Preview:
Citation preview
- 1. 1997 A N NU A L REVIEW GLOBAL INVESTMENT BANK
- 2. 1 Chief Executives Letter 4 Fact Sheet 6 Deals of the Year 8
Corporate and Investment Banking 16Fixed Income 20Equity 24Credit
Suisse Financial Products 28Private Equity 30Support Services
34Credit Suisse Group 36Board of Directors 37Executive Board
38Managing Directors 40Financial Statements 47Office Locations
Credit Suisse Group (CSG) is one of the leading global Credit
Suisse First Boston (CSFB) is a leading global financial services
companies, providing a comprehensiveinvestment banking firm,
providing comprehensive range of banking and insurance products. It
is active on financial advisory, capital raising, sales and
trading, and six continents and in the worlds major financial
centers. financial products for users and suppliers of capital
Credit Suisse Group comprises five business units four around the
world. It operates in over 50 offices across banking units and one
insurance provider each geared tomore than 30 countries and six
continents and has over the requirements of specific customer
groups and markets:12,000 employees.Credit Suisse First Boston is
one of the worlds Credit Suisselargest securities firms in terms of
financial resources, Corporate and individual customers in
Switzerlandwith approximately $7.1 billion in revenues in 1997 and
Credit Suisse Private Banking$7.3 billion in equity and $310
billion in assets as of Services for private investors in
SwitzerlandDecember 31, 1997. and internationallyCredit Suisse
First Boston is organized around thefollowing five major operating
divisions: Credit Suisse First Boston Worldwide investment banking
Corporate and Investment BankingCredit Suisse Asset Management
Fixed Income Services for institutional investors worldwideEquity
WinterthurCredit Suisse Financial Products Worldwide insurance
businessPrivate Equity
- 3. CHIEF EXECUTIVES LETTER1 1997 was an extraordinary year for
Credit Suisse First CSFB faces this environment with considerable
Boston. The year began with the Firms major restructuring
strengths. Among the leading group of global investment (from three
constituent parts) and ended with the impor- banks, CSFB possesses
a unique international culture and tant BZW acquisition in Europe
and Asia. Despite the spread of operations and management,
particularly intense effort required to absorb these changes,
CSFBtransatlantic, where our business is broadly balanced. produced
$1.2 billion of net income, before extraordinaryCSFB also continues
to foster powerful entrepreneurial and exceptional items, and the
fastest organic growth rate drive and creativity. These
distinguishing characteristics of major firms in the investment
banking industry, with rev- were illustrated well during 1997.
enues exceeding $7 billion for the first time. The 30% organic
revenue growth rate recorded by CSFBs strategy is to build
exceptional shareholderCSFB was broadly based, but showcased
particularly the value by exploiting attractive global growth
trends in the strengths of key businesses all new to the Firm
within the industry while strengthening our position as one of
thelast eight years. These included our world-leading deriva-
worlds leading investment banks. 1997 was a year that tives
business, Credit Suisse Financial Products, which demonstrated well
the fruits of this strategy and thehas grown revenues 26%
compounded since the first full impact of the industry trends that
shape it. year of operation. Other businesses, less than five years
Intense concentration in the financial services indus- old, grew
spectacularly during 1997 including our Fixed try, long predicted,
is now advancing fast. The process is Income businesses in the
emerging markets and in real producing what many observers have
anticipated a small estate-related activity, in particular, the
Principal group of global institutions emerging
preeminent.Transactions Group. Within the Equity division very
strong Alongside this structural development is continued
evi-growth was also recorded in Eastern Europe, where CSFB dence of
the powerful global growth trends underpinninghas been a pioneer.
Supporting these particular growth the industry, dampened in part
by market cyclicality and areas were strong results from more
traditional business- intense competition. es. CSFBs Investment
Banking revenues increased 26%from 1996 levels, while customer
revenues in Equity out-side the emerging markets rose 41%. The
groupsparticularly strengthened by CSFBs restructuring alsoshowed
tremendous progress with foreign exchange andmoney markets
achieving growth rates exceeding 69%.
- 4. We estimate that two of CSFBs principal divisions our
strategy perfectly was CSFBs acquisition of BZWs (Fixed Income and
CSFP) rank 1 or 2 in the world byEuropean and selected Asian
equity, equity capital mar- revenues while two others (Corporate
and Investmentkets and mergers and acquisitions advisory
businesses. Banking and Equity) rank among the top 5. With respect
This has given CSFB the unique leverage of a third home to
profitability, CSFBs 18% return on equity in 1997market (the U.K.)
to complement our global activities. compares well with those banks
that combine corporateWe are also making substantial investments in
the organic and investment banking. Particularly pleasing was
thegrowth of our Equity, Investment Banking, Fixed Income, 30% ROE
achieved, excluding the corporate loan book. and Private Equity
businesses. Additionally, a crucial This represents an industry
leading level of profitability and requirement of the industry
trends toward growth, global- underlines the importance of our
strategic shift of capitalization and more sophisticated risk
management is away from lending and into other activities. Cost
andinvestment in our infrastructure and control environment.
productivity measures such as pretax profit margins, 26%,Such
investment needs are exacerbated by inefficiencies and
compensation/revenues, 49%, remained in line withidentified by the
Firms restructuring and by integrating other industry leaders.BZW,
and major external challenges such as Year 2000 Although we had a
very successful 1997, CSFB isand EMU. CSFB is aggressively
responding to these very conscious of the need to strengthen its
competitive needs and has taken prudent advantage of 1997s prof-
position as the industry changes. In executing our
strategyitability to make some exceptional provisions to cover the
of capitalizing on growth trends and strengthening the integration
of BZW and some of these one-off Information Firm, CSFB is engaged
in several major, multi-year invest- Technology costs. ment
programs. While increasing our cost base near-term, This Annual
Review seeks to describe in more detail these programs are
essential to capturing excellent long-CSFBs global and product
strengths and the strategies term value for our shareholders. We
continue to make driving our business forward. Most importantly,
this Review investments to position us well to serve our
clientsreflects the lifeblood of our business our client relation-
increasingly global needs. One such investment which fitsships.
Whether it be in mature or emerging markets, orwith investors or
users of capital and advice, our serviceto clients comes first. Our
capital strength and expertiseas principal increasingly link with
our client businesses toensure we can provide differentiated
service.
- 5. 3 Neither our 1997 performance nor our future ambi-Chief
Executive of Credit Suisse Private Banking. tions would be
imaginable without the enormous energy, Their commitment to
excellence and their contributions to creativity, and dedication of
our people. Size is importantthe delicate task of integrating our
structures and cultures in the global financial services industry,
and we obviouslyhave left a lasting mark. have size; intelligence
is even more important, and IWhile 1998 has begun well, we are
conscious that believe our record of client service and notable
transac-not every year will enjoy the market conditions that
assist- tions demonstrate our resources of thoughtfulness anded our
growth in 1997. Nevertheless, we look to the imagination. I
congratulate our staff worldwide for theirfuture with confidence
and in the knowledge that CSFBs achievement. strengths continue to
build and can be expected to offer Two people deserve special
mention. Beginningour clients the consistency and excellence they
expect in with the announced restructuring in mid-1996, Hans-the
future. Ulrich Doerig played a crucial role in bringing together
the new CSFB into one global organization. During 1997, he served
with distinction as Chairman of CSFB before moving on to become
Vice Chairman and Chief Risk Officer of Credit Suisse Group. Oswald
Grubel served as head of trading until his appointment in March
1998 as Allen D. WheatChairman of the Executive Boardand Chief
Executive Officer
- 6. THE GREATER THE RESOURCES, THE GREATER THE
POSSIBILITIESFinancial Resources Asian Region Vice Chairman, Among
Alan Smith near CSFBs office in Hong Kong with May Koon, director,
the Besthead Asian Equity Sales.in the PRO FORMA DOLLARS IN
MILLIONS (UNAUDITED)1997 1996% CHANGE IndustryFor the year Revenues
$ 7,128 $5,493 30% Operating expenses $ 4,762 $3,675 30% Gross
operating prot$ 2,366 $1,818 30% Pretax income(1)$ 1,828 $1,417 29%
Net income (1)$ 1,207n/an/aAt year end Total shareholders equity
(2) $ 7,274 $6,551 11% Total assets $ 310,353 $ 304,3462%Selected
ratios Return on average equity (1) 18%n/an/a Pretax prot
margin(1)26% 26% Expense/revenues 67% 67% Staff expense/total
revenues 49% 49% Tier 1 BIS-based capital ratio (3)8.5%n/an/a Total
BIS-based capital ratio(3) 14.9% n/an/a Employees11,863 10,8819%(1)
Excludes extraordinary/exceptional items, and minority interest.
(2) Shareholders equity at January 1, 1997, includes the pro forma
effect of CHF 500 preferred stock issuance which occurred on March
31, 1997. (3) These ratios apply to the Bank.
- 7. 5NUMBER OFFIRM DEALS OF THE YEARA Leader in Innovation
Credit Suisse First Boston 10Goldman Sachs10 1997 Deal of the Year
Awards Institutional Investor Merrill Lynch10Morgan Stanley Dean
Witter Discover9J.P. Morgan 8 #1 Number one in global
privatizations.(1)Top Tier #1 Number one coordinator of global
offerings. (5) Capital Raising #1 Number one European IPO
house.(5)Credentials#1 Number one in capital markets project
finance dollar volume.(3) #1 Number one in Swiss capital markets
every year since 1991. (3) #2 Number two in private placements.(2)
#1 Number one in quantity of Latin American debt issued from
1990-1997.(1)Daniela Iten and Daniel Gut, Swiss fixed income
capital markets. #2 Number two in Deutsche Mark market share.(1) #1
Number one in Central and Eastern European equity research.(4)
Sources:(1) (2) Securities Data Company. Investment Dealers Digest.
#1 (3) CSFB. (4) Euromoney. Pioneered in European high yield dollar
volume.(3)(5) Bondware.
- 8. DEALS OF THE YEARCredit Suisse First Boston has been judged
a leader inclient service by a wide range of financial press
coveringour businesses. Based on current returns, below is a listof
the Deals of the Year and other awards won by theFirm for financing
and advisory work worldwide. The Firmwon 61 awards this year, up
from 40 in 1996. TRANSACTION AWA R D P U B L I C AT I O N A.K.
SteelProject Finance Deal of the Year Corporate
FinanceBoeing/McDonnell DouglasM&A Deal of the Year
Institutional InvestorBVG Rail Deal of the YearAsset Finance
InternationalCalEnergy Project Finance Deal of the Year
Institutional InvestorCiba Specialty ChemicalsBest
Non-Privatization Equity Issue of the YearInternational Equity
ReviewCiba Specialty Chemicals/Novartis Demerger of the
YearCorporate FinanceCibas Exec Stock Options Best Derivatives Deal
of the Year Global FinanceContinental AirlinesNorth America Airline
Financing Deal of the YearAirFinance JournalCredit Suisse
Group/WinterthurInternational Deal of the Year Institutional
InvestorENI European Equity Issue of the Year International
Financing ReviewFirst Union/CoreStates FinancialBreakthrough Deal
Mega-MergersInvestment Dealers DigestImpress Metal Packaging
Buyouts Deal of the Year Corporate FinanceIspat International
Equity Deal of the Year Corporate FinanceJ. C. PenneyCorporate
Finance Deal of the YearInstitutional InvestorJorf Lasfar Power
Deal of the YearProject FinanceLa Oroya MetallurgicalHonorable
Mention: PrivatizationLatinFinanceMATV East Europe IPOEmerging
Markets InvestorInternational Deal of the YearInstitutional
InvestorBest Eastern European Equity Issue of the YearInternational
Equity ReviewEEMEA Equity Issue of the YearInternational Financing
ReviewEast European Deal of the Year World EquityOsprey Maritime
Ship Financing Deal of the Year IFR Transport FinancePeoples
Republic of ChinaBest Asian Bond Issue Euroweek AsiaBest
Sovereign/Public Sector Asian Bond Issue Euroweek AsiaBest Eurobond
Finance AsiaPetrozuata FinanceProject Finance Deal of the
YearCorporate FinanceLatin Project Bond Emerging Markets
InvestorProject Finance Deal of the Year Institutional
Investor
- 9. 7 TRANSACTIONAWA R D P U B L I C AT I O N Petrozuata Finance
(continued) Americas Project Finance Loan of the Year International
Financing Review Project Finance Deal of the YearLatinFinance Deal
of the YearProject FinancePharmacia Biotech/Amersham M&A Deal
of the YearCorporate FinancePT Pindo Deli Pulp & Paper Mills
Best Offering for a Corporate IssuerFinance Asia High Yield Bond
Deal of the YearAsiamoney Best Asian Bond Issue Euroweek Asia Best
Asian High Yield BondEuroweek Asia Best Corporate Asian Bond Issue
Euroweek Asia International Deal of the YearInstitutional Investor
Asian Bond of the YearInternational Financing ReviewPycsa Panama
Deal of the YearProject FinanceRaytheon/Hughes Aircraft Most
Noteworthy Mergers Global Finance M&A Deal of the
YearInstitutional InvestorRepublic of ItalySwiss FrancsEuroweek
Swiss Franc Bond of the YearInternational Financing ReviewSouthern
Peru Copper Honorable Mention: Structured Trade Finance
LatinFinance Deal of the YearProject FinanceSR Earthquake Fund
International Deal of the YearInstitutional InvestorTeam
Rental/Budget Rent a CarM&A Deal of the YearCorporate
FinanceTelstraBest IPO of the YearFinance Asia Best Australian
Equity IPO of the YearInternational Equity ReviewYapi Kredi Bank
AsiBest Turkish Equity Issue of the Year International Equity
ReviewYPF/Andina M&A Deal of the YearInstitutional
InvestorENTITY AWA R D P U B L I C AT I O N Credit Suisse Financial
Products Credit Derivatives House of the YearInternational
Financing Review Best Foreign Dealer of the Year Swaps Monitor
Derivatives House of the Year World EquityCredit Suisse First
Boston Best Lead Manager of Asian BondsEuroweek Asia Best Bank in
Corporate FinanceGlobal Finance Global Winner in Project
FinanceGlobal Finance Project Finance House of the Year
International Financing Review Swiss Franc Bond House of the
YearInternational Financing Review Bond House of the Year Americas
Project Finance Intl Yearbook
- 10. 60+Full Service Product Offerings Focused Industry
ExpertiseAcquisition FinanceAutomotiveAsset FinanceCapital
GoodsCorporate Lending and Syndicated Finance ChemicalsCorporate
Sales and Divestitures Consumer ProductsDebt, Equity and
Convertible UnderwritingDepository InstitutionsEquity Derivatives
Energy Deals of the YearGeneric and Structured Trade Finance Health
CareJoint Ve n t u r e s Insurance in 1997 (1)LeasingLodging &
GamingLeveraged BuyoutsMediaLeveraged FinanceMetals &
MiningMergers and Acquisitions P a p e r, PackagingPreferred Stock
& Forest ProductsPrivate Placements PowerPrivatizations Real
EstateProject FinanceRetailRestructurings Te c h n o l o g yShare
Repurchase ProgramsTe l e c o m m u n i c a t i o n sTakeover
Defense Tr a n s p o r t a t i o n (Dollars in Millions) 19971996 %
CHANGE Revenue$ 1,479 $1,3688%Employees 2,0342,102 (3%)Average BIS
Capital$ 2,841 n/an/a C O R P O R ATE AND INVESTMENT BANKING The
Corporate and Investment Banking Division had a Charles G. Ward
IIIstellar year in 1997. We executed a record number ofManaging
Director Corporate and landmark transactions for valued clients. We
also Investment Banking increased our geographic and industry
coverage and enhanced our product line all key elements in our
strat- egy. As a result, CSFB continues to be one of only a handful
of truly global investment banks. The globalization of the entire
financial services industry is proceeding rapidly, and for a very
simple reason: investment banks need to be global because our
clients are global. Our sig- nificant presence in the U.S., Europe,
Asia, and in emerging markets everywhere puts us at the leading
edge of the globalization trend in each of our major product areas.
In 1997 CSFB announced the acquisition of the European and selected
Asian equity, equity capital mar- kets and mergers and acquisitions
advisory businesses of(1) See listing on pages 6 and 7.
- 11. 9BZW from Barclays. These businesses have
establishedmarket-leading positions in a number of key areas.
Theacquisition adds 250 bankers and capital markets profes-sionals
to our European and Asian Investment Bankingoperations and bolsters
our M&A and Equity positions inthese areas. It also adds a
third home market, the U.K.,to our original home markets of the
U.S. and Switzerland. Mergers & AcquisitionsCSFB completed $172
billion worth of transactions, rank-ing us among the handful of
leading advisors in the world.Our M&A team executed more than
55 transactions inexcess of $1 billion. These transactions bore our
trade-marks of creativity, strategic perspective,
flawlessexecution, and strong financing support. CSFBs
globalpresence is a particularly strategic advantage for clients
ascross-border M&A activity increases.CSFB has a strong M&A
franchise in marketsaround the world, as our M&A highlights
list demon-strates. We were particularly proud of our defense
ofThyssen AG against a hostile offer launched by FriedLargestKrupp
AG Hoesch-Krupp, which later resulted in a friendlymerger
announcement valued at $10.5 billion. Institutional Takeover Battle
in French CSFB advised French insurance company Assurances Gnrales
de France (AGF) History on two transactions that illustrate the
dramatic opening of the European M&A market. First, we advised
AGF when it acted as white knight for French holding company Worms
& Cie, which had rejected a rare unsolicited offer from another
French company. In the midst of negotiations to acquire Worms for
$6 billion, AGF itself received a $9.3 billion hostile offer from
Italian insurer Assicurazioni Generali SpA. CSFBs efforts as
defense advisor on the largest takeover battle in French history
helped AGF to reach an agree- ment to be acquired by Germanys
Allianz AG and forced the withdrawal of Generalis offer. The
Allianz/AGF deal, valued at $10.4 billion, creates Europes largest
insurer.
- 12. Mergers and Acquisitions Highlights CREDIT SUISSE FIRST
BOSTON CLIENT DESCRIPTION OF TRANSACTION A P P R O X I M ATE DOLLAR
VA L U ECoreStates Financial Corp Sale of Company to First Union
Corporation* $ 16,600,000,000 Thyssen AGAcquisition offer from
Fried Krupp AG Hoesch-Krupp 10,500,000,000 (offer withdrawn)
Assurances Gnrales de France SA Sale of Company to Allianz AG*
10,400,000,000 Raytheon CompanyAcquisition of Hughes Aircraft
Company from9,500,000,000 Hughes Electronics Corporation and
General Motors Corporation U.S. BancorpSale of Company to First
Bank System, Inc. 9,086,000,000 Ashland Inc.Joint venture with
USX-Marathon Group of their oil rening,7,000,000,000 marketing and
transportation operations Assurances Gnrales de France SA
Acquisition, with SOMEAL SA, of Worms et Cie.6,100,000,000 Tyco
International Ltd. Acquisition of ADT Limited 5,600,000,000 W. R.
Grace & Co. Merger of its Cryovac subsidiary with5,000,000,000
Sealed Air Corporation* Nordbanken AB Merger with Merita Oy*
4,300,000,000 DQE, Inc. Sale of Company to Allegheny Power System,
Inc.* 4,200,000,000 Occidental Petroleum CorporationDivestiture of
MidCon Corp. subsidiary to KN Energy, Inc.4,000,000,000 CVS
Corporation Acquisition of Revco D.S., Inc.3,970,000,000 The State
Government of Victoria, Divestiture of Loy Yang Power to a
consortium3,800,000,000 Australia led by CMS Energy Corp. U.S.
Department of Energy Divestiture of Elk Hills Naval Petroleum
Reserve to3,650,000,000 Occidental Petroleum Corporation First
Union Corporation Acquisition of Signet Banking
Corporation3,300,000,000 Falcon Drilling Company, Inc. Merger with
Reading & Bates Corporation to form3,100,000,000 R&B Falcon
Corporation Deposit Guaranty Corp.Sale of Company to First American
Corporation* 2,700,000,000 American Radio Systems Corp.Sale of its
radio broadcasting operations to 2,600,000,000 CBS Corporation*
Abitibi-Price Inc.Merger with Stone-Consolidated Corporation
2,300,000,000 Wachovia CorporationAcquisition of Central Fidelity
Banks, Inc.2,300,000,000 The State Government of Victoria,
Divestiture of PowerNet Victoria to GPU International,
Inc.2,000,000,000 Australia Team Rental Group, Inc. Acquisition of
Budget Rent a Car Corporation 2,000,000,000 to form Budget Group,
Inc. Swiss Reinsurance Company Acquisition of Socit Anonyme
Franaise de Rassurances 1,780,000,000 (SAFR) and subsequent sale to
Partner Reinsurance Company Living Centers of America, Inc.
Recapitalization with Apollo Management, L.P., and 1,668,000,000
subsequent merger with GranCare, Inc. Coca-Cola Enterprises
Inc.Fairness opinion with respect to the acquisition of
Coca-Cola1,660,000,000 Beverages Ltd. of Canada and The Coca-Cola
Bottling Co. of New York The Walt Disney Company Divestiture of
four daily newspapers to Knight-Ridder, Inc.1,650,000,000 CalEnergy
Company, Inc. Repurchase of Peter Kiewit Sons, Inc., 26% interest
in1,600,000,000 the company and certain project interests Province
of Buenos AiresPrivatization of ESEBA 1,368,000,000 NationsBank
Corporation Acquisition of Montgomery Securities 1,200,000,000
Prime Service, Inc. Sale of Company to Atlas Copco AB1,170,000,000
Viacom Inc. Divestiture of Viacom Radio Group to Evergreen Media
Corporation 1,075,000,000 Greenfield Industries Inc.Sale of Company
to Kennametal Inc. 1,000,000,000 Texaco Inc. Joint venture with
Shell Oil Company and Saudi Aramco of their Not Disclosed East
Coast and Gulf Coast rening and marketing operations* Texaco Inc.
Joint venture with Shell Oil Company of their midwestern and Not
Disclosed western rening and marketing operations*Pending at
3/15/98.
- 13. Investor magazine named our representation of Raytheon in
global equity coordination and, complementing our lead- in its $9.5
billion acquisition of Hughes Aircraft an M&Aing position in
U.S. IPOs, we became the number one Deal of the Year.European house
of 1997. We pride ourselves on providing We represented Boeing in
its $16.3 billion acquisi-outstanding execution for clients. For
example, our global tion of McDonnell Douglas, the largest
transaction ever in marketing strategy for the $535 million
Petrobras 11 the aerospace industry, and one of the largest
domesticPreferred Shares offering was so successful that the
acquisitions in U.S. history.offering size was increased by nearly
40%. This story was We also represented CoreStates Financial Corp.
inrepeated many times for the more than 60 offerings we its $16.6
billion acquisition by First Union Corp., whichlead-managed in
1997. will create the fifth largest bank in the U.S., and repre- We
are also the leading firm for IPOs in which our sents the largest
M&A transaction ever in the U.S. clients spin off 100% of their
ownership in subsidiary banking industry. Also in the banking
industry, CSFB rep-companies. We believe weve earned this position
through resented Nordbanken AB in its $4.3 billion merger with our
ingenuity in creating structures that best serve our Merita Oy, the
first cross-border bank merger in Europe, clients. As an example,
CSFBs management of the spin- creating the largest Nordic bank.off
of Ciba Specialty Chemicals Holding Inc. from itsparent Novartis
was accomplished through a structure that Equity Underwritingnever
before has been undertaken. CSFB continues to be a global force in
equity underwrit- CSFB has also built an unparalleled record in
ings, benefiting from our extensive local presence inprivatizations
harnessing our strategic advisory capabilities countries around the
world. CSFB is the outright leaderwith our global distribution
strength to deliver superiorresults. (see box pages 14-15).
LargestCSFB lead-managed the largest IPO of 1997 and the largest
privatization in Australianhistory. Based on CSFBs strong presence
in the Australian market and our outstandingperformance divesting
the State of Victorias energy operations, CSFB was mandated by
IPOThe Commonwealth to act as joint global coordinator of a $10
billion IPO for Telstra,the Australian state-owned
telecommunications company. The highly successful offeringof
1997represented an important component of Australias continuing
privatization strategy. In order to finance a large share
repurchase, CalEnergy approached CSFB to advise on financing
options. The situation was complicated by the Asian marketStrong
crisis, since CalEnergy has significant holdings in the region.
CSFB was able to fully finance the share acquisition and the
purchase of various project interests through a $723 million global
common stock offering, a $400 million revolving Underwriting credit
facility, and a $350 million senior notes offering totaling $3.1
billion accomplishing an increase in the clients stock price of 20%
during the refi- Support nancing/marketing period. In awarding the
transaction one of its Project Finance Deal of the Year citations,
Institutional Investor noted that it was the largest, most
successful offering to date by an independent power producer.
Despite Volatile Markets
- 14. Project Finance We believe we have the premier project
finance franchise in the world. CSFB has been active in Project
Finance for 25 years and has been in the vanguard of developing the
capital markets to finance projects. We are among a few in offering
a complete range of products to project finance clients including
advisory, equity and debt capital markets and lending alternatives
an important benefit brought by the consolidation of the former
Credit Suisse with the former CS First Boston. Debt Underwriting
and Corporate Lending CSFB has been a global leader in debt for
over a decade. CSFBs debt capabilities offer an array of financing
oppor- tunities for clients ranging from investment grade to
Largest non-investment grade public offerings, private placements
Latin American Petrozuata is the first strategic association in
VenezuelaProject formed to develop the countrys vast extra heavy
oil reserves. It is a joint venture between Conoco Inc. and Maraven
S.A., a wholly-owned subsidiary of the state- Financing owned oil
company of Venezuela. CSFB lead-managed a $1 billion bond financing
and also acted as lead arranger and administrative agent of a $450
million bank facility for the project. The transaction was named
Project Finance Deal of the Year by six periodicals including
Institutional Investor, Corporate Finance and Project Finance.
Adebayo Ogunlesi (middle) and Charles Chigas (standing) of project
finance with Francisco Bustillos, Corporate Finance Manager,
Petrleos de Venezuela S.A. (left) and Theodore Helms, International
Finance Manager, PDV America, Inc. (right). First Sterling
Denominated High Yield Offering CSFB has played a leading role in
the development, commencing in 1997, of a non-dollar high-yield
market. CSFB lead-managed the first ever sterling denominated high
yield offering for Castle Transmission International, a company
formed by the television and radio transmission tower businesses of
the British Broadcasting Corporation. Having already provided bank
financing for the closing of the buyout, CSFB underwrote 125
million of 9% senior notes which were ultimately sold to a broad
cross-section of European institutional investors in a syndication
that was several times oversubscribed.
- 15. of debt, asset-backed and lease financings, corporate We
lead-managed the first ever Sterling High Yield lending and
acquisition finance. During the period 1990Eurobond 125 million for
Castle Transmission 1997, CSFB ranked second in U.S. Corporate
issues, andInternational. We have also been active in the Asian
mar- third in Euro and global U.S. $ issues. Reflecting our
trulyket and underwrote the $750 million offering for PT Pindo
global presence, we are currently second in EmergingDeli. In the
U.S., CSFB has a diverse High Yield client 13 Market issues.base
that reflects our extensive industry expertise. Several Lending is
a major differentiating advantage of offerings were noteworthy
including our $300 million CSFB. As a result of the consolidation
of the formerunderwriting for Fairchild Semiconductor and our $450
Credit Suisse with the former CS First Boston, we are million
offering for Winstar Communications. now able to commit the Firms
capital towards large, lever-During 1997 we established a Global
Lease Finance aged financings in a short amount of time. During the
lastGroup to advise clients on all aspects of big- decade, CSFB
ranked second in event deals bonds ticket tax leveraged lease
transactions, as well as for the over $750 million that are issued
in conjunction with anarrangement of lease debt, debt and equity
defeasance, acquisition or other major corporate event. When J.
C.and other lease-related products such as synthetic leases. Penney
launched an offer for Eckerd Corporation, CSFB We completed more
than 20 lease finance transactions extended $3 billion of
acquisition financing overnight.in 1997. CSFB subsequently
lead-managed the $2.5 billion bond offering, which represented the
largest investment gradeOur Mission is Client Service offering of
1997. CSFBs goal is to offer a broad array of integrated finan-
CSFB lead-managed 46 High Yield offerings total-cial solutions so
that clients can attain their strategic ing $7.4 billion in 1997.
CSFB has been in the forefrontobjectives. To this end, we have
assembled many of the of developing the market for high yield
issuers in Europe.worlds preeminent product experts in M&A,
Equity, and Premier Coordinator of Complex Global Transactions When
Team Rental Group acquired Budget Rent a Car, we advised on the
acquisition, handled the global common stock offering, and arranged
seven separate but related pieces of debt financing. CSFB provided
$2 billion in new capital, a $225 million bridge loan commitment,
and managed a $186 million common stock offering. The Firm acted as
sole placement agent for $125 million in convertible subordinated
notes, $165 million in guaranteed senior notes, and $500 million in
asset-backed notes. CSFB was also sole agent for $900 million in
asset-backed commercial paper, a $900 million secured revolving
liquidity facility, and a $300 million senior secured revolving
credit facility. Finally, CSFB provided $200 million in letters of
credit. This integrated support made possible Team Rental Groups
successful bid against significantly larger potential buyers and
earned Corporate Finance magazines M&A Deal of the Year
award.
- 16. Debt. In order to be more available and more in tune
withbankers who can engineer financial structures that enable
clients needs, we have placed these investment bankingour clients
to take advantage of the best market opportu- specialists on six
continents and in the major financial nities available throughout
the world. Our Team Rental centers throughout the world. Few firms
offer the range of Group deal is a prime example of how well CSFB
pulls investment banking and lending products that CSFB offers
together resources in a multitude of product areas and with the
same global reach. Few offer the capital base diverse markets to
serve the interests of our clients. We that we have.plan to
continue to aggressively augment our base of CSFBs ability to
manage highly complex, multi-highly skilled experts so that we can
continue to deliver a product, global transactions is our greatest
strength. Wehigh level of service to clients around the globe.
place a great emphasis on developing highly skilled Privatization
and Advisory to Governments In the past 12 months CSFB has built on
its unparalleled record in privatization equity offerings.
Completing the transactions required significant resource
commitment, local expertise, capital strength and global
distribution capability. Its what you would expect from the worlds
first truly global investment banking firm. Privatization can be a
policy tool of immense power, saidappear to have given away a
national resource; price it too David Mulford, Chairman
International for CSFB, and pre-high, and the performance after
sale may be sluggish and cisely for that reason a government which
wishes tocreate a major financial and political disappointment. It
is employ it must choose an advisor or global coordinator an
intricate process with dozens of delicate decisions. with the
greatest care. At Credit Suisse First Boston, weSecond, the asset
must be restructured for privati- have built a reputation in the
field because we understand zationto operate not as a government
agency but as a two absolutely fundamental facts.profitable private
corporation. Weve had wide experience First, to be judged a
success, any privatization must repositioning assets for a
successful IPO or for sale to a make sense in both financial and
political terms. Thestrategic investor. appropriate pricing of the
asset has enormous politicalWhen it comes to a very large
privatization, govern- implications: price it too low, and the
government willments naturally want to entrust the responsibility
to
- 17. 15 SELECTED 1 9 9 7 US DOLLARS P R I VAT I Z ATIONS*IN
MILLIONSTelstra Corporation Ltd. Australia$ 9,997Largest IPO of
1997. Privatized 33% of thecompanys stock. ENI S.p.A. Italy$
7,795Third stock offering in 18 months, totaling $18 billionand
decreasing the governments ownership to 51%. Nordbanken Holding
ABSweden $ 1,046Largest equity offering in banking sector
inScandinavia ever. MATV Rt.Hungary$ 1,013Sold 26% of the company
in an IPO that was thelargest ever offering from the region. First
in the regionto be NYSE listed. Petroleo Brasileiro S.A. Brazil $
535The rst bookbuilding transaction the Braziliangovernment has
ever undertaken; the second largestBrazilian issue ever. Telecom
Italia Italy$ 14,000 The largest European privatization to date
comprising$10.933 billion of equity, making this the largest
Europeansecondary equity offering ever. An additional $3 billionwas
a sale to strategic investors, totaling $14 billion.* CSFB was
joint global coordinator for each except for Telecom Italia, which
was completed in 1997 by a group from BZW prior to its joining
CSFB, and Petrobras, for which CSFB was sole global coordinator.
seasoned professionals who have done the largest andin eighteen
months and in the process transformed the most challenging deals in
the world. We handled the IPO Italian equities market. Regulatory
officials there had to of Telstra, the Australian
telecommunications giant, at modernize the entire system of retail
sales to facilitate $9.997 billion, the largest of the year, as
well as the purchases by individual investors. In late 1997, we
com- largest privatization and public offering in Australian
history.pleted strategic advisory for the Hungarian
governmentGovernments also want experience in privatizationsand the
subsequent initial public offering for telecommuni- with
far-reaching economic implications. We did all three cations
company MATV. MATV became the first Central stock offerings of ENI,
the Italian state-owned oil compa-European company to be listed on
the NYSE and 92% of ny; the most recent offering in 1997 won
Internationalthe institutional investor base was international.
Financing Reviews award for European Equity Issue of the Year. The
Italian government raised almost $18 billion
- 18. 28 markets Government and Corporate Fixed Income Securities
Global Foreign Exchange Emerging Markets New Issues Underwriting
Asset Backed Securities Leveraged Finance Mortgage Securities
Trading Presence Real Estate Finance Across DevelopedMoney Markets
Countries and Bank Notes Emerging MarketsPrecious Metals Fixed
Income Research (Dollars in Millions) 1997 1996% CHANGE Revenue $
3,379$ 2,356 43%Employees1,7601,53515%Average BIS Capital $
2,441n/an/a FIXED INCOME 1997 was a landmark year for the Fixed
Income division. Marc HotimskyOur revenue of $3,379 million, a 43%
increase fromManaging Director Fixed Income 1996, positions us as
one of the most profitable fixed income divisions in the world. Our
success in 1997 stems from several basic strengths: our diversified
business, which makes possible a substantial appetite for risk; our
balance sheet strength; our premier skills in structuring; and our
global coverage and organization by business lines.The biggest
growth in earnings came from two rela- tively new business groups,
Emerging Markets Group and Principal Transactions Group. In
addition, our reconfigured Foreign Exchange business had an
excellent year and is considered among the top handful of Foreign
Exchange businesses in the world.
- 19. 17Our Emerging Markets Group has experiencedthe Russian
Federation seven-year DM 2 billion Eurobond remarkable growth in
the last several years. As recently as issue, the $500 million,
three-year issue for the City of 1992, our only emerging market
presence was in Russia.Moscow and the RUR 700 billion one- and one
half-year Today, we participate in 28 geographic markets worldwide,
issues for the Republic of Tartarstan. with a physical presence in
15 centers, in particular,We have also seen significant
contributions from the Moscow, Warsaw, Sao Paulo, Seoul, Shanghai
and Cairo.Principal Transactions Group, which provides creative
That presence is especially effective, I am convinced,solutions for
complex real estate transactions. PTG com- because of our heavy
reliance upon local professionals pleted more than $12 billion in
U.S. real estate financings thoroughly familiar with the markets
and business culture in 18 months, ranking PTG as the leading U.S.
real they cover. We believe it to be one of the most
successfulestate investment banking group. In 1997, PTG success-
businesses of its kind in operation today, and we expectfully
securitized over $4 billion of commercial mortgage its expansion to
continue.securities. PTG targets untapped niches where there is a
Among award-winning accomplishments in Emerging significant
shortage of capital for deals due to past prob- Markets last year,
I would cite the Groups financing trans- lems, deals that require
analytic complexity, deals that are actions for Pindo Deli Finance
in Indonesia ($750 million difficult to understand or deals that
are out of favor. This multi-tranche, awarded Asian Bond of the
Year by IFR), highly profitable group is expanding its global
presence.Sale of The words come from Institutional Investors
description of the $2.5 billion bond financing CSFB arranged for J.
C. Penney, to refinance its acquisition of the Eckerd drugstore the
chain (on which the Firm also advised). In spite of adverse market
concerns prompted by a Federal Reserve Board rate increase, the
offering was oversubscribed by 1.5 times Season after a five day
roadshow. Other big issuers immediately found the confidence to go
to market. As J. C. Penneys treasurer noted, The deal helped change
the tone in the market from night to day. Largest Asian High Yield
Offering PT Pindo Deli Pulp and Paper Mills is one of the largest
vertically integrated pulp and paper manufacturers in Indonesia. To
pay down existing bank debt and extend the companys debt maturity
profile, Pindo Deli asked CSFB to organize a $400 million issue of
senior notes. After an extensive roadshow on three continents,
overwhelming demand enabled the company to increase the deal size
to $750 million. Roughly 100 separate institutional investor
portfolios participated in the offering, significantly expand- ing
the companys investor base. Trading floor, Hong Kong, as viewed
through an aquarium.
- 20. First International Financing for Local Authority Three
individual parts of CSFBthe London fixed income unit, the banking
unit at CSFB (London), and Credit Suisse Financial Productscombined
to create a $1 billion financing for the Region of Sicily. It was
the largest capital markets financing ever undertaken for a local
authority outside North America, and the markets largest unrated
transaction of 1997. Subsequent to this transaction, the rates
achievable by Italian regions in general improved significantly
from their historic levels. CSFB has maintained a presence in
Russia for five years, one that now numbersLandmarkover 300 people,
and is one of the largest foreign bank primary dealers of
government bonds. The Firm completed a $1.2 billion offering for
the Russian Federation in the DM market, the largest in this market
by a transition economy. CSFB also lead-managed Russian a RUR 700
billion bond issue for the Republic of Tartarstan. This was the
first Rouble public bond issue listed and traded on MICEX by a
Russian Republic.Bond Offerings In 1997 PTG purchased a $625
million Swedish property expansion in emerging currency, and the
provision of portfolio, just over $1 billion in U.K. properties,
and has a seamless link between FX and all products of the Firm
funded more than $500 million in mortgage bond financ-including
Equities and Investment Banking. ings in Latin America. PTG has
established a vehicle forOur Debt Capital Markets Group and
corporate purchasing distressed real estate portfolios in Japan and
secondary trading business saw its share of the $1,778 is
co-sponsoring a company for real estate investments in billion in
worldwide bond issuance. In particular, we contin- the former
Soviet Union and East and Central Europe withued our efforts to
develop and structure creative bond the Zell Group. financings for
which we have become well known. This is 1997 was a year of great
structural change forexemplified by our offering for J. C. Penney,
which was CSFB and nowhere in Fixed Income was this more appar-
cited by Institutional Investor as one of 1997s five Most ent than
Foreign Exchange. In 1997 we retooled the FX Noteworthy Deals of
the Year. operations of the former Credit Suisse and the former
Separately, our historical leadership in structured CS First Boston
into a single business. Our first task wasfinancings was
highlighted by the Triangle Funding Limited to reduce the number of
trading operations previously run deal, a $5 billion collateralized
loan obligation for CSFBs by the group and focus on five key
international centers. loan portfolio. We have continued to expand
our high yield At the same time, we globalized management and
linked underwriting presence by providing a leadership role in the
trading centers to capture information and take advan-developing
the local currency European high yield market, tage of economies of
scale in spot trading and market as well as increasing our new
issue underwriting volumes making. This strategy was aligned with a
strong researchglobally by 84% over 1996. and risk management focus
that aims at offering clients In the Swiss capital markets, once
again by a very value in a variety of markets. In the future,
growthwide margin, CSFB was the leading institution. This is the in
Foreign Exchange will be led by product innovation,seventh straight
year we have held this position.
- 21. 19Two eventful transactions were for the Republic of
Italywhich allows customers to transact in cash U.S. govern- for
SFr 1,000 million (voted SFr deal of the year by IIFR) SFr. 1,000
million (voted SFr deal of the year by FR) ment securities with
multiple dealers. and the Citibank Credit Card Master Trust, the
first fixed During 1997, we brought all fixed income research rate
Swiss Franc credit card deal, of SFr 1,064 million.into a single
unit under one global head. Our research Our global government bond
business has a pres- already enjoys a strong reputation, and this
change ence in most of the leading government debt markets improves
further the service we provide to our customers worldwide. We have
sustained our select position as one and to our own trading desks.
The economists (who serve of the few firms that provide investors
with twenty-fourthe entire Firm) were brought under the same
manage- hour trading in the liquid and global market for
govern-ment structure, enhancing our ability to link global macro
ment bonds and related products. The group is organized themes with
profitable trade recommendations. Among and managed on a global
basis, with a fully dedicated many achievements in 1997, our
researchers laid the sales force that combines research, execution
capabilities, groundwork for the structural changes (towards credit
and and ideas to serve investors worldwide. duration plays) now
being implemented in both our sales CSFB has for some time been a
leader in electronicand trading operations ahead of EMU. trading,
which represents the future in marketing com- The future is always
full of uncertainties and new moditized products to customers. We
have continued to challenges. The reshaping of the European
financial mar- expand our current family of electronic products,
which ket, the expansion of activities in emerging countries, and
include GovTradeSM and CPTradeSM, and to encompassthe explosion of
high yield issuances worldwide are clear International RepoTrade ,
currently doing $3 billion of SM challenges in 1998 and beyond for
all global players. transactions per day. We have also introduced a
family of I believe the broad base of our business, its global
scope Prime products to execute and clear multi-product trans-and
capital support give us the strength and the edge to actions, and
we are the founding partner of TradeWebSM ,maintain and even expand
our leadership and position in the Fixed Income markets for many
years to come. Major Commercial Mortgage-Backed Securities
Transaction The Principal Transactions Group successfully launched
and priced $1.4 billion in commercial mortgage pass-through
certificatesthe second largest single commercial mortgage-backed
securities transaction ever. PTG originated all of the
approximately 165 commercial mortgage-backed whole loans in the
transaction. The senior bonds were rated AAA by all three major
rating agencies. During the initial offering, CSFB sold the
transaction at new issue pricing, and set new market levels for the
single-B and unrated tranches of this transaction.
- 22. Research#1 Sales Tr a d i n g Underwriting Equity
Finance/Prime Brokerage C o n v e r t i b l e s / Wa r r a n t s
Derivatives Proprietary Tr a d i n g Coordinator of European
Private Corporate Equity Globally IPO DistributedHouse(2) Equity
Issues in 1997(1) (Dollars in Millions) 1997 1996% CHANGE Revenue$
1,212 $ 834 45%Employees1,08980435%Average BIS Capital$ 462 n/an/a
EQUITY Credit Suisse First Boston continued to demonstrate in
aBrady W. Douganhighly profitable 1997 that it belongs among the
eliteManaging Director Equity equity firms to merit the title
global super-bulge bracket.The global footprint of our divisionnow
more than 1,000 people strong worldwideis extensive. We are alone
in having three major home marketsthe U.S., the U.K., and
Switzerland. We have more than 200 traders spanning the developed
markets, the emerging markets, and cash and derivative products.
They trade 5,000 stocks globally, providing liquidity for
customers, but also developing and executing proprietary ideas for
CSFBs own account.We have a sales force in excess of 300 people
talk- ing to 2,000 institutional clients globally about research,
secondary ideas and primary issues. The breadth of our distribution
available to our global account base, com- (1) Securities Data
Company. posed of institutional and individual investors, is
extensive.(2) Bondware.
- 23. 21 CSFB underscored its commitment to equityresearch in the
last two years, increasing the size of itsanalytical staff and its
companies under coverage globallyfrom 1,500 to 4,000. We have
significantly expanded ourcoverage in areas such as health
care,technology, busi-healthcare, technology, busi-ness and
educational services, real estate and lodging,natural resources,
and Canadian research, while remainingextremely active in the
industrial sector. Our EVA per-spective has provided a dynamic
framework for equityresearch and in the process has become the
industrysynonym for the most effective methodology. For the
thirdconsecutive year our focus list of 32 companies outper-formed
the total return of the S&P 500; our three-yearedge over the
S&P was 162% to 125%.We have organized three functionstrading,
sales,Major Acquisitionand researchacross business lines around the
world foroptimum effectiveness and mutual reinforcement. More-
Enhances over, in all these areas we have maintained the
continuityof key personnel that is the hallmark of a global leader.
Equity & Advisory Capabilities In 1997 CSFB announced the
acquisition of the European and selected Asian equity, equity
capital markets and mergers and acquisitions advisory businesses of
BZW from Barclays. These businesses have established market-leading
positions in a number of key areas. BZW M&A/Advisory has
advised on $58.5 billion worth of transactions since 1992. The
Equity Capital Markets unit has acted as bookrunner or global
coordinator to $19.2 billion of equity transactions globally during
the same period.These primary divisions are supported by a
secondary division widely acknowledged as one of the market leaders
in equity sales, trading, and research, with a presence in all
principal financial centers worldwide, as well as a highly skilled
derivatives group producing tailored products for clients
globally.With this acquisition, CSFB now ranks second in U.K.
equity trading and fth in European equity research, up from
twentieth.
- 24. First 100% IPO ofRental Car Company Dollar Thrifty
Automotive Groups search for a large fleet financing led to a
complex equity/debt transaction that totaled $2.8 billion. In
addition CSFB sold Chryslers ownership in Dollar Thrifty, executing
an initial public offering of $484 million in common stock and
completing an unusually complicated and innovative structure
including medium-term notes, commercial paper, and liquidity and
revolving credit facilities in only three months. EuropesCiba
Specialty Chemicals Holding Inc. was distributed to shareholders of
its parent, Novartis. The underlying structure of this $5.5 billion
transactionincorporating the simultaneous par value rights issue,
global offering, rights recycling, and hard under- Largest
writinghad never before been undertaken. The deal created the
worlds leading specialty chemicals company and earned a Corporate
Finance magazine award asSpin-OffDemerger of the Year. CSFB
lead-managed the $535 million global offering of preferred shares
for Petrobras, the huge Brazilian integrated oil and gas company. A
strong marketing effortGlobal increased the original offering size
from 1.35 billion to 2.0 billion shares and broadened Petrobrass
base of international shareholders, in particular, dedicated oil
and gas investors and large U.S. investors.MarketingIncreases These
combined strengths have made us the fourthTransaction leading
global IPO firm, and the outright global coordinator leader with
more than $39 billion in transactions lead-Size managed in 1997 as
well as the number one European IPO House. No institution has
executed more secondary IPOs in the last four years than CSFB, as
our clients employ the equity markets (rather than the M&A
markets)Expert to sell their positions in companies. We are also a
leader in the convertible and synthetic new issue markets.Execution
of We have become the preeminent lead manager in privatizations, as
demonstrated most recently by theMarketedOffering On behalf of Zell
Chilmark Partners, CSFB concluded a marketed offering of Raises
15.6 million shares of common stock of the CVS Corporation, one of
the leading chain drugstores in the U.S. The offering, which was
confined to a three-day period, was more than four times
oversubscribed. The stock price rose from $51.58 to $54.00Stock
Price during the period, and resulted in proceeds of $855.5 million
for CVS.
- 25. enormous transactions for Telstra and the 1997 phase sive
national network of active retail customers, comple- of ENI, both
described on page 15. CSFB managed thementing our leading private
client services group that $723 million common stock offering for
the CalEnergy covers over 2,000 sophisticated individual investors
and refinancing, described on page 11, and the $484 millionsmall
institutions. IPO for Dollar Thrifty Automotive Groupthe first 100%
Our relationship with Credit Suisse Financial23 initial public
offering of a rental car company. We also Products has been
especially fruitful in the area of equity managed the CVS share
offering of $855 million and the derivatives. This business
combines CSFPs balance sheet MATV privatization IPO at $1,013
million for the govern-and OTC structuring capability with CSFBs
command of ment of Hungary. equity derivatives and distribution
expertise. The global Our strength and market coverage was
broadened integration of all these capabilities is unmatched by any
of by our acquisition of the European and selected Asianour
competitors. equity, equity capital markets and mergers and
acquisi- The global super-bulge bracket of equity firms is tions
advisory businesses of BZW from Barclays rapidly taking shape. It
will be small and enormously (discussed on page 21), and through
the opening of a fullpowerful, with worldwide coverage, research
that sets the service Canadian equity operation in mid-1997.
Similarly,standard for excellence and leadership in every product
our joint equity distribution alliance with Charles Schwab
category. CSFB already has a solid claim on membership. affords our
client equity issuers with access to an exten- It is not a claim we
intend to relinquish.First CentralEuropean CompanyListed on NYSE
Credit Suisse First Boston acted as joint global coordinator in the
largest equity offering from Central Europe by raising $1,013
million in the privatization IPO of MATV, Hungarys main
telecommunications services provider. The transaction was completed
within the original price range and in full size, despite a 22%
decline in the Hungarian stock market in the four days ahead of
pricing and a 13% decline on the day of pricing. IFR magazine
awarded the MATV deal an Equity Issue of the Year for East
Europe/Middle East/Africa.
- 26. Interest Rate Products #1 #1Swaps and options in over30
currenciesEquity ProductsIndex, basket and single stockswaps and
optionsForeign Exchange ProductsLonger term swaps and otherFX risk
management products EquityCreditCommodity Products Derivatives (1)
Derivatives (2)Longer term swaps and optionson precious metals, oil
andother energyAsset Trading and CreditDerivativesIncluding assets
and derivativesfrom emerging and developedmarkets (Dollars in
Millions)1997 1996% CHANGE Revenue$ 1,167$ 950 23%Employees (front
ofce)281 24117%Average BIS Capital$ 885n/an/a CREDIT SUISSE
FINANCIAL PRODUCTS 1997 proved to be another record year for Credit
SuisseChristopher GoekjianManaging Director Financial Products. Net
trading revenue for the year wasChief Executive Off i c e r U.S.
$1,167 million, a 23% increase over 1996, resultingCredit Suisse
from increased client and proprietary activities. Global Financial
Products market conditions were benign until the fourth quarter
when the Asian crisis broke. CSFP continued to be at the forefront
of the derivatives industry, and used its leader- ship in credit
derivatives to develop and then make publicly available an
analytical framework for measuring and man- aging credit risk,
CREDITRISK+.During 1997 interest rate derivatives continued to be
the largest contributor to trading revenues. This area continued to
grow due to higher turnover and proprietary (1) World Equity voted
CSFPDerivatives House of the Year trading profits in the vanilla
products. European swap in January 1998. markets were very active,
ahead of EMU, and an increas-(2) IFR voted CSFP CreditDerivatives
House of the Year ing number of CSFPs clients intensified their
interest risk in December 1997.
- 27. 25 management activities. In Japan, the continuing low
Yeninterest rate environment enabled CSFP to execute manyinnovative
yield enhancement structures. The generally lowlevel of G7 interest
rates has led to increased investorinterest in less developed swap
markets such as theSouth African Rand where CSFP has developed a
domi-nant presence in the market.In the first half of the year, the
equity business builton the successes of 1996 and showed very
strongresults, which was somewhat offset by a more difficultsecond
half. There is clearly a growing equity culture inEurope which has
led to a strong demand for equity-linkedretail products, such as
capital protected notes. CSFPcontinued to be one of the major
providers of these prod-ucts during 1997. Recurring fears of a
potential equitymarket correction led to healthy client hedging
business,especially in Europe and the U.S. In Japan several of
ourclients hedged their core equity holdings. 1997 again sawa
number of very successful Corporate Finance-typeCSFP has been
atequity derivative deals that were executed in close cooper-ation
with the Equity Capital Markets group, such as the the forefront of
theLeveraged Executive Asset Plan (LEAP) for CibaSpecialty
Chemicals which accompanied the companysbooming synthetic initial
public offering. Additionally, CSFP significantlyconvertible
businessit goes from strengthto strength.* In early 1997 many
European investors sought access to the exceptional returns
available in the global equity markets without exposing themselves
to the downside risks of equity investing. To meet this objective,
together with Credit Suisse First Boston, we structured and
executed several synthetic convertible bonds that provide the
upside of equity with the principal protection of a bond. The
synthetic convertibles were issued by European and U.S. corporates,
including Nestl, ABB and Texaco. These issuers immedi- ately hedged
out the equity component of the bonds via an OTC equity component;
the * I F Rs World Equ ity corporates obtained funding at rates
substantially below market cost, while investors J a n u a r y,
1998 gained access to high-quality equity investments that match
their desired exposure profile.
- 28. C R E D I T R I S K+ In October 1997, we released our
internal credit risk management framework, CREDITRISK +, to the
public, after extensive internal testing and use. We wanted to pro-
mote discussion about the assessment and management of credit
default risk within a portfolio of different credits. At the same
time, we sought to encourage regulators to consider a more
flexible, model-based approach to the calculation of regulatory
capital for credit default risk. CREDITRISK+ received a warm
reception from regulators, manage- ment consultants, accountancy
firms, and major academics and generated interest from all sectors
of the financial world, with up to 3,000 hits a week on our
website. With growing investor interest in what had previously been
thought to be an unmanageable risk, we fully expect to be at the
forefront of the debate on the regulatory treatment of credit
derivatives during 1998. increased its activity of providing
clients with derivativeproducers and, consequently, significantly
increased its structures that facilitate share repurchases,
divestitures client activity during 1997. and acquisitions.Credit
derivative trading and risk management was a In foreign exchange
derivatives, 1997 marked the major focus in 1997. The start of the
year saw the inte- continuation of trends established at the end of
1996, asgration of the Fixed Income Divisions Asset Trading the
U.S.$appreciated roughly 11.5% versus core USD appreciated roughly
11.5% versus corebusiness with CSFPs credit derivatives business.
In trad- European currencies and 13% versus the Japanese Yen. ing,
CSFP now turns over in excess of U.S.$2 billionU.S. $2 billion
These moves were matched by the resurgence of impliednotional a
month in credit derivatives, making it one of the volatilities in
the U.S.$currency pairs. The opposite was USD currency pairs. The
opposite was two dominant firms in this segment of the derivatives
mar- true for European crosses where, in anticipation of theket.
Expertise gained in this market helped the Group to single European
currency to be implemented in 1999,arrange the largest CBO/CLO of
1997 CSFBs EMS currency volatilities fell to all-time lows.
CSFPsU.S. $5 billion Triangle transaction. In risk
management,U.S.$5 billion Triangle transaction. In risk management,
close working relationship with the Global Foreign CSFP has
developed an analytical model to help manage Exchange Group enabled
it to provide its clients with a full its credit exposure. The
models use has subsequently array of FX products. In this
environment, CSFP focusedbeen extended on a Group-wide basis and
was released on creating interesting investment opportunities and
to the public as CREDITRISK+ in October. The principles attractive
long-dated hedging strategies.behind CREDITRISK+ have been endorsed
by Moodys CSFPs commodities business continued to improve,Investor
Services, Standard and Poors, IBCA, JBRI and and as gold continued
its long-term decline, many produc-three of the major accounting
firms. CREDITRISK + repre- ers looked to hedge their production.
CSFP developed sents a significant contribution to the ongoing
debate on a number of long-dated hedging products to aid goldthe
subject.
- 29. 27In April 1997 CSFP opened a Tokyo branch,Financing Review
acclaimed CSFP Credit Derivativesmaking it the first bank
specializing in risk managementHouse of the Year, and the company
also was awardedproducts to open a branch in Japan. The branch will
allow Derivatives House of the Year by World Equity andCSFP to
provide better service to the Groups clients inBest Foreign Dealer
by Swaps Monitor. The successes ofthe Japanese market. This was
followed in July by the 1997 against a background of sometimes
difficult marketopening of the Hong Kong representative office.
conditions show the strength in depth of CSFPs trading, Overall,
1997 represented another record year formarketing and support
functions, all of which are put atCSFP and the companys position in
the industry was the disposal of CSFBs global client
base.recognized by a number of awards. International Specialists in
Risk Management Credit Suisse Financial Products Relationship
between Daily Revenue and VAR Estimate
- 30. A Global Network Generating Superior Returnsof
Professionals Experienced investorsCreates theSignificant
commitmentsof capital TransactionInstitutional priority
Opportunities forCompelling incentive systems Private
EquityIntegrated origination eff o r tIndependent execution
andcommitment process 1997 1996 % CHANGE Employees43 16 169% P R I
VATE EQUITYDavid A. DeNunzio 1997 was a year of significant
accomplishment for PrivateManaging Director Equity. We redefined
our business on a global basis andChief Executive Off i c e r added
significantly to our staff. At the same time, we Private
Equityharvested several investments at attractive rates of return,
while investing over $130 million in new situations. We now have
three investment pools to address global private equity
opportunities sourced by CSFB, Credit Suisse, and Credit Suisse
Group. Representing approximately $1.5 billion in assets under
management, they are focused on the U.S. and Canada, Russia and the
Ukraine, and the rest of the world (International). These funds,
when fully subscribed, will aggregate a significant commitment of
CSG capital with that of outside investors to make direct
investments in growth opportunities, corporate partnerships,
recapitalizations, buyouts, and other types of private equity
investments.