1. FINANCIAL REPORT
50 Comments to the financial statements
52 Consolidated income statement
54 Consolidated balance sheet
55 Consolidated statement of source
and application of funds
56 Consolidated off-balance sheet business
58 Notes to the consolidated financial statements
101 Report of the Group’s auditors
102 Income statement (parent company)
103 Balance sheet before allocation of retained
earnings (parent company)
104 Notes to the financial statements (parent company)
108 Proposed allocation of retained earnings
109 Report of the statutory auditors
49

2. COMMENTS TO THE FINANCIAL STATEMENTS
Credit Suisse Group’s Annual Report contains two sets of financial statements: the
consolidated annual financial statements of Credit Suisse Group at 31 December 1999
and the annual financial statements of Credit Suisse Group, parent company, for the
financial year ended 31 March 2000. Both sets of statements have been examined by
independent auditors. Their reports are presented on pages 101 and 109.
The consolidated financial statements include Credit Suisse First Boston, Credit Suisse,
Neue Aargauer Bank, the Private Banks, the financial subsidiaries of Credit Suisse
Group in Guernsey and Winterthur Insurance.
For the banking and financial businesses, the consolidated financial statements
were prepared pursuant to the accounting rules for banks; for the insurance business,
the accounting rules for insurance companies were applied. ‘Winterthur’ Swiss
Insurance Company (Winterthur) is included in the consolidated financial statements
using the ‘pooling of interests’ method. Significant information about insurance
operations is shown separately in the balance sheet and income statement.
The 1999 financial year Following organisational changes at Credit Suisse
First Boston, in April 1999 Credit Suisse Group repurchased Swiss Re’s 20% minority
position in Credit Suisse Financial Products.
Credit Suisse Group’s acquisition of Warburg Pincus Asset Management
(CHF 36 bn in assets under management) and of a 19.9% stake in the private equity
activities of Warburg, Pincus & Co became effective in July 1999.
In December, the BGP Banca di Gestione Patrimoniale SA, Lugano was founded
with share capital of CHF 50 m. The new private bank is a 100% direct subsidiary of
Credit Suisse Group. Business activities started in February 2000.
In December, Winterthur bought an additional 23% stake in DBV Winterthur
Holding AG, Wiesbaden, from Commerzbank. This stake is composed of a 15% share
held indirectly by Commerzbank through the intermediate WinCom holding and a direct
shareholding of 8%. Winterthur’s participation in DBV Winterthur Holding AG thus
increased to 69%. In the consolidated accounts, the change in equity capital held is
effective from 1 July 1999.
50

3. Of the CHF 446 m restructuring provisions available for the Focus project, BZW and
Winterthur at the start of the year, CHF 327 m was used in 1999. The resulting end
balance is CHF 119 m.
Provisions for technology costs declined by CHF 181 m from CHF 247 m at the
beginning of the year to CHF 66 m at the end. In 1999 CHF 96 m was booked
against the reserve specifically earmarked for costs associated with the Y2K date
change. This figure was CHF 163 m in 1998.
Subsequent events In the United Kingdom, Winterthur announced the acquisition of
the National Insurance and Guarantee Corp. Plc. (NIG), London in December. Together
with its subsidiaries, NIG’s gross written premiums for 1999 will amount to some
CHF 1.1 bn. NIG will be consolidated in the accounts as soon as regulatory approval is
obtained, probably in the first quarter of 2000.
In January, Winterthur Group anounced the acquisition of the Japanese life
insurance company, Nicos Life. In the current business year (ending March 2000),
Nicos Life is expected to achieve gross premiums of some CHF 447 m.
51

4. CONSOLIDATED INCOME STATEMENT
Notes 1999 1998 Change Change
(p. 68 ff) in CHF m in CHF m in CHF m in %
RESULT FROM INTEREST BUSINESS
Interest and discount income 16,953 19,280 –2,327 –12
Interest and dividend income from trading portfolios 4,127 5,562 –1,435 –26
Interest and dividend income from financial
investments from banking business 656 425 231 54
Interest expenses from banking business 16,484 20,115 – 3,631 –18
5,252 5,152 100 2
NET INTEREST INCOME 1, 2, 6
RESULT FROM COMMISSION AND
SERVICE FEE BUSINESS
Commission income from lending business 594 392 202 52
Commission from securities and investment transactions 10,523 8,030 2,493 31
Commission from other services 393 330 63 19
Commission expenses 640 425 215 51
10,870 8,327 2,543 31
NET COMMISSION AND SERVICE FEE INCOME 1, 2
6,578 2,378 4,200 177
NET TRADING INCOME 1, 2, 7
NET INCOME FROM INSURANCE BUSINESS
Premiums earned, net 26,203 26,477 –274 –1
Claims incurred and actuarial provisions 27,120 27,395 –275 –1
Commission expenses, net 2,157 2,075 82 4
Investment income from insurance business 8,134 8,350 –216 –3
5,060 5,357 –297 –6
NET INCOME FROM INSURANCE BUSINESS 1, 2, 9, 10
OTHER ORDINARY INCOME
Income from the sale of financial investments 505 1,224 –719 – 59
Income from investment activities 124 129 –5 –4
– of which from participations valued according to the equity method 95 105 –10 –10
– of which from other non-consolidated participations 29 24 5 21
Real estate income 33 28 5 18
Sundry ordinary income 703 336 367 109
Sundry ordinary expenses 1,255 1,231 24 2
110 486 – 376 –77
OTHER ORDINARY INCOME 1, 2
27,870 21,700 6,170 28
NET OPERATING INCOME
52

5. Notes 1999 1998 Change Change
(p. 68 ff) in CHF m in CHF m in CHF m in %
27,870 21,700 6,170 28
NET OPERATING INCOME (continued)
Personnel expenses 13,509 10,586 2,923 28
1, 2
Other operating expenses 5,229 4,473 756 17
1, 2
18,738 15,059 3,679 24
TOTAL OPERATING EXPENSES
6,641
9,132 2,491 38
GROSS OPERATING PROFIT
Depreciation and write-offs on non-current assets 657
1,045 388 59
1
Valuation adjustments, provisions and losses
from banking business 3,175
1,540 –1,635 – 51
1, 8
3,832
2,585 –1,247 – 33
DEPRECIATION, VALUATION ADJUSTMENTS, LOSSES
GROUP PROFIT BEFORE EXTRAORDINARY
2,809
6,547 3,738 133
ITEMS AND TAXES
Extraordinary income 1,554
93 –1,461 – 94
1, 3
Extraordinary expenses 573
152 – 421 –73
1, 4
Taxes 575
1,149 574 100
1, 2
3,215
5,339 2,124 66
GROUP PROFIT
Minority interests 147
118 –29 –20
1
3,068
5,221 2,153 70
NET PROFIT (AFTER MINORITY INTERESTS)
53

6. CONSOLIDATED BALANCE SHEET
Notes 31 Dec. 1999 31 Dec. 1998 Change Change
(p. 68 ff) in CHF m in CHF m in CHF m in %
ASSETS
Cash and other liquid assets 3,141 2,313 828 36
33
Money market claims 28,994 26,594 2,400 9
12, 33
Due from banks 164,901 140,152 24,749 18
33
Claims from insurance business 6,457 7,482 –1,025 –14
33
Due from customers 104,931 103,183 1,748 2
13, 14, 33
Mortgages 86,553 80,558 5,995 7
14, 33
Securities and precious metals trading portfolios 126,746 102,515 24,231 24
15, 16, 33
Financial investments from banking business 18,828 17,467 1,361 8
17, 19, 33
Investments from insurance business 117,222 102,316 14,906 15
18, 19
Non-consolidated participations 1,823 1,331 492 37
20, 21
Tangible fixed assets 6,828 6,362 466 7
21
Intangible assets 2,990 802 2,188 273
21
Accrued income and prepaid expenses 9,023 9,628 – 605 –6
Other assets 44,309 51,734 –7,425 –14
23
722,746 652,437 70,309 11
TOTAL ASSETS 24, 35, 36
Total subordinated claims 1,792 3,048 –1,256 – 41
Total due from non-consolidated participations 928 227 701 309
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities in respect of money market paper 22,120 14,735 7,385 50
33
Due to banks 198,324 154,048 44,276 29
33
Commitments from insurance business 6,268 8,412 –2,144 –25
33
Due to customers, in savings and investment accounts 44,007 46,618 –2,611 –6
33
Due to customers, other 182,249 178,561 3,688 2
33
Medium-term notes (cash bonds) 3,885 5,844 –1,959 – 34
33
Bonds and mortgage-backed bonds 47,905 44,953 2,952 7
27, 33
Accrued expenses and deferred income 11,778 3,138
14,916 27
Other liabilities 57,004 – 4,427
52,577 –8
28
Valuation adjustments and provisions 5,670 2,896 51
8,566
29
Technical provisions for insurance business 96,652 10,909 11
107,561
30
Reserves for general banking risks 2,048 83 4
2,131
29, 31
Share capital 5,382 62 1
5,444
31
Capital reserve 10,993 703 6
11,696
31
Revaluation reserves from insurance business 5,942 1,035 17
6,977
31
Retained earnings –1,596 2,748 172
1,152
31
Minority interests in shareholders’ equity 2,178 – 549 –25
1,629
31
Group profit 3,215 2,124 66
5,339
31
– of which minority interests 147 –29 –20
118
31
Total shareholders’ equity 28,162 6,206 22
34,368
31
652,437 70,309 11
722,746
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 35, 36
Total subordinated liabilities 16,524 1,670 10
18,194
Total liabilities due to non-consolidated participations 718 31 4
749
54

7. CONSOLIDATED STATEMENT OF SOURCE AND APPLICATION OF FUNDS
1999 1998
Net Net
in/outflow
Source Application Source Application in/outflow
in CHF m
in CHF m in CHF m in CHF m in CHF m in CHF m
FROM OPERATIONS,
8,399
EQUITY TRANSACTIONS AND INVESTMENTS 1,186
12,749
OPERATING ACTIVITIES 5,917
Net profit for the year 3,215
5,339
Provisions for credit and other risks 1,421 2,584
Losses 78 101
Provisions for taxes 1,149 575
Depreciation and write-offs 1,045 681
Extraordinary income 1,488
32
Extraordinary expenses 101 462
Valuation of participations valued according
to the equity method 105
95
Accrued income and prepaid expenses 209
605
Accrued expenses and deferred income 3,138 101
787
EQUITY TRANSACTIONS 226
Share capital 62 60
Capital surplus and retained earnings 1,486 1,922
Dividends paid 1,457
1,430
Foreign exchange differences 363
1,313
Minority interests 644 64
– 4,085
INVESTMENTS IN LONG-TERM ASSETS – 874
Investments in companies 386 514
Real estate 152 42
Other tangible and intangible fixed assets 1,430
3,547
FINANCIAL INVESTMENTS, PROVISIONS,
–1,052
OTHER ASSETS AND LIABILITIES – 4,083
Investments from banking business 1,450
1,361
Investments from insurance business 8,929
14,906
Valuation adjustments and provisions 3,108
1,020
Technical insurance provisions 1 10,909 5,424
Other assets 7,713 5,144
Other liabilities 1,164
4,427
16,660
FROM OTHER BALANCE SHEET ITEMS – 3,588
– 34,927
ASSETS 38,956
Money market claims 2,581
2,401
24,953 2
Due from banks 5,626
Claims from insurance business 1,058
1,025
2,320 2
Due from customers 40,234
Mortgages 3,265
6,278
51,587
LIABILITIES – 42,544
Liabilities in respect of money market paper 7,385 2,215
44,276 2
Due to banks 26,188
Commitments from insurance business 2,144 2,367
2,611 2
Due to customers 1,915
Due to customers, other 17,010
3,688
Bonds and medium-term notes 2,013
993
25,059
CHANGE IN LIQUID ASSETS –2,402
Securities and precious metals trading portfolios 24,231 1,311
Cash and accounts with central banks 828 1,091
1 In line with insurance practice, the change in the technical provisions is shown as a total amount under changes in provisions affecting cashflow.
2 The changes are affected to some extent by the changes to accounting principles described on pages 64/65.
55

8. CONSOLIDATED OFF-BALANCE SHEET BUSINESS
31 Dec. 1999 31 Dec. 1998 Change Change
in CHF m in CHF m in CHF m in %
CONTINGENT LIABILITIES
Credit guarantees in form of avals, guarantees
and indemnity liabilities 6,755 8,870 –2,115 –24
Bid bonds, delivery and performance bonds,
letters of indemnity, other performance-related guarantees 5,262 4,471 791 18
Irrevocable commitments in respect of documentary credits 3,224 2,225 999 45
Other contingent liabilities 3,870 3,710 160 4
19,111 19,276 –165 –1
TOTAL CONTINGENT LIABILITIES
120,560 84,775 35,785 42
IRREVOCABLE COMMITMENTS
50 59 –9 –15
LIABILITIES FOR CALLS ON SHARES AND OTHER EQUITY
226 262 – 36 –14
CONFIRMED CREDITS
Mortgage Other Without
collateral collateral collateral Total
ANALYSIS OF COLLATERAL AS AT 31 DECEMBER 1999 in CHF m in CHF m in CHF m in CHF m
CONTINGENT LIABILITIES
Credit guarantees in form of avals, guarantees
and indemnity liabilities 44 6,313 398 6,755
Bid bonds, delivery and performance bonds,
letters of indemnity, other performance-related guarantees 171 2,306 2,785 5,262
Irrevocable commitments in respect of documentary credits 0 216 3,008 3,224
Other contingent liabilities 137 1,043 2,690 3,870
352 9,878 8,881 19,111
TOTAL CONTINGENT LIABILITIES
At 31 December 1998 339 9,759 9,178 19,276
2,630 56,553 61,377 120,560
IRREVOCABLE COMMITMENTS
At 31 December 1998 2,889 40,946 40,940 84,775
0 0 50 50
LIABILITIES FOR CALLS ON SHARES AND OTHER EQUITY
At 31 December 1998 0 0 59 59
0 1 225 226
CONFIRMED CREDITS
At 31 December 1998 0 0 262 262
31 Dec. 1999 31 Dec. 1998 Change Change
in CHF m in CHF m in CHF m in %
37,371
FIDUCIARY TRANSACTIONS 35,216 2,155 6
56

9. 31 Dec. 1999 31 Dec. 1999 31 Dec. 1998 31 Dec. 1998
31 Dec. 1999 Positive gross Negative gross 31 Dec. 1998 Positive gross Negative gross
Nominal replacement replacement Nominal replacement replacement
value 4
value value 4 value value value
in CHF bn in CHF bn in CHF bn in CHF bn in CHF bn in CHF bn
DERIVATIVE INSTRUMENTS
INTEREST RATE PRODUCTS
Forward rate agreements 305.2 0.3 0.3 152.7 0.1 0.1
Swaps 3,354.3 52.7 50.1 2,383.1 65.3 60.3
Options bought and sold (OTC) 1,186.1 8.6 9.1 914.1 8.5 8.8
Forwards 45.3 0.6 0.5 54.0 0.2 0.3
Futures 542.4 – – 539.2 – –
Options bought and sold (traded) 348.8 – – 633.8 – –
5,782.1 62.2 60.0 4,676.9 74.1 69.5
TOTAL INTEREST RATE PRODUCTS
FOREIGN EXCHANGE PRODUCTS
Forwards 1 525.7 10.5 9.7 782.2 14.7 16.9
Swaps 2 261.8 10.8 14.6 247.4 9.3 11.6
Options bought and sold (OTC) 280.6 3.9 3.7 342.3 5.5 6.1
Futures 0.5 – – 1.5 – –
Options bought and sold (traded) 0.1 – – 0.3 – –
1,068.7 25.2 28.0 1,373.7 29.5 34.6
TOTAL FOREIGN EXCHANGE PRODUCTS
PRECIOUS METALS PRODUCTS
Forwards 1 17.5 1.5 1.2 18.8 0.9 1.1
Options bought and sold (OTC) 11.2 0.6 0.7 15.4 0.5 0.9
Futures 0.1 – – 0.2 – –
Options bought and sold (traded) 0.0 – – 0.4 – –
28.8 2.1 1.9 34.8 1.4 2.0
TOTAL PRECIOUS METALS PRODUCTS
EQUITY/INDEX-RELATED PRODUCTS
Forwards 27.0 2.5 2.8 8.2 0.7 0.6
Options bought and sold (OTC) 295.3 20.2 21.3 191.4 13.8 14.7
Futures 35.7 – – 38.6 – –
Options bought and sold (traded) 81.9 – – 63.2 – –
439.9 22.7 24.1 301.4 14.5 15.3
TOTAL EQUITY/INDEX-RELATED PRODUCTS
OTHER PRODUCTS
Forwards 8.7 0.5 0.4 0.1 0.0 0.0
Options bought and sold (OTC) 8.7 0.3 0.3 4.0 0.3 0.1
Futures 7.8 – – 8.5 – –
Options bought and sold (traded) 0.1 – – 0.1 – –
25.3 0.8 0.7 12.7 0.3 0.1
TOTAL OTHER PRODUCTS
7,344.8 113.0 114.7 6,399.5 119.8 121.5
TOTAL, GROSS
TOTAL REPLACEMENT VALUES
3, 5 5
43.1 3, 5 49.2 5
37.3
ACCORDING TO THE BALANCE SHEET 40.4
1 including outstanding spot transactions
2 cross-currency interest rate swaps
3 positive replacement value after deduction of CHF 1.4 bn (1998: CHF 4.4 bn) of assets pledged as security
4 No replacement values are shown for traded derivatives (futures and traded options) subject to daily margining requirements.
Total positive and negative replacement values on traded derivatives amount to CHF 1.1 bn and CHF 1.0 bn respectively.
5 of which from insurance business: positive replacement values CHF 0.3 bn (1998 CHF 1.3 bn), negative replacement values CHF 0.4 bn (1998 CHF 0.6 bn)
57

10. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
GENERAL PRINCIPLES
The Group financial statements have been drawn up based on the accounting rules of
the Implementing Ordinance to the Swiss Federal Law on Banks and Savings Banks
of 14 December 1994 (status as at 28 October 1999), supplemented by the pooling-
of-interests method and the provisions of the Swiss accounting and reporting recom-
mendations with respect to insurance companies (FER 14). As required by the pooling-
of-interests method, the consolidated financial statements of Credit Suisse Group show
the combined results of Credit Suisse Group and Winterthur as if the merger had been
effective for all previous periods shown. In addition, the consolidation and valuation
policies reflect the accounting principles set out in the Swiss stock exchange listing
regulations; they also largely conform to the provisions of the 4th and 7th EU directives
and the EU directive governing the financial statements of banks. The financial year
for the Group ends on 31 December. Group companies with a different closing date
prepare interim financial statements as of 31 December for consolidation purposes.
Until the end of 1996, goodwill (the difference between the purchase price and the
amount of equity capital acquired) was set off against equity capital. For subsidiaries
acquired after 1 January 1997, goodwill is stated in the balance sheet under ‘Intangible
assets’ and amortised over its estimated useful life (not exceeding 20 years).
SCOPE AND METHOD OF CONSOLIDATION
All banking, insurance and financial institutions in which Credit Suisse Group has a
direct or an indirect interest of more than 50% as of the balance sheet date are fully
consolidated in the financial statements. For the ‘Winterthur’ Swiss Insurance Company
subgroup, capital is consolidated according to the pooling-of-interests method. For the
other Group companies capital is consolidated according to the purchase method with
effect from 1 January 1990 (or later, if acquired thereafter). Intercompany transactions
and unrealised gains therefrom are eliminated. Minority interests in shareholders’ equity
and net profit are indicated separately, but are viewed as forming an integral part of the
corporate base. Other companies in which the Group has a stake of 20% or more are
accounted for using the equity method. Long-term holdings which are designated for
resale are booked as ‘Financial investments’. Subsidiaries and long-term holdings out-
side the core business, and less significant holdings are not consolidated.
58

11. CHANGES TO THE SCOPE OF CONSOLIDATION
The scope of consolidation has undergone the following material changes:
Banking business
Credit Suisse Financial Products
In April 1999 Credit Suisse Group repurchased Swiss Re’s 20% minority position in
Credit Suisse Financial Products. The transaction is reflected in the consolidated
accounts with effect from 1 January 1999. In March 2000, the company was renamed
Credit Suisse First Boston International.
Warburg Pincus Asset Management
In July, the Credit Suisse Asset Management business unit (part of the Credit Suisse
First Boston legal entity) acquired 100% of Warburg Pincus Asset Management,
New York.
BGP Banca di Gestione Patrimoniale SA
In December, the BGP Banca di Gestione Patrimoniale SA, Lugano was founded
with share capital of CHF 50 m. The new private bank, which is a 100% direct sub-
sidiary of Credit Suisse Group, started its operations in February 2000.
Insurance business
DBV-Winterthur
In December, Winterthur bought an additional 23% stake in DBV Winterthur Holding AG,
Wiesbaden, from Commerzbank. This stake is composed of a 15% share held by
Commerzbank indirectly through the intermediate WinCom holding and a direct share-
holding that currently stands at 8%. Winterthur’s participation in DBV Winterthur
Holding AG thus increased to 69%. In Winterthur’s consolidated accounts, the change
in equity capital held is effective from 1 July 1999.
59

12. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOREIGN CURRENCY TRANSLATION
In the annual accounts of the individual Group companies, income and expense items
denominated in foreign currencies are translated into the relevant local reporting
currencies on the basis of the exchange rate as of the transaction date. Assets,
liabilities and off-balance-sheet items are translated using the year-end rate. Hedged
assets and liabilities are carried at their forward hedging rates. For the purposes of
consolidation, the balance sheets of foreign Group companies are translated into Swiss
francs using the year-end exchange rate, and their income statements are translated
using the average exchange rate for the financial year. Translation differences are cred-
ited or debited to shareholders’ equity and are shown separately in the statement of
shareholders’ equity.
The key foreign exchange rates are listed on page 100.
DEVIATIONS FROM THE RELEVANT EU DIRECTIVES
The Swiss accounting rules for banks conform in essence to EU directives and guide-
lines. The areas in which Group accounting policies deviate from the accounting prin-
ciples set out in the directives of the European Union (4th and 7th EU directives and
the EU directive governing the financial statements of banks) can be summarised as
follows:
– the classification criteria used in the balance sheet and the income statement differ
from those set out in the EU directive governing the financial statements of banks;
– the proportions of overall income and expenditure for operations outside Switzerland
are not detailed by geographical location but are provided as combined totals;
– no specific information is given concerning emoluments paid to and liabilities in
respect of Members of the Board of Directors or Members of the Executive Board of
Credit Suisse Group;
– securities and precious metals treated as trading positions are carried at their fair
value. Historical differences between cost and fair value are not disclosed in the
notes to the financial statements;
– there is no formal management report on the business year.
The following are significant deviations from the EU directives governing the financial
statements of insurance companies:
– the classification and presentation used in the financial statements have been adjust-
ed from those set out in the EU directives governing the financial statements of
insurance companies. Winterthur Group publishes an annual report which focuses on
the presentation of the results of the insurance business;
– unrealised gains on life business investments are taken to revaluation reserves as
part of shareholders’ equity and not to funds for future distribution to shareholders
and policyholders.
60

13. GENERAL ACCOUNTING AND VALUATION PRINCIPLES
All completed business is recorded in the financial state-
Recording of business
ments as follows: foreign exchange, money market and precious metals transactions
are recorded on value (settlement) date. Prior to the value date, foreign exchange and
precious metals transactions are recorded as off-balance-sheet business. Securities
transactions are recorded on a trade date basis.
Reverse repurchase and repurchase transactions are shown in the
Repo business
balance sheet as advances secured by securities or as deposits against which the
bank’s securities are pledged. Depending on the type of counterparty, they are shown
as claims on (‘Due from’) or liabilities to (‘Due to’) banks or customers. They are
carried in the balance sheet at the amounts at which the securities were initially
acquired or sold as specified by the respective agreements, plus interest accrued to
the balance sheet date.
Securities borrowed and lent with
Transactions involving non-monetary assets
cash collateral and daily margining are included in the balance sheet corresponding to
the accounting treatment for repurchase and reverse repurchase agreements. Securities
borrowed and lent with non-monetary collateral and daily margining are recorded as a
combination of repurchase and reverse repurchase agreements. Securities borrowed
and lent against a fee are recorded in the balance sheet as inventory movement only
when the transferor relinquishes control over the securities. All other claims and liabilities
from transactions involving non-monetary assets (e.g. precious metals and commodities)
are marked to market and shown as claims on (‘Due from’) or liabilities to (‘Due to’)
banks or customers.
Receivables and liabilities
Cash, bank balances, money market paper and loans
are generally accounted for at nominal value. Money market instruments held for trading
are carried at their fair value. The necessary provisions for recognisable risks and
potential losses are normally deducted from the appropriate asset items in the balance
sheet. Endangered interest and commission income due from customers and banks are
not booked as ‘Income from interest business’. Instead, they are only included in the
income statement following payment. Provisions for exposures subject to country risk,
default risk and other bank risks are booked to ‘Valuation adjustments and provisions’.
This position contains no undisclosed reserves.
Leasing All leased items (capital goods, vehicles and real estate) are valued using
the annuity method and are stated as a separate item under lendings. The depreciation
charges contained in the rental income are set off directly against the book values of
the corresponding leased assets, so that only the interest portion of the rental income is
shown in the income statement.
61

14. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Real estate is valued at cost (including capital improvements) less depre-
Real estate
ciation over its useful life (40 – 67 years). No depreciation is charged on land except
where valuation adjustments have been made to allow for a reduction in the market
value.
Other tangible fixed assets such as computers,
Other tangible fixed assets
machinery, furnishings, vehicles and other equipment, as well as alterations and
improvements to rented premises, are depreciated using the straight line method
over their estimated useful life (in general 3 – 5 years).
The goodwill included in this balance sheet position arises from
Intangible assets
the capital consolidation of the majority holdings acquired from 1 January 1997.
This goodwill is amortised over its estimated useful life (maximum 20 years). From
1 January 1999, third-party costs relating to the purchase and installation of software
are capitalised and depreciated over the estimated useful life of the software, normally
not exceeding 3 years.
As a rule, employees are affiliated to legally autonomous staff pension
Pension fund
funds which are independent of the Group. The requisite contributions are made to the
pension funds and posted under ‘Personnel expenses’.
Taxes Tax expenses are calculated on the basis of the annual results posted in the
individual financial statements of the Group companies. Deferred tax assets and
liabilities are established for the expected future tax implications of temporary differ-
ences between the carrying amounts and the tax bases of assets and liabilities.
Deferred tax assets and liabilities calculated at the expected tax rate on the basis of
adjustments in the valuation of assets and liabilities for Group purposes are charged to
tax expenses and recorded as other assets or provisions. No provision is made for non-
recoverable withholding taxes on undistributed profits of Group companies. Deferred tax
assets arising from tax losses brought forward are similarly not recognised.
Claims and liabilities in respect of
Claims and liabilities of related companies
related companies which are accounted for using the equity method and valued at cost
are reported in the notes to the consolidated financial statements.
62

15. VALUATION AND ACCOUNTING POLICIES IN RELATION
TO BANK-SPECIFIC POSITIONS
The trading portfolio consists of holdings of readily
Securities trading portfolio
realisable securities, securities acquired as a result of underwriting activities and
holdings of precious metals. Securitised and non-securitised options are shown under
‘Other assets’.
Trading balances in bonds, shares and similar securities and precious metals
accounts and holdings are carried at fair value (amount for which an asset could be
exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s-
length transaction). Profits and losses from the valuation of the trading portfolio and
realised gains and losses on these positions are shown under ‘Income from trading’.
Interest and dividend income from the trading portfolio is credited to ‘Result from
interest business’.
This balance sheet item comprises
Financial investments from banking business
securities and precious metals positions purchased as a long-term investment.
It also includes real estate and holdings assumed from the lending business and desig-
nated for resale.
Private equity positions (long-term equity financing of companies usually not listed
on a stock exchange) are valued at the lower of cost or market value.
Fixed-interest debt securities which are being held until final maturity are valued
according to the accrual method. In this case, premiums and discounts are accrued or
deferred over the term of the instrument until final maturity in the relevant balance
sheet position. Realised profits or losses which are interest related and which arise from
the early disposal or redemption of the instrument are accrued or deferred over the
remaining term of the instrument, i.e. to the original final maturity, and credited or
debited to ‘Result from interest business’ as appropriate.
Investment holdings of equities and debt securities which are designated for
resale and which do not constitute trading balances are valued at the lower of cost or
market value. The notes to the consolidated financial statements include details of both
the cost price and the market value of these holdings.
Capital gains resulting from the disposal of financial investments at above the
purchase price are shown under ‘Income from the disposal of financial investments’.
Unrealised losses on equity positions as a result of a decrease in their market value,
and unrealised profits which do not exceed the original result of changes in credit-
worthiness are accounted for in the same way as credit business.
Real estate assumed from lending business and designated for resale is valued
according to the lower of cost or market value.
63

16. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Reserves for general banking risks are
Reserves for general banking risks
precautionary reserves charged to ‘Extraordinary expenses’ to hedge against latent
risks in the bank’s operating activities. Releases are credited to extraordinary income.
Forward rate agreements, futures, swaps, options, forward contracts and
Derivatives
other over-the-counter off-balance-sheet instruments held for trading purposes are
carried at their fair value and the resulting profits and losses are included in ‘Net trading
income’ in the income statement. The resulting replacement values are included in
‘Other assets’ or ‘Other liabilities’ as appropriate and are presented net by counterparty
for transactions in those products where the bank has a legal right to set off; otherwise
the replacement values are presented gross by contract.
Hedging transactions are valued using the same procedures as for the underlying
transactions they hedge.
Strategic positions are valued according to the lower of cost or market value.
Derivative financial instruments which are deployed in the context of interest rate risk
management are valued according to the accrual method. The interest component is
accrued or deferred over the term of the instrument according to the annuity method.
Realised profits or losses which are interest related and which arise from the early dis-
posal or redemption of the instrument are also accrued or deferred over the remaining
term of the instrument, i.e. to the original final maturity.
CHANGES TO ACCOUNTING PRINCIPLES
From 1 January 1999, third-party costs relating to the acquisition
Intangible assets
and installation of software which meets the entity’s business needs alone are capi-
talised and depreciated over the estimated useful life, normally not exceeding 3 years.
Based on the changes in
Transactions involving non-monetary assets (SLB)
accounting rules, securities lending and borrowing transactions are recorded as
described on page 61. Prior to 1999, the securities borrowed and lent in connection
with such transactions were recorded as inventory movements and corresponding
receivables and payables. Using the revised accounting rules, the 1998 figures for the
balance sheet items would have been as follows:
64

17. Disclosed Under new
Balance sheet heading
amount policy
(in CHF m)
Due from banks 140,152 134,378
Due from customers 103,183 103,164
Securities and precious metals trading portfolio 102,515 98,386
Due to banks 154,048 158,439
Due to customers 178,561 164,247
VALUATION AND ACCOUNTING POLICIES IN RELATION
TO INSURANCE-SPECIFIC POSITIONS
INVESTMENTS IN RESPECT OF INSURANCE BUSINESS
Real estate is valued at market price. The market price of a property is
Real estate
calculated at its capitalised rental income using the interest rate applied in the country
or market in question. Undeveloped plots of land and buildings under construction
are carried at cost.
Bonds and loans are valued according to the amortised cost
Bonds and loans
method. The difference between the purchase price and the redemption value is dis-
tributed over the remaining life so that a constant yield is achieved. The corresponding
valuation adjustment is shown under the ‘Net investment income from insurance busi-
ness’ position. Default risk is accounted for through the use of write-offs. Inter-
company transactions and unrealised gains have been eliminated, with the exception
of assets booked as investments from insurance business.
Listed shares are marked to market at year-end. Unlisted shares are valued
Shares
at cost. If the yield or intrinsic value is endangered, a valuation adjustment is made.
65

18. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Derivatives and other financial instruments are generally used to hedge
Derivatives
exposure to changes in the fair value of recognised assets, liabilities and firm
commitments. Any gains and losses are therefore recognised in the income statement
together with the offsetting loss or gain on the hedged item.
Investments for the benefit of life insurance policyholders who bear the
Investments for the benefit of life insurance policyholders who
investment risk
bear the investment risk are carried at their market value.
Statement of higher and lower values arising from the uniform valuation of
Higher or lower
investments in the Group accounts and revaluation reserves
values arising from the uniform valuation of investments in the Group accounts in com-
parison with the figures contained in the statutory accounts are recorded as follows:
valuation differences resulting from the revaluation of fixed-interest securities and mort-
gages, unlisted shares and non-consolidated long-term holdings are included in the
income statement (under ‘Net investment income from insurance business’).
In the case of listed shares and real estate, compensated write-offs in respect of the
difference between the balance sheet value in the statutory accounts and the cost value
are stated in the income statement (‘Net investment income from insurance business’).
Valuation differences between cost and market values are allocated to shareholders’
equity (‘Revaluation reserves from the insurance business’) directly, without affecting
the income statement, after deferred tax calculated on the basis of a full provision on
unrealised gains for which there is no contractual obligation to pay to policyholders upon
realisation.
The amount of the technical provisions is based on the expected
Technical provisions
liabilities due to insured persons and claimants. As a rule, calculations are made
individually, i.e. depending on the insurance contract or claim. Statistical or mathematical
calculation methods are applied if these lead to approximately the same results and if
they conform to the methods approved by the supervisory authorities of the respective
countries. The equalisation reserves legally prescribed and locally created in some
countries are not included in the Group accounts. As a rule, provisions for claims out-
standing are not discounted. Technical provisions for life business are calculated
with regard to local regulations. The surplus due to policyholders is accounted for on
the basis of the resolutions passed by the individual companies as to the distribution
of profit.
66

19. CHANGES TO ACCOUNTING PRINCIPLES
In the reporting period, various companies in which Winterthur Group has a majority
interest (mainly finance and real estate companies) have been fully consolidated for the
first time. Only nominal investments outside the insurance sector are still consolidated
using the equity method or accounted for at cost.
Deferred taxes are calculated based on the current tax rates on unrealised capital gains
of the individual companies.
EVENTS SINCE THE BALANCE SHEET DATE
In January 2000, Winterthur Group acquired the Japanese life insurance company,
Nicos Life. In the current business year (ending March 2000), Nicos Life is expected to
achieve gross premiums of some CHF 447 m. Nicos Life will continue to operate as a
legally independent company under its present name. Winterthur assumed the opera-
tional management of the company on 31 March 2000.
67

20. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Banking business Insurance business Total
1 SPLIT OF INCOME STATEMENT INTO BANKING 1999 1998 1999 1999 1998
1998
AND INSURANCE BUSINESS in CHF m in CHF m in CHF m in CHF m in CHF m
in CHF m
Net interest income 5,252 5,152 0 5,252 5,152
0
Net commission and service fee income 10,870 8,327 0 10,870 8,327
0
Net trading income 6,578 2,378 0 6,578 2,378
0
Net income from insurance business 1, 2 1, 2
0 0 5,060 5,060 5,357
5,357
Other ordinary income 577 1,386 – 467 110 486
– 900
23,277 17,243 4,593 27,870 21,700
NET OPERATING INCOME 4,457
Salaries and other remuneration 10,331 7,587 1,225 11,556 8,919
1,332
Employee benefits 908 680 293 1,201 1,005
325
Other personnel expenses 515 438 237 752 662
224
1,755 1 1,881 1
Personnel expenses 11,754 8,705 13,509 10,586
Premises and real estate expenses 731 672 202 933 885
213
Expenses for IT, machinery, furnishings,
vehicles and other equipment 853 784 249 1,102 921
137
Sundry operating expenses 2,442 1,841 752 3,194 2,667
826
1,203 2 1,176 2
Other operating expenses 4,026 3,297 5,229 4,473
Total operating expenses 15,780 12,002 2,958 18,738 15,059
3,057
7,497 5,241 1,635 9,132 6,641
GROSS OPERATING PROFIT 1,400
Depreciation and write-offs on non-current assets 929 567 116 1,045 657
90
Valuation adjustments, provisions and losses 1,540 3,175 0 1,540 3,175
0
Total depreciation, valuation adjustments, losses 2,469 3,742 116 2,585 3,832
90
GROUP PROFIT BEFORE EXTRAORDINARY
5,028 1,499 1,519 6,547 2,809
ITEMS AND TAXES 1,310
Extraordinary income 93 1,011 0 93 1,554
543
Extraordinary expenses 152 573 0 152 573
0
Taxes 809 204 340 1,149 575
371
4,160 1,733 1,179 5,339 3,215
GROUP PROFIT 1,482
Minority interests 28 36 90 118 147
111
4,132 1,697 1,089 5,221 3,068
NET PROFIT (AFTER MINORITY INTERESTS) 1,371
Expenses owing to the handling of both claims and investments are allocated to the income from insurance business.
1 personnel expenses CHF 618 m (previous year CHF 510 m)
2 other operating expenses CHF 487 m (previous year CHF 321 m)
68

21. 1999 1998 Change
2 INCOME AND EXPENSES FROM Switzerland Abroad Switzerland Abroad Switzerland Abroad
ORDINARY ACTIVITIES BY ORIGIN in CHF m in CHF m in CHF m in CHF m in CHF m in CHF m
Net interest income 2,646 2,606 2,808 2,344 –162 262
Net commission and service fee income 4,225 6,645 3,688 4,639 537 2,006
Net trading income 1,371 5,207 1,193 1,185 178 4,022
Income from insurance business 2,216 2,844 2,933 2,424 –717 420
Other ordinary income 264 –154 410 76 –146 –230
10,722 17,148 11,032 10,668 – 310 6,480
NET OPERATING INCOME
Personnel expenses 3,785 9,724 3,563 7,023 222 2,701
Other operating expenses 2,025 3,204 1,755 2,718 270 486
5,810 12,928 5,318 9,741 492 3,187
TOTAL OPERATING EXPENSES
4,912 4,220 5,714 927 – 802 3,293
GROSS OPERATING PROFIT BEFORE TAXES
% of total 54% 46% 86% 14%
Taxes 381 768 274 301 107 467
% of total 33% 67% 48% 52%
4,531 3,452 5,440 626 – 909 2,826
GROSS OPERATING PROFIT AFTER TAXES
% of total 57% 43% 90% 10%
1999 1998 Change Change
3 ANALYSIS OF EXTRAORDINARY INCOME in CHF m in CHF m in CHF m in %
Release of reserves for general banking risks 21 933 – 912 – 98
Gains from the disposal of participations 11 553 – 542 – 98
Other extraordinary income 61 68 –7 –10
93
TOTAL EXTRAORDINARY INCOME 1,554 –1,461 – 94
1999 1998 Change Change
4 ANALYSIS OF EXTRAORDINARY EXPENSES in CHF m in CHF m in CHF m in %
Creation of reserves for general banking risks 101 3 98 –
World War II settlement 0 459 – 459 –100
Other extraordinary expenses 51 111 – 60 – 54
152 573 – 421 –73
TOTAL EXTRAORDINARY EXPENSES
69

22. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1999 1998 Change Change
5 INCOME STATEMENT FOR BANKING BUSINESS Notes in CHF m in CHF m in CHF m in %
5,252 5,152 100 2
NET INTEREST INCOME 6
RESULT FROM COMMISSION AND SERVICE FEE ACTIVITIES
594 202 52
Commission income from lending business 392
10,523 2,493 31
Commission from securities and investment transactions 8,030
393 63 19
Commission from other services 330
640 215 51
Commission expenses 425
10,870 2,543 31
8,327
NET COMMISSION AND SERVICE FEE INCOME
6,578 4,200 177
2,378
NET TRADING INCOME 7
OTHER ORDINARY INCOME
505 –719 – 59
Income from the sale of financial investments 1,224
71 –23 –24
Income from investment activities 94
60 –23 –28
– of which from participations valued according to the equity method 83
11 0 0
– of which from other non-consolidated participations 11
33 5 18
Real estate income 28
403 81 25
Sundry ordinary income 322
435 153 54
Sundry ordinary expenses 282
577 – 809 – 58
1,386
OTHER ORDINARY INCOME
23,277 6,034
17,243 35
NET OPERATING INCOME
11,754 3,049
Personnel expenses 8,705 35
4,026 729
Other operating expenses 3,297 22
15,780 3,778
12,002 31
TOTAL OPERATING EXPENSES
7,497 2,256
5,241 43
GROSS OPERATING PROFIT
929 362
Depreciation and write-offs on non-current assets 567 64
87 5
– of which on real estate 82 6
842 362
– of which on other tangible and intangible fixed assets 480 75
0 –5
– of which on non-consolidated participations 5 –100
1,540 –1,635
Valuation adjustments, provisions and losses 3,175 – 51
8
2,469 –1 273
3,742 – 34
DEPRECIATION, VALUATION ADJUSTMENTS, LOSSES
5,028 3,529
1,499 235
ANNUAL PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES
93 – 918
Extraordinary income – 91
1,011
152 – 421
Extraordinary expenses –73
573
809 605
Taxes 297
204
4,160 2,427 140
1,733
ANNUAL PROFIT
28 –8
Minority interests –22
36
4,132 2,435 143
1,697
NET PROFIT (AFTER MINORITY INTERESTS)
70