EXHIBIT 99.2

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Consolidated Financial Statements

March 31, 2007

(With Independent Auditors’ Report Thereon)

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page

Independent Auditors' Report		2
Consolidated Statements of Financial Condition (Unaudited)		3
Consolidated Statements of Income (Unaudited)		5
Consolidated Statements of Changes in Stockholder's Equity (Unaudited)		6
Consolidated Statements of Cash Flows (Unaudited)		7
Notes to Consolidated Financial Statements (Unaudited)
1.	Summary of Significant Accounting Policies	8
2.	Fair Value of Financial Instruments	16
3.	Related Party Transactions	22
4.	Transfers and Servicing of Financial Assets	24
5.	Private Equity and Other Long‑Term Investments	28
6.	Derivatives Contracts	29
7.	Goodwill and Identifiable Intangible Assets	32
8.	Borrowings	32
9.	Leases and Commitments	34
10.	Guarantees	35
11.	Concentrations of Credit Risk	38
12.	Net Capital Requirements	39
13.	Cash and Securities Segregated Under Federal and Other Regulations	39
14.	Stockholder's Equity	40
15.	Employee Benefit Plans	40
16.	Income Taxes	41
17.	Legal Proceedings	43
18.	Industry Segment Data	43
19.	Subsequent Event	45

Independent Auditors’ Report

The Board of Directors and Stockholder

Credit Suisse (USA), Inc. and Subsidiaries:

We have reviewed the consolidated statement of financial condition of Credit Suisse (USA), Inc. and Subsidiaries (the “Company”) as of March 31, 2007 and the related consolidated statements of income, changes in stockholder’s equity and cash flows for the three-month periods ended March 31, 2007 and 2006. These consolidated financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the generally accepted auditing standards, in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

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

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated statement of financial condition of Credit Suisse (USA), Inc. and Subsidiaries as of December 31, 2006, and the related consolidated statements of income, changes in stockholder’s equity, and cash flows for the year then ended (not presented herein); and in our report dated March 26, 2007, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of financial condition as of December 31, 2006, is fairly stated, in all material respects, in relation to the consolidated statement of financial condition from which it has been derived.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2007, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No 157, “Fair Value Measurements”, SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, and Statement of Financial Accounting Standard Board (“FASB”) Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109”.

/s/ KPMG LLP

New York, New York

May 16, 2007

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(Unaudited)

(In millions)

ASSETS	March 31, 2007		December 31, 2006


Cash and cash equivalents	$	1,819	$	1,902
Collateralized short-term financings:
Securities purchased under agreements to resell	57,417		46,721
Securities borrowed	104,149		95,403
Receivables:
Customers	1,988		4,932
Brokers, dealers and others	12,557		12,214
Financial instruments owned (of which $83,994 and $70,168, respectively was encumbered):
U.S. government and agencies	40,061		30,600
Corporate debt	26,850		24,056
Mortgage whole loans	21,974		18,906
Equities	52,043		52,360
Commercial paper	2,989		1,862
Private equity and other long-term investments	12,653		11,649
Derivatives contracts	9,944		10,347
Other	7,838		7,524
Net deferred tax asset	1,317		1,488
Office facilities at cost (net of accumulated depreciation and amortization of $684 and $1,014, respectively)	576		557
Goodwill	629		616
Loans receivable from parent and affiliates	45,745		31,811
Other assets and deferred amounts (includes encumbered loans of $2,940 and $152, respectively)	9,049		6,529
Total assets	$	409,598	$	359,477

See accompanying notes to consolidated financial statements (unaudited).

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition (Continued)

(Unaudited)

(In millions, except share data)

LIABILITIES AND STOCKHOLDER’S EQUITY	March 31, 2007			December 31, 2006

Commercial paper and short-term borrowings	$	33,867		$	20,270
Collateralized short-term financings:
Securities sold under agreements to repurchase	138,203			126,498
Securities loaned	70,900			62,896
Payables:
Customers	9,819			7,922
Brokers, dealers and others	9,423			10,140
Financial instruments sold not yet purchased:
U.S. government and agencies	26,594			19,578
Corporate debt	4,547			4,158
Equities	12,426			9,484
Derivatives contracts	5,168			6,536
Other	723			491
Obligation to return securities received as collateral	12,491			11,049
Accounts payable and accrued expenses	2,396			3,764
Other liabilities	22,212			18,789
Long-term borrowings	45,965			43,518
Total liabilities	394,734			345,093

Stockholder’s Equity:
Common stock ($0.10 par value; 50,000 shares authorized; 1,100 shares issued and outstanding)	―			―
Paid-in capital	10,637			10,315
Retained earnings	4,412			4,259
Accumulated other comprehensive loss	(185		)	(190		)
Total stockholder’s equity	14,864			14,384
Total liabilities and stockholder’s equity	$	409,598		$	359,477

See accompanying notes to consolidated financial statements (unaudited).

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(In millions)

	For the Three Months Ended March 31,
	2007		2006

Revenues:
Principal transactions-net	$	1,740	$	1,648
Investment banking and advisory	865		583
Commissions and fees	410		351
Other	38		47
	3,053		2,629

Interest and dividends	5,324		4,082
Interest expense	5,174		3,788
Net interest and dividends	150		294
Total net revenues	3,203		2,923
Expenses:
Employee compensation and benefits	1,476		1,171
Occupancy and equipment rental	127		121
Brokerage, clearing and exchange fees	92		85
Communications	36		41
Professional fees	94		82
Other operating expenses	18		40
Total expenses	1,843		1,540
Income before provision for income taxes and minority interests	1,360		1,383
Provision for income taxes	219		137
Minority interests	722		929
Net income	$	419	$	317

See accompanying notes to consolidated financial statements (unaudited).

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholder’s Equity

For the Three Months Ended March 31, 2007 and 2006

(Unaudited)

(In millions)

	Common Stock	Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total
Balances as of December 31, 2005	$ ―	$ 9,530	$ 2,661	$ (180)	$ 12,011

Net income	―	―	317	―	317
Total comprehensive income					317
CSG share plan activity, including tax benefit of $19	―	314	―	―	314
Balances as of March 31, 2006	$ ―	9,844	2,978	(180)	12,642

Balances as of December 31, 2006, as previously reported	$ ―	$ 10,315	$ 4,259	$ (190)	$ 14,384

Cumulative effect of the adoption of SFAS 157, net of tax charge of $32	―	―	58	―	58
Cumulative effect of the adoption of SFAS 159, net of tax benefit of $176	―	―	(328)	―	(328)
Cumulative effect of the adoption of FIN 48	―	―	4	―	4
Balances as of December 31, 2006 after the cumulative effect of the adoption of new accounting pronouncements	―	10,315	3,993	(190)	14,118

Net income	―	―	419	―	419
Reversal of cash flow hedges, net of tax benefit of $2.	―	―	―	5	5
Total comprehensive income					424
CSG share plan activity, including tax benefit of $61	―	315	―	―	315
Capital contribution	―	7	―	―	7
Balances as of March 31, 2007	$ ―	$ 10,637	$ 4,412	$ (185)	$ 14,864

See accompanying notes to consolidated financial statements (unaudited).

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2007 and 2006

(Unaudited)

(In millions)

	2007				2006
Cash flows from operating activities:
Net income	$		419		$	317
Adjustments to reconcile net income to net cash used in operating activities:
Cumulative effect of accounting changes, net of tax	(266			)	--
Depreciation and amortization	56				51
Non-cash CSG share plan activity, pre-tax	254				295
Deferred taxes	313				239
Other, net	5				--
Change in operating assets and operating liabilities:
Securities borrowed	(8,746			)	(11,087			)
Receivables from customers	2,944				(85			)
Receivables from brokers, dealers and others	(343			)	(1,985			)
Financial instruments owned	(13,637			)	(4,572			)
Other assets and deferred amounts and Other liabilities, net	48				(1,674			)
Securities loaned	8,004				5,995
Payables to customers	1,897				2,272
Payables to brokers, dealers and others	(717			)	336
Financial instruments sold not yet purchased	9,211				2,504
Obligation to return securities received as collateral	1,442				1,799
Accounts payable and accrued expenses	(1,368			)	(1,010			)
Net cash used in operating activities	(484			)	(6,605			)

Cash flows from investing activities:
Net (payments for) proceeds from:
Loans receivable from parent and affiliates	(13,934			)	(2,419			)
Office facilities, net	(69			)	(64			)
Net cash used in investing activities	(14,003			)	(2,483			)

Cash flows from financing activities:
Net proceeds from (payments for):
Commercial paper and short-term borrowings	13,597				3,426
Securities sold under agreements to repurchase, net of securities purchased under agreements to resell	1,009				2,777
Tax benefit on CSG share plan activity	61				19
Capital contribution	7				--
Issuances of long-term borrowings	95				3,040
Redemptions and maturities of long-term borrowings	(365			)	(103			)
Net cash provided by financing activities	14,404				9,159

Increase (decrease) in cash and cash equivalents	(83			)	71
Cash and cash equivalents as of the beginning of year	1,902				884
Cash and cash equivalents as of the end of year	$	1,819			$		955

SUPPLEMENTAL DISCLOSURES
Cash payments for interest	$	5,331			$		3,749
Cash payments for income taxes, net of refunds	$	40			$		19

See accompanying notes to consolidated financial statements (unaudited).

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2007

1. Summary of Significant Accounting Policies

The Company

The consolidated financial statements include Credit Suisse (USA), Inc., and its subsidiaries (the “Company”). The Company is an integrated investment bank serving institutional, corporate, government and high-net-worth individual clients. The Company’s products and services include securities underwriting, sales and trading, financial advisory services, private equity investments, full service brokerage services, derivatives and risk management products, asset management and investment research. The Company is a wholly owned subsidiary of Credit Suisse Holdings (USA), Inc. (“CS Holdings”). The Company is an indirect subsidiary of Credit Suisse, a Swiss bank, and an indirect wholly owned subsidiary of Credit Suisse Group (“CSG”).

Basis of financial information. To prepare consolidated financial statements in accordance with accounting principles generally accepted in the United States, management must make estimates and assumptions. The reported amounts of assets and liabilities and revenues and expenses are affected by these estimates and assumptions, the most significant of which are discussed in the notes to the consolidated financial statements. Estimates, by their nature, are based on judgment and available information. Therefore, actual results could differ materially from these estimates.

The Company consolidates entities in which it has a controlling financial interest, which is typically all, or a majority of, the voting interests. The Company also consolidates entities that are variable interest entities (“VIEs”) when it is determined to be the primary beneficiary under Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”) and the subsequent modifications of FIN 46 under FIN 46R. The Company also consolidates certain partnerships under Emerging Issues Task Force (“EITF”) Issue No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-5”). See Notes 4 and 5 for more information. Entities in which the Company holds 20% to 50% of the voting rights or has the ability to exercise significant influence, other than private equity investments which are consolidated primarily under FIN 46R, are accounted for under Accounting Principles Board (“APB”) Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.” In cases where the Company has a voting interest of less than 20% and does not have significant influence, the investment is carried at cost. Where an investment is treated as financial instruments owned in its broker-dealers, the Company does not apply the cost or equity method and carries the investment at fair value.

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

Certain reclassifications have been made to prior year consolidated financial statements to conform to the 2007 presentation.

The Company has restated its consolidated statement of income for the three months ended March 31, 2006 based on a December 2006 speech by the Securities and Exchange Commission (“SEC”) staff. As a result the Company no longer classifies certain private equity interests as minority interest expenses resulting in a decrease in minority interests expense of $14 million for the three months ended March 31, 2006. This reclassification did not change net income as offsetting increases in employee compensation and benefits expense and decreases in principal transactions-net were recorded. See Notes 4 and 5 for more information.

All significant intercompany balances and transactions have been eliminated.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

1. Summary of Significant Accounting Policies (Continued)

Significant Accounting Policies

Cash and cash equivalents. Cash and cash equivalents include all demand deposits held in banks and certain highly liquid investments with original maturities of 90 days or less, other than those held for sale in the ordinary course of business.

Collateralized short-term financings. The Company enters into transactions involving securities sold under agreements to repurchase (“repurchase agreements”) and securities purchased under agreements to resell (“resale agreements”) and securities borrowed and securities loaned transactions as part of the Company’s matched-book activities to accommodate clients, finance the Company’s trading inventory, obtain securities for settlement and earn interest spreads.

In connection with the Company’s adoption of Statement of Financial Accounting Standards (“SFAS”) No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115” (“SFAS 159”), certain repurchase agreements and resale agreements that primarily represent matched-book activities were elected to be carried at fair value with changes in fair value included in principal transactions-net in the consolidated statements of income. The remaining repurchase agreements and resale agreements are carried at contract amounts that reflect the amounts at which the securities will be subsequently repurchased or resold. For more information on the Company’s adoption of SFAS 159 see Note 2. Interest on repurchase and resale agreements is accrued and is included in the consolidated statements of financial condition in receivables from and payables to brokers, dealers and others. The Company takes possession of the securities purchased under resale agreements and obtains additional collateral when the market value falls below the contract value. The Company nets certain repurchase agreements and resale agreements with the same counterparty in the consolidated statements of financial condition when the requirements of FIN No. 41, “Offsetting of Amounts Relating to Certain Repurchase and Reverse Repurchase Agreements,” are satisfied.

In connection with the Company’s adoption of SFAS 159, securities borrowed and securities loaned transactions that represent matched-book activities are carried at fair value with changes in fair value included in principal transactions-net in the consolidated statements of income. The remaining securities borrowed and securities loaned transactions are recorded at the amount of cash collateral advanced or received. For securities borrowed, the Company deposits cash, letters of credit or other collateral with the lender. For securities loaned, the Company receives cash or other collateral from the borrower generally in excess of the market value of securities loaned. Interest on such transactions is accrued and is included in the consolidated statements of financial condition in receivables from and payables to brokers, dealers and others. The Company monitors the market value of securities borrowed and loaned daily and obtains or refunds collateral as necessary.

Receivables from customers/Payables to customers. Receivables from and payables to customers include amounts due on regular-way securities transactions, margin transactions and commodities futures. Securities owned by customers, including those that collateralize margin or similar transactions are not reflected in the consolidated statements of financial condition.

Receivables from brokers, dealers and others/Payables to brokers, dealers and others. Receivables from brokers, dealers and others include amounts receivable for securities not delivered by the Company to a purchaser by the settlement date (“fails to deliver”), omnibus receivables, receivables from clearing organizations, other non-customer receivables, margin deposits and accrued dividends and interest. Payables to brokers, dealers and others include amounts payable for securities not received by the Company from a seller by the settlement date (“fails to receive”), payables to clearing organizations, amounts related to future contracts transacted on behalf of customers, other non-customer payables, and accrued dividends and interest. In addition, the net receivable or payable arising from unsettled regular-way trades is included in receivables from brokers, dealers and others or payables to brokers, dealers and others.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

1. Summary of Significant Accounting Policies (Continued)

Fair value of financial instruments. Substantially all of the Company’s financial instruments, as well as financial instruments with off-balance sheet risk are carried at fair value. For more information on fair value including the Company’s adoption of SFAS No. 157, “Fair Value Measurements” (“SFAS 157”) and SFAS 159 see Note 2.

Mortgage whole loans. Mortgage whole loans are generally carried at fair value with the changes in fair value included in principal transactions-net in the consolidated statements of income with the exception of originated residential mortgage whole loans and commercial mortgage whole loans which the Company held prior to its adoption of SFAS 159, which are carried at the lower of cost or fair value. For more information on the Company’s adoption of SFAS 159 see Note 2. Adjustments to the carrying value of loans carried at the lower of cost or fair value are determined as the amounts by which cost exceeds fair value and are reflected in principal transactions-net in the consolidated statements of income. Management determines fair value using pricing factors specific to loan level attributes, such as loan-to-value ratios, current balances and liens. Purchases and sales of mortgage whole loans are recorded on a settlement date basis. Interest is accrued on all mortgage whole loans with the exception of those that are delinquent 90 days or more, as reported by the servicer.

Securitization. The Company securitizes commercial and residential mortgages, which it originates and purchases, as well as loans and other debt obligations, which it purchases from third parties. The Company accounts for the transfers of financial assets in accordance with SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS 140”). The Company records a securitization as a sale when the accounting criteria for a sale are met. The Company may retain interests in these securitized assets in connection with its underwriting and market-making activities. Retained interests in securitized financial assets are included at fair value in financial instruments owned in the consolidated statements of financial condition. Any changes in the fair value of these retained interests are recognized in the consolidated statements of income. The fair values of retained interests are determined using present value of estimated future cash flows valuation techniques that incorporate assumptions that market participants customarily use in their estimates of values including prepayment speeds, credit losses and discount rates. See Note 4 for more information.

Derivatives contracts?trading. All trading derivatives contracts are carried at fair value with realized and unrealized gains and losses and interest flows included in principal transactions-net in the consolidated statements of income. Cash flows from these derivatives contracts are included as operating activities in the consolidated statements of cash flows. See Note 6 for more information.

Derivatives contracts—nontrading. Prior to the adoption of SFAS 159, the Company managed its interest rate exposure on its long-term fixed rate debt by using interest rate swaps that were designated for hedge accounting treatment under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended (“SFAS 133”). These financial instruments were accounted for as fair value hedges, with changes in the fair value of both the derivative and the hedged item included in principal transactions–net in the consolidated statements of income. Interest flows on both the Company’s borrowings and the related fair value hedges were included in interest income (expense) in the consolidated statements of income. In connection with the adoption of SFAS 159 the Company carries the long-term fixed rate debt at fair value with changes in fair value included in principal transactions-net in the consolidated statements of income. Interest flows on the Company’s borrowings continue to be included in interest expense in the consolidated statements of income; however, interest flows on the hedges are now included in principal transactions – net in the consolidated statements of income. See Notes 2 and 6 for more information.

Prior to the adoption of SFAS 159, the Company applied cash flow hedge accounting to derivatives that hedge certain loans that were originated by an affiliate and purchased by the Company. In connection with the adoption of SFAS 159 the loans are carried at fair value with changes in fair value reflected in the consolidated statements of income. Interest flows on the hedges are included in principal transactions-net in the consolidated statements of income. Cash flows from these derivatives instruments are included in operating activities in the consolidated statements of cash flows. See Notes 2 and 6 for more information.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

1. Summary of Significant Accounting Policies (Continued)

Private equity and other long-term investments. Private equity and other long-term investments generally have no readily available market or may be otherwise restricted as to resale under the Securities Act of 1933 (the “Securities Act”); therefore, these investments are carried at fair value. Fair value for private equity and other long-term investments is based upon a number of factors, including readily available market quotes with appropriate adjustments for trading restrictions, the most recent round of financings, earnings-multiple analyses using comparable companies, discounted cash flow analysis or valuations received from the general partner of a third-party managed fund. Changes in net unrealized appreciation/depreciation arising from changes in fair value and gains and losses realized upon sale and carried interest are reflected in principal transactions-net in the consolidated statements of income. The Company’s subsidiaries manage many private equity partnerships (the “Funds”). When the investment performance on Credit Suisse-managed Funds exceeds specific thresholds, the Company and certain other partners, most of which are current and former employees of the Company (collectively the “GPs”), may be entitled to receive a carried interest distribution under the governing documents of the Funds. Carried interest distributions are based on the cumulative investment performance of each Fund at the time the distribution is made. As a result, the Company may be obligated to return to investors in the Funds all or a portion of the carried interest distributed to the GPs. The amount of such contingent obligations is based upon the performance of the Funds but cannot exceed the amount of carried interest received by the GPs. See Notes 5 and 10 for more information.

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

Goodwill and identifiable intangible assets. Goodwill represents the amount by which the purchase price exceeds the fair value of the net tangible and intangible assets of an acquired company on the date of acquisition. Goodwill and indefinite-lived intangible assets are reviewed annually for impairment. Based on the results of the Company’s annual review it was determined that no impairment charge was required. Intangible assets that do not have indefinite lives, principally software and customer lists, are amortized over their useful lives and reviewed for impairment. Intangible assets are included in other assets and deferred amounts in the consolidated statements of financial condition. Also included in intangible assets are mortgage servicing rights which are carried at fair value. See Note 7 for more information.

Long-term borrowings. In connection with the adoption of SFAS 159, the Company carries long-term fixed rate debt at fair value. Prior to the adoption of SFAS 159 the Company carried long-term fixed rate debt on an accrual basis. See Notes 2 and 8 for more information.

Principal transactions-net. Principal securities transactions are recorded on a trade date basis. Realized and unrealized gains and losses on trading in financial instruments, including securities, private equity investments, derivatives contracts, carried interest from private equity investments and interest flows on the Company’s trading derivatives contracts are reflected in principal transactions-net in the consolidated statements of income. Principal transactions-net also include realized and unrealized gains and losses on repurchase and resale agreements and loans which are recorded on a settlement date basis.

Loan origination fees. In connection with the adoption of SFAS 159, mortgage whole loan origination fees are recognized upon origination while direct origination costs are expensed in their entirety upon origination. For mortgage whole loans originated prior to the adoption of SFAS 159, mortgage whole loan origination fees and direct origination costs are deferred until the time of sale and are included in principal transactions-net in the consolidated statements of income.

Investment banking underwriting revenues and fees. Investment banking underwriting revenues and fees, net of syndicate expenses, arising from securities offerings in which the Company acts as an underwriter or agent, are recorded in investment banking and advisory in the consolidated statements of income. Investment banking revenues from fees earned for providing merger and acquisition and other advisory services are also recorded in investment banking and advisory in

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

1. Summary of Significant Accounting Policies (Continued)

the consolidated statements of income. In addition, placement fees earned by the Company’s private funds group are included in investment banking and advisory revenues. Investment banking and advisory revenues are recorded at the time the transactions are completed.

Commissions. Commissions primarily include fees from executing and clearing customer transactions on stock, options and futures markets. Commissions are recorded in the consolidated statements of income on a trade date basis. Commissions also include management fees earned by the Company from managing private equity funds and are recorded in the consolidated statements of income when earned.

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

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

Share-based compensation. The Company recognizes compensation expense over the vesting period for all share option, share unit and share awards granted under the Credit Suisse Group International Share Plan (the “Share Plan”).

Income taxes. The Company is included in the consolidated federal income tax return and certain state and local income tax returns filed by the Company’s immediate parent CS Holdings. CS Holdings allocates federal income taxes to its subsidiaries on a separate return basis, and any state and local income taxes on a pro rata basis, pursuant to a tax sharing arrangement.

The Company uses the asset and liability method in providing for income taxes, which requires that deferred income taxes be recorded and adjusted for the future tax consequences of events that have been recognized in the financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. See Note 16 for more information.

RECENTLY ADOPTED ACCOUNTING STANDARDS

EITF 04-5, FSP SOP 78-9-1 and EITF 96-16

In June 2005, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-5”). EITF 04-5 provides a framework for evaluating whether a general partner or a group of general partners controls a limited partnership and therefore should consolidate it. EITF 04-5 states that the presumption of general partner control would be overcome only when the limited partners have substantive “kick-out rights” or “participating rights.” These rights would allow a simple majority of the limited partners to dissolve or liquidate the partnership or otherwise remove the general partner “without cause” or effectively participate in significant decisions made in the ordinary course of the partnership business. EITF 04-5 was effective upon ratification for all newly formed limited partnerships and for existing limited partnership agreements that have been modified. The guidance was effective for the Company with respect to existing unmodified partnerships as of January 1, 2006.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

1. Summary of Significant Accounting Policies (Continued)

As a result of the ratification of EITF 04-5, EITF Issue No. 96-16, “Investor’s Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights” (“EITF 96-16”) was updated and FASB Staff Position (“FSP”) No. SOP 78-9-1, “Interaction of American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 78-9 and EITF Issue No. 04-5” (“FSP SOP 78-9-1”) was issued. The amendments to EITF 96-16 were effective on a prospective basis upon issuance, whereas, similar to EITF 04-5, FSP SOP 78-9-1 was effective upon issuance for all new partnerships formed and for existing partnership agreements modified after June 29, 2005, and was effective for the Company with respect to existing unmodified partnerships as of January 1, 2006.

The changes to EITF 96-16 and the provisions of EITF 04-5 and FSP SOP 78-9-1 did not have a material impact on the Company’s financial condition, results of operations or cash flows. As of January 1, 2006, the Company increased its assets and liabilities by $6.7 billion, primarily due to the consolidation of certain unmodified private equity partnerships which existed prior to June 29, 2005.

SFAS 154

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, ‘Accounting Changes’ (“APB 20”) and FASB Statement No. 3, ‘Reporting Accounting Changes in Interim Financial Statements (an Amendment of APB Opinion No. 28, ‘Interim Financial Reporting’)’” (“SFAS 154”). SFAS 154 requires retrospective application, unless impracticable, to prior period financial statements for voluntary changes in accounting principles and changes required by an accounting pronouncement in the unusual circumstances in which the pronouncement does not include specific transition provisions. This statement also requires that a change in depreciation, amortization or depletion method for long-lived, nonfinancial assets should be accounted for as a change in accounting estimate effected by a change in accounting principle (i.e., as a retrospective application). The guidance for reporting the correction of an error in previously issued financial statements and the change of an accounting estimate does not change from APB 20. SFAS 154 was effective for the Company as of January 1, 2006. The adoption of SFAS 154 did not have a material impact on the Company’s financial condition, results of operations or cash flows.

SFAS 155

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

SFAS 156

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets” (“SFAS 156”), which amended SFAS 140. SFAS 156 requires that all separately recognized servicing rights after the effective date be initially measured at fair value and permits separately recognized servicing rights to be accounted for at fair value in subsequent periods with changes in fair value recognized in the statement of income. SFAS 156

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

1. Summary of Significant Accounting Policies (Continued)

permits an irrevocable election to apply fair value measurement for classes of servicing rights based on the different valuation and risk characteristics of the underlying assets and the method in which the economic risks are managed. SFAS 156 is effective on a prospective basis for fiscal years beginning after September 15, 2006, with early adoption permitted as of the beginning of a fiscal year for which an entity has not previously issued interim financial statements. SFAS 156 allows limited retrospective application for existing separately recognized servicing rights. The Company elected to early adopt SFAS 156 as of January 1, 2006. The adoption of SFAS 156 did not have a material impact on the Company’s financial condition, results of operations or cash flows.

FSP FIN 46(R)-6

In April 2006, the FASB issued FSP No. FIN 46(R)-6, “Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R)” (“FSP FIN 46(R)-6”). FSP FIN 46(R)-6 provides guidance regarding how contracts or arrangements that create or reduce variability should be assessed when determining if they are VIEs and when assessing the need for consolidation of VIEs. FSP FIN 46(R)-6 requires that evaluations of the variability created or absorbed in an entity from its contracts or arrangements be based on an analysis of the entity’s design. In evaluating the design of an entity, an analysis must be performed as to the potential risks to which the entity is exposed as well as the risks that the entity was designed to create and pass along to its interest holders based on the purpose for which the entity was formed. The guidance of FSP FIN 46(R)-6 was adopted by the Company and applied effective July 1, 2006 to all new entities as well as entities previously analyzed under FIN 46(R) “Consolidation of Variable Interest Entities – An Interpretation of ARB No. 51” (“FIN 46(R)”) when a reconsideration event occurs. FSP FIN 46(R)-6 did not have a material impact on the Company’s financial condition, results of operations or cash flows.

SFAS 158

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS 158”). SFAS 158 requires an employer to: i) recognize in the statement of financial condition the funded status of a defined benefit plan on a prospective basis; ii) recognize as a component of other comprehensive income, net of tax, the actuarial gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to SFAS No. 87, “Employers’ Accounting for Pensions” (“SFAS 87”) or No. 106, “Employers’ Accounting for Postretirement Benefits Other than Pensions” (“SFAS 106”). Amounts recognized in accumulated other comprehensive income, including gains or losses, prior service costs or credits and transition assets or obligations remaining from the initial application of SFAS 87 and 106, are to be adjusted as they are subsequently recognized as a component of net periodic benefit cost; iii) measure the defined benefit plan assets and obligations at the date of the employer’s fiscal year-end statement of financial condition; and iv) disclose in the notes to the financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits and transition assets or obligations. SFAS 158 recognition provisions associated with the funded status of a defined benefit plan are effective as of the end of the fiscal year ending after December 15, 2006. The provision to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial condition is effective for fiscal years ending after December 15, 2008 with early adoption permitted. The cumulative effect of the Company initially adopting the recognition provisions of SFAS 158 as of December 31, 2006 was an after tax decrease in accumulated other comprehensive income and consolidated net assets of $280 million. The Company does not intend to early adopt the measurement date provisions.

SAB 108

In September 2006, the SEC issued Staff Accounting Bulletin No. 108 on Quantifying Misstatements (“SAB 108”). SAB 108 requires registrants to use both a balance sheet approach and an income statement approach when

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

1. Summary of Significant Accounting Policies (Continued)

quantifying and evaluating the materiality of a misstatement. In addition, SAB 108 provides guidance on correcting errors under this approach as well as providing transition guidance on correcting errors that existed prior to application of SAB 108. The guidance in SAB 108 is effective for the first fiscal year ending after November 15, 2006 with early adoption permitted. The adoption of SAB 108 as of December 31, 2006 did not have a material impact on the Company’s financial condition, results of operations or cash flows nor were any prior periods restated.

FIN 48

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 addresses the accounting for uncertainty in income tax positions by prescribing a consistent recognition threshold and measurement attribute for income tax positions taken or expected to be taken in an income tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

FIN 48 requires a two-step process in evaluating income tax positions. In the first step, an enterprise determines whether it is more likely than not that an income tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Income tax positions meeting the more-likely-than-not recognition threshold are then measured to determine the amount of benefit eligible for recognition in the financial statements. Each income tax position is measured at the largest amount of benefit that is more likely than not to be realized upon ultimate settlement.

The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 as of January 1, 2007 resulted in an increase in beginning retained earnings of $4 million. For more information see Note 16.

SFAS 157

In September 2006, the FASB issued SFAS No. 157. SFAS 157 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures for instruments carried at fair value. The statement applies only to fair value measurements which are already required or permitted by other accounting standards. It eliminates the EITF 02-3 guidance which prohibits the recognition of gains or losses at the inception of derivative transactions whose fair value is estimated based upon unobservable market data. SFAS 157 also eliminates the use of blockage factors on instruments that are quoted in active markets by brokers, dealers and investment companies that have been applying the applicable AICPA Audit and Accounting Guides. SFAS 157 also requires the Company to consider its own credit spreads when measuring the fair value of liabilities. The Company adopted the provisions of SFAS 157 on January 1, 2007. As a result of this adoption, the Company reported an after-tax increase in opening retained earnings of $58 million. For more information see Note 2.

SFAS 159

In February 2007, the FASB issued SFAS 159. SFAS 159 creates an alternative measurement treatment for certain financial assets and financial liabilities that permits fair value to be used for initial and subsequent measurement with changes in fair value recognized in earnings. The availability of this alternative measurement treatment is referred to as the fair value option. The statement also provides for additional financial statement presentation and disclosures relating to the alternative measurement treatment. The Company adopted the provisions of SFAS 159 on January 1, 2007. As a result of adoption and election of certain existing instruments under the fair value option, the Company reported an after-tax decrease in opening retained earnings of $328 million. For more information see Note 2.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

2. Fair Value of Financial Instruments

The fair value of the majority of the Company’s financial instruments is based on quoted prices in active markets or observable inputs. These instruments include government and agency securities, commercial paper, most investment-grade corporate debt, most high-yield debt securities, exchange traded and certain OTC derivative instruments, most collateralized debt obligations (“CDOs”), most mortgage-backed and asset-backed securities, certain residential mortgage whole loans and listed equity securities.

In addition, the Company holds financial instruments for which no prices are available, and which have little or no observable inputs. For these instruments the determination of fair value requires subjective assessment and varying degrees of judgment depending on liquidity, concentration, pricing assumptions and the risks affecting the specific instrument. In such circumstances, valuation is determined based on management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These instruments include certain investment-grade corporate debt securities, certain high-yield debt securities, distressed debt securities, certain CDO’s, certain OTC derivatives, certain mortgage-backed and asset-backed securities and private equity and other long-term investments. Valuation techniques for certain of these instruments are described more fully below.

The Company has availed itself of the simplification in accounting offered under the fair value option. This has been accomplished generally by electing fair value, both at initial adoption and for subsequent transactions, on items impacted by the hedge accounting requirements of SFAS 133 such as long-term borrowings. For instruments where there was an inability to achieve hedge accounting where we economically hedged the Company has elected fair value for the instrument. Likewise, where the Company manages an activity on a fair value basis but previously had been unable to achieve fair value accounting, the Company has utilized the fair value option to align its risk management accounting to its financial reporting.

Fair Value Hierarchy

Financial instruments recorded in the Company’s consolidated statement of financial condition at fair value as of March 31, 2007 have been categorized based upon the relative reliability of the fair value measures in accordance with SFAS 157 (the fair value hierarchy).

The levels of the fair value hierarchy are defined as follows in SFAS 157

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. This level of the fair value hierarchy provides the most reliable evidence of fair value and is used to measure fair value whenever available.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs include: (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active, that is, markets in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly; (c) inputs other than quoted prices that are observable for the asset or liability or (d) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3: Inputs that are unobservable for the asset or liability. These inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These inputs are developed based on the best information available in the circumstances, which include the Company’s own data. The Company’s own data used to develop unobservable inputs are adjusted if information indicates that market participants would use different assumptions.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

2. Fair Value of Financial Instruments (Continued)

The Company records net open positions at bid prices if long or asked prices if short unless the Company is a market maker in such positions in which case mid pricing is utilized. Fair value measurements are not adjusted for transaction costs.

Prior to January 1, 2007, net costs of originating or acquiring mortgage loans held for sale were recognized as part of the initial loan carrying value, with any subsequent change in fair value being recognized as a component of trading revenue. For such loans where the fair value option has been elected, net costs are now recognized on a gross basis as fee income and/or expense.

Quantitative Disclosures of Fair Values

Following is a tabular presentation of fair value of assets and liabilities for instruments measured at fair value on a recurring basis:

Fair value of assets and liabilities

March 31, 2007	Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Impact of netting⁽¹⁾			Total at fair value
Assets (in millions)
Resale agreements and securities borrowed transactions	$	―	$	74,210	$	―	$	―		$	74,210
Cash instruments	85,169		60,372		1,823					147,364
Private equity investments	460		1,870		10,323		―			12,653
Derivatives	1,793		14,713		3,313		(9,875		)	9,944
Other assets	―		2,944		―		―			2,944
Total assets at fair value	$	87,422	$	154,109	$	15,459	$	(9,875	)	$	247,115

Liabilities (in millions)
Repurchase agreements and securities loaned transactions	$	―	$	73,446	$	―	$	―		$	73,446
Obligation to return securities received as collateral		12,491		―		―		―			12,491
Cash instruments		39,264		5,014		12		―			44,290
Derivatives		1,834		12,243		966		(9,875	)		5,168
Long-term debt		―		24,670		―		―			24,670
Other liabilities		―		2,094		―		―			2,094
Total liabilities at fair value	$	53,589		117,467	$	978	$	(9,875	)	$	162,159

(1)	Derivative contracts are reported on a gross basis by level. The impact of netting represents an adjustment related to counterparty netting.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

2. Fair Value of Financial Instruments (Continued)

Fair value measurements using significant unobservable inputs (level 3)

March 31, 2007	Cash instruments			Private equity investments			Derivatives		Total
Assets (in millions)
Balance as of January 1, 2007	$	1,770		$	9,540		$	2,308	$	13,618
Total gains or (losses) (realized/unrealized)	2				667			703		1,372
Purchases, issuances and settlements	74			135			245		454
Transfers in and/or out of level 3	(23		)	(19		)	57		15
Balance as of March 31, 2007	$	1,823		$	10,323		$	3,313	$		15,459

Liabilities (in millions)		Cash instruments		Derivatives					Total
Balance as of January 1, 2007	$	(40	)	$	745			$	705
Total (gains) or losses (realized/ unrealized)	(4		)	463				459
Purchases, issuances and settlements	32			(79			)	(47		)
Transfers in and/or out of level 3	24			(163			)	(139		)
Balance as of March 31, 2007	$	12		$		966		$	978

	Principal Transactions-net
March 31, 2007 (in millions)
Total gains (losses) included in earnings for the period	$	913
Changes in unrealized gains (losses) relating to assets still held at reporting date	$	502

Both observable and unobservable inputs may be used to determine the fair value of positions that have been classified within level 3. As a result, the unrealized gains and losses for assets and liabilities within level 3 presented in the table above may include changes in fair value that were attributable to both observable and unobservable inputs.

The Company employs various economic hedging techniques in order to manage risks, including risks in level 3 positions. Such techniques may include the purchase or sale of financial instruments that are classified in levels 1 and/ or 2. The realized and unrealized gains and losses for assets and liabilities in level 3 presented in the table above do not reflect the related realized or unrealized gains and losses arising on economic hedging instruments classified in levels 1 and/ or 2.

Qualitative Disclosures of Valuation Techniques

Trading assets and liabilities

Trading securities

The Company’s trading securities consist of interest-bearing securities and equity securities. Interest-bearing securities and rights include debt securities, residential and commercial mortgage-backed and other asset-backed securities and CDOs. Equity securities include common equity shares and convertible bonds.

For debt securities for which market prices are not available, valuations are based on yields reflecting the perceived risk of the issuer and the maturity of the security, recent disposals in the market or other modeling techniques,

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

2. Fair Value of Financial Instruments (Continued)

which may involve judgment.

Values of residential and commercial mortgage-backed securities and other asset-backed securities are generally available through quoted prices, which are often based on the prices at which similarly structured and collateralized securities trade between dealers and to and from customers. Values of residential and commercial mortgage-backed securities and other asset-backed securities for which there are no significant observable inputs are valued using valuation models incorporating prepayment scenarios and Monte Carlo simulations.

Collateralized debt, bond and loan obligations are split into various structured tranches, and each tranche is valued based upon its individual rating and the underlying collateral supporting the structure. Values are derived by using valuation models to calculate the internal rate of return of the estimated cash flows.

The majority of the Company’s positions in equity securities are traded on public stock exchanges, for which quoted prices are readily and regularly available. Fair values of preferred shares are determined by their yield and the subordination relative to the issuer’s other credit obligations. Convertible bonds are generally valued using observable pricing sources. For a small number of convertible bonds no observable prices are available and valuation is determined using internal and external models, for which the key inputs include stock price, dividend rates, credit spreads, foreign exchange rates, prepayment rates and equity market volatility.

Derivatives

Positions in derivatives held for trading purposes include both OTC and exchange-traded derivatives. The fair values of exchange-traded derivatives are typically derived from the observable exchange prices and/or observable inputs. Fair values for OTC derivatives are determined on the basis of internally developed proprietary models using various inputs. The inputs include those characteristics of the derivative that have a bearing on the economics of the instrument.

The determination of the fair value of many derivatives involves only a limited degree of subjectivity because the required inputs are observable in the marketplace. Other, more complex derivatives, use unobservable inputs. Specific unobservable inputs include long-dated volatility assumptions on OTC option transactions and recovery rate assumptions for credit derivative transactions. Uncertainty of pricing inputs and liquidity are also considered as part of the valuation process.

For further information on the fair value of derivatives as of March 31, 2007 and December 31, 2006, see note 6.

Private equity and other long-term investments

Private equity and other long-term investments include direct investments and investments in partnerships that make private equity and related investments in various portfolio companies and funds. Private equity investments and other long-term investments consist of both publicly traded securities and private securities. Publicly traded investments that are restricted or that are not quoted in active markets are valued based upon quotes with appropriate adjustments for trading restrictions. Private securities are valued taking into account a number of factors, such as the most recent round of financing involving unrelated new investors, earnings multiple analyses using comparable companies or discounted cash flow analysis.

Internally-managed funds include partnerships and related direct investments for which the Company acts as the fund’s adviser and makes investment decisions. Internally-managed funds principally invest in private securities and, to a lesser extent, publicly traded securities and fund of funds partnerships. The fair value of investments in internally-managed fund of funds partnerships is based on the valuation received from the underlying fund manager and is reviewed by the Company. The fair value of investments in other internally managed funds is based on the Company’s

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

2. Fair Value of Financial Instruments (Continued)

valuation. Balances reported in internally-managed funds also include amounts relating to the consolidation of private equity funds under FIN 46(R). A substantial portion of the investments held by the private equity funds consolidated primarily under FIN 46(R) are reflected in level 3. Funds managed by third parties include investments in funds managed by an external fund manager. The fair value of these funds is based on the valuation received from the general partner of the fund and is reviewed by the Company.

Fair Value Option

Upon adoption of SFAS 159 the Company elected fair value for certain of its financial statement captions as follows:

Repurchase agreement and resale agreement transactions: the Company has elected to account for certain repurchase and resale agreements held at January 1, 2007 and those entered into after January 1, 2007 at fair value. These activities are managed on a fair value basis, thus fair value accounting for these instruments is deemed more appropriate for reporting purposes.

Long-term debt: The Company’s long-term debt includes debt issuances managed by the Treasury Group. The Company actively manages the interest rate risk on these instruments with derivatives; in particular fixed-rate debt is hedged with receive-fixed, pay-floating interest rate swaps. The Company has availed itself of the simplification objective of the fair value option to elect fair value for this fixed-rate debt and will no longer be required to maintain hedge documentation to achieve a similar financial statement outcome.

Loans. The Company has elected to account for substantially all commercial mortgage whole loans and originated residential whole loans entered into after January 1, 2007 at fair value. These activities are managed on a fair value basis, thus fair value accounting is deemed more appropriate for reporting purposes. Additionally, recognition on a fair value basis eliminates the mismatch that currently exists because of the economic hedging the Company employs to manage these loans. Commercial mortgage whole loans and originated residential whole loans entered into prior to January 1, 2007 continue to be carried at the lower of cost or fair value.

Other assets and other liabilities. Other assets include assets of VIEs and mortgage securitizations that did not meet the criteria for sale treatment under SFAS 140. Such assets existing as of January 1, 2007 did not elect the fair value due to the operational effort to change accounting for already recorded items. Transactions entered into after January 1, 2007 elected the fair value option.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

2. Fair Value of Financial Instruments (Continued)

Difference between carrying amount and fair value of financial instruments

Following is a tabular presentation of the cumulative effect adjustment to opening retained earnings.

	Carrying value as of December 31, 2006		Fair value as of January 1, 2007		Cumulative effect adjustment to opening R/E
(in millions)
Resale agreements and securities borrowed transactions	$	73,713	$	73,671	$	(42	)
Repurchase agreements and securities lending transactions	73,861		73,858		3
Long-term debt	24,168		24,633		(465		)
Total					$	(504	)

Gains/losses on financial instruments where fair value was elected

March 31, 2007	Total gains/losses			Of which related to interest income		Of which related to interest expense			Of which related to principal transactions net
(in millions)
Resale agreements and securities borrowed transactions	$	2,200		$	2,166	$	―		$	34
Cash instruments	94				113		―			(19	)
Private equity	10			―		―			10
Repurchase agreements and securities lending transactions	(2,064		)	―		(2,061		)	(3		)
Long-term debt	(371		)	―		(334		)	(37		)

Interest income and expense are recorded within the consolidated statements of income depending on the nature of the instrument and related market convention. When interest is included as a component of the change in the instrument’s fair value, interest is included in principal transactions-net. Otherwise, it is included within interest income or expense.

Gains/losses on financial instruments with fair value options elected and relation to own credit risk

March 31, 2007	Total gains/ losses			Of which related to credit risk		Of which not related to credit risk
Financial instruments/ liabilities (in millions)
Cash instruments	$	94		$	9	$	85
Long-term debt	(371		)	21		(392		)

The impacts of changes in own credit risk on liabilities presented in the table above have been calculated as the difference between the fair value of those instruments as of the reporting date and the theoretical fair values of those instruments calculated by using the yield curve prevailing at the end of the reporting period, adjusted up or down for changes in our own credit spreads from the transition date to the reporting date.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

2. Fair Value of Financial Instruments (Continued)

Difference between the fair value and the aggregate unpaid principal balances

March 31, 2007	Of which at fair value		Aggregate unpaid principal		Difference between aggregate fair value and unpaid principal
Financial instruments (in millions)
Resale agreements and securities-borrowed transactions	$	74,210	$	74,156	$	54
Cash instruments (assets)	10,262			10,299		(37	)
Other assets	2,944			2,904		40
Other liabilities	2,094			2,064		30
Repurchase agreements and securities-lending transactions	73,446		73,423		23
Long-term debt	24,670		24,382		288

3. Related Party Transactions

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

The following table sets forth the Company’s related party assets and liabilities as of March 31, 2007 and December 31, 2006:

	March 31, 2007		December 31, 2006
ASSETS	(In millions)
Securities purchased under agreements to resell	$	3,480		$	5,152
Securities borrowed	8,665			5,474
Receivables from brokers, dealers and others	1,192			2,476
Derivatives contracts	2,320			2,398
Net deferred tax asset	1,317			1,488
Loans receivable from parent and affiliates	45,745			31,811
Total assets	$	62,719		$	48,799
LIABILITIES
Short-term borrowings	$	31,144		$	17,990
Securities sold under agreements to repurchase		37,496			29,219
Securities loaned	60,759			54,841
Payables to customers	475			252
Payables to brokers, dealers and others	5,889			4,099
Derivatives contracts	2,116			2,208
Obligation to return securities received as collateral	6,594			1,945
Taxes payable (included in Other liabilities	278			309
Intercompany payables (included in Other liabilities	1,883			854
Total liabilities	$	146,634		$	111,717

Included in the consolidated statements of income are revenues and expenses resulting from various securities trading and financing activities with certain affiliates, as well as fees for administrative services performed by the Company

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

3. Related Party Transactions (Continued)

under the terms of various agreements. The Company earns commission revenues and incurs commission expenses during the normal course of business for securities transactions conducted with affiliates. Other operating expenses include affiliate service fees that are treated as a reduction in other operating expenses in the consolidated statements of income. These fees include compensation and benefits expense relating to business activities conducted by Company employees on behalf of CSG affiliates outside the Company.

The following table sets forth the Company’s related party revenues and expenses for the three months ended March 31, 2007 and 2006:

	For the three months ended March 31,
	2007			2006
	(In millions)

Principal transactions-net (derivatives contracts)	$	1,163		$	187
Commissions and fees (expense)	(12		)	(22		)
Interest and dividend revenues	671			458
Interest expense	(1,420		)	(753		)
Total net revenues	$	402		$	(130	)

Other operating expenses (credits)	$	(34	)	$	(51	)
Provision for income taxes		219			137
Total expenses	$	185		$	86

The Company manages certain private equity funds of funds, hedge funds of funds and VIEs that issue CDOs of CS Alternative Capital, Inc., an indirect wholly owned subsidiary of CS Holdings. As of March 31, 2007, the aggregate assets under management in these funds and VIEs were approximately $27.8 billion. CS Alternative Capital, Inc. reimburses the Company for all expenses incurred by the Company in connection with managing these assets. The Company treats these reimbursements as a reduction in other operating expenses in the consolidated statements of income.

The Share Plan provides for the grant of equity-based awards to Company employees based on CSG shares pursuant to which employees of the Company may be granted, as compensation, shares or other equity-based awards as compensation for services performed. CS Holdings purchases shares indirectly from CSG to satisfy these awards, but CS Holdings does not require reimbursement from the Company; therefore, amounts associated with these awards are considered a capital contribution to the Company and credited to paid-in-capital. Amounts contributed by CS Holdings relating to equity-based awards for the three months ended March 31, 2007 and 2006 were $315 million and $314 million, respectively, including tax effects.

Certain of the Company’s directors, officers and employees and those of its affiliates and their subsidiaries maintain margin accounts with the Company’s principal broker-dealer subsidiary, Credit Suisse Securities (USA) LLC (“CS Securities”) and other affiliated broker-dealers in the ordinary course of business. In addition, certain of such directors, officers and employees have investments or commitments to invest in various private equity funds. The Company makes loans to directors and executive officers on the same terms as are generally available to third parties or otherwise pursuant to widely available employee benefit plans. CS Securities and other affiliated broker-dealers, from time to time and in the ordinary course of business, enter into, as principal, transactions involving the purchase or sale of securities from or to such directors, officers and employees and members of their immediate families. See Note 15 for more information.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

3. Related Party Transactions (Continued)

The Company is included in the consolidated federal income tax return and certain state and local income tax returns filed by CS Holdings. See Note 16 for more information.

4. Transfers and Servicing of Financial Assets

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

The following table sets forth the assets pledged by the Company and the collateral received by the Company as of March 31, 2007 and December 31, 2006:

	March 31, 2007		December 31, 2006
	(In billions)
Fair value of the financial instruments pledged and assigned as collateral by the Company	$	113.3	$	103.1
of which was encumbered		84.0		70.2

Fair value of the collateral received by the Company with the right to sell or repledge		233.2		198.5
of which was sold or repledged		212.5		188.1

Securitization Activities

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

As of March 31, 2007 and December 31, 2006, the Company held encumbered mortgage loans totaling $2.9 billion and $152 million, respectively, related to securitization transactions that did not qualify for sale accounting treatment under paragraph 40b of SFAS 140. Prior to securitization, such encumbered loans were accounted for in financial instruments owned; however, due to the transfer of legal title in the form of a pledge in the securitization, these loans have been reclassified to Other assets and deferred amounts in the consolidated statement of financial condition. Cash amounts received in payment upon transfer for such loans are accounted for as secured borrowings and are recorded in Other liabilities in the consolidated statement of financial condition. Also included in Other assets and deferred amounts and Other liabilities as of March 31, 2007 and December 31, 2006 was $3.5 billion and $3.8 billion, respectively, in VIEs that were consolidated under FSP FIN 46(R)-6 related to securitization transactions that did not qualify for sale accounting treatment under SFAS 140, and were similarly encumbered.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

4. Transfers and Servicing of Financial Assets (Continued)

The following table presents the proceeds, cash flows and gains related to the securitization of commercial mortgage loans, residential mortgage loans and other asset-backed loans for the three months ended March 31, 2007 and 2006. The gain on securitizations includes underwriting revenues, deferred origination fees and expenses, gains or losses on the sale of the collateral to the QSPE or VIE and gains or losses on the sale of the newly issued securities to third parties but excludes net interest revenues earned on assets prior to securitization.

	Commercial mortgage loans			Residential mortgage loansl			Other asset-backed loans(3)l
For the Three months ended March 31, 2007
Proceeds from securitizations	$	3,684		$	8,226		$	712
Cash flows received on retained interests	23				180			(3	)
Gain on securitizations	109		⁽¹⁾		68	⁽²⁾		7	⁽²⁾

For the Three months ended March 31, 2006
Proceeds from securitizations	$ 2,267			$ 6,494			$ 1,220
Cash flows received on retained interests	--			253			1
Gain on securitizations	$ 63		⁽¹⁾	$ 10		⁽²⁾	$ 16		⁽²⁾

(1)

For loans that the Company did not elect to account for at fair value, the gains or losses on the sale of the collateral to the QSPE is the difference between the carrying value on the day prior to the securitization date (the lower of amortized cost or fair value) and the selling price of the mortgage whole loans to the QSPE on the securitization pricing date. For loans that the Company did elect to account for at fair value, the gains or losses on the sale of the collateral to the QSPE is the difference between the fair value on the day prior to the securitization pricing date and the selling price of the mortgage whole loans to the QSPE on the securitization pricing date.

(2)	The gains or losses on the sale of the collateral to the QSPE is the difference between the fair value on the day prior to the securitization pricing date and the selling price of the mortgage whole loans to the QSPE on the securitization pricing date.

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

The Company may retain interests in these securitized assets in connection with its underwriting and market-making activities. The Company’s primary exposure in its securitization activities is limited to its retained interests. Retained interests in securitized financial assets are included at fair value in corporate debt in financial instruments owned in the consolidated statements of financial condition. Any changes in the fair value of these retained interests are recognized in the consolidated statements of income. The fair values of retained interests are determined using market quotes where available or the present value of estimated future cash flows valuation techniques that incorporate assumptions that market place participants customarily use in their estimates of values. As of March 31, 2007 and December 31, 2006, the fair value of the interests retained by the Company was $3.4 billion and $3.7 billion, respectively.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

4. Transfers and Servicing of Financial Assets (Continued)

Key economic assumptions used at the date of securitization in measuring the fair value of the retained interests resulting from securitizations completed during the three months ended March 31, 2007 were as follows:

	For the three months ended March 31, 2007
	Commercial mortgage loans⁽¹⁾	Residential mortgage loans	Other asset-backed
Weighted-average life (in years)	1.6	9.5	N/A
Prepayment rate (in rate per annum)⁽²⁾	N/A	1.3%-30.0%	N/A
Cash flow discount rate (in rate per annum) ⁽³⁾	5.1%-6.3%	4.9%-24.9%	N/A
Expected credit losses (in rate per annum)	0.6%-1.8%	0.0%-20.%	N/A

The following table sets forth the fair value of retained interests from securitizations as of March 31, 2007, key economic assumptions used to determine the fair value and the sensitivity of the fair value to immediate adverse changes in those assumptions:

	As of March 31, 2007
	Commercial mortgage loans⁽¹⁾		Residential mortgage loans		Other asset-backed
	(Dollars in Millions)
Fair value of retained interests	$	240	$	3,088	$	28
Weighted-average life (in years)		3.7		8.2		N/A
Prepayment rate (in rate per annum) ⁽²⁾		N/A		10.0%-41.5%		25.0%
Impact on fair value of 10% adverse change	$	--	$	(14)	$	--
Impact on fair value of 20% adverse change	$	--	$	(27)	$	--
Cash flow discount rate (in rate per annum) ⁽³⁾		7.7%		6.1%		N/A
Impact on fair value of 10% adverse change	$	(2)	$	(68)	$	--
Impact on fair value of 20% adverse change	$	(4)	$	(137)	$	--
Expected credit losses (in rate per annum)		3.1%		0.5%		N/A
Impact on fair value of 10% adverse change	$	--	$	(15)	$	--
Impact on fair value of 20% adverse change	$	(1)	$	(30)	$	--

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

(2)	The Company utilizes the constant prepayment rate assumptions.

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

These sensitivities are hypothetical and do not reflect the benefits of hedging activities. Changes in fair value based on a 10% or 20% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the retained interests is calculated without changing any other assumption. In practice, changes in one assumption may result in changes in other assumptions (for example, increases in market interest rates may result in lower prepayments and increased credit losses), which may magnify or counteract the sensitivities.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

4. Transfers and Servicing of Financial Assets (Continued)

Variable Interest Entities

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

The Company has consolidated CDO VIEs and other VIEs for which it is the primary beneficiary. As of March 31, 2007 and December 31, 2006, the Company recorded $2.7 billion and $296 million, respectively, representing the carrying amount of the consolidated assets of these CDO VIEs and other VIEs that are collateral for the VIE obligations. The increase in the total assets consolidated was primarily related to securitization transactions that did not qualify for sale accounting treatment under SFAS 140 and were consolidated under FSP FIN 46(R)-6. The beneficial interests of these consolidated CDO VIEs and other VIEs are payable solely from the cash flows of the related collateral, and the creditors of these CDO VIEs and other VIEs do not have recourse to the Company in the event of default.

The Company holds significant debt and equity interests in CDO VIEs that are not consolidated because the Company is not the primary beneficiary. The total assets in these CDO VIEs as of March 31, 2007 and December 31, 2006 were $7.8 billion and $7.0 billion, respectively. The Company’s maximum exposure to loss on significant debt and equity interests in CDO VIEs as of March 31, 2007 and December 31, 2006 was $247 million and $158 million, respectively, which was the amount carried at fair value in financial instruments owned.

In the normal course of its private equity activities, the Company is typically the general partner and investment adviser to private equity funds. Limited partners of these funds typically have recourse to the fund’s assets but generally have no recourse to the Company’s assets. The Company consolidates certain private equity funds that are managed by the Company. A portion of these private equity funds are not VIEs but are consolidated based on the Company’s control of the voting interest of the fund. See Note 1 for more information. The following table presents the impact on the consolidated statements of financial condition of the Company as of March 31, 2007 and December 31, 2006 as a result of consolidating certain private equity funds:

	March 31, 2007		December 31, 2006
	(In millions)
Private equity and other long-term investments	$	10,892	$	10,193
All other assets, net		792	728
Total assets	$	11,684	$	10,921

Minority interests (included in other liabilities)	$	10,765	$	10,192
All other liabilities, net (excluding minority interests)		919		729
Total liabilities	$	11,684	$	10,921

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

4. Transfers and Servicing of Financial Assets (Continued)

The following table presents the impact on the consolidated statements of income of the Company for the three months ended March 31, 2007 and 2006 as a result of consolidating certain private equity funds:

	For the three months ended March 31,
	2007		2006
	(In millions)
Net revenues	$	756	$	941
Expenses	32		12
Minority interests	$	724	$	929

5. Private Equity and Other Long-Term Investments

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

As of March 31, 2007 and December 31, 2006, the Company had investments in private equity and other long-term investments of $12.7 billion and $11.6 billion, respectively, including $10.9 billion and $10.2 billion, respectively, in private equity funds the Company is required to consolidate. Changes in net unrealized appreciation/depreciation arising from changes in fair value and the gain or loss realized upon sale are reflected in principal transactions-net in the consolidated statements of income. See Notes 1 and 4 for more information. The original cost of these investments, excluding the consolidated private equity investments, was $2.0 billion as of March 31, 2007 and $1.7 billion as of December 31, 2006. As of March 31, 2007, the Company had commitments to invest up to an additional $1.1 billion in non-consolidated private equity funds and $984 million in consolidated private equity funds. The Company's consolidated private equity funds had commitments to invest approximately $1.3 billion in non-consolidated private equity funds and other investments which are expected to be met by capital calls to third party minority interest limited partners of such funds and by the Company as an investor in these consolidated private equity funds.

The Company’s subsidiaries manage many private equity partnerships (the “Funds”). When the investment performance on Credit Suisse-managed Funds exceeds specific thresholds, the Company and certain other partners, most of which are current and former employees of the Company (collectively the “GPs”), may be entitled to receive a carried interest distribution under the governing documents of the Funds. Carried interest distributions are based on the cumulative investment performance of each Fund at the time the distribution is made. As a result, the Company may be obligated to return to investors in the Funds all or a portion of the carried interest distributed to the GPs. The amount of such contingent obligations is based upon the performance of the Funds but cannot exceed the amount of carried interest received by the GPs. As of March 31, 2007 and December 31, 2006, the maximum amount of such contingent obligations was $481 million and $524 million, respectively, assuming the Funds’ remaining investments were worthless. Assuming the Funds’ remaining investments were sold at their current carrying values as of March 31, 2007 and December 31, 2006, the contingent obligations would have been $6 million and $21 million, respectively. As of March 31, 2007 and December 31, 2006, the Company withheld cash from prior distributions to the GPs and recorded corresponding liabilities of $151 million and $147 million, respectively, in connection with the Company’s guarantee to return prior carried interest distributions to third party investors in the Funds.

In addition, pursuant to certain contractual arrangements, the Company is obligated to make cash payments to certain investors in certain Funds if specified performance thresholds are not met. As of March 31, 2007 and December

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

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

31, 2006, the maximum amount of such contingent obligations was $60 and $55 million, respectively, assuming the Funds’ remaining investments were worthless. Assuming the Funds’ remaining investments were sold at their current carrying values as of March 31, 2007 and December 31, 2006, the contingent obligation would have been $2 million and $1 million, respectively.

6. Derivatives Contracts

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

Non-trading Derivatives

The Company hedges its fixed rate debt by using interest rate swaps. Prior to the adoption of SFAS 159, these swaps were designated for hedge accounting treatment under SFAS 133. For designated fair value hedges, the changes in fair value of both the hedging instrument and the underlying debt were included in principal transactions-net and the interest flows were included in net interest and dividends in the consolidated statements of income. In connection with the adoption of SFAS 159, the Company has availed itself of the simplification objective of the fair value option to elect fair value for this fixed-rate debt and is no longer required to maintain hedge documentation to achieve a similar financial statement outcome.

Prior to the adoption of SFAS 159, the Company assessed the effectiveness of hedging relationships both prospectively and retrospectively. The prospective assessment was made both at the inception of a hedging relationship and on an ongoing basis and required the Company to justify its expectation that the relationship will be highly effective over future periods. The retrospective assessment was also performed on an ongoing basis and required the Company to determine whether or not the hedging relationship has actually been effective. If the Company concluded, through a retrospective evaluation that hedge accounting was appropriate for the current period then it measured the amount of hedge ineffectiveness to be recognized in earnings.

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

For the three months ended March 31, 2006, the ineffective component of the fair value hedges was a pre-tax gain of $9 million.

Other derivatives used to hedge the Company’s long-term borrowings that were not designated for hedge accounting treatment under SFAS 133 were carried at fair value with changes in value and interest flows included in principal transactions-net in the consolidated statements of income. For the three months ended March 31, 2006, the Company recognized a pre-tax loss of $47 million related to these hedges.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

6. Derivatives Contracts (Continued)

Prior to the adoption of SFAS 159 the Company entered into total return swaps on certain loans that were originated by an affiliate and purchased by the Company. The loans will be held until the total return swaps are terminated. The loans were accounted for as held for sale and were recorded in other financial instruments owned in the consolidated statement of financial condition. The total return swaps were designated and qualified for cash flow hedge accounting treatment in accordance with SFAS 133. A cash flow hedge is a hedging relationship where the variability of the hedged item’s cash flows attributable to a particular risk is offset by the cash flows of the hedging instrument. The strategy of these hedges is to mitigate the variability of the cash flows that will be received upon sale of the loan. The cash flow hedges were highly effective and the total decrease in the fair value of the swaps of $5 million net of taxes was recorded in accumulated other comprehensive loss in the consolidated statement of financial condition as of December 31, 2006. During the three months ended March 31, 2007, in connection with the adoption of SFAS 159, the Company reversed the $5 million which was previously recorded in accumulated other comprehensive loss. Increases in the value of the total return swaps are recorded in principal transactions–net in the consolidated statement of income which offsets the fair value adjustment made on the loans for the hedged risk.

Trading Derivatives

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

Options

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

The Company also purchases options to meet customer needs, for trading purposes or for hedging purposes. With purchased options, the Company gets the right, for a fee, to buy or sell the underlying instrument at a fixed price on or before a specified date. The underlying instruments for these options include fixed income securities, equities, foreign currencies, commodity and interest rate instruments or indices. The counterparties to OTC option contracts are reviewed to determine whether they are creditworthy.

Forwards and Futures

In the normal course of business, the Company’s customer and trading activities include executing, settling and financing various securities and financial instrument transactions. To execute these transactions, the Company purchases and sells (including “short sales”) securities, and purchases and sells forward contracts primarily for U.S. Government and agency securities, corporate debt, mortgage-backed securities, commodities and foreign currencies. See Note 1 for more information. In addition, the Company enters into futures contracts on equity-based indices and other financial instruments, as well as options on futures contracts. The Company also enters into variable prepaid forward (“VPFs”) transactions which meet the definition of a derivative and are classified as forward contracts.

Because forward contracts are subject to the financial reliability of the counterparty, the Company is exposed to credit risk. To mitigate this credit risk, the Company limits transactions with specific counterparties, reviews credit limits, requires certain customers and counterparties to maintain margin collateral and adheres to internally established

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

6. Derivatives Contracts (Continued)

credit extension policies.

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

VPFs are a form of OTC hybrid transaction pursuant to which the Company purchases a variable number of shares of common stock from a customer on a forward basis. At inception, the Company pays the customer a dollar amount based on the underlying value of the common stock. At the maturity of the transaction, the Company receives a variable number of shares (or an amount in cash equal to the value of such variable number of shares, with a maximum share cap) from the customer based on the market price of the shares at maturity. VPFs allow customers to monetize their stock position and provide market risk protection through an equity collar that, among other things, protects the customer against decreases in the value of the underlying common stock. The VPFs are generally long-dated and have maturities of three to ten years. In accordance with SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS 149”), all VPFs entered into prior to July 1, 2003 are included in other financial instruments owned in the consolidated statements of financial condition. All of the Company’s VPFs entered into after June 30, 2003 meet the definition of a derivative and are reported as derivative contracts in the consolidated statements of financial condition. All VPFs are carried at fair value.

Swaps

The Company’s swap agreements consist primarily of interest rate, equity, commodity, credit default and total return swaps. Interest rate swaps are contractual agreements to exchange interest rate payments based on agreed notional amounts and maturity. Equity swaps are contractual agreements to receive the appreciation or depreciation in value based on a specific strike price on an equity instrument in exchange for paying another rate, which is usually based on index or interest rate movements. Commodity swaps are contractual agreements to exchange payments based on the price of a specific commodity. Credit default swaps are contractual agreements in which one counterparty pays a periodic fee in return for a contingent payment by the other counterparty following a credit event of a reference entity. A credit event is commonly defined as bankruptcy, insolvency, receivership, material adverse restructuring of debt, or failure to meet payment obligations when due. Total return swaps are contractual agreements where one counterparty agrees to pay the other counterparty the total economics of a defined underlying asset, in return for receiving a stream of floating rate cash flows such as the London Interbank Offered Rate (“LIBOR”). Swaps are reported at fair value.

Quantitative Disclosures for All Derivatives

The fair values of all derivatives contracts outstanding as of March 31, 2007 and 2006 were as follows:

	March 31, 2007				December 31, 2006
	Assets		Liabilities		Assets		Liabilities
	(In millions)

Options	$	1,661	$	1,924	$	1,859	$	1,835
Forward contracts	6,024		1,205		5,740		1,790
Swaps	2,259		2,039		2,748		2,911
Total derivatives	$	9,944	$	5,168	$	10,347	$	6,536

These assets and liabilities are included as derivatives contracts in financial instruments owned and sold not yet purchased, respectively, in the consolidated statements of financial condition. Assets and liabilities related to futures contracts are included in receivables from brokers, dealers and others and payables to brokers, dealers and others,

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

6. Derivatives Contracts (Continued)

respectively, in the consolidated statements of financial condition.

7. Goodwill and Identifiable Intangible Assets

The Company allocates goodwill to its reporting units. Goodwill impairment testing showed no impairment and had no effect on the Company’s consolidated financial condition or results of operations as of March 31, 2007 and 2006. There have been no events or circumstances occurring subsequent to these impairment tests that would more likely than not have resulted in the fair values of the Company’s reporting units being below the carrying values. As of March 31, 2007 and December 31, 2006, the Company had $629 million and $616 million, respectively, of goodwill.

As of March 31, 2007 and December 31, 2006, the Company had intangible assets of $214 million and $197 million, respectively, net of accumulated amortization of $32 million and $31 million, respectively, which are included in other assets and deferred amounts in the consolidated statements of financial condition.

Intangible assets included $19 million and $21 million of identifiable intangible assets as of March 31, 2007 and December 31, 2006, respectively. Identifiable intangible assets consisted primarily of client relationships, which are amortized over useful lives ranging from 3 to 21 years. Intangible amortization expense for the three months ended March 31, 2007 and 2006 was $1 million and $2 million, respectively.

Intangible assets included $28 million of indefinite-lived intangible assets as of March 31, 2007 and December 31, 2006. Indefinite-lived intangible assets consisted primarily of trademarks, which are not amortized over a useful life but rather are reviewed annually for impairment.

Intangible assets included $167 million and $148 million of mortgage servicing rights as of March 31, 2007 and December 31, 2006, respectively. Mortgage servicing rights are recorded at fair value with changes in fair value reflected in principal transaction-net in the consolidated statements of income.

8. Borrowings

Short-term borrowings are generally demand obligations with interest approximating the Federal Funds rate, LIBOR or other money market indices. Such borrowings are generally used to facilitate the securities settlement process, finance financial instruments owned and finance securities purchased by customers on margin. As of March 31, 2007 and December 31, 2006, there were no short-term borrowings secured by Company-owned securities.

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

	Short-term borrowings				Weighted average interest rates
	As of March 31, 2007		As of December 31, 2006		As of March 31, 2007		As of December 31, 2006
	(In millions)

Bank loans, including loans from affiliates⁽¹⁾	$	32,134	$	18,888	5.82	%	5.59	%
Commercial paper		1,733		1,382	5.24	%	5.25	%
Total commercial paper and short-term borrowings	$	33,867	$	20,270

(1)	Includes $31.1 billion and $18.0 billion in loans from affiliates as of March 31, 2007 and December 31, 2006, respectively.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

8. Borrowings (Continued)

The Company has a commercial paper program exempt from registration under the Securities Act that allows the Company to issue up to $5.0 billion in commercial paper. As of March 31, 2007 and December 31, 2006, $1.7 billion and $1.4 billion, respectively, of commercial paper was outstanding under this program.

The following table sets forth the Company’s long-term borrowings as of March 31, 2007 and December 31, 2006:

	March 31, 2007		December 31, 2006
	(In millions)
Senior notes 3.9%-7.1%, due various dates through 2032	$	40,296		$	39,802
Medium-term notes 4.3%-8.8%, due various dates through 2032		2,550			2,890
Structured borrowings 5.3% -19.0%, due various dates through 2015		926			826
Other long-term debt 5.5%-9.8%, due various dates through 2052⁽¹⁾		2,193			--
Total long-term borrowings	$	45,965		$	43,518
Current maturities of long-term borrowings	$	5,115		$	3,240

(1)	Represents the long term borrowings in those CDO VIEs consolidated under FIN 46.

As of March 31, 2007, long-term borrowings included upward fair value adjustments of approximately $540 million associated with fair value under SFAS 159. As of December 31, 2006, long-term borrowings included upward fair value adjustments of approximately $30 million associated with fair value hedges under SFAS 133. As of March 31, 2007 and December 31, 2006, the Company had entered into interest rate swaps, with a notional amount of $24.7 billion on the Company’s long-term borrowings. See Note 6 for more information.

The following table sets forth scheduled maturities of all long-term borrowings as of March 31, 2007:

	March 31, 2007
	(In millions)
2008	$		5,115
2009	7,646
2010	8,633
2011	4,368
2012		8,358
2013-2052		11,845
Total	$	45,965

The following table sets forth scheduled maturities of the current portion of long-term borrowings as of March 31, 2007:

	Three Months Ending
	(In millions)
June 30, 2007	$	2,405
September 30, 2007	28
December 31, 2007	453
March 31, 2008	2,229
Total	$	5,115

On March 26, 2007, Credit Suisse and CSG issued full, unconditional and several guarantees, on a senior and subordinated basis, respectively, of the Company’s outstanding SEC-registered debt securities. In accordance with the

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

8. Borrowings (Continued)

guarantee, if the Company fails to make timely payment under the agreements governing such debt securities, the holders of the debt securities may demand payment from either Credit Suisse or CSG, without first proceeding against the Company.

Pursuant to the centralization of funding at Credit Suisse, the committed secured revolving credit facilities between various third party banks and CS Securities will not be renewed. As of May 14, 2007, CS Securities maintained with third parties three 364-day committed secured revolving credit facilities totaling $1.2 billion, with one facility for $500 million maturing in July 2007, one facility for $200 million maturing in August 2007 and one facility for $500 million maturing in November 2007. These facilities require CS Securities to pledge unencumbered marketable securities to secure any borrowings. Borrowings under each facility would bear interest at short-term rates related to either the Federal Funds rate or LIBOR and can be used for general corporate purposes. The facilities contain customary covenants that the Company believes will not impair its ability to obtain funding. As of March 31, 2007, no borrowings were outstanding under any of the facilities.

2007 Financings

For the three months ended March 31, 2007, the Company issued $95 million in structured notes and repaid approximately $352 million of medium-term notes and $13 million of structured notes.

2006 Financings

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

9. Leases and Commitments

The following table sets forth the Company’s minimum operating lease commitments as of March 31, 2007:

	Twelve Months Ending March 31,
	(In millions)
2008	$	153
2009	146
2010	143
2011	138
2012	132
2013-2025	843
Total⁽¹⁾	$	1,555

(1)	Excludes sublease revenue of $261 million and executory costs such as insurance, maintenance and taxes of $519 million. Rent expense was $37 million for the three months ended March 31, 2007.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

9. Leases and Commitments (Continued)

The following table sets forth the Company’s commitments, including the current portion as of March 31, 2007:

	Commitment Expiration Per Period
	Less than 1 year		1-3 years		4-5 years		Over 5 years		Total commitments
	(In Millions)
Standby resale agreements⁽¹⁾	$	125	$	--	$	--	$	414	$	539
Private equity⁽²⁾	28		37		37		956			1,058
Forward agreements⁽³⁾	3,952		1,175		100		310			5,537
Unfunded lending commitments⁽⁴⁾	62		146		155		473			836
Unfunded warehousing commitments⁽⁵⁾	1,141		--		--		--			1,141
Total commitments	$	5,308	$	1,358	$	292	$	2,153	$	9,111

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

(2)

As of March 31, 2007, the Company had commitments to invest up to an additional $984 million in consolidated private equity funds. The Company's consolidated private equity funds had commitments to invest approximately $1.3 billion in non-consolidated private equity funds and other investments which are expected to be met by capital calls to third party minority interest limited partners of such funds and by the Company as an investor in these consolidated private equity funds.

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

(4)	The Company enters into commitments to extend credit in connection with various activities.

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

Excluded from the table above are certain commitments to originate and purchase mortgage whole loans and purchase certain other loans that qualify as derivatives. These commitments are reflected in derivatives contracts in the consolidated statements of financial condition. For more information on the Company’s derivatives contracts see Note 6.

As of March 31, 2007, the Company used $1.1 billion in outstanding standby letters of credit to satisfy counterparty collateral requirements.

The Company had no material capital lease obligations as of March 31, 2007. For information about certain of the Company’s additional commitments, see Notes 5 and 10.

10. Guarantees

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

The guarantees covered by FIN 45 may require the Company to make payments to the guaranteed party based on changes related to an asset, a liability or an equity security of the guaranteed party. The Company may also be contingently required to make payments to the guaranteed party based on another entity’s failure to perform under an

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

10. Guarantees (Continued)

agreement, or the Company may have an indirect guarantee of the indebtedness of others, even though the payment to the guaranteed party may not be based on changes related to an asset, liability or equity security of the guaranteed party.

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

The following table sets forth the maximum quantifiable contingent liabilities and carrying amounts associated with guarantees covered by FIN 45 as of March 31, 2007 by maturity.

	Amount of Guarantee Expiration Per Period
	Less than 1 year		1-3 years		4-5 years		Over 5 years		Total guarantees		Carrying amounts		Collateral
	(in millions)
Credit guarantees	$	3	$	27	$	43	$	460	$	533	$	6	$	389
Performance guarantees	30		339		--		26		395		7		--
Derivatives	7,818		3,743		2,225		9,496		23,282		1,054		--
Related party guarantees	--		--		--		169		169		--		--
Total guarantees	$	7,851	$	4,109	$	2,268	$	10,151	$	24,379	$	1,067	$	389

Credit Guarantees

In the ordinary course of business the Company enters into contracts that would require it, as the guarantor, to make payments to the guaranteed party if a third party fails to pay under a credit obligation. These credit guarantees are described below.

As part of the Company’s residential mortgage activities, the Company previously sold to the Federal National Mortgage Association (“FNMA”) certain residential mortgages that it had purchased and agreed to bear a percentage of any losses should the borrowers fail to perform. In accordance with FIN 45, the Company did not recognize a liability for these guarantees because they were issued prior to December 31, 2002 and have not been modified.

As part of the Company’s commercial mortgage activities, the Company sells to FNMA certain commercial mortgages that it has originated and agrees to bear a percentage of the losses should the borrowers fail to perform.

Additionally, the Company provides guarantees in the form of standby letters of credit, which represent obligations to make payments to third parties if the counterparties fail to fulfill their obligations under a borrowing arrangement or other contractual obligation.

Performance Guarantees

In the ordinary course of business, the Company enters into contracts that would require it, as the guarantor, to make payments to the guaranteed party based on a third party’s failure to perform under an agreement. These performance guarantees are described below.

As part of the Company’s residential mortgage and asset-backed securitization activities, the Company at times guarantees the collection by the servicer and remittance to the securitization trust of prepayment penalties.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

10. Guarantees (Continued)

In connection with the Company’s tax credit warehouse business, the Company issues minimum performance guarantees to the investors in these funds.

The Company also provides guarantees in the form of standby letters of credit, which represent obligations to make payments to third parties if the counterparties fail to perform under a non-financial obligation.

In addition, the Company at times guarantees any increases in servicing fees in connection with the replacement of the existing servicer that would otherwise be borne by the securitization trust. The Company did not record a liability because it has determined that is it not possible to estimate the fair value and the maximum amount of its obligations under these guarantees as of March 31, 2007.

Derivatives

In the ordinary course of business, the Company enters into OTC contracts that meet the definition of a guarantee under FIN 45. Included in this category are certain written OTC put option contracts, pursuant to which the counterparty can potentially force the Company to acquire the underlying financial instrument or require the Company to make a cash payment in an amount equal to the decline in value of the financial instrument underlying the OTC put option. Also included in this category are credit derivatives that may subject the Company to credit spread or issuer default risk because the change in credit spreads or the credit quality of the underlying financial instrument may obligate the Company to make a payment. The Company seeks to manage these OTC derivatives exposures by engaging in various hedging strategies to reduce its exposure.

Derivative contracts that may be cash settled, and which the counterparties were not required to hold the underlying instruments at the inception of the contracts, are not considered guarantees under FIN 45.

As of March 31, 2007, the Company recorded derivatives that met the definition of a guarantee under FIN 45. These are reflected as derivatives contracts in the consolidated statements of financial condition. These amounts were determined by using notional values and represent the obligations of the Company in the event that all the underlying financial instruments are worthless, the likelihood of which the Company believes is remote. For more information on derivatives, see Note 6.

Related Party Guarantees

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

The Company issues guarantees to customers with respect to certain obligations of its affiliates in the ordinary course of business, including, but not limited to, certain derivatives transactions. Failure to perform by an affiliate would require the Company to perform under the guarantee. Excluded from the maximum contingent liability are certain guarantees for which an estimate cannot be made because the exposure is unlimited and therefore impossible to estimate. While the maximum contingent liability represents possible future payments under the guarantees, the Company believes that the likelihood of nonperformance by these affiliates is remote.

Guarantees Related to Private Equity Activities

As part of its private equity activities, the Company provides guarantees related to carried interest and performance thresholds. The amounts of such guarantees are included in the contingent obligations disclosed in Note 5.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

10. Guarantees (Continued)

Other Guarantees

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

Indemnifications Issued in Connection with Asset Sales

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

Tax Gross-up Arrangements

As a normal part of issuing its own securities, the Company typically agrees to reimburse holders for additional tax withholding charges or assessments resulting from changes in applicable tax laws or the interpretation of those laws. Securities that include these agreements to pay additional amounts generally also include a related redemption or call provision if the obligation to pay the additional amounts results from a change in law or its interpretation and the obligation cannot be avoided by the issuer taking reasonable steps to avoid the payment of additional amounts. Since such potential obligations are dependent on future changes in tax laws, the related liabilities the Company may incur as a result of such changes cannot be reasonably estimated. In light of the related call provisions typically included, the Company does not expect any potential liabilities in respect of tax gross-ups to be material.

Exchange and Clearinghouse Memberships

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

11. Concentrations of Credit Risk

The Company is engaged in various securities trading and brokerage activities servicing a diverse group of domestic and foreign corporations, governments and institutional and individual investors. A substantial portion of the Company’s transactions are executed with and on behalf of institutional investors, including other brokers and dealers, mortgage brokers, commercial banks, U.S. agencies, mutual funds, hedge funds and other financial institutions. These transactions are generally collateralized. Credit risk is the potential for loss resulting from the default by a counterparty of its obligations. Exposure to credit risk is generated by securities and currency settlements, contracting derivatives and forward transactions with customers and dealers, and the holding in inventory of bonds and/or loans. The Company uses various means to manage its credit risk. The creditworthiness of all counterparties is analyzed at the outset of a credit relationship with the Company. These counterparties are subsequently reviewed on a periodic basis. The Company sets a maximum exposure limit for each counterparty, as well as for groups or classes of counterparties. Furthermore, the Company enters into master netting agreements when feasible and demands collateral from certain counterparties or for

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

10. Concentrations of Credit Risk (Continued)

certain types of credit transactions. As of March 31, 2007, the Company did not have any significant concentrations of credit risk.

The Company’s customer securities activities are transacted either in cash or on a margin basis, in which the Company extends credit to the customer. The Company seeks to control the risks associated with its customer activities by requiring customers to maintain margin collateral to comply with various regulatory and internal guidelines. The Company monitors required margin levels each day and requires customers to deposit additional collateral, or reduce positions, when necessary.

12. Net Capital Requirements

The Company’s principal wholly owned subsidiary, CS Securities, is a registered broker-dealer, registered futures commission merchant and member firm of the New York Stock Exchange, Inc. Accordingly, CS Securities is subject to the minimum net capital requirements of the SEC and the Commodities Futures Trading Commission (“CFTC”). Under the alternative method permitted by Rule 15c3-1 under the Securities Exchange Act of 1934 (the “Exchange Act”), the required net capital may not be less than the greater of 2% of aggregate debit balances arising from customer transactions or 4% of the funds required to be segregated pursuant to the Commodity Exchange Act less the market value of certain commodity options, all as defined. Under CFTC Regulation 1.17, the required minimum net capital requirement is 8% of the total risk margin requirement (as defined) for all positions carried in customer accounts plus 4% of the total risk margin requirement (as defined) for all positions carried in non-customer accounts. As of March 31, 2007, CS Securities’ net capital of approximately $3.8 billion was 64.5% of aggregate debit balances and in excess of the CFTC’s minimum requirement by approximately $3.6 billion.

The Company’s over-the-counter (“OTC”) derivatives dealer subsidiary, Credit Suisse Capital LLC (“CS Capital”) is also subject to the uniform net capital rule, but computes its net capital based on value at risk under Appendix F of Rule 15c3-1 under the Exchange Act. As of March 31, 2007, CS Capital’s net capital of $341 million, after allowing for market and credit risk exposure of $98 million and $311 million, respectively, was in excess of the minimum net capital requirement by $321 million. CS Capital is in compliance with the exemptive provisions of Rule 15c3-3 under the Exchange Act because the Company does not carry securities accounts for customers or perform custodial functions relating to customer securities.

As of March 31, 2007, the Company and its subsidiaries complied with all applicable regulatory capital adequacy requirements.

13. Cash and Securities Segregated Under Federal and Other Regulations

In compliance with the Commodity Exchange Act, CS Securities segregates funds deposited by customers and funds accruing to customers as a result of trades or contracts. As of March 31, 2007 and December 31, 2006, cash and securities aggregating $2.4 billion and $2.3 billion, respectively, were segregated or secured by CS Securities in separate accounts exclusively for the benefit of customers.

In accordance with the SEC’s no-action letter dated November 3, 1998, CS Securities computed a reserve requirement for the proprietary accounts of introducing broker-dealers. As of March 31, 2007 and December 31, 2006, CS Securities segregated U.S. Treasury securities aggregating $7.5 billion and $3.9 billion, respectively, on behalf of introducing broker-dealers.

In addition, CS Securities segregated U.S. Treasury securities with a market value of $5.6 billion and $7.4 billion as of March 31, 2007 and December 31, 2006, respectively, in a special reserve bank account exclusively for the benefit of customers as required by Rule 15c3-3 of the Exchange Act.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

14. Stockholder’s Equity

In connection with the adoption of SFAS 157 and FIN 48, the Company recorded increases in opening retained earnings of $58 million, net of tax, and $4 million, respectively. In connection with the adoption of SFAS 159, the Company recorded a decrease in opening retained earnings of $328 million, net of tax. See Notes 1 and 2 for more information.

The Share Plan provides for the grant of equity-based awards to Company employees based on CSG shares pursuant to which employees of the Company may be granted, as compensation, share or other equity-based awards as compensation for services performed. CS Holdings purchases shares indirectly from CSG to satisfy these awards, but CS Holdings does not require reimbursement from the Company; therefore, amounts are considered a capital contribution to the Company and credited to paid-in-capital. Amounts contributed by CS Holdings relating to equity-based awards for the three months ended March 31, 2007 and 2006 were $315 million and $314 million, respectively, including tax effects. See Note 1 for further information on the Company’s share-based compensation.

During the three months ended March 31, 2007 the Company recorded a decrease of $5 million, net of tax, in accumulated other comprehensive loss in the consolidated statement of financial condition related to the reversal of the cash flow hedges on certain loans that were originated by an affilate and were purchased by the Company in connection with the adoption of SFAS 159. See Note 1 for more information.

During the three months ended March 31, 2007, Credit Suisse transferred Credit Suisse Investment Advisory Partners LLC to the Company as a capital contribution of $7 million.

15. Employee Benefit Plans

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

Net Periodic Benefit Cost

The following table presents the pension expense by component for the Company’s defined benefit pension plans and other post-retirement plans for the three months ended March 31, 2007 and 2006:

	For the three months ended March 31,
	2007		2006
Components of Net Periodic Benefit Cost:	(In millions)
Service cost	$	6	$	7
Interest cost	13		12
Expected return on plan assets	(13)		(13)
Transition obligation	(1)		--
Amortization of loss	8		10
Net periodic benefit cost	$	13	$	16

The Company did not make payments to the qualified pension plan during the three months ended March 31, 2007 and does not expect to make any payments during the remainder of the year ending December 31, 2007. The Company made payments of $4 million to the supplemental plan and the other post-retirement plans during the three months ended March 31, 2007 and expects to pay a total of $8 million during the remainder of the year ending December 31, 2007.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

16. Income Taxes

The Company is included in the consolidated federal income tax return and certain state and local income tax returns filed by CS Holdings. CS Holdings allocates federal income taxes to its subsidiaries on a separate return basis, and any state and local income taxes on a pro rata basis, pursuant to a tax sharing arrangement.

The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of FIN 48, a decrease in the liability for unrecognized tax benefits of approximately $4 million was recognized as an increase to the January 1, 2007 balance of retained earnings. The total amount of unrecognized tax benefits as of January 1, 2007 was $334 million. On January 1, 2007, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $315 million.

The Company continues to recognize interest and penalties accrued relating to unrecognized tax benefits as current income taxes in income tax expense. Approximately $43 million was accrued at January 1, 2007 for the payment of interest and penalties, net of any tax benefit associated with the payment of these amounts. The Company is currently subject to ongoing tax audits and inquiries with the tax authorities in a number of jurisdictions. Although the timing of the completion of these audits is uncertain, it is reasonably possible that some of these audits and inquiries will be resolved within 12 months of the adoption date of January 1, 2007. However, quantification of an estimate of the range of the reasonable possible change in unrecognized tax benefits cannot be made at this time. The Company remains open to examination for the years 1993 and forward.

Included in the consolidated statements of income for the three months ended March 31, 2007 and 2006 are current and deferred provisions for income taxes that were allocated to the Company by CS Holdings as follows:

	For the three months ended March 31,
	2007			2006
	(In millions)
Current:
U.S. federal taxes	$	(97	)	$	(104	)
State and local taxes	2			1
Foreign taxes	1			1
Total current	(94		)	(102		)
Deferred:
U.S. federal taxes	313			239
Total deferred	313			239
Provision for income taxes	$	219		$	137

Excluded from the table above is an income tax benefit of $61 million and $19 million for the three months ended March 31, 2007 and 2006, respectively, related to Share Plan activity, an income tax benefit of $2 million for the three months ended March 31, 2007 related to the reversal of cash flow hedges and an income tax charge of $32 million and an income tax benefit of $176 million for the three months ended March 31, 2007, respectively, related to the adoption of SFAS 157 and SFAS 159, respectively.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

16. Income Taxes (Continued)

The following table summarizes the difference between the federal statutory tax rate and the effective tax rate for the three months ended March 31, 2007 and 2006:

	For the three months ended March 31,
	2007					2006
	Amount			Percent of Pre-tax Income		Amount			Percent of Pre-tax (Loss)
	(In millions)					(In millions)
U.S. federal statutory income tax provision	$	476		35.0	%	$	489		35.0	%
Increase (decrease) due to:
Minority interests⁽¹⁾		(253	)	(18.6	)		(330	)	(23.6	)
Dividend exclusion		(4	)	(0.3	)		(6	)	(0.4	)
Entertainment expense		1		0.1			2		0.1
State and local taxes, net of federal income tax effects		1		0.1			--		--
Other		(2	)	(0.2	)		(18	)	(1.3	)
Provision for income taxes	$	219		16.1	%	$	137		9.8	%

(1)	Represents the effect of non-taxable revenues and expenses from private equity funds consolidated. Net income was unaffected as offsetting minority interests were recorded in the consolidated statements of income. See Note 4 for more information.

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

	March 31, 2007				December 31, 2006
	(In millions)
Deferred tax assets:
Inventory	$	210			$	64
Investments	50				51
Other liabilities and accrued expenses, primarily compensation and benefits	1,627				1,941
State and local taxes	38				43
Total deferred tax assets	1,925				2,099
Deferred tax liabilities:
Inventory	81				81
Investments	221				220
Other		268						267
Total deferred tax liabilities	570				568

Deferred tax assets net of deferred tax liabilities	1,355				1,531
Valuation allowance for state and local taxes	(38			)	(43				)
Net deferred tax asset	$		1,317		$		1,488

Due to uncertainty concerning the Company’s ability to generate the necessary amount and mix of state and local taxable income in future periods, the Company maintains a valuation allowance against its deferred state and local tax asset in the amount $38 million and $43 million as of March 31, 2007 and December 31, 2006, respectively. The Company has determined that the realization of the remaining recognized deferred tax assets as of March 31, 2007 is more likely than not based on anticipated future taxable income. In addition, for federal income tax purposes, the Company has planning strategies available that enhance its ability to utilize these tax benefits.

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

17. Legal Proceedings

The Company has provided reserves for litigation, claims and proceedings involving the Company in accordance with SFAS No. 5, “Accounting for Contingencies.” The Company recorded in the second quarter of 2005 a $750 million litigation charge to increase the reserve for private litigation involving Enron, certain initial public offering allocation practices, research analyst independence and other related litigation. This charge, coupled with the charge recorded in 2002, brings the Company’s reserves for these private litigation matters to $953 million after the application of settlements entered into through March 31, 2007.

The Company is involved in a number of judicial, regulatory and arbitration proceedings concerning matters arising in connection with the conduct of its businesses. The Company believes, based on currently available information and advice of counsel, that the results of such proceedings, in the aggregate, will not have a material adverse effect on its financial condition but might be material to operating results for any particular period, depending, in part, upon the operating results for such period. The Company intends to defend itself vigorously in these matters, litigating or settling when determined by management to be in the best interests of the Company.

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

18. Industry Segment Data

The Company operates and manages its businesses through three operating segments: the Investment Banking segment, consisting primarily of investment banking, trading and certain separately managed private equity and distressed assets; the Asset Management segment, consisting primarily of the private equity business; and Private Banking, consisting of the private client services business in the United States.

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

The Investment Banking segment consists of:

•

investment banking, which serves a broad range of users and suppliers of capital and provides financial advisory and securities underwriting and placement services; and

•

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

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

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2007

18. Industry Segment Data (Continued)

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

The Private Banking segment consists of the private client services business in the United States. Private client services is a financial advisory business serving high-net-worth individuals and corporate investors with a wide range of Credit Suisse and third-party investment management products and services.

The Company allocates to its segments a pro rata share of certain centrally managed costs. Leased facilities and equipment costs, employee benefits and certain general overhead expenses are allocated based upon specified amounts, usage criteria or agreed rates. Interest expense is allocated based upon the particular type of asset. The allocation of some costs, such as incentive bonuses, has been estimated. The timing and magnitude of changes in the Company’s incentive bonus accrual can have a significant effect on the Company’s operating results for a given period. Any revenues and expenses not allocated to the Company’s segments appear in Elimination & Other in the table below. For additional information, see Note 1.

The following table sets forth the net revenues excluding net interest, net interest and dividends revenue, total net revenues, total expenses and income (loss) before provision for income taxes and assets of the Company’s segments.

	Investment Banking			Asset Management			Private Banking					Elimination & Other⁽¹⁾			Total


	(In millions)
For the three months ended March 31, 2007:
Net revenues excluding net interest	$		2,137	$	125		$	68				$		723	$	3,053
Net interest and dividends revenue (expense)	136			(7		)	1					20			150
Total net revenues⁽²⁾	2,273			118			69					743			3,203
Total expenses	1,634			79			91					39			1,843
Income (loss)⁽³⁾			639		39			(22			)			704			1,360
Minority interests⁽⁴⁾	--			--			--					722			722
Income (loss) after minority interests⁽⁵⁾	$		639	$	39		$		(22		)	$		(18)	$		638

For the three months ended March 31, 2006:
Net revenues excluding net interest	$		1,555	$	91		$	64				$	919		$		2,629
Net interest and dividends revenue	286			--			2					6			294
Total net revenues⁽²⁾	1,841			91			66					925			2,923
Total expenses	1,390			62			75					13			1,540
Income (loss)⁽³⁾			451		29			(9			)			912		1,383
Minority interests⁽⁴⁾	--			--			--					929			929
Income (loss) after minority interests⁽⁵⁾	$		451	$	29		$	(9			)	$		(17)	$		454

Segment assets as of March 31, 2007	$	395,012		$	2,625		$			277		$		11,684	$		409,598
Segment assets as of December 31, 2006	$	346,176		$	2,109		$			271		$		10,921	$		359,477

(1)	For the three months ended March 31, 2007 and 2006, Elimination & Other primarily included revenues and expenses that result from the consolidation of certain private equity funds and a limited amount of treasury costs not allocated to the Company’s segments.

(2)	Interest income and expense is accrued at the stated coupon rate for coupon-bearing financial instruments, and for non-coupon-bearing financial instruments, interest income (expense) is recognized by accreting the discount over the life of the instrument. For coupon-bearing

CREDIT SUISSE (USA), INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited) (Concluded)

March 31, 2007

18. Industry Segment Data (Continued)

financial instruments purchased at a discount or premium, the difference between interest income and expense accrued at the stated coupon rate and interest income and expense determined on an effective yield basis, which could be significant, is included in principal transactions-net instead of interest and dividends, net, in the Company’s consolidated statements of income and in net revenues excluding net interest.

(3)	Income (loss) before provision for income taxes and minority interests.

(4)	Related to the Company’s consolidation of certain private equity funds. See Note 4 for more information.

(5)	Income (loss) before provision for income taxes.

19. Subsequent Event

In April 2007 the Company announced that it had agreed to acquire Lime Financial Services, a wholesale sub prime residential lender contingent upon successfully obtaining state regulatory approvals.

Crusade Global Trust No. 2 of 2006 10-D