The information in this pricing supplement is not complete and may be changed.
A registration statement relating to the securities has been filed with the Securities and Exchange Commission.
Subject to completion dated January 11, 2011.
Preliminary Pricing Supplement No. U304 | Filed Pursuant to Rule 424(b)(2) |
 $ | |||
| Financial Products | |||
General
- The securities are designed for investors who are mildly bearish, neutral or mildly bullish on the Underlyings. Investors should be willing to lose some or all of their investment if a Knock-In Event occurs with respect to any Underlying. Any payment on the securities is subject to our ability to pay our obligations as they become due.
- Interest will be paid quarterly in arrears at a rate per annum that will depend on whether a Knock-In Event occurs. If no Knock-In Event occurs, interest will be paid at an Applicable Rate per annum that is expected to be 16.0% (to be determined on the Trade Date). If a Knock-In Event occurs during any quarterly Observation Period, interest for that quarterly period and each subsequent quarterly interest period will be paid at an Applicable Rate per annum that is expected to be 4.0% (to be determined on the Trade Date). Interest will be calculated on a 30/360 basis, subject to Early Redemption.
- The Issuer may redeem the securities, in whole but not in part, on any Interest Payment Date scheduled to occur on or after April 20, 2011. No interest will accrue or be payable following an Early Redemption.
- Senior unsecured obligations of Credit Suisse AG, acting through its Nassau Branch, maturing January 20, 2012.†
- Minimum purchase of $1,000. Minimum denominations of $1,000 and integral multiples in excess thereof.
- The securities are expected to price on or about January 18, 2011 (the “Trade Date”) and are expected to settle on or about January 21, 2011. Delivery of the securities in book-entry form only will be made through The Depository Trust Company.
Key Terms
Issuer: | Credit Suisse AG (“Credit Suisse”), acting through its Nassau Branch | |||
| Underlying | Ticker | Initial Level | Knock-In Level |
| Russell 2000 Index (“RTY”) | RTY |
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| Market Vectors Gold Miners ETF (“GDX”) | GDX UP |
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| United States Oil Fund, LP (“USO”) | USO |
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Underlyings: | Each Underlying is identified in the table below, together with its Bloomberg ticker symbol, Initial Level and Knock-In Level: | |||
Applicable
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Interest will be calculated on a 30/360 basis. | ||||
Interest | Unless redeemed earlier, interest will be paid quarterly in arrears at the Applicable Rate per annum on April 20, 2011, July 20, 2011, October 20, 2011 and the Maturity Date, subject to the modified following business day convention. No interest will accrue or be payable following an Early Redemption. | |||
Redemption | The Redemption Amount you will be entitled to receive will depend on the individual performance of each Underlying and whether a Knock-In Event occurs. If the securities are not subject to Early Redemption, the Redemption Amount will be determined as follows: | |||
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| Any payment you will be entitled to receive at maturity is subject to our ability to pay our obligations as they become due. | |||
Early | The Issuer may redeem the securities in whole, but not in part, on any Interest Payment Date scheduled to occur on or after April 20, 2011, upon at least three business days notice, at 100% of the principal amount of the securities, together with the interest payable on that Interest Payment Date. | |||
Knock-In Event: | A Knock-In Event occurs if the closing level of any Underlying is less than or equal to its Knock-In Level on any trading day for that Underlying during any Observation Period. | |||
Knock-In Level: | The Knock-In Level for each Underlying will be approximately 65% of the Initial Level of such Underlying. | |||
Lowest | The Underlying with the lowest Underlying Return. | |||
Underlying | For each Underlying, the Underlying Return will be calculated as follows: | |||
Final Level – Initial Level Initial Level | , subject to a maximum of zero | |||
Initial Level:* | For each Underlying, the closing level of such Underlying on the Trade Date. | |||
Final Level: | For each Underlying, the closing level of such Underlying on the Valuation Date. | |||
Observation | There are four quarterly Observation Periods. The first quarterly Observation Period will be from but excluding the Trade Date to and including the first Observation Date. Each subsequent quarterly Observation Period will be from but excluding an Observation Date to and including the next following Observation Date. | |||
Observation | April 15, 2011, July 15, 2011, October 17, 2011 and the Valuation Date. | |||
Valuation Date:† | January 17, 2012 | |||
Maturity Date:† | January 20, 2012 | |||
Listing: | The securities will not be listed on any securities exchange. | |||
CUSIP: | 22546ER22 | |||
* In the event that the closing level for any Underlying is not available on the Trade Date, the Initial Level for such Underlying will be determined on the immediately following trading day on which a closing level is available.
† The determination of the closing level for each Underlying on each Observation Date, other than the Valuation Date, is subject to postponement if such date is not a trading day for such Underlying or as a result of a market disruption event in respect of such Underlying, as described herein under “Market Disruption Events.” The Valuation Date is subject to postponement in respect of each Underlying if such date is not an underlying business day for such Underlying or as a result of a market disruption event in respect of such Underlying, as described in the accompanying product supplement under “Description of the Securities—Market disruption events”. The Interest Payment Dates including the Maturity Date are subject to postponement, each as described herein, if such date is not a business day or if the determination of the closing level for any Underlying on the corresponding Observation Date or the Valuation Date, as relevant, is postponed because such date is not a trading day or an underlying business day for any Underlying, as applicable, or as a result of a market disruption event in respect of any Underlying.
Investing in the securities involves a number of risks. See “Selected Risk Considerations” in this pricing supplement and “Risk Factors” beginning on page PS-3 of the accompanying product supplement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy or the adequacy of this pricing supplement or the accompanying underlying supplement, the product supplement, the prospectus supplement and the prospectus. Any representation to the contrary is a criminal offense.
| Price to Public | Underwriting Discounts and Commissions(1) | Proceeds to Issuer |
Per security | $1,000.00 | $ | $ |
Total | $ | $ | $ |
(1) We or one of our affiliates may pay varying discounts and commissions of between $20.00 and $22.50 per $1,000 principal amount of securities in connection with the distribution of the securities. In addition, an affiliate of ours may pay referral fees of up to $5.00 per $1,000 principal amount of securities in connection with the distribution of the securities. For more detailed information, please see “Supplemental Plan of Distribution (Conflicts of Interest)” on the last page of this pricing supplement.
The agent for this offering, Credit Suisse Securities (USA) LLC (“CSSU”), is our affiliate. For more information, see “Supplemental Plan of Distribution (Conflicts of Interest)” on the last page of this pricing supplement.
The securities are not deposit liabilities and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency of the United States, Switzerland or any other jurisdiction.
Credit Suisse
January , 2011
You may revoke your offer to purchase the securities at any time prior to the time at which we accept such offer on the date the securities are priced. We reserve the right to change the terms of, or reject any offer to purchase the securities prior to their issuance. In the event of any changes to the terms of the securities, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case we may reject your offer to purchase.
Additional Terms Specific to the Securities
You should read this pricing supplement together with the underlying supplement dated June 24, 2010, the product supplement dated October 18, 2010, the prospectus supplement dated March 25, 2009 and the prospectus dated March 25, 2009, relating to our Medium-Term Notes of which these securities are a part. You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
- Underlying supplement dated June 24, 2010:
http://www.sec.gov/Archives/edgar/data/1053092/000104746910006110/a2199225z424b2.htm
- Product supplement No. U-I dated October 18, 2010:
http://www.sec.gov/Archives/edgar/data/1053092/000095010310003007/dp19604_424b2-ui.htm
- Prospectus supplement dated March 25, 2009:
http://www.sec.gov/Archives/edgar/data/1053092/000104746909003093/a2191799z424b2.htm
- Prospectus dated March 25, 2009:
http://www.sec.gov/Archives/edgar/data/1053092/000104746909003289/a2191966z424b2.htm
Our Central Index Key, or CIK, on the SEC website is 1053092. As used in this pricing supplement, the “Company,” “we,” “us,” or “our” refers to Credit Suisse.
This pricing supplement, together with the documents listed above, contains the terms of the securities and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, fact sheets, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in “Risk Factors” in the product supplement and “Selected Risk Considerations” in this pricing supplement, as the securities involve risks not associated with conventional debt securities. You should consult your investment, legal, tax, accounting and other advisors before deciding to invest in the securities.
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Hypothetical Redemption Amounts and Total Payments on the Securities
The tables and examples below illustrate hypothetical Redemption Amounts payable at maturity and, in the case of the tables, total payments over the term of the securities (which include both payments at maturity and the total interest paid on the securities) on a $1,000 investment in the securities for a range of Underlying Returns of the Lowest Performing Underlying, both in the event a Knock-In Event does not occur and in the event a Knock-In Event does occur. The tables and examples assume that (i) the securities are not redeemed prior to maturity, (ii) the Applicable Rate is 16.0% per annum if a Knock-In Event does not occur and 4.0% per annum if a Knock-In Event occurs, and assume that (A) the term of the securities is exactly one year and (B) the Knock-In Level for each Underlying is 65% of the Initial Level of such Underlying. In addition, the examples below assume that the Initial Level is 790 for RTY, $57 for GDX and $38 for USO. The examples are intended to illustrate hypothetical calculations of only the Redemption Amount and do not illustrate the calculation or payment of any individual interest payment. The Redemption Amounts and total payments set forth below are provided for illustration purposes only. The actual Redemption Amounts and total payments applicable to a purchaser of the securities will depend on several variables, including, but not limited to (a) whether the closing level of any Underlying is less than or equal to its Knock-In Level on any trading day for that Underlying during any Observation Period and (b) the Final Level of the Lowest Performing Underlying determined on the Valuation Date. It is not possible to predict whether a Knock-In Event will occur, and in the event that there is a Knock-In Event, whether and by how much the Final Level of the Lowest Performing Underlying will decrease in comparison to its Initial Level. Any payment you will be entitled to receive is subject to our ability to pay our obligations as they become due. The numbers appearing in the following tables and examples have been rounded for ease of analysis.
TABLE 1: A Knock-In Event DOES NOT occur during any Observation Period.
| Principal Amount of Securities | Percentage Change from the Initial Level to the Final Level of the Lowest Performing Underlying | Underlying Return of the Lowest Performing Underlying | Redemption Amount (Knock-In Event does not occur) | Total Interest Payment on the Securities | Total Payment on the Securities |
$1,000 | 50% | 0% | $1,000 | $160.00 | $1,160.00 |
$1,000 | 40% | 0% | $1,000 | $160.00 | $1,160.00 |
$1,000 | 30% | 0% | $1,000 | $160.00 | $1,160.00 |
$1,000 | 20% | 0% | $1,000 | $160.00 | $1,160.00 |
$1,000 | 10% | 0% | $1,000 | $160.00 | $1,160.00 |
$1,000 | 0% | 0% | $1,000 | $160.00 | $1,160.00 |
$1,000 | -10% | -10% | $1,000 | $160.00 | $1,160.00 |
$1,000 | -20% | -20% | $1,000 | $160.00 | $1,160.00 |
$1,000 | -30% | -30% | $1,000 | $160.00 | $1,160.00 |
$1,000 | -34.99% | -34.99% | $1,000 | $160.00 | $1,160.00 |
TABLE 2: A Knock-In Event OCCURS during the period from the Trade Date to the first Observation Date.
| Principal Amount of Securities | Percentage Change from the Initial Level to the Final Level of the Lowest Performing Underlying | Underlying Return of the Lowest Performing Underlying | Redemption Amount (Knock-In Event occurs during the first Observation Period) | Total Interest Payment on the Securities | Total Payment on the Securities |
$1,000 | 50% | 0% | $1,000 | $40.00 | $1,040.00 |
$1,000 | 40% | 0% | $1,000 | $40.00 | $1,040.00 |
$1,000 | 30% | 0% | $1,000 | $40.00 | $1,040.00 |
$1,000 | 20% | 0% | $1,000 | $40.00 | $1,040.00 |
$1,000 | 10% | 0% | $1,000 | $40.00 | $1,040.00 |
$1,000 | 0% | 0% | $1,000 | $40.00 | $1,040.00 |
$1,000 | -10% | -10% | $900 | $40.00 | $940.00 |
$1,000 | -20% | -20% | $800 | $40.00 | $840.00 |
$1,000 | -30% | -30% | $700 | $40.00 | $740.00 |
$1,000 | -40% | -40% | $600 | $40.00 | $640.00 |
$1,000 | -50% | -50% | $500 | $40.00 | $540.00 |
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TABLE 3: A Knock-In Event OCCURS during the period from the first Observation Date to the second Observation Date but not prior.
| Principal Amount of Securities | Percentage Change from the Initial Level to the Final Level of the Lowest Performing Underlying | Underlying Return of the Lowest Performing Underlying | Redemption Amount (Knock-In Event occurs during the second Observation Period) | Total Interest Payment on the Securities | Total Payment on the Securities |
$1,000 | 50% | 0% | $1,000 | $70.00 | $1,070.00 |
$1,000 | 40% | 0% | $1,000 | $70.00 | $1,070.00 |
$1,000 | 30% | 0% | $1,000 | $70.00 | $1,070.00 |
$1,000 | 20% | 0% | $1,000 | $70.00 | $1,070.00 |
$1,000 | 10% | 0% | $1,000 | $70.00 | $1,070.00 |
$1,000 | 0% | 0% | $1,000 | $70.00 | $1,070.00 |
$1,000 | -10% | -10% | $900 | $70.00 | $970.00 |
$1,000 | -20% | -20% | $800 | $70.00 | $870.00 |
$1,000 | -30% | -30% | $700 | $70.00 | $770.00 |
$1,000 | -40% | -40% | $600 | $70.00 | $670.00 |
$1,000 | -50% | -50% | $500 | $70.00 | $570.00 |
TABLE 4: A Knock-In Event OCCURS during the period from the second Observation Date to the third Observation Date but not prior.
| Principal Amount of Securities | Percentage Change from the Initial Level to the Final Level of the Lowest Performing Underlying | Underlying Return of the Lowest Performing Underlying | Redemption Amount (Knock-In Event occurs during the third Observation Period) | Total Interest Payment on the Securities | Total Payment on the Securities |
$1,000 | 50% | 0% | $1,000 | $100.00 | $1,100.00 |
$1,000 | 40% | 0% | $1,000 | $100.00 | $1,100.00 |
$1,000 | 30% | 0% | $1,000 | $100.00 | $1,100.00 |
$1,000 | 20% | 0% | $1,000 | $100.00 | $1,100.00 |
$1,000 | 10% | 0% | $1,000 | $100.00 | $1,100.00 |
$1,000 | 0% | 0% | $1,000 | $100.00 | $1,100.00 |
$1,000 | -10% | -10% | $900 | $100.00 | $1,000.00 |
$1,000 | -20% | -20% | $800 | $100.00 | $900.00 |
$1,000 | -30% | -30% | $700 | $100.00 | $800.00 |
$1,000 | -40% | -40% | $600 | $100.00 | $700.00 |
$1,000 | -50% | -50% | $500 | $100.00 | $600.00 |
TABLE 5: A Knock-In Event OCCURS during the period from the third Observation Date to the Valuation Date but not prior.
| Principal Amount of Securities | Percentage Change from the Initial Level to the Final Level of the Lowest Performing Underlying | Underlying Return of the Lowest Performing Underlying | Redemption Amount (Knock-In Event occurs during the fourth Observation Period) | Total Interest Payment on the Securities | Total Payment on the Securities |
$1,000 | 50% | 0% | $1,000 | $130.00 | $1,130.00 |
$1,000 | 40% | 0% | $1,000 | $130.00 | $1,130.00 |
$1,000 | 30% | 0% | $1,000 | $130.00 | $1,130.00 |
$1,000 | 20% | 0% | $1,000 | $130.00 | $1,130.00 |
$1,000 | 10% | 0% | $1,000 | $130.00 | $1,130.00 |
$1,000 | 0% | 0% | $1,000 | $130.00 | $1,130.00 |
$1,000 | -10% | -10% | $900 | $130.00 | $1,030.00 |
$1,000 | -20% | -20% | $800 | $130.00 | $930.00 |
$1,000 | -30% | -30% | $700 | $130.00 | $830.00 |
$1,000 | -40% | -40% | $600 | $130.00 | $730.00 |
$1,000 | -50% | -50% | $500 | $130.00 | $630.00 |
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Example 1: A Knock-In Event occurs because the closing level of one Underlying reaches its Knock-In Level during an Observation Period; and the Final Level of the Lowest Performing Underlying is less than its Initial Level.
| Underlying | Initial Level | Lowest closing level of the Underlying during the Observation Period | Final Level on the Valuation Date |
RTY | 790 | 513.50 | 513.50 |
GDX | $57 | $57 | $62.70 |
USO | $38 | $26.60 | $26.60 |
Since the closing level of RTY reaches its Knock-In Level during an Observation Period, a Knock-In Event occurs. RTY is also the Lowest Performing Underlying.
Therefore, the Underlying Return of the Lowest Performing Underlying will equal:
Final Level of RTY – Initial Level of RTY
Initial Level of RTY
; subject to a maximum of 0.00
= (513.50 – 790)/790 = -0.35
The Redemption Amount = principal amount of the securities × (1 + Underlying Return of the Lowest Performing Underlying)
= $1,000 × (1 – 0.35) = $650
Example 2: A Knock-In Event occurs because the closing level of one Underlying reaches its Knock-In Level during an Observation Period; the Lowest Performing Underlying never reaches or falls below its Knock-In Level during any Observation Period; and the Final Level of the Lowest Performing Underlying is less than its Initial Level.
| Underlying | Initial Level | Lowest closing level of the Underlying during the Observation Period | Final Level on the Valuation Date |
RTY | 790 | 632 | 869 |
GDX | $57 | $43.89 | $43.89 |
USO | $38 | $24.70 | $41.80 |
Since the closing level of USO reaches its Knock-In Level, a Knock-In Event occurs. GDX is the Lowest Performing Underlying, even though its closing level never reaches or falls below its Knock-In Level during an Observation Period.
Therefore, the Underlying Return of the Lowest Performing Underlying will equal:
Final Level of GDX - Initial Level of GDX
Initial Level of GDX
; subject to a maximum of 0.00
= ($43.89 – $57)/$57 = -0.23
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The Redemption Amount = principal amount of the securities × (1 + Underlying Return of the Lowest Performing Underlying)
= $1,000 × (1 - 0.23) = $770
Example 3: A Knock-In Event occurs because the closing level of one Underlying reaches its Knock-In Level during an Observation Period; and the Final Level of the Lowest Performing Underlying is greater than its Initial Level.
| Underlying | Initial Level | Lowest closing level of the Underlying during the Observation Period | Final Level on the Valuation Date |
RTY | 790 | 553 | 948 |
GDX | $57 | $51.30 | $68.40 |
USO | $37 | $24.05 | $40.70 |
Since the closing level of USO reaches its Knock-In Level during an Observation Period, a Knock-In Event occurs. USO is also the Lowest Performing Underlying.
Therefore, the Underlying Return of the Lowest Performing Underlying will equal:
| Final Level of USO – Initial Level of USO |
|
; subject to a maximum of 0.00
= ($40.70 – $37)/$37 = 0.10
BUT 0.10 is greater than the maximum of 0.00, so the Underlying Return of the Lowest Performing Underlying is 0.00.
The Redemption Amount = principal amount of the securities × (1 + Underlying Return of the Lowest Performing Underlying)
= $1,000 × (1 + 0.00) = $1,000
Example 4: A Knock-In Event does not occur.
| Underlying | Initial Level | Lowest closing level of the Underlying during the Observation Period | Final Level on the Valuation Date |
RTY | 790 | 608.30 | 869 |
GDX | $57 | $44.46 | $62.70 |
USO | $37 | $27.75 | $40.70 |
Since the closing level of each Underlying did not reach or fall below its Knock-In Level, a Knock-In Event does not occur.
Therefore, the Redemption Amount equals $1,000.
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Selected Risk Considerations
An investment in the securities involves significant risks. Investing in the securities is not equivalent to investing directly in the Underlyings. These risks are explained in more detail in the “Risk Factors” section of the accompanying product supplement.
YOU MAY RECEIVE LESS THAN THE PRINCIPAL AMOUNT AT MATURITY – You may receive less at maturity than you originally invested in the securities, or you may receive nothing, excluding any accrued or unpaid interest. If a Knock-In Event occurs during any Observation Period and the Final Level of the Lowest Performing Underlying is less than its Initial Level, you will not receive the maximum amount of interest payable on the securities and you will be fully exposed to any depreciation in the Lowest Performing Underlying. In this case, the Redemption Amount you will be entitled to receive will be less than the principal amount of the securities, and you could lose your entire investment. It is not possible to predict whether a Knock-In Event will occur and, in the event that there is a Knock-In Event, whether and by how much the Final Level of the Lowest Performing Underlying will decrease in comparison to its Initial Level. Any payment you will be entitled to receive at maturity is subject to our ability to pay our obligations as they become due.
THE SECURITIES WILL NOT PAY MORE THAN THE PRINCIPAL AMOUNT, PLUS ACCRUED AND UNPAID INTEREST AT THE APPLICABLE RATE, AT MATURITY OR UPON EARLY REDEMPTION – The securities will not pay more than the principal amount, plus accrued and unpaid interest, at maturity or upon early redemption. If the Final Level of each Underlying is greater than its respective Initial Level (regardless of whether a Knock-In Event has occurred), you will not receive the appreciation of any Underlying. Assuming the securities are held to maturity, the maximum amount payable with respect to the securities is expected to be $1,160 (to be determined on the Trade Date) for each $1,000 principal amount of the securities.
THE SECURITIES ARE SUBJECT TO THE CREDIT RISK OF CREDIT SUISSE – Although the return on the securities will be based on the performance of the Underlyings, the payment of any amount due on the securities, including any applicable interest payments, early redemption payment or payment at maturity, is subject to the credit risk of Credit Suisse. Investors are dependent on our ability to pay all amounts due on the securities and, therefore, investors are subject to our credit risk. In addition, any decline in our credit ratings, any adverse changes in the market’s view of our creditworthiness or any increase in our credit spreads is likely to adversely affect the value of the securities prior to maturity.
IF A KNOCK-IN EVENT OCCURS DURING ANY QUARTERLY OBSERVATION PERIOD, THE APPLICABLE RATE FOR THE CORRESPONDING QUARTERLY INTEREST PERIOD AND EACH SUBSEQUENT INTEREST PERIOD WILL EQUAL 4.0% PER ANNUM – If a Knock-In Event occurs during any quarterly Observation Period, the Applicable Rate for the corresponding quarterly interest period and each subsequent interest period will equal 4.0% per annum (to be determined on the Trade Date). For example, if a Knock-In Event occurs during the period from the Trade Date to the first Observation Date, the Applicable Rate per annum for each interest period will equal to 4.0% and the maximum amount of interest you will receive will equal $40.00 per $1,000 principal amount of the securities.
IF A KNOCK-IN EVENT OCCURS, YOUR RETURN WILL BE BASED ON THE INDIVIDUAL PERFORMANCE OF THE LOWEST PERFORMING UNDERLYING – If a Knock-In Event occurs, your return will be based on the individual performance of the Lowest Performing Underlying. This will be true even if the closing level of the Lowest Performing Underlying never reached or fell below its Knock-In Level on any trading day during any Observation Period.
YOUR RETURN WILL BE NEGATIVE EVEN IF A KNOCK-IN EVENT OCCURS WITH RESPECT TO ONLY ONE UNDERLYING AND THE FINAL LEVEL OF ONLY ONE UNDERLYING REACHES OR FALLS BELOW ITS INITIAL LEVEL – Your return will be negative even if a Knock-In Event occurs with respect to only one Underlying and the Final Level of only one Underlying reaches or falls below its Initial Level. Even if the closing level of only one Underlying reaches or falls below its Knock-In Level on any trading day during any Observation Period, a Knock-In Event will have occurred.
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THE REDEMPTION AMOUNT PAYABLE AT MATURITY WILL BE LESS THAN THE PRINCIPAL AMOUNT OF THE SECURITIES EVEN IF A KNOCK-IN EVENT OCCURS WITH RESPECT TO ONLY ONE UNDERLYING AND THE FINAL LEVEL OF ONLY ONE UNDERLYING FALLS BELOW ITS INITIAL LEVEL – Even if the closing level of only one Underlying is less than or equal to its Knock-In Level on any trading day for that Underlying during any Observation Period, a Knock-In Event will have occurred. In this case, the Redemption Amount payable at maturity will be less than the principal amount of the securities if, in addition to the occurrence of a Knock-In Event, the Final Level of just one Underlying is less than its Initial Level. This will be true even if the closing level of the Lowest Performing Underlying was never less than or equal to its Knock-In Level on any trading day for that Underlying during any Observation Period.
THE SECURITIES ARE SUBJECT TO A POTENTIAL EARLY REDEMPTION, WHICH WOULD LIMIT YOUR ABILITY TO ACCRUE INTEREST OVER THE FULL TERM OF THE SECURITIES – The securities are subject to a potential early redemption. The securities may be redeemed on any Interest Payment Date scheduled to occur on or after April 20, 2011, upon at least three business days notice. If the securities are redeemed prior to the Maturity Date, you will be entitled to receive the principal amount of your securities and any accrued but unpaid interest payable at the Applicable Rate on that Interest Payment Date. In this case, you will lose the opportunity to continue to accrue and be paid interest from the Early Redemption Date to the scheduled Maturity Date. If the securities are redeemed prior to the Maturity Date, you may be unable to invest in other securities with a similar level of risk that yield as much interest as the securities.
SINCE THE SECURITIES ARE LINKED TO THE PERFORMANCE OF MORE THAN ONE UNDERLYING, YOU WILL BE FULLY EXPOSED TO THE RISK OF FLUCTUATIONS IN THE LEVEL OF EACH UNDERLYING – Since the securities are linked to the performance of more than one Underlying, the securities will be linked to the individual performance of each Underlying. Because the securities are not linked to a basket, in which the risk is mitigated and diversified among all of the components of a basket, you will be exposed to the risk of fluctuations in the levels of the Underlyings to the same degree for each Underlying. For example, in the case of securities linked to a basket, the return would depend on the weighted aggregate performance of the basket components as reflected by the basket return. Thus, the depreciation of any basket component could be mitigated by the appreciation of another basket component, to the extent of the weightings of such components in the basket. However, in the case of securities linked to the lowest performing of each of two Underlyings, the individual performance of each Underlying is not combined to calculate your return and the depreciation of any Underlying is not mitigated by the appreciation of any other Underlying. Instead, the Redemption Amount payable at maturity depends on the lowest performing of the two Underlyings to which the securities are linked.
THERE ARE RISKS ASSOCIATED WITH THE MARKET VECTORS GOLD MINERS ETF – Although shares of the Market Vectors Gold Miners ETF are listed for trading on a national securities exchange and a number of similar products have been traded on various national securities exchanges for varying periods of time, there is no assurance that an active trading market will continue for the shares of the Market Vectors Gold Miners ETF or that there will be liquidity in the trading market. The Market Vectors Gold Miners ETF is subject to management risk, which is the risk that a fund’s investment strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. Pursuant to the Market Vectors Gold Miners ETF’s investment strategy or otherwise, the Market Vectors Gold Miners ETF’s investment advisor may add, delete or substitute the equity securities held by the Market Vectors Gold Miners ETF. Any of these actions could adversely affect the price of the shares of the Market Vectors Gold Miners ETF and consequently the value of the securities. For further information on the Market Vectors Gold Miners ETF, please refer to the accompanying underlying supplement.
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THE PERFORMANCE OF THE MARKET VECTORS GOLD MINERS ETF MAY NOT CORRELATE TO THE PERFORMANCE OF ITS TRACKED INDEX – The Market Vectors Gold Miners ETF will generally invest in all of the equity securities included in the index tracked by the Market Vectors Gold Miners ETF (the “Tracked Index”). There may, however, be instances where the Market Vectors Gold Miners ETF’s investment advisor may choose to overweight another stock in the Tracked Index, purchase securities not included in the Tracked Index that the investment advisor believes are appropriate to substitute for a security included in the Tracked Index or utilize various combinations of other available investment techniques in seeking to track accurately the Tracked Index. In addition, the performance of the Market Vectors Gold Miners ETF will reflect additional transaction costs and fees that are not included in the calculation of the Tracked Index. Also, corporate actions with respect to the equity securities (such as mergers and spin-offs) may impact the variance between the Market Vectors Gold Miners ETF and the Tracked Index. Finally, because the shares of the Market Vectors Gold Miners ETF are traded on a national securities exchange and are subject to market supply and investor demand, the market value of one share of the Market Vectors Gold Miners ETF may differ from the net asset value per share of the Market Vectors Gold Miners ETF. For these reasons, the performance of the Market Vectors Gold Miners ETF may not correlate with the performance of the Tracked Index.
RISKS ASSOCIATED WITH INVESTMENTS IN SECURITIES WITH CONCENTRATION IN THE GOLD AND SILVER MINING INDUSTRY – The stocks comprising the NYSE Arca Gold Miners Index and that are generally tracked by the Market Vectors Gold Miners ETF are stocks of companies primarily engaged in the mining of gold or silver. The shares of the Market Vectors Gold Miners ETF may be subject to increased price volatility as they are linked to a single industry, market or sector and may be more susceptible to adverse economic, market, political or regulatory occurrences affecting that industry, market or sector. Because the Market Vectors Gold Miners ETF primarily invests in stocks and ADRs of companies that are involved in the gold mining industry, and to a lesser extent the silver mining industry, the shares of the Market Vectors Gold Miners ETF are subject to certain risks associated with such companies.
Gold mining companies are highly dependent on the price of gold and subject to competition pressures that may have a significant effect on their financial condition. Gold prices are subject to volatile price movements over short periods of time and are affected by numerous factors. These include economic factors, including, among other things, the structure of and confidence in the global monetary system, expectations of the future rate of inflation, the relative strength of, and confidence in, the U.S. dollar (the currency in which the price of gold is generally quoted), interest rates and gold borrowing and lending rates, and global or regional economic, financial, political, regulatory, judicial or other events. Gold prices may also be affected by industry factors such as industrial and jewelry demand, lending, sales and purchases of gold by the official sector, including central banks and other governmental agencies and multilateral institutions which hold gold, levels of gold production and production costs, and short-term changes in supply and demand because of trading activities in the gold market.
Silver mining companies are highly dependent on the price of silver. Silver prices can fluctuate widely and may be affected by numerous factors. These include general economic trends, technical developments, substitution issues and regulation, as well as specific factors including industrial and jewelry demand, expectations with respect to the rate of inflation, the relative strength of the U.S. dollar (the currency in which the price of silver is generally quoted) and other currencies, interest rates, central bank sales, forward sales by producers, global or regional political or economic events, and production costs and disruptions in major silver producing countries such as Peru, Mexico and China.
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THE PERFORMANCE OF THE UNITED STATES OIL FUND, LP MAY NOT FULLY REPLICATE THE PERFORMANCE OF THE PRICE OF WTI LIGHT, SWEET CRUDE OIL – United States Commodity Funds, LLC, the general partner of the United States Oil Fund, LP, is responsible for investing the assets of the United States Oil Fund, LP in accordance with the objectives and policies of the United States Oil Fund, LP. The assets of the United States Oil Fund, LP consist primarily of investments in futures contracts for light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas, and other petroleum-based fuels that are traded on the New York Mercantile Exchange, ICE Futures or other U.S. and foreign exchanges (collectively, “oil futures contracts”) and other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and over-the-counter transactions that are based on the price of oil, other petroleum-based fuels, oil futures contracts and indices based on the foregoing (collectively, “other oil interests” and together with oil futures contracts, “oil interests”). The United States Oil Fund, LP seeks to achieve its investment objective by investing in a mix of oil futures contracts and other oil interests such that changes in the net asset value of the United States Oil Fund, LP will closely track the changes in the price of a specified oil futures contract (the “benchmark oil futures contract”). The United States Oil Fund, LP’s general partner believes that the benchmark oil futures contract historically has exhibited a close correlation with the spot price of light, sweet crude oil. There is no assurance that the general partner of the United States Oil Fund, LP will successfully implement its investment strategy and there is a risk that changes in the price of United States Oil Fund, LP units will not closely track changes in the spot price of WTI light, sweet crude oil. This could happen if the price of the units does not correlate closely with the United States Oil Fund, LP’s net asset value; changes in the United States Oil Fund, LP’s net asset value do not closely correlate with changes in the price of the benchmark oil futures contract; or changes in the price of the benchmark oil futures contract do not closely correlate with changes in the cash or spot price of light, sweet crude oil.
RISKS ASSOCIATED WITH INVESTMENTS IN SECURITIES WITH CONCENTRATION IN ENERGY COMMODITIES – Market prices of the commodities and commodity futures contracts comprising the United States Oil Fund, LP tend to be highly volatile. Commodity market prices are not related to the value of a future income or earnings stream, as tends to be the case with fixed-income and equity investments, but are subject to rapid fluctuations based on numerous factors, including changes in supply and demand relationships, governmental programs and policies, national and international monetary, trade, political and economic events, changes in interest and exchange rates, speculation and trading activities in commodities and related contracts, drought, floods, weather, and agricultural, trade, fiscal and exchange control policies, embargoes and tariffs. The markets for many commodities is also highly cyclical. Demand for refined petroleum products by consumers, as well as the agricultural, manufacturing and transportation industries, affects the price of energy commodities. Sudden disruptions in the supplies of energy commodities, such as those caused by war, natural events, accidents or acts of terrorism, may cause prices of energy commodities futures contracts to become extremely volatile and unpredictable. Also, sudden and dramatic changes in the futures market may occur, for example, upon a cessation of hostilities that may exist in countries producing energy commodities, the introduction of new or previously withheld supplies into the market or the introduction of substitute products or commodities. In particular, supplies of crude oil may increase or decrease depending on, among other factors, production decisions by the Organization of Oil and Petroleum Exporting Countries (“OPEC”) and other crude oil producers. Crude oil prices are determined with significant influence by OPEC, which has the capacity to influence oil prices worldwide because its members possess a significant portion of the world’s oil supply. Crude oil prices are generally more volatile and subject to dislocation than prices of other commodities. Demand for energy commodities such as crude oil is generally linked to economic activity, and will tend to reflect general economic conditions.
These factors may have a larger impact on commodity prices and commodity-linked instruments than on traditional fixed-income and equity securities. These variables may create additional investment risks that cause the value of the securities to be more volatile than the values of traditional securities. These and other factors may affect the price of the United States Oil Fund, LP, and thus the value of your securities, in unpredictable or unanticipated ways. The high volatility and cyclical nature of commodity markets may render such an investment inappropriate as the focus of an investment portfolio.
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THE SECURITIES ARE NOT SUBJECT TO REGULATION BY THE COMMODITY FUTURES TRADING COMMISSION – The proceeds to be received by us from the sale of the securities will not be used to purchase or sell any commodities futures contracts or options on futures contracts for your benefit. An investment in the securities thus does not constitute either an investment in futures contracts, options on futures contracts or in a collective investment vehicle that trades in these futures contracts (i.e., the securities will not constitute a direct or indirect investment by you in the futures contracts), and you will not benefit from the regulatory protections of the Commodity Futures Trading Commission, commonly referred to as the “CFTC.” The Issuer is not registered with the CFTC as a futures commission merchant and you will not benefit from the CFTC’s or any other non-U.S. regulatory authority’s regulatory protections afforded to persons who trade in futures contracts on a regulated futures exchange through a registered futures commission merchant. Unlike an investment in the securities, an investment in a collective investment vehicle that invests in futures contracts on behalf of its participants may be subject to regulation as a commodity pool and its operator may be required to be registered with and regulated by the CFTC as a commodity pool operator, or qualify for an exemption from the registration requirement. Because the securities will not be interests in a commodity pool, the securities will not be regulated by the CFTC as a commodity pool, we will not be registered with the CFTC as a commodity pool operator, and you will not benefit from the CFTC’s or any non-U.S. regulatory authority’s regulatory protections afforded to persons who invest in regulated commodity pools.
CERTAIN BUILT-IN COSTS ARE LIKELY TO ADVERSELY AFFECT THE VALUE OF THE SECURITIES PRIOR TO MATURITY – While the payment at maturity described in this pricing supplement is based on the full principal amount of your securities, the original issue price of the securities includes the agent’s commission and the cost of hedging our obligations under the securities through one or more of our affiliates. As a result, the price, if any, at which Credit Suisse (or its affiliates), will be willing to purchase securities from you in secondary market transactions, if at all, will likely be lower than the original issue price, and any sale prior to the Maturity Date could result in a substantial loss to you. The securities are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your securities to maturity.
NO OWNERSHIP RIGHTS RELATING TO THE UNDERLYINGS – Your return on the securities will not reflect the return you would realize if you actually owned shares of the Market Vectors Gold Miners ETF or the United States Oil Fund, LP and the equity securities that comprise the Underlyings. The return on your investment, which is based on the percentage change in the Underlyings, is not the same as the total return based on the purchase of shares of the Market Vectors Gold Miners ETF, the United States Oil Fund, LP or the equity securities that comprise the Underlyings.
NO DIVIDEND PAYMENTS OR VOTING RIGHTS – As a holder of the securities, you will not have voting rights or rights to receive cash dividends or other distributions or other rights with respect to the shares of the Market Vectors Gold Miners ETF, the United States Oil Fund, LP or the equity securities that comprise the Underlyings.
ANTI-DILUTION PROTECTION IS LIMITED – The calculation agent will make anti-dilution adjustments for certain events affecting the shares of the Market Vectors Gold Miners ETF or the United States Oil Fund, LP. However, the calculation agent will not make an adjustment in response to all events that could affect the shares of the Market Vectors Gold Miners ETF or the United States Oil Fund, LP. If an event occurs that does not require the calculation agent to make an adjustment, the value of the securities may be materially and adversely affected. See “Description of the Securities— Adjustments — For reference funds” in the accompanying product supplement for further information.
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LACK OF LIQUIDITY – The securities will not be listed on any securities exchange. Credit Suisse (or its affiliates) intends to offer to purchase the securities in the secondary market but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities when you wish to do so. Because other dealers are not likely to make a secondary market for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which Credit Suisse (or its affiliates) is willing to buy the securities. If you have to sell your securities prior to maturity, you may not be able to do so or you may have to sell them at a substantial loss.
POTENTIAL CONFLICTS – We and our affiliates play a variety of roles in connection with the issuance of the securities, including acting as calculation agent and hedging our obligations under the securities. In performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the securities.
MANY ECONOMIC AND MARKET FACTORS WILL AFFECT THE VALUE OF THE SECURITIES – In addition to the levels of the Underlyings on any trading day during any Observation Period, the value of the securities will be affected by a number of economic and market factors that may either offset or magnify each other, including:
the expected volatility of the Underlyings;
the time to maturity of the securities;
the Early Redemption feature, which is likely to limit the value of the securities;
interest and yield rates in the market generally;
global gold and silver supply and demand, which is influenced by such factors as forward selling by gold and silver producers, purchases made by gold and silver producers to unwind gold and silver hedge positions, central bank purchases and sales of gold, and production and cost levels in major gold-producing countries and in major silver-producing countries;
supply and demand trends for crude oil;
investors’ expectations with respect to the rate of inflation;
geopolitical conditions and a variety of economic, financial, political, regulatory or judicial events that affect the components comprising the Underlyings, or markets generally and which may affect the levels of the Underlyings; and
our creditworthiness, including actual or anticipated downgrades in our credit ratings.
Some or all of these factors may influence the price that you will receive if you choose to sell your securities prior to maturity. The impact of any of the factors set forth above may enhance or offset some or all of any change resulting from another factor or factors.
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Supplemental Use of Proceeds and Hedging
We intend to use the proceeds of this offering for our general corporate purposes, which may include the refinancing of existing debt outside Switzerland. Some or all of the proceeds we receive from the sale of the securities may be used in connection with hedging our obligations under the securities through one or more of our affiliates. Such hedging or trading activities on or prior to the Trade Date and during the term of the securities (including on the Valuation Date) could adversely affect the value of the Underlyings and, as a result, could decrease the amount you may receive on the securities at maturity. For further information, please refer to “Use of Proceeds and Hedging” in the accompanying product supplement.
The Underlyings
We have derived all information regarding each Underlying contained in this pricing supplement, including, without limitation, their make-up, method of calculation and changes in their components, from publicly available information. We make no representation or warranty as to the accuracy or completeness of this publicly available information. The information on the Underlyings provided herein is just a summary and should be read together with the additional publicly available information. Information contained in the respective Underlying websites and the Bloomberg pages referenced below is not incorporated by reference herein.
United States Oil Fund, LP
The United States Oil Fund, LP, a Delaware limited partnership, is a commodity pool that issues units that may be purchased and sold on the NYSE Arca, Inc. The United States Oil Fund, LP was organized as a limited partnership under Delaware law on May 12, 2006. It is managed and controlled by United States Commodity Funds, LLC (the “general partner of the United States Oil Fund, LP”), formerly known as Victoria Bay Asset Management, LLC. The general partner of the United States Oil Fund, LP is a single member limited liability company formed in Delaware on May 10, 2006 that is registered as a commodity pool operator with the Commodity Futures Trading Commission and is a member of the National Futures Association.
Information provided to or filed with the SEC by the United States Oil Fund, LP pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934 can be located by reference to SEC file numbers 333-153310 and 001-32834, respectively, through the SEC’s website at http://www.sec.gov. The United States Oil Fund, LP is not a mutual fund or any other type of Investment Company within the meaning of the Investment Company Act of 1940, as amended, and is not subject to regulation thereunder.
The investment objective of the United States Oil Fund, LP is for changes in percentage terms of the net asset value of the units of United States Oil Fund, LP to reflect the changes in percentage terms of the spot price of West Texas Intermediate light, sweet crude oil delivered to Cushing, Oklahoma as traded on the New York Mercantile Exchange, less the United States Oil Fund, LP’s expenses.
The units of the United States Oil Fund, LP (which we refer to as “shares of the United States Oil Fund, LP” for purposes of the accompanying product supplement) are listed on NYSE Arca, Inc. under the trading symbol “USO.”
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Historical Information
The following graphs set forth the historical performance of the Russell 2000 Index based on the closing level of the Russell 2000 Index from January 1, 2006 through January 6, 2011, the historical performance of the Market Vectors Gold Miners ETF based on the closing level of one share of such Underlying from May 22, 2006 through January 6, 2011 and the historical performance of the United States Oil Fund, LP based on the closing level of one share of such Underlying from April 10, 2006 through January 6, 2011. The closing level of the Russell 2000 Index on January 6, 2011 was 791.42. The closing level of one share of the Market Vectors Gold Miners ETF on January 6, 2011 was $56.77. The closing price of one share of the United States Oil Fund, LP on January 6, 2011 was $37.64. We obtained the closing levels below from Bloomberg, without independent verification. We make no representation or warranty as to the accuracy or completeness of the information obtained from Bloomberg. You should not take the historical levels of the Underlyings as an indication of future performance of the Underlyings or the securities. The levels of any of the Underlyings may decrease so that a Knock-In Event occurs and at maturity you will receive a Redemption Amount equal to less than the principal amount of the securities. Any payment on the securities is subject to our ability to pay our obligations as they become due. We cannot give you any assurance that the closing levels of the Underlyings will remain above their respective Knock-In Levels during any Observation Period. If the closing level of any Underlying is less than or equal to its Knock-In Level on any trading day for that Underlying during any Observation Period, and the closing level of the Lowest Performing Underlying on the Valuation Date is less than its Initial Level, then you will lose money on your investment.
For further information on the United States Oil Fund, LP, see “The United States Oil Fund, LP” herein and for further information on the Russell 2000 Index and the Market Vectors Gold Miners ETF, please refer to the accompanying underlying supplement.
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Market Disruption Events
If the calculation agent determines that on any Observation Date, other than the Valuation Date, a market disruption event (as defined in the accompanying product supplement under “Description of the Securities—Market disruption events”) exists in respect of any Underlying or if such day is not a trading day (as defined in the accompanying product supplement under “Description of the Securities—Definitions”) for any Underlying, then the determination of the closing level for such Underlying on such Observation Date will be postponed to the first succeeding trading day for such Underlying on which the calculation agent determines that no market disruption event exists in respect of such Underlying, unless the calculation agent determines that a market disruption event exists in respect of such Underlying on each of the five trading days for such Underlying immediately following such Observation Date. In that case, the closing level for such Underlying on such Observation Date will be determined as of the fifth succeeding trading day for such Underlying following such Observation Date (such fifth trading day, the “calculation date”), notwithstanding the market disruption event in respect of such Underlying:
if a market disruption event has occurred and is continuing with respect to a reference index, the calculation agent will determine the closing level for such reference index on that calculation date in accordance with the formula for and method of calculating such reference index last in effect prior to the commencement of the market disruption event in respect of such reference index using exchange traded prices on the relevant exchanges (as determined by the calculation agent in its sole discretion) or, if trading in any component comprising such reference index has been materially suspended or materially limited, its good faith estimate of the prices that would have prevailed on such exchanges (as determined by the calculation agent in its sole discretion) but for the suspension or limitation, as of the valuation time on that calculation date, of each component comprising the reference index (subject to the provisions described under “Description of the Securities—Changes to the calculation of a reference index” in the accompanying product supplement); and/or
if a market disruption event has occurred and is continuing with respect to a reference fund, the calculation agent then will determine the closing level for such reference fund on that calculation date using its good faith estimate of the settlement prices that would have prevailed on the relevant exchange of the reference fund but for the occurrence of a market disruption event (subject to the provisions described under “Description of the Securities—Changes to the calculation of a reference fund” in the accompanying product supplement).
The determination of the closing level for each Underlying not affected by a market disruption event on an Observation Date (other than the Valuation Date) or by an Observation Date (other than the Valuation Date) not being a trading day for such Underlying will occur on such Observation Date. The Valuation Date for any Underlying not affected by a market disruption event will be the scheduled Valuation Date for such Underlying.
If the determination of the closing level for any Underlying on an Observation Date other than the Valuation Date is postponed as a result of a market disruption event as described above to a date on or after the corresponding Interest Payment Date, then such corresponding Interest Payment Date will be postponed to the business day following the latest date to which such determination is so postponed for any Underlying.
If the Valuation Date for any Underlying is postponed as a result of a market disruption event as described in the accompanying product supplement or because the scheduled Valuation Date is not an underlying business day for any Underlying, then the Maturity Date will be postponed to the fifth business day following the latest Valuation Date for any Underlying.
Supplemental Information Regarding Certain United States Federal Income Tax Considerations
The amount of the stated interest rate on the security that constitutes interest on the Deposit (as defined in the accompanying product supplement) equals 0.4325%, and the remaining balance constitutes the Option Premium (as defined in the accompanying product supplement). Please refer to “Certain U.S. Federal Income Tax Considerations” in the accompanying product supplement.
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Supplemental Plan of Distribution (Conflicts of Interest)
Under the terms and subject to the conditions contained in a distribution agreement dated May 7, 2007, as amended, which we refer to as the distribution agreement, we have agreed to sell the securities to CSSU. The distribution agreement provides that CSSU is obligated to purchase all of the securities if any are purchased.
CSSU proposes to offer the securities at the offering price set forth on the cover page of this pricing supplement and will receive underwriting discounts and commissions of between $20.00 and $22.50 per $1,000 principal amount of securities. CSSU may re-allow some or all of the discount on the principal amount per security on sales of such securities by other brokers or dealers. If all of the securities are not sold at the initial offering price, CSSU may change the public offering price and other selling terms.
In addition, Credit Suisse International, an affiliate of Credit Suisse, may pay referral fees of up to $5.00 per $1,000 principal amount of securities in connection with the distribution of the securities. An affiliate of Credit Suisse has paid or may pay in the future a fixed amount to broker-dealers in connection with the costs of implementing systems to support these securities.
The agent for this offering, CSSU, is our affiliate. In accordance with FINRA Rule 5121, CSSU may not make sales in this offering to any of its discretionary accounts without the prior written approval of the customer. A portion of the net proceeds from the sale of the securities will be used by CSSU or one of its affiliates in connection with hedging our obligations under the securities. For further information, please refer to “Underwriting (Conflicts of Interest)” in the accompanying product supplement.
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Credit Suisse