obligations when due. Swaps are reported at fair value.

~~Quantitative Disclosures for All Derivatives~~

~~The fair values of all derivatives contracts outstanding as of September 30, 2004 and December 31, 2003 were as follows:~~

As of September 30, 2004

As of December 31, 2003

   Assets

   Liabilities

   Assets

   Liabilities

(In millions)

Options

$
2,740

$
2,634

$
2,892

$
2,756

Forward contracts

1,028

553

695

257

Swaps

1,740

962

1,986

942

Total

$
5,508

$
4,149

$
5,573

$
3,955

~~These assets and liabilities are included as derivatives contracts in financial instruments owned/sold not yet purchased, respectively, in the condensed consolidated statements of financial condition.~~

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

~~12.~~ ~~Employee Benefit Plans~~

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

~~Pension Plans~~

The Company participates in a non-contributory defined benefit pension plan (the “Qualified Plan”) available to certain individuals employed before January 1, 2000. Contributions to the Qualified Plan are made as required by the Internal Revenue Code and applicable law but not in excess of the amounts deductible by the Company for income tax purposes.

The Company also sponsors a savings and retirement plan, which is a defined contribution plan, with both a savings and a retirement component. All employees are eligible to participate in the savings component whereby the Company matches employee contributions. In addition, individuals employed before January 1, 2000 who do not accrue benefits under the Qualified Plan and employees hired on or after January 1, 2000 participate in the retirement component and receive a retirement contribution that is linked to the return on equity of the Credit Suisse First Boston business unit.

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

~~Other Postretirement Plans~~

In addition, the Company provides certain subsidized unfunded health-care benefits for eligible retired employees (the “Other Plans”). Employees hired prior to July 1, 1988 become eligible for these benefits if they meet minimum age and service requirements.

In May 2004, the FASB issued FSP 106-2. The Medicare Act became law in December 2003 and introduced both a Medicare prescription drug benefit and a federal subsidy to sponsors of retiree health-care plans that provide a benefit that is at least “actuarially equivalent” 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 benefit that is “actuarially equivalent” to the Medicare benefit. The effect of adopting FSP 106-2 was not significant.

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

~~12.~~ ~~Employee Benefit Plans (Continued)~~

The following table ~~presents~~sets forth the ~~pension expense by component for the Qualified Plan, the Supplemental Plan~~Company’s minimum operating lease commitments as of March 31, 2005:

	Twelve Months Ended March 31,
	(In millions)
2006		$	154
2007		150
2008		140
2009		134
2010		131
2011-2025		1,050
Total(1)		$	1,759

(1) Includes contractual obligations related to certain information technology, equipment leases and ~~the Other Plans for the three and nine months ended September 30, 2004 and 2003:~~

For the Three
Months Ended
September 30,

For the Nine
Months Ended
September 30,

    2004

    2003

    2004

    2003

(In millions)

Components of Net Periodic Benefit Cost:

Service cost

$
4

$
7

$
16

$
20

Interest cost

9

8

27

24

Expected return on plan assets

(12
)

(9
)

(34
)

(25
)

Amortization of loss

3

4

13

9

Amortization of prior service cost

—

—

—

1

Recognized net actuarial loss

—

—

(1
)

(1
)

Net periodic benefit cost

$
4

$
10

$
21

$
28

~~The Company made payments of $225 million to the Qualified Plan during the first nine months of 2004. The Company made payments~~software licenses of $4 million ~~to participants in the Supplemental Plan~~ and ~~the Other Plans during the first nine months~~excludes sublease revenue of ~~2004~~$341 million and ~~expects to pay a total~~executory costs such as insurance, maintenance and taxes of ~~$1 million for the remainder of 2004.~~

~~13.~~$554 million. ~~Commitments~~

The following table sets forth certain of the Company’s long-term commitments, including the current portion as of ~~September 30, 2004:~~March 31, 2005:

	Commitment Expiration Per Period												Commitment Expiration Per Period
	Less than 1 year			1-3 years		4-5 years		Over 5 years		Total commitments			Less than 1 year			1-3 years		4-5 years			Over 5 years			Total commitments
	(In millions)												(In millions)
Standby resale agreements(1)		$	25	$	—	$	—	$	—		$	25
Private equity(2)		166		105		169		606			1,046
Operating lease obligations(3)		154		292		262		1,105			1,813
Forward agreements(4)		7,119		—		—		—			7,119
Standby resale agreements(1)														$	—	$	25		$	—		$	—		$	25
Private equity(2)														169		129			57			581			936
Forward agreements(3)														10,048		—			—			—			10,048
Unfunded mortgage commitments(4)														—		51			—			—			51
Total commitments		$	7,464	$	397	$	431	$	1,711		$	10,003		$	10,217	$	205		$	57		$	581		$	11,060

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

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

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
~~September 30, 2004~~March 31, 2005

~~13.~~7. Leases and Commitments (Continued)

(3) ~~Includes contractual obligations related to certain information technology, equipment leases and software licenses of $8 million and excludes sublease revenue of $314 million.~~

~~(4)~~ Represents commitments to enter into forward ~~agreements for~~ securities purchased under agreements to resell and forward agreements to borrow securities.

(4)The Company ~~had access~~enters into commitments to ~~standby letters~~extend credit, predominantly at variable interest rates, in connection with certain commercial mortgage activities.

Excluded from the table above are certain commitments to originate, purchase and sell mortgage whole loans. These commitments are reflected as derivatives contracts in the condensed consolidated statements of ~~credit of $1.5 billion as of September 30, 2004.~~ financial condition. For more information on the Company’s derivatives contracts see Note 5.

The Company ~~had $91~~used $55 million in outstanding standby letters of credit as of ~~September 30, 2004,~~March 31, 2005, in order to satisfy counterparty collateral requirements.

In connection with its residential mortgage business, the Company may from time to time arrange for the sale of certain qualifying mortgage loans or pools of mortgage loans (the “Loans”) to an unaffiliated entity (the “Purchaser”) pursuant to an agreement between the Company and the Purchaser. In accordance with the agreement, the Company may be required to repurchase one or more Loans, including the related hedge positions, from the Purchaser at its request in accordance with the terms of the agreement. As of September 30, 2004, the Purchaser has the right to request the Company to repurchase approximately $809 million of Loans from the Purchaser pursuant to the terms of the agreement.

The Company had no capital lease or purchase obligations as of ~~September 30, 2004.~~March 31, 2005. For information about certain of the Company’s additional commitments, see Notes ~~7, 8~~4 and ~~14.~~8.

~~14.~~8. Guarantees ~~Guarantees~~

In the ordinary course of business, the Company enters into guarantee contracts as guarantor. FIN No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”), requires disclosure by a guarantor of its maximum potential payment obligations under certain of its guarantees to the extent that it is possible to estimate them. FIN 45 also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligations undertaken in issuing such guarantee, including its ongoing obligation to stand ready to perform over the term of the guarantee in the event that certain events or conditions occur. With certain exceptions, these liability recognition requirements apply to any ~~new~~ guarantees entered into or ~~existing guarantees that are~~ modified after December 31, 2002.

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

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

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
~~September 30, 2004~~March 31, 2005

~~14.~~8. Guarantees (Continued)

The following table sets forth the maximum quantifiable contingent ~~liability~~liabilities and carrying ~~amount~~amounts associated with guarantees covered by FIN 45 as of ~~September 30, 2004~~March 31, 2005, by ~~maturity:~~maturity.

	Guarantee of Commitment Expiration Per Period															Guarantee of Commitment Expiration Per Period
	Less than 1 year			1-3 years		4-5 years		Over 5 years		Total guarantees			Carrying amount			Less than 1 year			1-3 years		4-5 years		Over 5 years		Total guarantees			Carrying amounts
	(In millions)															(In millions)
Credit guarantees		$	—	$	20	$	43	$	363		$	426		$	10		$	6	$	10	$	53	$	384		$	453		$	11
Performance guarantees		42		189		134		—			365			4			73		326		—		—			399			6
Derivatives		3,396		1,760		483		1,070			6,709			141			3,621		2,075		248		1,246			7,190			112
Related party guarantees		—		—		20		1			21			—			—		—		—		1			1			—
Indemnifications																	—		—		—		6			6			—
Total guarantees		$	3,438	$	1,969	$	680	$	1,434		$	7,521		$	155		$	3,700	$	2,411	$	301	$	1,637		$	8,049		$	129

~~Credit Guarantees~~

InFor more information on the ~~ordinary course of business~~Company’s guarantees, including guarantees for which the Company enters into contracts that would require it, as the guarantor, to make payments to the guaranteed party if a third party fails to pay under a credit obligation. As of September 30, 2004, the Company recorded liabilities of $10 million and had a maximum contingent liability ~~of $426 million under credit guarantees. These credit guarantees are described below.~~

~~As part~~cannot be quantified, see Note 10 of the ~~Company’s residential mortgage activities,~~consolidated financial statements in Part II, Item 8 in the ~~Company sells to~~Annual Report on Form 10-K for the Federal National Mortgage Association (“FNMA”) certain residential mortgages that it has purchased and agrees to bear a percentage of the losses should the borrowers fail to perform. In accordance with FIN 45, the Company did not recognize a liability for these guarantees because they were issued prior toyear ended December 31, ~~2002 and have not been modified. The Company’s maximum potential exposure related to these guarantees, assuming all the borrowers failed to perform, was $149 million as of September 30, 2004.~~

As part of the Company’s commercial mortgage activities, the Company sells to FNMA certain commercial mortgages that it has originated and agrees to bear a percentage of the losses should the borrowers fail to perform. As of September 30, 2004, in accordance with FIN 45, the Company recorded liabilities of $10 million related to these guarantees. The Company’s maximum potential exposure related to these guarantees, assuming all the borrowers failed to perform, was $277 million as of September 30, 2004.

~~Performance Guarantees~~9. Net Capital Requirements

InThe Company’s principal wholly owned subsidiary, CSFB LLC, is a registered broker-dealer, registered futures commission merchant and member firm of the ~~ordinary course of business,~~New York Stock Exchange Inc. (“NYSE”). Accordingly, the Company ~~enters into contracts that would require it, as the guarantor, to make payments~~is subject to the ~~guaranteed party~~minimum net capital requirements of the SEC and the Commodities Futures Trading Commission (“CFTC”). Under the alternative method permitted by SEC rule 15c3-1, the required net capital may not be less than the greater of 2% of aggregate debit balances arising from customer transactions or 4% of the funds required to be segregated pursuant to the Commodity Exchange Act less the market value of certain commodity options, all as defined. Under CFTC Regulation 1.17, the required minimum net capital requirement is 8% of the total risk margin requirement (as defined) for all positions carried in customer accounts plus 4% of the total risk margin requirement (as defined) for all positions carried in non-customer accounts. As of March 31, 2005, the CFTC’s minimum net capital requirement was greater than the SEC’s minimum net capital requirement. As of March 31, 2005, CSFB LLC’s net capital of approximately $2.8 billion was 40.8% of aggregate debit balances and in excess of the CFTC’s minimum requirement by approximately $2.6 billion.

The Company’s OTC derivatives dealer subsidiary, Credit Suisse First Boston Capital LLC (“CSFB Capital LLC”), is also subject to the uniform net capital rule, but computes its net capital based on value at risk under Appendix F of rule 15c3-1 under the ~~occurrence~~Securities Exchange Act of 1934. As of March 31, 2005, CSFB Capital LLC’s net capital of $302 million, allowing for market and credit risk exposure of $82 million and $43 million, respectively, was in excess of the minimum net capital requirement by $282 million. CSFB Capital LLC is in compliance with the exemptive provisions of Rule 15c3-3 because the Company does not carry securities accounts for customers or ~~non-occurrence of a specified event such as a third party’s failure~~perform custodial functions relating to ~~perform under an agreement.~~customer securities.

As ~~part~~ of ~~the Company’s residential mortgage securitization activities,~~March 31, 2005, the Company ~~at times guarantees the collection by the servicer~~ and remittance to the securitization trust of prepayment penalties. As of September 30, 2004, the Company recorded liabilities of $4 million related to these guarantees. As of September 30, 2004, the Company’s maximum exposure under the guarantees, assuming that every mortgage holder prepays and the servicers fail to collect and remit the prepayment penalties, was $365 million; however, the Company has recourse against the servicer.its subsidiaries complied with all applicable regulatory capital adequacy requirements.

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
~~September 30, 2004~~March 31, 2005

~~14.~~10. Cash and Securities Segregated ~~Guarantees (Continued)~~ Under Federal and Other Regulations

In compliance with the Commodity Exchange Act, CSFB LLC segregates funds deposited by customers and funds accruing to customers as a result of trades or contracts. As of March 31, 2005 and December 31, 2004, cash and securities aggregating $3.4 billion and $3.1 billion, respectively, were segregated or secured by CSFB LLC in separate accounts exclusively for the benefit of customers.

In accordance with the SEC’s no-action letter dated November 3, 1998, CSFB LLC computed a reserve requirement for the proprietary accounts of introducing broker-dealers. As of March 31, 2005 and December 31, 2004, CSFB LLC segregated securities aggregating $2.6 billion and $1.5 billion, respectively, on behalf of introducing broker-dealers.

In addition, CSFB LLC segregated U.S. Treasury securities with a market value of $4.8 billion and $4.4 billion as of March 31, 2005 and December 31, 2004, respectively, in a special reserve bank account exclusively for the benefit of customers as required by Rule 15c3-3 of the Exchange Act.

11. Share-Based Compensation

The Company participates in the Credit Suisse Group International Share Plan (the “Plan”). The Plan provides for share option and share awards to be granted to certain employees based on the fair market value of CSG shares at the time of grant. Effective January 1, 2005, the Company ~~at times guarantees any increases in servicing fees in connection~~early adopted the provisions of SFAS 123R on accounting for stock compensation using the modified prospective method. For additional information on the effect of adopting SFAS 123R, see Note 1.

Share Awards

Under the Plan, the Company grants share awards as part of incentive compensation with a three-year vesting period. Compensation expense is recognized over the ~~replacement~~vesting period on a straight-line basis. For share awards that are not granted as part of ~~the existing servicer that would otherwise be borne~~incentive compensation, compensation expense is recognized over a vesting period of one to five years on a straight-line basis.

The fair value of share awards is determined by the ~~securitization trust.~~market price of CSG shares on the date of grant. The weighted-average fair value at grant date for share awards granted during the three months ended March 31, 2005 and 2004 was $41.56 and $37.81, respectively. The number of share awards granted during the three months ended March 31, 2005 and 2004 was 17 million.

Share Option Awards

Under the Plan, the Company may grant share option awards as part of incentive compensation with a three-year vesting period. Compensation expense is recognized over the vesting period on a straight-line basis. For share option awards that are not part of incentive compensation, compensation expense is recognized on a straight-line basis over the service period, which ranges from two to four years. These awards expire ten years from the grant date. The Company did not ~~record a liability because it has determined that is it~~grant any share option awards during the three months ended March 31, 2005 and 2004.

Share option awards granted in or before January 2003 for services provided before January 1, 2003, if not ~~possible to estimate the fair value and the maximum amount of its obligations under these guarantees as of September 30, 2004.~~

~~Derivatives~~

In the ordinary course of business, the Company enters into 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 acquire the underlying financial instrument or require the Company to make a cash payment in an amount equal to the decline in value of the financial instrument underlying the OTC put option. Also included in this category are credit derivatives that may subject the Company to credit spread or issuer default risk because the change in credit spreads or the credit quality of the underlying financial instrument may obligate the Company to make a payment. The Company seeks to manage these OTC derivatives exposures by engaging in various hedging strategies to reduce its exposure.

FIN 45 does not require disclosures about derivatives instruments if they can be cash settled and the Company has no basis to conclude that it is probable that the counterparties held the underlying instruments related to the derivatives instruments at the inception of the contract. Derivatives meeting both of these criteria are not disclosed in the table above.

As of September 30, 2004, the Company recorded $141 million in derivatives that met the definition of a guarantee under FIN 45. These are reflected as derivatives contracts in the condensed consolidated statements of financial condition. The maximum gross contingent liability, excluding any potential offset from hedging activities related to these contracts, was $6.7 billion, of which $4.0 billion was with CSG affiliates, and represents the obligation of the Company in the event that all the underlying financial instruments are worthless, the likelihood of which the Company believes is remote. For more information on derivatives, see Note 11.

~~Related Party Guarantees~~

~~For purposes of FIN 45, related party guarantees refer to any guarantees issued by the Company~~subsequently modified, were previously accounted for obligations of any company (“affiliates”) controlled by CSG, the Company’s ultimate parent, unless it is one of the Company’s consolidated subsidiaries. Guarantees issued by the Company for the obligations of its consolidated subsidiaries are excluded because they do not create any incremental liability.

The Company issues guarantees to customers with respect to certain obligations of its affiliates in the ordinary course of business, including, but not limited to, certain derivatives transactions. Failure to perform by an affiliate would require the Company to perform under the ~~guarantee. The maximum contingent liability~~recognition and measurement provisions of ~~future payments of guarantees issued~~Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to counterparties of affiliates as of September 30, 2004 was $21 million. Excluded from this maximum contingent liability are certain guarantees for which an estimate cannot be made because the exposure is unlimited and therefore impossible to estimate. While the maximum contingent liability represents possible future payments under the guarantees, the Company believes that the likelihood of nonperformance by these affiliates is remote.Employees”.

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
~~September 30,~~March 31, 2005

11. Share-Based Compensation (Continued)

Upon adoption of SFAS 123R, compensation expense for these options that have future vesting requirements was recognized in the condensed consolidated statement of income.

If the Company had applied the fair-value based method under SFAS 123 to recognize expense over the relevant service period for share options that had future vesting requirements granted in or before January 2003, net income would have decreased for the three months ended March 31, 2004. For the three months ended March 31, 2005, there was no pro forma impact as compensation expense includes the fair value as of the grant date of all outstanding unvested share option awards granted. The following table reflects the pro forma effect for the three months ended March 31, 2004:

~~14.~~12. ~~Guarantees (Continued)~~

~~Guarantees Related to Private Equity Activities~~

As part of its private equity activities, the Company provides guarantees related to carried interest and performance thresholds. The amounts of such guarantees are included in the contingent obligations disclosed in Note 8.

~~Other Guarantees~~Employee Benefit Plans

The Company ~~has~~provides retirement and postretirement benefits to its U.S. and certain ~~guarantees~~non-U.S. employees through participation in defined benefit pension plans, a defined contribution plan and other post-retirement plans. The Company’s measurement date is September 30 for ~~which~~ its ~~maximum contingent liability cannot be quantified. These guarantees are not reflected~~pension and other plans. For more information on the Company’s employee benefit plans, see Note 16 of the consolidated financial statements in Part II, Item 8 in the ~~table above and are discussed below.~~

~~Indemnifications Issued in Connection with Asset Sales~~Annual Report on Form 10-K for the year ended December 31, 2004.

~~In connection with sales of certain assets or businesses,~~The following table presents the Company has provided purchasers customary indemnification provisions based on changes in an underlying asset or liability relating to the assets sold. These indemnification provisions are negotiated with the purchaser of the assets or businesses and vary in their scope and duration. These indemnification provisions generally shift the risk of certain unquantifiable and unknowable loss contingencies (~~e.g.~~, relating to litigation, tax and intellectual property matters) from the purchaser to the seller, as known or quantifiable loss contingencies generally are reflected in the value of the assets or businesses being sold. The Company has determined that it is not possible to make an estimate of the maximum contingent liability under these indemnification provisions. To date,pension expense by component for the Company’s ~~actual payments arising from these indemnification provisions have been in connection with litigation matters~~ defined benefit pension plans and ~~have not been material.~~

~~Tax Gross-up Arrangements~~

~~As a normal part of issuing its own securities,~~other post-retirement plans for the Company typically agrees to reimburse holders for additional tax withholding charges or assessments resulting from changes in applicable tax laws or the interpretation of those laws. Securities that include these agreements to pay additional amounts generally also include a related redemption or call provision if the obligation to pay the additional amounts results from a change in law or its interpretationthree months ended March 31, 2005 and the obligation cannot be avoided by the issuer taking reasonable steps to avoid the payment of additional amounts. Since such potential obligations are dependent on future changes in tax laws, the Company has determined that it is not possible to make an estimate of the maximum amount it could be obligated to pay as a result of such changes. In light of the related redemption or call provisions generally included in the securities, the Company does not expect any potential liabilities in respect of tax gross-ups to be material.2004:

	For the Three Months Ended March 31,
	2005				2004
	(In millions)
Components of Net Periodic Benefit Cost:
Service cost		$	6			$	7
Interest cost		11				11
Expected return on plan assets		(14		)		(13		)
Amortization of loss		5				6
Amortization of prior service cost		—				(1		)
Net periodic benefit cost		$	8			$	10

~~Exchange and Clearinghouse Memberships~~

The Company is a member of numerous securities exchanges and clearinghouses, and may, as a result of its membership arrangements, be required to perform if another member defaults. The Company has determined that it is not possible to estimate the maximum amount of these obligations and believes that any potential requirement to make payments under these arrangements is remote.

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
~~September 30, 2004~~March 31, 2005

~~15.~~12. ~~Industry Segment and Geographic Data~~

As of January 1, 2004, the Company transferred the private equity and private fund businesses from the Institutional Securities segment to the Financial Services segment, which has been renamed the Wealth & Asset Management segment. As a result, the Company changed the presentation of the Institutional Securities and Wealth & Asset Management segment results. In addition, the Company allocated to the segments merger-related costs and certain other costs and revenues, previously excluded from its reportable segments, which the Company believed did not represent normal operating costs and revenues. ~~Prior period segment numbers have been changed to conform to the new segment reporting structure.~~ Employee Benefit Plans (Continued)

The Company ~~operates~~did not make payments to the qualified pension plan during the three months ended March 31, 2005 and ~~manages its businesses through two operating segments:~~does not expect to make any payments during the ~~Institutional Securities segment, consisting primarily~~remainder of the ~~Investment Banking and Trading divisions;~~year ending December 31, 2005. The Company made payments of $1 million to participants in the supplemental plan and the ~~Wealth & Asset Management segment, consisting~~other post-retirement plans during the three months ended March 31, 2005 and expects to pay a total of $4 million during the remainder of the ~~Alternative Capital division, which includes the results of the private equity and private fund businesses, and the Private Client Services division.~~

The Company’s segments are managed based on types of products and services offered and their related client bases. The Company evaluates the performance of its segments based primarily on income (loss) from continuing operations before provision for income taxes and discontinued operations but excluding minority interests.

~~The Institutional Securities segment consists of:~~

· ~~the Investment Banking division, which serves a broad range of users and suppliers of capital and provides financial advisory and securities underwriting and placement services; and~~

· the Trading division, which trades and distributes equity and equity-related products, including listed and OTC derivatives, fixed income financial instruments and derivatives and risk management products, and engages in securities lending and borrowing.

~~The Institutional Securities segment also includes the results from legacy private equity and distressed assets.~~

~~The Wealth & Asset Management segment consists of:~~

· the Alternative Capital division, which includes the private equity and private fund businesses. The private equity business makes privately negotiated investments and acts as an investment advisor for private equity funds. The private fund business raises private capital, primarily from institutional investors, for direct investment by venture capital, management buyout and other investment firms in a variety of fund types; and

· the Private Client Services division, which is a financial advisory business serving high-net-worth individuals and corporate investors with a wide range of CSFB and third-party investment management products and services.

~~The Company allocates to its segments a~~ ~~pro rata~~ share of certain centrally managed costs, such as leased facilities and equipment costs, employee benefits and certain general overhead expenses based upon specified amounts, usage criteria or agreed rates, and allocates interest expense based upon the type of asset. The segmental allocation of some costs, such as incentive bonuses, is estimated.

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

~~15.~~ ~~Industry Segment and Geographic Data (Continued)~~

~~The following table sets forth certain financial information of the Company’s segments.~~

Institutional
Securities

Wealth & Asset
Management

Total
Segment

(In millions)

For the Three Months Ended September 30, 2004:

Net revenues excluding net interest

$
426

$
203

$
629

Net interest revenue

560

(6
)

554

Total net revenues(1)

986

197

1,183

Total expenses

984

138

1,122

Income(2)

2

59

61

Minority interests(3)

8

41

49

(Loss) Income after minority interests(4)

$
(6
)

$
18

12

For the Three Months Ended September 30, 2003:

Net revenues excluding net interest

$
221

$
132

$
353

Net interest revenue

694

16

710

Total net revenues(1)(5)

915

148

1,063

Total expenses

780

99

879

Income(2)(5)

135

49

184

Minority interests(3)

—

—

—

Income after minority interests(4)(5)

$
135

$
49

$
184

For the Nine Months Ended September 30, 2004:

Net revenues excluding net interest

$
1,805

$
1,100

$
2,905

Net interest revenue

1,790

35

1,825

Total net revenues(1)

3,595

1,135

4,730

Total expenses

3,103

434

3,537

Income(2)

492

701

1,193

Minority interests(3)

70

425

495

Income after minority interests(4)

$
422

$
276

$
698

For the Nine Months Ended September 30, 2003:

Net revenues excluding net interest

$
1,413

$
444

$
1,857

Net interest revenue

1,823

30

1,853

Total net revenues(1)(5)

3,236

474

3,710

Total expenses

2,916

367

3,283

Income(2)(5)

320

107

427

Minority interests(3)

—

—

—

Income after minority interests(4)(5)

$
320

$
107

$
427

Segment assets as of September 30, 2004(6)

$
266,941

$
3,786

$
270,727

Segment assets as of December 31, 2003

$
239,733

$
1,833

$
241,566

~~(1)~~Interest income and expense is accrued at the stated coupon rate for coupon-bearing financial instruments, and for non-coupon-bearing financial instruments, interest income is recognized by accreting the discount over the life of the instrument. For coupon-bearing financial instruments purchased at a discount or premium, the difference between interest income and expense accrued at the stated coupon rate and interest income and

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

~~15.~~ ~~Industry Segment and Geographic Data (Continued)~~

expense determined on an effective yield basis is included in principal transactions-net in the Company’s condensed consolidated statements of income and in net revenues excluding net interest above.

~~(2)Income from continuing operations before provision (benefit) for income taxes, minority interests and discontinued operations.~~

~~(3)Related to the Company’s consolidation of certain private equity funds.~~

~~(4)Income (loss) from continuing operations before provision (benefit) for income taxes and discontinued operations.~~

~~(5)~~In early 2004, management identified erroneous profit recorded in Institutional Securities in the three and nine months ended September 30, 2003 on certain intercompany residential mortgage securitization-related transactions. The Company has restated total net revenues and income from continuing operations from that filed with the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 2003. For the three and nine-months ended September 30, 2003, each of total net revenues and income from continuing operations has been reduced by $37 million and $24 million, respectively, as previously disclosed in the Annual Report on Form 10-K for the year ~~ended~~ending December 31, ~~2003 and the June 4 Form 8-K.~~

~~(6)~~The Institutional Securities and Wealth & Asset Management segment assets as of September 30, 2004 include $522 million and $879 million, respectively, related to the Company’s consolidation of certain private equity funds.

~~The Company’s principal operations are located in the United States. The Company’s foreign revenues are not significant.~~2005.

~~16.~~ ~~Goodwill and Identifiable Intangible Assets~~

On January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), which addresses the initial recognition and measurement of intangible assets acquired outside a business combination and the recognition and measurement of goodwill and other intangible assets subsequent to acquisition. Under the standard, goodwill and indefinite-lived intangible assets are reviewed annually for impairment instead of being amortized to earnings. Intangible assets that do not have indefinite lives will continue to be amortized over their useful lives and reviewed for impairment.

As of September 30, 2004 and December 31, 2003, the Company had $527 million and $532 million, respectively, of goodwill. In September 2004, the Company reduced its interest in PM Realty Group, LP, a real estate management company, resulting in a decrease in goodwill of $5 million. As of September 30, 2004 and December 31, 2003, the Company had identifiable intangible assets (primarily software and customer lists, which are being amortized over useful lives ranging from 3 to 20 years) of $40 million and $46 million, net of accumulated amortization of $51 million and $47 million, respectively, included in other assets and deferred amounts in the condensed consolidated statements of financial condition.

~~17.~~13. Legal Proceedings

The Company is involved in a number of judicial, regulatory and arbitration proceedings concerning matters arising in connection with the conduct of its businesses. ~~These actions have been brought on behalf of various classes of claimants and, unless otherwise specified, seek damages of material and/or~~

~~CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES~~
~~Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)~~
~~September 30, 2004~~

~~17.~~ ~~Legal Proceedings (Continued)~~

~~indeterminate amounts.~~ The Company believes, based on currently available information and advice of counsel, that the results of such proceedings, in the aggregate, will not have a material adverse effect on its financial condition but might be material to operating results for any particular period, depending, in part, upon the operating results for such period.

It is inherently difficult to predict the outcome of many of these matters. In presenting the condensed consolidated financial statements, management makes estimates regarding the outcome of these matters and records a reserve and takes a charge to income when losses with respect to such matters are probable and can be reasonably estimated. Estimates, by their nature, are based on judgment and currently available information and involve a variety of factors, including, but not limited to, the type and nature of the litigation, claim or proceeding, the progress of the matter, the advice of legal counsel, the Company’s defenses and its experience in similar cases or proceedings.

3614. Industry Segment and Geographic Data

The Company operates and manages its businesses through two operating segments: the Institutional Securities segment, consisting primarily of Investment Banking, Trading and certain separately managed private equity and distressed assets; and the Wealth & Asset Management segment, consisting of Alternative Capital, which includes the results of the private equity and private funds businesses, and Private Client Services. For further information on the segments, see Note 19 of the consolidated financial statements in Part II, Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2004.

CREDIT SUISSE FIRST BOSTON (USA), INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued)
March 31, 2005

14. Industry Segment and Geographic Data (Continued)

The following table sets forth the net revenues excluding net interest, net interest revenue, total net revenues, total expenses and income before provision for income taxes and cumulative effect of a change in accounting principle and assets of the Company’s segments.

	Institutional Securities			Wealth & Asset Management			Total Segments
	(In millions)
For the three months ended March 31, 2005:
Net revenues excluding net interest		$	767		$	289	$	1,056
Net interest revenue		567			10		577
Total net revenues(1)		1,334			299		1,633
Total expenses		1,093			149		1,242
Income(2)		241			150		391
Minority interests(3)		54			101		155
Income after minority interests(4)		$	187		$	49	$	236
Segment assets as of March 31, 2005(5)		$	284,674		$	4,771	$	289,445
For the three months ended March 31, 2004:
Net revenues excluding net interest		$	703		$	230	$	933
Net interest revenue		637			10		647
Total net revenues(1)		1,340			240		1,580
Total expenses		1,095			158		1,253
Income(2)		245			82		327
Minority interests(3)		27			54		81
Income after minority interests(4)		$	218		$	28	$	246
Segment assets as of December 31, 2004(5)		$	271,203		$	4,610	$	275,813

(1) Interest income and expense is accrued at the stated coupon rate for coupon-bearing financial instruments, and for non-coupon-bearing financial instruments, interest income is recognized by accreting the discount over the life of the instrument. For coupon-bearing financial instruments purchased at a discount or premium, the difference between interest income and expense accrued at the stated coupon rate and interest income and expense determined on an effective yield basis is included in principal transactions-net in the Company’s condensed consolidated statements of income and in net revenues excluding net interest above.

(2) Income before provision for income taxes, minority interests and cumulative effect at a change in accounting principle.

(3) Related to the Company’s consolidation of certain private equity funds. See Note 3 for more information.

(4) Income before provision for income taxes and cumulative effect of a change in accounting principle.

(5) The Institutional Securities and Wealth & Asset Management segment assets include $510 million and $1.2 billion, respectively, as of March 31, 2005 and $494 million and $1.5 billion, respectively, as of December 31, 2004, related to the Company’s consolidation of certain private equity funds.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholder
Credit Suisse First Boston (USA), Inc.:

We have reviewed the accompanying condensed consolidated statement of financial condition of Credit Suisse First Boston (USA), Inc. and subsidiaries (the “Company”) as of ~~September 30, 2004,~~March 31, 2005, the related condensed consolidated statements of income for the ~~three and nine-month~~three-month periods ended ~~September 30,~~March 31, 2005 and 2004, ~~and 2003,~~ and the related condensed consolidated statements of changes in ~~stockholders’~~stockholder’s equity and cash flows for the ~~nine-month~~three-month periods ended ~~September 30, 2004~~March 31, 2005 and ~~2003.~~2004. These condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial condition of Credit Suisse First Boston (USA), Inc. and subsidiaries as of December 31, ~~2003,~~2004, and the related consolidated statements of income, changes in ~~stockholders’~~stockholder’s equity, and cash flows for the year then ended (not presented herein); and in our report dated ~~May 19, 2004,~~March 17, 2005, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial condition as of December 31, ~~2003~~2004 is fairly stated, in all material respects, in relation to the consolidated statement of financial condition from which it has been derived.

As discussed in Note 1 to the condensed consolidated financial statements, in 2005 the Company changed its method of accounting for share-based compensation.

/s/ KPMG LLP
New York, New York ~~November 8, 2004~~
May 10, 2005

3726

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~
~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

We ~~are a leading integrated investment bank serving~~serve institutional, corporate, government and high-net-worth individual clients. Our businesses include securities underwriting, sales and trading, financial advisory services, alternative investments, full-service brokerage services, derivatives and risk management products and investment research. We are part of the Credit Suisse First Boston business unit, which we call CSFB, of Credit Suisse Group, or CSG, and our results do not ~~necessarily~~ reflect the overall performance of CSFB or CSG.

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

The Company’s principal operations are located in the United States. The Company’s foreign revenues are not significant.

BUSINESS ENVIRONMENT

Our principal business activities, investment banking, ~~private equity,~~ securities underwriting and sales, trading and ~~trading,~~wealth and asset management, are, by their nature, highly competitive and subject to general market conditions that include volatile trading markets, ~~and~~ fluctuations in the volume of new issues, ~~and public and private~~ mergers and acquisitions activities and ~~fluctuations in~~ the value of ~~financial instruments.~~securities. Consequently, our results have been, and are likely to continue to be, subject to ~~significant~~wide fluctuations reflecting the impact of many factors beyond our control, including securities market conditions, the level and volatility of interest rates, competitive conditions, the size and timing of transactions and the geopolitical environment.

The ~~strong growth that characterized the direction of the~~ U.S. economy ~~late in 2003 and early in 2004 deteriorated in the third quarter of 2004 as the U.S gross domestic product grew~~expanded at a ~~slower~~moderate pace ~~and~~during the ~~job market weakened. High~~first three months of 2005 despite rising oil prices and the negative implications they have on consumer spending and corporate profitability contributed to a slide in stock prices and a rise in bond prices. While recent increases in construction spending, auto sales and manufacturing appear to show the economy gaining momentum, high oil prices,that sparked inflation concerns. Although mixed ~~economic~~employment data ~~and geopolitical uncertainties continue to raise~~raised concerns about the ~~economy and create challenging markets.~~durability of the economy’s expansion, the Federal Reserve Board continued to raise interest rates at a measured pace but implied that interest rate increases may be less measured in the future.

~~For the three and nine months ended September 30, 2004, the~~The major U.S. stock market indices ~~were primarily down,~~posted losses during the three months ended March 31, 2005 reflecting ~~disappointing corporate earnings, higher oil prices and~~ rising interest ~~rates.~~rates and concerns over inflation. For the three months ended ~~September 30, 2004,~~March 31, 2005, the Dow Jones Industrial Average, the Standard & Poor’s 500 stock index and the NASDAQ composite index ~~declined~~decreased 3%, 2%3% and 7%8%, respectively. ~~The Dow Jones Industrial Average and the NASDAQ composite index decreased 4% and 5%, respectively and the Standard & Poor’s 500 stock index was flat for the nine months ended September 30, 2004.~~

The federal funds rate was 2.75% as of March 31, 2005 compared to 2.25% as of December 31, 2004 as the Federal Reserve Board increased the federal funds rate twice during the three ~~times beginning June 30, 2004. As~~months ended March 31, 2005. Unlike 2004, when well-telegraphed and measured rate increases along with demand for U.S. treasuries by foreign central banks kept bond yields stable, during the three months ended March 31, 2005, concerns over inflation, signals that the Federal Reserve Board may speed up the pace of ~~September 30, 2004,~~rate increases and lower demand for U.S. treasuries by foreign central banks pushed bond yields higher. The yield on the ~~federal funds rate was 1.75% compared to 1%~~benchmark 10-year Treasury note rose from 4.22% as of December 31, ~~2003. Long-term interest rates declined in the third quarter~~2004 to 4.49% as of ~~2004 and the yield curve flattened. Treasury bond prices rose as soft economic data caused concern about the outlook of the economy. Corporate bonds also performed well during the quarter.~~March 31, 2005.

The dollar value of U.S. debt underwriting decreased for the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003, led by a decline in mortgage-backed new issues. The dollar value of U.S. debt underwriting increased slightlydeclined for the three months ended ~~September 30, 2004~~March 31, 2005 compared to the three months ended ~~September 30, 2003,~~March 31, 2004, as ~~increases in asset-backed underwriting were partially offset by a decline in mortgage-backed securities~~high-yield and investment grade new issues. The dollar value of U.S. equity and equity-related underwriting increased moderately in the first nine months of 2004 compared to the first nine months of 2003, as increases in primary and secondary offerings of common stock were partially offset by decreases in convertible securities issuances.issues declined. The dollar value of U.S. equity and equity-related underwriting decreased for the three months ended ~~September 30, 2004~~March 31, 2005 compared to the three months

ended ~~September 30, 2003, primarily reflecting a decrease~~March 31, 2004, as decreases in secondary offerings of common stock and convertible securities ~~issuances. Mergers and acquisitions activity showed signs~~issuances were partially offset by increases in initial public offerings of ~~recovery as the~~common stock. The dollar value of completed mergers and acquisitions in the United States increased for the three ~~and nine~~ months ended ~~September 30, 2004~~March 31, 2005 compared to the three ~~and nine~~ months ended ~~September 30, 2003.~~March 31, 2004, reflecting an increase in both the size and number of transactions.

MANAGEMENT OVERVIEW

~~Net income of $19 million decreased compared to third quarter 2003 net income of $131 million, reflecting improved revenues offset by higher expenses,~~Despite rising interest rates and ~~a small income tax benefit. Net revenues~~declines in the ~~third quarter~~major U.S. stock market indices and the dollar value of ~~2004~~U.S. debt and equity underwriting activity, the Company’s net revenues for the three months ended March 31, 2005 increased ~~$120 million~~3% compared to the ~~third quarter of 2003.~~three months ended March 31, 2004. The ~~increase was~~improved results primarily ~~attributed to improvements in~~reflected higher revenues from fixed income trading offset in part by significant decreases in underwriting, advisory and equity trading revenues. Revenues from ~~Institutional Securities and the~~our Alternative Capital business increased, reflecting our consolidation of certain private equity funds, ~~which increased net revenues by $55 million. Net trading revenues increased 16%~~primarily under Financial Accounting Standards Board, or FASB, Interpretation, or FIN, No. 46 “Consolidation of Variable Interest Entities,” or FIN 46, as ~~increases in fixed income trading revenues were partially offset by decreases in~~subsequently modified, FIN 46R. Revenues from our private client services business decreased slightly, reflecting weaker equity ~~trading revenues. Investment Banking revenues~~capital markets. Operating expenses for the ~~Institutional Securities segment~~three months ended March 31, 2005 decreased 9%, reflecting a decline in debt and equity underwriting and essentially flat advisory and other fees. Total expenses increased 28% primarily due to increases in incentive compensation, higher severance expenses and increased base salary expenses. The increase in incentive compensation reflected the introduction of vesting for stock awards in the third quarter of 2003 and the reversal of $85 million of expenses accrued in the first half of 2003.

Net income of $478 million decreased compared to first nine months 2003 net income of $1.2 billion, primarily reflecting the after-tax gain of $852 million from the sale of Pershing in the second quarter of 2003. Net revenues in the first nine months of 2004 increased $1.0 billion1% compared to the ~~first nine~~three months of 2003, primarily due to significant gains from Wealth & Asset Management private equity investments, the consolidation of certain private equity funds, which increased net revenues by $501 million, and improvements in fixed income trading from Institutional Securities. Net trading revenues for Institutional Securities increased 8% as increases in fixed income trading revenues were partially offset by decreases in equity trading revenues. Investment Banking revenues for the Institutional Securities segment decreased 4%,ended March 31, 2004, reflecting ~~declines in debt underwriting and essentially flat advisory and other revenues offset in part by an increase in equity underwriting. Total expenses increased 8% primarily due to increases in~~slightly lower employee compensation and benefits ~~including higher incentive compensation, severance~~ expenses and slightly increased ~~base salary expenses, offset in part by~~other operating expenses. Net income increased, reflecting higher revenues and modestly lower ~~merger-related costs and other~~ expenses.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In order to prepare the condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, we must make estimates and assumptions based on judgment and available information. The reported amounts of assets and liabilities and revenues and expenses are affected by these estimates and assumptions. Actual results could differ from these estimates, and the differences could be material.

Our significant accounting policies and a discussion of new accounting pronouncements are disclosed in Note 1 of the consolidated financial statements in Part II, Item 8 in our Annual Report on Form 10-K for the year ended December 31, ~~2003.~~2004 and Note 1 of the condensed consolidated financial statements in Part I, Item 1. We believe that the critical accounting policies discussed below involve the most complex judgments and assessments. We believe that the estimates and assumptions used in the preparation of the condensed consolidated financial statements are prudent, reasonable and consistently applied.

Fair Value

As is the normal practice in our industry, the values we report in the condensed consolidated financial statements with respect to ~~Financial~~financial instruments owned and ~~Financial~~financial instruments sold not yet purchased

are in most cases based on fair value, with related unrealized and realized gains or losses included in the condensed consolidated statements of income. Commercial mortgage whole loans are carried at the lower of aggregate cost or fair value and certain residential mortgage whole loans held for sale are carried at the lower of ~~aggregate~~ cost or fair value.

Fair value may be objective, as is the case for exchange-traded instruments, for which quoted prices in price-efficient and liquid markets generally exist, or as is the case where a financial instrument’s fair value is derived from actively quoted prices or pricing parameters or alternative pricing sources with a reasonable level of price transparency. For financial instruments that trade infrequently and have little price transparency, fair value may be subjective and require varying degrees of judgment depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument. In such circumstances, valuation is based on management’s best estimate of fair value. In addition, valuation of financial instruments ordinarily based on quoted prices may be distorted in times of market dislocation.

Controls Over Fair Valuation Process

Control processes are applied to ensure that the fair value of the financial instruments reported in our condensed consolidated financial statements, including those derived from pricing models, are appropriate

and measured on a reliable basis. The Company bases fair value on observable market prices or market-based parameters whenever possible. In the absence of observable market prices or market-based parameters in an active market or from comparable market transactions, or other observable data supporting fair value based on a model at the inception of a contract, fair value is based on the transaction price. Control processes are designed to ensure that the valuation approach is appropriate and the assumptions are reasonable.

Control processes include the approval of new products, review of profit and loss, risk monitoring and review, price verification procedures and reviews of models used to price financial instruments by senior management and personnel with relevant expertise who are independent of the trading and investment functions.

The Company also has agreements with certain counterparties to exchange collateral based on the fair value of derivatives contracts. Through this process, one or both parties provide the other party with the fair value of these derivatives contracts in order to determine the amount of collateral required. This exchange of information provides additional support for the Company’s derivatives contracts valuations. As part of the Company’s over-the-counter, or OTC, derivatives business, the Company and other participants provide pricing information to aggregation services that compile this data and provide this information to subscribers. This information is considered in the determination of fair value for certain OTC derivatives.

For further discussion of our risk management policies and procedures, see “Quantitative and Qualitative Disclosures About Market Risk” in Part ~~I, Item 3 and in Part~~ II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2003.~~2004.

Valuation

For purposes of valuation, we categorize our financial instruments as cash products, derivatives contracts and private equity and other long-term investments. ~~As of September 30, 2004 and December 31, 2003,~~The table below presents the ~~fair~~carrying value of our cash products, derivatives contracts and private equity and other long-term investments ~~was:~~as of March 31, 2005 and December 31, 2004. Included in cash products are commercial mortgage whole loans, which are carried at the lower of the aggregate cost or fair value, and certain residential mortgage whole loans, which are carried at the lower of the cost or fair value.

	As of September 30, 2004						As of December 31, 2003						As of March 31, 2005						As of December 31, 2004
	Financial instruments owned			Financial instruments sold not yet purchased			Financial instruments owned			Financial instruments sold not yet purchased			Financial instruments owned			Financial instruments sold not yet purchased			Financial instruments owned			Financial instruments sold not yet purchased
	(In millions)												(In millions)
Cash products		$	92,414		$	39,703		$	73,210		$	31,790		$	102,179		$	39,809		$	96,097		$	28,402
Derivatives contracts		5,508			4,149			5,573			3,955			4,348			2,840			3,663			2,295
Private equity investments		2,615			—			1,123			—
Private equity and other long-term investments														3,119			—			3,127			—
Total		$	100,537		$	43,852		$	79,906		$	35,745		$	109,646		$	42,649		$	102,887		$	30,697

Cash Products

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

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

For certain high-yield debt securities that are thinly traded or for which market prices are not available, valuation is based on recent market transactions, taking into account changes in the creditworthiness of the issuer, and pricing models to derive yields reflecting the perceived risk of the issuer or country rating and the maturity of the security. ~~These factors contribute to significant subjectivity in the~~Such valuation ~~of these financial instruments.~~may involve judgment.

Financial instruments held in the distressed portfolio are typically issued by private companies under significant financial burden and/or near bankruptcy. Because of the less liquid nature of these financial instruments, valuation techniques often include earnings-multiple analyses ~~similar market transactions and default recovery analyses.~~using comparable companies or discounted cash flow analysis. These factors contribute to significant subjectivity in the valuation of these financial instruments.

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

Values of residential and commercial mortgage-backed securities and other asset-backed securities that are not based on quoted market prices or prices at which similarly structured and collateralized securities trade between dealers and to and from customers are valued using pricing models employing prepayment scenarios and Monte Carlo simulations.

CDOs are structured securities based on underlying portfolios of asset-backed securities, certain residential and commercial mortgage securities, high-yield and investment grade corporate bonds, leveraged loans and other debt obligations. These instruments are split into various structured tranches, and each tranche is priced based upon its individual rating and the value or cash flow of the underlying collateral supporting the structure. Values are derived using pricing models that involve projected cash flows, default recovery analysis and other assumptions, and such valuations involve judgment.

For convertible securities that are thinly traded or for which no market prices are available, internal models are used to derive fair value. The terms and conditions of the security are factored into the model, along with market inputs such as underlying equity price, equity price volatility and credit spread. Certain adjustments are made to the derived theoretical values for high concentration levels and low trading volumes.

Derivatives Contracts

Our derivatives contracts consist of ~~OTC~~exchange-traded and ~~exchange-traded~~OTC derivatives, and the fair value of these as of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003~~2004 was as follows:

	As of September 30, 2004						As of December 31, 2003						As of March 31, 2005					As of December 31, 2004
	Assets			Liabilities			Assets			Liabilities			Assets		Liabilities			Assets			Liabilities
	(In millions)												(In millions)
Exchange-traded		$	2,417		$	2,232		$	2,552		$	2,292	$	567		$	453		$	695		$	598
OTC		3,091			1,917			3,021			1,663		3,781			2,387			2,968			1,697
Total		$	5,508		$	4,149		$	5,573		$	3,955	$	4,348		$	2,840		$	3,663		$	2,295

The fair value of exchange-traded derivatives is typically derived from the observable exchange price and/or observable market parameters. Our primary exchange-traded derivatives include ~~futures and~~ certain option agreements. OTC derivatives include forwards, swaps and options on foreign exchange, interest rates, equities and credit products. Fair values for OTC derivatives are determined ~~on the basis of~~using internally developed proprietary models using various input parameters. The input parameters include those characteristics of the derivative that have a bearing on the economics of the instrument and market parameters. In well-established derivatives markets, the use of a particular model may be widely accepted. For example, the Black-Scholes model 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 to facilitate the effective risk management of the portfolio. The determination of the fair value of many derivatives involves only limited subjectivity because the required input parameters are observable in the marketplace. For other more complex derivatives, subjectivity relating to the determination of input parameters reduces price transparency. Specific areas of subjectivity include long-dated volatilities on OTC option transactions and recovery rate assumptions for credit derivatives transactions. Uncertainty of pricing assumptions and liquidity are also considered as part of the valuation process. Because of these uncertainties, we do not recognize a dealer profit or unrealized gain at the inception of a derivatives transaction unless the valuation underlying the unrealized gain is evidenced by quoted market prices in an active market, observable prices of other current market transactions or other observable data supporting a valuation technique in accordance with Emerging Issues Task Force Issue No. 02-3, “Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities.” As of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003,~~2004, most of the replacement values reported in our condensed consolidated statements of financial condition were derived using observable input parameters. For further information on the fair value of derivatives as of ~~September 30,~~

~~2004~~March 31, 2005 and December 31, ~~2003,~~2004, see “—Derivatives—Sources and Maturities of OTC Derivatives” and Note 115 of the condensed consolidated financial statements in Part I, Item 1.

Private ~~Equity Investments~~equity and other long-term investments

Private equity and other long-term investments include direct investments and investments in partnerships that make private equity and related investments in various portfolio companies and funds. Private equity investments and other long-term investments consist of both publicly traded securities and private securities. Publicly traded investments are valued based upon readily available market quotes with appropriate adjustments for liquidity as a result of holding large blocks and/or having trading restrictions. Private securities, which generally have no readily available market or may be otherwise restricted as to resale, are valued taking into account a number of factors, such as the most recent round of financing involving unrelated new investors, earnings-multiple analyses using comparable companies or discounted cash flow ~~analysis.~~analysis, and have little or no price transparency.

The Company categorizes its private equity investments into three categories: CSFB-managed funds (which include certain funds consolidated primarily under FIN 46R), funds managed by third parties and

direct investments. ~~The increase in CSFB-managed funds reflects our consolidation primarily under the~~ ~~Financial Accounting Standards Board Interpretation, or FIN, No. 46, “(Revised 2003) Consolidation of Variable Interest Entities,” or FIN 46R,~~ ~~of certain private equity funds. For more information see Note 6 of the condensed consolidated financial statements in Part I, Item 1.~~ The following table sets forth the fair value of our private equity investments by category as of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003:~~2004:

	As of September 30, 2004						As of December 31, 2003						As of March 31, 2005						As of December 31, 2004
	Fair value			Percent of total			Fair value			Percent of total			Fair value			Percent of total			Fair value			Percent of total
	(In millions)						(In millions)						(In millions)						(In millions)
CSFB-managed funds		$	2,208		84	%		$	839		74	%
CSFB-managed funds (which includes $1,825 and $1,947 related to funds consolidated primarily under FIN 46R(1) as of March 31, 2005 and December 31, 2004, respectively)														$	2,648		85	%		$	2,670		85	%
Funds managed by third parties		392			15			279			25			455			14			442			14
Direct investments		15			1			5			1			16			1			15			1
Total		$	2,615		100	%		$	1,123		100	%		$	3,119		100	%		$	3,127		100	%

(1) For more information on the funds consolidated primarily under FIN 46R as of March 31, 2005 and December 31, 2004, see Note 3 of the condensed consolidated financial statements in Part I, Item 1.

CSFB-Managed Funds. CSFB-managed funds are partnerships and related ~~“side~~“side-by-side” direct investments made by ~~side” direct investments~~our subsidiaries for which CSFB acts as the fund’s advisor and makes investment decisions. As of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003,~~2004, approximately ~~92%~~7% and ~~80%~~10%, respectively, of CSFB-managed fund investments, ~~(excluding minority interests in~~excluding private equity funds that were consolidated primarily under FIN ~~46R)~~46R, were ~~in private~~public securities. The fair value of our investments in CSFB-managed ~~fund of~~ funds ~~partnerships~~ is based on our valuation or, in the ~~valuation~~case of funds of funds, valuations received from the underlying fund ~~manager.~~manager and reviewed by us.

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

Direct Investments. Direct investments are generally debt and equity securities that are not made through or ~~“side by side”~~“side-by-side” with CSFB-managed funds and consist of public and private securities. These investments are priced in accordance with the procedures for CSFB-managed ~~or third-party managed~~ funds. As of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003,~~2004, approximately ~~81%~~29% and ~~82%~~22%, respectively, of direct investments were ~~in private~~public securities.

Income Taxes

Deferred Tax Assets

We recognize deferred tax assets and liabilities for the estimated future tax effects of operating loss carry-forwards and temporary differences between the carrying amounts of existing assets and liabilities and their respective tax bases as of the ~~balance sheet date.~~date of the statement of financial condition.

The realization of deferred tax assets on temporary differences is dependent upon the generation of taxable income during the periods in which those temporary differences become deductible. The realization of deferred tax assets on net operating losses is dependent upon the generation of 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 a deferred tax asset will not be realized, a corresponding valuation allowance is established. In evaluating whether deferred tax assets can be realized, management considers projected future taxable income, the scheduled reversal of deferred tax liabilities and tax planning strategies.

This evaluation requires significant management judgment, primarily with respect to projected taxable income. The estimate of future taxable income can never be predicted with certainty. It is derived from budgets and strategic business plans but is dependent on numerous factors, some of which are beyond our control. Substantial variance of actual results from estimated future taxable ~~income,~~profits, or changes in our estimate of future taxable ~~income,~~profits, could lead to changes in deferred tax assets being realizable or considered realizable, and would require a corresponding adjustment to the valuation allowance.

As of ~~September 30,~~March 31, 2005 and December 31, 2004, we had deferred tax assets resulting from temporary differences that could reduce taxable income in future periods. The condensed consolidated statements of financial condition as of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003~~2004 include deferred tax assets of ~~$1.7~~$1.5 billion and $1.6 billion, respectively, and deferred tax liabilities of ~~$376~~$450 million and ~~$375~~$438 million, respectively. Due to uncertainty concerning our ability to generate the necessary amount and mix of state and local taxable income in future periods, we maintained a valuation allowance against our deferred state and local tax assets in the amount of ~~$35~~$28 million and ~~$36~~$32 million as of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003,~~2004, respectively. ~~For further information on~~

Tax Contingencies

Significant judgment is required in determining the ~~temporary differences~~effective tax rate and in evaluating certain of our tax positions. We accrue for tax contingencies when, despite our belief that ~~generate deferred~~our tax ~~assets, see Note 5~~return positions are fully supportable, certain positions could be challenged and our positions may not be fully sustained. Once established, tax contingency accruals are adjusted due to changing facts and circumstances, such as case law, progress of audits or when an event occurs requiring a change to the ~~condensed consolidated financial statements in Part I, Item 1.~~tax contingency accruals. We regularly assess the likelihood of adverse outcomes to determine the appropriateness of our provision for income taxes. Although the outcome of any dispute is uncertain, management believes that it has appropriately accrued for any unfavorable outcome.

Litigation Contingencies

From time to time, we are involved in a variety of legal, regulatory and arbitration matters in connection with the conduct of our business. It is inherently difficult to predict the outcome of many of these matters, particularly those cases in which the matters are brought on behalf of various classes of claimants, seek damages of unspecified or indeterminate amounts or involve novel legal claims. In presenting our condensed consolidated financial statements, management makes estimates regarding the outcome of legal, regulatory and arbitration matters and takes a charge to income when losses with respect to such matters are probable and can be reasonably estimated. Charges, other than those taken periodically for cost of defense, are not established for matters when losses cannot be reasonably estimated. Estimates, by their nature, are based on judgment and currently available information and involve a variety of factors, including, but not limited to, the type and nature of the litigation, claim or proceeding, the progress of the matter, the advice of legal counsel and other advisers, our defenses and our experience in similar cases or proceedings. For a discussion of legal proceedings, see “Legal Proceedings” in Part II, Item 1.

~~RECENT DEVELOPMENTS~~33

On June 4, 2004, we filed on Form 8-K audited consolidated statements of financial condition as of December 31, 2003 and 2002 and the related audited consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the three years ended December 31, 2003, 2002 and 2001 and related notes, restated to reflect the transfer of the high-net-worth business and updated segment information to reflect the segment changes made effective January 1, 2004. ~~The Form 8-K filed on June 4, 2004 also includes a revised discussion of the Company’s results of operations to reflect the transfer of the high-net-worth business and change in segments.~~

On May 17, 2004, we entered into a memorandum of understanding with TXU Energy Company LLC, a Texas-based energy trading company, or TXU, to work together to form an independent energy trading entity to market and trade power, natural gas and other energy-related commodities in North America. After a detailed review of the proposal, TXU and we were unable to agree on an economic arrangement that met each side’s objectives and on September 29, 2004, TXU and we agreed not to form this entity.

On March 31, 2004, Credit Suisse First Boston, Inc., or CSFBI, our immediate parent company, transferred the high-net-worth business of Credit Suisse Asset Management, LLC, or CSAM, a wholly owned subsidiary of CSFBI, to us as a capital contribution of $221 million, and this business is part of our Private Client Services business. The transfer of this business was accounted for at historical cost in a manner similar to pooling-of-interest accounting because CSAM and we were under the common control of CSFBI at the time of transfer. Accordingly, we have restated our financial information for all periods presented to reflect the results of operations, financial condition, cash flows and changes in stockholders’ equity of the CSAM high-net-worth business as if we had acquired it on November 3, 2000, the date that we were acquired by CSFBI. The transferred assets of this business consist principally of goodwill and intangible assets relating primarily to CSAM’s acquisition of Warburg Pincus Asset Management in 1999. In December 2003, CSAM wrote down the value of its high-net-worth intangible assets, resulting in a pre-tax loss of $200 million and an after-tax loss of $130 million, and this loss is reflected in our restated audited consolidated financial statements.

RESULTS OF OPERATIONS

The following table sets forth a summary of our financial results for the three and nine months ended September 30, 2004 and 2003. On May 1, 2003, we sold the Pershing unit, or Pershing, to The Bank of New York Company, Inc. The results of operations for Pershing, including the gain on the sale, are presented as discontinued operations in the condensed consolidated statements of income and in the following table.results:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,				For the Three Months Ended March 31,
	2004			2003		2004		2003		2005		2004
	(In millions)									(In millions)
Total net revenues	$	1,183		$	1,063	$	4,730	$	3,710	$	1,633	$	1,580
Total expenses	1,122			879		3,537		3,283		1,242		1,253
Income from continuing operations before provision for income taxes, minority interests and discontinued operations	61			184		1,193		427
(Benefit) Provision for income taxes	(7		)	53		220		113
Income before provision for income taxes, minority interests and cumulative effect of a change in accounting principle										391		327
Provision for income taxes										66		79
Minority interests	49			––		495		––		155		81
Income from continuing operations	19			131		478		314
Income from discontinued operations, net of income tax provision	––			––		––		876
Income before cumulative effect of a change in accounting principle										170		167
Cumulative effect of a change in accounting principle, net of income tax expense of $3										6		—
Net income	$	19		$	131	$	478	$	1,190	$	176	$	167

In early 2004, we identified erroneous profit recorded in the three and nine months ended September 30, 2003 on certain intercompany residential mortgage securitization-related transactions. We have restated total net revenues, income from continuing operations and net income from that filed with the Securities and Exchange Commission on Form 10-Q for the quarterly period ended September 30, 2003. For the three and nine-months ended September 30, 2003, each of total net revenues and income from continuing operations has been reduced by $37 million and net income has been reduced by $24 million as previously reported in our Annual Report on Form 10-K for the year ended December 31, 2003 and in our Form 8-K filed on June 4, 2004.

Substantially all of our inventory is marked to market daily and, therefore, the value of such inventory and our net revenues are subject to fluctuations based on market movements. In addition, net revenues derived from our less liquid assets may fluctuate significantly depending on the revaluation or sale of these investments in any given period. We also regularly enter into large transactions as part of our proprietary and other trading businesses, and the number and size of such transactions may ~~affect~~subject our ~~results of operations in a given~~net revenues to volatility from period to period.

Interest income and expense is accrued at the stated coupon rate for coupon-bearing financial instruments, and for non-coupon-bearing financial instruments, interest income is recognized by accreting the discount over the life of the instrument. For coupon-bearing financial instruments purchased at a discount or premium, the difference between interest income and expense accrued at the stated coupon rate and interest income and expense determined on an effective yield basis is included in principal transactions-net in the condensed consolidated statements of income.

We use derivatives and cash instruments to ~~hedge~~mitigate the interest rate exposure associated with commercial mortgage whole loans and resale and repurchase agreements. These derivatives and cash instruments are carried at fair value, while the commercial mortgage whole loans are carried at the lower of aggregate cost or fair value and the resale and repurchase agreements are carried at contract ~~amounts, with interest income or expense accruing over~~amounts. As a result, decreases in the ~~term~~value of the ~~agreement. As a result,~~derivatives and cash instruments, if any, are not offset by increases in the value of the commercial mortgage whole loans until the loans are sold and increases and decreases in the value of the derivatives and cash instruments, if any, are not offset by decreases and increases in the value of ~~(i) the commercial mortgage whole loans until the loans are sold and (ii)~~ the resale and repurchase agreements until the securities are sold or repurchased. Commercial whole loans and resale and repurchase agreements can be a significant part of our statement of financial condition. Therefore, our net revenues are subject to volatility from period to period.

Our businesses are materially affected by conditions in the financial markets and economic conditions generally, including geopolitical events. Unpredictable or adverse market and economic conditions have adversely affected and may in the future adversely affect our results of operations. See “Business—Certain Factors That May Affect Our Results of Operations” in Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, ~~2003.~~2004.

Three Months Ended ~~September 30, 2004~~March 31, 2005 Compared to Three Months Ended ~~September 30, 2003~~March 31, 2004

The Company recorded net income of ~~$19~~$176 million for the three months ended ~~September 30, 2004~~March 31, 2005 compared to net income of ~~$131~~$167 million for the three months ended ~~September 30, 2003~~March 31, 2004, reflecting ~~improved~~higher net

revenues and modestly lower expenses. The Company consolidates certain private equity funds primarily under FIN 46R, resulting in an increase in net revenues ~~offset by higher expenses.~~

~~Total net revenues increased $120~~of $157 million ~~or 11%, to $1.2 billion~~and $81 million, respectively, for the three months ended ~~September 30, 2004,~~March 31, 2005 and 2004. Net income was unaffected by the consolidation of private equity funds as ~~principal transactions improved compared~~offsetting minority interests and related operating expenses were recorded in the condensed consolidated statements of income. See Note 3 of the condensed consolidated financial statements in Part I, Item 1 for more information. Excluding the increases attributable to the consolidation under FIN 46R of certain private equity funds, net revenues decreased 2%.

Total net revenues increased $53 million, or 3%, to $1.6 billion for the three months ended ~~September 30, 2003,~~March 31, 2005, as principal transactions-net improved compared to the three months ended March 31, 2004, partially offset by decreases in investment banking and advisory, net interest revenues, commissions and ~~net interest~~fees and other revenues. ~~Principal transactions losses were reduced as a result of higher trading revenues~~The increase in principal transactions-net was primarily due to improved results from our fixed income ~~products~~trading business and ~~the consolidation of~~higher revenues from certain private equity funds ~~in 2004, which increased net~~consolidated primarily under FIN 46R. These increases were partially offset by lower revenues ~~by $55 million. Net income was unaffected by the consolidation of such private~~from our equity ~~funds as offsetting minority interests of $49 million and related operating expenses of $6 million were recorded in the condensed consolidated statements of income.~~trading business. Investment banking and advisory fees decreased ~~primarily~~ due to lower debt and equity underwriting fees. Commissions were ~~down due to decreases in equity commissions.~~lower primarily as a result of decreased trading activity from fixed income listed derivatives and lower revenues from convertible securities. Net interest revenues ~~declined~~decreased primarily due to lower net interest from ~~fixed income products.~~structured products as a result of higher interest rates.

~~Nine Months Ended September 30,~~ 2004, ~~Compared to Nine Months Ended September 30, 2003~~

The Company recorded net income of $478 million for the nine months ended September 30, 2004 compared to net income of $1.2 billion for the nine months ended September 30, 2003. The decrease reflects the after-tax gain of $852 million from the sale of Pershing during the second quarter of 2003. The Company recorded income from continuing operations of $478 million for the nine months ended September 30, 2004 compared to $314 million for the nine months ended September 30, 2003, reflecting both higher net revenues and higher expenses.

Total net revenues increased $1.0 billion, or 27%, to $4.7 billion for the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003, primarily due to a significant increase in principal transactions and slightly higher commissions. The increase in principal transactions revenue was primarily due to significant gains from certain private equity investments and the consolidation of certain private equity funds in 2004, which increased net revenues by $501 million. Net income was unaffected by the consolidation of such private equity funds as offsetting minority interests of $495 million and related operating expenses of $6 million were recorded in the condensed consolidated statements of income. The slight increase in commissions was primarily a result of increased trading activity from fixed income listed derivatives. Net interest revenues declined due to lower net interest from fixed income products.

~~Total expenses increased $254 million, or 8%, to $3.5 billion for the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003, as increases~~decreases in employee compensation and benefits expenses ~~reflecting increased revenues,~~and other operating expenses were partially offset by ~~lower merger-related costs~~higher professional fees. Included in employee compensation and benefits expense was $60 million and $28 million for the three months ended March 31, 2005 and 2004, respectively, related to business activities conducted by Company employees on behalf of CSG affiliates outside of the Company. These expenses were charged to these affiliates and are reflected as a reduction in our other operating expenses. See “—Expenses.”

Results by Segment

As of January 1, 2004, we transferred the private equity and private fund businesses from the Institutional Securities segment to the Financial Services segment, which has been renamed Wealth & Asset Management. In addition, we changed the presentation of the Institutional Securities and Wealth & Asset Management segment results. The operations of the Institutional Securities segment ~~are presented in two divisions:~~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 other related activities. The Institutional Securities segment also includes the results from ~~legacy~~certain separately managed private equity and distressed assets. The operations of the Wealth & Asset Management segment ~~are presented in two divisions:~~include: Alternative Capital, which includes the results of the private equity and private ~~fund~~funds businesses, and Private Client Services. ~~Prior period segment numbers have been changed to conform to the new segment reporting structure. These segment changes did not affect our previously reported consolidated results of operations.~~

Our segments are managed based on ~~the~~ types of products and services offered and their related client bases. We evaluate the performance of our segments based primarily on income ~~from continuing operations~~ before the provision for income taxes, minority interests and ~~discontinued operations but excluding minority interests.~~cumulative effect of a change in accounting principle.

Revenues are evaluated in the aggregate, including an assessment of trading gains and losses and the related interest income and expense attributable to financing and hedging positions. Therefore, individual revenue categories may not be indicative of the performance of the segment results.

The cost structure of each of our segments is broadly similar to that of the Company as a whole, and, consequently, the discussion of expenses is presented on a company-wide basis. The Company allocates to its segments a pro rata share of certain centrally managed ~~costs, such as leased~~costs. Leased facilities and equipment costs, employee benefits and certain general overhead expenses are allocated based upon specified amounts, usage criteria or agreed ~~rates, and allocates interest~~rates. Interest expense is allocated based upon the particular type of asset. The

allocation of some costs, such as incentive bonuses, has been estimated. The timing and magnitude of changes in our incentive bonus accrual can have a significant effect on our operating results for a given period.

Beginning in 2004, CSFB’s Corporate Treasury department allocated to the Company’s segments certain interest expense primarily relating to the goodwill and intangible assets from the acquisition of Donaldson, Lufkin & Jenrette, Inc., or DLJ, which is recorded in the financial statements of Credit Suisse First Boston, Inc., the Company’s direct parent, or CSFBI. In addition, CSFB’s Corporate Treasury department allocated to the Company’s segments gains and losses related to certain corporate treasury funding transactions, which allocation is based upon the expected funding requirements of the segments. There is an offsetting credit for this allocated interest expense and offsetting contra-revenues/revenues for the allocated gains and losses in other revenues of the segments.

Institutional Securities

The Institutional Securities segment ~~consists of~~includes the Trading and Investment Banking ~~divisions~~businesses and the results from ~~legacy~~certain separately managed private equity and distressed assets. ~~The~~ Trading ~~division~~ consists of sales and trading in equity securities, equity-related derivatives, fixed income financial instruments, ~~and~~ fixed income-related derivatives, and other related activities. ~~The~~ Investment Banking ~~division~~ raises ~~and invests~~ capital and provides financial advice to companies throughout the United States and abroad. Through ~~the~~ Investment Banking, ~~division,~~ we manage and underwrite offerings of securities, arrange private placements and provide financial advisory and other services.

The following table sets forth certain financial information of the Company’s Institutional Securities segment:

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,						For the Three Months Ended March 31,
	2004			2003			2004			2003			2005		2004
	(In millions)												(In millions)
Revenues:
Principal transactions-net	$	(267	)	$	(554	)	$	(274	)	$	(724	)	$	202	$	(58	)
Investment banking and advisory	463			508			1,281			1,339			290		454
Commissions	219			256			761			741			264		287
Interest and dividends, net	560			694			1,790			1,823
Interest and dividends, net of interest expense													567		637
Other	11			11			37			57			11		20
Total net revenues	986			915			3,595			3,236			1,334		1,340
Total expenses	984			780			3,103			2,916			1,093		1,095
Income(1)	2			135			492			320
Minority interests(2)	8			—			70			—
(Loss) Income after minority interests(3)	$	(6	)	$	135		$	422		$	320
Income(1)													241		245
Minority interests(2)													54		27
Income after minority interests(3)													$	187	$	218

(1) Income ~~from continuing operations~~ before provision ~~(benefit)~~ for income taxes, minority interests and ~~discontinued operations.~~cumulative effect of a change in accounting principle.

(2) ~~Related~~Represents minority interest revenues related to the Company’s consolidation of certain private equity ~~funds.~~funds primarily under FIN 46R, net of related operating expenses.

(3) ~~(Loss) income from continuing operations~~Income before ~~(benefit)~~ provision for income taxes and ~~discontinued operations.~~cumulative effect of a change in accounting principle.

Three Months Ended ~~September 30, 2004~~March 31, 2005 Compared to Three Months Ended ~~September 30, 2003~~March 31, 2004

The Institutional Securities segment recorded a loss after minority interests of $6 million for the three months ended September 30, 2004 compared to income after minority interests of $135 million for the three months ended September 30, 2003. Total net revenues for the Institutional Securities segment increased $71 million to $1.0 billion for the three months ended September 30, 2004 compared to the three months ended September 30, 2003, reflecting reductions in losses from principal transactions partially offset by decreases in investment banking and advisory fees, commissions and net interest. Excluding $11 million of revenues from the consolidation of certain legacy private equity funds, total net revenues increased $60 million, or 7%.

~~Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003~~

The Institutional Securities segment recorded income after minority interests of ~~$422~~$187 million for the three months ended March 31, 2005 compared to $218 million for the ~~nine~~three months ended ~~September 30, 2004 compared to $320 million for the nine months ended September 30, 2003.~~March 31, 2004. Total net revenues ~~increased $359~~decreased $6 million, or ~~11%~~less than 1%, to ~~$3.6~~$1.3 billion for the ~~nine~~three months ended ~~September 30, 2004,~~March 31, 2005, reflecting ~~reductions~~decreases in ~~losses in principal transactions and~~Investment banking revenues offset by increases in ~~commissions partially offset by decreases in investment banking~~Trading revenues and ~~advisory fees, net interest and other revenues. Excluding $73 million of revenues from~~ the consolidation of certain ~~legacy~~ private equity funds ~~total~~primarily under FIN 46R, which resulted in

an increase in net revenues ~~increased $286~~of $55 million and $27 million for the three months ended March 31, 2005 and 2004, respectively. See Note 3 of the condensed consolidated financial statements in Part I, Item 1 for more information. Excluding the increases attributable to the consolidation primarily under FIN 46R of certain private equity funds, net revenues decreased $34 million, or ~~9%.~~3%, for the three months ended March 31, 2005 compared to the three months ended March 31, 2004.

Investment Banking

The following table sets forth the Investment Banking revenues for the Institutional Securities segment:

	For the Three Months Ended March 31,
	2005(1)			2004(1)
	(In millions)
Debt underwriting		$	133		$	228
Equity underwriting		77			139
Total underwriting		210			367
Advisory and other fees		80			87
Total Investment Banking		$	290		$	454

(1) Revenues reflect the allocation of certain net revenues and interest expense from CSFB’s Corporate Treasury department to Investment Banking. For the three months ended March 31, 2005 and 2004, the amount was less than $1 million of expenses. See “—Results by Segment” above.

Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004

Investment Banking revenues decreased 36% to $290 million, reflecting significant declines in debt and equity underwriting and advisory and other fees. For the three months ended March 31, 2005, debt underwriting revenues decreased 42% compared to the three months ended March 31, 2004 to $133 million, primarily due to lower underwriting revenues from asset-backed, commercial mortgage-backed and high-yield securities. Asset-backed securities underwriting declined reflecting a highly competitive environment. The decline in commercial mortgage-backed securities reflects the industry-wide decline in mortgage-backed new issues. Underwriting revenues from high-yield debt and investment grade new issuance revenues also declined due to lower volume. Equity underwriting revenues decreased 45% to $77 million reflecting a decrease in our initial public offering and secondary new issuance volumes. Advisory and other fees decreased 8% to $80 million reflecting lower fees from restructurings and structured products and flat mergers and acquisition fees.

Trading

In evaluating the performance of its Trading activities, the Company aggregates principal transactions, commissions and net interest as net trading revenues. Changes in the composition of trading inventories and hedge positions can cause principal transactions and net interest income to ~~vary.~~vary from period to period.

The following table sets forth net Trading revenues of the Institutional Securities segment:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				For the Three Months Ended March 31,
	2004		2003		2004		2003		2005(1)			2004(1)
	(In millions)								(In millions)
Fixed Income	$	252	$	119	$	1,275	$	1,035		$	623		$	466
Equity	183		257		721		812			240			347
Total net Trading	$	435	$	376	$	1,996	$	1,847
Total Trading										$	863		$	813

(1) Revenues reflect the allocation of certain net revenues and interest expense from CSFB’s Corporate Treasury department to Trading. For the three months ended March 31, 2005 and 2004, the amount was $80 million and $21 million of expenses, respectively. See “—Results by Segment” above.

Three Months Ended ~~September 30, 2004~~March 31, 2005 Compared to Three Months Ended ~~September 30, 2003~~March 31, 2004

Total net ~~Trading~~trading revenues for the Institutional Securities segment increased ~~$59~~$50 million, or ~~16%~~6%, to ~~$435~~$863 million for the three months ended ~~September 30, 2004~~March 31, 2005 compared to the three months ended ~~September 30, 2003, as~~March 31, 2004, due to increases in fixed income net trading revenues ~~were~~ partially offset by ~~decreases in~~lower equity net trading revenues. ~~The increase in fixed~~

Fixed income net trading revenues ~~reflected~~increased 34% to $623 million reflecting significantly improved results in structured products ~~offset in part by weaker results in~~and interest rate ~~products and credit~~ products. The increase in structured products net trading revenues was due ~~primarily~~ to higher revenues from residential ~~mortgage-backed securities due to improved market conditions~~mortgages, other asset-backed products and ~~lower write-downs. Net trading revenues~~commercial mortgages. Revenues from ~~commercial mortgage-backed securities were also higher, reflecting favorable market conditions and lower write-downs. Losses in~~ interest rate products reflected ~~losses~~gains on derivatives that hedged certain resale and repurchase agreements. ~~The weaker results~~These increases were partially offset by lower revenues from credit products, primarily high-yield, which reflected ~~decreased volumes in high yield trading activity due to concerns about rising interest rates.~~

~~The~~an industry-wide decrease in ~~equity~~volume, and an increase in interest expense allocated by CSFB’s Corporate Treasury department to our Trading business.

Equity net trading revenues ~~was~~decreased 31% to $240 million primarily due to lower revenues from ~~the cash business due to lower volumes and declining equity prices. Revenues from~~ convertible securities ~~declined, reflecting lower trading volumes~~ as a result of lower trading volumes reflecting reduced liquidity, low volatility and ~~wider spreads. The decrease was partially offset by improved results~~widened spreads and lower revenues from ~~certain arbitrage strategies and growth in our advanced execution services and prime services businesses.~~

~~Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003~~

Total net Trading revenues for the Institutional Securities segment increased $149 million, or 8%, to $2.0 billion for the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003, as increases in fixed income net trading revenuesproprietary trading. These decreases were partially offset by ~~decreases in equity net trading revenues.~~ ~~The increase in fixed income net trading revenues reflected significantly improved results in structured products offset in part by weaker results in credit products. The increase in~~

structured products net trading revenues was due primarily to increases from residential mortgage-backed securities due to improved market conditions and lower write-downs. Net trading revenues from commercial mortgage-backed securities were higher, reflecting favorable market conditions. The weaker results from credit products reflected decreased volumes in high yield trading activity due to concerns about rising interest rates.

The decrease in equity net trading revenues was primarily due to declines in revenues from convertible securities, reflecting lower trading volumes as a result of reduced liquidity and wider spreads, and declines in revenues from the cash business due to lower volumes and declining equity prices. The decrease was partially offset by improved results from certain arbitrage strategies and growth in our ~~advanced execution services and~~ prime services ~~businesses.~~business.

~~Investment Banking~~

~~The following table sets forth the Investment Banking revenues for the~~Other Institutional Securities ~~segment:~~

For the Three
Months Ended

For the Nine
Months Ended

September 30,

September 30,

2004

2003

2004

2003

(In millions)

Debt underwriting

$
203

$
237

$
553

$
674

Equity underwriting

78

92

315

254

Total underwriting

281

329

868

928

Advisory and other fees

182

179

413

411

Total Investment Banking

$
463

$
508

$
1,281

$
1,339

Three Months Ended ~~September 30, 2004~~March 31, 2005 Compared to Three Months Ended ~~September 30, 2003~~March 31, 2004

~~Investment Banking~~Other Institutional Securities revenues ~~decreased 9% to $463 million, reflecting a decline in debt~~primarily consist of revenues from certain separately managed private equity and ~~equity underwriting and flat advisory and other fees.~~ ~~For~~distressed assets. Other Institutional Securities revenues for the three months ended ~~September 30, 2004, debt underwriting~~March 31, 2005 also reflect a $59 million increase in the credit that offsets allocations by CSFB’s Corporate Treasury department to our Investment Banking and Trading businesses of certain interest expense and revenues. Total revenues ~~decreased 14%~~from Other Institutional Securities increased $108 million to $181 million during the three months ended March 31, 2005 compared to the three months ended ~~September 30, 2003 to $203 million as commercial mortgage-backed securities and high-yield debt new issuance revenues declined due to lower volume.~~ ~~Equity underwriting revenues decreased 15% to $78 million~~March 31, 2004, reflecting ~~modest industry-wide declines in convertible securities and common stock new issuances.~~ ~~Advisory and other fees~~ ~~improved 2% to $182 million, reflecting industry-wide increases in mergers and acquisitions activity offset by lower fees from restructurings and private placements.~~

~~Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003~~

~~Investment Banking revenues decreased 4% to $1.3 billion, reflecting declines in debt underwriting offset by an increase in equity underwriting. Advisory and other fees were essentially flat. For~~ the nine months ended September 30, 2004, debt underwriting revenues decreased 18% compared to the nine months ended September 30, 2003 to $553 million primarily due to lower underwriting revenues from commercial mortgage-backed securities. Underwriting revenues from high-yield debt new issuance revenues also declined significantly due to lower volume. The decreases were partially offset by increases in residential mortgage securitizations. Equity underwriting revenues increased 24% to $315 million despite a decline in convertible securities issuances as our initial public offering and common stock transaction volumes increased compared to the weak first nine monthsconsolidation of 2003. Advisory and other fees increased less than 1% to $413 million as improvement in mergers and acquisitions activity was offset by lower fees from structured products, restructurings and private placements.

~~Other Institutional Securities~~

~~Three Months Ended September 30, 2004 Compared to Three Months Ended September 30, 2003~~

~~Total rev~~enues from Other Institutional Securities increased $57 million to $88 million for the three months ended September 30, 2004 compared to the three months ended September 30, 2003, primarily including revenue that offsets certain ~~allocations of interest expense charged to our business divisions and gains in legacy~~ private equity ~~investments. Revenues from legacy distressed assets declined in the three months ended September 30, 2004.~~

~~Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003~~

~~Total rev~~enues from Other Institutional Securities increased $268 million to $318 million for the nine months ended September 30, 2004 primarily reflecting revenue that offsets certain allocations of interest expense charged to our business divisions and gains from legacy distressed and real estate assets, including increases in legacy private equity revenues of $73 million as a result of our consolidation,funds primarily under FIN 46R which resulted in an increase in net revenues of ~~certain private equity funds.~~$55 million and $27 million, respectively. Net income was unaffected by the consolidation of private equity funds as offsetting minority interests and related operating expenses were recorded in the condensed consolidated statements of income. Excluding the revenues attributable to the consolidation under FIN 46R of certain private equity funds, Other Institutional Securities revenues increased $80 million, primarily reflecting an increase in the offsetting credit described above and gains from certain separately managed real estate assets. See Note 63 of the condensed consolidated financial statements in Part I, Item 1 for more information.

Wealth & Asset Management

The Wealth & Asset Management segment consists of ~~the~~ Alternative Capital, ~~division,~~ which includes the private equity and private ~~fund~~funds businesses, and ~~the~~ Private Client ~~Services division.~~Services. The private equity business makes privately negotiated investments and acts as an investment advisor for private equity funds. The private ~~fund~~funds business raises private capital, primarily from institutional investors, for direct investment by venture capital, management buyout and other investment firms in a variety of fund types. ~~The~~ Private Client Services ~~division~~ is a financial advisory business serving high-net-worth individuals and corporate investors with a wide range of CSFB and third-party investment management products and services.

The following table sets forth certain financial information of the Company’s Wealth & Asset Management segment:

	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,				For the Three Months Ended March 31,
	2004			2003		2004		2003		2005		2004
	(In millions)									(In millions)
Revenues:
Principal transactions-net	$	93		$	17	$	774	$	139	$	165	$	121
Investment banking and advisory	19			21		65		43		31		20
Asset Management and Other Fees	85			89		250		254
Interest and dividends, net	(6		)	16		35		30
Asset management and other fees										87		87
Interest and dividends, net of interest expense										10		10
Other	6			5		11		8		6		2
Total net revenues	197			148		1,135		474		299		240
Total expenses	138			99		434		367		149		158
Income(1)	59			49		701		107
Minority interests(2)	41			—		425		—
Income after minority interests(3)	$	18		$	49	$	276	$	107
Income(1)										150		82
Minority interests(2)										101		54
Income after minority interests(3)										$	49	$	28

(1) Income ~~from continuing operations~~ before provision ~~(benefit)~~ for income taxes, minority interests and ~~discontinued operations.~~cumulative effect of a change in accounting principle.

(2) ~~Related~~Represents minority interest net revenues related to the Company’s consolidation of certain private equity ~~funds.~~funds primarily under FIN 46R, net of related operating expenses.

(3) Income ~~from continuing operations~~ before provision ~~(benefit)~~ for income taxes and ~~discontinued operations.~~cumulative effect of a change in accounting principle.

Three Months Ended ~~September 30, 2004~~March 31, 2005 Compared to Three Months Ended ~~September 30, 2003~~March 31, 2004

The Wealth & Asset Management segment recorded income after minority interests of ~~$18 million for the three months ended September 30, 2004 compared to~~ $49 million for the three months ended ~~September 30, 2003. Total net revenues increased $49 million~~March 31, 2005 compared to ~~$197~~$28 million for the three months ended ~~September 30, 2004, including $44~~March 31, 2004. Total net revenues increased $59 million ~~of revenues as a result of our consolidation, primarily under FIN 46R, of certain private equity funds. Excluding~~to $299 million for the ~~effect of~~three months ended March 31, 2005, reflecting the consolidation of certain private equity funds ~~total~~primarily under FIN 46R which resulted in an increase in net revenues ~~increased $5~~of $102 million ~~or 3%.~~and $54 million for the three months ended March 31, 2005 and 2004, respectively. Net income was unaffected by the consolidation of private equity funds as offsetting minority interests and related operating expenses were recorded in the condensed consolidated statements of income. See Note 63 of the condensed consolidated financial statements in Part I, Item 1 for more information.

~~Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003~~

The Wealth & Asset Management segment recorded income after minority interests of $276 million for the nine months ended September 30, 2004 compared to $107 million for the nine months ended September 30, 2003. Total net revenues increased $661 million to $1.1 billion for the nine months ended September 30, 2004, reflecting increases in net investment gains from certain private equity investments and $428 million of revenues as a result of our consolidation, primarily under FIN 46R, of certain private equity funds. Excluding the ~~effect~~effects of the consolidation of certain private equity funds, total net revenues increased ~~$233~~$11 million, or ~~49%.~~6%, reflecting increased placement fees from our private funds business.

Alternative Capital, Private Client Services and Other

The following table sets forth the Alternative Capital, Private Client Services and Other revenues for the Wealth & Asset Management segment:

	For the Three Months Ended March 31,
	2005(1)			2004
	(In millions)
Alternative Capital		$	236	$	179
Private Client Services		55		61
Other		8		—
Total Wealth & Asset Management		$	299	$	240

(1) Revenues reflect the allocation of certain net revenues and interest expense from CSFB’s Corporate Treasury department to Alternative Capital and Private Client Services. For the three months ended March 31, 2005, the amount was $6 million of expenses. See “—Results by Segment” above.

Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004

Revenues from Alternative Capital consist of management and placement fees, net investment gains and losses, which include realized and unrealized gains and losses, including carried interest, net interest and other revenues from private equity and private funds. Revenues from Alternative Capital increased $57 million to $236 million for the three months ended March 31, 2005, reflecting the consolidation of certain private equity funds primarily under FIN 46R which resulted in an increase in net revenues of $102 million and $54 million for the three months ended March 31, 2005 and 2004, respectively. Net income was unaffected by the consolidation of private equity funds as offsetting minority interests and related operating expenses were recorded in the condensed consolidated statements of income. See Note 63 of the condensed consolidated financial statements in Part I, Item 1 for more information.

~~Wealth & Asset Management Divisions~~

~~The following table sets forth the Alternative Capital and Private Client Services division revenues for the Wealth & Asset Management segment:~~

For the Three
Months Ended

For the Nine
Months Ended

September 30,

September 30,

2004

2003

2004

2003

(In millions)

Alternative Capital

$
134

$
86

$
960

$
297

Private Client Services

48

59

162

170

Other

15

3

13

7

Total Wealth & Asset Management

$
197

$
148

$
1,135

$
474

~~Three Months Ended September 30, 2004 Compared to Three Months Ended September 30, 2003~~

~~Net revenues for the Alternative Capital division increased $48 million to $134 million, including~~ ~~$44 million of revenues as a result of our consolidation, primarily under FIN 46R, of certain private equity funds.~~ Excluding the effect of the consolidation of certain private equity funds, total net revenues increased $4$9 million, or 5%7%, reflecting ~~increases in net investment gains~~increased placement fees from our private ~~equity investments. Net income was unaffected by the consolidation of such private equity~~ funds as offsetting minority interests and related operating expenses were recorded in the condensed consolidated statements of income. See Note 6 of the condensed consolidated financial statements in Part I, Item 1business.

Revenues for ~~more information.~~

~~Net revenues for the~~ Private Client Services ~~division~~ decreased ~~19%~~10% to ~~$48~~$55 million primarily due to lower equity capital markets revenues.

Other revenues increased to $8 million compared to the three months ended March 31, 2004, reflecting ~~lower interest income as~~ a ~~result~~credit of ~~reduced customer margin debit balances.~~

~~Nine Months Ended September 30, 2004 Compared~~$6 million that offsets allocations by CSFB’s Corporate Treasury department to ~~Nine Months Ended September 30, 2003~~our

Net revenues for the Alternative Capital division increased $663 million to $960 million, primarily reflecting increases in net investment gains. The increase in net investment gains reflects gains from the salealternative capital and private client services businesses of certain ~~private equity investments~~interest expense and ~~$428 million of~~ revenues as a result of our consolidation, primarily under FIN 46R, of certain private equity funds. Excluding the effect of the consolidation of certain private equity funds, total net revenues increased $235 million, or 79%. Net income was unaffected by the consolidation of private equity funds as offsetting minority interests and related operating expenses were recorded in the condensed consolidated statements of income. See Note 6 of the condensed consolidated financial statements in Part I, Item 1 for more information.

Net revenues for the Private Client Services division decreased 5% to $162 million, primarily reflecting lower interest income as a result of reduced customer margin debit balances. The decrease was partially offset by increases in equity underwriting revenues and asset management fees.

Expenses

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

The following table sets forth employee compensation and benefits expenses, other expenses and total expenses of the Company:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,				For the Three Months Ended March 31,
	2004		2003		2004		2003		2005			2004
	(In millions)								(In millions)
Employee compensation and benefits	$	744	$	505	$	2,532	$	2,058		$	947		$	963
Other expenses	378		374		1,005		1,225			295			290
Total expenses	$	1,122	$	879	$	3,537	$	3,283		$1,242			$1,253

Three Months Ended ~~September 30, 2004~~March 31, 2005 Compared to Three Months Ended ~~September 30, 2003~~March 31, 2004

Total expenses ~~increased $243~~decreased $11 million, or ~~28%~~1%, to ~~$1.1~~$1.2 billion for the three months ended ~~September 30, 2004~~March 31, 2005 compared to the three months ended ~~September 30, 2003. The increase was principally due to higher compensation and benefits expenses.~~ ~~The increase~~March 31, 2004, as decreases in ~~employee~~ compensation and benefits expenses was due to increases in incentive compensation, higher severance expenses and increased base salary expenses offset in part by decreased accruals for certain deferred compensation plans. The third quarter 2003 employee compensation and benefits expenses ~~included~~and other operating expenses were partially offset primarily by higher professional fees. The decrease in employee compensation and benefits expenses reflects lower accruals for incentive compensation and certain deferred compensation plans. These decreases were partially offset by increases in share-based compensation, base salaries and severance. Included in employee compensation and benefits expense was $60 million and $28 million for the ~~effect~~three months ended March 31, 2005 and 2004, respectively, related to business activities conducted by Company employees on behalf of CSG affiliates outside of the ~~introduction~~Company. These expenses were charged to these affiliates and are reflected as a reduction in our other operating expenses. See Notes 1 and 11 of ~~vesting~~the condensed consolidated financial statements in Part I, Item 1 for ~~stock awards and the reversal of accrued expenses of $85 million recorded in the first half of 2003.~~more information.

Other expenses consist principally of occupancy and equipment rental; brokerage, clearing and exchange fees; communications; professional fees; merger-related costs of retention ~~awards;~~awards and all other operating expenses. Other expenses increased 1%2% for the three months ended ~~September 30, 2004~~March 31, 2005 compared to the three months ended ~~September 30, 2003,~~March 31, 2004, primarily as a result of ~~higher~~increases in professional fees, reflecting expansion of our mortgage business, and increased occupancy and equipment rental, brokerage, clearing and exchange fees and communications expenses due to increased business activity. These increases were partially offset by decreases in other operating expenses, ~~reflecting lower litigation accruals and~~which reflect higher affiliate service fees (including the charge to affiliates of compensation expense) that are treated as a reduction in other operating ~~expenses.~~

~~Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003~~

~~Total~~ expenses, ~~increased $254 million, or 8%, to $3.5 billion for the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003. The increase was principally~~and merger-related expenses due to ~~higher employee compensation and benefits expenses.~~ ~~The increase in employee~~ compensation and benefits expenses was due to increases in incentive compensation reflecting improved net revenues, higher severance expenses and increased base salary expenses offset in part by decreased accruals for certain deferred compensation plans.

~~Other expenses decreased 18% for the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003, primarily as a result of decreased merger-related costs, reflecting~~ the completion of ~~the~~ retention awards ~~and decreases~~ in 2004. Excluding the charges to affiliates for compensation expense, other operating expenses ~~reflecting lower litigation accruals and higher affiliate service fees that are treated as a reduction in other operating expenses.~~increased 12%.

Provision for Taxes

Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004

The provision for income taxes ~~from continuing operations~~ for the ~~nine~~three months ended ~~September 30,~~March 31, 2005 and 2004 ~~and 2003~~ was ~~$220~~$66 million and ~~$113~~$79 million, respectively. Excluded from the provision for income taxes ~~from continuing operations~~ for the ~~nine~~three months ended ~~September 30, 2003~~March 31, 2005 was an income tax expense of $3 million related to the Company’s adoption of Statement of Financial Accounting Standards, or SFAS, No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure,”andSFAS No. 123 (Revised 2004), “Share-Based Payment,” or SFAS 123R.

The effective tax rate changed from a provision of ~~$485 million from discontinued operations. In~~24.2% for the ~~third quarter~~three months ended March 31, 2004 to a provision of ~~2004,~~16.9% for the ~~Company had a $7 million~~three months ended March 31, 2005. The decrease in the effective tax ~~benefit resulting from operating losses~~rate was due primarily to an increase in ~~certain businesses,~~ non-taxable revenues from certain private equity funds consolidated ~~primarily under FIN 46R and increases in qualifying dividend income taxed at low rates.~~

The effective tax rate for continuing operations changed from a provision of 26.5% for the nine months ended September 30, 2003 to a provision of 18.3% for the nine months ended September 30, 2004. The lower effective tax rate was due to non-taxable revenues from certain private equity funds consolidated primarily under FIN 46R. ~~See Notes 5 and 6~~

Share-based Compensation

The Company has early adopted SFAS 123R as of January 1, 2005, using the modified prospective method. The Company had previously adopted the recognition provisions of SFAS 123 effective January 2003.

During the three months ended March 31, 2005, the Company recorded an after-tax gain of $6 million in the condensed consolidated ~~financial statements~~statement of income as cumulative effect of a change in ~~Part I, Item~~accounting principle to reverse the expense for awards previously recognized on all outstanding unvested awards that are not expected to vest. For new grants after January 1, ~~for more information.~~2005, forfeitures will be included in the initial estimate of compensation expense at the grant date.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity Management Oversight

We believe that maintaining access to liquidity is fundamental for firms operating in the financial services industry. We have therefore established a comprehensive process for the management and oversight of our capital, liquidity and funding strategies. CSFB’s Capital Allocation and Risk Management Committee, or CARMC, has primary oversight responsibility for these functional disciplines. CARMC periodically reviews and approves our liquidity management policies and targets and reviews our liquidity position and other key risk indicators. The Corporate Treasury department is responsible for the day-to-day management of capital, liquidity ~~long-term funding~~ and ~~a portion of the Company’s short-term~~ funding, as well as relationships with creditor banks and fixed income investors. It also maintains regular contact with rating agencies and regulators on these and other issues. See “Liquidity Risk” in “Business—Certain Factors That May Affect Our Results of Operations” in Part I, Item I of our Annual Report on Form 10-K for the year ended December 31, ~~2003.~~2004 for more information.

Liquidity Management Organization

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

First, at the holding company level, the “Non-bank Franchise,” where access to parent bank funding is limited, we aim to maintain sufficient liquidity so that in the event that we are unable to access the unsecured capital markets, we have cash and liquid assets sufficient to repay maturing liabilities for a minimum period of one year. When assessing the amount of cash and liquid assets, we take account of the regulatory restrictions that limit the amount of cash that could be distributed upstream by our principal broker-dealer subsidiaries, Credit Suisse First Boston LLC, or CSFB LLC, and Credit Suisse First Boston Capital LLC, or CSFB Capital LLC, which hold over 85% of our consolidated assets.

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

Balance Sheet and Funding

The majority of our assets are held in our broker-dealer subsidiaries and comprise a substantial portion of the Bank Franchise. These assets—principally trading inventories in our Institutional Securities business—are funded by a combination of collateralized short-term borrowings, which include securities sold under agreements to repurchase and securities loaned, as well as unsecured loans from Credit Suisse First Boston, the central funding entity of the Bank Franchise. Significant portions of our assets held in the Bank Franchise are highly liquid, with the majority consisting of securities inventories and collateralized receivables, which fluctuate depending on the levels of proprietary trading and customer business. Collateralized receivables consist primarily of securities purchased under agreements to resell and securities borrowed, both of which are primarily secured by U.S. government and agency securities and marketable corporate debt and equity securities. In addition, we have significant receivables from

customers, brokers, dealers and others, which turn over frequently. To meet client needs as a securities dealer, we carry significant levels of trading inventories.

~~In addition~~Unsecured funding for the Bank Franchise originates largely from Credit Suisse First Boston’s borrowings in the wholesale and institutional deposit markets, as well as from its Swiss bank affiliate, Credit Suisse, which has access to ~~these liquid assets, we also maintain positions in~~retail deposits.

Assets not funded by CSFB’s Bank Franchise include less liquid assets such as certain mortgage whole loans, distressed securities, high-yield debt securities, asset-backed securities and private equity investments. These less liquid assets are principally held in the Non-Bank Franchise. These assets may be relatively illiquid at times, especially during periods of market stress. ~~We typically fund a significant portion of less liquid assets, such as private equity investments, with long-term borrowings and stockholders’ equity.~~ Mortgage whole loans, distressed securities, high-yield debt and asset-backed securities are generally financed with a combination of short-term unsecured financing or repurchase agreements, long-term borrowings and ~~stockholders’~~stockholder’s equity. We typically fund a significant portion of less liquid assets, such as private equity investments, with long-term borrowings that we issue directly to the market, and stockholder’s equity.

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 vary significantly from period to period. As of September 30, 2004 and December 31, 2003, our total assets were $270.7 billion and $241.6 billion, respectively.

~~Included below is a discussion of our long-term contractual obligations, off-balance sheet arrangements and less liquid assets.~~

~~Funding Sources and Strategy~~

The majority of our assets are funded by collateralized short-term borrowings, which include securities sold under agreements to repurchase and securities loaned. Other significant funding sources include: commercial paper; short-term borrowings from affiliates; payables to customers, brokers, dealers and others; long-term borrowings; and stockholders’ equity. Short-term funding is generally obtained at rates related to the ~~federal funds~~Federal Funds rate, LIBOR or other money market indices, while long-term funding is generally obtained at fixed and floating rates related to U.S. Treasury securities or LIBOR, depending upon prevailing market conditions. We continually aim to broaden our funding base by geography, investor and funding instrument.

The majority of our unsecured funding originates largely from two sources: we borrow from affiliates (principally Credit Suisse First Boston, a Swiss bank subsidiary of CSG and an indirect parent of the Company) and we issue debt securities directly to the market. We lend funds as needed to our operating subsidiaries and affiliates on both a senior and subordinated basis, the latter typically to meet capital requirements of regulated subsidiaries. We generally try to ensure that loans to our operating subsidiaries and affiliates have maturities equal to or shorter than the maturities of our market borrowings. As such, senior funding to operating subsidiaries and affiliates is typically extended on a demand basis. Alternatively, subordinated financing to regulated subsidiaries is extended on a term basis and we structure our long-term market borrowings with maturities that extend beyond those of our subordinated advances to subsidiaries 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 vary significantly from period to period. As of March 31, 2005 and December 31, 2004, our total assets were $289.4 billion and $275.8 billion, respectively.

Included below is a discussion of our long-term contractual obligations, off-balance sheet arrangements and less liquid assets.

Liquidity ~~Planning~~Measurement and ~~Measurement~~Planning

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

For the Non-Bank Franchise, our objective is to ensure that the liquidity barometer equals or exceeds a time horizon of one-year. For the Bank Franchise, our objective is to ensure the liquidity barometer equals or exceeds 120 days. The different time horizons reflect the relative stability of 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 highly liquidity event sensitive such that we believe access to these markets could be quickly diminished. Conversely, the Bank Franchise’s retail and institutional deposit base is measured using contractual

maturities that have been adjusted to reflect behavioral stability. Historically, this core deposit base has proven extremely stable, even in stressed markets. The conservative parameters we use in establishing the time horizons in the funding franchises assume that assets will not be sold to generate cash, that no new unsecured debt can be issued, and that funds that are assumed to be trapped because of regulatory restrictions are not available to be distributed upstream in a stressed liquidity environment. The adjusted market value of unencumbered assets includes a conservative reduction from market value, or “haircut,” reflecting the amount that could be realized by pledging an asset as collateral to a third-party lender in a secured funding transaction.

In the case of the Non-Bank Franchise, contingent commitments include such items as commitments to invest in private equity funds. Certain contingent obligations do not materially impact the liquidity planning at the Company or Non-Bank Franchise, as these are incurred by other CSFB affiliated operating entities that are not consolidated under the Company. These items, which are taken into account in our liquidity planning for the Bank Franchise, include:

· credit rating-related collateralization requirements (CSFB’s derivatives business is primarily conducted in Credit Suisse First Boston International);

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

· committed credit facilities to clients that are currently undrawn (CSFB’s corporate lending business is conducted in Credit Suisse First Boston).

The Bank Franchise maintains a large secondary source of liquidity, principally through ~~our~~CSFB’s principal broker-dealers and ~~various~~ other regulated operating ~~subsidiaries. We have~~entities. The Bank Franchise has historically been able to access significant liquidity through the secured funding markets (securities sold under agreements to repurchase, securities loaned and other collateralized financing arrangements), even in periods of market stress. We continually monitor overall liquidity by tracking the extent to which unencumbered marketable assets and alternative unsecured funding sources exceed both contractual obligations and anticipated contingent commitments.

As of March 31, 2005, we estimate that the Non-Bank Franchise held cash, other liquidity reserves and marginable assets, net of haircuts, of approximately $6.4 billion versus estimated maturing obligations and commitments out to one year of $4.0 billion. Also, as of March 31, 2005, we estimate that the Bank Franchise held cash, other liquidity reserves and marginable assets, net of haircuts, of approximately $98 billion versus estimated maturing obligations, commitments and contingent funding requirements out to 120 days of $76 billion.

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

· Stage I—Market disruption

· Stage II—Unsecured markets partially inaccessible

· Stage III—Unsecured markets fully inaccessible

In the event of a liquidity crisis, a meeting of the Liquidity Crisis Committee would be convened by Corporate Treasury to activate the contingency plan. The Liquidity Crisis Committee’s membership includes senior business line, funding and finance department management, and this committee would meet frequently throughout the crisis to ensure our plans are executed.

Cash Capital

We measure ~~we use~~cash capital (long-term funding sources) against long-term unsecured funding requirements on an ongoing basis, and seek to ~~monitor our liquidity position~~maintain a surplus at all times. Sources of cash capital include the non-current component of the Company’s long-term borrowings and stockholder’s equity. Uses of cash capital include illiquid assets such as related party receivables (except where the receivable is the ~~“liquidity barometer,” which estimates the time period over which the adjusted market value of unencumbered assets (including cash) exceeds the aggregate value~~short-term investment of our ~~maturing unsecured liabilities plus anticipated contingent commitments.~~excess cash with Credit Suisse First Boston), property, goodwill and intangibles, deferred tax assets, private equity and other long-term investments.

Our cash capital as of March 31, 2005 totaled $36.6 billion compared with $36.9 billion as of December 31, 2004. The ~~adjusted market value~~decrease in cash capital of ~~unencumbered assets includes a reduction from market value, or “haircut,” reflecting the amount that could be realized by pledging an asset as collateral~~$0.3 billion was primarily due to a ~~third-party lender~~net redemption of long-term debt during the first quarter of 2005. As of March 31, 2005, cash capital was substantially in ~~a secured funding transaction. Contingent commitments include letters~~excess of ~~credit, guarantees, commitments to invest in private equity funds and collateralization requirements related to credit ratings.~~

~~Our objective, as mandated by CARMC, is to ensure that the liquidity barometer equals or exceeds one year. We believe this will enable us to carry out~~ our ~~business plans during extended periods of market stress, while minimizing, to the extent possible, disruptions to our business.~~cash capital requirements.

Contractual Obligations and Commitments

The following table sets forth future cash payments on our contractual obligations pursuant to long-term borrowings and operating leases as of ~~September 30, 2004:~~March 31, 2005:

	Contractual Obligations Expiration Per Period											Contractual Obligations Expiration Per Period
	Less than 1 year			1-3 years		4-5 years		Over 5 years		Total		Less than 1 year		1-3 years	4-5 years	Over 5 years	Total
	(In millions)											(In millions)
Long-term borrowings		$	3,263	$	7,078	$	6,237	$	9,641	$	26,219		$ 1,647	$ 8,965	$ 4,971	$ 11,266	$ 26,849
Operating leases		154		292		262		1,105		1,813			154	290	265	1,050	1,759
Total contractual obligations		$	3,417	$	7,370	$	6,499	$	10,746	$	28,032		$ 1,801	$ 9,255	$ 5,236	$ 12,316	$ 28,608

Our long-term borrowings are unsecured. As of ~~September 30, 2004,~~March 31, 2005, the weighted average maturity of our long-term borrowings was approximately ~~5.2~~5.5 years. Our lease obligations are primarily for our principal offices in New York City and other locations. The operating lease obligations in the table above include $8$4 million in contractual obligations related to certain information technology, equipment leases and software licenses and exclude ~~$314~~$341 million in sublease ~~revenue.~~revenue and executory costs such as insurance, maintenance and taxes of $554 million. We had no capital lease or purchase obligations as of ~~September 30, 2004.~~March 31, 2005.

	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)		169	129		57		581		936
Forward agreements(3)		10,048	—		—		—		10,048
Unfunded mortgage commitments(4)		—	51		—		—		51
Total commitments		$ 10,217	$ 205		$ 57		$ 581		$ 11,060

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

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

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

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

For information on these and other material commitments, see Notes 4, 6, 7 ~~8, 13~~ and 148 of the condensed consolidated financial statements in Part I, Item 1. For information on commitments under our pension arrangements, see Note 12 of the condensed consolidated financial statements in Part I, Item 1.

The following table sets forth our commercial paper and other short-term unsecured borrowings:

	As of September 30, 2004			As of December 31, 2003			March 31, 2005		December 31, 2004
	(In millions)						(In millions)
Bank loans		$	267		$	450		$ 388		$ 350
Commercial paper		1,271			1,052			1,371		1,249
Loans from affiliates(1)		16,593			14,482
Loans from affiliates(1)								13,983		20,085
Total		$	18,131		$	15,984		$ 15,742		$ 21,684

(1) We have significant financing transactions with Credit Suisse First Boston and certain of its subsidiaries and affiliates. See “—Related Party Transactions” and Note 42 of the condensed consolidated financial statements in Part I, Item 1.

Credit Facilities

As part of our liquidity management strategy, we moved from syndicated unsecured facilities to bilateral secured facilities. As of ~~September 30, 2004, Credit Suisse First Boston LLC, or~~March 31, 2005, CSFB LLC maintained with third parties four 364-day committed secured revolving credit facilities totaling ~~$1.2~~$2.0 billion, with one facility ~~totaling $250~~for $500 million maturing in July 2005, one facility for $500 million maturing in November ~~2004, two facilities~~2005, one facility for ~~$450~~$500 million maturing in February ~~2005~~2006 and one facility for $500 million maturing in ~~July 2005.~~March 2006. We expect to renew these facilities as they mature. These facilities require CSFB LLC to pledge unencumbered marketable securities to secure any borrowings. Borrowings under each facility would bear interest at short-term rates related to either the ~~federal funds~~Federal Funds rate or LIBOR and can be used for general corporate purposes. The facilities contain customary covenants that we believe will not impair our ability to obtain funding. As of ~~September 30, 2004,~~March 31, 2005, no borrowings were outstanding under any of the facilities. We may from time to time enter into additional secured revolving credit facilities as part of our liquidity management.

Long-term Funding

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

Under our currently effective $15.0 billion shelf registration statement on file with the SEC, which was established in June 2004 and allows us to issue from time to time senior and subordinated debt securities and warrants to purchase such securities, we had as of ~~November 8, 2004 $15.0~~May 10, 2005 $11.5 billion available for issuance.

Under our $5.0 billion Euro Medium-term Note program, which was established in July 2001 and allows us to issue notes from time to time, we had as of May 10, 2005 $1.2 billion available for issuance.

For the ~~nine~~three months ended ~~September 30, 2004, in order to extend the maturity profile of our debt,~~March 31, 2005, we issued ~~$1.1 billion~~$3 million in ~~medium-term~~structured notes ~~$1.0 billion of 5.125% notes due 2014~~ and ~~$1.4 billion of 4.7% notes due 2009 off of our then-existing $10.0 billion shelf registration statement.~~

~~During the nine months ended September 30, 2004,~~ we repaid approximately ~~$1.6~~$1.1 billion of medium-term notes, $500 million of senior notes and ~~$68~~$55 million of structured notes.

Credit Ratings

Our access to the debt capital markets and our borrowing costs depend significantly on our credit ratings. These ratings are assigned by agencies, which may raise, lower or withdraw their ratings or place us on “credit watch” with positive or negative implications at any time. Credit ratings are important to us when competing in certain markets and when seeking to engage in longer-term transactions, including OTC derivatives. We believe agencies consider several factors in determining our credit ratings, including earnings performance, business mix, market position, financial strategy, level of capital, risk management policies and practices and management team, and our affiliation with CSFB and CSG, in addition to the broader outlook for the financial services industry.

A reduction in our credit ratings could limit our access to capital markets, increase our borrowing costs, require us to provide additional collateral in connection with OTC derivatives contracts, and allow counterparties to terminate transactions under certain of our trading and collateralized financing contracts. This, in turn, could reduce our liquidity and negatively impact our operating results and financial position. Our liquidity planning takes into consideration those contingent events associated with a reduction in our credit ratings.

Because ~~the majority~~a significant portion of our OTC derivatives arrangements are with affiliates, the amount of collateral that we would have been required to post pursuant to such contracts in the event of a one-notch downgrade of our senior long-term debt credit rating was not material as of ~~September 30, 2004.~~March 31, 2005.

As of ~~November 8, 2004,~~May 10, 2005, our ratings and ratings outlooks were as follows:

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

~~(1) On October 5, 2004, Fitch Ratings changed our credit rating outlook from negative to stable.~~

Capital Resources

Certain of our businesses are capital intensive. In addition to normal operating requirements, capital is required to cover financing and regulatory capital charges on various asset classes, including but not limited to, securities inventories, private equity investments and investments in fixed assets. Our overall capital needs are regularly reviewed to ensure that our capital base can appropriately support the anticipated needs of our business and the regulatory and

other capital requirements of our subsidiaries. Based onupon these analyses, we believe that our capitalization is adequate for current operating levels.

Regulated Subsidiaries

Our principal wholly owned subsidiary, CSFB LLC, is a registered broker-dealer, registered futures commission merchant and member firm of the New York Stock Exchange ~~or NYSE. As such, it~~Inc. Accordingly, CSFB LLC is subject to the ~~NYSE’s~~minimum net capital ~~rule, which conforms to the uniform net capital rule pursuant to Rule 15c3-1~~requirements of the ~~Securities Exchange Act of 1934, as amended, or~~SEC and the ~~Exchange Act.~~CFTC. Under the alternative method permitted by ~~this rule, its~~SEC Rule 15c3-1, the required net capital may not be less than ~~two percent~~the greater of 2% of aggregate debit balances arising from customer transactions or ~~four percent~~4% of the funds required to be segregated ~~funds, whichever~~pursuant to the Commodity Exchange Act less the market value of certain commodity options, all as defined. Under CFTC Regulation 1.17, the required minimum net capital requirement is ~~greater. If a member firm’s capital is less than four percent~~8% of ~~aggregate debit balances,~~ the ~~NYSE may require~~total risk margin requirement (as defined) for all positions carried in customer accounts plus 4% of the ~~firm to reduce its business. If a member firm’s capital is less than five percent of aggregate debit balances, the NYSE may prevent the firm from expanding its business and declaring cash dividends.~~total risk margin requirement (as defined) for all positions carried in non-customer accounts. As of ~~September 30, 2004,~~March 31, 2005, the CFTC’s minimum net capital requirement was greater than the SEC’s minimum net capital requirement. As of March 31, 2005, CSFB LLC’s net capital of approximately ~~$2.6~~$2.8 billion was ~~63%~~40.8% of aggregate debit balances and in excess of the CFTC’s minimum requirement by approximately ~~$2.5~~$2.6 billion.

Our OTC derivatives dealer subsidiary, ~~Credit Suisse First Boston~~CSFB Capital LLC, is also subject to the uniform net capital rule, but ~~calculates~~computes its net capital requirements based on value at risk pursuant to Appendix F of Rule 15c3-1. As of ~~September 30, 2004, Credit Suisse First Boston~~March 31, 2005, CSFB Capital LLC’s net capital of ~~$180~~$302 million, allowing for market and credit risk exposure of ~~$41~~$82 million and ~~$55~~$43 million, respectively, was in excess of the minimum net capital requirement by ~~$160~~$282 million. ~~Credit Suisse First Boston~~CSFB Capital LLC operates pursuant to the (k)(2)(ii) exemptive provisions of Rule 15c3-3 of the Exchange Act, and, accordingly, all customer transactions are cleared through ~~an affiliated broker-dealer~~CSFB LLC on a fully disclosed basis.

~~Certain of our other subsidiaries are subject to capital adequacy requirements.~~ As of ~~September 30, 2004,~~March 31, 2005, our subsidiaries complied with all applicable regulatory capital adequacy requirements.

Cash Flows

Our condensed consolidated statements of cash flows classify cash flows into three broad categories: cash flows from operating activities, investing activities and financing activities. These statements should be read in conjunction with “—Related Party Transactions” as well as Note 42 of the condensed consolidated financial statements in Part I, Item 1.

We present the condensed consolidated statements of cash flows for the nine months ended September 30, 2003 as if Pershing were part of our continuing operations and its assets and liabilities as of December 31, 2002 were not presented as Assets held for sale and Liabilities held for sale in the condensed consolidated statement of financial condition and its results of operations were not presented as discontinued operations in the condensed consolidated statement of income.

Our cash flows are complex and frequently bear little relation to our net income and net assets, particularly because the Company is a wholly owned subsidiary of CSG, a global financial ~~services~~ institution that may choose to allocate cash among its subsidiaries for reasons independent of the Company’s activities. As a result, we believe that traditional cash flow analysis is not a particularly useful method to evaluate our liquidity position as discussed above. Cash flow analysis may, however, assist in highlighting certain macro trends and strategic initiatives in our business.

For the ~~Nine~~Three Months ~~Ended September 30, 2004~~ended March 31, 2005

Cash and cash equivalents ~~increased $39~~decreased $262 million to ~~$373~~$465 million as of ~~September 30, 2004.~~March 31, 2005. Cash used in operating activities was ~~$4.0 billion. The change in cash used in operating activities~~$855 million and reflected a net ~~decrease~~increase in operating assets and operating liabilities ~~relative to operating assets~~ of ~~$5.0~~$1.3 billion, which occurred in the normal course of operations as a result of changes in customer needs, market conditions and proprietary trading and other strategies.

Cash of ~~$2.0~~$1.9 billion was ~~used in~~provided by investing activities. ~~Prior to the acquisition of the Company, CSFBI issued its own debt to fund its operating, investment and financing needs.~~ The Company ~~now~~ provides ~~most of~~funding to affiliates. The Company received cash from its affiliates related to this funding, resulting in ~~increases~~decreases in receivables from parent and affiliates of ~~$1.8~~$1.9 billion.

Cash ~~provided by~~used in financing activities was ~~$6.0~~$1.3 billion. ~~The changes are~~This was due to increases in net collateralized financing arrangements of ~~$2.0~~$6.2 billion ~~increases~~and decreases of ~~$2.1~~$5.9 billion in short-term borrowings, reflecting an increase in the use of secured borrowings and ~~increases~~repayments of ~~$3.5 billion in long-term borrowings used primarily to fund normal operating activities, provide funding to affiliates as part of the Company’s investing activities and repay~~ $1.6 billion in long-term borrowings.

For the ~~Nine~~Three Months ~~Ended September 30, 2003~~ended March 31, 2004

Cash and cash equivalents ~~decreased $25~~increased $595 million to ~~$455~~$929 million as of ~~September 30, 2003.~~March 31, 2004. Cash ~~provided by~~used in operating activities was ~~$2.1 billion. The change in cash provided by operating activities~~$16.2 billion and reflected a net increase in operating assets and operating liabilities ~~relative to operating assets~~ of ~~$1.7~~$16.5 billion, which occurred in the normal course of operations as a result of changes in customer needs, market conditions and proprietary trading and other strategies.

Cash of ~~$653~~$271 million was ~~provided by~~used for investing activities. The Company provides funding to ~~CSFBI to fund its operating, investing and financing needs,~~affiliates, resulting in increases in receivables from affiliates of ~~$1.3 billion. The Company received $2.0 billion in cash as a result of the Pershing disposal.~~$174 million.

Cash ~~used in~~provided by financing activities was ~~$2.7~~$17.0 billion. ~~The changes are~~This was due to ~~decreases~~increases in net collateralized financing arrangements of ~~$7.0~~$8.6 billion, ~~partially offset by~~ increases of ~~$3.3~~$8.0 billion in short-term borrowings and increases of ~~$4.1 billion~~$996 million in long-term borrowings used primarily to fund normal operating activities, provide funding to affiliates as part of the Company’s investing activities and to repay ~~$3.1 billion~~$626 million in long-term borrowings.

OFF-BALANCE SHEET ARRANGEMENTS

We enter into off-balance sheet arrangements in the ordinary course of business. Off-balance sheet arrangements are transactions, agreements or other contractual arrangements with, or for the benefit of, an entity that is not consolidated with an issuer, and which include guarantees and similar arrangements, retained or contingent interests in assets transferred to an unconsolidated entity, and obligations and liabilities (including contingent obligations and liabilities) under material variable interests in unconsolidated entities for the purpose of providing financing, liquidity, market risk or credit risk support.

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

Guarantees

In the ordinary course of our business, we provide guarantees and indemnifications that contingently obligate us to make payments to the guaranteed or indemnified party based on changes in an asset, liability or equity security of the guaranteed or indemnified party. We may also be contingently obligated to make payments to a guaranteed party based on another entity’s failure to perform, or we may have an indirect guarantee of the indebtedness of others. Guarantees we provide include customary indemnifications to

purchasers in conjunction with the sale of assets or businesses; to investors in private equity funds sponsored by the firm regarding potential obligations of employees to return amounts previously paid as carried interest; and to investors in our securities and other arrangements to provide “gross up” payments if there is a withholding or deduction because of a tax assessment or other governmental charge. From time to time, we also guarantee the obligations of subsidiaries of CSG that are not our consolidated subsidiaries, and these guarantees are included in the scope of the disclosure requirements of FIN No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” or FIN 45.

FIN 45 requires disclosure of our maximum potential payment obligations under certain guarantees to the extent that it is possible to estimate them and requires recognition of a liability for the fair value of guaranteed obligations for guarantees issued or amended after December 31, 2002. The recognition of these liabilities did not have a material effect on our financial position or results of operations. For disclosure of our estimable maximum payment obligations under certain guarantees and related information, see Note 148 of the condensed consolidated financial statements in Part I, Item 1.

Retained or Contingent Interests in Assets Transferred to Unconsolidated Entities

We originate and purchase commercial and residential mortgages and purchase other debt obligations such as automobile loans and student loans and sell these assets directly or through affiliates to special purpose entities that are, in most cases, qualified special purpose entities, or QSPEs. These QSPEs issue securities that are backed by the assets transferred to the QSPEs and pay a return based on the returns on those assets. Investors in these mortgage-backed and asset-backed securities typically have recourse to the assets in the QSPE. The investors and the QSPEs have no recourse to our assets.

These QSPEs are generally sponsored by our subsidiaries. Our principal broker-dealer subsidiary, CSFB LLC, underwrites and makes markets in these mortgage-backed and asset-backed securities. Under ~~Statement of Financial Accounting Standards, or~~ SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement No. 125,” ~~or SFAS 140,~~ a QSPE is not required to be consolidated with the transferor. Our mortgage-backed and asset-backed securitization activities are generally structured to use QSPEs, and the assets and liabilities transferred to QSPEs are not included in our financial statements.

We may retain interests in these securitized assets if CSFB LLC holds the assets in connection with its underwriting or market-making activities. Retained interests in securitized financial assets are included at fair value in the condensed consolidated statements of financial condition. Any changes in the fair value of

these retained interests are recognized in the condensed consolidated statements of income. We engage in these securitization activities to meet the needs of clients as part of our fixed income activities, to earn fees and to sell financial assets. These securitization activities do not provide a material source of our liquidity, capital resources or credit risk or market risk support. See Note 63 of the condensed consolidated financial statements in Part I, Item 1, which includes quantitative information on our securitization activities and retained interests.

In connection with our residential mortgage business, we may from time to time arrange for the sale of certain qualifying mortgage loans or pools of mortgage loans, or the Loans, to an unaffiliated entity, or the Purchaser, pursuant to an agreement between us and the Purchaser, or the Agreement. In accordance with the Agreement, we may be required to repurchase one or more Loans, including the related hedge positions, from the Purchaser at its request in accordance with the terms of the Agreement. As of September 30, 2004, the Purchaser has the right to request us to repurchase approximately $809 million of Loans from the Purchaser pursuant to the terms of the Agreement.

Variable Interest Entities

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

We purchase loans and other debt obligations from and on behalf of clients primarily for the purpose of securitization. The loans and other debt obligations are transferred by us directly, or indirectly through affiliates, to QSPEs or to VIEs that issue CDOs. CDOs are securities backed by the assets transferred to the VIE and pay a return based on the returns on those assets. Investors typically have recourse to the assets in the CDO VIE. The investors and the CDO VIE have no recourse to the Company’s assets. CSFB LLC structures, underwrites and makes a market in these CDOs, and we may have retained interests in these CDOs in connection with CSFB LLC’s underwriting and market-making activities. We engage in these CDO transactions to meet the needs of clients, to earn fees and to sell financial assets. These CDO transactions do not provide a material source of our liquidity, capital resources or credit risk or market risk support.

FIN ~~No. 46, “Consolidation of Variable Interest Entities,” or FIN~~ 46 requires us to consolidate all VIEs for which we are the primary beneficiary which is defined as the entity that will absorb a majority of expected losses, receive a majority of the expected residual returns, or both. In December 2003, the FASB modified FIN 46, through the issuance of FIN 46R, to address various implementation issues that had arisen since the issuance of FIN 46 and to provide companies the option to defer the adoption of FIN 46 for certain VIEs to periods ending after March 15, 2004. As of March 31, 2005 and December 31, ~~2003, with the exception of certain private equity funds that were a subject of the deferral,~~2004, we consolidated ~~all~~CDO VIEs ~~under FIN 46~~ for which we are the primary ~~beneficiary, all of which were related to our CDO activities.~~beneficiary. We also have interests in CDO VIEs that are not required 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 funds that are managed by the Company. See ~~Note 6~~Notes 1 and 3 of the condensed consolidated financial statements in Part I, Item 1.

~~OTHER COMMITMENTS~~

We have commitments under a variety of arrangements that are not recorded as liabilities in our condensed consolidated statements of financial condition. These commitments are in addition to guarantees and other arrangements discussed in “—Off-Balance Sheet Arrangements.” These commitments include standby letters of credit, standby resale agreement facilities that commit us to enter into resale agreements with customers at market rates, commitments to invest in various partnerships that make private equity and related investments in various portfolio companies and in other private equity funds and commitments to enter into forward resale agreements. See Note 13 of the condensed consolidated financial statements in Part I, Item 1.

RELATED PARTY TRANSACTIONS

CSG, through CSFBI, owns all of our outstanding voting common stock. We are involved in significant financing and other transactions, and have significant related party balances, with Credit Suisse First Boston and certain affiliates. We generally enter into these transactions in the ordinary course of business and believe that these transactions are on market terms that could be obtained from unrelated third parties. See “—Derivatives” and Notes 42 and 145 of the condensed consolidated financial statements in Part I, Item 1 for more information.

Certain of our directors, officers and employees and those of our affiliates and their subsidiaries maintain margin accounts with CSFB LLC and other affiliated broker-dealers in the ordinary course of business. In addition, certain of such directors, officers and employees ~~had~~have investments or commitments to invest in various private ~~funds sponsored by us,~~equity funds. We make loans to directors and executive officers on the same terms as are generally available to third parties or otherwise pursuant to ~~which we have made loans to such directors,~~

~~officers and employees, to the extent permitted by law.~~widely available employee benefit plans. CSFB LLC and other affiliated broker-dealers, from time to time and in the ordinary course of business, enter into, as principal, transactions involving the purchase or sale of securities from or to such 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, distressed securities, high-yield debt, mortgage whole loans and other non-investment-grade debt, are not highly liquid or trade in markets that have periods of volatility and illiquidity. The values of most of the more illiquid assets are reported at fair value, and the determination of fair value is based on management’s best estimate and depends on varying factors. See “—“—Critical Accounting Policies and ~~Estimates~~—Estimates—Fair Value” for further information on the determination of fair value of these ~~more illiquid~~less liquid assets.

Private Equity Activities

Our private equity and other long-term investment activities include direct investments and investments in partnerships that make private equity and related investments in various portfolio companies and funds. These investments are primarily in unlisted or illiquid equity or equity-related securities and are carried at fair value based on a number of factors. As of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003,~~2004, we had investments in private equity and other long-term investments of ~~$2.6~~$3.1 billion ~~and $1.1 billion, respectively,~~ and we had commitments to invest up to an additional ~~$1.0 billion and $1.3 billion~~$936 million as of ~~September 30, 2004 and December~~March 31, ~~2003, respectively.~~2005. The increase in private equity and other long-term investments reflects our consolidation primarily under FIN 46R of certain private equity funds. See “—Critical Accounting Policies and Estimates—Fair Value” in Part I, Item 2 and Notes 1 6 and 84 of the condensed consolidated financial statements in Part I, Item 1 for more information.

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

We underwrite, trade and hold high-yield debt, which includes distressed debt, mortgage whole loans, loan participations, ~~legacy~~certain separately managed distressed financial instruments and other non-investment-grade financial instruments. Due to credit considerations, liquidity of secondary trading markets and vulnerability to general economic conditions, these financial instruments and loans generally involve greater risk than investment-grade financial instruments. We record high-yield debt, residential mortgage whole loans ~~legacy~~and certain separately managed distressed ~~financial instruments and other non-investment-grade~~ financial instruments at fair value, with the exception of certain residential mortgage whole loans and loan participations that are held for sale and are carried at the lower of cost or fair value. We record commercial mortgage whole loans held for sale ~~and loan participations~~ at the lower of aggregate cost or fair value. Timing of the securitization of our mortgage whole loan inventory will affect the size of our positions at any given time. The following table sets forth our positions in these instruments as of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003:~~2004:

	As of September 30, 2004						As of December 31, 2003						March 31, 2005					December 31, 2004
	Assets			Liabilities			Assets			Liabilities			Assets		Liabilities			Assets		Liabilities
	(In millions)												(In millions)
High-yield and distressed debt		$	1,498		$	710		$	1,551		$	675	$	1,856		$	742	$	2,152		$	709
Mortgage whole loans		14,636			—			9,101			—		17,380			—		14,987			—
Loan participations		18			—			70			—		17			—		17			—
Legacy distressed financial instruments		213			—			171			—
Certain separately managed distressed financial instruments													116			—		185			—
Total		$	16,365		$	710		$	10,893		$	675	$	19,369		$	742	$	17,341		$	709

DERIVATIVES

We enter into various transactions involving derivatives. We use derivatives contracts for both trading and hedging purposes and to provide products for our clients. These derivatives include options, forwards, futures and swaps. In general, derivatives are contractual agreements that derive their values from the performance of underlying assets, interest or currency exchange rates or a variety of indices. Most of our derivatives transactions are considered trading positions. See Note 115 of the condensed consolidated financial statements in Part I, Item 1 for more information.

Sources and Maturities of OTC Derivatives

The following table sets forth the distributions, by maturity, of substantially all of our exposure with respect to OTC derivatives as of ~~September 30, 2004, after taking into account the effect of netting agreements.~~March 31, 2005. Fair values were determined on the basis of pricing models and other valuation methods. See “—“—Critical Accounting Policies and Estimates—Fair Value” and Notes 115 and 148 of the condensed consolidated financial statements in Part I, Item 1 for more information.

	Assets Maturity Distribution as of September 30, 2004															Assets Maturity Distribution as of March 31, 2005
	Less than 1 year			1-4 years			4-5 years			Over 5 years			Total fair value			Less than 1 year			1-3 years			4-5 years			Over 5 years			Total fair value
	(In millions)															(In millions)
Interest rate risk		$	499		$	1,382		$	534		$	431		$	2,846
Interest rate and credit spread risk																	$	1,010		$	471		$	170		$	1,026		$	2,677
Foreign exchange risk																	15			25			32			—			72
Equity price risk		32			92			5			67			196			96			600			77			259			1,032
Foreign exchange risk		1			21			27			—			49
Total		$	532		$	1,495		$	566		$	498		$	3,091		$	1,121		$	1,096		$	279		$	1,285		$	3,781

	Liabilities Maturity Distribution as of September 30, 2004															Liabilities Maturity Distribution as of March 31, 2005
	Less than 1 year			1-4 years			4-5 years			Over 5 years			Total fair value			Less than 1 year			1-3 years			4-5 years			Over 5 years			Total fair value
	(In millions)															(In millions)
Interest rate risk		$	501		$	357		$	191		$	357		$	1,406
Interest rate and credit spread risk																	$	911		$	341		$	215		$	451		$	1,918
Foreign exchange risk																	11			—			15			—			26
Equity price risk		99			138			27			225			489			19			104			14			306			443
Foreign exchange risk		1			—			21			—			22
Total		$	601		$	495		$	239		$	582		$	1,917		$	941		$	445		$	244		$	757		$	2,387

The following table sets forth as of ~~September 30, 2004~~March 31, 2005 substantially all of our exposure with respect to OTC derivatives, by counterparty credit rating and with ~~affiliates, after taking into account the effect of netting agreements.~~affiliates.

		As of September 30,
Credit Rating(1)		2004				March 31, 2005
		(In millions)				(In millions)
AAA			$	2
AA+/AA	AA+/AA		1,112		AA+/AA		$	2,090
AA-	AA-		33		AA-		10
A+/A/A-	A+/A/A-		237		A+/A/A-		260
BBB+/BBB/BBB-	BBB+/BBB/BBB-		16		BBB+/BBB/BBB-		10
BB+ or lower	BB+ or lower		16		BB+ or lower		20
Unrated	Unrated		93		Unrated		91
Derivatives with affiliates	Derivatives with affiliates		1,582		Derivatives with affiliates		1,300
Total	Total		$	3,091	Total		$	3,781

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

Derivatives With Related Parties

We enter into a substantial number of derivatives transactions with related parties. The following table sets forth derivatives transactions with related parties consisting primarily of interest rate swaps, credit default swaps and foreign exchange forward contracts. The fair values of derivatives contracts outstanding with related parties as of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003~~2004 were as ~~follows:~~follows.

	As of September 30, 2004						As of December 31, 2003						March 31, 2005				December 31, 2004
	Assets			Liabilities			Assets			Liabilities			Assets		Liabilities		Assets	Liabilities
	(In millions)												(In millions)
Interest rate risk		$	1,557		$	793		$	1,860		$	794
Interest rate and credit spread risk														$1,242		$934	$1,346		$616
Foreign exchange risk														40		8	45		18
Equity price risk		2			1			12			29			18		4	9		61
Foreign exchange risk		23			6			38			1
Total		$	1,582		$	800		$	1,910		$	824		$1,300		$946	$1,400		$695

See Notes 42 and 115 of the condensed consolidated financial statements in Part I, Item 1 for more information.

FORWARD LOOKING STATEMENTS

We have made in this Quarterly Report on Form 10-Q, including, without limitation, in “Legal Proceedings” in Part II, Item 1, and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2, and from time to time may otherwise make in our public filings and press releases, forward-looking statements concerning our operations, economic performance and financial condition, as well as our future plans and strategic objectives. Such forward-looking statements are subject to various risks and uncertainties, and we claim the protection afforded by the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those anticipated herein or in any such other filings, releases or statements because of a number of factors, including without limitation, those detailed in “Business—Certain Factors That May Affect Our Results of Operations” in Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2004, those discussed elsewhere herein, and in other public filings and press releases. These forward-looking statements are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and beyond our control. Forward-looking statements are typically identified by the use of future or conditional verbs such as “will,” “should,” “would” or “could,” and by words or phrases such as “believe,” “expect,” “intend,” “estimate” and similar expressions. By identifying these statements for you in this manner, we are alerting you to the possibility that our actual results may differ, possibly materially, from the results indicated in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements except as otherwise required by applicable law.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

Risk Management and Value at Risk

For a description of the Company’s risk management policies and procedures and value-at-risk, or VAR, model, including such model’s assumptions and limitations, see “Quantitative and Qualitative Disclosure About Market Risk” in Part II, Item 7A of the Company’s Annual Report on Form 10-K for the December 31, ~~2003.~~2004.

Market Risk Exposure

Trading portfolios

The Company-wide trading portfolio VAR was approximately ~~$30~~$40 million and ~~$49~~$37 million as of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003,~~2004, respectively.

Due to the benefit of diversification, the Company-wide VAR is less than the sum of the individual components. The ~~three~~four main components of market risk, expressed in terms of theoretical fair values, had the following VAR:

Company’s Market Risk Exposures in Trading Portfolios (Unaudited)

As of
  September 30,
2004

As of
   June 30,
2004

As of
    March 31,
2004

As of
  December 31,
2003

99%, one-day VAR, in $ millions

Interest rate risk

29

51

35

49

Equity risk

13

20

17

14

Foreign currency exchange risk

2

1

—

—

Benefit of diversification

(14
)

(23
)

(13
)

(14
)

Total

30

49

39

49

	Company’s Market Risk Exposures in Trading Portfolios
	As of March 31, 2005			As of December 31, 2004
99%, one-day VAR, in $ millions
Interest rate and credit spread		34			34
Equity		19			15
Foreign exchange rate		2			1
Commodity		1			—
Diversification benefit		(16	)		(13	)
Total		40			37

The table below presents minimum, maximum and average VAR by market risk component:

Company’s Market Risk Exposures in Trading Portfolios (Unaudited)

Three Months Ended
September 30, 2004

Three Months Ended
June 30, 2004

Three Months Ended
March 31, 2004

Minimum(1)

Maximum(1)

Average

Minimum(1)

Maximum(1)

Average

Minimum(1)

Maximum(1)

Average

99%, one-day VAR, in $ millions

Interest rate risk

28

50

38

39

55

46

32

49

40

Equity risk

13

29

19

19

32

24

12

26

19

Foreign currency exchange risk

1

2

1

—

4

—

—

3

—

Benefit of diversification

—

—

(14
)

—

—

(16
)

—

—

(11
)

Total

30

62

44

45

69

54

34

63

48

	Company’s Market Risk Exposures in Trading Portfolios
	Three Months Ended March 31, 2005									Three Months Ended March 31, 2004									Year Ended December 31, 2004
	Minimum			Maximum			Average			Minimum			Maximum			Average			Minimum			Maximum			Average
99%, one-day VAR, in $ millions
Interest rate and credit spread		33			52			42			32			49			40			25			55			39
Equity		13			21			17			12			26			19			12			32			19
Foreign exchange rate		—			4			1			—			3			—			—			4			1
Commodity		—			3			1			—			—			—			—			—			—
Diversification benefit		—	(1)		—	(1)		(16	)		—	(1)		—	(1)		(11	)		—	(1)		—	(1)		(14	)
Total		36			55			45			34			63			48			27			69			45

(1) As the minimum and maximum occur on different days for different risk types, it is not meaningful to calculate a portfolio diversification benefit.

The average, maximum and minimum daily trading revenue ~~over~~for the ~~last~~ three ~~quarters~~months ended March 31, 2005 and 2004 and for the year ended December 31, 2004 is shown below:

	Three Months Ended September 30, 2004			Three Months Ended June 30, 2004			Three Months Ended March 31, 2004			Three months ended March 31, 2005			Three months ended March 31, 2004			Year ended December 31, 2004
Daily trading revenue, in $ millions
Average		11			14			16			15			16			14
Maximum		64			63			67			64			67			67
Minimum		(7	)		(16	)		(17	)		(12	)		(17	)		(17	)

Non-trading portfolios

We measure equity risk on non-trading positions using sensitivity analysis that estimates the potential change in the recorded value of the investments resulting from a 10% decline in the equity markets of ~~G22~~developed nations and a 20% decline in the equity markets of ~~non-G22~~emerging market nations. The estimated impact of equity risk on our non-trading financial instruments portfolio, which is mainly comprised of our private equity investments, would be a decrease in the value of the non-trading portfolio of approximately ~~$105~~$129 million and a decrease of approximately ~~$112~~$118 million as of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003,~~ 2004,

respectively. The estimated impact of equity ~~price~~ risk as ~~of September 30, 2004~~ excludes the investments in certain private equity funds consolidated primarily under FIN 46R.

The interest rate risk on non-trading positions is measured using sensitivity analysis that estimates the potential change in the value of the non-trading portfolio resulting from a 50 basis point decline in the interest rates of ~~G22~~developed nations and a 200 basis point decline in the interest rates of ~~non-G22~~emerging market nations. The estimated impact of interest rate risk on pre-tax net income would be a decrease of approximately ~~$14~~$12 million ~~and an increase of approximately $55 million as of September 30, 2004~~on both March 31, 2005 and December 31, ~~2003, respectively. This decrease is due to the reclassification of certain positions into the trading portfolio.~~2004.

The foreign exchange risk on non-trading positions is measured using sensitivity analysis that estimates the potential change in the value of the non-trading portfolio resulting from a 10% strengthening of the U.S. dollar against ~~G22~~developed currencies and a 20% strengthening of the U.S. dollar against ~~non-G22~~emerging market currencies. The estimated impact of foreign exchange risk on the value of the non-trading portfolio would be zero and a decrease of approximately $1 million as of ~~September 30, 2004~~March 31, 2005 and December 31, ~~2003.~~2004, respectively.

~~We do not have material~~The commodity price risk on non-trading positions is measured using sensitivity analysis that estimates the potential change in the value of the non-trading portfolio resulting from a 20% weakening in commodity prices. The estimated impact of commodity price risk on the value of the non-trading portfolio would be a decrease of $2 million as of March 31, 2005. Previously, commodity price risk was immaterial in our non-trading portfolio.

Item 4: Controls and Procedures

As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial and Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon and as of the date of the evaluation, our Chief Executive Officer and Chief Financial and Accounting Officer concluded that the design and operation of these disclosure controls and procedures were effective in all material respects to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~September 30, 2004~~March 31, 2005 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

6655

PART II
OTHER INFORMATION

Item 1: Legal Proceedings

Certain significant legal proceedings and matters have been previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2003 and Quarterly Reports on Form 10-Q for the three months ended March 31, 2004 and June 30,~~ 2004. The following is an update of such proceedings.

Litigation Relating to IPO Allocation/Research-related Practices

On ~~October 13, 2004, in~~March 31, 2005, the ~~In re Initial Public Offering Securities Litigation~~,U.S. District Court for the District of Massachusetts granted CSFB LLC’s motion to dismiss the complaint brought on behalf of purchasers of shares of Agilent Technologies, Inc.

On April 14, 2005, the U.S. District Court for the Southern District of New York ~~issued an order granting in substantial part plaintiffs’ motion for class certification in each of~~dismissed the ~~six focus cases selected~~analyst research-related claims brought by the parties for class certification motion practice. The Court denied aspects of plaintiffs’ motion relating to the length of the class period with respect to claims arising under Section 11 of the Securities Act of 1933, as amended,plaintiff who previously filed, and then voluntarily dismissed, a similar action in two of the focus cases, the Court denied class certification on the Section 11 claims for lack of an adequate class representative. The Court stated that the order “is intended to provide strong guidance, if not dispositive effect, to all parties when considering class certification in the remaining actions.” Missouri state court.

NCFE-related Litigation

On ~~October 27, 2004, the underwriter defendants in the six focus cases~~March 31, 2005, CSFB LLC and certain affiliates filed a ~~petition for review of the class certification order in the United States Court of Appeals for the Second Circuit.~~

~~On August 12, 2004, the U.S. District Court for the District of Massachusetts denied CSFB LLC’s~~ motion to dismiss the ~~putative class~~ action ~~brought on behalf of purchasers of shares of Winstar, Inc.; on September 21, 2004, the Court denied CSFB LLC’s motion to dismiss the putative class action brought on behalf of purchasers of shares of Razorfish, Inc.~~

~~On September 13, 2004,~~in the U.S. District Court for the Southern District of ~~New York preliminarily approved~~Ohio filed by a ~~settlement~~trust created through the confirmed bankruptcy plan of National Century Financial Enterprise Inc. asserting common law claims similar to those asserted in the ~~In re NewPower Securities~~Multidistrict Litigation ~~between~~ cases as well as statutory claims under the ~~plaintiffs~~Ohio corrupt practices act, claims for professional negligence and ~~CSFB LLC and~~claims under the ~~other underwriter defendants after the Court approved a settlement involving other parties in March 2004.~~

On July 16, 2004, CSFB LLC and certain other investment banks were sued in Texas state court by a sub-group of the limited partners that had invested in LJM2 Co-Investment, L.P. (“LJM2”), a now bankrupt limited partnership formed by Enron’s former Chief Financial Officer, Andrew Fastow. The plaintiffs allege, among other things, that the defendants breached their fiduciary duties, were unjustly enriched, engaged in a civil conspiracy, aided and abetted a violation of the Texas Securities Act, Art. 581-33(B), aided and abetted fraud, and aided and abetted breach of fiduciary duty. The defendants removed the case to theU.S. Bankruptcy ~~Court for the Northern District of Texas, where LJM2’s bankruptcy proceedings are pending. On September 29, 2004, the plaintiffs moved to remand the case back to Texas state court.~~

~~AmeriServe Food Distribution Inc. Litigation~~

On October 7, 2004, in the action filed by GSC Recovery, Inc. against Donaldson, Lufkin & Jenrette Securities Corporation, certain of its affiliates, and certain officers, directors and other individuals and entities in the Superior Court of New Jersey, Law Division, Morris County, the Court denied defendants’ motion for summary judgment.Code.

We are involved in a number of judicial, regulatory and arbitration proceedings (including those described ~~below and actions that have been separately described in previous filings)~~above) concerning matters

arising in connection with the conduct of our businesses. Some of these actions have been brought on behalf of various classes of claimants and ~~unless otherwise specified,~~ 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 a material adverse effect on our financial condition but might be material to operating results for any particular period, depending, in part, upon the operating results for such period. ~~We intend to defend ourselves vigorously against all of the claims asserted in these matters.~~

Items 2, 3 and 4:

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

Item ~~5: Other Information~~6: Exhibits

We have made in this Quarterly Report on Form 10-Q, including, without limitation, in “Legal Proceedings” in Part II, Item 1, and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2, and from time to time may otherwise make in our public filings and press releases, forward-looking statements concerning our operations, economic performance and financial condition, as well as our future plans and strategic objectives. Such forward-looking statements are subject to various risks and uncertainties, and we claim the protection afforded by the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those anticipated herein or in any such other filings, releases or statements because of a number of factors, including without limitation, those detailed in “Business—Certain Factors That May Affect Our Results of Operations” in Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2003, those discussed elsewhere herein, and in other public filings and press releases. These forward-looking statements are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and beyond our control. Forward-looking statements are typically identified by the use of future or conditional verbs such as “will,” “should,” “would” or “could,” and by words or phrases such as “believe,” “expect,” “intend,” “estimate” and similar expressions. By identifying these statements for you in this manner, we are alerting you to the possibility that our actual results may differ, possibly materially, from the results indicated in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements except as otherwise required by applicable law.

~~Item 6:~~(a) Exhibits ~~and Reports on Form 8-K~~

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

~~(b)~~	~~Reports on Form 8-K~~
	~~1. Form 8-K dated August 4, 2004; Item 5~~
	~~2. Form 8-K dated September 29, 2004; Item 8.01~~
	~~3. Form 8-K dated November 4, 2004; Item 8.01~~

6856

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CREDIT SUISSE FIRST BOSTON (USA), INC.
~~November 9, 2004~~May 11, 2005	By:	/s/ ~~PAUL~~DAVID C. ~~WIRTH~~FISHER
		Chief Financial and Accounting Officer (On behalf of the Registrant and as Principal Financial Officer)

6957

INDEX TO EXHIBITS

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

7058

	Preferred Stock				Common Stock			Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive (Loss) Income				Total
Balances as of December 31, 2002		$	4			$	—	$	7,646		$	595		$	(156	)	$	8,089
Net income		—				—		—			1,190			—			1,190
Foreign currency translation adjustment		—				—		—			—			(1		)	(1		)
Total comprehensive income																	1,189
Redemption of Series B preferred stock		(4		)		—		—			—			—			(4		)
Capital contribution by CSFBI		—				—		75			—			—			75
CSG share plan activity, net of tax charge of $28		—				—		250			—			—			250
Balances as of September 30, 2003		$	—			$	—	$	7,971		$	1,785		$	(157	)	$	9,599
Balances as of December 31, 2003		$	—			$	—	$	8,012		$	1,787		$	(158	)	$	9,641
Net income		—				—		—			478			—			478
Decrease in pension liability		—				—		—			—			1			1
Total comprehensive income																	479
CSG share plan activity, including tax benefit of $99		—				—		354			—			—			354
Balances as of September 30, 2004		$	—			$	—	$	8,366		$	2,265		$	(157	)	$	10,474

	For the Nine Months Ended September 30,
	2004			2003
	(In millions)
Current:
U.S. federal		$	187		$	(3	)
State and local		3			1
Foreign		4			1
Total current		194			(1		)
Deferred:
U.S. federal		26			114
Total deferred		26			114
Provision for income taxes from continuing operations		$	220		$	113

	Institutional Securities				Wealth & Asset Management				Total Segment
	(In millions)
For the Three Months Ended September 30, 2004:
Net revenues excluding net interest		$	426			$	203		$	629
Net interest revenue		560				(6		)	554
Total net revenues(1)		986				197			1,183
Total expenses		984				138			1,122
Income(2)		2				59			61
Minority interests(3)		8				41			49
(Loss) Income after minority interests(4)		$	(6	)		$	18		12
For the Three Months Ended September 30, 2003:
Net revenues excluding net interest		$	221			$	132		$	353
Net interest revenue		694				16			710
Total net revenues(1)(5)		915				148			1,063
Total expenses		780				99			879
Income(2)(5)		135				49			184
Minority interests(3)		—				—			—
Income after minority interests(4)(5)		$	135			$	49		$	184
For the Nine Months Ended September 30, 2004:
Net revenues excluding net interest		$	1,805			$	1,100		$	2,905
Net interest revenue		1,790				35			1,825
Total net revenues(1)		3,595				1,135			4,730
Total expenses		3,103				434			3,537
Income(2)		492				701			1,193
Minority interests(3)		70				425			495
Income after minority interests(4)		$	422			$	276		$	698
For the Nine Months Ended September 30, 2003:
Net revenues excluding net interest		$	1,413			$	444		$	1,857
Net interest revenue		1,823				30			1,853
Total net revenues(1)(5)		3,236				474			3,710
Total expenses		2,916				367			3,283
Income(2)(5)		320				107			427
Minority interests(3)		—				—			—
Income after minority interests(4)(5)		$	320			$	107		$	427
Segment assets as of September 30, 2004(6)		$	266,941			$	3,786		$	270,727
Segment assets as of December 31, 2003		$	239,733			$	1,833		$	241,566

	Company’s Market Risk Exposures in Trading Portfolios (Unaudited)
	As of September 30, 2004			As of June 30, 2004			As of March 31, 2004			As of December 31, 2003
99%, one-day VAR, in $ millions
Interest rate risk		29			51			35			49
Equity risk		13			20			17			14
Foreign currency exchange risk		2			1			—			—
Benefit of diversification		(14	)		(23	)		(13	)		(14	)
Total		30			49			39			49

For the Three
Months Ended
March 31, 2004

(In millions)

Net income, as reported

Add: Share-based employee compensation expense, net of related tax effects, included in reported net income

Deduct: Share-based employee compensation expense, net of related tax effects, determined under the fair-value based method for all awards

Pro forma net income