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					BASE LISTING DOCUMENT DATED APRIL 14, 2011


  If you are in doubt as to any aspect of this document, you should consult your stockbroker
  or other registered dealer in securities, bank manager, solicitor, professional accountant or
  other professional adviser.

  Hong Kong Exchanges and Clearing Limited (HKEx), The Stock Exchange of Hong Kong
  Limited (stock exchange) and Hong Kong Securities Clearing Company Limited (HKSCC)
  take no responsibility for the contents of this document, make no representation as to its
  accuracy or completeness and expressly disclaim any liability whatsoever for any loss
  howsoever arising from or in reliance upon the whole or any part of the contents of this
  document.




                           (incorporated under the laws of Switzerland)

                      Base Listing Document relating to
                     Structured Products to be issued by

                                    Credit Suisse AG
This document includes particulars given in compliance with the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited (the listing rules) and is published for
the purpose of giving information with regard to us and our derivative warrants (warrants),
callable bull/bear contracts (CBBCs) and other structured products (warrants, CBBCs and such
other structured products are collectively, structured products) to be listed on the stock
exchange from time to time. This document may be updated and/or amended from time to time by
way of addenda. You must ask us if any addenda to this document have been issued.

We accept full responsibility for the accuracy of the information contained in this document
and confirm, having made all reasonable enquiries, that to the best of our knowledge and
belief there are no other facts the omission of which would make any statement in this
document misleading.

The structured products involve derivatives. Do not invest in them unless you fully
understand and are willing to assume the risks associated with them.

You are warned that the prices of structured products may fall in value as rapidly as they may rise
and you may sustain a total loss of your investment. You should therefore ensure that you
understand the nature of the structured products and carefully study the risk factors set out in this
document and, where necessary, seek professional advice, before you invest in any structured
products.

The structured products constitute our general unsecured contractual obligations and of no other
person and will rank equally among themselves and with all our other unsecured obligations (save
for those obligations preferred by law) upon liquidation. If you purchase any structured products
you are relying upon our creditworthiness and have no rights under such structured products
against (a) the company which has issued the underlying securities; (b) the trustee or the manager
of the underlying unit trust; or (c) the index compiler of any underlying index.


                                    Sponsor and Manager


                        Credit Suisse (Hong Kong) Limited
                                                 TABLE OF CONTENTS

                                                                                                                                     Page

IMPORTANT INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                       3

OVERVIEW OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        6

OVERVIEW OF CBBCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  10

TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     13

PLACING AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               15

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           19

GENERAL INFORMATION ABOUT US . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               30

APPENDIX 1             — GENERAL CONDITIONS OF THE STRUCTURED PRODUCTS . . .                                                           33

APPENDIX 2             — PRODUCT CONDITIONS OF THE WARRANTS . . . . . . . . . . . . . . .                                              40
        PART A         — PRODUCT CONDITIONS OF CALL/PUT WARRANTS OVER
                          SINGLE EQUITIES (CASH SETTLED) . . . . . . . . . . . . . . . . . . . . .                                     41
        PART B         — PRODUCT CONDITIONS OF CALL WARRANTS OVER SINGLE
                          EQUITIES (PHYSICALLY SETTLED) . . . . . . . . . . . . . . . . . . . . . .                                    53
       PART C          — PRODUCT CONDITIONS OF LOCKED-IN RETURN CALL/PUT
                          WARRANTS OVER SINGLE EQUITIES (CASH SETTLED) . . . . .                                                       65
       PART D          — PRODUCT CONDITIONS OF AVERAGE RETURN CALL/PUT
                          WARRANTS OVER SINGLE EQUITIES (CASH SETTLED) . . . . .                                                       74
        PART E         — PRODUCT CONDITIONS OF BASKET CALL/PUT WARRANTS
                          (CASH SETTLED) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   82
        PART F         — PRODUCT CONDITIONS OF INDEX CALL/PUT WARRANTS
                          (CASH SETTLED) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     94
       PART G          — PRODUCT CONDITIONS OF CALL/PUT WARRANTS OVER
                          SINGLE UNIT TRUSTS (CASH SETTLED) . . . . . . . . . . . . . . . . . .                                       103
       PART H          — PRODUCT CONDITIONS OF CALL/PUT WARRANTS OVER
                          SINGLE FOREIGN EQUITIES (CASH SETTLED) . . . . . . . . . . . . .                                            115

APPENDIX 3             — PRODUCT CONDITIONS OF THE CBBCs . . . . . . . . . . . . . . . . . . .                                        127
        PART A         — PRODUCT CONDITIONS OF INDEX CALLABLE BULL/BEAR
                          CONTRACTS (CASH SETTLED) . . . . . . . . . . . . . . . . . . . . . . . . . .                                128
        PART B         — PRODUCT CONDITIONS OF CALLABLE BULL/BEAR
                          CONTRACTS OVER SINGLE EQUITIES (CASH SETTLED) . . . .                                                       138
       PART C          — PRODUCT CONDITIONS OF CALLABLE BULL/BEAR
                          CONTRACTS OVER SINGLE UNIT TRUSTS (CASH SETTLED) .                                                          151

APPENDIX 4             — OUR GENERAL INFORMATION EXTRACTED FROM CREDIT
                          SUISSE GROUP AG ANNUAL REPORT 2010 . . . . . . . . . . . . . . .                                            165

APPENDIX 5             — OUR FINANCIAL STATEMENTS EXTRACTED
                          FROM CREDIT SUISSE GROUP AG ANNUAL REPORT 2010 . .                                                          246

APPENDIX 6             — LEGAL PROCEEDINGS INFORMATION EXTRACTED
                           FROM CREDIT SUISSE GROUP AG ANNUAL REPORT 2010 . .                                                         331

PARTIES


                                                                  −2−
                                IMPORTANT INFORMATION

What is this document about?                         (c)   a high credit rating is not necessarily
                                                           indicative of low risk. Our credit ratings as
This document is for information purposes only             of the above date are for reference only
and does not constitute an offer, an                       and may be subject to change thereafter.
advertisement or invitation to the public to               You may visit www.credit-suisse.com to
subscribe for or to acquire any structured                 obtain information about our credit ratings.
products.                                                  Any downgrading of our credit ratings
                                                           could result in a reduction in the value of
What documents should you read before                      the structured products.
investing in the structured products?
                                                     The structured products are not rated.
A supplemental listing document will be issued
on the issue date of each series of structured       Are we regulated by any bodies referred to
products,   which     will  include   detailed       in rule 15A.13(2) or (3) of the listing rules?
commercial terms of the relevant series.
                                                     We are regulated by the Hong Kong Monetary
You must read this document (including any           Authority as a registered institution. We are
addendum to this document to be issued from          also, amongst others, regulated by the Swiss
time to time) together with such supplemental        Financial Market Supervisory Authority and the
listing document (including any addendum to          Swiss National Bank.
such supplemental listing document to be
issued from time to time) (together, the listing     Are we subject to any litigation?
documents) before investing in any structured
product. You should carefully study the risk         Save as disclosed in the section headed “Legal
factors set out in the listing documents.            Proceedings Information extracted from Credit
                                                     Suisse Group AG annual report 2010” set out in
What are our credit ratings?                         appendix 6 of this document, we and our
                                                     affiliates are not involved in any litigation,
                                                     claims or arbitration proceedings which are
Our senior long term debt ratings as of April 13,
                                                     material in the context of any issue of the
2011 were:
                                                     structured products. Also, we are not aware of
                                                     any proceedings or claims which are
Rating agency                    Credit ratings
                                                     threatened or pending against us or any
                                                     member of our group of companies.
Moody’s Investors Service        Aa1
Standard and Poor’s                                  Has our financial position changed since
Ratings Services                 A+                  last financial year-end?
Fitch Ratings                    AA-
                                                     Save as disclosed in the section headed “Our
Rating agencies usually receive a fee from the       financial statements extracted from Credit
entities that they rate. When evaluating our         Suisse Group AG annual report 2010” set out in
creditworthiness, you should not solely rely on      appendix 5 of this document, there has been no
our credit ratings because:                          material adverse change in our financial
                                                     position since December 31, 2010. You may
(a)   a credit rating is not a recommendation to     access our latest publicly available financial
      buy, sell or hold the structured products;     information by visiting our website at
                                                     www.credit-suisse.com.
(b)   our credit ratings may involve difficult-to-
      quantify    factors  such    as     market     Do you need to pay any transaction cost?
      competition, the success or failure of new
      products and markets and managerial            The stock exchange charges a trading fee of
      competence; and                                0.005 per cent. and the Securities and Futures


                                                  −3−
Commission (SFC) charges a transaction levy         (c)   this document and any addenda or
of 0.003 per cent. in respect of each transaction         successor document to this document;
effected on the stock exchange payable by
each of the seller and the buyer and calculated     (d)   the supplemental listing document as long
on the value of the consideration for the                 as the relevant series of structured
structured products. The levy for the investor            products is listed on the stock exchange;
compensation fund is currently suspended.                 and

Do you need to pay any tax?                         (e)   a Chinese translation of each of the listing
                                                          documents.
You may be required to pay stamp duties, taxes
and other charges in accordance with the laws       Request for photocopies of the above
and practices of the country of your purchase in    documents will be subject to a reasonable fee
addition to the issue price of each structured      which reflects the costs of making such copies.
product. See the section headed “Taxation” for
further information.                                The listing documents are also available on the
                                                    following websites of the stock exchange:
Authorised representatives and acceptance
of service
                                                    (a)   in respect of warrants, at http://www.hkex.
                                                          com.hk/eng/dwrc/search/listsearch.asp.
Our authorised representatives are Ken Pang
and James Green, both of 45th Floor, Two
                                                    (b)   in respect of CBBCs, at http://www.hkex.
Exchange Square, 8 Connaught Place, Central,
                                                          com.hk/eng/cbbc/search/listsearch.asp.
Hong Kong.

                                                    T N ^ e‡NöN¦Sïe¼N R €oN¤b@}²zÙp ‰½     :
Credit Suisse (Hong Kong) Limited (presently
at 45th Floor, Two Exchange Square, 8
                                                    (a)   \1N |ûR k ‹I€ Š  , http://www.hkex.com.
Connaught Place, Central, Hong Kong) has
                                                          hk/chi/dwrc/search/listsearch_c.asp.
been authorised to accept, on our behalf,
service of process and any other notices
                                                    (b)   \1N |ûR r[qŠ‹I€ Š    , http://www.hkex.com.
required to be served on us.
                                                          hk/chi/cbbc/search/listsearch_c.asp.
Where can       you    inspect   the    relevant
documents?                                          Have our auditors consented to the
                                                    inclusion of their reports in this document?
You may inspect copies of the following
documents during usual business hours on any        Our auditors have given and have not
weekday (Saturdays, Sundays and holidays            withdrawn their written consent dated 13 April,
excepted) at the offices of Credit Suisse (Hong     2011 regarding the inclusion of their two reports
Kong) Limited, (presently at 45th Floor, Two        and/or the references to their name in this
Exchange Square, 8 Connaught Place, Central,        document, in the form and context in which they
Hong Kong):                                         are included. Their two reports were not
                                                    prepared exclusively for incorporation in this
(a)   the consent letter from KPMG AG (our          document. Our auditors do not have any
      auditors) in relation to the inclusion of     shareholding in us, nor do they have the right
      their two reports on our (i) consolidated     (whether legally enforceable or not) to
      financial statements; and (ii) the            subscribe for or to nominate persons to
      effectiveness of internal control over        subscribe for our securities.
      financial reporting in this document;
                                                    Placing and sale and grey market dealings
(b)   annual report 2010 of Credit Suisse Group
      AG (Credit Suisse Group AG annual             No action has been taken to permit a public
      report 2010);                                 offering of structured products or the


                                               −4−
distribution of this document in any jurisdiction    Governing law of the structured products
where action would be required for such
purposes. The distribution of this document and      All contractual documentation for the structured
the offering of any structured products may, in      products will be governed by, and construed in
certain jurisdictions, be restricted by law. You
                                                     accordance with, the laws of Hong Kong.
must inform yourself of and observe all such
restrictions. See the section headed “Placing
and Sale” in this document for further details.      How can you get further information about
                                                     us or the structured products?
Following the launch of a series of structured
products, we may place all or part of that series    You may visit www.credit-suisse.com to obtain
with our related party.                              further information about us and/or the
                                                     structured products.
The structured products may be sold to
investors in the grey market in the period           Undefined terms
between the launch date and the listing date.
We will report any dealings in structured
                                                     Unless otherwise specified, terms not defined
products by us and/or any of our subsidiaries or
                                                     in this document have the meanings given to
associated companies in the grey market to the
stock exchange on the listing date through the       them in the general conditions set out in
website    of   the    stock    exchange      at     appendix 1 of this document and the relevant
www.hkex.com.hk.                                     product conditions applicable to the relevant
                                                     series of structured products set out in
The listing documents are not the sole basis         appendix 2 and appendix 3 of this document
for making your investment decision                  (together, conditions).

The listing documents do not take into account
your investment objectives, financial situation
or particular needs. The listing documents are
not intended to provide the basis of any credit
or other evaluation and should not be
considered as a recommendation by us or the
sponsor, that you should purchase any of the
structured products or the underlying asset of
the structured products. We do not imply that
there has been no change in the information set
out in this document since its publication date.

No person has been authorised to give any
information or to make any representations
other than those contained in this document in
connection with the structured products, and, if
given or made, such information or
representations must not be relied upon as
having been authorised by us.

HKEx, the stock exchange and HKSCC have
made no assessment of, nor taken any
responsibility for, our financial soundness or the
merits of investing in any structured products,
nor have they verified the accuracy or the
truthfulness of statements made or opinions
expressed in this document.


                                                −5−
                                OVERVIEW OF WARRANTS

What is a derivative warrant?                        the underlying asset) from us. If the value of the
                                                     entitlement drops below your investment
A derivative warrant linked to a share, a unit, an   amount, you will suffer a loss or a substantial
index, a basket of securities or other asset         loss of your investment.
(each an underlying asset) is an instrument
which gives the holder a right to “buy” or “sell”    How do our warrants work?
the underlying asset at, or derives its value by
reference to, a pre-set price or level called the    Ordinary warrants
exercise price or strike level on the exercise
date or the expiry date (as the case may be). It     The potential payoff of an ordinary warrant is
usually costs a fraction of the price or level of    calculated by reference to the difference
the underlying asset.                                between:

A derivative warrant may provide leveraged
                                                     (a)   for a warrant linked to a share or a unit, the
return to you (but conversely, it could also
                                                           exercise price and the closing price(s) of
magnify your losses).
                                                           such share or unit on the valuation date or
                                                           each valuation date (closing price);
How and when can you get back your
investment?
                                                     (b)   for a warrant linked to an index, the strike
                                                           level and the closing level of such index on
American style warrants can be exercised on or
                                                           the valuation date; or
before the expiry date. European style warrants
can only be exercised on the expiry date.
                                                     (c)   for a warrant linked to a basket of shares
                                                           or units, the exercise price and the sum of
Our warrants will be exercised on the exercise
                                                           the closing price(s) of each share or unit in
date or the expiry date (as the case may be),
                                                           the basket on the valuation date or each
entitling you to:
                                                           valuation date, multiplied by their
                                                           respective weightings called the basket
(a)   in the case of cash settled warrants, a
                                                           components (basket closing price),
      cash amount called the cash settlement
      amount (if positive); or
                                                     each as described more in the applicable
(b)   in the case of physically settled warrants,    product conditions set out in parts A, B, E, F, G
      physical delivery of a pre-fixed quantity of   and H of appendix 2 of this document.
      the    underlying    asset     called    the
      entitlement,                                   Call warrants


each according to the conditions applicable to       A call warrant is suitable for an investor holding
our warrants.                                        a bullish view of the price or level of the
                                                     underlying asset during the term of the warrant.
For cash settled warrants, you will receive the
cash settlement amount upon exercise or              A call warrant will be exercised if the closing
expiry. If the cash settlement amount is equal to    price, the closing level or the basket closing
or less than the exercise expenses, no amount        price is greater than the exercise price or the
is payable to you upon exercise or expiry of         strike level (as the case may be). The more the
your warrants.                                       closing price, the closing level or the basket
                                                     closing price is greater than the exercise price
For physically settled warrants, you must pay        or the strike level (as the case may be), the
any exercise expenses to us and will receive         higher the payoff upon exercise or expiry. If the
the entitlement (being a pre-fixed quantity of       closing price, the closing level or the basket


                                                −6−
closing price (as the case may be) is equal to or     The periodic cash settlement amount is
less than the exercise price or the strike level      calculated by us by reference to the difference
(as the case may be), an investor in the call         between the arithmetic mean of the closing
warrant will lose all of his investment.              prices of one share or one unit on each of the 5
                                                      business days immediately prior to the relevant
Put warrants                                          periodic fixing date (called the periodic
                                                      average price) and the exercise price. This
A put warrant is suitable for an investor holding     calculation is similar to the calculation of the
a bearish view of the price or level of the           cash settlement amount for an ordinary cash
underlying asset during the term of the warrant.      settled warrant linked to a share or a unit.


A put warrant will be exercised if the closing        Your return at expiry under a locked-in return
price, the closing level or the basket closing        warrant will be the aggregate sum of the
price is less than the exercise price or the strike   periodic cash settlement amounts divided by
level (as the case may be). The more the              the total number of periodic fixing dates.
closing price, the closing level or the basket
closing price is less than the exercise price or      Locked-in return call warrant
the strike level (as the case may be), the higher
                                                      A locked-in return call warrant is suitable for an
the payoff upon exercise or expiry. If the closing
                                                      investor holding a bullish view of the price of the
price, the closing level or the basket closing
                                                      share or unit on each periodic fixing date during
price is equal to or greater than the exercise
                                                      the term of the warrant.
price or the strike level (as the case may be), an
investor in the put warrant will lose all of his
                                                      A locked-in return call warrant will be exercised
investment.
                                                      if the periodic average price in respect of any
                                                      periodic fixing date is greater than the exercise
Exotic warrants
                                                      price. The more the periodic average price is
                                                      greater than the exercise price, the higher the
Exotic warrants have different terms and risk
                                                      relevant periodic cash settlement amount and
profiles to ordinary warrants.
                                                      the payoff at expiry.

The information below is a summary of the key
                                                      Locked-in return put warrant
features of two types of our exotic warrants,
namely, (a) locked-in return warrants and (b)         A locked-in return put warrant is suitable for an
average return warrants.                              investor holding a bearish view of the price of
                                                      the share or unit on each periodic fixing date
Locked-in return warrants                             during the term of the warrant.

You should carefully review the relevant              A locked-in return put warrant will be exercised
supplemental listing document together with           if the periodic average price in respect of any
the product conditions set out in part C of           periodic fixing date is less than the exercise
appendix 2 of this document before deciding to        price. The more the periodic average price is
invest in a “locked-in return” warrant.               less than the exercise price, the higher the
                                                      relevant periodic cash settlement amount and
Locked-in return warrants will “lock-in” any          the payoff at expiry.
positive return on the warrants called the
periodic cash settlement amount on each               Average return warrants
periodic fixing date.
                                                      You should carefully review the relevant
On each periodic fixing date during the term of       supplemental listing document together with
a locked-in return warrant, we will determine         the product conditions set out in part D of
the periodic cash settlement amount applicable        appendix 2 of this document before deciding to
to that period.                                       invest in an “average return” warrant.


                                                 −7−
On each periodic fixing date during the term of      less than the exercise price. The more the
an average return warrant, the arithmetic mean       average of the periodic reference prices is less
of the closing prices of one share or one unit on    than the exercise price, the higher the payoff at
each of the 5 business days immediately prior        expiry.
to such periodic fixing date (called the periodic
reference price) is recorded. A positive             If the average of the periodic reference prices is
performance in the share or unit on a periodic       equal to or greater than the exercise price, an
fixing date may be offset by a negative              investor in the average return put warrant will
performance of such share or unit on another         lose all of his investment.
periodic fixing date and vice versa. Your return
under an average return warrant is therefore         Other types of warrants
dependent on the average of the performances
of the share or unit on each periodic fixing date.   The supplemental listing document applicable
                                                     to other types of warrants will specify the type
The description average return refers to the         of such warrants and whether such warrants
calculation of the return on the warrants only.      are ordinary or exotic warrants.
Your return of an average return warrant is
calculated by reference to difference between        Further details relating to how a particular
(a) the average of the periodic reference prices     series of warrants work will be set out in the
(that is, the sum of the periodic reference prices   relevant supplemental listing document.
divided by the number of the periodic fixing
dates); and (b) the exercise price.                  Where can you find the general conditions
                                                     and the product conditions applicable to our
Average return call warrant                          warrants?

An average return call warrant is suitable for an    You should review the general conditions and
investor holding a bullish view of the               the product conditions applicable to each type
performance of the share or unit on each             of the warrants before your investment.
periodic fixing date during the term of the
warrant.                                             The general conditions are set out in appendix
                                                     1 of this document and the product conditions
An average return call warrant will be exercised     applicable to each type of our warrants are set
if the average of the periodic reference prices is   out in appendix 2 of this document (as may be
greater than the exercise price. The more the        supplemented by any addendum or the relevant
average of the periodic reference prices is          supplemental listing document).
greater than the exercise price, the higher the
payoff at expiry.                                    What are the factors determining the price of
                                                     a derivative warrant?
If the average of the periodic reference prices is
equal to or less than the exercise price, an         The price of a warrant generally depends on the
investor in the average return call warrant will     prevailing price or level of the underlying asset.
lose all of his investment.                          However, the price of a warrant will be
                                                     influenced by a number of factors throughout
Average return put warrant                           the warrant term, including:

An average return put warrant is suitable for an     (a)   the exercise price or the strike level;
investor holding a bearish view of the
performance of the share or unit on each             (b)   the depth of market and the liquidity of the
periodic fixing date during the term of the                underlying asset and/or futures contracts
warrant.                                                   relating to the underlying asset;

An average return put warrant will be exercised      (c)   the probable range of the cash settlement
if the average of the periodic reference prices is         amount;


                                                −8−
(d)   the volatility of the price or level of the
      underlying asset (being a measure of the
      fluctuation in the price or level of the
      underlying asset);


(e)   the time remaining to expiry: a derivative
      warrant is generally more valuable the
      longer the remaining life of the derivative
      warrant;


(f)   any changes in interim interest rates and
      dividend yields;


(g)   expected dividend payments or other
      distributions on the underlying asset or on
      any components comprising the index;


(h)   the supply and demand for that warrant;
      and/or


(i)   our creditworthiness.


What is your maximum loss?


Your maximum loss in our warrants will be
limited to your investment amount plus any
transaction costs.


How can you get information about the
warrants after issue?


You may visit the stock exchange website at
http://www.hkex.com.hk/eng/prod/secprod/dwrc/
dw.htm to obtain further information on
derivative warrants or any notice given by us or
the stock exchange in relation to our warrants.




                                               −9−
                                   OVERVIEW OF CBBCS

What are CBBCs?                                      Your entitlement following the occurrence of a
                                                     mandatory call event will depend on the
CBBCs are a type of structured products that         category of the CBBCs. See “Category R
track the performance of an underlying asset.        CBBCs vs. category N CBBCs” below for
CBBCs can be issued on different types of            further information.
underlying assets as prescribed by the stock
exchange from time to time, including:               If no mandatory call event occurs, the CBBCs
                                                     will be exercised automatically on the expiry
(a)   shares or unit trusts listed on the stock      date. The cash settlement amount (if any)
      exchange;                                      payable at expiry represents the difference
                                                     between the closing price or the closing level of
                                                     the underlying asset on the valuation date and
(b)   Hang Seng Index, Hang Seng China
                                                     the strike price or the strike level.
      Enterprises Index and Hang Seng China
      H-Financials Index; and/or
                                                     What are the mandatory call features of
                                                     CBBCs?
(c)   overseas securities, overseas indices,
      currencies or commodities (such as oil,
                                                     Mandatory call event
      gold and platinum).
                                                     Subject to the limited circumstances set out in
A list of eligible underlying assets for CBBCs is    the relevant conditions in which a mandatory
available on the website of the stock exchange       call event may be reversed, we must terminate
at http://www.hkex.com.hk/eng/prod/secprod/cbbc/     the CBBCs if a mandatory call event occurs. A
underlying_latest.htm.                               mandatory call event occurs if the spot price or
                                                     the spot level of the underlying asset is:
CBBCs are issued either as callable bull
contracts or callable bear contracts, allowing       (a)   at or below the call price or the call level
you to take either bullish or bearish positions on         (in the case of a callable bull contract); or
the underlying asset. Callable bull contracts are
designed for investors who have an optimistic        (b)   at or above the call price or the call level
view on the underlying asset. Callable bear                (in the case of a callable bear contract),
contracts are designed for investors who have
a pessimistic view on the underlying asset.          at any time during the observation period.

CBBCs have a mandatory call feature (the             For CBBCs over underlying assets traded or
mandatory call event) and, subject to the            quoted locally, the observation period starts
limited circumstances set out in the relevant        from   and      includes   the    observation
conditions in which a mandatory call event may       commencement date of the relevant CBBCs
be reversed, we must terminate our CBBCs             and ends on and includes the trading day
upon the occurrence of a mandatory call event.       immediately preceding the expiry date.
See “What are the mandatory call features of
CBBCs?” below for further information.               Subject to the limited circumstances set out in
                                                     the relevant conditions in which a mandatory
                                                     call event may be reversed and such
There are 2 categories of CBBCs, namely:
                                                     modification and amendment as may be
                                                     prescribed by the stock exchange from time to
(a)   category R CBBCs; and
                                                     time:

(b)   category N CBBCs.
                                                     (a)   all trades in the CBBCs concluded after
                                                           the time at which the mandatory call event
                                                           occurs; and


                                               − 10 −
(b)   where the mandatory call event occurs            the strike price or the strike level. In respect of
      during a pre-opening session or closing          a series of category R CBBCs, you may receive
      auction session (if applicable), all auction     a cash payment called the residual value upon
      trades in the CBBCs concluded in such            the occurrence of a mandatory call event. The
      session and all manual trades of the             amount of the residual value payable (if any) is
      CBBCs concluded after the end of the             calculated by reference to:
      pre-order matching period in such
      session,                                         (a)   (in the case of callable bull contract) the
                                                             difference between the minimum trade
                                                             price or the minimum index level and the
will be invalid and cancelled, and will not be
                                                             strike price or the strike level of the
recognised by us or the stock exchange.
                                                             underlying asset; and

The time at which a mandatory call event
                                                       (b)   (in the case of callable bear contract) the
occurs will be determined by reference to:
                                                             difference between the strike price or the
                                                             strike level and the maximum trade price
(a)   (in the case of CBBCs over single equities             or the maximum index level of the
      or CBBCs over single unit trusts listed on             underlying asset.
      the stock exchange) the stock exchange’s
      automatic order matching and execution           Category N CBBCs refer to CBBCs for which
      system time at which the spot price is at or     the call price or the call level is equal to their
      below the call price (for a series of callable   strike price or the strike level. In respect of a
      bull contracts) or is at or above the call       series of category N CBBCs, you will not
      price (for a series of callable bear             receive any cash payment following the
      contracts);                                      occurrence of a mandatory call event.

(b)   (in the case of CBBCs over index quoted          You must read the applicable conditions and
      on the stock exchange) the time the              the relevant supplemental listing document to
      relevant spot level is published by the          obtain further information on the calculation
      index compiler at which the spot level is at     formula of the residual value applicable to
      or below the call level (for a series of         category R CBBCs.
      callable bull contracts) or is at or above
      the call level (for a series of callable bear    You may lose all of your investment in a
      contracts); or                                   particular series of CBBCs if:


(c)   (in the case of CBBCs over other                 (a)   in the case of a series of callable bull
                                                             contracts, the minimum trade price or the
      underlying assets), the time as specified in
                                                             minimum index level of the underlying
      the    relevant    supplemental      listing
                                                             asset is equal to or less than the strike
      document,
                                                             price or the strike level; or

subject to the rules and requirements as
                                                       (b)   in the case of a series of callable bear
prescribed by the stock exchange from time to
                                                             contracts, the maximum trade price or the
time.                                                        maximum index level of the underlying
                                                             asset is equal to or greater than the strike
Category R CBBCs vs. category N CBBCs                        price or the strike level.

The supplemental listing document for the              Where can you find the general conditions
relevant series of CBBCs will specify whether          and the product conditions applicable to our
the CBBCs are category R CBBCs or category             CBBCs?
N CBBCs.
                                                       You should review the general conditions and
Category R CBBCs refer to CBBCs for which              the product conditions applicable to the CBBCs
the call price or the call level is different from     before you invest.


                                                 − 11 −
The general conditions are set out in appendix         in dollar value (on the assumption of an
1 of this document and the product conditions          entitlement ratio of one CBBC to one underlying
applicable to our CBBCs are set out in appendix        asset).
3 of this document (as may be supplemented by
any addendum or the relevant supplemental              However, throughout the term of a CBBC, its
listing document).                                     price will be influenced by a number of factors,
                                                       including:
How is the funding cost calculated?
                                                       (a)   the strike price or the strike level and the
The issue price of a CBBC is set by reference to             call level or the call price;
(a) the difference between the initial reference
spot price or spot level of the underlying asset       (b)   the likelihood of the occurrence of a
as at the launch date of the CBBC and the strike             mandatory call event;
price or the strike level, plus (b) if applicable, a
funding cost.                                          (c)   for category R CBBCs only, the probable
                                                             range of the residual value payable upon
The issue price of a CBBC includes the initial               the occurrence of a mandatory call event;
funding cost (if any) and the initial funding cost
applicable to the CBBCs as of the launch date
                                                       (d)   the time remaining to expiry;
will be specified in the relevant supplemental
listing document for the relevant series.
                                                       (e)   any change(s) in interim interest rates;

The funding cost is an amount determined by
                                                       (f)   expected dividend payments or other
us based on a number of factors, including but
                                                             distribution on the underlying asset or on
not limited to the strike price or the strike level,
                                                             any     components      comprising     the
the prevailing interest rate and, for CBBCs over
                                                             underlying index;
single equities or CBBCs over single unit trusts,
the expected dividend or distribution yield in
                                                       (g)   the supply and demand for the CBBCs;
respect of the underlying asset.

                                                       (h)   the depth of the market or liquidity of
Further details about the funding cost
                                                             future contracts relating to the underlying
applicable to a series of CBBCs will be
                                                             index;
described in the relevant supplemental listing
document.
                                                       (i)   any related transaction costs; and/or
Do you own the underlying asset?
                                                       (j)   our creditworthiness.
CBBCs convey no interest in the underlying
asset. We may choose not to hold the                   What is your maximum loss?
underlying asset or any derivatives contracts
linked to the underlying asset. There is no            Your maximum loss in the CBBCs will be limited
restriction through the issue of the CBBCs on          to your investment amount plus any transaction
our ability to sell, pledge or otherwise convey all    costs.
right, title and interest in any underlying asset
or any derivatives products linked to the              How can you get information about the
underlying asset.                                      CBBCs after issue?

What are the factors determining the price of          You may visit the stock exchange website at
a CBBC?                                                http://www.hkex.com.hk/eng/prod/secprod/cbbc/
                                                       Intro.htm to obtain further information on
The price of a CBBC tends to mirror the                CBBCs or any notice given by us or the stock
movement in the value of the underlying asset          exchange in relation to our CBBCs.


                                                 − 12 −
                                           TAXATION

     The information below is of a general nature and is only a summary of the law and practice
currently applicable in Switzerland and under Hong Kong law. The comments relate to the position
of persons who are the absolute beneficial owners of the structured products and may not apply
equally to all persons. If you are in any doubt as to your tax position on purchase, ownership,
transfer or exercise of any structured product, you should consult your own tax advisers as to the
Swiss, Hong Kong or other tax consequences of the acquisition, ownership and disposition of
structured products, including, in particular, the effect of any foreign, state or local tax laws to
which you are subject.


Taxation in Switzerland                            (c)   any capital gains, arising on the sale of the
                                                         underlying    securities    or    structured
Gain on sale or redemption                               products, except that Hong Kong profits
                                                         tax may be chargeable on any such gains
Under present Swiss law, a holder of structured          in the case of certain persons carrying on
products who is neither a resident of                    a trade, profession or business in Hong
Switzerland nor whose transactions in the                Kong.
structured products are attributable to a
permanent establishment within Switzerland
                                                   Stamp duty
during the taxable year will not be subject to
any Swiss Federal, Cantonal or Municipal
income or other tax on gains realised during       You do not need to pay any stamp duty in
that year on the holding, sale, redemption or      respect of purely cash settled structured
exercise of a structured product.                  products.

Stamp tax                                          Where Hong Kong stock is to be delivered,
                                                   stamp duty will normally be payable since any
No stamp tax will arise in Switzerland in          person who effects a sale or purchase of Hong
connection with the issue or sale of the           Kong stock, such term as defined in the Stamp
structured products provided that no Swiss         Duty Ordinance (Cap 117, The Laws of Hong
Bank or Swiss securities dealer is involved as a
                                                   Kong), whether as principal or as agent and
counterparty or an intermediary. Swiss stamp
                                                   whether such transaction is effected in Hong
tax will not be payable on the exercise of a
                                                   Kong or elsewhere, is required to execute a
structured product provided that the structured
product is not exercised by or through a Swiss     contract note evidencing such sale or purchase
Bank or a Swiss securities dealer.                 and have such contract note stamped with
                                                   Hong Kong stamp duty.
Taxation in Hong Kong
                                                   Taxation in United States of America
Profits tax
                                                   Legislation affecting securities held through
No tax is payable in Hong Kong by withholding      foreign accounts
or otherwise in respect of:
                                                   Under the “Hiring Incentives to Restore
(a)   dividends of any company;
                                                   Employment Act” (the “Act”), a 30% withholding
                                                   tax is imposed on “withholdable payments”
(b)   distributions of any trust authorised as a
                                                   made to foreign financial institutions (and their
      collective investment scheme by the SFC
      under section 104 of the Securities and      more than 50% affiliates) unless the payee
      Futures Ordinance (Cap 571, The Laws of      foreign financial institution agrees, among other
      Hong Kong) or otherwise approved by the      things, to disclose the identity of any U.S.
      SFC which has issued the underlying          individual with an account at the institution (or
      units; and                                   the institution’s affiliates) and to annually report


                                              − 13 −
certain information about such account.              applicable tax treaty with the United States,
“Withholdable payments” include payments of          such payments generally would be subject to
interest (including original issue discount),        U.S. withholding tax. A “dividend equivalent”
dividends, and other items of fixed or               payment is (i) a substitute dividend payment
determinable annual or periodical gains, profits,    made pursuant to a securities lending or a
and income (“FDAP”), in each case, from              sale-repurchase transaction that (directly or
sources within the United States, as well as         indirectly) is contingent upon, or determined by
gross proceeds from the sale of any property of      reference to, the payment of a dividend from
a type which can produce interest or dividends       sources within the United States, (ii) a payment
from sources within the United States. The Act
                                                     made pursuant to a “specified notional principal
also requires withholding agents making
                                                     contract” that (directly or indirectly) is
withholdable payments to certain foreign
                                                     contingent upon, or determined by reference to,
entities that do not disclose the name, address,
                                                     the payment of a dividend from sources within
and taxpayer identification number of any
                                                     the United States, and (iii) any other payment
substantial U.S. owners (or certify that they do
                                                     determined by the IRS to be substantially
not have any substantial United States owners)
to withhold tax at a rate of 30%. We will treat      similar to a payment described in the preceding
payments on the securities as withholdable           clauses (i) and (ii). In the case of payments
payments for these purposes.                         made after March 18, 2012, a dividend
                                                     equivalent payment includes a payment made
Withholding under the Act will apply to all          pursuant to any notional principal contract
withholdable payments without regard to              unless otherwise exempted by the IRS. Where
whether the beneficial owner of the payment is       the securities reference an interest in a fixed
a U.S. person, or would otherwise be entitled to     basket of securities or an index, such fixed
an exemption from the imposition of withholding      basket or index will be treated as a single
tax pursuant to an applicable tax treaty with the    security. Where the securities reference an
United States or pursuant to U.S. domestic law.      interest in a basket of securities or an index that
Unless a foreign financial institution is the        may provide for the payment of dividends from
beneficial owner of a payment, it will be subject    sources within the United States, absent
to refund or credit in accordance with the same      guidance from the IRS, it is uncertain whether
procedures and limitations applicable to other       the IRS would determine that payments under
taxes withheld on FDAP payments provided             the securities are substantially similar to a
that the beneficial owner of the payment             dividend. If the IRS determines that a payment
furnishes such information as the IRS
                                                     is substantially similar to a dividend, it may be
determines is necessary to determine whether
                                                     subject to U.S. withholding tax, unless reduced
such beneficial owner is a United States owned
                                                     by an applicable tax treaty.
foreign entity and the identity of any substantial
United States owners of such entity. Generally,
the Act’s withholding and reporting regime will
apply to payments made after December 31,
2012. Thus, if you hold your securities through
a foreign financial institution or foreign
corporation or trust, a portion of any of your
payments made after December 31, 2012 may
be subject to 30% withholding.

Legislation affecting substitute dividend and
dividend equivalent payments

The Act treats a “dividend equivalent” payment
as a dividend from sources within the United
States. Under the Act, unless reduced by an


                                               − 14 −
                                      PLACING AND SALE

General                                                whose account or benefit the structured
                                                       products are being purchased is a U.S. Person,
We have not taken, and will not take, any action       that it is not located in the U.S., nor was
that would permit a public offering of the             solicited to purchase the structured products
structured     products     or   possession       or   while present in the U.S. and that it is not aware
distribution of any offering material in relation to   of any reason such purchase or ownership
the structured products in any jurisdiction            would not be eligible for Reg S exemption or
where action for that purpose is required. No          otherwise require securities to be registered
offers, sales or deliveries of any structured          under the Securities Act and (c) agree that if it
                                                       should resell or otherwise transfer the
products, or distribution of any offering material
                                                       structured products, it will do so only (i) to us or
relating to the structured products may be
                                                       any of our affiliates, (ii) in the case of certain
made in or from any jurisdiction except in
                                                       structured products eligible for sale in the
circumstances which will result in compliance
                                                       United States, through us or any affiliate
with any applicable laws or regulations and will
                                                       thereof to an institutional accredited investor
not impose any obligation on us. In the event          that executes and delivers an investor
that we contemplate a placing, placing fees            representation letter to us (as described below)
may be payable in connection with any issue            in a transaction exempt from the registration
and we may at our discretion allow discounts to        requirements of the Securities Act, subject to
placees.                                               our prior approval or such affiliate’s prior
                                                       approval, or (iii) to a non-U.S. Person in an
United States of America                               offshore    transaction      in   reliance     upon
                                                       Regulation S.
The structured products will not be registered
under the U.S. Securities Act of 1933, as              Each holder of a structured product and each
amended (the Securities Act), or the securities        beneficial owner of a structured product
laws of any state in the United States.                purchasing structured products inside the
Accordingly, the structured products may be            United States on the basis of the exemption
offered only (a) outside the United States to          provided by section 4(2) of the Securities Act,
non-U.S. Persons in reliance upon Regulation           as a condition to purchasing or owning such
S under the Securities Act (Regulation S) and          structured product or any beneficial interest
(b) in the case of certain types of structured         therein will be deemed to (a) represent that it is
product offerings inside the United States, to a       purchasing such structured products for its own
limited number of institutions that are                account or an account over which it exercises
accredited investors under the Securities Act          sole investment discretion and that it or such
                                                       account is an institutional accredited investor
(institutional accredited investors) on the
                                                       and (b) acknowledge that such structured
basis of the exemption provided by section 4(2)
                                                       products have not been and will not be
of the Securities Act from the registration
                                                       registered under the Securities Act, and may
requirements of section 5 thereof.
                                                       not be offered or sold except as set forth herein
                                                       and (c) agree that if it should resell or otherwise
Each holder of a structured product and each
                                                       transfer the structured products, it will do so
beneficial owner of a structured product               only (i) to us or any affiliate thereof, or (ii)
purchasing structured products outside the             through us or any affiliate thereof to an
United States in reliance upon Regulation S, as        institutional accredited investor that executes
a condition to purchasing or owning such               and delivers an investor representation letter to
structured product or any beneficial interest          us (as described below) in a transaction exempt
therein, will be deemed to (a) acknowledge that        from the registration requirements of the
such structured products will not be registered        Securities Act, subject to the prior approval of
under the Securities Act, and may not be               us or such affiliate, or (iii) to a non-U.S. Person
offered or sold except as set forth herein and         in an offshore transaction in reliance upon
(b) represent that neither it nor any person for       Regulation S.


                                                 − 15 −
Upon execution and delivery of an investor             (e)   that the institutional accredited investor
representation letter to us in the form required             was not formed for the purpose of
under the conditions of such structured                      investing in the structured products or our
products, structured products may be issued                  other securities unless each of its
and sold to institutional accredited investors.              beneficial owners is an institutional
                                                             accredited investor that was not so
The investor representation letter will state,               formed;
among other things, the following:
                                                       (f)   that the institutional accredited investor is
(a)   that the institutional accredited investor             able to bear the economic risks of an
      has received or may receive upon request               investment in such structured products
      copies of this base listing document and               and has such knowledge and experience
      such other information as it deems                     in financial and business matters as to be
      necessary in order to make its investment              capable of evaluating the merits and risks
      decision;                                              of acquiring such structured products;

(b)   that the institutional accredited investor       (g)   that the institutional accredited investor is
      understands that any subsequent transfer               acquiring      the    structured    products
      of the structured products is subject to               purchased by it for its own account or for
      certain restrictions and conditions set forth          the accounts of one or more persons each
      in this base listing document and the                  of whom meet all of the requirements of
      structured products (including those set               paragraph (c), (d), (e) and (f) above;
      out above) and that it agrees to be bound
      by and not to resell pledge or otherwise         (h)   that the institutional accredited investor is
      transfer the structured products except in
                                                             not aware of any reason such purchase or
      compliance with such restrictions and
                                                             ownership would not be eligible for
      conditions and the Securities Act;
                                                             exemption provided by 4(2) of the
                                                             Securities Act or would otherwise require
(c)   that the purchaser is an institution that is
                                                             securities to be registered under the
      an “accredited investor” as defined in Rule
                                                             Securities Act; and
      501(a)(1), (2), (3) or (7) under the
      Securities Act;
                                                       (i)   that the institutional accredited investor
                                                             acknowledges that it has conducted and
(d)   that the institutional accredited investor is
                                                             relied on its own research into such
      not itself, or a fiduciary investing assets of
                                                             matters as it deemed necessary or
      or on behalf of (i) an employee benefit
                                                             advisable in connection with its purchase
      plan (as defined in section 3(3) of the
                                                             of the structured products.
      United States Employee Retirement
      Income Security Act of 1974, as amended
      (ERISA)) that is subject to Title I of ERISA;    The structured products in definitive form not
      (ii) a plan (as defined in section 4975(e)(1)    eligible for sale in the United States will bear
      of the United States Internal Revenue            the following legend:
      Code of 1986, as amended) that is subject
      to the prohibited transaction provisions of      THE STRUCTURED PRODUCTS EVIDENCED
      section 4975 of the code, or; (iii) an entity    HEREBY HAVE NOT BEEN REGISTERED
      the assets of which are treated as “plan         UNDER THE UNITED STATES SECURITIES
      assets” of employee benefit plans or plans       ACT OF 1933, AS AMENDED (THE
      as a result of investments by such plans in      SECURITIES  ACT),   OR   ANY   STATE
      the entity pursuant to section 3(42) of          SECURITIES LAWS, AND, ACCORDINGLY,
      ERISA or otherwise. This representation          MAY NOT BE OFFERED, SOLD, PLEDGED
      shall be deemed made on each day from            OR OTHERWISE TRANSFERRED EXCEPT AS
      the date on which the purchaser acquires         SET   FORTH    IN   THE   FOLLOWING
      the structured products through and              SENTENCE. BY ITS ACQUISITION HEREOF,
      including the date on which the purchaser        THE HOLDER HEREOF OR OF A BENEFICIAL
      disposes of the structured products;             INTEREST HEREIN (1) REPRESENTS THAT


                                                 − 16 −
IT IS PURCHASING THE STRUCTURED                    THAT IT WILL RESELL OR OTHERWISE
PRODUCTS EVIDENCED HEREBY FOR ITS                  TRANSFER THE STRUCTURED PRODUCTS
OWN ACCOUNT OR AN ACCOUNT OVER                     EVIDENCED HEREBY ONLY TO (A) CREDIT
WHICH IT EXERCISES SOLE INVESTMENT                 SUISSE OR ANY AFFILIATE THEREOF OR (B)
DISCRETION; (2) REPRESENTS THAT IT AND             THROUGH CREDIT SUISSE OR ANY
ANY SUCH ACCOUNT IS A NON-U.S.                     AFFILIATE THEREOF TO AN INSTITUTION
PERSON (WITHIN THE MEANING OF                      THAT IS AN ACCREDITED INVESTOR THAT
REGULATION S UNDER THE SECURITIES                  EXECUTES AND DELIVERS AN INVESTOR
ACT) ACQUIRING      THE    STRUCTURED              REPRESENTATION LETTER TO THE ISSUER
PRODUCTS EVIDENCED HEREBY IN AN                    IN A TRANSACTION EXEMPT FROM THE
OFFSHORE TRANSACTION IN RELIANCE                   REGISTRATION REQUIREMENTS OF THE
UPON    REGULATION     S   UNDER THE               SECURITIES ACT OR (C) A NON-U.S.
SECURITIES ACT; AND (3) AGREES FOR THE             PERSON IN AN OFFSHORE TRANSACTION
BENEFIT OF THE ISSUER THAT IT WILL                 IN RELIANCE UPON RULE 904 OF
RESELL OR OTHERWISE TRANSFER THE                   REGULATION S UNDER THE SECURITIES
STRUCTURED      PRODUCTS     EVIDENCED             ACT.
HEREBY ONLY (A) TO CREDIT SUISSE OR
ANY AFFILIATE THEREOF OR (B) A NON-U.S.            Each purchaser of structured products
PERSON IN AN OFFSHORE TRANSACTION                  acknowledges that we and others will rely upon
IN RELIANCE UPON RULE 904 OF                       the truth and accuracy of the foregoing
REGULATION S UNDER THE SECURITIES                  acknowledgments,        representations      and
ACT. CONSEQUENTLY, ANY OFFER, SALE,                agreements and agrees that, if any of the
RESALE, TRADE OR DELIVERY MADE,                    acknowledgments,         representations        or
DIRECTLY OR INDIRECTLY, WITHIN THE                 agreements deemed to have been made by it
UNITED STATES OR TO OR FOR THE                     by its purchase of structured products is no
BENEFIT OF A U.S. PERSON WILL NOT BE               longer accurate, it shall promptly notify us. If it
RECOGNISED.                                        is acquiring any structured products as a
                                                   fiduciary or agent for one or more accounts, it
The structured products in definitive form         represents that it has sole investment
eligible for sale in the United States will bear   discretion with respect to each such account
the following legend:                              and that it has full power to make the foregoing
                                                   acknowledgments,        representations      and
THE STRUCTURED PRODUCTS EVIDENCED                  agreements on behalf of each such account.
HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES                 As used herein, “U.S.” means the United States
ACT OF 1933, AS AMENDED (THE                       of America (including the States and the District
SECURITIES    ACT),  OR     ANY     STATE          of Columbia), its territories and possessions;
SECURITIES LAWS, AND, ACCORDINGLY,                 and “U.S. Person” has the meaning defined in
MAY NOT BE OFFERED, SOLD, PLEDGED                  Regulation S.
OR OTHERWISE TRANSFERRED EXCEPT AS
SET   FORTH      IN  THE     FOLLOWING             European Economic Area
SENTENCE. BY ITS ACQUISITION HEREOF,
THE HOLDER HEREOF OR OF A BENEFICIAL               In relation to each Member State of the
INTEREST HEREIN (1) REPRESENTS THAT                European      Economic      Area   which    has
IT IS PURCHASING THE STRUCTURED                    implemented the Prospectus Directive (each, a
PRODUCTS EVIDENCED HEREBY FOR ITS                  relevant member state), with effect from and
OWN ACCOUNT OR AN ACCOUNT OVER                     including the date on which the prospectus
WHICH IT EXERCISES SOLE INVESTMENT                 directive is implemented in that relevant
DISCRETION; (2) REPRESENTS THAT IT AND             member state (the relevant implementation
ANY SUCH ACCOUNT IS AN INSTITUTION                 date), no offer of structured products which are
THAT IS AN “ACCREDITED INVESTOR” AS                the subject of the offering contemplated by this
DEFINED IN RULE 501(A)(1), (2), (3) OR (7)         base listing document as completed by the
UNDER THE SECURITIES ACT; AND (3)                  relevant supplemental listing document in
AGREES FOR THE BENEFIT OF THE ISSUER               relation thereto to the public in that relevant


                                              − 17 −
member state has been, or will be, made except        pursuant to article 3 of the prospectus directive
for, with effect from and including the relevant      or supplement a prospectus pursuant to article
implementation date, an offer of structured           16 of the prospectus directive.
products to the public in that relevant member
state may be made:                                    For the purposes of this provision, the
                                                      expression relating to an offer of structured
(a)   if the supplemental listing document in
                                                      products to the public in relation to any
      relation to the structured products
                                                      structured products in any relevant member
      specifies that an offer of those structured
                                                      state means the communication in any form and
      products may be made other than
                                                      by any means of sufficient information on the
      pursuant to Article 3(2) of the prospectus
                                                      terms of the offer and the structured products to
      directive in that relevant member state (a
      non-exempt offer), following the date of        be offered so as to enable an investor to decide
      publication of a prospectus in relation to      to purchase or subscribe the structured
      such structured products which has been         products, as the same may be varied in that
      approved by the competent authority in          member state by any measure implementing
      that relevant member state or, where            the prospectus directive in that member state
      appropriate, approved in another relevant       and the expression prospectus directive
      member state and notified to the                means Directive 2003/71/EC (and amendments
      competent authority in that relevant            thereto, including the 2010 PD amending
      member state, provided that any such            directive, to the extent implemented in the
      prospectus has subsequently been                relevant member state), and includes any
      completed by the supplemental listing           relevant implementing measure in the relevant
      document contemplating such non-                member state and the expression 2010 PD
      exempt offer, in accordance with the            amending       directive      means     Directive
      prospectus directive, in the period             2010/73/EU.
      beginning and ending on the dates
      specified     in   such    prospectus    or
                                                      United Kingdom
      supplemental      listing  document,     as
      applicable and the issuer has consented in
      writing to its use for the purpose of that      Any invitation or inducement to engage in
      non-exempt offer;                               investment activity (within the meaning of
                                                      section 21 of the Financial Services and
(b)   at any time to any legal entity which is a      Markets Act 2000 (FSMA)) in connection with
      qualified investor as defined in the            the issue or sale of the structured products has
      prospectus directive;                           only been communicated or caused to be
                                                      communicated and will only be communicated
(c)   at any time to fewer than 100 or, if the        or     caused      to   be    communicated       in
      relevant member state has implemented           circumstances in which section 21(1) of the
      the relevant provisions of the 2010 PD          FSMA would not, if we were not an authorised
      amending directive, 150 natural or legal        person, apply to us. All applicable provisions of
      persons (other than qualified investors as      the FSMA have been complied with, and will be
      defined in the prospectus directive)            complied with, with respect to anything done by
      subject to obtaining prior consent of the       it in relation to any structured products in, from
      relevant dealer or dealers nominated by         or otherwise involving the United Kingdom.
      us for any such offer; or

(d)   at any time in any other circumstances
      falling within article 3(2) of the prospectus
      directive,

provided that no such offer of structured
products referred to in (b) to (d) above shall
require us or any dealer to publish a prospectus


                                                − 18 −
                                        RISK FACTORS

     Not all of the risk factors described below will be applicable to a particular series of the
structured products. Please consider all risks carefully prior to investing in any structured products
and consult your professional independent financial adviser and legal, accounting, tax and other
advisers with respect to any investment in the structured products. Please read the following
section together with the risk factors set out in the relevant supplemental listing document.


General risks relating to us                         We do not guarantee the repayment of your
                                                     investment in any structured products.
Ultimate holding company of our group
                                                     Any downgrading of our rating by our rating
We are not the ultimate holding company of the       agencies could result in a reduction in the value
group to which we belong and with which our          of the structured products.
name is identified. The ultimate holding
company of the group to which we belong is           No deposit liability or debt obligation
Credit Suisse Group AG.
                                                     We are obliged to deliver to you the cash
Structured products are unsecured obligations        settlement amount or the entitlement (as the
                                                     case may be) under the conditions applicable to
Each series of structured products constitutes       the relevant structured products upon expiry or
our general unsecured contractual obligations        exercise. We do not intend (expressly, implicitly
and of no other person and will rank equally         or otherwise) to create a deposit liability or a
with    our   other   unsecured    contractual       debt obligation of any kind by the issue of any
obligations. At any given time, the number of        structured product.
our structured products outstanding may be
substantial.                                         Conflicts of interest

Repurchase of our structured products                Credit Suisse Group AG constitutes a
                                                     diversified financial services group with
We may repurchase structured products at any         relationships in countries around the world. We
time from time to time in the private market or      engage in a wide range of commercial and
otherwise at a negotiated price or the prevailing    investment      banking,     brokerage,    funds
market price, at our discretion. You should not      management,       hedging     transactions   and
therefore make any assumption as to the              investment and other activities for our own
number of structured products in issue at any        account or the account of others. In addition,
time.                                                Credit Suisse Group AG, in connection with our
                                                     other business activities, may possess or
Our creditworthiness                                 acquire material information about any
                                                     underlying assets. Such activities and
If you purchase our structured products, you         information may involve or otherwise affect the
are relying upon our creditworthiness and have       issuers of the underlying assets in a manner
no rights under the structured products against:     that may cause consequences adverse to you
                                                     or otherwise create conflicts of interests in
(a)   any company which issues the underlying        connection with our issue of structured
      shares;                                        products. Such actions and conflicts may
                                                     include, without limitation, the exercise of
(b)   the trustee or the      manager     of   the   voting power, the purchase and sale of
      underlying unit; or                            securities, financial advisory relationships and
                                                     exercise of creditor rights. Credit Suisse Group
(c)   the index compiler of the underlying index.    AG has no obligation to disclose such


                                                − 19 −
information about the underlying assets,             outstanding debt securities by any one of our
baskets of shares and/or indices or such             rating agencies could result in a reduction in the
activities. Credit Suisse Group AG and our           trading value of the structured products.
respective officers and directors may engage in
any such activities without regard to our issue      General risks        relating     to   structured
of structured products or the effect that such       products
activities may directly or indirectly have on any
structured product. In the ordinary course of our
                                                     You may lose all your investment in the
business, including without limitation in
                                                     structured product
connection with us or our appointed liquidity
provider’s market making activities, Credit
Suisse Group AG may effect transactions for          Structured products involve a high degree of
our own account or for the account of our            risk, and are subject to a number of risks which
customers and hold long or short positions in        may include interest, foreign exchange, time
the underlying assets or related derivatives. In     value, market, and/or political risks. Structured
addition, in connection with the offering of any     products may expire worthless.
structured product, we or any member of Credit
Suisse Group AG may enter into one or more           Options, warrants and asset linked instruments
hedging transactions with respect to the             are priced primarily on the basis of the price or
underlying assets or related derivatives. In         level of the underlying asset, the volatility of the
connection with such hedging or market making        underlying asset’s price or level and the time
activities or with respect to proprietary or other
                                                     remaining to expiry of the structured product.
trading activities by us or any member of Credit
Suisse Group AG, we may enter into
                                                     The prices of structured products may fall in
transactions in the underlying assets or related
derivatives which may affect the market price,       value as rapidly as they may rise and you
liquidity or value of the structured products and    should be prepared to sustain a significant or a
which may affect your interests in the structured    total loss of your investment in the structured
products.                                            products. Assuming all other factors are held
                                                     constant, the more the price or level of the
In particular, you should note that we issue a       underlying asset of a structured product moves
large number of financial instruments, including     in a direction against you and the shorter its
the structured products, on a global basis. The      remaining term to expiration, the greater the
number      of   such    financial    instruments    risk that you will lose all or a significant part of
outstanding at any time may be substantial. We       your investment.
have substantially no obligation to any holder of
the structured products other than to pay            European style structured products are only
amounts in accordance with the applicable            exercisable on their respective expiry dates and
conditions and in the relevant supplemental
                                                     may not be exercised by you prior to the
listing document. We do not in any respect
                                                     relevant expiry date. Accordingly, if on such
underwrite or guarantee the performance of any
                                                     expiry date the cash settlement amount is zero
structured product. Any profit or loss realised by
                                                     or negative, you will lose the value of your
you in respect of a structured product upon
                                                     investment.
exercise or otherwise due to changes in the
value of such structured product, or the price or
level of the underlying asset, is solely for your    The risk of losing all or any part of the purchase
own account. In addition, we have the absolute       price of a structured product means that, in
discretion to put in place any hedging               order to recover and realise a return upon your
transaction or arrangement which we consider         investment in the structured products, you must
appropriate in connection with any structured        generally be correct about the direction, timing
products or the applicable underlying asset. A       and magnitude of an anticipated change in the
reduction in our rating, if any, accorded to our     price or level of the underlying asset.


                                               − 20 −
Changes in the price or level of an underlying        Maximum exercise amount
asset can be unpredictable, sudden and large
and such changes may result in the price or           In respect of American style structured products
level of the underlying asset moving in a             and if so indicated in the relevant supplemental
direction which will negatively impact upon the       listing document, we will have the option to limit
return on your investment. You therefore risk         the number of structured products exercisable
losing your entire investment if the price or level   or being closed out on any exercise date or
of the relevant underlying asset does not move        expiry date to the maximum number specified
                                                      therein and, in conjunction with such limitation,
in the anticipated direction.
                                                      to limit the number of structured products
                                                      exercisable or being closed out by any holder
The value of the structured products may be
                                                      on such day. In the event that the total number
disproportionate or opposite to movement in
                                                      of structured products being exercised or being
price or level of the underlying assets               closed out exceeds such specified maximum
                                                      number, you may not be able to realise the
An investment in structured products is not the       value of your investment in all the structured
same as owning the underlying asset or having         products on that day.
a direct investment in the underlying asset. The
market values of structured products are linked       Minimum exercise amount
to the relevant underlying assets and will be
influenced (positively or negatively) by it or        In respect of American style structured products
them but any change may not be comparable             and if so indicated in the relevant supplemental
and may be disproportionate. It is possible that      listing document, you may have to tender a
while the price or level of the underlying assets     specified minimum number of the structured
is increasing, the value of the structured            products at any one time in order to exercise
product is falling.                                   the structured products. If you have fewer than
                                                      the specified minimum number of such
You should recognise the risks of utilising           structured products, you will either have to sell
                                                      your structured products or purchase additional
structured products if you intend to purchase
                                                      structured products, incurring transaction costs
any series of structured products to hedge
                                                      in each case, in order to realise a return on your
against the market risk associated with
                                                      investment, and you may incur the risk that the
investing in the relevant underlying asset. The
                                                      trading price of the structured product at that
value of the structured products may not              time is different from the applicable cash
exactly correlate with the price or level of the      settlement amount.
underlying asset. Due to fluctuations in supply
and demand for structured products, there is no       Possible illiquidity of secondary market
assurance that their value will correlate with
movements in the price or level of the                It is not possible to predict:
underlying asset. The structured products may
not be a perfect hedge to the underlying asset        (a)   if and to what extent a secondary market
or portfolio of which the underlying asset forms            may develop in any series of structured
a part.                                                     products;

Furthermore, it may not be possible to liquidate      (b)   at what price such series of structured
the structured products at a price or level which           products will trade in the secondary
directly reflects the price or level of the                 market; and
underlying asset or portfolio of which the
underlying asset forms a part. You may                (c)   whether such market will be liquid or
therefore suffer substantial losses in the                  illiquid.
structured products notwithstanding any losses
suffered with respect to investments in or            The fact that the structured products are listed
exposures to any underlying assets.                   does not necessarily lead to greater liquidity
                                                      than if they were not listed.


                                                − 21 −
We intend to apply to list each         series of    of factors influence interest rates such as
structured products on the stock      exchange.      macro economic, governmental, speculative
There can be no assurance that the    listing of a   and market sentiment factors. Such fluctuations
series of structured products at       the stock     may have an impact on the value of the
exchange can be maintained.                          structured products at any time prior to
                                                     valuation of the underlying assets relating to
If any series of structured products are not         the structured products.
listed or traded on any exchange, pricing
information for such series of structured            Exchange rate risk
products may be difficult to obtain and the
liquidity of that series of structured products      There may be an exchange rate risk in the case
may be adversely affected.                           of structured products where the cash
                                                     settlement amount will be converted from a
The liquidity of any series of structured            foreign currency into Hong Kong dollars.
products may also be affected by restrictions on     Exchange rates between currencies are
offers and sales of the structured products in       determined by forces of supply and demand in
some jurisdictions. Transactions in off-             the foreign exchange markets. These forces
exchange structured products may be subject          are, in turn, affected by factors such as
to greater risks than dealing in exchange-           international balances of payments and other
traded structured products. To the extent that       economic and financial conditions, government
any structured products of a series is exercised     intervention in currency markets and currency
or closed out, the number of structured              trading speculation.
products outstanding in that series will
decrease, which may result in a lessening of         Fluctuations in foreign exchange rates, foreign
the liquidity of structured products. A lessening    political and economic developments and the
of the liquidity of the affected series of           imposition of exchange controls or other foreign
structured products may cause, in turn, an           governmental laws or restrictions applicable to
increase in the volatility associated with the       such investments may affect the foreign
price of such structured products.                   currency market price and the exchange rate-
                                                     adjusted equivalent price of the structured
We, acting through our liquidity provider, may       products. Fluctuations in the exchange rates of
be the only market participant for the structured    any one currency may be offset by fluctuations
products. Therefore, the secondary market for        in the exchange rate of other relevant
the structured products may be limited. We and       currencies. There can be no assurance that
our liquidity provider may at any time purchase      rates of exchange between any relevant
the structured products at any price in the open     currencies which are current at the date of
market or by tender or private agreement,            issue of any structured products will be
subject to the requirements under the listing        representative of the rates of exchange used in
rules relating to the provision of liquidity, as     computing the value of the relevant structured
described further in the relevant supplemental       products at any time thereafter.
listing document. The more limited the
secondary market is for any particular series of     Where structured products are described as
the structured products, the more difficult for      being “quantoed”, the value of the underlying
you to realise the value of your structured          assets will be converted from one currency (the
products prior to the expiration date.               original currency) into a new currency (the
                                                     new currency) on the date and in the manner
Interest rates                                       specified in, or implied by, the applicable
                                                     conditions using a fixed exchange rate. The
Investments in the structured products may           cost to us of maintaining such a fixing between
involve interest rate risk with respect to the       the original currency and the new currency will
currency of denomination of the underlying           have an implication on the value of the
assets and/or the structured products. A variety     structured products, which will vary during the


                                               − 22 −
term of the structured products. No assurance        terminate the structured products. In such
can be given as to whether or not, taking into       event, we will, if and to the extent permitted by
account relative exchange rates and interest         applicable law, pay an amount calculated by us
rate fluctuations between the original currency      to be the fair market value of the structured
and the new currency, a quanto feature in a          products     prior     to    such     termination
                                                     notwithstanding the illegality less our cost of
structured product would at any time enhance
                                                     unwinding any related hedging arrangements.
the return on the structured product over a level
of a similar structured product issued without
                                                     Risks relating to the underlying asset
such a quanto feature.
                                                     You have no right to the underlying asset
Taxes
                                                     Unless specifically indicated in the conditions,
You may be required to pay stamp duty or other       you will not be entitled to:
taxes or other documentary charges. If you are
in doubt as to your tax position, you should         (a)   voting rights or rights to receive dividends
consult your own independent tax advisers. In              or other distributions or any other rights
addition, you should be aware that tax                     that a holder of the shares or units would
regulations and their application by the relevant          normally be entitled to; or
taxation authorities change from time to time.
Accordingly, it is not possible to predict the       (b)   voting rights or rights to receive dividends
                                                           or other distributions or any other rights
precise tax treatment which will apply at any
                                                           with respect to any company constituting
given time. See the section headed “Taxation”
                                                           any underlying index.
for further information.
                                                     Valuation risk
Modification to the conditions
                                                     An investment in the structured products
Under the conditions, we may without your            involve valuation risk in relation to the relevant
consent, modify the general conditions and/or        underlying asset. The price or level of the
the product conditions if such modification is:      underlying asset may vary over time and may
                                                     increase or decrease by reference to a variety
(a)   not materially prejudicial to your interest;   of factors which may include corporate actions
                                                     (where the underlying asset is a share or a
                                                     basket of shares), changes in computation or
(b)   of a formal, minor or technical nature;
                                                     composition (where the underlying asset is an
                                                     index), macro economic factors and market
(c)   to correct an obvious error;                   trends.

(d)   for compliance with any mandatory              You must be experienced with dealing in these
      requirements under Hong Kong laws or           types of structured products and must
      regulations; or                                understand the risks associated with dealing in
                                                     such products. You should reach an investment
(e)   considered by the issuer to be appropriate     decision only after careful consideration, with
      and is approved by the stock exchange.         your advisers, of the suitability of any
                                                     structured product in light of your particular
                                                     financial circumstances, the information
Possible early termination for illegality
                                                     regarding the relevant structured product and
                                                     the particular underlying asset to which the
If we determine that for reasons beyond our          value of the relevant structured product relates.
control the performance of our obligations
under the structured products has become             Adjustment related risk
illegal in whole or in part as a result of our
compliance in good faith with any applicable         Certain events relating to the underlying asset
law, we may at our absolute discretion               require or, as the case may be, permit us to


                                                − 23 −
make certain adjustments or amendments to             trading after the suspension period of the
the conditions. You have limited anti-dilution        structured products. This may adversely affect
protection under the conditions. We may, in our       your investment in the structured products.
sole discretion adjust, among other things, the
entitlement, the exercise price, the call price (if   Delay in settlement
applicable) or any other terms (including
without limitation the closing price or the           Unless otherwise specified in the relevant
closing level of the underlying asset) of any         conditions, there may be a time lag between the
series of structured product. However, we are         date on which the structured products are
not required to adjust for every event that may       exercised or expire, and the time the applicable
affect an underlying asset, such as changes in        settlement amount relating to such event is
computation or composition (where the                 determined. Any such delay between the time
underlying asset is an index), macro economic         of exercise or expiry and the determination of
factors or market trends that affect the              the settlement amount will be specified in the
underlying asset, in which case the market            relevant conditions.
price of the structured products, and the return
upon the exercise or expiry of the structured         However, such delay could be significantly
products may be affected.                             longer, particularly in the case of a delay in the
                                                      exercise or expiry of such structured products
For structured products linked to an index, the       arising from our determination that a market
index level may be published by the index             disruption event, settlement disruption event or
compiler at a time when one or more                   delisting of a company has occurred at any
components comprising the index are not               relevant time or that adjustments are required
trading. If this occurs on a valuation date and       in accordance with the conditions.
there is no market disruption event called under
the conditions, then the closing level of the         The relevant settlement amount may change
index may be calculated by the index compiler         significantly during any such period, and such
by reference to the remaining components. In          movement or movements could decrease or
addition, certain events relating to the index        modify the settlement amount.
(including a material change in the formula or
the method of calculating the index or a failure      You should note that in the event of there being
to publish the index) permit us to determine the      a settlement disruption event or a market
level of the index on the basis of the formula or     disruption event, payment of the cash
method last in effect prior to such change in         settlement amount may be delayed as more
formula or method.                                    fully described in the conditions.

Suspension of trading                                 Risks relating to structured products over
                                                      trusts
If the underlying assets are suspended from
trading or dealing for whatever reason on the         General risks
market on which they are listed or dealt in
(including the stock exchange), trading in the        In the case of structured products which relate
relevant series of structured products will be        to the units of a trust:
suspended for a similar period. The value of the
structured products will decrease over time as        (a)   neither we nor any of our affiliates have
the length of the period remaining to expiration            the ability to control or predict the actions
becomes shorter. You should note that in the                of the trustee or the manager of the
case of a prolonged suspension period, the                  relevant trust. Neither the trustee nor the
market price of the structured products will be             manager of the relevant trust (i) is
subject to a significant impact of time decay of            involved in the offer of any structured
such prolonged suspension period and may                    product in any way, or (ii) has any
fluctuate significantly upon resumption of                  obligation to consider the interest of the


                                                − 24 −
      holders of any structured product in taking     ETF adopting a synthetic replication investment
      any corporate action that might affect the      strategy to achieve its investment objectives by
      value of any structured product; and            investing in financial derivative instruments
                                                      linked to the performance of an underlying
(b)   we have no role in the relevant trust. The      asset pool or index that the ETF is designed to
      manager of the relevant trust is                track (Synthetic ETF), you should note that:
      responsible      for   making     strategic,
      investment and other trading decisions
                                                      (a)   investments      in    financial  derivative
      with respect to the management of the
                                                            instruments will expose the Synthetic ETF
      relevant    trust    consistent   with   its
      investment objectives and in compliance               to the credit, potential contagion and
      with the investment restrictions as set out           concentration risks of the counterparties
      in the constitutive documents of the                  who issued such financial derivative
      relevant trust. The manner in which the               instruments. As such counterparties are
      relevant trust is managed and the timing of           predominantly       international  financial
      actions may have a significant impact on              institutions, the failure of one such
      the performance of the relevant trust.                counterparty may have a negative effect
      Hence, the market price of the relevant               on other counterparties of the Synthetic
      units is also subject to these risks.                 ETF. Even if the Synthetic ETF has
                                                            collateral to reduce the counterparty risk,
Exchange traded funds
                                                            there may still be a risk that the market
                                                            value of the collateral has fallen
In the case of structured products linked to
                                                            substantially when the Synthetic ETF
units of an exchange traded fund (ETF), you
should note that:                                           seeks to realise the collateral; and

(a)   an ETF is exposed to the economic,              (b)   the Synthetic ETF may be exposed to
      political, currency, legal and other risks of         higher liquidity risk if the Synthetic ETF
      a specific sector or market related to the            invests in financial derivative instruments
      underlying asset pool or index or market              which do not have an active secondary
      that the ETF is designed to track;                    market.

(b)   there may be disparity between the              The above risks may have a significant impact
      performance of the ETF and the
                                                      on the performance of the relevant ETF or
      performance of the underlying asset pool
                                                      Synthetic ETF and hence the market price of
      or index or market that the ETF is
                                                      structured products linked to such ETF or
      designed to track as a result of, for
      example, failure of the tracking strategy,      Synthetic ETF.
      currency differences, fees and expenses;
      and                                             Risks relating to our warrants

(c)   where the underlying asset pool or index        Time decay
      or market that the ETF tracks is subject to
      restricted access, the efficiency in the unit   The settlement amount of a series of warrants
      creation or redemption to keep the price of     at any time prior to expiration may be less than
      the ETF in line with its net asset value may    the trading price of such warrants at that time.
      be disrupted, causing the ETF to trade at a     The difference between the trading price or
      higher premium or discount to its net asset
                                                      level and the settlement amount will reflect,
      value. Hence, the market price of the
                                                      among other things, a “time value” of the
      structured products will also be indirectly
                                                      warrants. The “time value” of the warrants will
      subject to these risks.
                                                      depend upon, among others, the length of the
Synthetic exchange traded funds                       period remaining to expiration and expectations
                                                      concerning the range of possible future price or
Additionally, where the underlying asset of           level of the underlying assets. The value of the
structured products comprises the units of an         warrants is likely to decrease over time.


                                                − 25 −
Therefore, the warrants should not be viewed         will be terminated upon the occurrence of a
as products for long term investments.               mandatory call event and you will not be able to
                                                     benefit from your investment in the CBBCs
Risks relating to locked-in return warrants          even if the performance of the underlying asset
                                                     recovers subsequent to the occurrence of the
In the case of locked-in return warrants, if the     mandatory call event. When a mandatory call
periodic average price in respect of each            event occurs, payoff for a category N CBBC will
periodic fixing date is:                             be zero and for a category R CBBC, you may
                                                     lose all of your investment or receive a small
(a)   in the case of a locked-in return call         amount of residual value payment. Please refer
      warrant, equal to or less than the exercise    to the section headed “Overview of CBBCs” for
      price; or                                      more information.


(b)   in the case of a locked-in return put          Correlation between the price of a CBBC and
      warrant, equal to or greater than the          the price or level of the underlying asset
      exercise price,
                                                     When the underlying asset of a CBBC is trading
the periodic cash settlement amount for such         at a price or level close to its call price or call
warrant will be zero for each periodic fixing date   level, the price of that CBBC tends to be more
                                                     volatile and any change in the value of that
and you will lose all of your investment.
                                                     CBBC at such time may be incomparable and
                                                     disproportionate with the change in the price or
Risks relating to average return warrants
                                                     level of the underlying asset.

In the case of average return warrants, the
                                                     Mandatory call event is irrevocable
performance of the underlying asset on a
periodic fixing date may off-set its performance
                                                     A mandatory call event is irrevocable unless it
on another periodic fixing date.
                                                     is triggered as a result of any of the following
                                                     events:
If the average of the periodic reference prices
on each periodic fixing date is:
                                                     (a)   system malfunction or other technical
                                                           errors of HKEx (such as the setting up of
(a)   in the case of average return call warrants,
                                                           wrong call price or call level and other
      equal to or less than the exercise price; or
                                                           parameters) and such event is reported by
                                                           the stock exchange to us and we and the
(b)   in the case of average return put warrants,          stock exchange mutually agree that such
      equal to or greater than the exercise price,         mandatory call event is to be revoked; or

you will not receive any payment from us and         (b)   manifest errors caused by the relevant
will sustain a total loss of your investment.              third party price source where applicable
                                                           (such as miscalculation of the index level
Risks relating to our CBBCs                                by the index compiler) and such event is
                                                           reported by us to the stock exchange and
You may lose all or substantially all of your              we and the stock exchange mutually agree
investment upon the occurrence of a mandatory              that such mandatory call event is to be
call event                                                 revoked,

CBBCs are not suitable for all types of              in each case, such mutual agreement must be
investors. You should not invest in the CBBCs        reached no later than the time specified in the
unless you understand the nature of the CBBCs        relevant supplemental listing document or such
and are prepared to lose all or substantially all    other time as prescribed by the stock exchange
of your investment in the CBBCs. The CBBCs           from time to time. Upon revocation of the


                                               − 26 −
mandatory call event, trading of the CBBCs will      Residual value     may    not   include   residual
resume and any trade cancelled after such            funding cost
mandatory call event will be reinstated.
                                                     In respect of category R CBBCs, the residual
Delay in announcements of a mandatory call           value (if any) payable by us following the
event                                                occurrence of a mandatory call event may or
                                                     may not include the residual funding cost for the
The stock exchange will notify the market as         CBBCs. You may not receive any residual
soon as practicable after the CBBC has been          funding cost back from us upon early
called upon the occurrence of a mandatory call       termination of a category R CBBC upon a
event. You must however be aware that there          mandatory call event.
may be delay in the announcement of a
mandatory call event due to technical errors or      Our hedging activities may adversely affect the
system failures and other factors that are           price or level of the underlying asset
beyond our control or the control of the stock
exchange.                                            We and/or any of our affiliates may carry out
                                                     activities that minimise our risks related to the
Non-recognition of post MCE trades                   CBBCs, including effecting transactions for our
                                                     own account or for the account of our
The stock exchange and its recognised                customers and hold long or short positions in
exchange controller, HKEx, shall not incur any       the underlying asset (whether for risk reduction
liability (whether based on contract, tort           purposes or otherwise). In addition, in
(including, without limitation, negligence), or
                                                     connection with the offering of any CBBCs, we
any other legal or equitable grounds and,
                                                     and/or any of our affiliates may enter into one or
without regard to the circumstances giving rise
                                                     more hedging transactions with respect to the
to any purported claim (except in the case of
                                                     underlying asset. In connection with such
wilful misconduct on the part of the stock
                                                     hedging or market-making activities or with
exchange and/or HKEx)) for any direct,
                                                     respect to proprietary or other trading activities
consequential, special, indirect, economic,
                                                     by us and/or any of our affiliates, we and/or any
punitive, exemplary or any other loss or
                                                     of our affiliates may enter into transactions in
damage suffered or incurred by us or any other
                                                     the underlying asset which may affect the
party arising from or in connection with the
                                                     market price, liquidity or price or level of the
mandatory call event or the suspension of
                                                     underlying asset and/or the value of CBBCs
trading (trading suspension) or the non-
                                                     and which could be deemed to be adverse to
recognition of trades after a mandatory call
event (non-recognition of post MCE trades),          your interests. We and/or any of our affiliates
including, without limitation, any delay, failure,   are likely to modify our hedging positions
mistake or error in the trading suspension or        throughout the life of the CBBCs whether by
non-recognition of post MCE trades.                  effecting transactions in the underlying asset or
                                                     in derivatives linked to the underlying asset.
We and our affiliates shall not have any             Further, it is possible that the advisory services
responsibility towards you for any losses            which we or any of our affiliates provide in the
suffered as a result of the trading suspension       ordinary course of our business could lead to
and/or non-recognition of post MCE trades in         an adverse impact on the value of the
connection with the occurrence of a mandatory        underlying asset.
call event, the resumption of trading of the
CBBCs or reinstatement of any post MCE               Unwinding of hedging arrangements
trades cancelled as a result of the reversal of
any mandatory call event, notwithstanding that       Our or our affiliates’ trading and/or hedging
such    trading   suspension     and/or   non-       activities related to CBBCs and/or other
recognition of post MCE trades occur as a            financial instruments issued by us from time to
result of an error in the observation of the         time may have an impact on the price or level of
event.                                               the underlying asset and may trigger a


                                               − 27 −
mandatory call event. In particular, when the       of such structured products are held by HKSCC
underlying asset is trading close to the call       Nominees Limited, being the only legal owner.
price or the call level, our unwinding activities   The evidence of your title, as well as the
may cause a fall or rise (as the case may be) in    efficiency of ultimate delivery of the cash
the trading price or level of the underlying        settlement amount (if any) under the structured
asset, leading to a mandatory call event as a       products, will be subject to the CCASS Rules.
result of such unwinding activities.
                                                    You should be aware of the following risks:
In respect of category N CBBCs, we or our
affiliates may unwind any hedging transactions
                                                    (a)   you will not receive any definitive
entered into by us in relation to the CBBCs at
                                                          certificates representing your beneficial
any time even if such unwinding activities may
                                                          interests in the structured products;
trigger a mandatory call event.

                                                    (b)   you may only refer to the records of
In respect of category R CBBCs, before the
                                                          CCASS or their brokers/custodians and
occurrence of a mandatory call event, we or our
                                                          the statements you receive to determine
affiliates may unwind our hedging transactions
relating to the CBBCs in proportion to the                your beneficial interest in the structured
amount of the CBBCs we repurchase from time               products;
to time. Upon the occurrence of a mandatory
call event, we or our affiliates may unwind any     (c)   any notices, announcements and/or
hedging transactions in relation to the CBBCs.            information relating to meetings in respect
Such unwinding activities after the occurrence            of the structured products will only be
of a mandatory call event may affect the trading          delivered to you through the CCASS
price or level of the underlying asset and                participants in accordance with the
consequently the residual value for the CBBCs.            General Rules of CCASS and the CCASS
                                                          Operational Procedures in effect from time
Possible early      termination   for   hedging           to time; and
disruption
                                                    (d)   our obligations under the conditions of the
If we determine that a hedging disruption event           structured products will be duly performed
has occurred, we may at our absolute                      by the payment of the cash settlement
discretion terminate the CBBCs. In such event,            amount to HKSCC Nominees Limited as
we will, if and to the extent permitted by                the registered holder of the structured
applicable law, pay an amount calculated by us            products, all in accordance with the
to be the fair market value of the CBBCs prior to
                                                          General Rules of CCASS and the CCASS
such termination less our cost of unwinding any
                                                          Operational Procedures in effect from time
related hedging arrangements.
                                                          to time.

Risks relating to the legal form of the
                                                    Fee arrangements with brokers               and
structured products
                                                    conflicts of interest of brokers
Each series of structured products will be
                                                    We may enter into fee arrangements with
issued in global registered form and
represented by a global certificate registered in   brokers and/or any of their affiliates with
the name of HKSCC Nominees Limited (or such         respect to the placement of the structured
other nominee company as may be used by             products in the primary market. You should note
HKSCC from time to time in relation to the          that any brokers with whom we have a fee
provision of nominee services to persons            arrangement does not, and cannot be expected
admitted for the time being by HKSCC as a           to, deal exclusively in the structured products,
CCASS participant).                                 therefore any broker and/or its subsidiaries or
                                                    affiliates may from time to time engage in
The register for the relevant structured            transactions involving the underlying assets
products will only record at all times that 100%    and/or the structured products of other issuers


                                               − 28 −
over the same underlying assets to which the
particular series of structured products may
relate, or other underlying assets as the case
may be, for their proprietary accounts and/or for
the accounts of their clients. The fact that the
same broker may deal simultaneously for
different clients in competing products in the
market place may affect the value of the
structured products and present certain
conflicts of interests.


Effect of the combination of risk factors
unpredictable


Two or more risk factors may simultaneously
have an effect on the value of a series of
structured products such that the effect of any
individual risk factor may not be predictable. No
assurance can be given as to the effect any
combination of risk factors may have on the
value of a series of structured products.




                                               − 29 −
                         GENERAL INFORMATION ABOUT US

Incorporation, registered office and objective


We were established on July 5, 1856 and registered in the Commercial Register of the Canton of
Zurich on April 27, 1883 for an unlimited duration under the name of Schweizerische Kreditanstalt.
Our name was changed to Credit Suisse First Boston on December 11, 1996 (by entry in the
Commercial Register), effective as of January 1, 1997. Our name was then changed to Credit
Suisse, effective as of May 13, 2005. Our name was further changed to Credit Suisse AG, effective
as of November 9, 2009. We are a joint stock corporation established under Swiss law. Our share
capital amounts to CHF 4,399,665,200, which is divided into 43,996,652 fully paid-up registered
shares with a par value of CHF 100 each.


Members of our board of directors as of April 13, 2011*

Name                             Office held            Office address

Hans-Ulrich Doerig               Chairman               Credit Suisse Group AG
                                                        Paradeplatz 8
                                                        8070 Zurich
                                                        Switzerland

Urs Rohner                       Vice Chairman          Credit Suisse Group AG
                                                        Paradeplatz 8
                                                        8070 Zurich
                                                        Switzerland

Peter Brabeck-Letmathe           Vice Chairman          Nestlé SA
                                                        Avenue Nestlé 55
                                                        1800 Vevey, Switzerland

Jassim Bin Hamad J.J. Al         Director               Qatar Islamic Bank (QIB)
Thani                                                   Grand Hamad Avenue
                                                        P.O. Box 559
                                                        Doha, Qatar

Robert H. Benmosche              Director               American International Group, Inc.
                                                        President & CEO,
                                                        70 Pine Street,
                                                        New York, NY 10270, USA

Noreen Doyle                     Director               Credit Suisse Group AG
                                                        Paradeplatz 8
                                                        8070 Zurich
                                                        Switzerland

Walter B. Kielholz               Director               Swiss Reinsurance Company AG
                                                        Mythenquai 50/60
                                                        8022 Zurich
                                                        Switzerland



                                               − 30 −
Name                                   Office held                 Office address

Andreas N. Koopmann                    Director                    Credit Suisse Group AG
                                                                   Paradeplatz 8
                                                                   8070 Zurich
                                                                   Switzerland

Jean Lanier                            Director                    Credit Suisse Group AG
                                                                   Paradeplatz 8
                                                                   8070 Zurich
                                                                   Switzerland

Anton van Rossum                       Director                    Credit Suisse Group AG
                                                                   Paradeplatz 8
                                                                   8070 Zurich
                                                                   Switzerland

Aziz R. D. Syriani                     Director                    The Olayan Group
                                                                   111 Poseidonos Avenue
                                                                   P.O. Box 70228, Glyfada
                                                                   Athens 16610, Greece

David W. Syz                           Director                    ecodocs AG
                                                                   Dufourstrasse 21
                                                                   8702 Zollikon
                                                                   Switzerland

Richard E. Thornburgh                  Director                    Corsair Capital LLC
                                                                   717 Fifth Avenue, 24th Floor
                                                                   New York, 10022
                                                                   USA

John Tiner                             Director                    Resolutions Operations LLP
                                                                   23 Savile Row, London
                                                                   W1S 2ET, UK

Peter F. Weibel                        Director                    Credit Suisse Group AG
                                                                   Paradeplatz 8
                                                                   8070 Zurich
                                                                   Switzerland

*    The composition of the boards of directors of Credit Suisse Group AG and Credit Suisse AG is identical.


ERISA matters


We and certain of our affiliates may each be considered a “party in interest” within the meaning
of the Employee Retirement Income Security Act of 1974, as amended (ERISA), or a “disqualified
person” within the meaning of the United States Internal Revenue Code of 1986, as amended (the
code) with respect to many employee benefit plans and individual retirement accounts, Keoghs
and other plans subject to section 4975 of the code.



                                                     − 31 −
Certain transactions between an employee benefit plan and a party in interest or disqualified
person may result in “prohibited transactions” within the meaning of ERISA and the code.
Accordingly, structured products may not be purchased or held with the assets of (a) an “employee
benefit plan” as defined in section 3(3) of ERISA, (b) a “plan” as defined in section 4975 of the
code, or (c) an entity whose underlying assets include “plan assets” under US Department of
Labor Regulation 29 CFR section 2510.3-101.




                                             − 32 −
APPENDIX 1 — GENERAL CONDITIONS OF THE STRUCTURED PRODUCTS

      These General Conditions relate to each series of Structured Products and must be read in
conjunction with, and are subject to, the relevant Product Conditions set out in Appendix 2 and
Appendix 3 to this Base Listing Document and the relevant Supplemental Listing Document in
relation to the particular series of Structured Products. These General Conditions, the relevant
Product Conditions and the supplemental provisions contained in the relevant Supplemental
Listing Document together constitute the Conditions of the relevant Structured Products, and will
be endorsed on the Global Certificate representing the relevant Structured Products. The relevant
Supplemental Listing Document in relation to the issue of any series of Structured Products may
specify additional terms and conditions which shall, to the extent so specified or to the extent
inconsistent with these General Conditions and the relevant Product Conditions, replace or modify
these General Conditions and the relevant Product Conditions for the purpose of such series of
Structured Products.

1.   Definitions

     “Applicable Law” means any applicable present or future law, rule, regulation, judgment,
     order or directive of any governmental, administrative, legislative or judicial authority or
     power;

     “Base Listing Document” means the base listing document relating to Structured Products
     dated April 14, 2011 and issued by the Issuer (including any addenda to such base listing
     document issued by the Issuer from time to time);

     “Board Lot” has the meaning given to it in the relevant Supplemental Listing Document;

     “Cash Settlement Amount” has the meaning given to it in the relevant Product Conditions;

     “CCASS” means the Central Clearing and Settlement System established and operated by
     Hong Kong Securities Clearing Company Limited;

     “CCASS Rules” means the General Rules of CCASS and the CCASS Operational
     Procedures in effect from time to time;

     “Conditions” means, in respect of a particular series of Structured Products, these General
     Conditions and the applicable Product Conditions;

     “CS Hong Kong” means Credit Suisse (Hong Kong) Limited, which expression shall include
     any successors to Credit Suisse (Hong Kong) Limited for the purposes of maintaining the
     Register;

     “Exercise Notice” means a duly completed exercised notice obtainable from CS Hong Kong;

     “Global Certificate” means, in respect of the relevant Structured Products, a global
     certificate by way of deed poll dated the Issue Date executed by the Issuer;

     “HKEx” means Hong Kong Exchanges and Clearing Limited;

     “Holder” means, in respect of each series of Structured Products, each person who is for the
     time being shown in the Register as entitled to a particular number of Structured Products
     and such person shall be treated by the Issuer and CS Hong Kong as the absolute owner and
     holder of such number of Structured Products;


                                             − 33 −
“Hong Kong” means the Hong Kong Special Administrative Region of the People’s Republic
of China;

“Institutional Accredited Investor” means an accredited investor as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act;

“Investor Representation Letter” means an investor representation letter to the Issuer in
the form required by CS Hong Kong;

“Issue Date” means the date specified as such in the relevant Supplemental Listing
Document;

“Issuer” means Credit Suisse AG;

“Product Conditions” means, in respect of each series of Structured Product, the product
specific terms and conditions that apply to that Structured Product;

“Register” means the register in respect of the Structured Products maintained by the
Registrar under General Condition 3;

“Register Maintenance Agreement” means:

(a)   in respect of Warrants and CBBCs, the base register maintenance agreement and
      structured product agency agreement (as amended, varied or supplemented from time
      to time or any successor document) dated April 23, 2003 as supplemented by a
      Confirmation (as defined in such Register Maintenance Agreement) relating to the
      Structured Products made between, inter alios, the Issuer and CS Hong Kong; or

(b)   in respect of other structured products, the agreement specified as such in the relevant
      Supplemental Listing Document;

“Registrar” means CS Hong Kong or such other party as specified in the relevant
Supplemental Listing Document;

“Regulation S” means Regulation S under the Securities Act;

“Securities Act” means the United States Securities Act of 1933, as amended and in effect
from time to time;

“Stock Exchange” means The Stock Exchange of Hong Kong Limited;

“Structured Products” means derivative warrants (“Warrants”), callable bull/bear contracts
(“CBBCs”) and other structured products to be issued by the Issuer from time to time.
References to “Structured Products” are to be construed as references to a particular
series of Structured Products and, unless the context otherwise requires, include any further
Structured Products issued pursuant to General Condition 9;

“Supplemental Listing Document” means the supplemental listing document relating to a
particular series of Structured Products;

“Transfer Office” means the specified office of CS Hong Kong or such other office as
specified in the relevant Supplemental Listing Document; and

“U.S. Person” shall have the meaning ascribed to it in Regulation S.


                                         − 34 −
2.   Form, Status and Transfer

     2.1 Form

         The Structured Products are issued in registered form subject to and with the benefit of
         the Global Certificate and the relevant Register Maintenance Agreement. Copies of the
         Global Certificate and the relevant Register Maintenance Agreement are available for
         inspection at the Transfer Office.

         The Holders are entitled to the benefit of, are bound by and are deemed to have notice
         of, all the provisions of the Global Certificate and the relevant Register Maintenance
         Agreement.

     2.2 Status

         The Structured Products represent general, unsecured, contractual obligations of the
         Issuer and of no other person and rank pari passu among themselves and (save for
         certain obligations required to be preferred by law) equally with all other unsecured
         obligations of the Issuer.

     2.3 Transfer

         Transfers of beneficial interests in the Structured Products may be effected only in
         Board Lots or integral multiples thereof in CCASS in accordance with the CCASS Rules.

     2.4 Transfer to U.S. Person

         (a)   Cash Settled Structured Products

               Upon execution and delivery of the Investor Representation Letter, cash settled
               Structured Products may be issued and sold to Institutional Accredited Investors.
               The cash settled Structured Products may not be registered in the name of or
               beneficially owned by U.S. Persons unless such U.S. Person is an Institutional
               Accredited Investor. Cash settled Structured Products held by Institutional
               Accredited Investors may be resold or otherwise transferred only:

               (i)    to the Issuer or any affiliate thereof; or

               (ii)   through the Issuer or any affiliate thereof to an Institutional Accredited
                      Investor that executes and delivers an Investor Representation Letter to the
                      Issuer in a transaction exempt from the registration requirements of the
                      Securities Act, subject to the prior approval of the Issuer or such affiliate; or

               (iii) to a non-U.S. person in an offshore transaction in reliance upon Regulation
                     S. Each Holder and each beneficial owner of a cash settled Structured
                     Product hereby represents as a condition to purchasing or owning such cash
                     settled Structured Product or any beneficial interest therein that it is either:

                      (aa) not located in the United States nor is a U.S. Person nor was solicited
                           to purchase the cash settled Structured Products while present in the
                           United States; or

                      (bb) an Institutional Accredited Investor that has executed and delivered the
                           Investor Representation Letter to the Issuer.


                                                − 35 −
          (b)   Physically settled Structured Products

                Physically settled Structured Products may not be registered in the name of or
                beneficially owned by U.S. Persons. Each Holder and each beneficial owner of a
                physically settled Structured Product hereby represents as a condition to
                purchasing or owning such physically settled Structured Products or any beneficial
                interest therein that it is neither located in the United States nor a U.S. Person.

3.   Register and Transfer Office

     3.1 Maintenance of Register

          (a)   In respect of each series of Structured Products, the Registrar will maintain a
                Register for that series.

                The Issuer reserves the right, subject to the appointment of a successor, at any
                time to vary or terminate the appointment of the Registrar under the relevant
                Register Maintenance Agreement provided that it will at all times maintain or
                arrange for the maintenance of a Register.

                Notice of any such termination or appointment and any change in the Transfer
                Office or the specified office of CS Hong Kong will be given to the Holders in
                accordance with General Condition 7.

          (b)   The Registrar will enter or cause to be entered the name, address and banking
                details of the Holders, the details of the relevant series of Structured Products held
                by any Holder including the number of Structured Products held, and any other
                particulars which it thinks proper.

          (c)   The Register will be maintained by the Registrar:

                (i)    in respect of a series of Warrants and CBBCs, in Hong Kong; and

                (ii)   in respect of other Structured Products, at such location as the Issuer and the
                       Registrar may agree and specified in the relevant Supplemental Listing
                       Document.

     3.2 Registrar is the agent of the Issuer

          The Registrar for each series of Structured Products will be acting as the agent of the
          Issuer and will not assume any obligation or duty to or any relationship of agency or
          trust for the Holders.

4.   Purchases

     The Issuer and/or any of its respective affiliates may at any time purchase Structured
     Products at any price in the open market or by tender or by private treaty. Any Structured
     Products so purchased may be held or resold or surrendered for cancellation. Any resales by
     the Issuer or (as the case may be) the relevant affiliate will be made (a) to Institutional
     Accredited Investors that each executes and delivers an Investor Representation Letter to
     the Issuer in transactions exempt from the registration requirements of the Securities Act, or
     (b) to non-U.S. persons in offshore transactions in reliance upon Regulation S.


                                                − 36 −
5.   Global Certificate

     Each series of the Structured Products is represented by a Global Certificate registered in
     the name of HKSCC Nominees Limited and deposited with CCASS in accordance with the
     CCASS Rules. Holders will not be entitled to definitive certificates in respect of any
     Structured Products issued or transferred to them.

6.   Meetings of Holders and Modifications to Conditions

     6.1 Meetings of Holders

          The relevant Register Maintenance Agreement contains provisions for the convening of
          meetings of the Holders to consider any matter affecting their interests, including
          sanctioning by Extraordinary Resolution (as defined in the relevant Register
          Maintenance Agreement) of a modification of the provisions of the Structured Products
          or of the Global Certificate.

          Any resolution to be passed in a meeting of the Holders shall be decided by poll. Such
          a meeting may be convened by the Issuer or by Holders holding not less than 10 per
          cent. of the Structured Products for the time being remaining unexercised. The quorum
          at any such meeting for passing an Extraordinary Resolution will be two or more
          persons holding or representing not less than 25 per cent. of the Structured Products
          for the time being remaining unexercised, or at any adjourned meeting two or more
          persons being or representing Holders whatever the number of Structured Products so
          held or represented.

          A resolution will be an Extraordinary Resolution when it has been passed at a duly
          convened meeting by not less than three-quarters of the votes cast by such Holders as,
          being entitled to do so, vote in person or by proxy.

          An Extraordinary Resolution passed at any meeting of the Holders shall be binding on
          all the Holders, whether or not they are present at the meeting.

          In the case of Structured Products which are expressed to be American Style, an
          Extraordinary Resolution passed at any meeting of the Holders shall be binding on all
          the Holders, whether or not they are present at the meeting, save for those Structured
          Products remaining unexercised but for which an Exercise Notice shall have been
          submitted prior to the date of the meeting. Structured Products which have not been
          exercised but in respect of which an Exercise Notice has been submitted will not confer
          the right to attend or vote at, or join in convening, or be counted in quorum for, any
          meeting of the Holders.

          Resolutions can be passed in writing without a meeting of the Holders being held if
          passed unanimously.

     6.2 Modification

          The Issuer may, without the consent of the Holders, effect any modification of the
          provisions of the Structured Products or the Global Certificate:

          (a)   which is not materially prejudicial to the interests of the Holders;


                                               − 37 −
         (b)   which is of a formal, minor or technical nature;

         (c)   which is made to correct an obvious error;

         (d)   which is necessary in order to comply with mandatory provisions of the laws or
               regulations of Hong Kong; or

         (e)   which is considered by the Issuer to be appropriate and such modification is
               approved by the Stock Exchange.

         Any such modification made in accordance with this General Condition 6.2 shall be
         binding on the Holders and shall be notified to them by CS Hong Kong before the
         effective date or as soon as practicable thereafter in accordance with General Condition
         7.

7.   Notices

     7.1 Mail delivery

         All documents required or permitted by the Conditions to be sent to a Holder or to which
         a Holder is entitled or which the Issuer shall have agreed to deliver to a Holder may be:

         (a)   delivered by hand; or

         (b)   sent by post,

         addressed to the Holder (otherwise than in accordance with an Exercise Notice (in the
         case of Structured Products which are expressed to be American Style)) to the Holder’s
         address (or, in the case of joint Holders, to the address of the first named Holder)
         appearing in the Register provided that airmail post shall be used if such address is not
         in Hong Kong.

         All documents delivered or sent in accordance with this General Condition 7.1 shall be
         delivered or sent at the risk of the relevant Holder. Where such documents are notices,
         such notices will be delivered on the same date as notices are delivered pursuant to
         General Condition 7.2.

     7.2 Publication of notices

         All notices to Holders will be validly given if published in English and in Chinese on the
         website of HKEx. Such notices shall be deemed to have been given on the date of the
         first such publication. If publication is not practicable, notice will be given in such other
         manner as the Issuer may determine, provided that:

         (a)   copies of the notices will also be sent by mail to the Holders at their addresses
               appearing in the Register; and

         (b)   in the case of Holders who are Institutional Accredited Investors, notice is deemed
               to have been validly given when sent by facsimile or other electronic means of
               communication, including by messaging via a third party data vendor, such as
               Bloomberg, in accordance with the contact details maintained in the Register
               regardless of whether the Holder has had actual notice or not.


                                              − 38 −
8.    Illegality


      The Issuer shall have the right to terminate the Structured Products if it shall have
      determined in its absolute discretion that for reasons beyond its control, its performance
      thereunder shall have become unlawful in whole or in part as a result of compliance in good
      faith by the Issuer with any Applicable Law. In such circumstances, the Issuer will, if and to
      the extent permitted by the Applicable Law, pay to each Holder in respect of each Structured
      Product held by such Holder an amount calculated by it as the fair market value of the
      Structured Product immediately prior to such termination (ignoring such illegality) less the
      cost to the Issuer of unwinding any related hedging arrangements. Payment will be made to
      the Holder in such manner as shall be notified to the Holder in accordance with General
      Condition 7.


9.    Further Issues


      The Issuer shall be at liberty from time to time, without the consent of the Holders, to create
      and issue further Structured Products so as to form a single series with the Structured
      Products.


10. Governing Law


      The Structured Products, the Global Certificate and the relevant Register Maintenance
      Agreement will be governed by and construed in accordance with the laws of Hong Kong.


      The Issuer and each Holder (by its purchase of the Structured Products) shall be deemed to
      have submitted for all purposes in connection with the Structured Products, the Global
      Certificate and the relevant Register Maintenance Agreement to the non-exclusive
      jurisdiction of the courts of Hong Kong.


11.   Language


      In the event of any inconsistency between the Chinese translation and the English version
      of these General Conditions and/or the applicable Product Conditions, the English version of
      these General Conditions and/or the applicable Product Conditions shall prevail.




                                               − 39 −
         APPENDIX 2 — PRODUCT CONDITIONS OF THE WARRANTS

Part A   —   Product Conditions of Call/Put Warrants over Single Equities
               (Cash Settled) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    41


Part B   —   Product Conditions of Call Warrants over Single Equities
               (Physically Settled) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        53


Part C   —   Product Conditions of Lock-in Return Call/Put Warrants
               over Single Equities (Cash Settled) . . . . . . . . . . . . . . . . . . . . . . . . . .                   65


Part D   —   Product Conditions of Average Return Call/Put Warrants
               over Single Equities (Cash Settled) . . . . . . . . . . . . . . . . . . . . . . . . . .                   74


Part E   —   Product Conditions of Basket Call/Put Warrants
               (Cash Settled) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    82


Part F   —   Product Conditions of Index Call/Put Warrants
               (Cash Settled) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    94


Part G   —   Product Conditions of Call/Put Warrants over
               Single Unit Trusts (Cash Settled) . . . . . . . . . . . . . . . . . . . . . . . . . . . .                103


Part H   —   Product Conditions of Call/Put Warrants over Single
               Foreign Equities (Cash Settled). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               115




                                                       − 40 −
     PART A — PRODUCT CONDITIONS OF CALL/PUT WARRANTS OVER
                 SINGLE EQUITIES (CASH SETTLED)

      These Product Conditions will, together with the General Conditions and the supplemental
provisions contained in the relevant Supplemental Listing Document and subject to completion
and amendment, be endorsed on the Global Certificate. The relevant Supplemental Listing
Document in relation to the issue of any series of Warrants may specify additional terms and
conditions which shall, to the extent so specified or to the extent inconsistent with these Product
Conditions, replace or modify these Product Conditions for the purpose of such series of
Warrants. Capitalised terms used in these Product Conditions and not otherwise defined herein
shall have the meaning given to them in the General Conditions and the relevant Supplemental
Listing Document.

1.   Definitions

     For the purposes of these Product Conditions:

     “Business Day” means a day (excluding Saturdays) on which the Stock Exchange is
     scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

     “Cash Settlement Amount” means, in respect of every Board Lot, an amount in Hong Kong
     dollars calculated by the Issuer as:

     (a)   for American Style Warrants exercised on any Exercise Date prior to the Expiry Date in
           accordance with Product Condition 3.1(a):

           (i)    in the case of a series of call Warrants, an amount equal to (1) the product of (A)
                  the Entitlement (subject to adjustment as provided in Product Condition 5), (B) the
                  closing price of one Share (as derived from the Daily Quotation Sheet of the Stock
                  Exchange, subject to any adjustments to such closing price as may be necessary
                  to reflect any capitalisation, rights issue, distribution or the like) on the Valuation
                  Date less the Exercise Price (subject to adjustment as provided in Product
                  Condition 5); and (C) one Board Lot; (2) divided by the Exercise Amount; and (3)
                  less the Exercise Expenses; and

           (ii)   in the case of a series of put Warrants, an amount equal to (1) the product of (A)
                  the Entitlement (subject to adjustment as provided in Product Condition 5), (B) the
                  Exercise Price (subject to adjustment as provided in Product Condition 5) less the
                  closing price of one Share (as derived from the Daily Quotation Sheet of the Stock
                  Exchange, subject to any adjustments to such closing price as may be necessary
                  to reflect any capitalisation, rights issue, distribution or the like) on the Valuation
                  Date, and (C) one Board Lot; (2) divided by the Exercise Amount; and (3) less the
                  Exercise Expenses; or

     (b)   for Warrants automatically exercised on the Expiry Date in accordance with Product
           Condition 3.1(b) or Product Condition 3.2(b):

           (i)    in the case of a series of call Warrants, an amount equal to (1) the product of (A)
                  the Entitlement (subject to adjustment as provided in Product Condition 5), (B) the
                  arithmetic mean of the closing prices of one Share (as derived from the Daily
                  Quotation Sheet of the Stock Exchange, subject to any adjustments to such


                                                 − 41 −
             closing prices as may be necessary to reflect any capitalisation, rights issue,
             distribution or the like) for each Valuation Date less the Exercise Price (subject to
             adjustment as provided in Product Condition 5), and (C) one Board Lot; (2) divided
             by the Exercise Amount; and (3) less the Exercise Expenses; and

      (ii)   in the case of a series of put Warrants, an amount equal to (1) the product of (A)
             the Entitlement (subject to adjustment as provided in Product Condition 5), (B) the
             Exercise Price (subject to adjustment as provided in Product Condition 5) less the
             arithmetic mean of the closing prices of one Share (as derived from the Daily
             Quotation Sheet of the Stock Exchange, subject to any adjustments to such
             closing prices as may be necessary to reflect any capitalisation, rights issue,
             distribution or the like) for each Valuation Date, and (C) one Board Lot, (2) divided
             by the Exercise Amount; and (3) less the Exercise Expenses;

“Company” means the company specified as such in the relevant Supplemental Listing
Document;

“Dealing Commencement Date” means the date specified as such in the relevant
Supplemental Listing Document;

“Designated Bank Account” means the relevant bank account designated by the relevant
Holder;

“Entitlement” means the number specified as such in the relevant Supplemental Listing
Document, subject to any adjustment in accordance with Product Condition 5;

“Exercise Amount” means the amount specified as such in the relevant Supplemental
Listing Document;

“Exercise Date” means the date upon which a Warrant is, or is to be treated as, exercised
in accordance with Product Condition 4.1(b)(ii);

“Exercise Expenses” means any charges or expenses including any taxes or duties which
are incurred in respect of the exercise of the Warrants;

“Exercise Period” means:

(a)   in the case of American Style Warrants, the period beginning the earlier of the
      commencement of the morning trading session or any pre-opening session of the Stock
      Exchange on the Dealing Commencement Date (or, if later, the first day of dealings in
      the Warrants on the Stock Exchange) and ending at the earlier of the commencement
      of the morning trading session or any pre-opening session of the Stock Exchange on
      the sixth Business Day prior to the Expiry Date; and

(b)   in the case of European Style Warrants, the time at which the morning trading session
      or, if earlier, any pre-opening session of the Stock Exchange on the Expiry Date
      commences only;

“Exercise Price” means the price specified as such in the relevant Supplemental Listing
Document;

“Expiry Date” has the meaning given to it in the relevant Supplemental Listing Document;


                                            − 42 −
“General Conditions” means the general terms and conditions of Structured Products set
out in Appendix 1 of the Base Listing Document;

“Market Disruption Event” means:

(a)   the occurrence or existence on any Valuation Date during the one-half hour period that
      ends at the close of trading of any suspension of or limitation imposed on trading (by
      reason of movements in price exceeding limits permitted by the Stock Exchange or
      otherwise) on the Stock Exchange in: (i) the Shares; or (ii) any options or futures
      contracts relating to the Shares if, in any such case, that suspension or limitation is, in
      the determination of the Issuer, material; or

(b)   the hoisting of the tropical cyclone warning signal number 8 or above or the hoisting of
      a “BLACK” rainstorm signal which either results in the Stock Exchange being closed for
      dealings for an entire day or results in the Stock Exchange being closed prior to its
      regular time for close of trading on any day PROVIDED THAT there shall be no Market
      Disruption Event solely by reason of the Stock Exchange opening later than its regular
      time for open of trading on any day as a result of the tropical cyclone warning signal
      number 8 or above or the “BLACK” rainstorm signal having been hoisted;

“Product Conditions” means these product terms and conditions. These Product Conditions
apply to each series of cash settled call/put Warrants;

“Settlement Date” means three Business Days following:

(a)   with respect to the exercise of American Style Warrants on an Exercise Date prior to the
      Expiry Date in accordance with Product Condition 3.1(a), the Valuation Date; or

(b)   with respect to the automatic exercise of Warrants on the Expiry Date in accordance
      with Product Condition 3.1(b) or Product Condition 3.2(b), the Expiry Date;

“Settlement Disruption Event” means an event beyond the control of the Issuer as a result
of which the Issuer is unable to procure payment of the Cash Settlement Amount
electronically through CCASS to the Designated Bank Account;

“Shares” means the shares of the Company specified as such in the relevant Supplemental
Listing Document; and

“Valuation Date” means:

(a)   with respect to the exercise of American Style Warrants on any Exercise Date prior to
      the Expiry Date in accordance with Product Condition 3.1(a), the Exercise Date,
      provided that if the Issuer determines, in its sole discretion, that a Market Disruption
      Event has occurred on such Exercise Date, then the Valuation Date shall be postponed
      until the first succeeding Business Day on which there is no Market Disruption Event,
      provided that if there is a Market Disruption Event on each of the five Business Days
      immediately following the original Exercise Date that, but for the Market Disruption
      Event, would have been the Valuation Date, then:

      (i)   that fifth Business Day after the original Exercise Date shall be deemed to be the
            Valuation Date notwithstanding the Market Disruption Event; and


                                          − 43 −
           (ii)   the Issuer shall determine the closing price of the Shares on the basis of its good
                  faith estimate of such price that would have prevailed on that fifth Business Day
                  after the original Exercise Date but for the Market Disruption Event; or

     (b)   with respect to the automatic exercise of Warrants on the Expiry Date in accordance
           with Product Condition 3.1(b) or Product Condition 3.2(b), each of the five Business
           Days immediately preceding the Expiry Date, provided that if the Issuer determines, in
           its sole discretion, that on any Valuation Date a Market Disruption Event has occurred,
           then that Valuation Date shall be postponed until the first succeeding Business Day on
           which there is no Market Disruption Event irrespective of whether that postponed
           Valuation Date would fall on a day that already is or is deemed to be a Valuation Date.
           For the avoidance of doubt, in the event that a Valuation Date is postponed in
           accordance with this paragraph (b), the closing price of the Shares for such postponed
           Valuation Date will be the closing price of the Shares on the first succeeding Business
           Day. Accordingly, the closing price of a Valuation Date may be used more than once in
           calculating the arithmetic mean of the closing prices of one Share for the determination
           of the Cash Settlement Amount, so that in no event shall there be less than five closing
           prices to determine the arithmetic mean of the closing prices of one Share,

     provided further that if the postponement of the Valuation Date in accordance with
     paragraphs (a) or (b) above would result in the Valuation Date falling on or after the Expiry
     Date, then:

     (aa) the Business Day immediately preceding the Expiry Date (the “Last Valuation Date”)
          shall be deemed to be the Valuation Date notwithstanding the Market Disruption Event;
          and

     (bb) the Issuer shall determine the closing price of the Shares on the basis of its good faith
          estimate of such price that would have prevailed on the Last Valuation Date but for the
          Market Disruption Event.

2.   Warrant Rights and Exercise Expenses

     2.1 Warrant Rights

           Every Board Lot gives each Holder, upon due exercise and compliance with the General
           Conditions and these Product Conditions, in particular, Product Condition 4.1 or
           Product Condition 4.2, as the case may be, the right to receive the payment of the Cash
           Settlement Amount, if any.

     2.2 Exercise Expenses

           Upon exercise of the Warrants, Holders will be obliged to give an irrevocable
           authorisation to the Issuer to deduct all Exercise Expenses in accordance with Product
           Condition 4.1 or Product Condition 4.2, as the case may be.

3.   Exercise of American Style Warrants and European Style Warrants, Automatic
     Exercise and Expiry

     3.1 American Style Warrants

           The following provisions of this Product Condition 3.1 shall apply to Warrants which are
           expressed to be American Style.


                                                − 44 −
         (a)   Exercise of Warrants

               The Warrants may be exercised by delivery of an Exercise Notice in accordance
               with Product Condition 4.1 at any time during the relevant Exercise Period.

         (b)   Automatic Exercise

               Any Warrant with respect to which an Exercise Date has not occurred during the
               Exercise Period will automatically be exercised if the Cash Settlement Amount on
               the Expiry Date is greater than zero (without notice being given to the Holders).
               The Holders will not be required to deliver any Exercise Notice and the Issuer or
               its agent will pay to the Holders the Cash Settlement Amount (if any) in accordance
               with Product Condition 4.1(f).

         (c)   Expiry

               Any Warrant with respect to which an Exercise Date has not occurred during the
               Exercise Period or which has not been automatically exercised in accordance with
               Product Condition 3.1(b) shall expire immediately without value thereafter and all
               rights of the Holder and obligations of the Issuer with respect to such Warrant shall
               cease.

     3.2 European Style Warrants

         The following provisions of this Product Condition 3.2 shall apply to Warrants which are
         expressed to be European Style.

         (a)   Exercise of Warrants

               The Warrants are exercisable only on the Expiry Date.

         (b)   Automatic Exercise

               Any Warrant will automatically be exercised if the Cash Settlement Amount on the
               Expiry Date is greater than zero (without notice being given to the Holders). The
               Holders will not be required to deliver any Exercise Notice and the Issuer or its
               agent will pay to the Holders the Cash Settlement Amount (if any) in accordance
               with Product Condition 4.2(d).

         (c)   Expiry

               Any Warrant which has not been automatically exercised in accordance with
               Product Condition 3.2(b) shall expire immediately without value thereafter and all
               rights of the Holder and obligations of the Issuer with respect to such Warrant shall
               cease.

4.   Exercise of Warrants

     4.1 American Style Warrants

         The following provisions of this Product Condition 4.1 shall apply to Warrants which are
         expressed to be American Style.


                                              − 45 −
(a)   Exercise of Warrants in Board Lots

      Warrants may only be exercised in Board Lots or integral multiples thereof.

(b)   Delivery of an Exercise Notice

      (i)    In order to exercise Warrants, the Holder shall deliver to the Transfer Office
             an Exercise Notice, such delivery or deemed delivery to occur at any time
             during the relevant Exercise Period. Warrants may not be exercised at any
             other time.

      (ii)   The Exercise Date shall be the Business Day on which an Exercise Notice is
             delivered to CS Hong Kong and in respect of which there is a valid exercise
             of Warrants in accordance with the requirements of these Product
             Conditions, provided that any Exercise Notice received by CS Hong Kong
             after the earlier of the commencement of the morning trading session or any
             pre-opening session of the Stock Exchange on any Business Day shall be
             deemed to have been delivered before the earlier of the commencement of
             the morning trading session or any pre-opening session of the Stock
             Exchange on the next following Business Day.

(c)   Exercise Notice

      The Exercise Notice shall:

      (i)    specify the name(s) of the Holder(s) and the number of Warrants being
             exercised;

      (ii)   be accompanied by the Global Certificate in the name(s) of the exercising
             Holder(s); and

      (iii) (where applicable) specify the person in whose favour the cheque
            representing the Cash Settlement Amount should be drawn and the name
            and address of the bank, broker or other agent to whom the cheque should
            be sent or, as the case may be, specify the relevant account to which the
            Cash Settlement Amount should be credited.

(d)   Consequences of delivery of an Exercise Notice

      Delivery of an Exercise Notice in accordance with Product Conditions 4.1(b) and
      4.1(c) shall constitute an irrevocable election and undertaking by the Holder
      specified in such Exercise Notice to exercise the number of Warrants specified in
      such Exercise Notice and an irrevocable authorisation to deduct the Exercise
      Expenses in accordance with the calculation set out in the definition of the Cash
      Settlement Amount.

(e)   Cancellation

      The Issuer will procure that CS Hong Kong will, with effect from the first Business
      Day following the Exercise Date or the Expiry Date, as the case may be, remove
      from the Register the name of the person in respect of the Warrants which (i) are


                                      − 46 −
          the subject of a valid exercise in accordance with these Product Conditions
          whether pursuant to an Exercise Notice or automatic exercise; or (ii) have expired
          worthless, and thereby cancel the relevant Warrants.

    (f)   Cash Settlement

          Subject to a valid exercise, or automatic exercise, of Warrants in accordance with
          these Product Conditions, the Issuer will make a payment, in respect of every
          Board Lot, to the relevant Holder (or such other person as the Holder may have
          directed, if applicable) equal to the Cash Settlement Amount.

          The Cash Settlement Amount shall be despatched not later than the Settlement
          Date by crediting that amount in accordance with the CCASS Rules, to the
          Designated Bank Account.

          If, as a result of a Settlement Disruption Event, it is not possible for the Issuer to
          procure payment electronically through CCASS by crediting the relevant
          Designated Bank Account of the Holder on the original Settlement Date, the Issuer
          shall use its reasonable endeavours to procure payment electronically through
          CCASS by crediting the relevant Designated Bank Account of the Holder as soon
          as reasonably practicable after the original Settlement Date. The Issuer will not be
          liable to the Holder for any interest in respect of the amount due or any loss or
          damage that such Holder may suffer as a result of the existence of the Settlement
          Disruption Event.

4.2 European Style Warrants

    The following provisions of this Product Condition 4.2 shall apply to Warrants which are
    expressed to be European Style.

    (a)   Exercise of Warrants in Board Lots

          Warrants may only be exercised in Board Lots or integral multiples thereof.

    (b)   No requirement to deliver an Exercise Notice

          The Holders will not be required to deliver an Exercise Notice for any purpose in
          relation to the Warrants.

    (c)   Cancellation

          The Issuer will procure that CS Hong Kong will, with effect from the first Business
          Day following the Expiry Date, remove from the Register the name of the person
          in respect of the Warrants which (i) are the subject of a valid exercise pursuant to
          automatic exercise in accordance with these Product Conditions; or (ii) have
          expired worthless, and thereby cancel the relevant Warrants.

    (d)   Cash Settlement

          Subject to automatic exercise of Warrants in accordance with these Product
          Conditions, the Issuer will make a payment in respect of every Board Lot to the
          relevant Holder equal to the Cash Settlement Amount.


                                         − 47 −
              The Cash Settlement Amount shall be despatched not later than the Settlement
              Date by crediting that amount in accordance with the CCASS Rules to the
              Designated Bank Account.

              If, as a result of a Settlement Disruption Event, it is not possible for the Issuer to
              procure payment electronically through CCASS by crediting the relevant
              Designated Bank Account of the Holder on the original Settlement Date, the Issuer
              shall use its reasonable endeavours to procure payment electronically through
              CCASS by crediting the relevant Designated Bank Account of the Holder as soon
              as reasonably practicable after the original Settlement Date. The Issuer will not be
              liable to the Holder for any interest in respect of the amount due or any loss or
              damage that such Holder may suffer as a result of the existence of the Settlement
              Disruption Event.

5.   Adjustments

     5.1 Rights Issues

         If and whenever the Company shall, by way of Rights (as defined below), offer new
         Shares for subscription at a fixed subscription price to the holders of existing Shares pro
         rata to existing holdings (a “Rights Offer”), the Entitlement will be adjusted to take
         effect on the Business Day on which trading in the Shares becomes ex-entitlement
         (“Rights Issue Adjustment Date”) in accordance with the following formula:

                              Adjusted Entitlement = Adjustment Factor x E

         Where:

                                     1+M
         Adjustment Factor =
                                 1 + (R/S) x M

         E:   Existing Entitlement immediately prior to the Rights Offer

         S:   Cum-Rights Share price being the closing price of an existing Share as derived
              from the daily quotation sheet of the Stock Exchange on the last Business Day on
              which Shares are traded on a cum-Rights basis

         R:   Subscription price per new Share as specified in the Rights Offer plus an amount
              equal to any dividends or other benefits foregone to exercise the Rights

         M:   Number of new Share(s) (whether a whole or a fraction) per existing Share each
              holder thereof is entitled to subscribe

         Provided that if the adjustment to be made would result in the Entitlement being
         changed by one per cent. or less, then no adjustment will be made to the Entitlement.
         In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
         nearest Hong Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the
         reciprocal of the Adjustment Factor means one divided by the relevant Adjustment
         Factor. This adjustment shall take effect on the Rights Issue Adjustment Date.

         For the purposes of these Product Conditions:

         “Rights” means the right(s) attached to each existing Share or needed to acquire one
         new Share (as the case may be) which are given to the holders of existing Shares to


                                             − 48 −
    subscribe at a fixed subscription price for new Shares pursuant to the Rights Offer
    (whether by the exercise of one Right, a part of a Right or an aggregate number of
    Rights).

5.2 Bonus Issues

    If and whenever the Company shall make an issue of Shares credited as fully paid to
    the holders of Shares generally by way of capitalisation of profits or reserves (other than
    pursuant to a scrip dividend or similar scheme for the time being operated by the
    Company or otherwise in lieu of a cash dividend and without any payment or other
    consideration being made or given by such holders) (a “Bonus Issue”) the Entitlement
    will be adjusted on the Business Day on which trading in the Shares becomes
    ex-entitlement (“Bonus Issue Adjustment Date”) in accordance with the following
    formula:

                         Adjusted Entitlement = Adjustment Factor x E

    Where:

    Adjustment Factor = 1 + N

    E:    Existing Entitlement immediately prior to the Bonus Issue

    N:    Number of additional Shares (whether a whole or a fraction) received by a holder
          of existing Shares for each Share held prior to the Bonus Issue

    Provided that if the adjustment to be made would result in the Entitlement being
    changed by one per cent. or less, then no adjustment will be made to the Entitlement.
    In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
    nearest Hong Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the
    reciprocal of the Adjustment Factor means one divided by the relevant Adjustment
    Factor. This adjustment shall take effect on the Bonus Issue Adjustment Date.

5.3 Subdivisions or Consolidations

    If and whenever the Company shall subdivide its Shares or any class of its outstanding
    share capital comprised of the Shares into a greater number of shares (a
    “Subdivision”) or consolidate the Shares or any class of its outstanding share capital
    comprised of the Shares into a smaller number of shares (a “Consolidation”), then:

    (a)   in the case of a Subdivision, the Entitlement in effect immediately prior thereto will
          be increased whereas the Exercise Price (which shall be rounded to the nearest
          Hong Kong dollar 0.001) will be decreased in the same ratio as the Subdivision;
          and

    (b)   in the case of a Consolidation, the Entitlement in effect immediately prior thereto
          will be decreased whereas the Exercise Price (which shall be rounded to the
          nearest Hong Kong dollar 0.001) will be increased in the same ratio as the
          Consolidation,

    in each case on the day on which the Subdivision or Consolidation (as the case may be)
    shall have taken effect.


                                         − 49 −
5.4 Merger or Consolidation

    If it is announced that the Company is to or may merge or consolidate with or into any
    other corporation (including becoming, by agreement or otherwise, a subsidiary of any
    corporation or controlled by any person or corporation) (except where the Company is
    the surviving corporation in a merger) or that it is to or may sell or transfer all or
    substantially all of its assets, the rights attaching to the Warrants may in the absolute
    discretion of the Issuer be amended no later than the Business Day preceding the
    consummation of such merger, consolidation, sale or transfer (each a “Restructuring
    Event”) (as determined by the Issuer in its absolute discretion).

    The rights attaching to the Warrants after the adjustment shall, after such Restructuring
    Event, relate to the number of shares of the corporation(s) resulting from or surviving
    such Restructuring Event or other securities (“Substituted Securities”) and/or cash
    offered in substitution for the affected Shares, as the case may be, to which the holder
    of such number of Shares to which the Warrants related immediately before such
    Restructuring Event would have been entitled upon such Restructuring Event.
    Thereafter the provisions hereof shall apply to such Substituted Securities, provided
    that any Substituted Securities may, in the absolute discretion of the Issuer, be deemed
    to be replaced by an amount in Hong Kong dollars equal to the market value or, if no
    market value is available, fair value, of such Substituted Securities in each case as
    determined by the Issuer as soon as practicable after such Restructuring Event is
    effected.

    For the avoidance of doubt, any remaining Shares shall not be affected by this Product
    Condition 5.4 and, where cash is offered in substitution for Shares or is deemed to
    replace Substituted Securities as described above, references in these Product
    Conditions to the Shares shall include any such cash.

5.5 Cash Distribution

    No adjustment will be made for an ordinary cash dividend (whether or not it is offered
    with a script alternative) (“Ordinary Dividend”). For any other forms of cash distribution
    (“Cash Distribution”) announced by the Company, such as a cash bonus, special
    dividend or extraordinary dividend, no adjustment will be made unless the value of the
    Cash Distribution accounts for 2 per cent. or more of the Share’s closing price on the
    day of announcement by the Company.

    If and whenever the Company shall make a Cash Distribution credited as fully paid to
    the holders of Shares generally, the Entitlement shall be adjusted to take effect on the
    Business Day on which trading in the Shares becomes ex-entitlement in respect of the
    relevant Cash Distribution (“Cash Distribution Adjustment Date”) in accordance with
    the following formula:

                        Adjusted Entitlement = Adjustment Factor x E

    Where:

                               S – OD
    Adjustment Factor =
                            S – OD – CD

    E:   The existing Entitlement immediately prior to the Cash Distribution


                                        − 50 −
          S:   The closing price of the existing Share as derived from the daily quotation sheet
               of the Stock Exchange on the Business Day immediately preceding the Cash
               Distribution Adjustment Date

          CD: The amount of Cash Distribution per Share

          OD: The amount of Ordinary Dividend per Share, provided that the Ordinary Dividend
              and the Cash Distribution shall have the same ex-entitlement date. For the
              avoidance of doubt, the OD shall be deemed to be zero if the ex-entitlement dates
              of the relevant Ordinary Dividend and Cash Distribution are different

          In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
          nearest Hong Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the
          reciprocal of the Adjustment Factor means one divided by the relevant Adjustment
          Factor. The adjustment to the Exercise Price shall take effect on the Cash Distribution
          Adjustment Date.

     5.6 Other Adjustments

          Except as provided in General Condition 6, Product Condition 5 and/or Product
          Condition 7, adjustments or amendments will not be made in any other circumstances,
          subject to the right reserved by the Issuer (such right to be exercised in the Issuer’s sole
          and unfettered discretion and without any obligation whatsoever) to make such
          adjustments and amendments as it believes appropriate in circumstances where an
          event or events (including the events as contemplated in Product Conditions 5.1 to 5.5)
          occur which it believes in its sole discretion and irrespective of, in substitution for, or in
          addition to the provisions contemplated in Product Conditions 5.1 to 5.5 should, in the
          context of the issue of the Warrants and the obligations of the Issuer, give rise to such
          adjustment or, as the case may be, amendment provided that such adjustment or, as the
          case may be, amendment is (a) considered by the Issuer not to be materially prejudicial
          to the Holders generally (without considering the circumstances of any individual Holder
          or the tax or other consequences of such adjustment or amendment in any particular
          jurisdiction); or (b) otherwise considered by the Issuer to be appropriate and such
          adjustment or amendment is approved by the Stock Exchange.

     5.7 Notice of Determinations

          All determinations made by the Issuer pursuant hereto will be conclusive and binding on
          the Holders. The Issuer will give, or procure that there is given, notice as soon as
          practicable of any adjustment or amendment and of the date from which such
          adjustment or amendment is effective by publication in accordance with General
          Condition 7.

6.   Liquidation

     In the event of a liquidation or dissolution of the Company or the appointment of a liquidator,
     receiver or administrator or analogous person under Hong Kong law in respect of the whole
     or substantially the whole of its undertaking, property or assets, all unexercised Warrants will
     lapse and shall cease to be valid for any purpose, in the case of voluntary liquidation, on the
     effective date of the relevant resolution and, in the case of an involuntary liquidation or
     dissolution, on the date of the relevant court order or, in the case of the appointment of a
     liquidator or receiver or administrator or analogous person under any applicable law in


                                               − 51 −
     respect of the whole or substantially the whole of its undertaking, property or assets, on the
     date when such appointment is effective but subject (in any such case) to any contrary
     mandatory requirement of law.


7.   Delisting


     7.1 If at any time the Shares cease to be listed on the Stock Exchange, the Issuer shall give
         effect to the General Conditions and these Product Conditions in such manner and
         make such adjustments to the rights attaching to the Warrants as it shall, in its absolute
         discretion, consider appropriate to ensure, so far as it is reasonably able to do so, that
         the interests of the Holders generally are not materially prejudiced as a consequence
         of such delisting (without considering the individual circumstances of any Holder or the
         tax or other consequences that may result in any particular jurisdiction).


     7.2 Without prejudice to the generality of Product Condition 7.1, where the Shares are, or,
         upon the delisting, become, listed on any other stock exchange, the General Conditions
         and these Product Conditions may, in the absolute discretion of the Issuer, be amended
         to the extent necessary to allow for the substitution of that other stock exchange in
         place of the Stock Exchange and the Issuer may, without the consent of the Holders,
         make such adjustments to the entitlements of Holders on exercise (including, if
         appropriate, by converting foreign currency amounts at prevailing market rates into
         Hong Kong currency) as may be appropriate in the circumstances.


     7.3 The Issuer shall determine, in its absolute discretion, any adjustment or amendment
         and its determination shall be conclusive and binding on the Holders save in the case
         of manifest error. Notice of any adjustments or amendments shall be given to the
         Holders in accordance with General Condition 7, as soon as practicable after they are
         determined.




                                              − 52 −
 PART B — PRODUCT CONDITIONS OF CALL WARRANTS OVER SINGLE
               EQUITIES (PHYSICALLY SETTLED)

      These Product Conditions will, together with the General Conditions and the supplemental
provisions contained in the relevant Supplemental Listing Document and subject to completion
and amendment, be endorsed on the Global Certificate. The relevant Supplemental Listing
Document in relation to the issue of any series of Warrants may specify additional terms and
conditions which shall, to the extent so specified or to the extent inconsistent with these Product
Conditions, replace or modify these Product Conditions for the purpose of such series of
Warrants. Capitalised terms used in these Product Conditions and not otherwise defined herein
shall have the meaning given to them in the General Conditions and the relevant Supplemental
Listing Document.

1.   Definitions

     For the purposes of these Product Conditions:

     “Business Day” means a day (excluding Saturdays) on which the Stock Exchange is
     scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

     “Company” means the company specified as such in the relevant Supplemental Listing
     Document;

     “Dealing Commencement Date” means the date specified as such in the relevant
     Supplemental Listing Document;

     “Entitlement” means the number specified as such in the relevant Supplemental Listing
     Document, subject to any adjustment in accordance with Product Condition 5;

     “Exercise Amount” means the amount specified as such in the relevant Supplemental
     Listing Document;

     “Exercise Date” means the date upon which a Warrant is, or is to be treated as, exercised
     in accordance with Product Condition 4.2(b);

     “Exercise Expenses” has the meaning given to it by Product Condition 2.3;

     “Exercise Period” means

     (a)   in the case of American Style Warrants, the period beginning at the earlier of the
           commencement of the morning trading session or any pre-opening session of the Stock
           Exchange on the Dealing Commencement Date (or, if later, the first day of dealings in
           the Warrants on the Stock Exchange) and ending at the earlier of the commencement
           of the morning trading session or any pre-opening session of the Stock Exchange on
           the sixth Business Day prior to the Expiry Date, and

     (b)   in the case of European Style Warrants, the time at which the morning trading session
           or, if earlier, any pre-opening session of the Stock Exchange on the Expiry Date
           commences or on the Business Day immediately prior to the Expiry Date provided that
           any Exercise Notice delivered before the Expiry Date shall be deemed to be made
           before the earlier of the commencement of the morning trading session or any
           pre-opening session of the Stock Exchange on the Expiry Date;


                                              − 53 −
     “Exercise Price” means the price specified as such in the relevant Supplemental Listing
     Document;

     “Expiry Date” has the meaning given to it in the relevant Supplemental Listing Document;

     “General Conditions” means the general terms and conditions of Structured Products set
     out in Appendix 1 of the Base Listing Document;

     “Product Conditions” means these product terms and conditions. These Product Conditions
     apply to each series of physically settled call Warrants;

     “Settlement Date” means five Business Days following the Exercise Date;

     “Settlement Disruption Event” means an event beyond the control of the Issuer as a result
     of which the Issuer is unable (a) to deliver share certificates and/or stamped share transfer
     forms to the Company for registration of transfer, (b) to procure that an exercising Holder (or
     such person as it may have directed in the Exercise Notice) shall be entered in the register
     of members of the Company as a registered shareholder, or (c) to deliver the Shares
     electronically through CCASS; and

     “Shares” means the shares of the Company specified as such in the relevant Supplemental
     Listing Document.

2.   Warrant Rights, Exercise Price and Exercise Expenses

     2.1 Warrant Rights

          Every Board Lot gives each Holder, upon due exercise, payment of the Exercise Price
          and upon compliance with the General Conditions and these Product Conditions, in
          particular, Product Condition 4, the right to receive the Entitlement, subject to
          adjustment as provided in Product Condition 5.

     2.2 Exercise Price

          The price to be paid for the Entitlement upon the exercise of every Board Lot shall be
          the Exercise Price, subject to adjustment as described in Product Condition 5, plus any
          sums payable in accordance with Product Condition 2.3.

     2.3 Exercise Expenses

          Holders will be required to pay all charges which they incur in respect of the purchase
          and transfer of Shares upon the exercise of the Warrants including without limitation
          any stamp duty, levies and registration charges.

          In addition, Holders will be required to pay a sum equal to all the expenses payable by
          the seller and transferor of the relevant Shares, including without limitation any stamp
          duty, agent’s expenses, scrip fees, levies, registration charges and other expenses
          payable on or in respect of or in connection with the purchase of or agreement to
          purchase the Shares to which the relevant Warrants and/or the exercise of the Warrants
          relate (the above charges and expenses incurred by Holders and the above seller’s and
          transferor’s expenses are together referred to as the “Exercise Expenses”).


                                              − 54 −
         An amount equivalent to the Exercise Expenses must be paid by the Holder together
         with the Exercise Price in accordance with Product Condition 4. In certain
         circumstances, part of the Exercise Expenses may be required to be paid by Holders
         after the exercise of the Warrants but prior to the delivery of the Shares electronically
         through CCASS.


3.   Exercise of American Style Warrants and European Style Warrants and Expiry


     3.1 American Style Warrants


         The following provisions of this Product Condition 3.1 shall apply to Warrants which are
         expressed to be American Style.


         (a)   Exercise of Warrants


               The Warrants may be exercised by delivery of an Exercise Notice in accordance
               with Product Condition 4 at any time during the relevant Exercise Period.


         (b)   Expiry


               Any Warrant with respect to which an Exercise Date has not occurred during the
               Exercise Period shall expire immediately without value thereafter and all rights of
               the Holder and obligations of the Issuer with respect to such Warrant shall cease.


     3.2 European Style Warrants


         The following provisions of this Product Condition 3.2 shall apply to Warrants which are
         expressed to be European Style.


         (a)   Exercise of Warrants


               The Warrants are exercisable by delivery of an Exercise Notice in accordance with
               Product Condition 4 only on the Expiry Date or on the Business Day immediately
               prior to the Expiry Date provided that any delivery made before the Expiry Date
               shall be deemed to be made before the earlier of the commencement of the
               morning trading session or any pre-opening session of the Stock Exchange on the
               Expiry Date.


         (b)   Expiry


               Any Warrant with respect to which an Exercise Date has not occurred during the
               Exercise Period shall expire immediately without value thereafter and all rights of
               the Holder and obligations of the Issuer with respect to such Warrant shall cease.


4.   Exercise of Warrants


     4.1 Exercise of Warrants in Board Lots


         Warrants may only be exercised in Board Lots or integral multiples thereof.


                                             − 55 −
4.2 Delivery of an Exercise Notice

    (a)   In order to exercise Warrants, the Holder shall deliver to the Transfer Office an
          Exercise Notice, such delivery or deemed delivery to occur at any time during the
          relevant Exercise Period. Warrants may not be exercised at any other time.

    (b)   The Exercise Date shall be:

          (i)    in the case of American Style Warrants, the Business Day on which an
                 Exercise Notice is delivered to CS Hong Kong and in respect of which there
                 is a valid exercise of Warrants in accordance with the requirements of these
                 Product Conditions, provided that any Exercise Notice received by CS Hong
                 Kong after the earlier of the commencement of the morning trading session
                 or any pre-opening session of the Stock Exchange on any Business Day shall
                 be deemed to have been delivered before the earlier of the commencement
                 of the morning trading session or any pre-opening session of the Stock
                 Exchange on the next following Business Day; and

          (ii)   in the case of European Style Warrants, the time at which the morning trading
                 session or, if earlier, any pre-opening session of the Stock Exchange on the
                 Expiry Date commences in respect of which an Exercise Notice has been
                 delivered.

4.3 Exercise Notice

    The Exercise Notice shall:

    (a)   specify the name(s) of the Holder(s) and the number of Warrants being exercised;
          and

    (b)   be accompanied by the Global Certificate in the name(s) of the exercising
          Holder(s) and by payments by way of banker’s draft or other payment, in each
          case in immediately available funds, in favour of the Issuer for the aggregate of the
          Exercise Price for the total number of Shares to be purchased and in favour of CS
          Hong Kong for such of the aggregate of the Exercise Expenses as may be
          determined by CS Hong Kong at that time or, if later, as soon as the same shall
          have been determined by CS Hong Kong.

    Any Exercise Expenses which have not been determined by CS Hong Kong on the
    Exercise Date shall be notified to the Holder as soon as practicable after determination
    thereof by CS Hong Kong and shall be paid by the Holder forthwith.

4.4 Consequences of delivery of an Exercise Notice

    Delivery of an Exercise Notice in accordance with Product Conditions 4.2 and 4.3 shall
    constitute an irrevocable election and undertaking by the Holder specified in such
    Exercise Notice to exercise the number of Warrants specified in such Exercise Notice
    and an irrevocable authority to the Issuer and CS Hong Kong to take all necessary
    action to deliver the Shares electronically through CCASS. In no event will any payment
    be accepted after the earlier of the commencement of the morning trading session or
    any pre-opening session of the Stock Exchange on the Expiry Date.


                                         − 56 −
4.5 Delivery of Shares and payments relating to Excess Shares


    Subject to a valid exercise of Warrants in accordance with these Product Conditions:


    (a)   the Issuer will procure that CS Hong Kong will, with effect from the first Business
          Day following the Exercise Date or the Expiry Date, as the case may be, remove
          from the Register the name of the person in respect of the Warrants which are the
          subject of a valid exercise pursuant to an Exercise Notice or if the Warrants have
          expired worthless and thereby cancel the relevant Warrants; and


    (b)   subject as provided below in the case of a Settlement Disruption Event, the Issuer
          will procure:


          (i)    the delivery of the total number of Shares to be sold and transferred by the
                 Issuer pursuant to the exercise of the Warrants by way of electronic
                 settlement through CCASS to the relevant Holder in accordance with the
                 CCASS Rules no later than the Settlement Date; and


          (ii)   any payment to which the Holder is entitled pursuant to Product Condition
                 5.8, if applicable, shall be despatched no later than the Settlement Date (at
                 the risk and expense of the Holder) to the Holder (or, in the case of joint
                 Holders, the address of the first-named Holder) appearing on the Register.


    Notwithstanding the foregoing, such actions shall not take place until the Holder shall
    have accounted to CS Hong Kong for unpaid Exercise Expenses to the extent that they
    were not or could not be paid on the Exercise Date.


    If a Settlement Disruption Event exists on any Business Day from and including the
    Exercise Date to and including the Settlement Date, then the Settlement Date shall be
    postponed until the first succeeding Business Day on which there is no Settlement
    Disruption Event unless a Settlement Disruption Event prevents settlement on each of
    the ten Business Days immediately following the original Settlement Date.


    In that case,


    (a)   if the Shares can be delivered in any other commercially reasonable manner on
          the tenth Business Day immediately following the original Settlement Date, then
          they shall so be delivered; and


    (b)   if the Shares cannot be delivered in any other commercially reasonable manner,
          the Settlement Date shall be postponed until settlement can reasonably be
          effected under this Product Condition or in any other commercially reasonable
          manner.


    If, as a result of a Settlement Disruption Event it is not possible for the Issuer to deliver
    the Shares electronically through CCASS on or before the original Settlement Date, the
    Issuer shall procure that the exercising Holder is notified (in accordance with General
    Condition 7) of the postponement of the Settlement Date.



                                         − 57 −
4.6 Intervening Period

     As from the Exercise Date, an exercising Holder (or such person as he may have
     directed) shall become beneficially entitled to all those rights attaching to the Shares to
     be delivered in respect of such exercise to which he would have become entitled if he
     had been registered as the holder of such Shares on the Exercise Date.

     Notwithstanding the foregoing, as from the Exercise Date and until such time as the
     exercising Holder (or such person as he may have directed) has delivered the Shares
     electronically through CCASS (the “Intervening Period”), neither the Issuer nor its
     agent or nominee shall:

     (a)   be under any obligation to deliver to such exercising Holder or any subsequent
           beneficial owner of the Shares any letter, certificate, notice, circular, dividend or
           any other document or payment whatsoever received by the Issuer or its agent or
           nominee in its capacity as the registered holder of such Shares; or

     (b)   exercise any or all rights (including voting rights) attaching to the Shares during
           the Intervening Period without the prior written consent of the relevant exercising
           Holder, provided that neither the Issuer nor its agent nor nominee shall be under
           any obligation to exercise any such rights during the Intervening Period; or

     (c)   be under any liability to such exercising Holder or any subsequent beneficial
           owner of the Shares in respect of any loss or damage which such exercising
           Holder or subsequent beneficial owner may sustain or suffer as a result, whether
           directly or indirectly, of the Issuer or its agent or nominee being registered during
           such Intervening Period as legal owner of the Shares.

4.7 Notwithstanding Product Condition 4.6 above, the Issuer shall notify each relevant
    exercising Holder (or where there are joint Holders, the first named Holder) appearing
    in the Register by post (by air mail in the case of an address outside Hong Kong) of the
    receipt by the Issuer or its agent or nominee during the Intervening Period of any
    dividend, rights, bonus issue, shares issued pursuant to a share split or consolidation
    in respect of Shares beneficially owned by such exercising Holder or a subsequent
    beneficial owner of such Shares which the exercising Holder is entitled to under these
    Product Conditions.

     The Issuer shall also make available as soon as reasonably practicable such dividend
     payment or Shares, as the case may be, for collection by the Holder or such subsequent
     beneficial owner of such Shares from an office in Hong Kong which shall be specified
     in such notification upon production of such evidence of entitlement and identification
     as may reasonably be required by the Issuer.

     The Issuer shall also notify each relevant exercising Holder (or where there are joint
     Holders, the first named Holder) appearing on the Register by post (by airmail in the
     case of an address outside Hong Kong) of any right, entitlement or offer which the
     exercising Holder is entitled to exercise or accept under these Product Conditions as
     beneficial owner of the relevant Shares during the Intervening Period and shall make
     available any document relating to such right, entitlement or offer for collection by the
     Holder, or the person to whom the Holder directed the Shares to be delivered, from an
     office in Hong Kong which shall be specified in such notification upon production of such
     evidence of entitlement and identification as may reasonably be required and, following


                                          − 58 −
         receipt by the Issuer of written notification as may reasonably be required and, where
         appropriate, any relevant payment or consideration necessary in connection with
         exercising or accepting any such right, entitlement or offer from the relevant exercising
         Holder or the person to whom the Holder directed the Shares to be delivered, the Issuer
         shall on behalf of the relevant exercising Holder, or the person to whom the Holder
         directed the Shares to be delivered, exercise or accept such right, entitlement or offer.

         Notwithstanding anything in this Product Condition, in the case of the receipt by the
         Issuer during the Intervening Period of an entitlement (in respect of the Shares
         deliverable to or at the direction of the exercising Holder) which takes the form of
         securities issued by the Company by way of rights (to which entitlement the exercising
         Holder is entitled under these Product Conditions), the Issuer shall, as soon as
         reasonably practicable and:

         (a)   in any event by no later than one Business Day following receipt by it of the
               relevant entitlement from the Company, where necessary post to the Company or
               its share registrar an application for the entitlement to be split as appropriate as
               between Shares deliverable to different Holders (or subsequent Holders); and

         (b)   in any event no later than one Business Day following receipt by it of the relevant
               entitlement duly split as referred to in (i) above, post (by air mail in the case of an
               address outside Hong Kong) all documentation (duly renounced where
               appropriate) received by it relating to such entitlement to the exercising Holder, or
               the person to whom the Holder directed the Shares to be delivered, or (if the
               exercising Holder shall have so directed in the relevant Exercise Notice) make
               available such documentation for collection by the Holder, or the person to whom
               the Holder directed the Shares to be delivered, from the Transfer Office upon
               production of such evidence of entitlement and identification as may reasonably be
               required.

     4.8 Relationship of agency or trust

         These Product Conditions shall not be construed so as to give rise to any relationship
         of agency or trust between the Issuer or its agent or nominee and any exercising Holder
         in its capacity as beneficial owner of Shares, or any subsequent beneficial owner of
         Shares, during an Intervening Period and neither the Issuer nor its agent or nominee
         shall owe any duty of a fiduciary nature to either such Holder or such beneficial owner
         in respect of such Shares.

5.   Adjustments

     5.1 Rights Issues

         If and whenever the Company shall, by way of Rights (as defined below), offer new
         Shares for subscription at a fixed subscription price to the holders of existing Shares pro
         rata to existing holdings (a “Rights Offer”), the Entitlement will be adjusted to take
         effect on the Business Day on which trading in the Shares becomes ex-entitlement
         (“Rights Issue Adjustment Date”) in accordance with the following formula:

                               Adjusted Entitlement = Adjustment Factor x E



                                              − 59 −
    Where:

                                1+M
    Adjustment Factor =
                            1 + (R/S) x M

    E:   Existing Entitlement immediately prior to the Rights Offer

    S:   Cum-Rights Share price being the closing price of an existing Share as derived
         from the daily quotation sheet of the Stock Exchange on the last Business Day on
         which Shares are traded on a cum-Rights basis

    R:   Subscription price per new Share as specified in the Rights Offer plus an amount
         equal to any dividends or other benefits foregone to exercise the Rights

    M:   Number of new Share(s) (whether a whole or a fraction) per existing Share each
         holder thereof is entitled to subscribe

    Provided that if the adjustment to be made would result in the Entitlement being
    changed by one per cent. or less, then no adjustment will be made to the Entitlement.
    In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
    nearest Hong Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the
    reciprocal of the Adjustment Factor means one divided by the relevant Adjustment
    Factor. This adjustment shall take effect on the Rights Issue Adjustment Date.

    For the purposes of these Product Conditions:

    “Rights” means the right(s) attached to   each existing Share or needed to acquire one
    new Share (as the case may be) which      are given to the holders of existing Shares to
    subscribe at a fixed subscription price   for new Shares pursuant to the Rights Offer
    (whether by the exercise of one Right,    a part of a Right or an aggregate number of
    Rights).

5.2 Bonus Issues

    If and whenever the Company shall make an issue of Shares credited as fully paid to
    the holders of Shares generally by way of capitalisation of profits or reserves (other than
    pursuant to a scrip dividend or similar scheme for the time being operated by the
    Company or otherwise in lieu of a cash dividend and without any payment or other
    consideration being made or given by such holders) (a “Bonus Issue”) the Entitlement
    will be adjusted on the Business Day on which trading in the Shares becomes
    ex-entitlement (“Bonus Issue Adjustment Date”) in accordance with the following
    formula:

                         Adjusted Entitlement = Adjustment Factor x E

    Where:

    Adjustment Factor = 1 + N

    E:   Existing Entitlement immediately prior to the Bonus Issue

    N:   Number of additional Shares (whether a whole or a fraction) received by a holder
         of existing Shares for each Share held prior to the Bonus Issue


                                        − 60 −
    Provided that if the adjustment to be made would result in the Entitlement being
    changed by one per cent. or less, then no adjustment will be made to the Entitlement.
    In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
    nearest Hong Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the
    reciprocal of the Adjustment Factor means one divided by the relevant Adjustment
    Factor. This adjustment shall take effect on the Bonus Issue Adjustment Date.


5.3 Subdivisions or Consolidations


    If and whenever the Company shall subdivide its Shares or any class of its outstanding
    share capital comprised of the Shares into a greater number of shares (a
    “Subdivision”) or consolidate the Shares or any class of its outstanding share capital
    comprised of the Shares into a smaller number of shares (a “Consolidation”), then:


    (a)   in the case of a Subdivision, the Entitlement in effect immediately prior thereto will
          be increased whereas the Exercise Price (which shall be rounded to the nearest
          Hong Kong dollar 0.001) will be decreased in the same ratio as the Subdivision;
          and


    (b)   in the case of a Consolidation, the Entitlement in effect immediately prior thereto
          will be decreased whereas the Exercise Price (which shall be rounded to the
          nearest Hong Kong dollar 0.001) will be increased in the same ratio as the
          Consolidation,


    in each case on the day on which the Subdivision or Consolidation (as the case may be)
    shall have taken effect.


5.4 Merger or Consolidation


    If it is announced that the Company is to or may merge or consolidate with or into any
    other corporation (including becoming, by agreement or otherwise, a subsidiary of any
    corporation or controlled by any person or corporation) (except where the Company is
    the surviving corporation in a merger) or that it is to or may sell or transfer all or
    substantially all of its assets, the rights attaching to the Warrants may in the absolute
    discretion of the Issuer be amended no later than the Business Day preceding the
    consummation of such merger, consolidation, sale or transfer (each a “Restructuring
    Event”) (as determined by the Issuer in its absolute discretion).


    The rights attaching to the Warrants after the adjustment shall, after such Restructuring
    Event, relate to the number of shares of the corporation(s) resulting from or surviving
    such Restructuring Event or other securities (“Substituted Securities”) and/or cash
    offered in substitution for the affected Shares, as the case may be, to which the holder
    of such number of Shares to which the Warrants related immediately before such
    Restructuring Event would have been entitled upon such Restructuring Event.
    Thereafter the provisions hereof shall apply to such Substituted Securities, provided
    that any Substituted Securities may, in the absolute discretion of the Issuer, be deemed
    to be replaced by an amount in Hong Kong dollars equal to the market value or, if no
    market value is available, fair value, of such Substituted Securities in each case as
    determined by the Issuer as soon as practicable after such Restructuring Event is
    effected.


                                         − 61 −
    For the avoidance of doubt, any remaining Shares shall not be affected by this Product
    Condition 5.4 and, where cash is offered in substitution for Shares or is deemed to
    replace Substituted Securities as described above, references in these Product
    Conditions to the Shares shall include any such cash.

5.5 Cash Distribution

    No adjustment will be made for an ordinary cash dividend (whether or not it is offered
    with a script alternative) (“Ordinary Dividend”). For any other forms of cash distribution
    (“Cash Distribution”) announced by the Company, such as a cash bonus, special
    dividend or extraordinary dividend, no adjustment will be made unless the value of the
    Cash Distribution accounts for 2 per cent. or more of the Share’s closing price on the
    day of announcement by the Company.

    If and whenever the Company shall make a Cash Distribution credited as fully paid to
    the holders of Shares generally, the Entitlement shall be adjusted to take effect on the
    Business Day on which trading in the Shares becomes ex-entitlement in respect of the
    relevant Cash Distribution (“Cash Distribution Adjustment Date”) in accordance with
    the following formula:

                         Adjusted Entitlement = Adjustment Factor x E

    Where:

                               S – OD
    Adjustment Factor =
                            S – OD – CD

    E:   The existing Entitlement immediately prior to the Cash Distribution

    S:   The closing price of an existing Share as derived from the daily quotation sheet of
         the Stock Exchange on the Business Day immediately preceding the Cash
         Distribution Adjustment Date

    CD: The amount of Cash Distribution per Share

    OD: The amount of Ordinary Dividend per Share, provided that the Ordinary Dividend
        and the Cash Distribution shall have the same ex-entitlement date. For the
        avoidance of doubt, the OD shall be deemed to be zero if the ex-entitlement dates
        of the relevant Ordinary Dividend and Cash Distribution are different

    In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
    nearest Hong Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the
    reciprocal of the Adjustment Factor means one divided by the relevant Adjustment
    Factor. The adjustment to the Exercise Price shall take effect on the Cash Distribution
    Adjustment Date.

5.6 Other Adjustments

    Except as provided in General Condition 6, Product Condition 5 and/or Product
    Condition 7, adjustments or amendments will not be made in any other circumstances,
    subject to the right reserved by the Issuer (such right to be exercised in the Issuer’s sole


                                         − 62 −
          and unfettered discretion and without any obligation whatsoever) to make such
          adjustments and amendments as it believes appropriate in circumstances where an
          event or events (including the events as contemplated in Product Conditions 5.1 to 5.5)
          occur which it believes in its sole discretion irrespective of, in substitution for, or in
          addition to the provisions contemplated in Product Conditions 5.1 to 5.5 should, in the
          context of the issue of the Warrants and the obligations of the Issuer, give rise to such
          adjustment or, as the case may be, amendment provided that such adjustment or, as the
          case may be, amendment is (a) considered by the Issuer not to be materially prejudicial
          to the Holders generally (without considering the circumstances of any individual Holder
          or the tax or other consequences of such adjustment or amendment in any particular
          jurisdiction); or (b) otherwise considered by the Issuer to be appropriate and such
          adjustment or amendment is approved by the Stock Exchange.

     5.7 Notice of Determinations

          All determinations made by the Issuer pursuant hereto will be conclusive and binding on
          the Holders. The Issuer will give, or procure that there is given, notice as soon as
          practicable of any adjustment or amendment and of the date from which such
          adjustment or amendment is effective by publication in accordance with General
          Condition 7.

     5.8 Excess Shares

          If as a result of an adjustment or amendment to the Entitlement pursuant to Product
          Conditions 5.1, 5.2, 5.3, 5.5 and 5.6 above (but not otherwise), an exercise of a number
          of Warrants specified in an Exercise Notice would (if not for the provisions of this
          Product Condition 5.8) result in the relevant Holder becoming entitled to delivery of a
          number of Shares which is not equal to a board lot of the Shares at such time or an
          integral multiple thereof, then:

          (a)   the Issuer shall not deliver to the relevant Holder and the Holder shall cease to be
                entitled to receive in respect of the relevant exercise of Warrants, that number of
                Shares (the “Excess Shares”) which exceeds the amount of such board lot or
                integral multiple thereof; and

          (b)   the relevant Holder shall be entitled to receive a cash amount from the Issuer (to
                be paid no later than the Settlement Date in accordance with Product Condition
                4.5) equal to the closing price of one Share (as derived from the Daily Quotation
                Sheet of the Stock Exchange or, if no such quotation is available, the most recently
                available closing price) on the Business Day immediately preceding the relevant
                Exercise Date multiplied by the number of the Excess Shares.

6.   Liquidation

     In the event of a liquidation or dissolution of the Company or the appointment of a liquidator,
     receiver or administrator or analogous person under Hong Kong law in respect of the whole
     or substantially the whole of its undertaking, property or assets, all unexercised Warrants will
     lapse and shall cease to be valid for any purpose, in the case of voluntary liquidation, on the
     effective date of the relevant resolution and, in the case of an involuntary liquidation or
     dissolution, on the date of the relevant court order or, in the case of the appointment of a
     liquidator or receiver or administrator or analogous person under any applicable law in
     respect of the whole or substantially the whole of its undertaking, property or assets, on the
     date when such appointment is effective but subject (in any such case) to any contrary
     mandatory requirement of law.


                                              − 63 −
7.   Delisting


     7.1 If at any time the Shares cease to be listed on the Stock Exchange, the Issuer shall give
         effect to the General Conditions and these Product Conditions in such manner and
         make such adjustments to the rights attaching to the Warrants as it shall, in its absolute
         discretion, consider appropriate to ensure, so far as it is reasonably able to do so, that
         the interests of the Holders generally are not materially prejudiced as a consequence
         of such delisting (without considering the individual circumstances of any Holder or the
         tax or other consequences that may result in any particular jurisdiction).


     7.2 Without prejudice to the generality of Product Condition 7.1, where the Shares are, or,
         upon the delisting, become, listed on any other stock exchange, the General Conditions
         and these Conditions may, in the absolute discretion of the Issuer, be amended to the
         extent necessary to allow for the substitution of that other stock exchange in place of
         the Stock Exchange and the Issuer may, without the consent of the Holders, make such
         adjustments to the entitlements of Holders on exercise (including, if appropriate, by
         converting foreign currency amounts at prevailing market rates into Hong Kong
         currency) as may be appropriate in the circumstances.


     7.3 The Issuer shall determine, in its absolute discretion, any adjustment or amendment
         and its determination shall be conclusive and binding on the Holders save in the case
         of manifest error. Notice of any adjustments or amendments shall be given to the
         Holders in accordance with General Condition 7 as soon as practicable after they are
         determined.




                                              − 64 −
     PART C — PRODUCT CONDITIONS OF LOCKED-IN RETURN CALL/PUT
           WARRANTS OVER SINGLE EQUITIES (CASH SETTLED)

      These Product Conditions will, together with the General Conditions and the supplemental
provisions contained in the relevant Supplemental Listing Document and subject to completion
and amendment, be endorsed on the Global Certificate. The relevant Supplemental Listing
Document in relation to the issue of any series of Warrants may specify additional terms and
conditions which shall, to the extent so specified or to the extent inconsistent with these Product
Conditions, replace or modify these Product Conditions for the purpose of such series of
Warrants. Capitalised terms used in these Product Conditions and not otherwise defined herein
shall have the meaning given to them in the General Conditions and the relevant Supplemental
Listing Document.


1.    Definitions


      For the purposes of these Product Conditions:


      “Business Day” means a day (excluding Saturdays) on which the Stock Exchange is
      scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;


      “Cash Settlement Amount” means, in respect of every Board Lot, an amount in Hong Kong
      dollars calculated by the Issuer as equal to (1) the sum of the Periodic Cash Settlement
      Amounts divided by the number of Periodic Fixing Dates less (2) the Exercise Expenses;


      “Company” means the company specified as such in the relevant Supplemental Listing
      Document;


      “Dealing Commencement Date” means the date specified as such in the relevant
      Supplemental Listing Document;


      “Designated Bank Account” means the relevant bank account designated by the relevant
      Holder;


      “Entitlement” means the number specified as such in the relevant Supplemental Listing
      Document, subject to any adjustment in accordance with Product Condition 5;


      “Exercise Amount” means the amount specified as such in the relevant Supplemental
      Listing Document;


      “Exercise Expenses” means any charges or expenses including any taxes or duties which
      are incurred in respect of the exercise of the Warrants;


      “Exercise Price” means the price specified as such in the relevant Supplemental Listing
      Document;


      “Expiry Date” has the meaning given to it in the relevant Supplemental Listing Document;


      “General Conditions” means the general terms and conditions of Structured Products set
      out in Appendix 1 of the Base Listing Document;


                                              − 65 −
“Market Disruption Event” means:

(a)   the occurrence or existence on any Valuation Date during the one-half hour period that
      ends at the close of trading of any suspension of or limitation imposed on trading (by
      reason of movements in price exceeding limits permitted by the Stock Exchange or
      otherwise) on the Stock Exchange in: (i) the Shares; or (ii) any options or futures
      contracts relating to the Shares if, in any such case, that suspension or limitation is, in
      the determination of the Issuer, material; or

(b)   the hoisting of the tropical cyclone warning signal number 8 or above or the hoisting of
      a “BLACK” rainstorm signal which either results in the Stock Exchange being closed for
      dealings for an entire day or results in the Stock Exchange being closed prior to its
      regular time for close of trading on any day PROVIDED THAT there shall be no Market
      Disruption Event solely by reason of the Stock Exchange opening later than its regular
      time for open of trading on any day as a result of the tropical cyclone warning signal
      number 8 or above or the “BLACK” rainstorm signal having been hoisted;

“Periodic Cash Settlement Amount” means, in respect of every Board Lot and each
Periodic Fixing Date:

(a)   in respect of a series of call Warrants, an amount in Hong Kong dollars calculated by
      the Issuer as equal to (1) the greater of (i) zero and (ii) the product of (A) the Entitlement
      (subject to adjustment as provided in Product Condition 5) in respect of such Periodic
      Fixing Date, (B) the arithmetic mean of the closing prices of one Share (as derived from
      the Daily Quotation Sheet of the Stock Exchange, subject to any adjustments to such
      closing prices as may be necessary to reflect any capitalisation, rights issue,
      distribution or the like) for each Valuation Date in respect of such Periodic Fixing Date
      less the Exercise Price (subject to adjustment as provided in Product Condition 5), and
      (C) one Board Lot; and (2) divided by the Exercise Amount; for the avoidance of doubt,
      in respect of any Periodic Fixing Date, any adjustment under Product Condition 5 which
      takes effect after such Periodic Fixing Date shall not affect the calculation of the
      Periodic Cash Settlement Amount in respect of such Periodic Fixing Date in any way;
      and

(b)   in respect of a series of put Warrants, an amount in Hong Kong dollars calculated by the
      Issuer as equal to (1) the greater of (i) zero and (ii) the product of (A) the Entitlement
      (subject to adjustment as provided in Product Condition 5) in respect of such Periodic
      Fixing Date, (B) the Exercise Price (subject to adjustment as provided in Product
      Condition 5) less the arithmetic mean of the closing prices of one Share (as derived
      from the Daily Quotation Sheet of the Stock Exchange, subject to any adjustments to
      such closing prices as may be necessary to reflect any capitalisation, rights issue,
      distribution or the like) for each Valuation Date in respect of such Periodic Fixing Date,
      and (C) one Board Lot; and (2) divided by the Exercise Amount; for the avoidance of
      doubt, in respect of any Periodic Fixing Date, any adjustment under Product Condition
      5 which takes effect after such Periodic Fixing Date shall not affect the calculation of the
      Periodic Cash Settlement Amount in respect of such Periodic Fixing Date in any way;

“Periodic Fixing Dates” has the meaning given to it in the relevant Supplemental Listing
Document;

“Product Conditions” means these product terms and conditions. These Product Conditions
apply to each series of cash settled locked-in return Warrants;


                                           − 66 −
     “Settlement Date” means three Business Days following the Expiry Date;

     “Settlement Disruption Event” means an event beyond the control of the Issuer as a result
     of which the Issuer is unable to procure payment of the Cash Settlement Amount
     electronically through CCASS to the Designated Bank Account;

     “Shares” means the shares of the Company specified as such in the relevant Supplemental
     Listing Document; and

     “Valuation Date” means, with respect to the exercise of Warrants and each Periodic Fixing
     Date, each of the five Business Days immediately preceding such Periodic Fixing Date,
     provided that if the Issuer determines, in its sole discretion, that on any Valuation Date a
     Market Disruption Event has occurred, then that Valuation Date shall be postponed until the
     first succeeding Business Day on which there is no Market Disruption Event irrespective of
     whether that postponed Valuation Date would fall on a day that already is or is deemed to be
     a Valuation Date, provided that if the postponement of a Valuation Date as above would
     result in a Valuation Date falling on or after such Periodic Fixing Date then:

     (a)   the Business Day immediately preceding such Periodic Fixing Date (the “Last
           Valuation Date”) shall be deemed to be the Valuation Date notwithstanding the Market
           Disruption Event; and

     (b)   the Issuer shall determine the closing price of the Shares on the basis of its good faith
           estimate of such price that would have prevailed on the Last Valuation Date but for the
           Market Disruption Event.

     For the avoidance of doubt, in the event that a Valuation Date is postponed due to the
     occurrence of a Market Disruption Event, the closing price of the Shares for such postponed
     Valuation Date will be the closing price of the Shares on the first succeeding Business Day.
     Accordingly, the closing price of a Valuation Date may be used more than once in calculating
     the arithmetic mean of the closing prices of one Share for the determination of each Periodic
     Cash Settlement Amount, so that in no event shall there be less than five closing prices to
     determine the arithmetic mean of the closing prices of one Share for each Periodic Fixing
     Date.

2.   Warrant Rights and Exercise Expenses

     2.1 Warrant Rights

           Every Board Lot gives each Holder, upon due exercise and compliance with the General
           Conditions and these Product Conditions, in particular, Product Condition 4, the right to
           receive the payment of the Cash Settlement Amount, if any.

     2.2 Exercise Expenses

           Upon exercise of the Warrants, Holder will be obliged to give an irrevocable
           authorisation to the Issuer to deduct all Exercise Expenses in accordance with Product
           Condition 4.

3.   Exercise of Warrants, Automatic Exercise and Expiry

     3.1 Exercise of Warrants

           The Warrants are exercisable only on the Expiry Date.


                                              − 67 −
     3.2 Automatic Exercise

         Any Warrant will automatically be exercised if the Cash Settlement Amount on the
         Expiry Date is greater than zero (without notice being given to the Holders). The
         Holders will not be required to deliver any Exercise Notice and the Issuer or its agent
         will pay to the Holders the Cash Settlement Amount (if any) in accordance with Product
         Condition 4.4.

     3.3 Expiry

         Any Warrant which has not been automatically exercised in accordance with Product
         Condition 3.2 shall expire immediately without value thereafter and all rights of the
         Holder and obligations of the Issuer with respect to such Warrant shall cease.

4.   Exercise of Warrants

     4.1 Exercise of Warrants in Board Lots

         Warrants may only be exercised in Board Lots or integral multiples thereof.

     4.2 No requirement to deliver an Exercise Notice

         The Holders will not be required to deliver an exercise notice for any purpose in relation
         to the Warrants.

     4.3 Cancellation

         The Issuer will procure that CS Hong Kong will, with effect from the first Business Day
         following the Expiry Date, remove from the Register the name of the person in respect
         of the Warrants which (a) are the subject of a valid exercise pursuant to automatic
         exercise in accordance with these Product Conditions; or (b) have expired worthless,
         and thereby cancel the relevant Warrants.

     4.4 Cash Settlement

         Subject to automatic exercise of Warrants in accordance with these Product Conditions,
         the Issuer will make a payment in respect of every Board Lot to the relevant Holder
         equal to the Cash Settlement Amount.

         The Cash Settlement Amount shall be despatched not later than the Settlement Date by
         crediting that amount in accordance with the CCASS Rules to the Designated Bank
         Account.

         If, as a result of a Settlement Disruption Event, it is not possible for the Issuer to procure
         payment electronically through CCASS by crediting the relevant Designated Bank
         Account of the Holder on the original Settlement Date, the Issuer shall use its
         reasonable endeavours to procure payment electronically through CCASS by crediting
         the relevant Designated Bank Account of the Holder as soon as reasonably practicable
         after the original Settlement Date. The Issuer will not be liable to the Holder for any
         interest in respect of the amount due or any loss or damage that such Holder may suffer
         as a result of the existence of the Settlement Disruption Event.


                                              − 68 −
5.   Adjustments

     5.1 Rights Issues

         If and whenever the Company shall, by way of Rights (as defined below), offer new
         Shares for subscription at a fixed subscription price to the holders of existing Shares pro
         rata to existing holdings (a “Rights Offer”), the Entitlement will be adjusted to take
         effect on the Business Day on which trading in the Shares becomes ex-entitlement
         (“Rights Issue Adjustment Date”) in accordance with the following formula:

                            Adjustment Entitlement = Adjustment Factor x E

         Where:

                                     1+M
         Adjustment Factor =
                                 1 + (R/S) x M


         E:   Existing Entitlement immediately prior to the Rights Offer

         S:   Cum-Rights Share price being the closing price of an existing Share as derived
              from the daily quotation sheet of the Stock Exchange on the last Business Day on
              which Shares are traded on a cum-Rights basis

         R:   Subscription price per new Share as specified in the Rights Offer plus an amount
              equal to any dividends or other benefits foregone to exercise the Rights

         M:   Number of new Share(s) (whether a whole or a fraction) per existing Share each
              holder thereof is entitled to subscribe

         Provided that if the adjustment to be made would result in the Entitlement being
         changed by one per cent. or less, then no adjustment will be made to the Entitlement.
         In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
         nearest Hong Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the
         reciprocal of the Adjustment Factor means one divided by the relevant Adjustment
         Factor. This adjustment shall take effect on the Rights Issue Adjustment Date.

         For the purposes of these Product Conditions:

         “Rights” means the right(s) attached to each existing Share or needed to acquire one
         new Share (as the case may be) which are given to the holders of existing Shares to
         subscribe at a fixed subscription price for new Shares pursuant to the Rights
         Offer(whether by the exercise of one Right, a part of a Right or an aggregate number
         of Rights).

     5.2 Bonus Issues

         If and whenever the Company shall make an issue of Shares credited as fully paid to
         the holders of Shares generally by way of capitalisation of profits or reserves (other than
         pursuant to a scrip dividend or similar scheme for the time being operated by the
         Company or otherwise in lieu of a cash dividend and without any payment or other


                                             − 69 −
    consideration being made or given by such holders) (a “Bonus Issue”) the Entitlement
    will be adjusted on the Business Day on which trading in the Shares becomes
    ex-entitlement (“Bonus Issue Adjustment Date”) in accordance with the following
    formula:

                         Adjusted Entitlement = Adjustment Factor x E

    Where:

    Adjustment Factor = 1 + N

    E:    Existing Entitlement immediately prior to the Bonus Issue

    N:    Number of additional Shares (whether a whole or a fraction) received by a holder
          of existing Shares for each Share held prior to the Bonus Issue

    Provided that if the adjustment to be made would result in the Entitlement being
    changed by one per cent. or less, then no adjustment will be made to the Entitlement.
    In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
    nearest Hong Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the
    reciprocal of the Adjustment Factor means one divided by the relevant Adjustment
    Factor. This adjustment shall take effect on the Bonus Issue Adjustment Date.

5.3 Subdivisions or Consolidations

    If and whenever the Company shall subdivide its Shares or any class of its outstanding
    share capital comprised of the Shares into a greater number of shares (a
    “Subdivision”) or consolidate the Shares or any class of its outstanding share capital
    comprised of the Shares into a smaller number of shares (a “Consolidation”), then:

    (a)   in the case of a Subdivision, the Entitlement in effect immediately prior thereto will
          be increased whereas the Exercise Price (which shall be rounded to the nearest
          Hong Kong dollar 0.001) will be decreased in the same ratio as the Subdivision;
          and

    (b)   in the case of a Consolidation, the Entitlement in effect immediately prior thereto
          will be decreased whereas the Exercise Price (which shall be rounded to the
          nearest Hong Kong dollar 0.001) will be increased in the same ratio as the
          Consolidation,

    in each case on the day on which the Subdivision or Consolidation (as the case may be)
    shall have taken effect.

5.4 Merger or Consolidation

    If it is announced that the Company is to or may merge or consolidate with or into any
    other corporation (including becoming, by agreement or otherwise, a subsidiary of any
    corporation or controlled by any person or corporation) (except where the Company is
    the surviving corporation in a merger) or that it is to or may sell or transfer all or
    substantially all of its assets, the rights attaching to the Warrants may in the absolute
    discretion of the Issuer be amended no later than the Business Day preceding the
    consummation of such merger, consolidation, sale or transfer (each a “Restructuring
    Event”) (as determined by the Issuer in its absolute discretion).


                                         − 70 −
    The rights attaching to the Warrants after the adjustment shall, after such Restructuring
    Event, relate to the number of shares of the corporation(s) resulting from or surviving
    such Restructuring Event or other securities (“Substituted Securities”) and/or cash
    offered in substitution for the affected Shares, as the case may be, to which the holder
    of such number of Shares to which the Warrants related immediately before such
    Restructuring Event would have been entitled upon such Restructuring Event.
    Thereafter the provisions hereof shall apply to such Substituted Securities, provided
    that any Substituted Securities may, in the absolute discretion of the Issuer, be deemed
    to be replaced by an amount in Hong Kong dollars equal to the market value or, if no
    market value is available, fair value, of such Substituted Securities in each case as
    determined by the Issuer as soon as practicable after such Restructuring Event is
    effected.

    For the avoidance of doubt, any remaining Shares shall not be affected by this Product
    Condition 5.4 and, where cash is offered in substitution for Shares or is deemed to
    replace Substituted Securities as described above, references in these Product
    Conditions to the Shares shall include any such cash.

5.5 Cash Distribution

    No adjustment will be made for an ordinary cash dividend (whether or not it is offered
    with a script alternative) (“Ordinary Dividend”). For any other forms of cash distribution
    (“Cash Distribution”) announced by the Company, such as a cash bonus, special
    dividend or extraordinary dividend, no adjustment will be made unless the value of the
    Cash Distribution accounts for 2 per cent. or more of the Share’s closing price on the
    day of announcement by the Company.

    If and whenever the Company shall make a Cash Distribution credited as fully paid to
    the holders of Shares generally, the Entitlement shall be adjusted to take effect on the
    Business Day on which trading in the Shares becomes ex-entitlement in respect of the
    relevant Cash Distribution (“Cash Distribution Adjustment Date”) in accordance with
    the following formula:

                        Adjusted Entitlement = Adjustment Factor x E

    Where:

                               S – OD
    Adjustment Factor =
                            S – OD – CD

    E:   The existing Entitlement immediately prior to the Cash Distribution

    S:   The closing price of an existing Share as derived from the daily quotation sheet of
         the Stock Exchange on the Business Day immediately preceding the Cash
         Distribution Adjustment Date

    CD: The amount of Cash Distribution per Share

    OD: The amount of Ordinary Dividend per Share, provided that the Ordinary Dividend
        and the Cash Distribution shall have the same ex-entitlement date. For the
        avoidance of doubt, the OD shall be deemed to be zero if the ex-entitlement dates
        of the relevant Ordinary Dividend and Cash Distribution are different


                                        − 71 −
          In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
          nearest Hong Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the
          reciprocal of the Adjustment Factor means one divided by the relevant Adjustment
          Factor. The adjustment to the Exercise Price shall take effect on the Cash Distribution
          Adjustment Date.

     5.6 Other Adjustments

          Except as provided in General Condition 6, Product Condition 5 and/or Product
          Condition 7, adjustments or amendments will not be made in any other circumstances,
          subject to the right reserved by the Issuer (such right to be exercised in the Issuer’s sole
          and unfettered discretion and without any obligation whatsoever) to make such
          adjustments and amendments as it believes appropriate in circumstances where an
          event or events (including the events as contemplated in Product Conditions 5.1 to 5.5)
          occur which it believes in its sole discretion and irrespective of, in substitution for, or in
          addition to the provisions contemplated in Product Conditions 5.1 to 5.5 should, in the
          context of the issue of the Warrants and the obligations of the Issuer, give rise to such
          adjustment or, as the case may be, amendment provided that such adjustment or, as the
          case may be, amendment is (a) considered by the Issuer not to be materially prejudicial
          to the Holders generally (without considering the circumstances of any individual Holder
          or the tax or other consequences of such adjustment or amendment in any particular
          jurisdiction); or (b) otherwise considered by the Issuer to be appropriate and such
          adjustment or amendment is approved by the Stock Exchange.

     5.7 Notice of Determinations

          All determinations made by the Issuer pursuant hereto will be conclusive and binding on
          the Holders. The Issuer will give, or procure that there is given, notice as soon as
          practicable of any adjustment or amendment and of the date from which such
          adjustment or amendment is effective by publication in accordance with General
          Condition 7.

6.   Liquidation

     In the event of a liquidation or dissolution of the Company or the appointment of a liquidator,
     receiver or administrator or analogous person under Hong Kong law in respect of the whole
     or substantially the whole of its undertaking, property or assets, all unexercised Warrants will
     lapse and shall cease to be valid for any purpose, in the case of voluntary liquidation, on the
     effective date of the relevant resolution and, in the case of an involuntary liquidation or
     dissolution, on the date of the relevant court order or, in the case of the appointment of a
     liquidator or receiver or administrator or analogous person under any applicable law in
     respect of the whole or substantially the whole of its undertaking, property or assets, on the
     date when such appointment is effective but subject (in any such case) to any contrary
     mandatory requirement of law.

7.   Delisting

     7.1 If at any time the Shares cease to be listed on the Stock Exchange, the Issuer shall give
         effect to the General Conditions and these Product Conditions in such manner and
         make such adjustments to the rights attaching to the Warrants as it shall, in its absolute
         discretion, consider appropriate to ensure, so far as it is reasonably able to do so, that
         the interests of the Holders generally are not materially prejudiced as a consequence


                                               − 72 −
     of such delisting (without considering the individual circumstances of any Holder or the
     tax or other consequences that may result in any particular jurisdiction).


7.2 Without prejudice to the generality of Product Condition 7.1, where the Shares are, or,
    upon the delisting, become, listed on any other stock exchange, the General Conditions
    and these Product Conditions may, in the absolute discretion of the Issuer, be amended
    to the extent necessary to allow for the substitution of that other stock exchange in
    place of the Stock Exchange and the Issuer may, without the consent of the Holders,
    make such adjustments to the entitlements of Holders on exercise (including, if
    appropriate, by converting foreign currency amounts at prevailing market rates into
    Hong Kong currency) as may be appropriate in the circumstances.


7.3 The Issuer shall determine, in its absolute discretion, any adjustment or amendment
    and its determination shall be conclusive and binding on the Holders save in the case
    of manifest error. Notice of any adjustments or amendments shall be given to the
    Holders in accordance with General Condition 7, as soon as practicable after they are
    determined.




                                        − 73 −
     PART D — PRODUCT CONDITIONS OF AVERAGE RETURN CALL/PUT
           WARRANTS OVER SINGLE EQUITIES (CASH SETTLED)

      These Product Conditions will, together with the General Conditions and the supplemental
provisions contained in the relevant Supplemental Listing Document and subject to completion
and amendment, be endorsed on the Global Certificate. The relevant Supplemental Listing
Document in relation to the issue of any series of Warrants may specify additional terms and
conditions which shall, to the extent so specified or to the extent inconsistent with these Product
Conditions, replace or modify these Product Conditions for the purpose of such series of
Warrants. Capitalised terms used in these Product Conditions and not otherwise defined herein
shall have the meaning given to them in the General Conditions and the relevant Supplemental
Listing Document.

1.   Definitions

     For the purposes of these Product Conditions:

     “Business Day” means a day (excluding Saturdays) on which the Stock Exchange is
     scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

     “Cash Settlement Amount” means, in respect of every Board Lot, an amount in Hong Kong
     dollars calculated by the Issuer as equal to (1) the product of (A) the Entitlement (subject to
     adjustment as provided in Product Condition 5) in respect of a Periodic Fixing Date, (B) the
     sum of the Periodic Reference Prices (subject to adjustment as provided in Product
     Condition 5) divided by the number of Periodic Fixing Dates less the Exercise Price (subject
     to adjustment as provided in Product Condition 5) and (C) one Board Lot; (2) divided by the
     Exercise Amount; and (3) less the Exercise Expenses. For the avoidance of doubt, if the
     Cash Settlement Amount is a negative figure, it shall be deemed to be zero;

     “Company” means the company specified as such in the relevant Supplemental Listing
     Document;

     “Dealing Commencement Date” means the date specified as such in the relevant
     Supplemental Listing Document;

     “Designated Bank Account” mean the relevant bank account designated by the relevant
     Holder;

     “Entitlement” means the number specified as such in the relevant Supplemental Listing
     Document, subject to any adjustment in accordance with Product Condition 5;

     “Exercise Amount” means the amount specified as such in the relevant Supplemental
     Listing Document;

     “Exercise Expenses” means any charges or expenses including any taxes or duties which
     are incurred in respect of the exercise of the Warrants;

     “Exercise Price” means the price specified as such in the relevant Supplemental Listing
     Document;

     “Expiry Date” has the meaning given to it in the relevant Supplemental Listing Document;


                                              − 74 −
“General Conditions” means the general terms and conditions of Structured Products set
out in Appendix 1 of the Base Listing Document;

“Market Disruption Event” means:

(a)   the occurrence or existence on any Valuation Date during the one-half hour period that
      ends at the close of trading of any suspension of or limitation imposed on trading (by
      reason of movements in price exceeding limits permitted by the Stock Exchange or
      otherwise) on the Stock Exchange in: (i) the Shares; or (ii) any options or futures
      contracts relating to the Shares if, in any such case, that suspension or limitation is, in
      the determination of the Issuer, material; or

(b)   the hoisting of the tropical cyclone warning signal number 8 or above or the hoisting of
      a “BLACK” rainstorm signal which either results in the Stock Exchange being closed for
      dealings for an entire day or results in the Stock Exchange being closed prior to its
      regular time for close of trading on any day PROVIDED THAT there shall be no Market
      Disruption Event solely by reason of the Stock Exchange opening later than its regular
      time for open of trading on any day as a result of the tropical cyclone warning signal
      number 8 or above or the “BLACK” rainstorm signal having been hoisted;

“Periodic Fixing Dates” has the meaning given to it in the relevant Supplemental Listing
Document;

“Periodic Reference Price” means, in respect of each Periodic Fixing Date, an amount in
Hong Kong Dollars calculated by the Issuer as equal to the arithmetic mean of the closing
prices of one Share (as derived from the Daily Quotation Sheet of the Stock Exchange,
subject to any adjustments to such closing prices as may be necessary to reflect any
capitalisation, rights issue, distribution or the like) for each Valuation Date with respect to the
relevant Periodic Fixing Date;

“Product Conditions” means these product terms and conditions. These Product Conditions
apply to each series of cash settled average return call/put Warrants;

“Settlement Date” means three Business Days following the Expiry Date;

“Settlement Disruption Event” means an event beyond the control of the Issuer as a result
of which the Issuer is unable to procure payment of the Cash Settlement Amount
electronically through CCASS to the Designated Bank Account;

“Shares” means the shares of the Company specified as such in the relevant Supplemental
Listing Document; and

“Valuation Date” means, with respect to the exercise of Warrants and each Periodic Fixing
Date, each of the five Business Days immediately preceding such Periodic Fixing Date,
provided that if the Issuer determines, in its sole discretion, that on any Valuation Date a
Market Disruption Event has occurred, then that Valuation Date shall be postponed until the
first succeeding Business Day on which there is no Market Disruption Event irrespective of
whether that postponed Valuation Date would fall on a day that already is or is deemed to be
a Valuation Date, provided that if the postponement of a Valuation Date as above would
result in a Valuation Date falling on or after such Periodic Fixing Date then:

(a)   the Business Day immediately preceding such Periodic Fixing Date (the “Last
      Valuation Date”) shall be deemed to be the Valuation Date notwithstanding the Market
      Disruption Event; and


                                           − 75 −
     (b)   the Issuer shall determine the closing price of the Shares on the basis of its good faith
           estimate of such price that would have prevailed on the Last Valuation Date but for the
           Market Disruption Event.

     For the avoidance of doubt, in the event that a Valuation Date is postponed due to the
     occurrence of a Market Disruption Event, the closing price of the Shares for such postponed
     Valuation Date will be the closing price of the Shares on the first succeeding Business Day.
     Accordingly, the closing price of a Valuation Date may be used more than once in calculating
     the Periodic Reference Price with respect to a Periodic Fixing Date, so that in no event shall
     there be less than five closing prices to determine each Periodic Reference Price.

2.   Warrant Rights and Exercise Expenses

     2.1 Warrant Rights

           Every Board Lot gives each Holder, upon due exercise and compliance with the General
           Conditions and these Product Conditions, in particular, Product Condition 4, the right to
           receive the payment of the Cash Settlement Amount, if any.

     2.2 Exercise Expenses

           Upon exercise of the Warrants, Holders will be obliged to give an irrevocable
           authorisation to the Issuer to deduct all Exercise Expenses in accordance with Product
           Condition 4.

3.   Exercise of Warrants, Automatic Exercise and Expiry

     3.1 Exercise of Warrants

           The Warrants are exercisable only on the Expiry Date.

     3.2 Automatic Exercise

           Any Warrant will automatically be exercised if the Cash Settlement Amount on the
           Expiry Date is greater than zero (without notice being given to the Holders). The
           Holders will not be required to deliver any Exercise Notice and the Issuer or its agent
           will pay to the Holders the Cash Settlement Amount (if any) in accordance with Product
           Condition 4.4.

     3.3 Expiry

           Any Warrant which has not been automatically exercised in accordance with Product
           Condition 3.2 shall expire immediately without value thereafter and all rights of the
           Holder and obligations of the Issuer with respect to such Warrant shall cease.

4.   Exercise of Warrants

     4.1 Exercise of Warrants in Board Lots

           Warrants may only be exercised in Board Lots or integral multiples thereof.

     4.2 No requirement to deliver an Exercise Notice

           The Holders will not be required to deliver an exercise notice for any purpose in relation
           to the Warrants.


                                               − 76 −
     4.3 Cancellation

         The Issuer will procure that CS Hong Kong will, with effect from the first Business Day
         following the Expiry Date, remove from the Register the name of the person in respect
         of the Warrants which (a) are the subject of a valid exercise pursuant to automatic
         exercise in accordance with these Product Conditions; or (b) have expired worthless,
         and thereby cancel the relevant Warrants.

     4.4 Cash Settlement

         Subject to automatic exercise of Warrants in accordance with these Product Conditions,
         the Issuer will make a payment in respect of every Board Lot to the relevant Holder
         equal to the Cash Settlement Amount.

         The Cash Settlement Amount shall be despatched not later than the Settlement Date by
         crediting that amount in accordance with the CCASS Rules to the Designated Bank
         Account.

         If as a result of a Settlement Disruption Event, it is not possible for the Issuer to procure
         payment electronically through CCASS by crediting the relevant Designated Bank
         Account of the Holder on the original Settlement Date, the Issuer shall use its
         reasonable endeavours to procure payment electronically through CCASS by crediting
         the relevant Designated Bank Account of the Holder as soon as reasonably practicable
         after the original Settlement Date. The Issuer will not be liable to the Holder for any
         interest in respect of the amount due or any loss or damage that such Holder may suffer
         as a result of the existence of the Settlement Disruption Event.

5.   Adjustments

     5.1 Rights Issues

         If and whenever the Company shall, by way of Rights (as defined below), offer new
         Shares for subscription at a fixed subscription price to the holders of existing Shares pro
         rata to existing holdings (a “Rights Offer”), the Entitlement will be adjusted to take
         effect on the Business Day on which trading in the Shares becomes ex-entitlement
         (“Rights Issue Adjustment Date”) in accordance with the following formula:

                              Adjusted Entitlement = Adjustment Factor x E

         Where:

                                      1+M
         Adjustment Factor =
                                  1 + (R/S) x M

         E:   Existing Entitlement immediately prior to the Rights Offer

         S:   Cum-Rights Share price being the closing price of an existing Share as derived
              from the daily quotation sheet of the Stock Exchange on the last Business Day on
              which Shares are traded on a cum-Rights basis

         R:   Subscription price per new Share as specified in the Rights Offer plus an amount
              equal to any dividends or other benefits foregone to exercise the Rights


                                              − 77 −
    M:   Number of new Share(s) (whether a whole or a fraction) per existing Share each
         holder thereof is entitled to subscribe


    Provided that if the adjustment to be made would result in the Entitlement being
    changed by one per cent. or less, then no adjustment will be made to the Entitlement.
    In addition, the Issuer shall adjust the Exercise Price and any Periodic Reference
    Price(s) which has or have been determined (each of which shall be rounded to the
    nearest Hong Kong dollar 0.001), by the reciprocal of the Adjustment Factor, where in
    each case the reciprocal of the Adjustment Factor means one divided by the Adjustment
    Factor. These adjustments shall take effect on the Rights Issue Adjustment Date.


    For the purposes of these Product Conditions:


    “Rights” means the right(s) attached to   each existing Share or needed to acquire one
    new Share (as the case may be) which      are given to the holders of existing Shares to
    subscribe at a fixed subscription price   for new Shares pursuant to the Rights Offer
    (whether by the exercise of one Right,    a part of a Right or an aggregate number of
    Rights).


5.2 Bonus Issues


    If and whenever the Company shall make an issue of Shares credited as fully paid to
    the holders of Shares generally by way of capitalisation of profits or reserves (other than
    pursuant to a scrip dividend or similar scheme for the time being operated by the
    Company or otherwise in lieu of a cash dividend and without any payment or other
    consideration being made or given by such holders) (a “Bonus Issue”) the Entitlement
    will be adjusted on the Business Day on which trading in the Shares becomes
    ex-entitlement (“Bonus Issue Adjustment Date”) in accordance with the following
    formula:


                         Adjusted Entitlement = Adjustment Factor x E


    Where:


    Adjustment Factor = 1 + N


    E:   Existing Entitlement immediately prior to the Bonus Issue


    N:   Number of additional Shares (whether a whole or a fraction) received by a holder
         of existing Shares for each Share held prior to the Bonus Issue


    Provided that if the adjustment to be made would result in the Entitlement being
    changed by one per cent. or less, then no adjustment will be made to the Entitlement.
    In addition, the Issuer shall adjust the Exercise Price and any Periodic Reference
    Price(s) which has or have been determined (each of which shall be rounded to the
    nearest Hong Kong dollar 0.001), by the reciprocal of the Adjustment Factor, where in
    each case the reciprocal of the Adjustment Factor means one divided by the Adjustment
    Factor. These adjustments shall take effect on the Bonus Issue Adjustment Date.



                                        − 78 −
5.3 Subdivisions or Consolidations


    If and whenever the Company shall subdivide its Shares or any class of its outstanding
    share capital comprised of the Shares into a greater number of shares (a
    “Subdivision”) or consolidate the Shares or any class of its outstanding share capital
    comprised of the Shares into a smaller number of shares (a “Consolidation”), then:


    (a)   in the case of a Subdivision, the Entitlement in effect immediately prior thereto will
          be increased whereas the Exercise Price and any Periodic Reference Price(s)
          which has or have been determined (each of which shall be rounded to the nearest
          Hong Kong dollar 0.001) will be decreased in the same ratio as the Subdivision;
          and


    (b)   in the case of a Consolidation, the Entitlement in effect immediately prior thereto
          will be decreased whereas the Exercise Price and any Periodic Reference Price(s)
          which has or have been determined (each of which shall be rounded to the nearest
          Hong Kong dollar 0.001) will be increased in the same ratio as the Consolidation,


    in each case on the day on which the Subdivision or Consolidation (as the case may be)
    shall have taken effect.


5.4 Merger or Consolidation


    If it is announced that the Company is to or may merge or consolidate with or into any
    other corporation (including becoming, by agreement or otherwise, a subsidiary of any
    corporation or controlled by any person or corporation) (except where the Company is
    the surviving corporation in a merger) or that it is to or may sell or transfer all or
    substantially all of its assets, the rights attaching to the Warrants may in the absolute
    discretion of the Issuer be amended no later than the Business Day preceding the
    consummation of such merger, consolidation, sale or transfer (each a “Restructuring
    Event”) (as determined by the Issuer in its absolute discretion).


    The rights attaching to the Warrants after the adjustment shall, after such Restructuring
    Event, relate to the number of shares of the corporation(s) resulting from or surviving
    such Restructuring Event or other securities (“Substituted Securities”) and/or cash
    offered in substitution for the affected Shares, as the case may be, to which the holder
    of such number of Shares to which the Warrants related immediately before such
    Restructuring Event would have been entitled upon such Restructuring Event.
    Thereafter the provisions hereof shall apply to such Substituted Securities, provided
    that any Substituted Securities may, in the absolute discretion of the Issuer, be deemed
    to be replaced by an amount in Hong Kong dollars equal to the market value or, if no
    market value is available, fair value, of such Substituted Securities in each case as
    determined by the Issuer as soon as practicable after such Restructuring Event is
    effected.


    For the avoidance of doubt, any remaining Shares shall not be affected by this Product
    Condition 5.4 and, where cash is offered in substitution for Shares or is deemed to
    replace Substituted Securities as described above, references in these Product
    Conditions to the Shares shall include any such cash.


                                         − 79 −
5.5 Cash Distribution

    No adjustment will be made for an ordinary cash dividend (whether or not it is offered
    with a script alternative) (“Ordinary Dividend”). For any other forms of cash distribution
    (“Cash Distribution”) announced by the Company, such as a cash bonus, special
    dividend or extraordinary dividend, no adjustment will be made unless the value of the
    Cash Distribution accounts for 2 per cent. or more of the Share’s closing price on the
    day of announcement by the Company.

    If and whenever the Company shall make a Cash Distribution credited as fully paid to
    the holders of Shares generally, the Entitlement shall be adjusted to take effect on the
    Business Day on which trading in the Shares becomes ex-entitlement in respect of the
    relevant Cash Distribution (“Cash Distribution Adjustment Date”) in accordance with
    the following formula:

                         Adjusted Entitlement = Adjustment Factor x E

    Where:

                                S – OD
    Adjustment Factor =
                             S – OD – CD

    E:   The existing Entitlement immediately prior to the Cash Distribution

    S:   The closing price of an existing Share as derived from the daily quotation sheet of
         the Stock Exchange on the Business Day immediately preceding the Cash
         Distribution Adjustment Date

    CD: The amount of Cash Distribution per Share

    OD: The amount of Ordinary Dividend per Share, provided that the Ordinary Dividend
        and the Cash Distribution shall have the same ex-entitlement date. For the
        avoidance of doubt, the OD shall be deemed to be zero if the ex-entitlement dates
        of the relevant Ordinary Dividend and Cash Distribution are different

    In addition, the Issuer shall adjust the Exercise Price and any Periodic Reference
    Price(s) which has or have been determined (each of which shall be rounded to the
    nearest Hong Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the
    reciprocal of the Adjustment Factor means one divided by the relevant Adjustment
    Factor. These adjustments shall take effect on the Cash Distribution Adjustment Date.

5.6 Other Adjustments

    Except as provided in General Condition 6, Product Condition 5 and/or Product
    Condition 7, adjustments or amendments will not be made in any other circumstances,
    subject to the right reserved by the Issuer (such right to be exercised in the Issuer’s sole
    and unfettered discretion and without any obligation whatsoever) to make such
    adjustments and amendments as it believes appropriate in circumstances where an
    event or events (including the events as contemplated in Product Conditions 5.1 to 5.5)
    occur which it believes in its sole discretion and irrespective of, in substitution for, or in
    addition to the provisions contemplated in Product Conditions 5.1 to 5.5 should, in the
    context of the issue of the Warrants and the obligations of the Issuer, give rise to such


                                         − 80 −
          adjustment or, as the case may be, amendment provided that such adjustment or, as the
          case may be, amendment is (a) considered by the Issuer not to be materially prejudicial
          to the Holders generally (without considering the circumstances of any individual Holder
          or the tax or other consequences of such adjustment or amendment in any particular
          jurisdiction); or (b) otherwise considered by the Issuer to be appropriate and such
          adjustment or amendment is approved by the Stock Exchange.

     5.7 Notice of Determinations

          All determinations made by the Issuer pursuant hereto will be conclusive and binding on
          the Holders. The Issuer will give, or procure that there is given, notice as soon as
          practicable of any adjustment or amendment and of the date from which such
          adjustment or amendment is effective by publication in accordance with General
          Condition 7.

6.   Liquidation

     In the event of a liquidation or dissolution of the Company or the appointment of a liquidator,
     receiver or administrator or analogous person under Hong Kong law in respect of the whole
     or substantially the whole of its undertaking, property or assets, all unexercised Warrants will
     lapse and shall cease to be valid for any purpose, in the case of voluntary liquidation, on the
     effective date of the relevant resolution and, in the case of an involuntary liquidation or
     dissolution, on the date of the relevant court order or, in the case of the appointment of a
     liquidator or receiver or administrator or analogous person under any applicable law in
     respect of the whole or substantially the whole of its undertaking, property or assets, on the
     date when such appointment is effective but subject (in any such case) to any contrary
     mandatory requirement of law.

7.   Delisting

     7.1 If at any time the Shares cease to be listed on the Stock Exchange, the Issuer shall give
         effect to the General Conditions and these Product Conditions in such manner and
         make such adjustments to the rights attaching to the Warrants as it shall, in its absolute
         discretion, consider appropriate to ensure, so far as it is reasonably able to do so, that
         the interests of the Holders generally are not materially prejudiced as a consequence
         of such delisting (without considering the individual circumstances of any Holder or the
         tax or other consequences that may result in any particular jurisdiction).

     7.2 Without prejudice to the generality of Product Condition 7.1 where the Shares are, or,
         upon the delisting, become, listed on any other stock exchange, the General Conditions
         and these Product Conditions may, in the absolute discretion of the Issuer, be amended
         to the extent necessary to allow for the substitution of that other stock exchange in
         place of the Stock Exchange and the Issuer may, without the consent of the Holders,
         make such adjustments to the entitlements of Holders on exercise (including, if
         appropriate, by converting foreign currency amounts at prevailing market rates into
         Hong Kong currency) as may be appropriate in the circumstances.

     7.3 The Issuer shall determine, in its absolute discretion, any adjustment or amendment
         and its determination shall be conclusive and binding on the Holders save in the case
         of manifest error. Notice of any adjustments or amendments shall be given to the
         Holders in accordance with General Condition 7, as soon as practicable after they are
         determined.


                                              − 81 −
      PART E — PRODUCT CONDITIONS OF BASKET CALL/PUT WARRANTS
                          (CASH SETTLED)

      These Product Conditions will, together with the General Conditions and the supplemental
provisions contained in the relevant Supplemental Listing Document and subject to completion
and amendment, be endorsed on the Global Certificate. The relevant Supplemental Listing
Document in relation to the issue of any series of Warrants may specify additional terms and
conditions which shall, to the extent so specified or to the extent inconsistent with these Product
Conditions, replace or modify these Product Conditions for the purpose of such series of
Warrants. Capitalised terms used in these Product Conditions and not otherwise defined herein
shall have the meaning given to them in the General Conditions and the relevant Supplemental
Listing Document.

1.   Definitions

     For the purposes of these Product Conditions:

     “Basket” means a basket comprising each of the Basket Components;

     “Basket Component” has the meaning given to it in the relevant Supplemental Listing
     Document;

     “Business Day” means a day (excluding Saturdays) on which the Stock Exchange is
     scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

     “Cash Settlement Amount” means, in respect of every Board Lot, an amount in Hong Kong
     dollars calculated by the Issuer as:

     (a)   for American Style Warrants exercised on an Exercise Date prior to the Expiry Date in
           accordance with Product Condition 3.1(a):

           (i)    in the case of a series of call Warrants, an amount equal to (1) the product of (A)
                  the sum of each Basket Component of the Companies that comprise the Basket
                  (subject to adjustment as provided in Product Condition 5) multiplied by the closing
                  prices of the relevant Share to which each Basket Component relates (as derived
                  from the Daily Quotation Sheet of the Stock Exchange, subject to any adjustments
                  to such closing prices as may be necessary to reflect any capitalisation, rights
                  issue, distribution or the like) on the Valuation Date less the Exercise Price and (B)
                  one Board Lot; (2) divided by the Exercise Amount; and (3) less the Exercise
                  Expenses; and

           (ii)   in the case of a series of put Warrants, an amount equal to (1) the product of (A)
                  the Exercise Price less the sum of each Basket Component of the Companies that
                  comprise the Basket (subject to adjustment as provided in Product Condition 5)
                  multiplied by the closing prices of the relevant Share to which each Basket
                  Component relates (as derived from the Daily Quotation Sheet of the Stock
                  Exchange, subject to any adjustments to such closing prices as may be necessary
                  to reflect any capitalisation, rights issue, distribution or the like) on the Valuation
                  Date and (B) one Board Lot; (2) divided by the Exercise Amount and (3) less the
                  Exercise Expenses; or


                                                 − 82 −
(b)   for Warrants automatically exercised on the Expiry Date in accordance with Product
      Condition 3.1(b) or Product Condition 3.2(b):

      (i)    in the case of a series of call Warrants, an amount equal to (1) the product of (A)
             the sum of each Basket Component of the Companies that comprise the Basket
             (subject to adjustment as provided in Product Condition 5) multiplied by the
             arithmetic mean of the closing prices of the relevant Share to which each Basket
             Component relates (as derived from the Daily Quotation Sheet of the Stock
             Exchange, subject to any adjustments to such closing prices as may be necessary
             to reflect any capitalisation, rights issue, distribution or the like) for each Valuation
             Date less the Exercise Price and (B) one Board Lot; (2) divided by the Exercise
             Amount and (3) less the Exercise Expenses; and

      (ii)   in the case of a series of put Warrants, an amount equal to (1) the product of (A)
             the Exercise Price less the sum of each Basket Component of the Companies that
             comprise the Basket (subject to adjustment as provided in Product Condition 5)
             multiplied by the arithmetic mean of the closing prices of the relevant Share to
             which each Basket Component relates (as derived from the Daily Quotation Sheet
             of the Stock Exchange, subject to any adjustments to such closing prices as may
             be necessary to reflect any capitalisation, rights issue, distribution or the like) for
             each Valuation Date and (B) one Board Lot; (2) divided by the Exercise Amount;
             and (3) less the Exercise Expenses;

“Company” means each company specified as such in the relevant Supplemental Listing
Document and “Companies” shall be construed accordingly;

“Dealing Commencement Date” means the date specified as such in the relevant
Supplemental Listing Document;

“Designated Bank Account” means the relevant bank account designated by the relevant
Holder;

“Exercise Amount” means the amount specified as such in the relevant Supplemental
Listing Document;

“Exercise Date” means the date upon which a Warrant is, or is to be treated as, exercised
in accordance with Product Condition 4.1(b)(ii);

“Exercise Expenses” means any charges or expenses including any taxes or duties which
are incurred in respect of the exercise of the Warrants;

“Exercise Period” means:

(a)   in the case of American Style Warrants, the period beginning at the earlier of the
      commencement of the morning trading session or any pre-opening session of the Stock
      Exchange on the Dealing Commencement Date (or, if later, the first day of dealings in
      the Warrants on the Stock Exchange) and ending at the earlier of the commencement
      of the morning trading session or any pre-opening session of the Stock Exchange on
      the sixth Business Day prior to the Expiry Date;

(b)   in the case of European Style Warrants, the time at which the morning trading session
      or, if earlier, any pre-opening session of the Stock Exchange on the Expiry Date
      commences only;


                                             − 83 −
“Exercise Price” means the price specified as such in the relevant Supplemental Listing
Document;

“Expiry Date” has the meaning given to it in the relevant Supplemental Listing Document;

“General Conditions” means the general terms and conditions of Structured Products set
out in Appendix 1 of the Base Listing Document;

“Market Disruption Event” means:

(a)   the occurrence or existence on any Valuation Date during the one-half hour period that
      ends at the close of trading of any suspension of or limitation imposed on trading (by
      reason of movements in price exceeding limits permitted by the Stock Exchange or
      otherwise) on the Stock Exchange in: (i) any of the Shares in the Basket; or (ii) any
      options or futures contracts relating to any of the Shares in the Basket if, in any such
      case, that suspension or limitation is, in the determination of the Issuer, material; or

(b)   the hoisting of the tropical cyclone warning signal number 8 or above or the hoisting of
      a “BLACK” rainstorm signal which either results in the Stock Exchange being closed for
      dealings for an entire day or results in the Stock Exchange being closed prior to its
      regular time for close of trading on any day PROVIDED THAT there shall be no Market
      Disruption Event solely by reason of the Stock Exchange opening later than its regular
      time for open of trading on any day as a result of the tropical cyclone warning signal
      number 8 or above or the “BLACK” rainstorm signal having been hoisted;

“Product Conditions” means these product terms and conditions. These Product Conditions
apply to each series of cash settled basket call/put Warrants;

“Settlement Date” means three Business Days following:

(a)   with respect to the exercise of American Style Warrants on an Exercise Date prior to the
      Expiry Date in accordance with Product Condition 3.1(a), the Valuation Date; or

(b)   with respect to the automatic exercise of Warrants on the Expiry Date in accordance
      with Product Condition 3.1(b) or Product Condition 3.2(b), the Expiry Date;

“Settlement Disruption Event” means an event beyond the control of the Issuer as a result
of which the Issuer is unable to procure payment of the Cash Settlement Amount
electronically through CCASS to the Designated Bank Account;

“Shares” means the shares of each Company specified as such in the relevant Supplemental
Listing Document; and

“Valuation Date” means:

(a)   with respect to the exercise of American Style Warrants on any Exercise Date prior to
      the Expiry Date in accordance with Product Condition 3.1(a), the Exercise Date,
      provided that if the Issuer determines, in its sole discretion, that a Market Disruption
      Event has occurred on such Exercise Date, then the Valuation Date shall be postponed
      until the first succeeding Business Day on which there is no Market Disruption Event,


                                         − 84 −
           provided that if there is a Market Disruption Event on each of the five Business Days
           immediately following the original Exercise Date that, but for the Market Disruption
           Event, would have been the Valuation Date, then:

           (i)    that fifth Business Day after the original Exercise Date shall be deemed to be the
                  Valuation Date notwithstanding the Market Disruption Event; and

           (ii)   the Issuer shall determine the closing price of the Shares on the basis of its good
                  faith estimate of such price that would have prevailed on that fifth Business Day
                  after the original Exercise Date but for the Market Disruption Event; or

     (b)   with respect to the automatic exercise of Warrants on the Expiry Date in accordance
           with Product Condition 3.1(b) or Product Condition 3.2(b), each of the five Business
           Days immediately preceding the Expiry Date, provided that if the Issuer determines, in
           its sole discretion, that on any Valuation Date a Market Disruption Event has occurred,
           then that Valuation Date shall be postponed until the first succeeding Business Day on
           which there is no Market Disruption Event irrespective of whether that postponed
           Valuation Date would fall on a day that already is or is deemed to be a Valuation Date.
           For the avoidance of doubt, in the event that a Valuation Date is postponed in
           accordance with this paragraph (b), the closing price of the Shares for such postponed
           Valuation Date will be the closing price of the Shares on the first succeeding Business
           Day. Accordingly, the closing price of a Valuation Date may be used more than once in
           calculating the arithmetic mean of the closing prices of one Share for the determination
           of the Cash Settlement Amount, so that in no event shall there be less than five closing
           prices to determine the arithmetic mean of the closing prices of one Share,

     provided further that if the postponement of the Valuation Date in accordance with
     paragraphs (a) or (b) above would result in the Valuation Date falling on or after the Expiry
     Date, then:

     (aa) the Business Day immediately preceding the Expiry Date (the “Last Valuation Date”)
          shall be deemed to be the Valuation Date notwithstanding the Market Disruption Event;
          and

     (bb) the Issuer shall determine the closing price of the Shares on the basis of its good faith
          estimate of such price that would have prevailed on the Last Valuation Date but for the
          Market Disruption Event.

2.   Warrant Rights and Exercise Expenses

     2.1 Warrant Rights

           Every Board Lot gives each Holder, upon due exercise and compliance with the General
           Conditions and these Product Conditions, in particular, Product Condition 4.1 or
           Product Condition 4.2, as the case may be, the right to receive the payment of the Cash
           Settlement Amount, if any.

     2.2 Exercise Expenses

           Upon exercise of the Warrants, Holders will be obliged to give an irrevocable
           authorisation to the Issuer to deduct all Exercise Expenses in accordance with Product
           Condition 4.1 or Product Condition 4.2, as the case may be.


                                                − 85 −
3.   Exercise of American Style Warrants and European Style Warrants, Automatic
     Exercise and Expiry

     3.1 American Style Warrants

         The following provisions of this Product Condition 3.1 shall apply to Warrants which are
         expressed to be American Style.

         (a)   Exercise of Warrants

               The Warrants may be exercised by delivery of an Exercise Notice in accordance
               with Product Condition 4.1 at any time during the relevant Exercise Period.

         (b)   Automatic Exercise

               Any Warrant with respect to which an Exercise Date has not occurred during the
               Exercise Period will automatically be exercised if the Cash Settlement Amount on
               the Expiry Date is greater than zero (without notice being given to the Holders).
               The Holders will not be required to deliver any Exercise Notice and the Issuer or
               its agent will pay to the Holders the Cash Settlement Amount (if any) in accordance
               with Product Condition 4.1(f).

         (c)   Expiry

               Any Warrant with respect to which an Exercise Date has not occurred during the
               Exercise Period or which has not been automatically exercised in accordance with
               Product Condition 3.1(b) shall expire immediately without value thereafter and all
               rights of the Holder and obligations of the Issuer with respect to such Warrant shall
               cease.

     3.2 European Style Warrants

         The following provisions of this Product Condition 3.2 shall apply to Warrants which are
         expressed to be European Style.

         (a)   Exercise of Warrants

               The Warrants are exercisable only on the Expiry Date.

         (b)   Automatic Exercise

               Any Warrant will automatically be exercised if the Cash Settlement Amount on the
               Expiry Date is greater than zero (without notice being given to the Holders). The
               Holders will not be required to deliver any Exercise Notice and the Issuer or its
               agent will pay to the Holders the Cash Settlement Amount (if any) in accordance
               with Product Condition 4.2(d).

         (c)   Expiry

               Any Warrant which has not been automatically exercised in accordance with
               Product Condition 3.2(b) shall expire immediately without value thereafter and all
               rights of the Holder and obligations of the Issuer with respect to such Warrant shall
               cease.


                                              − 86 −
4.   Exercise of Warrants

     4.1 American Style Warrants

         The following provisions of this Product Condition 4.1 shall apply to Warrants which are
         expressed to be American Style.

         (a)   Exercise of Warrants in Board Lots

               Warrants may only be exercised in Board Lots or integral multiples thereof.

         (b)   Delivery of an Exercise Notice

               (i)    In order to exercise Warrants, the Holder shall deliver to the Transfer Office
                      an Exercise Notice, such delivery or deemed delivery to occur at any time
                      during the relevant Exercise Period. Warrants may not be exercised at any
                      other time.

               (ii)   The Exercise Date shall be the Business Day on which an Exercise Notice is
                      delivered to CS Hong Kong and in respect of which there is a valid exercise
                      of Warrants in accordance with the requirements of these Product
                      Conditions, provided that any Exercise Notice received by CS Hong Kong
                      after the earlier of the commencement of the morning trading session or any
                      pre-opening session of the Stock Exchange on any Business Day shall be
                      deemed to have been delivered before the earlier of the commencement of
                      the morning trading session or any pre-opening session of the Stock
                      Exchange on the next following Business Day.

         (c)   Exercise Notice

               The Exercise Notice shall:

               (i)    specify the name(s) of the Holder(s) and the number of Warrants being
                      exercised;

               (ii)   be accompanied by the Global Certificate in the name(s) of the exercising
                      Holder(s); and

               (iii) (where applicable) specify the person in whose favour the cheque
                     representing the Cash Settlement Amount should be drawn and the name
                     and address of the bank, broker or other agent to whom the cheque should
                     be sent or, as the case may be, specify the relevant account to which the
                     Cash Settlement Amount should be credited.

         (d)   Consequences of delivery of an Exercise Notice

               Delivery of an Exercise Notice in accordance with Product Conditions 4.1(b) and
               4.1(c) shall constitute an irrevocable election and undertaking by the Holder
               specified in such Exercise Notice to exercise the number of Warrants specified in
               such Exercise Notice and an irrevocable authorisation to deduct the Exercise
               Expenses in accordance with the calculation set out in the definition of the Cash
               Settlement Amount.


                                               − 87 −
    (e)   Cancellation

          The Issuer will procure that CS Hong Kong will, with effect from the first Business
          Day following the Exercise Date or the Expiry Date, as the case may be, remove
          from the Register the name of the person in respect of the Warrants which (i) are
          the subject of a valid exercise in accordance with these Product Conditions
          whether pursuant to an Exercise Notice or automatic exercise; or (ii) have expired
          worthless, and thereby cancel the relevant Warrants.

    (f)   Cash Settlement

          Subject to a valid exercise or automatic exercise of Warrants in accordance with
          these Product Conditions, the Issuer will make a payment in respect of every
          Board Lot to the relevant Holder (or such other person as the Holder may have
          directed, if applicable) equal to the Cash Settlement Amount.

          The Cash Settlement Amount shall be despatched not later than the Settlement
          Date by crediting that amount in accordance with the CCASS Rules, to the
          Designated Bank Account.

          If, as a result of a Settlement Disruption Event, it is not possible for the Issuer to
          procure payment electronically through CCASS by crediting the relevant
          Designated Bank Account of the Holder on the original Settlement Date, the Issuer
          shall use its reasonable endeavours to procure payment electronically through
          CCASS by crediting the relevant Designated Bank Account of the Holder as soon
          as reasonably practicable after the original Settlement Date. The Issuer will not be
          liable to the Holder for any interest in respect of the amount due or any loss or
          damage that such Holder may suffer as a result of the existence of the Settlement
          Disruption Event.

4.2 European Style Warrants

    The following provisions of this Product Condition 4.2 shall apply to Warrants which are
    expressed to be European Style.

    (a)   Exercise of Warrants in Board Lots

          Warrants may only be exercised in Board Lots or integral multiples thereof.

    (b)   No requirement to deliver an Exercise Notice

          The Holders will not be required to deliver an Exercise Notice for any purpose in
          relation to the Warrants.

    (c)   Cancellation

          The Issuer will procure that CS Hong Kong will, with effect from the first Business
          Day following the Expiry Date, remove from the Register the name of the person
          in respect of the Warrants which (i) are the subject of a valid exercise pursuant to
          automatic exercise in accordance with these Product Conditions; or (ii) have
          expired worthless, and thereby cancel the relevant Warrants.


                                         − 88 −
         (d)   Cash Settlement

               Subject to automatic exercise of Warrants in accordance with these Product
               Conditions, the Issuer will make a payment in respect of every Board Lot to the
               relevant Holder equal to the Cash Settlement Amount.

               The Cash Settlement Amount shall be despatched not later than the Settlement
               Date by crediting that amount in accordance with the CCASS Rules, to the
               Designated Bank Account.

               If, as a result of a Settlement Disruption Event, it is not possible for the Issuer to
               procure payment electronically through CCASS by crediting the relevant
               Designated Bank Account of the Holder on the original Settlement Date, the Issuer
               shall use its reasonable endeavours to procure payment electronically through
               CCASS by crediting the relevant Designated Bank Account of the Holder as soon
               as reasonably practicable after the original Settlement Date. The Issuer will not be
               liable to the Holder for any interest in respect of the amount due or any loss or
               damage that such Holder may suffer as a result of the existence of the Settlement
               Disruption Event.

5.   Adjustments

     5.1 Rights Issues

         If and whenever any of the Companies in the Basket shall, by way of Rights (as defined
         below), offer new Shares for subscription at a fixed subscription price to the holders of
         existing Shares pro rata to existing holdings (a “Rights Offer”), the Basket Component
         that relates to the Share(s) of the Company making the Rights Offer will be adjusted to
         take effect on the Business Day on which trading in the Shares becomes ex-entitlement
         (“Rights Issue Adjustment Date”) in accordance with the following formula:

                   Adjusted Basket Component insofar as
                       it relates to the Share(s) of the        = Adjustment Factor x E
                     Company making the Rights Offer

         Where:

                                      1+M
         Adjustment Factor =
                                  1 + (R/S) x M

         E:    The existing Basket Component insofar as it relates to the Share(s) of the
               Company making the Rights Offer immediately prior to the Rights Offer

         S:    Cum-Rights Share price being the closing price of an existing Share of the
               Company making the Rights Offer as derived on the daily quotation sheet of the
               Stock Exchange on the last Business Day on which such Shares are traded on a
               cum-Rights basis

         R:    Subscription price per new Share (of the Company making the Rights Offer)
               specified in the Rights Offer plus an amount equal to any dividends or other
               benefits foregone to exercise the Rights


                                              − 89 −
    M:   Number of new Share(s) (whether a whole or a fraction) per existing Share (of the
         Company making the Rights Offer) each holder thereof is entitled to subscribe


    Provided that if the adjustment to be made would result in the Basket Component
    (relating to the Share(s) of the Company making the Rights Offer) being changed by one
    per cent. or less, then no adjustment will be made to such Basket Component.


    For the purposes of these Product Conditions:


    “Rights” means the right(s) attached to   each existing Share or needed to acquire one
    new Share (as the case may be) which      are given to the holders of existing Shares to
    subscribe at a fixed subscription price   for new Shares pursuant to the Rights Offer
    (whether by the exercise of one Right,    a part of a Right or an aggregate number of
    Rights).


5.2 Bonus Issues


    If and whenever any of the Companies in the Basket shall make an issue of Shares
    credited as fully paid to the holders of Shares generally by way of capitalisation of
    profits or reserves (other than pursuant to a scrip dividend or similar scheme for the
    time being operated by the relevant Company or otherwise in lieu of a cash dividend
    and without any payment or other consideration being made or given by such holders)
    (a “Bonus Issue”) the Basket Component that relates to the Share(s) of the Company
    making the Bonus Issue will be adjusted on the Business Day on which trading in the
    Shares becomes ex-entitlement (“Bonus Issue Adjustment Date”) in accordance with
    the following formula:

         Adjusted Basket Component insofar as
             it relates to the Share(s) of the      = Adjustment Factor x E
           Company making the Bonus Issue


    Where:

    Adjustment Factor = 1 + N


    E:   The existing Basket Component insofar as it relates to the Share(s) of the
         Company making the Bonus Issue immediately prior to the Bonus Issue


    N:   Number of additional Shares (whether a whole or a fraction) received by a holder
         of existing Shares for each Share (of the Company making the Bonus Issue) held
         prior to the Bonus Issue


    Provided that if the adjustment to be made would result in the Basket Component
    (relating to the Share(s) of the Company making the Bonus Issue) being changed by
    one per cent. or less, then no adjustment will be made to such Basket Component.




                                      − 90 −
5.3 Subdivisions or Consolidations

    If and whenever any of the Companies in the Basket shall subdivide its Shares or any
    class of its outstanding share capital comprised of the Shares into a greater number of
    shares (a “Subdivision”) or consolidate the Shares or any class of its outstanding
    share capital comprised of the Shares into a smaller number of shares (a
    “Consolidation”), the Basket Component, insofar as it relates to the Share(s) of the
    Company making the Subdivision, in effect immediately prior thereto will be increased
    or the Basket Component, in effect immediately prior thereto insofar as it relates to the
    Share(s) of the Company making the Consolidation will be decreased in each case on
    the day on which the relevant Subdivision or Consolidation shall have taken effect.

5.4 Merger or Consolidation

    If it is announced that any of the Companies in the Basket is to or may merge or
    consolidate with or into any other corporation (including becoming, by agreement or
    otherwise, a subsidiary of any corporation or controlled by any person or corporation)
    (except where that Company is the surviving corporation in a merger) or that it is to or
    may sell or transfer all or substantially all of its assets, the rights attaching to the
    Warrants may in the absolute discretion of the Issuer be amended no later than the
    Business Day preceding the consummation of such merger, consolidation, sale or
    transfer (each a “Restructuring Event”) (as determined by the Issuer in its absolute
    discretion).

    The rights attaching to the Warrants after the adjustment shall, after such Restructuring
    Event, relate to the number of shares of the corporation(s) resulting from or surviving
    such Restructuring Event or other securities (“Substituted Securities”) and/or cash
    offered in substitution for the affected Shares, as the case may be, to which the holder
    of such number of Shares to which the Warrants related immediately before such
    Restructuring Event would have been entitled upon such Restructuring Event.
    Thereafter the provisions hereof shall apply to such Substituted Securities, provided
    that any Substituted Securities may, in the absolute discretion of the Issuer, be deemed
    to be replaced by an amount in Hong Kong dollars equal to the market value or, if no
    market value is available, fair value, of such Substituted Securities in each case as
    determined by the Issuer as soon as practicable after such Restructuring Event is
    effected.

    For the avoidance of doubt, any remaining Shares shall not be affected by this Product
    Condition 5.4 and, where cash is offered in substitution for Shares or is deemed to
    replace Substituted Securities as described above, references in these Product
    Conditions to the Shares shall include any such cash.

5.5 Cash Distribution

    No adjustment will be made for an ordinary cash dividend (whether or not it is offered
    with a script alternative) (“Ordinary Dividend”). For any other forms of cash distribution
    (“Cash Distribution”) announced by any of the Companies, such as a cash bonus,
    special dividend or extraordinary dividend, no adjustment will be made unless the value
    of the Cash Distribution accounts for 2 per cent. or more of the closing price of the
    Share (of the Company making the Cash Distribution) on the day of announcement by
    the relevant Company.


                                        − 91 −
    If and whenever the Company shall make a Cash Distribution credited as fully paid to
    the holders of Shares generally, the Basket Component that relates to the Share(s) of
    the Company making the Cash Distribution shall be adjusted on the Business Day on
    which trading in the Shares becomes ex-entitlement in respect of the relevant Cash
    Distribution (“Cash Distribution Adjustment Date”) in accordance with the following
    formula:

             Adjusted Basket Component insofar as
                 it relates to the Share(s) of the       = Adjustment Factor x E
             Company making the Cash Distribution

    Where:

                               S – OD
    Adjustment Factor =
                            S – OD – CD

    E:   The existing Basket Component insofar as it relates to the Share(s) of the
         Company making the Cash Distribution immediately prior to the Cash Distribution

    S:   The closing price of the existing Share of the Company making the Cash
         Distribution as derived from the daily quotation sheet of the Stock Exchange on the
         Business Day immediately preceding the Cash Distribution Adjustment Date

    CD: The amount of Cash Distribution per Share of the Company making the Cash
        Distribution

    OD: The amount of Ordinary Dividend per Share of the Company making the Cash
        Distribution, provided that the Ordinary Dividend and the Cash Distribution shall
        have the same ex-entitlement date. For the avoidance of doubt, the OD shall be
        deemed to be zero if the ex-entitlement dates of the relevant Ordinary Dividend
        and Cash Distribution are different

    Provided that if the adjustment to be made would result in the Basket Component
    (relating to the Share(s) of the Company making the Cash Distribution) being changed
    by one per cent. or less, then no adjustment will be made to such Basket Component.

5.6 Other Adjustments

    Except as provided in General Condition 6, Product Condition 5, Product Condition 6
    and/or Product Condition 7, adjustments or amendments will not be made in any other
    circumstances, subject to the right reserved by the Issuer (such right to be exercised in
    the Issuer’s sole and unfettered discretion and without any obligation whatsoever) to
    make such adjustments and amendments as it believes appropriate in circumstances
    where an event or events (including the events as contemplated in Product Conditions
    5.1 to 5.5) occur which it believes in its sole discretion and irrespective of, in
    substitution for, or in addition to the provisions contemplated in Product Conditions 5.1
    to 5.5 should, in the context of the issue of the Warrants and the obligations of the
    Issuer, give rise to such adjustment or, as the case may be, amendment provided that
    such adjustment or, as the case may be, amendment is (a) considered by the Issuer not
    to be materially prejudicial to the Holders generally (without considering the
    circumstances of any individual Holder or the tax or other consequences of such
    adjustment or amendment in any particular jurisdiction); or (b) otherwise considered by
    the Issuer to be appropriate and such adjustment or amendment is approved by the
    Stock Exchange.


                                       − 92 −
     5.7 Notice of Determinations


          All determinations made by the Issuer pursuant hereto will be conclusive and binding on
          the Holders. The Issuer will give, or procure that there is given, notice as soon as
          practicable of any adjustment or amendment and of the date from which such
          adjustment or amendment is effective by publication in accordance with General
          Condition 7.


6.   Liquidation


     In the event of a liquidation or dissolution of all of the Companies or the appointment of a
     liquidator, receiver or administrator or analogous person under Hong Kong law in respect of
     the whole or substantially the whole of their undertaking, property or assets, all unexercised
     Warrants will lapse and shall cease to be valid for any purpose, in the case of voluntary
     liquidation of the last Company to be so affected, on the effective date of the relevant
     resolution and, in the case of an involuntary liquidation or dissolution of the last Company to
     be so affected, on the date of the relevant court order or, in the case of the appointment of
     a liquidator or receiver or administrator or analogous person under any applicable law in
     respect of the whole or substantially the whole of its undertaking, property or assets, on the
     date when such appointment is effective but subject (in any such case) to any contrary
     mandatory requirement of law. In the event of the voluntary liquidation of any of the
     Companies, the Issuer shall make such adjustments or amendments as it reasonably
     believes are appropriate in the circumstances.


7.   Delisting


     7.1 If at any time any of the Shares cease to be listed on the Stock Exchange, the Issuer
         shall give effect to the General Conditions and these Product Conditions in such
         manner and make such adjustments to the rights attaching to the Warrants as it shall,
         in its absolute discretion, consider appropriate to ensure, so far as it is reasonably able
         to do so, that the interests of the Holders generally are not materially prejudiced as a
         consequence of such delisting (without considering the individual circumstances of any
         Holder or the tax or other consequences that may result in any particular jurisdiction).


     7.2 Without prejudice to the generality of Product Condition 7.1, where any of the Shares
         are, or, upon the delisting, become, listed on any other stock exchange, the General
         Conditions and these Product Conditions may, in the absolute discretion of the Issuer,
         be amended to the extent necessary to allow for the substitution of that other stock
         exchange in place of the Stock Exchange and the Issuer may, without the consent of the
         Holders, make such adjustments to the entitlements of Holders on exercise (including,
         if appropriate, by converting foreign currency amounts at prevailing market rates into
         Hong Kong currency) as may be appropriate in the circumstances.


     7.3 The Issuer shall determine, in its absolute discretion, any adjustment or amendment
         and its determination shall be conclusive and binding on the Holders save in the case
         of manifest error. Notice of any adjustments or amendments shall be given to the
         Holders in accordance with General Condition 7 as soon as practicable after they are
         determined.




                                              − 93 −
     PART F — PRODUCT CONDITIONS OF INDEX CALL/PUT WARRANTS
                         (CASH SETTLED)

      These Product Conditions will, together with the General Conditions and the supplemental
provisions contained in the relevant Supplemental Listing Document and subject to completion
and amendment, be endorsed on the Global Certificate. The relevant Supplemental Listing
Document in relation to the issue of any series of Warrants may specify additional terms and
conditions which shall, to the extent so specified or to the extent inconsistent with these Product
Conditions, replace or modify these Product Conditions for the purpose of such series of
Warrants. Capitalised terms used in these Product Conditions and not otherwise defined herein
shall have the meaning given to them in the General Conditions and the relevant Supplemental
Listing Document.

1.   Definitions

     For the purposes of these Product Conditions:

     “Business Day” means a day (excluding Saturdays) on which the Stock Exchange is
     scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

     “Cash Settlement Amount” means, in respect of every Board Lot:

     (a)   in respect of a series of call Warrants, an amount calculated by the Issuer equal to (1)
           the product of (A) the excess of the Closing Level over the Strike Level, (B) the Index
           Currency Amount, either converted (if applicable) (i) into the Settlement Currency at the
           Exchange Rate or, as the case may be, (ii) into the Interim Currency at the First
           Exchange Rate and then converted into the Settlement Currency at the Second
           Exchange Rate and (C) one Board Lot; (2) divided by the Exercise Amount and (3) less
           the Exercise Expenses; and

     (b)   in respect of a series of put Warrants, an amount calculated by the Issuer equal to (1)
           the product of (A) the excess of the Strike Level over the Closing Level, (B) the Index
           Currency Amount, either converted (if applicable) (i) into the Settlement Currency at the
           Exchange Rate or, as the case may be, (ii) into the Interim Currency at the First
           Exchange Rate and then converted into the Settlement Currency at the Second
           Exchange Rate and (C) one Board Lot; (2) divided by the Exercise Amount and (3) less
           the Exercise Expenses;

     “Closing Level” means:

     (a)   in respect of American Style Warrants, the meaning given to it in the relevant
           Supplemental Listing Document, subject to the adjustment in accordance with Product
           Condition 5; and

     (b)   in respect of European Style Warrants, the meaning given to it in the relevant
           Supplement Listing Document, subject to the adjustment in accordance with Product
           Conditions 5;

     “Dealing Commencement Date” means the date specified as such in the relevant
     Supplemental Listing Document;

     “Designated Bank Account” means the relevant bank account designated by the relevant
     Holder;


                                              − 94 −
“Exchange Rate” means the rate specified as such in the relevant Supplemental Listing
Document;


“Exercise Amount” means the amount specified as such in the relevant Supplemental
Listing Document;


“Exercise Date” means the date upon which a Warrant is, or is to be treated as, exercised
in accordance with Product Condition 4.1(b)(ii);


“Exercise Expenses” means any charges or expenses including any taxes or duties which
are incurred in respect of the exercise of the Warrants;


“Exercise Period” means:


(a)   in the case of American Style Warrants, the period beginning at the earlier of the
      commencement of the morning trading session or any pre-opening session of the Stock
      Exchange on the Dealing Commencement Date (or, if later, the first day of dealings in
      the Warrants on the Stock Exchange) and ending at the earlier of the commencement
      of the morning trading session or any pre-opening session of the Stock Exchange on
      the sixth Business Day prior to the Expiry Date; and


(b)   in the case of European Style Warrants, the time at which the morning trading session
      or, if earlier, any pre-opening session of the Stock Exchange on the Expiry Date
      commences only;


“Expiry Date” has the meaning given to it in the relevant Supplemental Listing Document;


“First Exchange Rate” means the rate specified as such in the relevant Supplemental
Listing Document;


“General Conditions” means the general terms and conditions of Structured Products set
out in Appendix 1 of the Base Listing Document;


“Index” means the index specified as such in the relevant Supplemental Listing Document;


“Index Compiler” has the meaning given to it in the relevant Supplemental Listing
Document;


“Index Currency Amount” has the meaning given to it in the relevant Supplemental Listing
Document;


“Index Exchange” has the meaning given to it in the relevant Supplemental Listing
Document;


“Interim Currency” means the currency specified as such in the relevant Supplemental
Listing Document;




                                        − 95 −
“Market Disruption Event” means:


(a)   the occurrence or existence, on any Valuation Date during the one-half hour period that
      ends at the close of trading on the Index Exchange, of any of:


      (i)    the suspension or material limitation of the trading of a material number of
             constituent securities, contracts, commodities or currencies that comprise the
             Index; or


      (ii)   the suspension or material limitation of the trading of constituent securities,
             contracts, commodities or currencies (A) on the Index Exchange; or (B) generally;
             or


      (iii) the suspension or material limitation of the trading of (A) options or futures
            contracts relating to the Index on any exchanges; or (B) options or futures
            generally on any options and/or futures exchanges on which options or futures
            contracts relating to the Index are traded; or


      (iv) the imposition of any exchange controls in respect of any currencies involved in
           determining the Cash Settlement Amount; or


      (v)    the occurrence of an event beyond the control of the Issuer as a result of which the
             Issuer is unable to determine the level of the Index by reference to the Price
             Source (if applicable) at the relevant time.


      For the purposes of paragraph (a) of this definition of “Market Disruption Event”, (i) the
      limitation of the number of hours or days of trading will not constitute a Market
      Disruption Event if it results from an announced change in the regular business hours
      of any exchange, and (ii) a limitation on trading imposed by reason of the movements
      in price exceeding the levels permitted by any relevant exchange will constitute a
      Market Disruption Event; or


(b)   where the Index Exchange is the Stock Exchange, the hoisting of the tropical cyclone
      warning signal number 8 or above or the hoisting of a “BLACK” rainstorm signal which
      either results in the Stock Exchange being closed for dealings for an entire day or
      results in the Stock Exchange being closed prior to its regular time for close of trading
      on any day PROVIDED THAT there shall be no Market Disruption Event solely by
      reason of the Stock Exchange opening later than its regular time for open of trading on
      any day as a result of the tropical cyclone warning signal number 8 or above or the
      “BLACK” rainstorm signal having been hoisted; or


(c)   a limitation or closure of the Index Exchange or the Stock Exchange due to any
      unforeseen circumstances;


“Price Source”, if applicable, has the meaning given to it in the relevant Supplemental
Listing Document;


“Product Conditions” means these product terms and conditions. These Product Conditions
apply to each series of cash settled index call/put Warrants;


                                           − 96 −
     “Settlement Date” means three Business Days following:


     (a)   in respect of American Style Warrants, the Valuation Date; or


     (b)   in respect of European Style Warrants, the Expiry Date;


     “Settlement Disruption Event” means an event beyond the control of the Issuer as a result
     of which the Issuer is unable to procure payment of the Cash Settlement Amount
     electronically through CCASS to the Designated Bank Account;


     “Strike Level” means the level specified as such in the relevant Supplemental Listing
     Document, subject to adjustment in accordance with Product Condition 5; and


     “Valuation Date” means:


     (a)   with respect to the exercise of American Style Warrants, the Exercise Date, provided
           that if the Issuer determines, in its sole discretion, that on the Valuation Date a Market
           Disruption Event has occurred, then the Issuer shall determine the Closing Level on the
           basis of its good faith estimate of the Closing Level that would have prevailed on that
           day but for the occurrence of the Market Disruption Event provided that the Issuer, if
           applicable, may, but shall not be obliged to, determine such Closing Level by having
           regard to the manner in which futures contracts relating to the Index are calculated; or


     (b)   with respect to the exercise of European Style Warrants, the Expiry Date, provided that
           if the Issuer determines, in its sole discretion, that on the Valuation Date a Market
           Disruption Event has occurred, then the Issuer shall determine the Closing Level of the
           Index on the basis of its good faith estimate of the Closing Level that would have
           prevailed on that day but for the occurrence of the Market Disruption Event provided
           that the Issuer, if applicable, may, but shall not be obliged to, determine such Closing
           Level by having regard to the manner in which futures contracts relating to the Index are
           calculated.


2.   Warrant Rights and Exercise Expenses


     2.1 Warrant Rights


           Every Board Lot gives each Holder, upon due exercise and compliance with the General
           Conditions and these Product Conditions, in particular, Product Condition 4.1 or
           Product Condition 4.2, as the case may be, the right to receive the payment of the Cash
           Settlement Amount, if any.


     2.2 Exercise Expenses


           Upon exercise of the Warrants, Holders will be obliged to give an irrevocable
           authorisation to the Issuer to deduct all Exercise Expenses in accordance with Product
           Condition 4.1 or Product Condition 4.2 as the case may be.




                                               − 97 −
3.   Exercise of American Style Warrants and European Style Warrants, Automatic
     Exercise and Expiry

     3.1 American Style Warrants

         The following provisions of this Product Condition 3.1 shall apply to Warrants which are
         expressed to be American Style.

         (a)   Exercise of Warrants

               The Warrants may be exercised by delivery of an Exercise Notice in accordance
               with Product Condition 4.1 at any time during the relevant Exercise Period.

         (b)   Automatic Exercise

               Any Warrant with respect to which an Exercise Date has not occurred during the
               Exercise Period will automatically be exercised if the Cash Settlement Amount on
               the Expiry Date is greater than zero (without notice being given to the Holders).

               The Holders will not be required to deliver any Exercise Notice and the Issuer or
               its agent will pay to the Holders the Cash Settlement Amount (if any) in accordance
               with Product Condition 4.1(f).

         (c)   Expiry

               Any Warrant with respect to which an Exercise Date has not occurred during the
               Exercise Period or which has not been automatically exercised in accordance with
               Product Condition 3.1(b) shall expire immediately without value thereafter and all
               rights of the Holder and obligations of the Issuer with respect to such Warrant shall
               cease.

     3.2 European Style Warrants

         The following provisions of this Product Condition 3.2 shall apply to Warrants which are
         expressed to be European Style.

         (a)   Exercise of Warrants

               The Warrants are exercisable only on the Expiry Date.

         (b)   Automatic Exercise

               Any Warrant will automatically be exercised if the Cash Settlement Amount on the
               Expiry Date is greater than zero (without notice being given to the Holders). The
               Holders will not be required to deliver any Exercise Notice and the Issuer or its
               agent will pay to the Holders the Cash Settlement Amount (if any) in accordance
               with Product Condition 4.2(d).

         (c)   Expiry

               Any Warrant which has not been automatically exercised in accordance with
               Product Condition 3.2(b) shall expire immediately without value thereafter and all
               rights of the Holder and obligations of the Issuer with respect to such Warrant shall
               cease.


                                              − 98 −
4.   Exercise of Warrants

     4.1 American Style Warrants

         The following provisions of this Product Condition 4.1 shall apply to Warrants which are
         expressed to be American Style.

         (a)   Exercise of Warrants in Board Lots

               Warrants may only be exercised in Board Lots or integral multiples thereof.

         (b)   Delivery of an Exercise Notice

               (i)    In order to exercise the Warrants, the Holder shall deliver to the Transfer
                      Office an Exercise Notice, such delivery or deemed delivery to occur at any
                      time during the Exercise Period. Warrants may not be exercised at any other
                      time.

               (ii)   The Exercise Date shall be the Business Day on which an Exercise Notice is
                      delivered to CS Hong Kong and in respect of which there is a valid exercise
                      of Warrants in accordance with the requirements of these Product
                      Conditions, provided that any Exercise Notice received by CS Hong Kong
                      after the earlier of the commencement of the morning trading session or any
                      pre-opening session of the Stock Exchange on any Business Day shall be
                      deemed to have been delivered before the earlier of the commencement of
                      the morning trading session or any pre-opening session of the Stock
                      Exchange on the next following Business Day.

         (c)   Exercise Notice

               The Exercise Notice shall:

               (i)    specify the name(s) of the Holder(s) and the number of Warrants being
                      exercised;

               (ii)   be accompanied by the Global Certificate in the name(s) of the exercising
                      Holder(s); and

               (iii) (where applicable) specify the person in whose favour the cheque
                     representing the Cash Settlement Amount should be drawn and the name
                     and address of the bank, broker or other agent to whom the cheque should
                     be sent or, as the case may be, specify the relevant account to which the
                     Cash Settlement Amount should be credited.

         (d)   Consequences of delivery of an Exercise Notice

               Delivery of an Exercise Notice in accordance with Product Conditions 4.1(b) and
               4.1(c) shall constitute an irrevocable election and undertaking by the Holder
               specified in such Exercise Notice to exercise the number of Warrants specified in
               such Exercise Notice and an irrevocable authorisation to deduct the Exercise
               Expenses in accordance with the calculation set out in the definition of the Cash
               Settlement Amount.


                                              − 99 −
    (e)   Cancellation

          The Issuer will procure that CS Hong Kong will, with effect from the first Business
          Day following the Exercise Date or the Expiry Date, as the case may be, remove
          from the Register the name of the person in respect of the Warrants which (i) are
          the subject of a valid exercise in accordance with these Product Conditions
          whether pursuant to an Exercise Notice or automatic exercise; or (ii) have expired
          worthless, and thereby cancel the relevant Warrants.

    (f)   Cash Settlement

          Subject to a valid exercise, or automatic exercise, of Warrants in accordance with
          these Product Conditions, the Issuer will make a payment, in respect of every
          Board Lot, to the relevant Holder (or such other person as the Holder may have
          directed, if applicable) equal to the Cash Settlement Amount.

          The Cash Settlement Amount shall be despatched not later than the Settlement
          Date by crediting that amount in accordance with the CCASS Rules, to the
          Designated Bank Account.

          If as a result of a Settlement Disruption Event, it is not possible for the Issuer to
          procure payment electronically through CCASS by crediting the relevant
          Designated Bank Account of the Holder on the original Settlement Date, the Issuer
          shall use its reasonable endeavours to procure payment electronically through
          CCASS by crediting the relevant Designated Bank Account of the Holder as soon
          as reasonably practicable after the original Settlement Date. The Issuer will not be
          liable to the Holder for any interest in respect of the amount due or any loss or
          damage that such Holder may suffer as a result of the existence of the Settlement
          Disruption Event.

4.2 European Style Warrants

    The following provisions of this Product Condition 4.2 shall apply to Warrants which are
    expressed to be European Style.

    (a)   Exercise of Warrants in Board Lots

          Warrants may only be exercised in Board Lots or integral multiples thereof.

    (b)   No requirement to deliver an Exercise Notice

          The Holders will not be required to deliver an Exercise Notice for any purpose in
          relation to the Warrants.

    (c)   Cancellation

          The Issuer will procure that CS Hong Kong will, with effect from the first Business
          Day following the Expiry Date, remove from the Register the name of the person
          in respect of the Warrants which (i) are the subject of a valid exercise pursuant to
          automatic exercise in accordance with these Product Conditions; or (ii) have
          expired worthless, and thereby cancel the relevant Warrants.


                                        − 100 −
         (d)   Cash Settlement

               Subject to automatic exercise of Warrants in accordance with these Product
               Conditions, the Issuer will make a payment in respect of every Board Lot to the
               relevant Holder equal to the Cash Settlement Amount.

               The Cash Settlement Amount shall be despatched not later than the Settlement
               Date by crediting that amount in accordance with the CCASS Rules to the
               Designated Bank Account.

               If as a result of a Settlement Disruption Event, it is not possible for the Issuer to
               procure payment electronically through CCASS by crediting the relevant
               Designated Bank Account of the Holder on the original Settlement Date, the Issuer
               shall use its reasonable endeavours to procure payment electronically through
               CCASS by crediting the relevant Designated Bank Account of the Holder as soon
               as reasonably practicable after the original Settlement Date. The Issuer will not be
               liable to the Holder for any interest in respect of the amount due or any loss or
               damage that such Holder may suffer as a result of the existence of the Settlement
               Disruption Event.

5.   Adjustments to the Index

     5.1 Successor Index Compiler Calculates and Reports Index

         If the Index is (a) not calculated and announced by the Index Compiler but is calculated
         and published by a successor to the Index Compiler (the “Successor Index Compiler”)
         acceptable to the Issuer, or (b) replaced by a successor index using, in the
         determination of the Issuer, the same or a substantially similar formula for and method
         of calculation as used in the calculation of the Index, then the Index will be deemed to
         be the index so calculated and announced by the Successor Index Compiler or that
         successor index, as the case may be.

     5.2 Modification and Cessation of Calculation of Index

         If:

         (a)   on or prior to a Valuation Date the Index Compiler or (if applicable) the Successor
               Index Compiler makes a material change in the formula for or the method of
               calculating the Index or in any other way materially modifies the Index (other than
               a modification prescribed in that formula or method to maintain the Index in the
               event of changes in constituent stock, contracts or commodities and other routine
               events); or

         (b)   on a Valuation Date the Index Compiler or (if applicable) the Successor Index
               Compiler fails to calculate and publish the Index (other than as a result of a Market
               Disruption Event),

         then the Issuer shall determine the closing level on such Valuation Date using, in lieu
         of a published level for the Index, the level for the Index as at that Valuation Date as
         determined by the Issuer in accordance with the formula for and method of calculating
         the Index last in effect prior to that change or failure, but using only those
         securities/commodities that comprised the Index immediately prior to that change or
         failure.


                                             − 101 −
5.3 Other Adjustments


    Except as provided in General Condition 6 and/or Product Condition 5, adjustments or
    amendments will not be made in any other circumstances, subject to the right reserved
    by the Issuer (such right to be exercised in the Issuer’s sole and unfettered discretion
    and without any obligation whatsoever) to make such adjustments and amendments as
    it believes appropriate in circumstances where an event or events (including the events
    as contemplated in Product Conditions 5.1 and 5.2) occur which it believes in its sole
    discretion and irrespective of, in substitution for, or in addition to the provisions
    contemplated in Product Conditions 5.1 and 5.2 should, in the context of the issue of the
    Warrants and the obligations of the Issuer, give rise to such adjustment or, as the case
    may be, amendment provided that such adjustment or, as the case may be, amendment
    is (a) considered by the Issuer not to be materially prejudicial to the Holders generally
    (without considering the circumstances of any individual Holder or the tax or other
    consequences of such adjustment or amendment in any particular jurisdiction); or (b)
    otherwise considered by the Issuer to be appropriate and such adjustment or
    amendment is approved by the Stock Exchange.


5.4 Notice of Determinations


    All determinations made by the Issuer pursuant hereto will be conclusive and binding on
    the Holders. The Issuer will give, or procure that there is given, notice as soon as
    practicable of any adjustment or amendment and of the date from which such
    adjustment or amendment is effective by publication in accordance with General
    Condition 7.




                                       − 102 −
           PART G — PRODUCT CONDITIONS OF CALL/PUT WARRANTS
                 OVER SINGLE UNIT TRUSTS (CASH SETTLED)

      These Product Conditions will, together with the General Conditions and the supplemental
provisions contained in the relevant Supplemental Listing Document and subject to completion
and amendment, be endorsed on the Global Certificate. The relevant Supplemental Listing
Document in relation to the issue of any series of Warrants may specify additional terms and
conditions which shall, to the extent so specified or to the extent inconsistent with these Product
Conditions, replace or modify these Product Conditions for the purpose of such series of
Warrants. Capitalised terms used in these Product Conditions and not otherwise defined herein
shall have the meaning given to them in the General Conditions and the relevant Supplemental
Listing Document.

1.   Definitions

     For the purposes of these Product Conditions:

     “Business Day” means a day (excluding Saturdays) on which the Stock Exchange is
     scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

     “Cash Settlement Amount” means, in respect of every Board Lot, an amount in Hong Kong
     dollars calculated by the Issuer as:

     (a)    for American Style Warrants exercised on an Exercise Date prior to the Expiry Date in
            accordance with Product Condition 3.1(a):

            (i)    in the case of a series of call Warrants, an amount equal to (1) the product of (A)
                   the Entitlement (subject to adjustment as provided in Product Condition 5), (B) the
                   closing price of one Unit (as derived from the Daily Quotation Sheet of the Stock
                   Exchange, subject to any adjustments to such closing price as may be necessary
                   to reflect any capitalisation, rights issue, distribution or the like) on the Valuation
                   Date less the Exercise Price (subject to adjustment as provided in Product
                   Condition 5), and (C) one Board Lot; (2) divided by the Exercise Amount and (3)
                   less the Exercise Expenses; and

            (ii)   in the case of a series of put Warrants, an amount equal to (1) the product of (A)
                   the Entitlement (subject to adjustment as provided in Product Condition 5), (B) the
                   Exercise Price (subject to adjustment as provided in Product Condition 5) less the
                   closing price of one Unit (as derived from the Daily Quotation Sheet of the Stock
                   Exchange, subject to any adjustments to such closing price as may be necessary
                   to reflect any capitalisation, rights issue, distribution or the like) on the Valuation
                   Date, and (C) one Board Lot; (2) divided by the Exercise Amount and (3) less the
                   Exercise Expenses; or

     (b)    for Warrants automatically exercised on the Expiry Date in accordance with Product
            Condition 3.1(b) or Product Condition 3.2(b):

            (i)    in the case of a series of call Warrants, an amount equal to (1) the product of (A)
                   the Entitlement (subject to adjustment as provided in Product Condition 5), (B) the
                   arithmetic mean of the closing prices of one Unit (as derived from the Daily
                   Quotation Sheet of the Stock Exchange, subject to any adjustments to such


                                                  − 103 −
             closing prices as may be necessary to reflect any capitalisation, rights issue,
             distribution or the like) for each Valuation Date less the Exercise Price (subject to
             adjustment as provided in Product Condition 5), and (C) one Board Lot; (2) divided
             by the Exercise Amount and (3) less the Exercise Expenses; and

      (ii)   in the case of a series of put Warrants, an amount equal to (1) the product of (A)
             the Entitlement (subject to adjustment as provided in Product Condition 5), (B) the
             Exercise Price (subject to adjustment as provided in Product Condition 5) less the
             arithmetic mean of the closing prices of one Unit (as derived from the Daily
             Quotation Sheet of the Stock Exchange, subject to any adjustments to such
             closing prices as may be necessary to reflect any capitalisation, rights issue,
             distribution or the like) for each Valuation Date, and (C) one Board Lot; (2) divided
             by the Exercise Amount and (3) less the Exercise Expenses;

“Dealing Commencement Date” means the date specified as such in the relevant
Supplemental Listing Document;

“Designated Bank Account” means the relevant bank account designated by the relevant
Holder;

“Entitlement” means the number specified as such in the relevant Supplemental Listing
Document, subject to any adjustment in accordance with Product Condition 5;

“Exercise Amount” means the amount specified as such in the relevant Supplemental
Listing Document;

“Exercise Date” means the date upon which a Warrant is, or is to be treated as, exercised
in accordance with Product Condition 4.1(b)(ii);

“Exercise Expenses” means any charges or expenses including any taxes or duties which
are incurred in respect of the exercise of the Warrants;

“Exercise Period” means:

(a)   in the case of American Style Warrants, the period beginning at the earlier of the
      commencement of the morning trading session or any pre-opening session of the Stock
      Exchange on the Dealing Commencement Date (or, if later, the first day of dealings in
      the Warrants on the Stock Exchange) and ending at the earlier of the commencement
      of the morning trading session or any pre-opening session of the Stock Exchange on
      the sixth Business Day prior to the Expiry Date; and

(b)   in the case of European Style Warrants, the time at which the morning trading session
      or, if earlier, any pre-opening session of the Stock Exchange on the Expiry Date
      commences only;

“Exercise Price” means the price specified as such in the relevant Supplemental Listing
Document;

“Expiry Date” has the meaning given to it in the relevant Supplemental Listing Document;

“General Conditions” means the general terms and conditions of Structured Products set
out in Appendix 1 of the Base Listing Document;


                                           − 104 −
“Market Disruption Event” means:

(a)   the occurrence or existence on any Valuation Date during the one-half hour period that
      ends at the close of trading of any suspension of or limitation imposed on trading (by
      reason of movements in price exceeding limits permitted by the Stock Exchange or
      otherwise) on the Stock Exchange in: (i) the Units; or (ii) any options or futures
      contracts relating to the Units if, in any such case, that suspension or limitation is, in the
      determination of the Issuer, material; or

(b)   the hoisting of the tropical cyclone warning signal number 8 or above or the hoisting of
      a “BLACK” rainstorm signal which either results in the Stock Exchange being closed for
      dealings for an entire day or results in the Stock Exchange being closed prior to its
      regular time for close of trading on any day PROVIDED THAT there shall be no Market
      Disruption Event solely by reason of the Stock Exchange opening later than its regular
      time for open of trading on any day as a result of the tropical cyclone warning signal
      number 8 or above or the “BLACK” rainstorm signal having been hoisted;

“Product Conditions” means these product terms and conditions. These Product Conditions
apply to each series of cash settled call/put Warrants over single Unit Trusts;

“Settlement Date” means three Business Days following:

(a)   with respect to the exercise of American Style Warrants on an Exercise Date prior to the
      Expiry Date in accordance with Product Condition 3.1(a); the Valuation Date; or

(b)   with respect to the automatic exercise of Warrants on the Expiry Date in accordance
      with Product Condition 3.1(b) or Product Condition 3.2(b), the Expiry Date;

“Settlement Disruption Event” means an event beyond the control of the Issuer as a result
of which the Issuer is unable to procure payment of the Cash Settlement Amount
electronically through CCASS to the Designated Bank Account;

“Trust” means the trust specified as such in the relevant Supplemental Listing Document;

“Unit” means the unit specified as such in the relevant Supplemental Listing Document; and

“Valuation Date” means:

(a)   with respect to the exercise of American Style Warrants on any Exercise Date prior to
      the Expiry Date in accordance with Product Condition 3.1(a), the Exercise Date,
      provided that if the Issuer determines, in its sole discretion, that a Market Disruption
      Event has occurred on such Exercise Date, then the Valuation Date shall be postponed
      until the first succeeding Business Day on which there is no Market Disruption Event,
      provided that if there is a Market Disruption Event on each of the five Business Days
      immediately following the original Exercise Date that, but for the Market Disruption
      Event, would have been the Valuation Date, then:

      (i)    that fifth Business Day after the original Exercise Date shall be deemed to be the
             Valuation Date notwithstanding the Market Disruption Event; and

      (ii)   the Issuer shall determine the closing price of the Units on the basis of its good
             faith estimate of such price that would have prevailed on that fifth Business Day
             after the original Exercise Date but for the Market Disruption Event, or


                                           − 105 −
     (b)   with respect to the automatic exercise of Warrants on the Expiry Date in accordance
           with Product Condition 3.1(b) or Product Condition 3.2(b), each of the five Business
           Days immediately preceding the Expiry Date, provided that if the Issuer determines, in
           its sole discretion, that on any Valuation Date a Market Disruption Event has occurred,
           then that Valuation Date shall be postponed until the first succeeding Business Day on
           which there is no Market Disruption Event irrespective of whether that postponed
           Valuation Date would fall on a day that already is or is deemed to be a Valuation Date.
           For the avoidance of doubt, in the event that a Valuation Date is postponed in
           accordance with this paragraph (b), the closing price of the Units for such postponed
           Valuation Date will be the closing price of the Units on the first succeeding Business
           Day. Accordingly, the closing price of a Valuation Date may be used more than once in
           calculating the arithmetic mean of the closing prices of one Unit for the determination
           of the Cash Settlement Amount, so that in no event shall there be less than five closing
           prices to determine the arithmetic mean of the closing prices of one Unit,

     provided further that if the postponement of the Valuation Date in accordance with
     paragraphs (a) or (b) above would result in the Valuation Date falling on or after the Expiry
     Date, then:

     (aa) the Business Day immediately preceding the Expiry Date (the “Last Valuation Date”)
          shall be deemed to be the Valuation Date notwithstanding the Market Disruption Event;
          and

     (bb) the Issuer shall determine the closing price of the Units on the basis of its good faith
          estimate of such price that would have prevailed on the Last Valuation Date but for the
          Market Disruption Event.

2.   Warrant Rights and Exercise Expenses

     2.1 Warrant Rights

           Every Board Lot gives each Holder, upon due exercise and compliance with the General
           Conditions and these Product Conditions, in particular, Product Condition 4.1 or
           Product Condition 4.2, as the case may be, the right to receive the payment of the Cash
           Settlement Amount, if any.

     2.2 Exercise Expenses

           Upon exercise of the Warrants, Holders will be obliged to give an irrevocable
           authorisation to the Issuer to deduct all Exercise Expenses in accordance with Product
           Condition 4.1 or Product Condition 4.2, as the case may be.

3.   Exercise of American Style Warrants and European Style Warrants, Automatic
     Exercise and Expiry

     3.1 American Style Warrants

           The following provisions of this Product Condition 3.1 shall apply to Warrants which are
           expressed to be American Style.

           (a)   Exercise of Warrants

                 The Warrants may be exercised by delivery of an Exercise Notice in accordance
                 with Product Condition 4.1 at any time during the relevant Exercise Period.


                                             − 106 −
         (b)   Automatic Exercise

               Any Warrant with respect to which an Exercise Date has not occurred during the
               Exercise Period will automatically be exercised if the Cash Settlement Amount on
               the Expiry Date is greater than zero (without notice being given to the Holders).
               The Holders will not be required to deliver any Exercise Notice and the Issuer or
               its agent will pay to the Holders the Cash Settlement Amount (if any) in accordance
               with Product Condition 4.1(f).

         (c)   Expiry

               Any Warrant with respect to which an Exercise Date has not occurred during the
               Exercise Period or which has not been automatically exercised in accordance with
               Product Condition 3.1(b) shall expire immediately without value thereafter and all
               rights of the Holder and obligations of the Issuer with respect to such Warrant shall
               cease.

     3.2 European Style Warrants

         The following provisions of this Product Condition 3.2 shall apply to Warrants which are
         expressed to be European Style.

         (a)   Exercise of Warrants

               The Warrants are exercisable only on the Expiry Date.

         (b)   Automatic Exercise

               Any Warrant will automatically be exercised if the Cash Settlement Amount on the
               Expiry Date is greater than zero (without notice being given to the Holders). The
               Holders will not be required to deliver any Exercise Notice and the Issuer or its
               agent will pay to the Holders the Cash Settlement Amount (if any) in accordance
               with Product Condition 4.2(d).

         (c)   Expiry

               Any Warrant which has not been automatically exercised in accordance with
               Product Condition 3.2(b) shall expire immediately without value thereafter and all
               rights of the Holder and obligations of the Issuer with respect to such Warrant shall
               cease.

4.   Exercise of Warrants

     4.1 American Style Warrants

         The following provisions of this Product Condition 4.1 shall apply to Warrants which are
         expressed to be American Style.

         (a)   Exercise of Warrants in Board Lots

               Warrants may only be exercised in Board Lots or integral multiples thereof.


                                             − 107 −
(b)   Delivery of an Exercise Notice


      (i)    In order to exercise Warrants, the Holder shall deliver to the Transfer Office
             an Exercise Notice, such delivery or deemed delivery to occur at any time
             during the relevant Exercise Period. Warrants may not be exercised at any
             other time.


      (ii)   The Exercise Date shall be the Business Day on which an Exercise Notice is
             delivered to CS Hong Kong and in respect of which there is a valid exercise
             of Warrants in accordance with the requirements of these Product
             Conditions, provided that any Exercise Notice received by CS Hong Kong
             after the earlier of the commencement of the morning trading session or any
             pre-opening session of the Stock Exchange on any Business Day shall be
             deemed to have been delivered before the earlier of the commencement of
             the morning trading session or any pre-opening session of the Stock
             Exchange on the next following Business Day.

(c)   Exercise Notice

      The Exercise Notice shall:

      (i)    specify the name(s) of the Holder(s) and the number of Warrants being
             exercised;

      (ii)   be accompanied by the Global Certificate in the name(s) of the exercising
             Holder(s); and

      (iii) (where applicable) specify the person in whose favour the cheque
            representing the Cash Settlement Amount should be drawn and the name
            and address of the bank, broker or other agent to whom the cheque should
            be sent or, as the case may be, specify the relevant account to which the
            Cash Settlement Amount should be credited.

(d)   Consequences of delivery of an Exercise Notice

      Delivery of an Exercise Notice in accordance with Product Conditions 4.1(b) and
      4.1(c) shall constitute an irrevocable election and undertaking by the Holder
      specified in such Exercise Notice to exercise the number of Warrants specified in
      such Exercise Notice and an irrevocable authorisation to deduct the Exercise
      Expenses in accordance with the calculation set out in the definition of the Cash
      Settlement Amount.

(e)   Cancellation

      The Issuer will procure that CS Hong Kong will, with effect from the first Business
      Day following the Exercise Date or the Expiry Date, as the case may be, remove
      from the Register the name of the person in respect of the Warrants which (i) are
      the subject of a valid exercise in accordance with these Product Conditions
      whether pursuant to an Exercise Notice or automatic exercise; or (ii) have expired
      worthless, and thereby cancel the relevant Warrants.


                                     − 108 −
    (f)   Cash Settlement

          Subject to a valid exercise or automatic exercise, of Warrants in accordance with
          these Product Conditions, the Issuer will make a payment in respect of every
          Board Lot to the relevant Holder (or such other person as the Holder may have
          directed, if applicable) equal to the Cash Settlement Amount.

          The Cash Settlement Amount shall be despatched not later than the Settlement
          Date by crediting that amount in accordance with the CCASS Rules, to the
          Designated Bank Account.

          If, as a result of a Settlement Disruption Event, it is not possible for the Issuer to
          procure payment electronically through CCASS by crediting the relevant
          Designated Bank Account of the Holder on the original Settlement Date, the Issuer
          shall use its reasonable endeavours to procure payment electronically through
          CCASS by crediting the relevant Designated Bank Account of the Holder as soon
          as reasonably practicable after the original Settlement Date. The Issuer will not be
          liable to the Holder for any interest in respect of the amount due or any loss or
          damage that such Holder may suffer as a result of the existence of the Settlement
          Disruption Event.

4.2 European Style Warrants

    The following provisions of this Product Condition 4.2 shall apply to Warrants which are
    expressed to be European Style.

    (a)   Exercise of Warrants in Board Lots

          Warrants may only be exercised in Board Lots or integral multiples thereof.

    (b)   No requirement to deliver an Exercise Notice

          The Holders will not be required to deliver an Exercise Notice for any purpose in
          relation to the Warrants.

    (c)   Cancellation

          The Issuer will procure that CS Hong Kong will, with effect from the first Business
          Day following the Expiry Date, remove from the Register the name of the person
          in respect of the Warrants which (i) are the subject of a valid exercise pursuant to
          automatic exercise in accordance with these Product Conditions; or (ii) have
          expired worthless, and thereby cancel the relevant Warrants.

    (d)   Cash Settlement

          Subject to automatic exercise of Warrants in accordance with these Product
          Conditions, the Issuer will make a payment in respect of every Board Lot to the
          relevant Holder equal to the Cash Settlement Amount.

          The Cash Settlement Amount shall be despatched not later than the Settlement
          Date by crediting that amount in accordance with the CCASS Rules, to the
          Designated Bank Account.


                                        − 109 −
              If, as a result of a Settlement Disruption Event, it is not possible for the Issuer to
              procure payment electronically through CCASS by crediting the relevant
              Designated Bank Account of the Holder on the original Settlement Date, the Issuer
              shall use its reasonable endeavours to procure payment electronically through
              CCASS by crediting the relevant Designated Bank Account of the Holder as soon
              as reasonably practicable after the original Settlement Date. The Issuer will not be
              liable to the Holder for any interest in respect of the amount due or any loss or
              damage that such Holder may suffer as a result of the existence of the Settlement
              Disruption Event.

5.   Adjustments

     5.1 Rights Issues

         If and whenever the Trust shall, by way of Rights (as defined below), offer new Units for
         subscription at a fixed subscription price to the holders of existing Units pro rata to
         existing holdings (a “Rights Offer”), the Entitlement will be adjusted to take effect on
         the Business Day on which trading in the Units becomes ex-entitlement (“Rights Issue
         Adjustment Date”) in accordance with the following formula:

                            Adjustment Entitlement = Adjustment Factor x E

         Where:

                                     1+M
         Adjustment Factor =
                                 1 + (R/S) x M

         E:   Existing Entitlement immediately prior to the Rights Offer

         S:   Cum-Rights Unit price being the closing price of an existing Unit as derived from
              the daily quotation sheet of on the Stock Exchange on the last Business Day on
              which the Units are traded on a cum-Rights basis

         R:   Subscription price per new Unit as specified in the Rights Offer plus an amount
              equal to any distributions or other benefits foregone to exercise the Rights

         M:   Number of new Unit(s) (whether a whole or a fraction) per existing Unit each holder
              thereof is entitled to subscribe

         Provided that if the adjustment to be made would result in the Entitlement being
         changed by one per cent. or less, then no adjustment will be made to the Entitlement.
         In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
         nearest Hong Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the
         reciprocal of the Adjustment Factor means one divided by the relevant Adjustment
         Factor. This adjustment shall take effect on the Rights Issue Adjustment Date.

         For the purposes of these Product Conditions:

         “Rights” means the right(s) attached to each existing Unit or needed to acquire one new
         Unit (as the case may be) which are given to the holders of existing Units to subscribe
         at a fixed subscription price for new Units pursuant to the Rights Offer (whether by the
         exercise of one Right, a part of a Right or an aggregate number of Rights).


                                            − 110 −
5.2 Bonus Issues


    If and whenever the Trust shall make an issue of Units credited as fully paid to the
    holders of Units generally (other than pursuant to a scrip distribution or similar scheme
    for the time being operated by the Trust or otherwise in lieu of a cash distribution and
    without any payment or other consideration being made or given by such holders) (a
    “Bonus Issue”) the Entitlement will be adjusted on the Business Day on which trading
    in the Units of the Trust becomes ex-entitlement (“Bonus Issue Adjustment Date”) in
    accordance with the following formula:


                         Adjusted Entitlement = Adjustment Factor x E


    Where:


    Adjustment Factor = 1 + N


    E:    Existing Entitlement immediately prior to the Bonus Issue


    N:    Number of additional Units (whether a whole or a fraction) received by a holder of
          existing Units for each Unit held prior to the Bonus Issue


    Provided that if the adjustment to be made would result in the Entitlement being
    changed by one per cent. or less, then no adjustment will be made to the Entitlement.
    In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
    nearest Hong Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the
    reciprocal of the Adjustment Factor means one divided by the relevant Adjustment
    Factor. This adjustment shall take effect on the Bonus Issue Adjustment Date.


5.3 Subdivisions or Consolidations


    If and whenever the Trust shall subdivide its Units or any class of its outstanding units
    into a greater number of units (a “Subdivision”) or consolidate the Units or any class
    of its outstanding units into a smaller number of units (a “Consolidation”), then:


    (a)   in the case of a Subdivision, the Entitlement in effect immediately prior thereto will
          be increased whereas the Exercise Price (which shall be rounded to the nearest
          Hong Kong dollar 0.001) will be decreased in the same ratio as the Subdivision;
          and


    (b)   in the case of a Consolidation, the Entitlement in effect immediately prior thereto
          will be decreased whereas the Exercise Price (which shall be rounded to the
          nearest Hong Kong dollar 0.001) will be increased in the same ratio as the
          Consolidation,


    in each case on the day on which the Subdivision or Consolidation (as the case may be)
    shall have taken effect.




                                         − 111 −
5.4 Merger or Consolidation

    If it is announced that the Trust is to or may merge with or into any other trust or
    consolidate with or into any other trust or corporation (including becoming, by
    agreement or otherwise, controlled by any person or corporation) (except where the
    Trust is the surviving trust in a merger) or that it is to or may sell or transfer all or
    substantially all of its assets, the rights attaching to the Warrants may in the absolute
    discretion of the Issuer be amended no later than the Business Day preceding the
    consummation of such merger, consolidation, sale or transfer (each a “Restructuring
    Event”) (as determined by the Issuer in its absolute discretion).

    The rights attaching to the Warrants after the adjustment shall, after such Restructuring
    Event, relate to the number of units of the trust(s) resulting from or surviving such
    Restructuring Event or other securities (“Substituted Securities”) and/or cash offered
    in substitution for the affected Units, as the case may be, to which the holder of such
    number of Units to which the Warrants related immediately before such Restructuring
    Event would have been entitled upon such Restructuring Event. Thereafter the
    provisions hereof shall apply to such Substituted Securities, provided that any
    Substituted Securities may, in the absolute discretion of the Issuer, be deemed to be
    replaced by an amount in Hong Kong dollars equal to the market value or, if no market
    value is available, fair value, of such Substituted Securities in each case as determined
    by the Issuer as soon as practicable after such Restructuring Event is effected.

    For the avoidance of doubt, any remaining Units shall not be affected by this Product
    Condition 5.4 and, where cash is offered in substitution for Units or is deemed to replace
    Substituted Securities as described above, references in these Product Conditions to
    the Units shall include any such cash.

5.5 Cash Distribution

    No adjustment will be made for an ordinary cash distribution (whether or not it is offered
    with a script alternative) (“Ordinary Distribution”). For any other forms of cash
    distribution (“Cash Distribution”) announced by the Trust, such as a cash bonus,
    special distribution or extraordinary distribution, no adjustment will be made unless the
    value of the Cash Distribution accounts for 2 per cent. or more of the Unit’s closing price
    on the day of announcement by the Trust.

    If and whenever the Trust shall make a Cash Distribution credited as fully paid to the
    holders of Units generally, the Entitlement shall be adjusted to take effect on the
    Business Day on which trading in the Units becomes ex-entitlement in respect of the
    relevant Cash Distribution (“Cash Distribution Adjustment Date”) in accordance with
    the following formula:

                         Adjusted Entitlement = Adjustment Factor x E

    Where:

                               S – OD
    Adjustment Factor =
                            S – OD – CD

    E:   The existing Entitlement immediately prior to the Cash Distribution


                                        − 112 −
          S:   The closing price of an existing Unit as derived from the daily quotation sheet of
               the Stock Exchange on the Business Day immediately preceding the Cash
               Distribution Adjustment Date.

          CD: The amount of Cash Distribution per Unit

          OD: The amount of Ordinary Distribution per Unit, provided that the Ordinary
              Distribution and the Cash Distribution shall have the same ex-entitlement date. For
              the avoidance of doubt, the OD shall be deemed to be zero if the ex-entitlement
              dates of the relevant Ordinary Distribution and Cash Distribution are different

          In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
          nearest Hong Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the
          reciprocal of the Adjustment Factor means one divided by the relevant Adjustment
          Factor. The adjustment to the Exercise Price shall take effect on the Cash Distribution
          Adjustment Date.

     5.6 Other Adjustments

          Except as provided in General Condition 6, Product Condition 5 and/or Product
          Condition 7, adjustments or amendments will not be made in any other circumstances,
          subject to the right reserved by the Issuer (such right to be exercised in the Issuer’s sole
          and unfettered discretion and without any obligation whatsoever) to make such
          adjustments and amendments as it believes appropriate in circumstances where an
          event or events (including the events as contemplated in Product Conditions 5.1 to 5.5)
          occur which it believes in its sole discretion and irrespective of, in substitution for, or in
          addition to the provisions contemplated in Product Conditions 5.1 to 5.5 should, in the
          context of the issue of the Warrants and the obligations of the Issuer, give rise to such
          adjustment or, as the case may be, amendment provided that such adjustment or, as the
          case may be, amendment is (a) considered by the Issuer not to be materially prejudicial
          to the Holders generally (without considering the circumstances of any individual Holder
          or the tax or other consequences of such adjustment or amendment in any particular
          jurisdiction); or (b) otherwise considered by the Issuer to be appropriate and such
          adjustment or amendment is approved by the Stock Exchange.

     5.7 Notice of Determinations

          All determinations made by the Issuer pursuant hereto will be conclusive and binding on
          the Holders. The Issuer will give, or procure that there is given, notice as soon as
          practicable of any adjustment or amendment and of the date from which such
          adjustment or amendment is effective by publication in accordance with General
          Condition 7.

6.   Termination or Liquidation

     6.1 In the event of a Termination or the liquidation or dissolution of the trustee of the Trust
         (including any successor trustee appointed from time to time (“Trustee”) (in its capacity
         as trustee of the Trust) or the appointment of a liquidator, receiver or administrator or
         analogous person under Hong Kong law in respect of the whole or substantially the
         whole of the Trustee’s undertaking, property or assets, all unexercised Warrants will
         lapse and shall cease to be valid for any purpose. In the case of a Termination, the
         unexercised Warrants will lapse and shall cease to be valid on the effective date of the


                                               − 113 −
          Termination, in the case of a voluntary liquidation, on the effective date of the relevant
          resolution and, in the case of an involuntary liquidation or dissolution, on the date of the
          relevant court order or, in the case of the appointment of a liquidator or receiver or
          administrator or analogous person under any applicable law in respect of the whole or
          substantially the whole of the Trustee’s undertaking, property or assets, on the date
          when such appointment is effective but subject (in any such case) to any contrary
          mandatory requirement of law.


     6.2 For the purpose of this Product Condition 6, “Termination” means (a) the Trust is
         terminated, or the Trustee or the manager of the Trust (including any successor
         manager appointed from time to time) (“Manager”) is required to terminate the Trust
         under the trust deed (“Trust Deed”) constituting the Trust or applicable law, or the
         termination of the Trust commences; (b) the Trust is held or is conceded by the Trustee
         or the Manager not to have been constituted or to have been imperfectly constituted; (c)
         the Trustee ceases to be authorised under the Trust to hold the property of the Trust in
         its name and perform its obligations under the Trust Deed; or (d) the Trust ceases to be
         authorised as an authorised collective investment scheme under the Securities and
         Futures Ordinance (Cap 571, The Laws of Hong Kong).


7.   Delisting


     7.1 If at any time the Units cease to be listed on the Stock Exchange, the Issuer shall give
         effect to the General Conditions and these Product Conditions in such manner and
         make such adjustments to the rights attaching to the Warrants as it shall, in its absolute
         discretion, consider appropriate to ensure, so far as it is reasonably able to do so, that
         the interests of the Holders generally are not materially prejudiced as a consequence
         of such delisting (without considering the individual circumstances of any Holder or the
         tax or other consequences that may result in any particular jurisdiction).


     7.2 Without prejudice to the generality of Product Condition 7.1, where the Units are, or,
         upon the delisting, become, listed on any other stock exchange, the General Conditions
         and these Product Conditions may, in the absolute discretion of the Issuer, be amended
         to the extent necessary to allow for the substitution of that other stock exchange in
         place of the Stock Exchange and the Issuer may, without the consent of the Holders,
         make such adjustments to the entitlements of Holders on exercise (including, if
         appropriate, by converting foreign currency amounts at prevailing market rates into
         Hong Kong currency) as may be appropriate in the circumstances.


     7.3 The Issuer shall determine, in its absolute discretion, any adjustment or amendment
         and its determination shall be conclusive and binding on the Holders save in the case
         of manifest error. Notice of any adjustments or amendments shall be given to the
         Holders in accordance with General Condition 7, as soon as practicable after they are
         determined.




                                              − 114 −
     PART H — PRODUCT CONDITIONS OF CALL/PUT WARRANTS OVER
              SINGLE FOREIGN EQUITIES (CASH SETTLED)

      These Product Conditions will, together with the General Conditions and the supplemental
provisions contained in the relevant Supplemental Listing Document and subject to completion
and amendment, be endorsed on the Global Certificate. The relevant Supplemental Listing
Document in relation to the issue of any series of Warrants may specify additional terms and
conditions which shall, to the extent so specified or to the extent inconsistent with these Product
Conditions, replace or modify these Product Conditions for the purpose of such series of
Warrants. Capitalised terms used in these Product Conditions and not otherwise defined herein
shall have the meaning given to them in the General Conditions and the relevant Supplemental
Listing Document.

1.   Definitions

     For the purposes of these Product Conditions:

     “Business Day” means a day (excluding Saturdays) on which the Stock Exchange is
     scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

     “Cash Settlement Amount” means, in respect of every Board Lot, an amount in Hong Kong
     dollars calculated by the Issuer as:

     (a)   for American Style Warrants exercised on any Exercise Date prior to the Expiry Date in
           accordance with Product Condition 3.1(a):

           (i)    in the case of a series of call Warrants, an amount equal to (1) the product of (A)
                  the Entitlement (subject to adjustment as provided in Product Condition 5), (B) the
                  official closing price of one Share (subject to any adjustments to such official
                  closing price as may be necessary to reflect any capitalisation, rights issue,
                  distribution or the like) on the Valuation Date less the Exercise Price (subject to
                  adjustment as provided in Product Condition 5); and (C) one Board Lot; (2) divided
                  by the Exercise Amount; (3) (if applicable) converted from Underlying Currency
                  into Hong Kong dollars at the Exchange Rate; and (4) less the Exercise Expenses;
                  and

           (ii)   in the case of a series of put Warrants, an amount equal to (1) the product of (A)
                  the Entitlement (subject to adjustment as provided in Product Condition 5), (B) the
                  Exercise Price (subject to adjustment as provided in Product Condition 5) less the
                  official closing price of one Share (subject to any adjustments to such official
                  closing price as may be necessary to reflect any capitalisation, rights issue,
                  distribution or the like) on the Valuation Date, and (C) one Board Lot; (2) divided
                  by the Exercise Amount; (3) (if applicable) converted from Underlying Currency
                  into Hong Kong dollars at the Exchange Rate; and (4) less the Exercise Expenses;
                  or

     (b)   for Warrants automatically exercised on the Expiry Date in accordance with Product
           Condition 3.1(b) or Product Condition 3.2(b):

           (i)    in the case of a series of call Warrants, an amount equal to (1) the product of (A)
                  the Entitlement (subject to adjustment as provided in Product Condition 5), (B) the
                  arithmetic mean of the official closing prices of one Share (subject to any


                                               − 115 −
             adjustments to such official closing prices as may be necessary to reflect any
             capitalisation, rights issue, distribution or the like) for each Valuation Date less the
             Exercise Price (subject to adjustment as provided in Product Condition 5), and (C)
             one Board Lot; (2) divided by the Exercise Amount; (3) (if applicable) converted
             from Underlying Currency into Hong Kong dollars at the Exchange Rate; and (4)
             less the Exercise Expenses; and

      (ii)   in the case of a series of put Warrants, an amount equal to (1) the product of (A)
             the Entitlement (subject to adjustment as provided in Product Condition 5), (B) the
             Exercise Price (subject to adjustment as provided in Product Condition 5) less the
             arithmetic mean of the official closing prices of one Share (subject to any
             adjustments to such official closing prices as may be necessary to reflect any
             capitalisation, rights issue, distribution or the like) for each Valuation Date, and (C)
             one Board Lot, (2) divided by the Exercise Amount; (3) (if applicable) converted
             from Underlying Currency into Hong Kong dollars at the Exchange Rate; and (4)
             less the Exercise Expenses;

“Company” means the company specified as such in the relevant Supplemental Listing
Document;

“Dealing Commencement Date” means the date specified as such in the relevant
Supplemental Listing Document;

“Designated Bank Account” means the relevant bank account designated by the relevant
Holder;

“Entitlement” means the number specified as such in the relevant Supplemental Listing
Document, subject to any adjustment in accordance with Product Condition 5;

“Exchange Rate” has the meaning given to it in the relevant Supplemental Listing
Document;

“Exercise Amount” means the amount specified as such in the relevant Supplemental
Listing Document;

“Exercise Date” means the date upon which a Warrant is, or is to be treated as, exercised
in accordance with Product Condition 4.1(b)(ii);

“Exercise Expenses” means any charges or expenses including any taxes or duties which
are incurred in respect of the exercise of the Warrants;

“Exercise Period” means:

(a)   in the case of American Style Warrants, the period beginning at the earlier of the
      commencement of the morning trading session or any pre-opening session of the Stock
      Exchange on the Dealing Commencement Date (or, if later, the first day of dealings in
      the Warrants on the Stock Exchange) and ending at the earlier of the commencement
      of the morning trading session or any pre-opening session of the Stock Exchange on
      the sixth Business Day prior to the Expiry Date; and

(b)   in the case of European Style Warrants, the time at which the morning trading session
      or, if earlier, any pre-opening session of the Stock Exchange on the Expiry Date
      commences only;


                                            − 116 −
“Exercise Price” means the price specified as such in the relevant Supplemental Listing
Document;

“Expiry Date” has the meaning given to it in the relevant Supplemental Listing Document;

“General Conditions” means the general terms and conditions of Structured Products set
out in Appendix 1 of the Base Listing Document;

“Market Disruption Event” means:

(a)   the occurrence or existence on any Valuation Date during the one-half hour period that
      ends at the close of trading of any suspension of or limitation imposed on trading (by
      reason of movements in price exceeding limits permitted by the Underlying Exchange
      or otherwise) on the Underlying Exchange in (i) the Shares; or (ii) any options or futures
      contracts relating to the Shares if, in any such case, that suspension or limitation is, in
      the determination of the Issuer, material; or

(b)   a closure of the Underlying Exchange or a disruption or limitation in trading on the
      Underlying Exchange due to any other unforeseen circumstances;

“Product Conditions” means these product terms and conditions. These Product Conditions
apply to each series of cash settled call/put Warrants;

“Settlement Date” means three Business Days following:

(a)   with respect to the exercise of American Style Warrants on an Exercise Date prior to the
      Expiry Date in accordance with Product Condition 3.1(a), the Valuation Date; or

(b)   with respect to the automatic exercise of Warrants on the Expiry Date in accordance
      with Product Condition 3.1(b) or Product Condition 3.2(b), the Expiry Date;

“Settlement Disruption Event” means an event beyond the control of the Issuer as a result
of which the Issuer is unable to procure payment of the Cash Settlement Amount
electronically through CCASS to the Designated Bank Account;

“Shares” means the shares of the Company specified as such in the relevant Supplemental
Listing Document; and

“Underlying Currency” has the meaning given to it in the relevant Supplemental Listing
Document;

“Underlying Exchange” has the meaning given to it in the relevant Supplemental Listing
Document;

“Underlying Exchange Business Day” means a day (excluding Saturdays) on which the
Underlying Exchange is open for dealings during its regular trading sessions;

“Valuation Date” means:

(a)   with respect to the exercise of American Style Warrants on any Exercise Date prior to
      the Expiry Date in accordance with Product Condition 3.1(a), the Exercise Date,
      provided that if the Issuer determines, in its sole discretion, that a Market Disruption


                                          − 117 −
           Event has occurred on such Exercise Date, then the Valuation Date shall be postponed
           until the first succeeding Underlying Exchange Business Day on which there is no
           Market Disruption Event, provided that if there is a Market Disruption Event on each of
           the five Underlying Exchange Business Days immediately following the original
           Exercise Date that, but for the Market Disruption Event, would have been the Valuation
           Date, then:

           (i)    that fifth Underlying Exchange Business Day after the original Exercise Date shall
                  be deemed to be the Valuation Date notwithstanding the Market Disruption Event;
                  and

           (ii)   the Issuer shall determine the official closing price of the Shares on the basis of
                  its good faith estimate of such price that would have prevailed on that fifth
                  Underlying Exchange Business Day after the original Exercise Date but for the
                  Market Disruption Event; or

     (b)   with respect to the automatic exercise of Warrants on the Expiry Date in accordance
           with Product Condition 3.1(b) or Product Condition 3.2(b), each of the five Underlying
           Exchange Business Days immediately preceding the Expiry Date, provided that if the
           Issuer determines, in its sole discretion, that on any Valuation Date a Market Disruption
           Event has occurred, then that Valuation Date shall be postponed until the first
           succeeding Underlying Exchange Business Day on which there is no Market Disruption
           Event irrespective of whether that postponed Valuation Date would fall on a day that
           already is or is deemed to be a Valuation Date. For the avoidance of doubt, in the event
           that a Valuation Date is postponed in accordance with this paragraph (b), the official
           closing price of the Shares for such postponed Valuation Date will be the official closing
           price of the Shares on the first succeeding Underlying Exchange Business Day.
           Accordingly, the official closing price of a Valuation Date may be used more than once
           in calculating the arithmetic mean of the official closing prices of one Share for the
           determination of the Cash Settlement Amount, so that in no event shall there be less
           than five official closing prices to determine the arithmetic mean of the official closing
           prices of one Share,

     provided further that if the postponement of the Valuation Date in accordance with
     paragraphs (a) or (b) above would result in the Valuation Date falling on or after the Expiry
     Date, then:

     (aa) the Underlying Exchange Business Day immediately preceding the Expiry Date (the
          “Last Valuation Date”) shall be deemed to be the Valuation Date notwithstanding the
          Market Disruption Event; and

     (bb) the Issuer shall determine the official closing price of the Shares on the basis of its good
          faith estimate of such price that would have prevailed on the Last Valuation Date but for
          the Market Disruption Event.

2.   Warrant Rights and Exercise Expenses

     2.1 Warrant Rights

           Every Board Lot gives each Holder, upon due exercise and compliance with the General
           Conditions and these Product Conditions, in particular, Product Condition 4.1 or
           Product Condition 4.2, as the case may be, the right to receive the payment of the Cash
           Settlement Amount, if any.


                                               − 118 −
     2.2 Exercise Expenses

         Upon exercise of the Warrants, Holders will be obliged to give an irrevocable
         authorisation to the Issuer to deduct all Exercise Expenses in accordance with Product
         Condition 4.1 or Product Condition 4.2, as the case may be.

3.   Exercise of American Style Warrants and European Style Warrants, Automatic
     Exercise and Expiry

     3.1 American Style Warrants

         The following provisions of this Product Condition 3.1 shall apply to Warrants which are
         expressed to be American Style.

         (a)   Exercise of Warrants

               The Warrants may be exercised by delivery of an Exercise Notice in accordance
               with Product Condition 4.1 at any time during the relevant Exercise Period.

         (b)   Automatic Exercise

               Any Warrant with respect to which an Exercise Date has not occurred during the
               Exercise Period will automatically be exercised if the Cash Settlement Amount on
               the Expiry Date is greater than zero (without notice being given to the Holders).
               The Holders will not be required to deliver any Exercise Notice and the Issuer or
               its agent will pay to the Holders the Cash Settlement Amount (if any) in accordance
               with Product Condition 4.1(f).

         (c)   Expiry

               Any Warrant with respect to which an Exercise Date has not occurred during the
               Exercise Period or which has not been automatically exercised in accordance with
               Product Condition 3.1(b) shall expire immediately without value thereafter and all
               rights of the Holder and obligations of the Issuer with respect to such Warrant shall
               cease.

     3.2 European Style Warrants

         The following provisions of this Product Condition 3.2 shall apply to Warrants which are
         expressed to be European Style.

         (a)   Exercise of Warrants

               The Warrants are exercisable only on the Expiry Date.

         (b)   Automatic Exercise

               Any Warrant will automatically be exercised if the Cash Settlement Amount on the
               Expiry Date is greater than zero (without notice being given to the Holders). The
               Holders will not be required to deliver any Exercise Notice and the Issuer or its
               agent will pay to the Holders the Cash Settlement Amount (if any) in accordance
               with Product Condition 4.2(d).


                                             − 119 −
         (c)   Expiry

               Any Warrant which has not been automatically exercised in accordance with
               Product Condition 3.2(b) shall expire immediately without value thereafter and all
               rights of the Holder and obligations of the Issuer with respect to such Warrant shall
               cease.

4.   Exercise of Warrants

     4.1 American Style Warrants

         The following provisions of this Product Condition 4.1 shall apply to Warrants which are
         expressed to be American Style.

         (a)   Exercise of Warrants in Board Lots

               Warrants may only be exercised in Board Lots or integral multiples thereof.

         (b)   Delivery of an Exercise Notice

               (i)    In order to exercise Warrants, the Holder shall deliver to the Transfer Office
                      an Exercise Notice, such delivery or deemed delivery to occur at any time
                      during the relevant Exercise Period. Warrants may not be exercised at any
                      other time.

               (ii)   The Exercise Date shall be the Business Day on which an Exercise Notice is
                      delivered to CS Hong Kong and in respect of which there is a valid exercise
                      of Warrants in accordance with the requirements of these Product
                      Conditions, provided that any Exercise Notice received by CS Hong Kong
                      after the earlier of the commencement of the morning trading session or any
                      pre-opening session of the Stock Exchange on any Business Day shall be
                      deemed to have been delivered before the earlier of the commencement of
                      the morning trading session or any pre-opening session of the Stock
                      Exchange on the next following Business Day.

         (c)   Exercise Notice

               The Exercise Notice shall:

               (i)    specify the name(s) of the Holder(s) and the number of Warrants being
                      exercised;

               (ii)   be accompanied by the Global Certificate in the name(s) of the exercising
                      Holder(s); and

               (iii) (where applicable) specify the person in whose favour the cheque
                     representing the Cash Settlement Amount should be drawn and the name
                     and address of the bank, broker or other agent to whom the cheque should
                     be sent or, as the case may be, specify the relevant account to which the
                     Cash Settlement Amount should be credited.


                                              − 120 −
    (d)   Consequences of delivery of an Exercise Notice

          Delivery of an Exercise Notice in accordance with Product Conditions 4.1(b) and
          4.1(c) shall constitute an irrevocable election and undertaking by the Holder
          specified in such Exercise Notice to exercise the number of Warrants specified in
          such Exercise Notice and an irrevocable authorisation to deduct the Exercise
          Expenses in accordance with the calculation set out in the definition of the Cash
          Settlement Amount.

    (e)   Cancellation

          The Issuer will procure that CS Hong Kong will, with effect from the first Business
          Day following the Exercise Date or the Expiry Date, as the case may be, remove
          from the Register the name of the person in respect of the Warrants which (i) are
          the subject of a valid exercise in accordance with these Product Conditions
          whether pursuant to an Exercise Notice or automatic exercise; or (ii) have expired
          worthless, and thereby cancel the relevant Warrants.

    (f)   Cash Settlement

          Subject to a valid exercise, or automatic exercise, of Warrants in accordance with
          these Product Conditions, the Issuer will make a payment, in respect of every
          Board Lot, to the relevant Holder (or such other person as the Holder may have
          directed, if applicable) equal to the Cash Settlement Amount.

          The Cash Settlement Amount shall be despatched not later than the Settlement
          Date by crediting that amount in accordance with the CCASS Rules, to the
          Designated Bank Account.

          If, as a result of a Settlement Disruption Event, it is not possible for the Issuer to
          procure payment electronically through CCASS by crediting the relevant
          Designated Bank Account of the Holder on the original Settlement Date, the Issuer
          shall use its reasonable endeavours to procure payment electronically through
          CCASS by crediting the relevant Designated Bank Account of the Holder as soon
          as reasonably practicable after the original Settlement Date. The Issuer will not be
          liable to the Holder for any interest in respect of the amount due or any loss or
          damage that such Holder may suffer as a result of the existence of the Settlement
          Disruption Event.

4.2 European Style Warrants

    The following provisions of this Product Condition 4.2 shall apply to Warrants which are
    expressed to be European Style.

    (a)   Exercise of Warrants in Board Lots

          Warrants may only be exercised in Board Lots or integral multiples thereof.

    (b)   No requirement to deliver an Exercise Notice

          The Holders will not be required to deliver an Exercise Notice for any purpose in
          relation to the Warrants.


                                        − 121 −
         (c)   Cancellation

               The Issuer will procure that CS Hong Kong will, with effect from the first Business
               Day following the Expiry Date, remove from the Register the name of the person
               in respect of the Warrants which (i) are the subject of a valid exercise pursuant to
               automatic exercise in accordance with these Product Conditions; or (ii) have
               expired worthless, and thereby cancel the relevant Warrants.

         (d)   Cash Settlement

               Subject to automatic exercise of Warrants in accordance with these Product
               Conditions, the Issuer will make a payment in respect of every Board Lot to the
               relevant Holder equal to the Cash Settlement Amount.

               The Cash Settlement Amount shall be despatched not later than the Settlement
               Date by crediting that amount in accordance with the CCASS Rules to the
               Designated Bank Account.

               If, as a result of a Settlement Disruption Event, it is not possible for the Issuer to
               procure payment electronically through CCASS by crediting the relevant
               Designated Bank Account of the Holder on the original Settlement Date, the Issuer
               shall use its reasonable endeavours to procure payment electronically through
               CCASS by crediting the relevant Designated Bank Account of the Holder as soon
               as reasonably practicable after the original Settlement Date. The Issuer will not be
               liable to the Holder for any interest in respect of the amount due or any loss or
               damage that such Holder may suffer as a result of the existence of the Settlement
               Disruption Event.

5.   Adjustments

     5.1 Rights Issues

         If and whenever the Company shall, by way of Rights (as defined below), offer new
         Shares for subscription at a fixed subscription price to the holders of existing Shares pro
         rata to existing holdings (a “Rights Offer”), the Entitlement will be adjusted to take
         effect on the Underlying Exchange Business Day on which trading in the Shares
         becomes ex-entitlement (“Rights Issue Adjustment Date”) in accordance with the
         following formula:

                              Adjusted Entitlement = Adjustment Factor x E

         Where:

                                      1+M
         Adjustment Factor =
                                  1 + (R/S) x M

         E:    Existing Entitlement immediately prior to the Rights Offer

         S:    Cum-Rights Share price being the official closing price of an existing Share on the
               Underlying Exchange on the last Underlying Exchange Business Day on which
               Shares are traded on a cum-Rights basis


                                             − 122 −
    R:   Subscription price per new Share as specified in the Rights Offer plus an amount
         equal to any dividends or other benefits foregone to exercise the Rights


    M:   Number of new Share(s) (whether a whole or a fraction) per existing Share each
         holder thereof is entitled to subscribe


    Provided that if the adjustment to be made would result in the Entitlement being
    changed by one per cent. or less, then no adjustment will be made to the Entitlement.
    In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
    nearest 0.001) by the reciprocal of the Adjustment Factor, where the reciprocal of the
    Adjustment Factor means one divided by the relevant Adjustment Factor. This
    adjustment shall take effect on the Rights Issue Adjustment Date.


    For the purposes of these Product Conditions:


    “Rights” means the right(s) attached to   each existing Share or needed to acquire one
    new Share (as the case may be) which      are given to the holders of existing Shares to
    subscribe at a fixed subscription price   for new Shares pursuant to the Rights Offer
    (whether by the exercise of one Right,    a part of a Right or an aggregate number of
    Rights).


5.2 Bonus Issues


    If and whenever the Company shall make an issue of Shares credited as fully paid to
    the holders of Shares generally by way of capitalisation of profits or reserves (other than
    pursuant to a scrip dividend or similar scheme for the time being operated by the
    Company or otherwise in lieu of a cash dividend and without any payment or other
    consideration being made or given by such holders) (a “Bonus Issue”) the Entitlement
    will be adjusted on the Underlying Exchange Business Day on which trading in the
    Shares becomes ex-entitlement (“Bonus Issue Adjustment Date”) in accordance with
    the following formula:


                         Adjusted Entitlement = Adjustment Factor x E


    Where:


    Adjustment Factor = 1 + N


    E:   Existing Entitlement immediately prior to the Bonus Issue


    N:   Number of additional Shares (whether a whole or a fraction) received by a holder
         of existing Shares for each Share held prior to the Bonus Issue


    Provided that if the adjustment to be made would result in the Entitlement being
    changed by one per cent. or less, then no adjustment will be made to the Entitlement.
    In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
    nearest 0.001) by the reciprocal of the Adjustment Factor, where the reciprocal of the
    Adjustment Factor means one divided by the relevant Adjustment Factor. This
    adjustment shall take effect on the Bonus Issue Adjustment Date.


                                        − 123 −
5.3 Subdivisions or Consolidations

    If and whenever the Company shall subdivide its Shares or any class of its outstanding
    share capital comprised of the Shares into a greater number of shares (a
    “Subdivision”) or consolidate the Shares or any class of its outstanding share capital
    comprised of the Shares into a smaller number of shares (a “Consolidation”), then:

    (a)   in the case of a Subdivision, the Entitlement in effect immediately prior thereto will
          be increased whereas the Exercise Price (which shall be rounded to the nearest
          0.001) will be decreased in the same ratio as the Subdivision; and

    (b)   in the case of a Consolidation, the Entitlement in effect immediately prior thereto
          will be decreased whereas the Exercise Price (which shall be rounded to the
          nearest 0.001) will be increased in the same ratio as the Consolidation,

    in each case on the day on which the Subdivision or Consolidation (as the case may be)
    shall have taken effect.

5.4 Merger or Consolidation

    If it is announced that the Company is to or may merge or consolidate with or into any
    other corporation (including becoming, by agreement or otherwise, a subsidiary of any
    corporation or controlled by any person or corporation) (except where the Company is
    the surviving corporation in a merger) or that it is to or may sell or transfer all or
    substantially all of its assets, the rights attaching to the Warrants may in the absolute
    discretion of the Issuer be amended no later than the Underlying Exchange Business
    Day preceding the consummation of such merger, consolidation, sale or transfer (each
    a “Restructuring Event”) (as determined by the Issuer in its absolute discretion).

    The rights attaching to the Warrants after the adjustment shall, after such Restructuring
    Event, relate to the number of shares of the corporation(s) resulting from or surviving
    such Restructuring Event or other securities (“Substituted Securities”) and/or cash
    offered in substitution for the affected Shares, as the case may be, to which the holder
    of such number of Shares to which the Warrants related immediately before such
    Restructuring Event would have been entitled upon such Restructuring Event.
    Thereafter the provisions hereof shall apply to such Substituted Securities, provided
    that any Substituted Securities may, in the absolute discretion of the Issuer, be deemed
    to be replaced by an amount in Hong Kong dollars equal to the market value or, if no
    market value is available, fair value, of such Substituted Securities in each case as
    determined by the Issuer as soon as practicable after such Restructuring Event is
    effected.

    For the avoidance of doubt, any remaining Shares shall not be affected by this Product
    Condition 5.4 and, where cash is offered in substitution for Shares or is deemed to
    replace Substituted Securities as described above, references in these Product
    Conditions to the Shares shall include any such cash.

5.5 Cash Distribution

    No adjustment will be made for an ordinary cash dividend (whether or not it is offered
    with a script alternative) (“Ordinary Dividend”). For any other forms of cash distribution
    (“Cash Distribution”) announced by the Company, such as a cash bonus, special


                                        − 124 −
    dividend or extraordinary dividend, no adjustment will be made unless the value of the
    Cash Distribution accounts for 2 per cent. or more of the Share’s official closing price
    on the day of announcement by the Company.

    If and whenever the Company shall make a Cash Distribution credited as fully paid to
    the holders of Shares generally, the Entitlement shall be adjusted to take effect on the
    Underlying Exchange Business Day on which trading in the Shares becomes ex-
    entitlement in respect of the relevant Cash Distribution (“Cash Distribution
    Adjustment Date”) in accordance with the following formula:

                         Adjusted Entitlement = Adjustment Factor x E

    Where:

                                S – OD
    Adjustment Factor =
                             S – OD – CD

    E:   The existing Entitlement immediately prior to the Cash Distribution

    S:   The official closing price of the existing Share on the Underlying Exchange on the
         Underlying Exchange Business Day immediately preceding the Cash Distribution
         Adjustment Date

    CD: The amount of Cash Distribution per Share

    OD: The amount of Ordinary Dividend per Share, provided that the Ordinary Dividend
        and the Cash Distribution shall have the same ex-entitlement date. For the
        avoidance of doubt, the OD shall be deemed to be zero if the ex-entitlement dates
        of the relevant Ordinary Dividend and Cash Distribution are different

    In addition, the Issuer shall adjust the Exercise Price (which shall be rounded to the
    nearest 0.001) by the reciprocal of the Adjustment Factor, where the reciprocal of the
    Adjustment Factor means one divided by the relevant Adjustment Factor. The
    adjustment to the Exercise Price shall take effect on the Cash Distribution Adjustment
    Date.

5.6 Other Adjustments

    Except as provided in General Condition 6, Product Condition 5 and/or Product
    Condition 7, adjustments or amendments will not be made in any other circumstances,
    subject to the right reserved by the Issuer (such right to be exercised in the Issuer’s sole
    and unfettered discretion and without any obligation whatsoever) to make such
    adjustments and amendments as it believes appropriate in circumstances where an
    event or events (including the events as contemplated in Product Conditions 5.1 to 5.5)
    occur which it believes in its sole discretion and irrespective of, in substitution for, or in
    addition to the provisions contemplated in Product Conditions 5.1 to 5.5 should, in the
    context of the issue of the Warrants and the obligations of the Issuer, give rise to such
    adjustment or, as the case may be, amendment provided that such adjustment or, as the
    case may be, amendment is (a) considered by the Issuer not to be materially prejudicial
    to the Holders generally (without considering the circumstances of any individual Holder
    or the tax or other consequences of such adjustment or amendment in any particular
    jurisdiction); or (b) otherwise considered by the Issuer to be appropriate and such
    adjustment or amendment is approved by the Stock Exchange.


                                         − 125 −
     5.7 Notice of Determinations


          All determinations made by the Issuer pursuant hereto will be conclusive and binding on
          the Holders. The Issuer will give, or procure that there is given, notice as soon as
          practicable of any adjustment or amendment and of the date from which such
          adjustment or amendment is effective by publication in accordance with General
          Condition 7.


6.   Liquidation


     In the event of a liquidation or dissolution of the Company or the appointment of a liquidator,
     receiver or administrator or analogous person under any applicable law in respect of the
     whole or substantially the whole of its undertaking, property or assets, all unexercised
     Warrants will lapse and shall cease to be valid for any purpose, in the case of voluntary
     liquidation, on the effective date of the relevant resolution and, in the case of an involuntary
     liquidation or dissolution, on the date of the relevant court order or, in the case of the
     appointment of a liquidator or receiver or administrator or analogous person under any
     applicable law in respect of the whole or substantially the whole of its undertaking, property
     or assets, on the date when such appointment is effective but subject (in any such case) to
     any contrary mandatory requirement of law.


7.   Delisting


     7.1 If at any time the Shares cease to be listed on the Underlying Exchange, the Issuer shall
         give effect to the General Conditions and these Product Conditions in such manner and
         make such adjustments to the rights attaching to the Warrants as it shall, in its absolute
         discretion, consider appropriate to ensure, so far as it is reasonably able to do so, that
         the interests of the Holders generally are not materially prejudiced as a consequence
         of such delisting (without considering the individual circumstances of any Holder or the
         tax or other consequences that may result in any particular jurisdiction).


     7.2 Without prejudice to the generality of Product Condition 7.1, where the Shares are, or,
         upon the delisting, become, listed on any other stock exchange, the General Conditions
         and these Product Conditions may, in the absolute discretion of the Issuer, be amended
         to the extent necessary to allow for the substitution of that other stock exchange in
         place of the Underlying Exchange and the Issuer may, without the consent of the
         Holders, make such adjustments to the entitlements of Holders on exercise (including,
         if appropriate, by converting foreign currency amounts at prevailing market rates into
         Hong Kong currency) as may be appropriate in the circumstances.


     7.3 The Issuer shall determine, in its absolute discretion, any adjustment or amendment
         and its determination shall be conclusive and binding on the Holders save in the case
         of manifest error. Notice of any adjustments or amendments shall be given to the
         Holders in accordance with General Condition 7, as soon as practicable after they are
         determined.




                                              − 126 −
         APPENDIX 3 — PRODUCT CONDITIONS OF THE CBBCS

Part A   —   Product Conditions of Index Callable Bull/Bear Contracts
               (Cash Settled) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   128


Part B   —   Product Conditions of Callable Bull/Bear Contracts Over Single
               Equities (Cash Settled) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          138


Part C   —   Product Conditions of Callable Bull/Bear Contracts Over Single
               Unit Trusts (Cash Settled) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           151




                                                      − 127 −
       PART A — PRODUCT CONDITIONS OF INDEX CALLABLE BULL/BEAR
                      CONTRACTS (CASH SETTLED)

     These Product Conditions will, together with the General Conditions and the supplemental
provisions contained in the relevant Supplemental Listing Document and subject to completion
and amendment, be endorsed on the Global Certificate. The relevant Supplemental Listing
Document in relation to the issue of any series of CBBCs may specify additional terms and
conditions which shall, to the extent so specified or to the extent inconsistent with these Product
Conditions, replace or modify these Product Conditions for the purpose of such series of CBBCs.
Capitalised terms used in these Product Conditions and not otherwise defined herein shall have
the meaning given to them in the General Conditions and the relevant Supplemental Listing
Document.

1.   Definitions

     For the purposes of these Product Conditions:

     “Board Lot” means the number specified as such in the relevant Supplemental Listing
     Document;

     “Business Day” means a day (excluding Saturdays) on which the Stock Exchange is
     scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

     “Call Level” means the level specified as such in the relevant Supplemental Listing
     Document, subject to any adjustments in accordance with Product Condition 5;

     “Cash Settlement Amount” means, in respect of every Board Lot:

     (a)   following a Mandatory Call Event:

           (i)    in respect of a series of Category R CBBCs, the Residual Value, provided that the
                  Issuer may, at its absolute discretion, pay a higher cash amount than the Residual
                  Value; or

           (ii)   in respect of a series of Category N CBBCs, zero; and

     (b)   at expiry:

           (i)    in respect of a series of callable bull contracts, an amount calculated by the Issuer
                  equal to (1) the product of (A) the excess of the Closing Level over the Strike
                  Level, (B) the Index Currency Amount, either converted (if applicable) (i) into the
                  Settlement Currency at the Exchange Rate or, as the case may be, (ii) into the
                  Interim Currency at the First Exchange Rate and then converted into the
                  Settlement Currency at the Second Exchange Rate, and (C) one Board Lot; (2)
                  divided by the Exercise Amount and (3) less the Exercise Expenses; and

           (ii)   in respect of a series of callable bear contracts, an amount calculated by the Issuer
                  equal to (1) the product of (A) the excess of the Strike Level over the Closing
                  Level, (B) the Index Currency Amount, either converted (if applicable) (i) into the
                  Settlement Currency at the Exchange Rate or, as the case may be, (ii) into the
                  Interim Currency at the First Exchange Rate and then converted into the
                  Settlement Currency at the Second Exchange Rate, and (C) one Board Lot; (2)
                  divided by the Exercise Amount and (3) less the Exercise Expenses.


                                                − 128 −
For the avoidance of doubt, if the Cash Settlement Amount is a negative figure, it shall be
deemed to be zero;

“Category N CBBCs” means a series of CBBCs where the Call Level is equal to the Strike
Level;

“Category R CBBCs” means a series of CBBCs where the Call Level is different from the
Strike Level;

“CCASS Settlement Day” has the meaning ascribed to the term “Settlement Day” in the
CCASS Rules, subject to such modification and amendment prescribed by Hong Kong
Securities Clearing Company Limited from time to time;

“Closing Level” has the meaning given to it in the relevant Supplemental Listing Document,
subject to any adjustment in accordance with Product Condition 5;

“Designated Bank Account” means the relevant bank account designated by the relevant
Holder;

“Exchange Rate”, if applicable, means the rate specified as such in the relevant
Supplemental Listing Document;

“Exercise Amount” means the amount specified as such in the relevant Supplemental
Listing Document;

“Exercise Expenses” means any charges or expenses including any taxes or duties which
are incurred in respect of the exercise of the CBBCs;

“Expiry Date” has the meaning given to it in the relevant Supplemental Listing Document;

“First Exchange Rate”, if applicable, means the rate specified as such in the relevant
Supplemental Listing Document;

“General Conditions” means the general terms and conditions of Structured Products set
out in Appendix 1 of the Base Listing Document;

“Index” means the index specified as such in the relevant Supplemental Listing Document;

“Index Business Day” means a day on which the Index Exchange is scheduled to open for
trading for its regular trading sessions;

“Index Compiler” has the meaning given to it in the relevant Supplemental Listing
Document;

“Index Currency Amount” has the meaning given to it in the relevant Supplemental Listing
Document;

“Index Exchange” has the meaning given to it in the relevant Supplemental Listing
Document;

“Interim Currency”, if applicable, means the currency specified as such in the relevant
Supplemental Listing Document;


                                       − 129 −
“Mandatory Call Event” occurs when the Spot Level at any time during the Observation
Period is:

(a)   in the case of a series of callable bull contracts, at or below the Call Level; or

(b)   in the case of a series of callable bear contracts, at or above the Call Level;

“Market Disruption Event” means:

(a)   the occurrence or existence, on any Trading Day or Index Business Day during the
      one-half hour period that ends at the close of trading on the Index Exchange, of any of:

      (i)    the suspension or material limitation of the trading of a material number of
             constituent securities, contracts, commodities or currencies that comprise the
             Index; or

      (ii)   the suspension or material limitation of the trading of constituent securities,
             contracts, commodities or currencies (A) on the Index Exchange; or (B) generally;
             or

      (iii) the suspension or material limitation of the trading of (A) options or futures
            contracts relating to the Index on any exchanges; or (B) options or futures
            generally on any options and/or futures exchanges on which options or futures
            contracts relating to the Index are traded; or

      (iv) the imposition of any exchange controls in respect of any currencies involved in
           determining the Cash Settlement Amount; or

      (v)    the occurrence of an event beyond the control of the Issuer as a result of which the
             Issuer is unable to determine the level of the Index by reference to the Price
             Source (if applicable) at the relevant time.

      For the purposes of paragraph (a) of this definition of “Market Disruption Event”, (i) the
      limitation of the number of hours or days of trading will not constitute a Market
      Disruption Event if it results from an announced change in the regular business hours
      of any exchange, and (ii) a limitation on trading imposed by reason of the movements
      in price exceeding the levels permitted by any relevant exchange will constitute a
      Market Disruption Event; or

(b)   where the Index Exchange is the Stock Exchange, the hoisting of the tropical cyclone
      warning signal number 8 or above or the hoisting of a “BLACK” rainstorm signal which
      either results in the Stock Exchange being closed for dealings for an entire day or
      results in the Stock Exchange being closed prior to its regular time for close of trading
      on any day PROVIDED THAT there shall be no Market Disruption Event solely by
      reason of the Stock Exchange opening later than its regular time for open of trading on
      any day as a result of the tropical cyclone warning signal number 8 or above or the
      “BLACK” rainstorm signal having been hoisted; or

(c)   a limitation or closure of the Index Exchange or the Stock Exchange due to any
      unforeseen circumstances;

“Maximum Index Level” means, in respect of Category R CBBCs, the highest Spot Level
during the MCE Valuation Period;


                                           − 130 −
“MCE Valuation Period” means:

(a)   in respect of an Index Exchange located in Hong Kong, the period commencing from
      and including the moment upon which the Mandatory Call Event occurs (the trading
      session on the Index Exchange during which the Mandatory Call Event occurs is the
      “1st Session”) and up to the end of the trading session on the Index Exchange
      immediately following the 1st Session (“2nd Session”) unless, in the determination of
      the Issuer in its good faith, the 2nd Session for any reason (including, without limitation,
      a Market Disruption Event occurring and subsisting in the 2nd Session) does not
      contain any continuous period of 1 hour or more than 1 hour during which the Spot
      Levels are available, the MCE Valuation Period shall be extended to the end of the
      subsequent trading session on the Index Exchange following the 2nd Session during
      which Spot Levels are available for a continuous period of at least 1 hour
      notwithstanding the existence or continuance of a Market Disruption Event in such
      postponed trading session, unless the Issuer determines in its good faith that each
      trading session on each of the four Index Business Days immediately following the date
      on which the Mandatory Call Event occurs does not contain any continuous period of 1
      hour or more than 1 hour during which Spot Levels are available. In that case:

      (i)    the period commencing from the 1st Session up to, and including, the last trading
             session of the fourth Index Business Day on the Index Exchange immediately
             following the date on which the Mandatory Call Event occurs shall be deemed to
             be the MCE Valuation Period; and

      (ii)   the Issuer shall determine the Maximum Index Level or the Minimum Index Level
             (as the case may be) having regard to the then prevailing market conditions, the
             last reported Spot Level published by the Index Compiler and such other factors
             as the Issuer may determine to be relevant in its good faith.

      For the avoidance of doubt, all Spot Levels available throughout the extended MCE
      Valuation Period shall be taken into account to determine the Maximum Index Level or
      the Minimum Index Level (as the case may be) for the calculation of the Residual Value.

      For the purposes of this definition,

      (A)    the pre-opening session, the morning session and, in the case of half day trading,
             the closing auction session (if applicable) of the same day; and

      (B)    the afternoon session and the closing auction session (if applicable) of the same
             day,

      shall each be considered as one session only; and

(b)   in respect of an Index Exchange located outside Hong Kong, the period specified in the
      relevant Supplemental Listing Document;

“Minimum Index Level” means, in respect of Category R CBBCs, the lowest Spot Level
during the MCE Valuation Period;

“Observation Commencement Date” has the meaning given to it in the relevant
Supplemental Listing Document;


                                          − 131 −
“Observation Period” means the period commencing from and including the Observation
Commencement Date up to and including the close of trading (Hong Kong time) on the
Trading Day immediately preceding the Expiry Date;

“Post MCE Trades” has the meaning given to it in the relevant Supplemental Listing
Document, subject to such modification and amendment prescribed by the Stock Exchange
from time to time;

“Price Source”, if applicable, has the meaning given to it in the relevant Supplemental
Listing Document;

“Product Conditions” means these product terms and conditions. These Product Conditions
apply to each series of cash settled index callable bull/bear contracts;

“Residual Value” means, in respect of every Board Lot:

(a)   in respect of a series of callable bull contracts, an amount calculated by the Issuer equal
      to (1) the product of (A) the excess of the Minimum Index Level over the Strike Level,
      (B) the Index Currency Amount, either converted (if applicable) (i) into the Settlement
      Currency at the Exchange Rate or, as the case may be, (ii) into the Interim Currency at
      the First Exchange Rate and then converted into the Settlement Currency at the Second
      Exchange Rate, and (C) one Board Lot; (2) divided by the Exercise Amount and (3) less
      the Exercise Expenses; and

(b)   in respect of a series of callable bear contracts, an amount calculated by the Issuer
      equal to (1) the product of (A) the excess of the Strike Level over the Maximum Index
      Level, (B) the Index Currency Amount, either converted (if applicable) (i) into the
      Settlement Currency at the Exchange Rate or, as the case may be, (ii) into the Interim
      Currency at the First Exchange Rate and then converted into the Settlement Currency
      at the Second Exchange Rate, and (C) one Board Lot; (2) divided by the Exercise
      Amount and (3) less the Exercise Expenses;

“Second Exchange Rate”, if applicable, means the rate specified as such in the relevant
Supplemental Listing Document;

“Settlement Currency” means the currency specified as such in the relevant Supplemental
Listing Document;

“Settlement Date” means the third CCASS Settlement Day immediately following (a) the
Valuation Date; or (b) the end of the MCE Valuation Period, as the case may be;

“Settlement Disruption Event” means an event beyond the control of the Issuer as a result
of which the Issuer is unable to procure payment of the Cash Settlement Amount
electronically through CCASS to the Designated Bank Account;

“Spot Level” means:

(a)   if no Price Source is specified, the spot level of the Index as compiled and published by
      the Index Compiler; or

(b)   if a Price Source is specified, the spot level of the Index as published on the Price
      Source;


                                          − 132 −
     “Stock Exchange” means The Stock Exchange of Hong Kong Limited;

     “Strike Level” means the level specified as such in the relevant Supplemental Listing
     Document, subject to adjustment in accordance with Product Condition 5;

     “Trading Day” means the day on which the Stock Exchange is scheduled to open for trading
     for its regular trading sessions; and

     “Valuation Date” has the meaning given to it in the relevant Supplemental Listing Document,
     provided that if the Issuer determines, in its sole discretion, that on the Valuation Date a
     Market Disruption Event has occurred, then the Issuer shall determine the Closing Level on
     the basis of its good faith estimate of the Closing Level that would have prevailed on that day
     but for the occurrence of the Market Disruption Event provided that the Issuer, if applicable,
     may, but shall not be obliged to, determine such Closing Level by having regard to the
     manner in which futures contracts relating to the Index are calculated.

2.   Hedging Disruption

     2.1 Notification: The Issuer shall as soon as reasonably practicable give notice to the
         Holders in accordance with General Condition 7 if it determines that a Hedging
         Disruption Event has occurred. The notice shall specify the consequence of such
         Hedging Disruption Event as determined by the Issuer pursuant to Product Condition
         2.3.

     2.2 Hedging Disruption Event: A “Hedging Disruption Event” occurs if the Issuer
         determines that it is or has become not reasonably practicable or it has otherwise
         become undesirable, for any reason, for the Issuer wholly or partially (X) to establish,
         re-establish, substitute or maintain a relevant hedging transaction (including, without
         limitation, any hedging transaction with respect to options or futures relating to the
         Index, or any currency in which the components of the Index are denominated) (a
         “Relevant Hedging Transaction”) it deems necessary or desirable to hedge the
         Issuer’s obligations in respect of the CBBCs, or (Y) to freely realise, recover, receive,
         repatriate, remit or transfer the proceeds of the Relevant Hedging Transactions
         between accounts within the jurisdiction of the Relevant Hedging Transactions (the
         “Affected Jurisdiction”) or from accounts within the Affected Jurisdiction to accounts
         outside of the Affected Jurisdiction. The reasons for such determination by the Issuer
         may include, but are not limited to, the following:

          (a)   any material illiquidity in the market for the components comprising the Index;

          (b)   a change in any applicable law (including, without limitation, any tax law) or the
                promulgation of, or change in, the interpretation of any court, tribunal or regulatory
                authority with competent jurisdiction of any applicable law (including any action
                taken by a taxing authority);

          (c)   a material decline in the creditworthiness of a party with whom the Issuer has
                entered into any such Relevant Hedging Transaction; or

          (d)   the general unavailability of:

                (i)   market participants who will agree to enter into a Relevant Hedging
                      Transaction; or


                                                 − 133 −
               (ii)   market participants who will so enter into a Relevant Hedging Transaction on
                      commercially reasonable terms.

     2.3 Consequences: The Issuer, in the event of a Hedging Disruption Event, may determine
         to:

         (a)   terminate the CBBCs. In such circumstances the Issuer will, however, if and to the
               extent permitted by the Applicable Law, pay to each Holder in respect of each
               CBBC held by such Holder an amount calculated by it as the fair market value of
               the CBBC immediately prior to such termination less the cost to the Issuer of
               unwinding any related hedging arrangements. Payment will be made to the Holder
               in such manner as shall be notified to the Holder in accordance with General
               Condition 7; or

         (b)   make any other adjustment to the Product Conditions as it considers appropriate
               in order to maintain the theoretical value of the CBBCs after adjusting for the
               relevant Hedging Disruption Event.

3.   CBBC Rights and Exercise Expenses

     3.1 CBBC Rights

         Every Board Lot gives each Holder, upon due exercise and compliance with Product
         Condition 4, the right to receive the payment of the Cash Settlement Amount, if any.

     3.2 Exercise Expenses

         On exercise of the CBBCs, Holders will be obliged to give an irrevocable authorisation
         to the Issuer to deduct all Exercise Expenses in accordance with Product Condition 4.

4.   Exercise of CBBCs

     4.1 Exercise of CBBCs in Board Lots

         CBBCs may only be exercised in Board Lots or integral multiples thereof.

     4.2 Automatic exercise

         If no Mandatory Call Event has occurred during the Observation Period, the CBBCs will
         be deemed to be automatically exercised at the earlier of the commencement of the
         morning trading session or any pre-opening session of the Stock Exchange on the
         Expiry Date if the Cash Settlement Amount is greater than zero (without notice being
         given to the Holders).

     4.3 Mandatory Call Event

         (a)   Subject to Product Condition 4.3(b) below, following a Mandatory Call Event, the
               CBBCs will be terminated automatically and the Issuer shall have no further
               obligation under the CBBCs except for the payment of the Cash Settlement
               Amount (if any) on the Settlement Date. The Issuer will notify the Holders of the
               occurrence of the Mandatory Call Event in accordance with General Condition 7.


                                              − 134 −
          Trading in the CBBCs will be suspended immediately upon the occurrence of a
          Mandatory Call Event and any Post MCE Trades will be cancelled and will not be
          recognised by the Stock Exchange or the Issuer.

    (b)   A Mandatory Call Event is irrevocable unless it is triggered as a result of any of the
          following events:

          (i)    system malfunction or other technical errors of HKEx and such event is
                 reported by the Stock Exchange to the Issuer and the Issuer and the Stock
                 Exchange mutually agree that such Mandatory Call Event is to be revoked; or

          (ii)   manifest errors caused by the relevant third party where applicable (such as
                 miscalculation of the index level by the Index Compiler) and such event is
                 reported by the Issuer to the Stock Exchange, and the Issuer and the Stock
                 Exchange mutually agree that such Mandatory Call Event is to be revoked;

          in each case, such mutual agreement must be reached no later than the time
          specified in the relevant Supplemental Listing Document or such other time as
          prescribed by the Stock Exchange from time to time.

          In both cases, the Mandatory Call Event so triggered will be reversed; and all
          cancelled trades (if any) will be reinstated and trading of the CBBCs will resume
          as soon as practicable in accordance with the rules and/or requirements
          prescribed by the Stock Exchange from time to time.

4.4 Entitlement

    Every Board Lot of CBBCs entitles the Holder to receive from the Issuer on the
    Settlement Date the Cash Settlement Amount (if any).

4.5 Exercise Expenses

    Any Exercise Expenses which are not determined by the Issuer by the end of the MCE
    Valuation Period or the Expiry Date (as the case may be) and deducted from the Cash
    Settlement Amount prior to delivery to the Holders in accordance with this Product
    Condition 4, shall be notified by the Issuer to the Holders as soon as practicable after
    determination thereof and shall be paid by the Holders to the Issuer immediately upon
    demand.

4.6 Cancellation

    The Issuer will procure that the Registrar will, with effect from the first Business Day
    following the MCE Valuation Period or the Expiry Date (as the case may be), remove
    from the Register the name of the person in respect of the CBBCs which (a) are the
    subject of a valid exercise in accordance with these Product Conditions or (b) have
    expired worthless, and thereby cancel the relevant CBBCs.

4.7 Cash Settlement

    Upon early termination of the CBBCs following the occurrence of a Mandatory Call
    Event or an automatic exercise of the CBBCs on the Expiry Date (as the case may be)
    in accordance with these Product Conditions, the Issuer will make a payment in respect
    of every Board Lot to the relevant Holder equal to the Cash Settlement Amount.


                                         − 135 −
         The Cash Settlement Amount shall be despatched not later than the Settlement Date by
         crediting that amount in accordance with the CCASS Rules to the Designated Bank
         Account.

         If as a result of a Settlement Disruption Event, it is not possible for the Issuer to procure
         payment electronically through CCASS by crediting the relevant Designated Bank
         Account of the Holder on the original Settlement Date, the Issuer shall use its
         reasonable endeavours to procure payment electronically through CCASS by crediting
         the relevant Designated Bank Account of the Holder as soon as reasonably practicable
         after the original Settlement Date. The Issuer will not be liable to the Holder for any
         interest in respect of the amount due or any loss or damage that such Holder may suffer
         as a result of the existence of the Settlement Disruption Event.

     4.8 Responsibility of Issuer and Registrar

         In the absence of gross negligence or wilful misconduct on its part, none of the Issuer,
         the Registrar or their respective agents shall have any responsibility for any errors or
         omissions in the calculation of the Cash Settlement Amount.

         The purchase of CBBCs does not confer on any Holder of such CBBCs any rights
         (whether in respect of voting, distributions or otherwise) in relation to the constituent
         securities, contracts, commodities or currencies comprising the Index.

     4.9 Liability of Issuer and Registrar

         Exercise and settlement of the CBBCs is subject to all applicable laws, regulations and
         practices in force at the relevant time and neither the Issuer nor the Registrar shall incur
         any liability whatsoever if it is unable to effect the transactions contemplated, after using
         all reasonable efforts, as a result of any such laws, regulations or practices. Neither the
         Issuer nor the Registrar shall under any circumstances be liable for any acts or defaults
         of the CCASS in relation to the performance of its duties in relation to the CBBCs.

     4.10 Trading in the CBBCs

         Subject to Product Condition 4.3(b), trading in CBBCs on the Stock Exchange shall
         cease (a) immediately upon the occurrence of a Mandatory Call Event or (b) at the close
         of trading for the Trading Day immediately preceding the Expiry Date (for the avoidance
         of doubt, in the case when the Stock Exchange is scheduled to open for the morning
         session only, at the close of trading for the morning session), whichever is the earlier.

5.   Adjustments to the Index

     5.1 Successor Index Compiler Calculates and Reports Index

         If the Index is (a) not calculated and announced by the Index Compiler but is calculated
         and published by a successor to the Index Compiler (the “Successor Index Compiler”)
         acceptable to the Issuer, or (b) replaced by a successor index using, in the
         determination of the Issuer, the same or a substantially similar formula for and method
         of calculation as used in the calculation of the Index, then the Index will be deemed to
         be the index so calculated and announced by the Successor Index Compiler or that
         successor index, as the case may be.


                                             − 136 −
5.2 Modification and Cessation of Calculation of Index


    If:


    (a)   on or prior to a Valuation Date the Index Compiler or (if applicable) the Successor
          Index Compiler makes a material change in the formula for or the method of
          calculating the Index or in any other way materially modifies the Index (other than
          a modification prescribed in that formula or method to maintain the Index in the
          event of changes in constituent stock, contracts or commodities and other routine
          events); or


    (b)   on a Valuation Date the Index Compiler or (if applicable) the Successor Index
          Compiler fails to calculate and publish the Index (other than as a result of a Market
          Disruption Event),


    then the Issuer shall determine the closing level on such Valuation Date using, in lieu
    of a published level for the Index, the level for the Index as at that Valuation Date as
    determined by the Issuer in accordance with the formula for and method of calculating
    the Index last in effect prior to that change or failure, but using only those
    securities/commodities that comprised the Index immediately prior to that change or
    failure.


5.3 Other Adjustments


    Except as provided in General Condition 6, Product Condition 2 and/or Product
    Condition 5, adjustments or amendments will not be made in any other circumstances,
    subject to the right reserved by the Issuer (such right to be exercised in the Issuer’s sole
    and unfettered discretion and without any obligation whatsoever) to make such
    adjustments and amendments as it believes appropriate in circumstances where an
    event or events (including the events as contemplated in Product Conditions 5.1 and
    5.2) occur which it believes in its sole and absolute discretion and irrespective of, in
    substitution for, or in addition to provisions contemplated in Product Conditions 5.1 and
    5.2 should, in the context of the issue of the CBBCs and the obligations of the Issuer,
    give rise to such adjustment or, as the case may be, amendment provided that such
    adjustment or, as the case may be, amendment (a) is considered by the Issuer not to
    be materially prejudicial to the Holders generally (without considering the
    circumstances of any individual Holder or the tax or other consequences of such
    adjustment or amendment in any particular jurisdiction); or (b) is otherwise considered
    by the Issuer to be appropriate and such adjustment or amendment is approved by the
    Stock Exchange.


5.4 Notice of Determinations


    All determinations made by the Issuer pursuant hereto will be conclusive and binding on
    the Holders. The Issuer will give, or procure that there is given, notice as soon as
    practicable of any adjustment or amendment and of the date from which such
    adjustment or amendment is effective by publication in accordance with General
    Condition 7.



                                        − 137 −
       PART B — PRODUCT CONDITIONS OF CALLABLE BULL/BEAR
         CONTRACTS OVER SINGLE EQUITIES (CASH SETTLED)

     These Product Conditions will, together with the General Conditions and the supplemental
provisions contained in the relevant Supplemental Listing Document and subject to completion
and amendment, be endorsed on the Global Certificate. The relevant Supplemental Listing
Document in relation to the issue of any series of CBBCs may specify additional terms and
conditions which shall, to the extent so specified or to the extent inconsistent with these Product
Conditions, replace or modify these Product Conditions for the purpose of such series of CBBCs.
Capitalised terms used in these Product Conditions and not otherwise defined herein shall have
the meaning given to them in the General Conditions and the relevant Supplemental Listing
Document.

1    Definitions

     For the purposes of these Product Conditions:

     “Board Lot” means the number specified as such in the relevant Supplemental Listing
     Document;

     “Business Day” means a day (excluding Saturdays) on which the Stock Exchange is
     scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

     “Call Price” means the price specified as such in the relevant Supplemental Listing
     Document, subject to any adjustment in accordance with Product Condition 5;

     “Cash Settlement Amount” means, in respect of every Board Lot:

     (a)   following a Mandatory Call Event:

           (i)    in respect of a series of Category R CBBCs, the Residual Value, provided that the
                  Issuer may, at its absolute discretion, pay a higher cash amount than the Residual
                  Value; or

           (ii)   in respect of a series of Category N CBBCs, zero; and

     (b)   at expiry:

           (i)    in respect of a series of callable bull contracts, an amount equal to (1) the product
                  of (A) the Entitlement (subject to adjustment as provided in Product Condition 5),
                  (B) the Closing Price less the Strike Price (subject to adjustment as provided in
                  Product Condition 5) and (C) one Board Lot; (2) divided by the Exercise Amount;
                  and (3) less the Exercise Expenses; and

           (ii)   in respect of a series of callable bear contracts, an amount equal to (1) the product
                  of (A) the Entitlement (subject to adjustment as provided in Product Condition 5),
                  (B) the Strike Price (subject to adjustment as provided in Product Condition 5) less
                  the Closing Price and (C) one Board Lot; (2) divided by the Exercise Amount; and
                  (3) less the Exercise Expenses.

     For the avoidance of doubt, if the Cash Settlement Amount is a negative figure, it shall be
     deemed to be zero;


                                                − 138 −
“Category N CBBCs” means a series of CBBCs where the Call Price is equal to the Strike
Price;

“Category R CBBCs” means a series of CBBCs where the Call Price is different from the
Strike Price;

“CCASS Settlement Day” has the meaning ascribed to the term “Settlement Day” in the
CCASS Rules, subject to such modification and amendment prescribed by Hong Kong
Securities Clearing Company Limited from time to time;

“Closing Price” means the official closing price of the Share (as derived from the Daily
Quotation Sheet of the Stock Exchange, subject to any adjustments as may be necessary to
reflect any capitalisation, rights issue, distribution or the like) on the Valuation Date. If a
Market Disruption Event occurs on each of the four Trading Days immediately following the
scheduled Valuation Date, then the Issuer shall determine the Closing Price in accordance
with the definition of “Valuation Date’’;

“Company” means the company specified as such in the relevant Supplemental Listing
Document;

“Designated Bank Account” means the relevant bank account designated by the relevant
Holder;

“Entitlement” means the number specified as such in the relevant Supplemental Listing
Document, subject to any adjustment in accordance with Product Condition 5;

“Exercise Amount” means the amount specified as such in the relevant Supplemental
Listing Document;

“Exercise Expenses” means any charges or expenses including any taxes or duties which
are incurred in respect of the exercise of the CBBCs;

“Expiry Date” has the meaning given to it in the relevant Supplemental Listing Document;

“General Conditions” means the general terms and conditions of Structured Products set
out in Appendix 1 of the Base Listing Document;

“Mandatory Call Event” occurs when the Spot Price of the Shares at any time during the
Observation Period is:

(a)   in the case of a series of callable bull contracts, at or below the Call Price; or

(b)   in the case of a series of callable bear contracts, at or above the Call Price;

“Market Disruption Event” means:

(a)   the occurrence or existence on any Trading Day during the one-half hour period that
      ends at the close of trading of any suspension of or limitation imposed on trading (by
      reason of movements in price exceeding limits permitted by the Stock Exchange or
      otherwise) on the Stock Exchange in: (i) the Shares; or (ii) any options or futures
      contracts relating to the Shares


                                         − 139 −
if, in any such case, that suspension or limitation is, in the determination of the Issuer,
material;

(b)   the hoisting of the tropical cyclone warning signal number 8 or above or the hoisting of
      a “BLACK” rainstorm signal which either results in the Stock Exchange being closed for
      dealings for an entire day or results in the Stock Exchange being closed prior to its
      regular time for close of trading on any day PROVIDED THAT there shall be no Market
      Disruption Event solely by reason of the Stock Exchange opening later than its regular
      time for open of trading on any day as a result of the tropical cyclone warning signal
      number 8 or above or the “BLACK” rainstorm signal having been hoisted;

(c)   a limitation on trading on or closure of the Stock Exchange due to any other unforeseen
      circumstances; or

(d)   any circumstances beyond the control of the Issuer in which the Closing Price cannot
      be determined by the Issuer in the manner set out in these Product Conditions or in
      such other manner as the Issuer considers appropriate at such time after taking into
      account all the relevant circumstances;

“Maximum Trade Price” means, in respect of Category R CBBCs, the highest Spot Price
during the MCE Valuation Period;

“MCE Valuation Period” means the period commencing from and including the moment
upon which the Mandatory Call Event occurs (the trading session on the Stock Exchange
during which the Mandatory Call Event occurs is the “1st Session”) and up to the end of the
trading session on the Stock Exchange immediately following the 1st Session (“2nd
Session”) unless, in the determination of the Issuer in its good faith, the 2nd Session for any
reason (including, without limitation, a Market Disruption Event occurring and subsisting for
the 2nd Session) does not contain any continuous period of 1 hour or more than 1 hour
during which Spot Prices are available, the MCE Valuation Period shall be extended to the
end of the subsequent trading session on the Stock Exchange following the 2nd Session
during which Spot Prices are available for a continuous period of at least 1 hour
notwithstanding the existence or continuance of a Market Disruption Event in such
postponed trading session, unless the Issuer determines in its good faith that each trading
session on each of the four Trading Days immediately following the day on which the
Mandatory Call Event occurs does not contain any continuous period of 1 hour or more than
1 hour during which Spot Prices are available. In that case:

(a)   the period commencing from the 1st Session up to, and including, the last trading
      session of the fourth Trading Day on the Stock Exchange immediately following the date
      on which the Mandatory Call Event occurs shall be deemed to be the MCE Valuation
      Period; and

(b)   the Issuer shall determine the Maximum Trade Price or the Minimum Trade Price (as the
      case may be) having regard to the then prevailing market conditions, the last reported
      Spot Price and such other factors as the Issuer may determine to be relevant in its good
      faith.

For the avoidance of doubt, all Spot Prices available throughout the extended MCE Valuation
Period shall be taken into account to determine the Maximum Trade Price or the Minimum
Trade Price (as the case may be) for the calculation of the Residual Value.


                                        − 140 −
For the purposes of this definition,

(A)   the pre-opening session, the morning session and, in the case of half day trading, the
      closing auction session (if applicable) of the same day; and

(B)   the afternoon session and the closing auction session (if applicable) of the same day,

shall each be considered as one session only;

“Minimum Trade Price” means, in respect of Category R CBBCs, the lowest Spot Price
during the MCE Valuation Period;

“Observation Commencement Date” has the meaning given to it in the relevant
Supplemental Listing Document;

“Observation Period” means the period commencing from and including the Observation
Commencement Date up to and including the close of trading (Hong Kong time) on the
Trading Day immediately preceding the Expiry Date;

“Post MCE Trades” has the meaning given to it in the relevant Supplemental Listing
Document, subject to such modification and amendment prescribed by the Stock Exchange
from time to time;

“Product Conditions” means these product terms and conditions. These Product Conditions
apply to each series of cash settled callable bull/bear contracts over single equities;

“Residual Value” means, in respect of every Board Lot:

(a)   in respect of a series of callable bull contracts, an amount calculated by the Issuer equal
      to (1) the product of (A) the Entitlement (subject to adjustment as provided in Product
      Condition 5), (B) the Minimum Trade Price less the Strike Price (subject to adjustment
      as provided in Product Condition 5) and (C) one Board Lot; (2) divided by the Exercise
      Amount; and (3) less the Exercise Expenses; and

(b)   in respect of a series of callable bear contracts, an amount calculated by the Issuer
      equal to (1) the product of (A) the Entitlement (subject to adjustment as provided in
      Product Condition 5), (B) the Strike Price (subject to adjustment as provided in Product
      Condition 5) less the Maximum Trade Price and (C) one Board Lot; (2) divided by the
      Exercise Amount; and (3) less the Exercise Expenses;

“Settlement Currency” means the currency specified as such in the relevant Supplemental
Listing Document;

“Settlement Date” means the third CCASS Settlement Day following (a) the Valuation Date;
or (b) the end of the MCE Valuation Period, as the case may be;

“Settlement Disruption Event” means an event beyond the control of the Issuer as a result
of which the Issuer is unable to procure payment of the Cash Settlement Amount
electronically through CCASS to the Designated Bank Account;

“Shares” means the shares of the Company specified as such in the relevant Supplemental
Listing Document;


                                          − 141 −
     “Spot Price” means:

     (a)   in respect of a continuous trading session of the Stock Exchange, the price per Share
           concluded by means of automatic order matching on the Stock Exchange as reported
           in the official real-time dissemination mechanism for the Stock Exchange during such
           continuous trading session of the Stock Exchange in accordance with the Trading
           Rules, excluding direct business (as defined in the Trading Rules); and

     (b)   in respect of a pre-opening session or a closing auction session (if applicable) of the
           Stock Exchange (as the case may be), the final Indicative Equilibrium Price (IEP) (as
           defined in the Trading Rules) of the Share (if any) calculated at the end of the pre-order
           matching period of such pre-opening session or closing auction session (if applicable)
           (as the case may be) in accordance with the Trading Rules, excluding direct business
           (as defined in the Trading Rules),

     subject to such modification and amendment prescribed by the Stock Exchange from time to
     time;

     “Stock Exchange” means The Stock Exchange of Hong Kong Limited;

     “Strike Price” means the price specified as such in the relevant Supplemental Listing
     Document, subject to any adjustment in accordance with Condition 5;

     “Trading Day” means a day on which the Stock Exchange is scheduled to open for trading
     for its regular trading sessions;

     “Trading Rules” means the Rules and Regulations of the Exchange prescribed by the Stock
     Exchange from time to time; and

     “Valuation Date” means the Trading Day immediately preceding the Expiry Date unless the
     Issuer determines, in its sole and absolute discretion, that a Market Disruption Event has
     occurred, then that day shall be postponed until the first succeeding Trading Day on which
     the Issuer determines that there is no Market Disruption Event, unless the Issuer determines
     that there is a Market Disruption Event occurring on each of the four Trading Days
     immediately following the original date which (but for the Market Disruption Event) would
     have been the Valuation Date. In that case:

     (a)   the fourth Trading Day immediately following the original date shall be deemed to be the
           Valuation Date (regardless of the Market Disruption Event); and

     (b)   the Issuer shall determine the Closing Price on the basis of its good faith estimate of
           such price that would have prevailed on that day but for the occurrence of the Market
           Disruption Event.

2.   Hedging Disruption

     2.1 Notification: The Issuer shall as soon as reasonably practicable give notice to the
         Holders in accordance with General Condition 7 if it determines that a Hedging
         Disruption Event has occurred. The notice shall specify the consequence of such
         Hedging Disruption Event as determined by the Issuer pursuant to Product Condition
         2.3.


                                              − 142 −
    2.2 Hedging Disruption Event: A “Hedging Disruption Event” occurs if the Issuer
        determines that it is or has become not reasonably practicable or it has otherwise
        become undesirable, for any reason, for the Issuer wholly or partially (X) to establish,
        re-establish, substitute or maintain a relevant hedging transaction (a “Relevant
        Hedging Transaction”) it deems necessary or desirable to hedge the Issuer’s
        obligations in respect of the CBBCs or (Y) to freely realize, recover, receive, repatriate,
        remit or transfer the proceeds of the Relevant Hedging Transactions between accounts
        within the jurisdiction of the Relevant Hedging Transactions (the “Affected
        Jurisdiction”) or from accounts within the Affected Jurisdiction to accounts outside of
        the Affected Jurisdiction. The reasons for such determination by the Issuer may include,
        but are not limited to, the following:

         (a)   any material illiquidity in the market for the Shares;

         (b)   a change in any applicable law (including, without limitation, any tax law) or the
               promulgation of, or change in, the interpretation of any court, tribunal or regulatory
               authority with competent jurisdiction of any applicable law (including any action
               taken by a taxing authority);

         (c)   a material decline in the creditworthiness of a party with whom the Issuer has
               entered into any such Relevant Hedging Transaction; or

         (d)   the general unavailability of:

               (i)    market participants who will agree to enter into a Relevant Hedging
                      Transaction; or

               (ii)   market participants who will so enter into a Relevant Hedging Transaction on
                      commercially reasonable terms.

    2.3 Consequences: The Issuer, in the event of a Hedging Disruption Event, may determine
        to:

         (a)   terminate the CBBCs. In such circumstances the Issuer will, however, if and to the
               extent permitted by the Applicable Law pay to each Holder in respect of each
               CBBC held by such Holder an amount calculated by it as the fair market value of
               the CBBC immediately prior to such termination less the cost to the Issuer of
               unwinding any related hedging arrangements. Payment will be made to the Holder
               in such manner as shall be notified to the Holder in accordance with General
               Condition 7; or

         (b)   make any other adjustment to the Product Conditions as it considers appropriate
               in order to maintain the theoretical value of the CBBCs after adjusting for the
               relevant Hedging Disruption Event.

3   CBBC Rights and Exercise Expenses

    3.1 CBBC Rights

         Every Board Lot gives each Holder, upon due exercise and compliance with Product
         Condition 4, the right to receive the payment of the Cash Settlement Amount, if any.


                                                − 143 −
    3.2 Exercise Expenses

        On exercise of the CBBCs, Holders will be obliged to give an irrevocable authorisation
        to the Issuer to deduct all Exercise Expenses in accordance with Product Condition 4.

4   Exercise of CBBCs

    4.1 Exercise of CBBCs in Board Lots

        CBBCs may only be exercised in Board Lots or integral multiples thereof.

    4.2 Automatic exercise

        If no Mandatory Call Event has occurred during the Observation Period, the CBBCs will
        be deemed to be automatically exercised at the earlier of the commencement of the
        morning trading session or any pre-opening session of the Stock Exchange on the
        Expiry Date if the Cash Settlement Amount is greater than zero (without notice being
        given to the Holders).

    4.3 Mandatory Call Event

        (a)   Subject to Product Condition 4.3(b) below, following a Mandatory Call Event, the
              CBBCs will be terminated automatically and the Issuer shall have no further
              obligation under the CBBCs except for the payment of the Cash Settlement
              Amount (if any) on the Settlement Date. The Issuer will notify the Holders of the
              occurrence of the Mandatory Call Event in accordance with General Condition 7.
              Trading in the CBBCs will be suspended immediately upon the occurrence of a
              Mandatory Call Event and any Post MCE Trades will be cancelled and will not be
              recognised by the Stock Exchange or the Issuer.

        (b)   A Mandatory Call Event is irrevocable unless it is triggered as a result of any of the
              following events:

              (i)    system malfunction or other technical errors of the Stock Exchange and such
                     event is reported by the Stock Exchange to the Issuer and the Issuer and the
                     Stock Exchange mutually agree that such Mandatory Call Event is to be
                     revoked; or

              (ii)   manifest errors caused by the relevant third party where applicable and such
                     event is reported by the Issuer to the Stock Exchange, and the Issuer and the
                     Stock Exchange mutually agree that such Mandatory Call Event is to be
                     revoked;

              in each case, such mutual agreement must be reached no later than the time
              specified in the relevant Supplemental Listing Document or such other time as
              prescribed by the Stock Exchange from time to time.

              In both cases, the Mandatory Call Event so triggered will be reversed; and all
              cancelled trades (if any) will be reinstated and trading of the CBBCs will resume
              as soon as practicable in accordance with the rules and/or requirements
              prescribed by the Stock Exchange from time to time.


                                             − 144 −
4.4 Entitlement

    Every Board Lot of CBBCs entitles the Holder to receive from the Issuer on the
    Settlement Date the Cash Settlement Amount (if any).

4.5 Exercise Expenses

    Any Exercise Expenses which are not determined by the Issuer by the end of the MCE
    Valuation Period or the Expiry Date (as the case may be) and deducted from the Cash
    Settlement Amount prior to delivery to the Holders in accordance with this Product
    Condition 4, shall be notified by the Issuer to the Holders as soon as practicable after
    determination thereof and shall be paid by the Holders to the Issuer immediately upon
    demand.

4.6 Cancellation

    The Issuer will procure that the Registrar will, with effect from the first Business Day
    following the MCE Valuation Period or the Expiry Date (as the case may be), remove
    from the Register the name of the person in respect of the CBBCs which (a) are the
    subject of an exercise in accordance with these Product Conditions; or (b) have expired
    worthless, and thereby cancel the relevant CBBCs.

4.7 Cash Settlement

    Upon early termination of the CBBCs following the occurrence of a Mandatory Call
    Event or an automatic exercise of the CBBCs on the Expiry Date (as the case may be)
    in accordance with these Product Conditions, the Issuer will make a payment in respect
    of every Board Lot to the relevant Holder equal to the Cash Settlement Amount.

    The Cash Settlement Amount shall be despatched not later than the Settlement Date by
    crediting that amount in accordance with the CCASS Rules to the Designated Bank
    Account.

    If, as a result of a Settlement Disruption Event, it is not possible for the Issuer to procure
    payment electronically through CCASS by crediting the relevant Designated Bank
    Account of the Holder on the original Settlement Date, the Issuer shall use its
    reasonable endeavours to procure payment electronically through CCASS by crediting
    the relevant Designated Bank Account of the Holder as soon as reasonably practicable
    after the original Settlement Date. The Issuer will not be liable to the Holder for any
    interest in respect of the amount due or any loss or damage that such Holder may suffer
    as a result of the existence of the Settlement Disruption Event.

4.8 Responsibility of Issuer and Registrar

    In the absence of gross negligence or wilful misconduct on its part, none of the Issuer,
    the Registrar or their respective agents shall have any responsibility for any errors or
    omissions in the calculation of the Cash Settlement Amount.

    The purchase of CBBCs does not confer on any Holder of such CBBCs any rights
    (whether in respect of voting, distributions or otherwise) in relation to the Shares.


                                         − 145 −
     4.9 Liability of Issuer and Registrar

         Exercise and settlement of the CBBCs is subject to all applicable laws, regulations and
         practices in force at the relevant time and neither the Issuer nor the Registrar shall incur
         any liability whatsoever if it is unable to effect the transactions contemplated, after using
         all reasonable efforts, as a result of any such laws, regulations or practices. Neither the
         Issuer nor the Registrar shall under any circumstances be liable for any acts or defaults
         of the CCASS in relation to the performance of its duties in relation to the CBBCs.

     4.10 Trading in the CBBCs

         Subject to Product Condition 4.3(b), trading in CBBCs on the Stock Exchange shall
         cease (a) immediately upon the occurrence of a Mandatory Call Event or (b) at the close
         of trading for the Trading Day immediately preceding the Expiry Date (for the avoidance
         of doubt, in the case when the Stock Exchange is scheduled to open for the morning
         session only, at the close of trading for the morning session), whichever is the earlier.

5.   Adjustments

     5.1 Rights Issues

         If and whenever the Company shall, by way of Rights (as defined below), offer new
         Shares for subscription at a fixed subscription price to the holders of existing Shares pro
         rata to existing holdings (a “Rights Offer”), the Entitlement shall be adjusted to take
         effect on the Trading Day on which trading in the Shares becomes ex-entitlement
         (“Rights Issue Adjustment Date”) in accordance with the following formula:

                              Adjusted Entitlement = Adjustment Factor x E

         Where:

                                      1+M
         Adjustment Factor =
                                  1 + (R/S) x M

         E:   Existing Entitlement immediately prior to the Rights Offer

         S:   Cum-Rights Share price being the closing price of an existing Share as derived
              from the daily quotation sheet of the Stock Exchange on the last Trading Day on
              which Shares are traded on a Cum-Rights basis

         R:   Subscription price per new Share as specified in the Rights Offer plus an amount
              equal to any dividends or other benefits foregone to exercise the Rights

         M:   Number of new Share(s) (whether a whole or a fraction) per existing Share each
              holder thereof is entitled to subscribe

         Provided that if the adjustment to be made would result in the Entitlement being
         changed by one per cent. or less, then no adjustment shall be made to the Entitlement.
         In addition, if adjustment is to be made to the Entitlement, the Issuer shall adjust the
         Strike Price and the Call Price (each of which shall be rounded to the nearest Hong
         Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the reciprocal of
         the Adjustment Factor means one divided by the relevant Adjustment Factor. This
         adjustment to the Strike Price and the Call Price shall take effect on the Rights Issue
         Adjustment Date.


                                             − 146 −
    For the purposes of these Product Conditions:

    “Rights” means the right(s) attached to    each existing Share or needed to acquire one
    new Share (as the case may be) which       are given to the holders of existing Shares to
    subscribe at a fixed subscription price    for new Shares pursuant to the Rights Offer
    (whether by the exercise of one Right,     a part of a Right or an aggregate number of
    Rights).

5.2 Bonus Issues

    If and whenever the Company shall make an issue of Shares credited as fully paid to
    the holders of Shares generally by way of capitalisation of profits or reserves (other than
    pursuant to a scrip dividend or similar scheme for the time being operated by the
    Company or otherwise in lieu of a cash dividend and without any payment or other
    consideration being made or given by such holders) (a “Bonus Issue”) the Entitlement
    shall be adjusted on the Trading Day on which trading in the Shares becomes
    ex-entitlement (“Bonus Issues Adjustment Date”) in accordance with the following
    formula:

                         Adjusted Entitlement = Adjustment Factor x E

    Where:

    Adjustment Factor = 1 + N

    E:    Existing Entitlement immediately prior to the Bonus Issue

    N:    Number of additional Shares (whether a whole or a fraction) received by a holder
          of existing Shares for each Share held prior to the Bonus Issue

    Provided that if the adjustment to be made would result in the Entitlement being
    changed by one per cent. or less, then no adjustment shall be made to the Entitlement.
    In addition, if adjustment is to be made to the Entitlement, the Issuer shall adjust the
    Strike Price and the Call Price (which shall be rounded to the nearest Hong Kong dollar
    0.001) by the reciprocal of the Adjustment Factor, where the reciprocal of the
    Adjustment Factor means one divided by the relevant Adjustment Factor. This
    adjustment to the Strike Price and the Call Price shall take effect on the Bonus Issue
    Adjustment Date.

5.3 Subdivisions or Consolidations

    If and whenever the Company shall subdivide its Shares or any class of its outstanding
    share capital comprised of the Shares into a greater number of shares (a
    “Subdivision”) or consolidate the Shares or any class of its outstanding share capital
    comprised of the Shares into a smaller number of shares (a “Consolidation”), then:

    (a)   in the case of a Subdivision, the Entitlement in effect immediately prior thereto will
          be increased whereas the Strike Price and the Call Price (each of which shall be
          rounded to the nearest Hong Kong dollar 0.001) will be decreased in the same
          ratio as the Subdivision; and

    (b)   in the case of a Consolidation, the Entitlement in effect immediately prior thereto
          will be decreased whereas the Strike Price and the Call Price (each of which shall
          be rounded to the nearest Hong Kong dollar 0.001) will be increased in the same
          ratio as the Consolidation,


                                        − 147 −
    in each case on the day on which the Subdivision or Consolidation (as the case may be)
    shall have taken effect.


5.4 Merger or Consolidation


    If it is announced that the Company is to or may merge or consolidate with or into any
    other corporation (including becoming, by agreement or otherwise, a subsidiary of any
    corporation or controlled by any person or corporation) (except where the Company is
    the surviving corporation in a merger) or that it is to or may sell or transfer all or
    substantially all of its assets, the rights attaching to the CBBCs may in the absolute
    discretion of the Issuer be amended no later than the Trading Day preceding the
    consummation of such merger, consolidation, sale or transfer (each a “Restructuring
    Event”) (as determined by the Issuer in its absolute discretion).


    The rights attaching to the CBBCs after the adjustment shall, after such Restructuring
    Event, relate to the number of shares of the corporation(s) resulting from or surviving
    such Restructuring Event or other securities (“Substituted Securities”) and/or cash
    offered in substitution for the affected Shares, as the case may be, to which the holder
    of such number of Shares to which the CBBCs related immediately before such
    Restructuring Event would have been entitled upon such Restructuring Event.
    Thereafter the provisions hereof shall apply to such Substituted Securities, provided
    that any Substituted Securities may, in the absolute discretion of the Issuer, be deemed
    to be replaced by an amount in Hong Kong dollars equal to the market value or, if no
    market value is available, fair value, of such Substituted Securities in each case as
    determined by the Issuer as soon as practicable after such Restructuring Event is
    effected.


    For the avoidance of doubt, any remaining Shares shall not be affected by this Product
    Condition 5.4 and, where cash is offered in substitution for Shares or is deemed to
    replace Substituted Securities as described above, references in these Product
    Conditions to the Shares shall include any such cash.


5.5 Cash Distribution


    No adjustment will be made for an ordinary cash dividend (whether or not it is offered
    with a script alternative) (“Ordinary Dividend”). For any other forms of cash distribution
    (“Cash Distribution”) announced by the Company, such as a cash bonus, special
    dividend or extraordinary dividend, no adjustment will be made unless the value of the
    Cash Distribution accounts for 2 per cent. or more of the Share’s closing price on the
    day of announcement by the Company.


    If and whenever the Company shall make a Cash Distribution credited as fully paid to
    the holders of Shares generally, the Entitlement shall be adjusted to take effect on the
    Trading Day on which trading in the Shares becomes ex-entitlement in respect of the
    relevant Cash Distribution (“Cash Distribution Adjustment Date”) in accordance with
    the following formula:


                        Adjusted Entitlement = Adjustment Factor x E



                                       − 148 −
    Where:

                               S – OD
    Adjustment Factor =
                            S – OD – CD


    E:   The existing Entitlement immediately prior to the Cash Distribution


    S:   The closing price of the existing Share as derived from the daily quotation sheet
         of the Stock Exchange on the Trading Day immediately preceding the Cash
         Distribution Adjustment Date


    CD: The amount of Cash Distribution per Share


    OD: The amount of Ordinary Dividend per Share, provided that the Ordinary Dividend
        and the Cash Distribution shall have the same ex-entitlement date. For the
        avoidance of doubt, the OD shall be deemed to be zero if the ex-entitlement dates
        of the relevant Ordinary Dividend and Cash Distribution are different


    In addition, the Issuer shall adjust the Strike Price and the Call Price (each of which
    shall be rounded to the nearest Hong Kong dollar 0.001) by the reciprocal of the
    Adjustment Factor, where the reciprocal of the Adjustment Factor means one divided by
    the relevant Adjustment Factor. The adjustment to the Strike Price and the Call Price
    shall take effect on the Cash Distribution Adjustment Date.


5.6 Other Adjustments


    Except as provided in General Condition 6, Product Condition 2, Product Condition 5
    and/or Product Condition 7, adjustments or amendments will not be made in any other
    circumstances, subject to the right reserved by the Issuer (such right to be exercised in
    the Issuer’s sole and unfettered discretion and without any obligation whatsoever) to
    make such adjustments and amendments as it believes appropriate in circumstances
    where an event or events (including the events as contemplated in Product Conditions
    5.1 to 5.5) occur which it believes in its sole discretion and irrespective of, in
    substitution for, or in addition to provisions contemplated in Product Conditions 5.1 to
    5.5 should, in the context of the issue of the CBBCs and the obligations of the Issuer,
    give rise to such adjustment or, as the case may be, amendment provided that such
    adjustment or, as the case may be, amendment (a) is considered by the Issuer not to
    be materially prejudicial to the Holders generally (without considering the
    circumstances of any individual Holder or the tax or other consequences of such
    adjustment or amendment in any particular jurisdiction); or (b) is otherwise considered
    by the Issuer to be appropriate and such adjustment or amendment is approved by the
    Stock Exchange.


5.7 Notice of Determinations


    All determinations made by the Issuer pursuant hereto shall be conclusive and binding
    on the Holders. The Issuer will give, or procure that there is given, notice as soon as
    practicable of any adjustment or amendment and of the date from which such
    adjustment or amendment is effective by publication in accordance with General
    Condition 7.


                                       − 149 −
6.   Liquidation


     In the event of a liquidation or dissolution of the Company or the appointment of a liquidator,
     receiver or administrator or analogous person under Hong Kong law in respect of the whole
     or substantially the whole of its undertaking, property or assets, all unexercised CBBCs will
     lapse and shall cease to be valid for any purpose, in the case of voluntary liquidation, on the
     effective date of the relevant resolution and, in the case of an involuntary liquidation or
     dissolution, on the date of the relevant court order or, in the case of the appointment of a
     liquidator or receiver or administrator or analogous person under any applicable law in
     respect of the whole or substantially the whole of its undertaking, property or assets, on the
     date when such appointment is effective but subject (in any such case) to any contrary
     mandatory requirement of law.


7.   Delisting


     7.1 Adjustments following delisting


          If at any time the Shares cease to be listed on the Stock Exchange, the Issuer shall give
          effect to the General Conditions and these Product Conditions in such manner and
          make such adjustments to the rights attaching to the CBBCs as it shall, in its absolute
          discretion, consider appropriate to ensure, so far as it is reasonably able to do so, that
          the interests of the Holders generally are not materially prejudiced as a consequence
          of such delisting (without considering the individual circumstances of any Holder or the
          tax or other consequences that may result in any particular jurisdiction).


     7.2 Listing on another exchange


          Without prejudice to the generality of Product Condition 7.1, where the Shares are, or,
          upon the delisting, become, listed on any other stock exchange, the General Conditions
          and these Product Conditions may, in the absolute discretion of the Issuer, be amended
          to the extent necessary to allow for the substitution of that other stock exchange in
          place of the Stock Exchange and the Issuer may, without the consent of the Holders,
          make such adjustments to the entitlements of Holders on exercise (including, if
          appropriate, by converting foreign currency amounts at prevailing market rates into
          Hong Kong currency) as may be appropriate in the circumstances.


     7.3 Adjustments binding


          The Issuer shall determine, in its absolute discretion, any adjustment or amendment
          and its determination shall be conclusive and binding on the Holders save in the case
          of manifest error. Notice of any adjustments or amendments shall be given to the
          Holders in accordance with General Condition 7, as soon as practicable after they are
          determined.




                                             − 150 −
       PART C — PRODUCT CONDITIONS OF CALLABLE BULL/BEAR
        CONTRACTS OVER SINGLE UNIT TRUSTS (CASH SETTLED)

     These Product Conditions will, together with the General Conditions and the supplemental
provisions contained in the relevant Supplemental Listing Document and subject to completion
and amendment, be endorsed on the Global Certificate. The relevant Supplemental Listing
Document in relation to the issue of any series of CBBCs may specify additional terms and
conditions which shall, to the extent so specified or to the extent inconsistent with these Product
Conditions, replace or modify these Product Conditions for the purpose of such series of CBBCs.
Capitalised terms used in these Product Conditions and not otherwise defined herein shall have
the meaning given to them in the General Conditions and the relevant Supplemental Listing
Document.

1.   Definitions

     For the purposes of these Product Conditions:

     “Board Lot” means the number specified as such in the relevant Supplemental Listing
     Document;

     “Business Day” means a day (excluding Saturdays) on which the Stock Exchange is
     scheduled to open for dealings in Hong Kong and banks are open for business in Hong Kong;

     “Call Price” means the price specified as such in the relevant Supplemental Listing
     Document, subject to any adjustment in accordance with Product Condition 5;

     “Cash Settlement Amount” means, in respect of every Board Lot:

     (a)   following a Mandatory Call Event:

           (i)    in respect of a series of Category R CBBCs, the Residual Value, provided that the
                  Issuer may, at its absolute discretion, pay a higher cash amount than the Residual
                  Value; or

           (ii)   in respect of a series of Category N CBBCs, zero; and

     (b)   at expiry:

           (i)    in respect of a series of callable bull contracts, an amount equal to (1) the product
                  of (A) the Entitlement (subject to adjustment as provided in Product Condition 5),
                  (B) the Closing Price less the Strike Price (subject to adjustment as provided in
                  Product Condition 5) and (C) one Board Lot; (2) divided by the Exercise Amount;
                  and (3) less the Exercise Expenses; and

           (ii)   in respect of a series of callable bear contracts, an amount equal to (1) the product
                  of (A) the Entitlement (subject to adjustment as provided in Product Condition 5),
                  (B) the Strike Price (subject to adjustment as provided in Product Condition 5) less
                  the Closing Price and (C) one Board Lot; (2) divided by the Exercise Amount; and
                  (3) less the Exercise Expenses.

     For the avoidance of doubt, if the Cash Settlement Amount is a negative figure, it shall be
     deemed to be zero;


                                                − 151 −
“Category N CBBCs” means a series of CBBCs where the Call Price is equal to the Strike
Price;

“Category R CBBCs” means a series of CBBCs where the Call Price is different from the
Strike Price;

“CCASS Settlement Day” has the meaning ascribed to the term “Settlement Day” in the
CCASS Rules, subject to such modification and amendment prescribed by Hong Kong
Securities Clearing Company Limited from time to time;

“Closing Price” means the official closing price of the Unit (as derived from the Daily
Quotation Sheet of the Stock Exchange, subject to any adjustments as may be necessary to
reflect any capitalisation, rights issue, distribution or the like) on the Valuation Date. If a
Market Disruption Event occurs on each of the four Trading Days immediately following the
scheduled Valuation Date, then the Issuer shall determine the Closing Price in accordance
with the definition of “Valuation Date’’;

“Designated Bank Account” means the relevant bank account designated by the relevant
Holder;

“Entitlement” means the number specified as such in the relevant Supplemental Listing
Document, subject to any adjustment in accordance with Product Condition 5;

“Exercise Amount” means the amount specified as such in the relevant Supplemental
Listing Document;

“Exercise Expenses” means any charges or expenses including any taxes or duties which
are incurred in respect of the exercise of the CBBCs;

“Expiry Date” has the meaning given to it in the relevant Supplemental Listing Document;

“General Conditions” means the general terms and conditions of Structured Products set
out in Appendix 1 of the Base Listing Document;

“Mandatory Call Event” occurs when the Spot Price of the Units at any time during the
Observation Period is:

(a)   in the case of a series of callable bull contracts, at or below the Call Price; or

(b)   in the case of a series of callable bear contracts, at or above the Call Price;

“Market Disruption Event” means:

(a)   the occurrence or existence on any Trading Day during the one-half hour period that
      ends at the close of trading of any suspension of or limitation imposed on trading (by
      reason of movements in price exceeding limits permitted by the Stock Exchange or
      otherwise) on the Stock Exchange in: (i) the Units; or (ii) any options or futures
      contracts relating to the Units

if, in any such case, that suspension or limitation is, in the determination of the Issuer,
material;


                                         − 152 −
(b)   the hoisting of the tropical cyclone warning signal number 8 or above or the hoisting of
      a “BLACK” rainstorm signal which either results in the Stock Exchange being closed for
      dealings for an entire day or results in the Stock Exchange being closed prior to its
      regular time for close of trading on any day PROVIDED THAT there shall be no Market
      Disruption Event solely by reason of the Stock Exchange opening later than its regular
      time for open of trading on any day as a result of the tropical cyclone warning signal
      number 8 or above or the “BLACK” rainstorm signal having been hoisted;

(c)   a limitation on trading on or closure of the Stock Exchange due to any other unforeseen
      circumstances; or

(d)   any circumstances beyond the control of the Issuer in which the Closing Price cannot
      be determined by the Issuer in the manner set out in these Product Conditions or in
      such other manner as the Issuer considers appropriate at such time after taking into
      account all the relevant circumstances;

“Maximum Trade Price” means, in respect of Category R CBBCs, the highest Spot Price
during the MCE Valuation Period;

“MCE Valuation Period” means the period commencing from and including the moment
upon which the Mandatory Call Event occurs (the trading session on the Stock Exchange
during which the Mandatory Call Event occurs is the “1st Session”) and up to the end of the
trading session on the Stock Exchange immediately following the 1st Session (“2nd
Session”) unless, in the determination of the Issuer in its good faith, the 2nd Session for any
reason (including, without limitation, a Market Disruption Event occurring and subsisting for
the 2nd Session) does not contain any continuous period of 1 hour or more than 1 hour
during which Spot Prices are available, the MCE Valuation Period shall be extended to the
end of the subsequent trading session on the Stock Exchange following the 2nd Session
during which Spot Prices are available for a continuous period of at least 1 hour
notwithstanding the existence or continuance of a Market Disruption Event in such
postponed trading session, unless the Issuer determines in its good faith that each trading
session on each of the four Trading Days immediately following the day on which the
Mandatory Call Event occurs does not contain any continuous period of 1 hour or more than
1 hour during which Spot Prices are available. In that case:

(a)   the period commencing from the 1st Session up to, and including, the last trading
      session of the fourth Trading Day on the Stock Exchange immediately following the date
      on which the Mandatory Call Event occurs shall be deemed to be the MCE Valuation
      Period; and

(b)   the Issuer shall determine the Maximum Trade Price or the Minimum Trade Price (as the
      case may be) having regard to the then prevailing market conditions, the last reported
      Spot Price and such other factors as the Issuer may determine to be relevant in its good
      faith.

For the avoidance of doubt, all Spot Prices available throughout the extended MCE Valuation
Period shall be taken into account to determine the Maximum Trade Price or the Minimum
Trade Price (as the case may be) for the calculation of the Residual Value.

For the purposes of this definition,

(A)   the pre-opening session, the morning session and, in the case of half day trading, the
      closing auction session (if applicable) of the same day; and


                                        − 153 −
(B)   the afternoon session and the closing auction session (if applicable) of the same day,

shall each be considered as one session only;

“Minimum Trade Price” means, in respect of Category R CBBCs, the lowest Spot Price
during the MCE Valuation Period;

“Observation Commencement Date” has the meaning given to it in the relevant
Supplemental Listing Document;

“Observation Period” means the period commencing from and including the Observation
Commencement Date up to and including the close of trading (Hong Kong time) on the
Trading Day immediately preceding the Expiry Date;

“Post MCE Trades” has the meaning given to it in the relevant Supplemental Listing
Document, subject to such modification and amendment prescribed by the Stock Exchange
from time to time;

“Product Conditions” means these product terms and conditions. These Product Conditions
apply to each series of cash settled callable bull/bear contracts over single unit trusts;

“Residual Value” means, in respect of every Board Lot:

(a)   in respect of a series of callable bull contracts, an amount calculated by the Issuer equal
      to (1) the product of (A) the Entitlement (subject to adjustment as provided in Product
      Condition 5), (B) the Minimum Trade Price less the Strike Price (subject to adjustment
      as provided in Product Condition 5) and (C) one Board Lot; (2) divided by the Exercise
      Amount; and (3) less the Exercise Expenses; and

(b)   in respect of a series of callable bear contracts, an amount calculated by the Issuer
      equal to (1) the product of (A) the Entitlement (subject to adjustment as provided in
      Product Condition 5), (B) the Strike Price (subject to adjustment as provided in Product
      Condition 5) less the Maximum Trade Price and (C) one Board Lot; (2) divided by the
      Exercise Amount; and (3) less the Exercise Expenses;

“Settlement Currency” means the currency specified as such in the relevant Supplemental
Listing Document;

“Settlement Date” means the third CCASS Settlement Day following (a) the Valuation Date;
or (b) the end of the MCE Valuation Period, as the case may be;

“Settlement Disruption Event” means an event beyond the control of the Issuer as a result
of which the Issuer is unable to procure payment of the Cash Settlement Amount
electronically through CCASS to the Designated Bank Account;

“Spot Price” means:

(a)   in respect of a continuous trading session of the Stock Exchange, the price per Unit
      concluded by means of automatic order matching on the Stock Exchange as reported
      in the official real-time dissemination mechanism for the Stock Exchange during such
      continuous trading session of the Stock Exchange in accordance with the Trading
      Rules, excluding direct business (as defined in the Trading Rules); and


                                          − 154 −
     (b)   in respect of a pre-opening session or a closing auction session (if applicable) of the
           Stock Exchange (as the case may be), the final Indicative Equilibrium Price (IEP) (as
           defined in the Trading Rules) of the Unit (if any) calculated at the end of the pre-order
           matching period of such pre-opening session or closing auction session (if applicable)
           (as the case may be) in accordance with the Trading Rules, excluding direct business
           (as defined in the Trading Rules),


     subject to such modification and amendment prescribed by the Stock Exchange from time to
     time;


     “Stock Exchange” means The Stock Exchange of Hong Kong Limited;


     “Strike Price” means the price specified as such in the relevant Supplemental Listing
     Document, subject to any adjustment in accordance with Condition 5;


     “Trading Day” means a day on which the Stock Exchange is scheduled to open for trading
     for its regular trading sessions;


     “Trading Rules” means the Rules and Regulations of the Exchange prescribed by the Stock
     Exchange from time to time;


     “Trust” means the trust specified as such in the relevant Supplemental Listing Document;


     “Unit” means the unit specified as such in the relevant Supplemental Listing Document; and


     “Valuation Date” means the Trading Day immediately preceding the Expiry Date unless the
     Issuer determines, in its sole and absolute discretion, that a Market Disruption Event has
     occurred, then that day shall be postponed until the first succeeding Trading Day on which
     the Issuer determines that there is no Market Disruption Event, unless the Issuer determines
     that there is a Market Disruption Event occurring on each of the four Trading Days
     immediately following the original date which (but for the Market Disruption Event) would
     have been the Valuation Date. In that case:


     (a)   the fourth Trading Day immediately following the original date shall be deemed to be the
           Valuation Date (regardless of the Market Disruption Event); and


     (b)   the Issuer shall determine the Closing Price on the basis of its good faith estimate of
           such price that would have prevailed on that day but for the occurrence of the Market
           Disruption Event.


2.   Hedging Disruption


     2.1 Notification: The Issuer shall as soon as reasonably practicable give notice to the
         Holders in accordance with General Condition 7 if it determines that a Hedging
         Disruption Event has occurred. The notice shall specify the consequence of such
         Hedging Disruption Event as determined by the Issuer pursuant to Product Condition
         2.3.




                                              − 155 −
     2.2 Hedging Disruption Event: A “Hedging Disruption Event” occurs if the Issuer
         determines that it is or has become not reasonably practicable or it has otherwise
         become undesirable, for any reason, for the Issuer wholly or partially (X) to establish,
         re-establish, substitute or maintain a relevant hedging transaction (a “Relevant
         Hedging Transaction”) it deems necessary or desirable to hedge the Issuer’s
         obligations in respect of the CBBCs or (Y) to freely realize, recover, receive, repatriate,
         remit or transfer the proceeds of the Relevant Hedging Transactions between accounts
         within the jurisdiction of the Relevant Hedging Transactions (the “Affected
         Jurisdiction”) or from accounts within the Affected Jurisdiction to accounts outside of
         the Affected Jurisdiction. The reasons for such determination by the Issuer may include,
         but are not limited to, the following:

          (a)   any material illiquidity in the market for the Units;

          (b)   a change in any applicable law (including, without limitation, any tax law) or the
                promulgation of, or change in, the interpretation of any court, tribunal or regulatory
                authority with competent jurisdiction of any applicable law (including any action
                taken by a taxing authority);

          (c)   a material decline in the creditworthiness of a party with whom the Issuer has
                entered into any such Relevant Hedging Transaction; or

          (d)   the general unavailability of:

                (i)    market participants who will agree to enter into a Relevant Hedging
                       Transaction; or

                (ii)   market participants who will so enter into a Relevant Hedging Transaction on
                       commercially reasonable terms.

     2.3 Consequences: The Issuer, in the event of a Hedging Disruption Event, may determine
         to:

          (a)   terminate the CBBCs. In such circumstances the Issuer will, however, if and to the
                extent permitted by the Applicable Law pay to each Holder in respect of each
                CBBC held by such Holder an amount calculated by it as the fair market value of
                the CBBC immediately prior to such termination less the cost to the Issuer of
                unwinding any related hedging arrangements. Payment will be made to the Holder
                in such manner as shall be notified to the Holder in accordance with General
                Condition 7; or

          (b)   make any other adjustment to the Product Conditions as it considers appropriate
                in order to maintain the theoretical value of the CBBCs after adjusting for the
                relevant Hedging Disruption Event.

3.   CBBC Rights and Exercise Expenses

     3.1 CBBC Rights

          Every Board Lot gives each Holder, upon due exercise and compliance with Product
          Condition 4, the right to receive the payment of the Cash Settlement Amount, if any.


                                                 − 156 −
     3.2 Exercise Expenses

         On exercise of the CBBCs, Holders will be obliged to give an irrevocable authorisation
         to the Issuer to deduct all Exercise Expenses in accordance with Product Condition 4.

4.   Exercise of CBBCs

     4.1 Exercise of CBBCs in Board Lots

         CBBCs may only be exercised in Board Lots or integral multiples thereof.

     4.2 Automatic exercise

         If no Mandatory Call Event has occurred during the Observation Period, the CBBCs will
         be deemed to be automatically exercised at the earlier of the commencement of the
         morning trading session or any pre-opening session of the Stock Exchange on the
         Expiry Date if the Cash Settlement Amount is greater than zero (without notice being
         given to the Holders).

     4.3 Mandatory Call Event

         (a)   Subject to Product Condition 4.3(b) below, following a Mandatory Call Event, the
               CBBCs will be terminated automatically and the Issuer shall have no further
               obligation under the CBBCs except for the payment of the Cash Settlement
               Amount (if any) on the Settlement Date. The Issuer will notify the Holders of the
               occurrence of the Mandatory Call Event in accordance with General Condition 7.
               Trading in the CBBCs will be suspended immediately upon the occurrence of a
               Mandatory Call Event and any Post MCE Trades will be cancelled and will not be
               recognised by the Stock Exchange or the Issuer.

         (b)   A Mandatory Call Event is irrevocable unless it is triggered as a result of any of the
               following events:

               (i)    system malfunction or other technical errors of the Stock Exchange and such
                      event is reported by the Stock Exchange to the Issuer and the Issuer and the
                      Stock Exchange mutually agree that such Mandatory Call Event is to be
                      revoked; or

               (ii)   manifest errors caused by the relevant third party where applicable and such
                      event is reported by the Issuer to the Stock Exchange, and the Issuer and the
                      Stock Exchange mutually agree that such Mandatory Call Event is to be
                      revoked;

               in each case, such mutual agreement must be reached no later than the time
               specified in the relevant Supplemental Listing Document or such other time as
               prescribed by the Stock Exchange from time to time.

               In both cases, the Mandatory Call Event so triggered will be reversed; and all
               cancelled trades (if any) will be reinstated and trading of the CBBCs will resume
               as soon as practicable in accordance with the rules and/or requirements
               prescribed by the Stock Exchange from time to time.


                                              − 157 −
4.4 Entitlement

    Every Board Lot of CBBCs entitles the Holder to receive from the Issuer on the
    Settlement Date the Cash Settlement Amount (if any).

4.5 Exercise Expenses

    Any Exercise Expenses which are not determined by the Issuer by the end of the MCE
    Valuation Period or the Expiry Date (as the case may be) and deducted from the Cash
    Settlement Amount prior to delivery to the Holders in accordance with this Product
    Condition 4, shall be notified by the Issuer to the Holders as soon as practicable after
    determination thereof and shall be paid by the Holders to the Issuer immediately upon
    demand.

4.6 Cancellation

    The Issuer will procure that the Registrar will, with effect from the first Business Day
    following the MCE Valuation Period or the Expiry Date (as the case may be), remove
    from the Register the name of the person in respect of the CBBCs which (a) are the
    subject of an exercise in accordance with these Product Conditions; or (b) have expired
    worthless, and thereby cancel the relevant CBBCs.

4.7 Cash Settlement

    Upon early termination of the CBBCs following the occurrence of a Mandatory Call
    Event or an automatic exercise of the CBBCs on the Expiry Date (as the case may be)
    in accordance with these Product Conditions, the Issuer will make a payment in respect
    of every Board Lot to the relevant Holder equal to the Cash Settlement Amount.

    The Cash Settlement Amount shall be despatched not later than the Settlement Date by
    crediting that amount in accordance with the CCASS Rules to the Designated Bank
    Account.

    If, as a result of a Settlement Disruption Event, it is not possible for the Issuer to procure
    payment electronically through CCASS by crediting the relevant Designated Bank
    Account of the Holder on the original Settlement Date, the Issuer shall use its
    reasonable endeavours to procure payment electronically through CCASS by crediting
    the relevant Designated Bank Account of the Holder as soon as reasonably practicable
    after the original Settlement Date. The Issuer will not be liable to the Holder for any
    interest in respect of the amount due or any loss or damage that such Holder may suffer
    as a result of the existence of the Settlement Disruption Event.

4.8 Responsibility of Issuer and Registrar

    In the absence of gross negligence or wilful misconduct on its part, none of the Issuer,
    the Registrar or their respective agents shall have any responsibility for any errors or
    omissions in the calculation of the Cash Settlement Amount.

    The purchase of CBBCs does not confer on any Holder of such CBBCs any rights
    (whether in respect of voting, distributions or otherwise) in relation to the Units.


                                         − 158 −
     4.9 Liability of Issuer and Registrar

         Exercise and settlement of the CBBCs is subject to all applicable laws, regulations and
         practices in force at the relevant time and neither the Issuer nor the Registrar shall incur
         any liability whatsoever if it is unable to effect the transactions contemplated, after using
         all reasonable efforts, as a result of any such laws, regulations or practices. Neither the
         Issuer nor the Registrar shall under any circumstances be liable for any acts or defaults
         of the CCASS in relation to the performance of its duties in relation to the CBBCs.

     4.10 Trading in the CBBCs

         Subject to Product Condition 4.3(b), trading in CBBCs on the Stock Exchange shall
         cease (a) immediately upon the occurrence of a Mandatory Call Event or (b) at the close
         of trading for the Trading Day immediately preceding the Expiry Date (for the avoidance
         of doubt, in the case when the Stock Exchange is scheduled to open for the morning
         session only, at the close of trading for the morning session), whichever is the earlier.

5.   Adjustments

     5.1 Rights Issues

         If and whenever the Trust shall, by way of Rights (as defined below), offer new Units for
         subscription at a fixed subscription price to the holders of existing Units pro rata to
         existing holdings (a “Rights Offer”), the Entitlement shall be adjusted to take effect on
         the Trading Day on which trading in the Units becomes ex-entitlement (“Rights Issue
         Adjustment Date”) in accordance with the following formula:

                              Adjusted Entitlement = Adjustment Factor x E

         Where:

                                      1+M
         Adjustment Factor =
                                  1 + (R/S) x M

         E:   The existing Entitlement immediately prior to the Rights Offer

         S:   Cum-Rights Unit price being the closing price of an existing Unit as derived from
              the daily quotation sheet of the Stock Exchange on the last Trading Day on which
              the Units are traded on a Cum-Rights basis

         R:   Subscription price per new Unit as specified in the Rights Offer plus an amount
              equal to any distributions or other benefits foregone to exercise the Rights

         M:   Number of new Unit(s) (whether a whole or a fraction) per existing Unit each holder
              thereof is entitled to subscribe

         Provided that if the adjustment to be made would result in the Entitlement being
         changed by one per cent. or less, then no adjustment shall be made to the Entitlement.
         In addition, if adjustment is to be made to the Entitlement, the Issuer shall adjust the
         Strike Price and the Call Price (each of which shall be rounded to the nearest Hong
         Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the reciprocal of
         the Adjustment Factor means one divided by the relevant Adjustment Factor. This
         adjustment to the Strike Price and the Call Price shall take effect on the Rights Issue
         Adjustment Date.


                                             − 159 −
    For the purposes of these Product Conditions:

    “Rights” means the right(s) attached to each existing Unit or needed to acquire one new
    Unit (as the case may be) which are given to the holders of existing Units to subscribe
    at a fixed subscription price for new Units pursuant to the Rights Offer (whether by the
    exercise of one Right, a part of a Right or an aggregate number of Rights).

5.2 Bonus Issues

    If and whenever the Trust shall make an issue of Units credited as fully paid to the
    holders of Units generally (other than pursuant to a scrip distribution or similar scheme
    for the time being operated by the Trust or otherwise in lieu of a cash distribution and
    without any payment or other consideration being made or given by such holders) (a
    “Bonus Issue”) the Entitlement shall be adjusted on the Trading Day on which trading
    in the Units becomes ex-entitlement (“Bonus Issues Adjustment Date”) in accordance
    with the following formula:

                         Adjusted Entitlement = Adjustment Factor x E

    Where:

    Adjustment Factor = 1 + N

    E:    The existing Entitlement immediately prior to the Bonus Issue

    N:    Number of additional Units (whether a whole or a fraction) received by a holder of
          existing Units for each Unit held prior to the Bonus Issue

    Provided that if the adjustment to be made would result in the Entitlement being
    changed by one per cent. or less, then no adjustment shall be made to the Entitlement.
    In addition, if adjustment is to be made to the Entitlement, the Issuer shall adjust the
    Strike Price and the Call Price (each of which shall be rounded to the nearest Hong
    Kong dollar 0.001) by the reciprocal of the Adjustment Factor, where the reciprocal of
    the Adjustment Factor means one divided by the relevant Adjustment Factor. This
    adjustment to the Strike Price and the Call Price shall take effect on the Bonus Issue
    Adjustment Date.

5.3 Subdivisions or Consolidations

    If and whenever the Trust shall subdivide its Units or any class of its outstanding Units
    into a greater number of units (a “Subdivision”) or consolidate the Units or any class
    of its outstanding Units into a smaller number of units (a “Consolidation”), then:

    (a)   in the case of a Subdivision, the Entitlement in effect immediately prior thereto
          shall be increased whereas the Strike Price and the Call Price (which shall be
          rounded to the nearest Hong Kong dollar 0.001) shall be decreased in the same
          ratio as the Subdivision; and

    (b)   in the case of a Consolidation, the Entitlement in effect immediately prior thereto
          shall be decreased whereas the Strike Price and the Call Price (which shall be
          rounded to the nearest Hong Kong dollar 0.001) shall be increased in the same
          ratio as the Consolidation,


                                       − 160 −
    in each case on the day on which the Subdivision or Consolidation (as the case may be)
    shall have taken effect.

5.4 Merger or Consolidation

    If it is announced that the Trust is to or may merge or consolidate with or into any other
    trust or consolidate with or into any other trust or corporation (including becoming, by
    agreement or otherwise, controlled by any person or corporation) (except where the
    Trust is the surviving entity in a merger) or that it is to or may sell or transfer all or
    substantially all of its assets, the rights attaching to the CBBCs may in the absolute
    discretion of the Issuer be amended no later than the Trading Day preceding the
    consummation of such merger, consolidation, sale or transfer (each a “Restructuring
    Event”) (as determined by the Issuer in its absolute discretion).

    The rights attaching to the CBBCs after the adjustment shall, after such Restructuring
    Event, relate to the number of units of the trust(s) resulting from or surviving such
    Restructuring Event or other securities (“Substituted Securities”) and/or cash offered
    in substitution for the affected Units, as the case may be, to which the holder of such
    number of Units to which the CBBCs related immediately before such Restructuring
    Event would have been entitled upon such Restructuring Event. Thereafter the
    provisions hereof shall apply to such Substituted Securities, provided that any
    Substituted Securities may, in the absolute discretion of the Issuer, be deemed to be
    replaced by an amount in Hong Kong dollars equal to the market value or, if no market
    value is available, fair value, of such Substituted Securities in each case as determined
    by the Issuer as soon as practicable after such Restructuring Event is effected.

    For the avoidance of doubt, any remaining Units shall not be affected by this Product
    Condition 5.4 and, where cash is offered in substitution for Units or is deemed to replace
    Substituted Securities as described above, references in these Product Conditions to
    the Units shall include any such cash.

5.5 Cash Distributions

    No adjustment shall be made for an ordinary cash distribution (whether or not it is
    offered with a script alternative) (“Ordinary Distribution”). For any other forms of cash
    distribution (“Cash Distribution”) announced by the Trust, such as a cash bonus,
    special distribution or extraordinary distribution, no adjustment shall be made unless
    the value of the Cash Distribution accounts for 2 per cent. or more of the Unit’s closing
    price on the day of announcement by the Trust.

    If and whenever the Trust shall make a Cash Distribution credited as fully paid to the
    holders of Units generally, the Call Price and the Strike Price shall be adjusted to take
    effect on the Trading Day on which trading in the Units becomes ex-entitlement (“Cash
    Distribution Adjustment Date”) in accordance with the following formula:

                         Adjusted Entitlement = Adjustment Factor x E

    Where:

                               S – OD
    Adjustment Factor =
                            S – OD – CD



                                       − 161 −
    E:   The existing Entitlement immediately prior to the Cash Distribution


    S:   The closing price of the existing Unit as derived from the daily quotation sheet of
         the Stock Exchange on the Trading Day immediately preceding the Cash
         Distribution Adjustment Date


    CD: The amount of Cash Distribution per Unit


    OD: The amount of Ordinary Distribution per Unit, provided that the Ordinary
        Distribution and the Cash Distribution shall have the same ex-entitlement date. For
        the avoidance of doubt, the OD shall be deemed to be zero if the ex-entitlement
        dates of the relevant Ordinary Distribution and Cash Distribution are different


    In addition, the Issuer shall adjust the Strike Price and the Call Price (each of which
    shall be rounded to the nearest Hong Kong dollar 0.001) by the reciprocal of the
    Adjustment Factor, where the reciprocal of the Adjustment Factor means one divided by
    the relevant Adjustment Factor. The adjustment to the Strike Price and the Call Price
    shall take effect on the Cash Distribution Adjustment Date.


5.6 Other Adjustments


    Except as provided in General Condition 6, Product Condition 2, Product Condition 5
    and/or Product Condition 7, adjustments or amendments will not be made in any other
    circumstances, subject to the right reserved by the Issuer (such right to be exercised in
    the Issuer’s sole and unfettered discretion and without any obligation whatsoever) to
    make such adjustments and amendments as it believes appropriate in circumstances
    where an event or events (including the events as contemplated in Product Conditions
    5.1 to 5.5) occur which it believes in its sole discretion and irrespective of, in
    substitution for, or in addition to provisions contemplated in Product Conditions 5.1 to
    5.5 should, in the context of the issue of the CBBCs and the obligations of the Issuer,
    give rise to such adjustment or, as the case may be, amendment provided that such
    adjustment or, as the case may be, amendment (a) is considered by the Issuer not to
    be materially prejudicial to the Holders generally (without considering the
    circumstances of any individual Holder or the tax or other consequences of such
    adjustment or amendment in any particular jurisdiction); or (b) is otherwise considered
    by the Issuer to be appropriate and such adjustment or amendment is approved by the
    Stock Exchange.


5.7 Notice of Determinations


    All determinations made by the Issuer pursuant hereto shall be conclusive and binding
    on the Holders. The Issuer will give, or procure that there is given, notice as soon as
    practicable of any adjustment or amendment and of the date from which such
    adjustment or amendment is effective by publication in accordance with General
    Condition 7.




                                       − 162 −
6.   Termination or Liquidation


     6.1 In the event of a Termination or the liquidation or dissolution of the trustee of the Trust
         (including any successor trustee appointed from time to time) (“Trustee”) (in its capacity
         as trustee of the Trust) or the appointment of a liquidator, receiver or administrator or
         analogous person under any applicable law in respect of the whole or substantially the
         whole of the Trustee’s undertaking, property or assets, all unexercised CBBCs will
         lapse and shall cease to be valid for any purpose. In the case of a Termination, the
         unexercised CBBCs will lapse and shall cease to be valid on the effective date of the
         Termination, in the case of voluntary liquidation, on the effective date of the relevant
         resolution and, in the case of an involuntary liquidation or dissolution, on the date of the
         relevant court order or, in the case of the appointment of a liquidator or receiver or
         administrator or analogous person under any applicable law in respect of the whole or
         substantially the whole of its undertaking, property or assets, on the date when such
         appointment is effective but subject (in any such case) to any contrary mandatory
         requirement of law.


     6.2 For the purpose of this Product Condition 6, “Termination” means (a) the Trust is
         terminated, or the Trustee or the manager of the Trust (including any successor
         manager appointed from time to time) (“Manager”) is required to terminate the Trust
         under the trust deed (“Trust Deed”) constituting the Trust or applicable law, or the
         termination of the Trust commences; (b) the Trust is held or is conceded by the Trustee
         or the Manager not to have been constituted or to have been imperfectly constituted; (c)
         the Trustee ceases to be authorised under the Trust to hold the property of the Trust in
         its name and perform its obligations under the Trust Deed; or (d) the Trust ceases to be
         authorised as an authorised collective investment scheme under the Securities and
         Futures Ordinance (Cap 571, The Laws of Hong Kong).


7.   Delisting


     7.1 Adjustments following delisting


          If at any time the Units cease to be listed on the Stock Exchange, the Issuer shall give
          effect to the General Conditions and these Product Conditions in such manner and
          make such adjustments to the rights attaching to the CBBCs as it shall, in its absolute
          discretion, consider appropriate to ensure, so far as it is reasonably able to do so, that
          the interests of the Holders generally are not materially prejudiced as a consequence
          of such delisting (without considering the individual circumstances of any Holder or the
          tax or other consequences that may result in any particular jurisdiction).


     7.2 Listing on another exchange


          Without prejudice to the generality of Product Condition 7.1, where the Units are, or,
          upon the delisting, become, listed on any other stock exchange, the General Conditions
          and these Product Conditions may, in the absolute discretion of the Issuer, be amended
          to the extent necessary to allow for the substitution of that other stock exchange in
          place of the Stock Exchange and the Issuer may, without the consent of the Holders,
          make such adjustments to the entitlements of Holders on exercise (including, if
          appropriate, by converting foreign currency amounts at prevailing market rates into
          Hong Kong currency) as may be appropriate in the circumstances.


                                              − 163 −
7.3 Adjustments binding


    The Issuer shall determine, in its absolute discretion, any adjustment or amendment
    and its determination shall be conclusive and binding on the Holders save in the case
    of manifest error. Notice of any adjustments or amendments shall be given to the
    Holders in accordance with General Condition 7, as soon as practicable after they are
    determined.




                                     − 164 −
     APPENDIX 4 — OUR GENERAL INFORMATION EXTRACTED FROM
          CREDIT SUISSE GROUP AG ANNUAL REPORT 2010

      We are a wholly owned subsidiary of Credit Suisse Group AG. We have extracted the
following sections from the Credit Suisse Group AG annual report 2010 in this appendix 4.
References to the following page numbers in this appendix 4 are to the pages in the Credit Suisse
Group AG annual report 2010 and not to the pages in this document.


1    Risk management (pages 119 – 140);


2    Board of Directors (pages 153 – 168);


3    Executive Board (pages 169 – 177);


4    Additional information (pages 178 – 180); and


5    Compensation (pages 181 – 210).




                                             − 165 −
                                                                         Treasury, Risk, Balance sheet and Off-balance sheet                119
                                                                                                                     Risk management




Risk management
During 2010, our overall position risk decreased 10% compared to 2009. Excluding the US dollar translation
impact, position risk decreased 2%. We received approval from FINMA to implement a revised VaR
methodology that is more responsive to short-term market volatility. Under this revised methodology, average
risk management VaR for our trading books decreased 20% to CHF 110 million, primarily reflecting a decline
in market volatility, and period-end risk management VaR decreased 16% to CHF 87 million compared to
2009.


New regulations in the banking industry                               addition, we expect strengthened capital requirements for
                                                                      q OTC derivatives to increase the incentives to move such
Government leaders and regulators continued to focus on               exposures to centralized exchange counterparties. We expect
reform of the financial services industry, including capital,         complex, risk-based techniques and measures in the proposed
leverage and liquidity requirements, changes in compensation          regulatory framework to result in increased risk management
practices and systemic risk. The G-20 pledged to increase             and information technology costs and resources.
regulation and improve coordination of oversight of banks and
financial institutions. For information on the liquidity principles
agreed with the Swiss Financial Market Supervisory Authority          Risk management oversight
(FINMA), the liquidity and capital standards under the Basel
Committee on Banking Supervision (BCBS) Basel III frame-              Risk governance
work, the report of the Swiss Expert Commission on “Too Big           The prudent taking of risk in line with our strategic priorities is
to Fail” issues relating to big banks, and the revisions to the       fundamental to our business as a leading global bank. To meet
q Basel II market risk framework (Basel II.5), refer to Treasury      the challenges in a fast-changing industry with new market
management – Regulatory capital developments and propos-              players and innovative and complex products, we continuously
als. For information on other regulatory developments and pro-        strengthen our risk function, which is independent of, but
posals, refer to I – Information on the company – Regulation          closely interacts with, the trading functions to ensure the
and supervision.                                                      appropriate flow of information. Our risk management frame-
    We implemented new risk measurement models, including             work is based on transparency, management accountability
an q incremental risk charge and q stressed VaR, to meet the          and independent oversight. As a consequence of the
Basel II.5 market risk framework for FINMA regulatory capital         increased complexity of risks, we have defined our risk per-
purposes effective January 1, 2011. The incremental risk              spective broadly. Risk management plays an important role in
charge is a regulatory capital charge for default and migration       our business planning process and is strongly supported by
risk on positions in the trading books and intended to comple-        senior management and the Board of Directors (Board). The
ment additional standards being applied to the VaR modelling          primary objectives of risk management are to protect our
framework, including stressed VaR. Stressed VaR replicates a          financial strength and reputation, while ensuring that capital is
VaR calculation on the Group’s current portfolio taking into          well deployed to support business activities and grow share-
account a one-year observation period relating to significant         holder value. Although we have implemented comprehensive
financial stress and helps reducing the pro-cyclicality of the        risk management processes and sophisticated control sys-
minimum capital requirements for market risk. We continued to         tems, we work to limit the impact of negative developments by
manage risks in a controlled and disciplined manner in line           carefully managing concentrations of risks. Further, the busi-
with the Group’s strategy.                                            ness mix of Private Banking, Investment Banking and Asset
    The changes in regulatory standards are also likely to have       Management provides a certain amount of risk diversification.
an impact on bank risk profiles. In particular, we expect the
cost of holding credit exposure in the trading book will rise,        Risk organization
particularly for securitization positions, which will continue to     Risks arise in all of our business activities and cannot be com-
increase the attractiveness of client-focused intermediation          pletely eliminated, however, we work to manage risk in our
businesses over origination and warehousing activities. In            internal control environment. Our risk management organiza-
120




      tion reflects the specific nature of the various risks in order to                           Overall risk limits are set by the Board and its Risk Committee.
      ensure that risks are managed within limits set in a transparent                             On a monthly basis, CARMC reviews risk exposures, concen-
      and timely manner. At the level of the Board, this includes the                              tration risks and risk-related activities. CARMC is responsible
      following responsibilities:                                                                  for supervising and directing our risk profile on a consolidated
      p Group/Bank Board: responsible to shareholders for the                                      basis, recommending risk limits to the Board and its Risk
          strategic direction, supervision and control of the Group                                Committee and for establishing and allocating risk limits within
          and for defining our overall tolerance for risk;                                         the various businesses. CARMC meetings focus on the follow-
      p Risk Committee: responsible for assisting the Board in ful-                                ing three areas on a rotating basis: asset and liability manage-
          filling their oversight responsibilities by providing guidance                           ment/liquidity, market and credit risk and operational risk/legal
          regarding risk governance and the development of the risk                                and compliance.
          profile and capital adequacy, including the regular review                                   Committees are implemented at a senior management level
          of major risk exposures and the approval of overall risk lim-                            to support risk management. The Risk Processes and Stan-
          its; and                                                                                 dards Committee is responsible for establishing and approving
      p Audit Committee: responsible for assisting the Board in                                    standards regarding risk management and risk measurement,
          fulfilling their oversight responsibilities by monitoring man-                           including methodology and parameters. The Credit Portfolio and
          agement’s approach with respect to financial reporting,                                  Provisions Review Committee reviews the quality of the credit
          internal controls, accounting and legal and regulatory com-                              portfolio with a focus on the development of impaired assets
          pliance. Additionally, the Audit Committee is responsible                                and the assessment of related provisions and valuation
          for monitoring the independence and the performance of                                   allowances. The Reputational Risk and Sustainability Commit-
          the internal and external auditors.                                                      tee sets policies, and reviews processes and significant cases
                                                                                                   relating to reputational risks. There are also divisional risk man-
                                                                                                   agement committees.

      Key management bodies and committees


          Group / Bank

                                                                               Board of Directors
                                                                        Audit Committee Risk Committee

                                                                                 Chief Executive Officer
                                                                                    Executive Board

                                                      Capital Allocation & Risk Management Committee (CARMC)

            ALM1 / Capital / Funding / Liquidity                                        Position Risks                                     OpRisk / LCD2 / BCM3

                        Risk Processes &                                        Credit Portfolio &                                         Reputational Risk &
                      Standards Committee                                 Provisions Review Committee                                    Sustainability Committee


          Divisions


                      Private Banking RMC4                                  Investment Banking RMC4                                      Asset Management RMC4

      1                                    2                                      3                                    4
          Asset and Liability Management       Legal and Compliance Department        Business Continuity Management       Risk Management Committee




      The risk committees are further supported by Treasury, which                                    The risk management function reports to the CRO, who is
      is responsible for the management of our balance sheet, cap-                                 independent of the business and is a member of the Executive
      ital management, liquidity and related hedging policies.                                     Board. In 2010, the function covered:
                                                                       Treasury, Risk, Balance sheet and Off-balance sheet               121
                                                                                                                  Risk management




p   Strategic Risk Management (SRM)                                 quantifiable, but are challenging in complexity and scale,
p   Risk Analytics and Reporting (RAR)                              especially when aggregated across all positions and types of
p   Credit Risk Management (CRM)                                    financial instruments. Additionally, the traditional boundaries
p   Bank Operational Risk Oversight (BORO)                          between market risks and credit risk have become blurred. For
p   Business Continuity Management                                  operational risk management, we have primarily set up
p   Reputational Risk Management                                    processes on Group, divisional and regional levels. Liquidity
                                                                    management is centralized with Treasury.
The risk management function is responsible for providing risk          Information required under Pillar 3 related to risk is avail-
management oversight and establishing an organizational basis       able on our website at www.credit-suisse.com/pillar3.
to manage all risk management matters through four primary
risk functions: SRM assesses the Group’s overall risk profile       Risk limits
on a strategic basis, recommending corrective action where          A sound system of risk limits is fundamental to effective risk
necessary, and is also responsible for market risk manage-          management. The limits define our maximum balance sheet
ment including measurement and limits; RAR is responsible for       and off-balance sheet exposure given the market environment,
risk analytics, reporting, systems implementation and policies;     business strategy and financial resources available to absorb
CRM is responsible for approving credit limits, monitoring and      losses.
managing individual exposures and assessing and managing                We use an economic capital limit structure to manage
the quality of credit portfolios and allowances; and BORO acts      overall risk taking. The overall risk limits for the Group are set
as the central hub for the divisional operational risk functions.   by the Board and its Risk Committee and are binding. Any
The risk management function also addresses critical risk           excess of these limits will result in immediate notification to
areas such as business continuity and reputational risk man-        the Chairman of the Board’s Risk Committee and the CEO of
agement.                                                            the Group, and written notification to the full Board at its next
                                                                    meeting. Following notification, the CRO can approve posi-
Risk types                                                          tions that exceed the Board limits by no more than an
Within our risk framework, we have defined the following types      approved percentage with any such approval being reported to
of risk:                                                            the full Board. Positions that exceed the Board limits by more
                                                                    than such approved percentage can only be approved by the
Management risks:                                                   CRO and the full Board acting jointly. In 2010 and 2009, no
p Strategy risk: outcome of strategic decisions or develop-         Board limits were exceeded.
  ments; and                                                            In the context of the overall risk appetite of the Group, as
p Reputational risk: damage to our standing in the market.          defined by the limits set by the Board and its Risk Committee,
                                                                    CARMC is responsible for setting divisional risk limits and
Chosen risks:                                                       more specific limits deemed necessary to control the concen-
p Market risk: changes in market factors such as prices,            tration of risk within individual lines of business. For this pur-
   volatilities and correlations;                                   pose, CARMC uses a detailed framework of more than 100
p Credit risk: changes in the creditworthiness of other enti-       individual risk limits designed to control risk taking at a granu-
   ties; and                                                        lar level by individual businesses and in aggregate. Limit
p Expense risk: difference between operating expenses and           measures used include VaR, economic capital, exposure, risk
   income in a crisis.                                              sensitivity and scenario analysis. The framework encompasses
                                                                    specific limits on a large number of different product and risk
Consequential risks:                                                type concentrations. For example, there are consolidated con-
p Operational risk: inadequate or failed internal processes,        trols over trading exposures, the mismatch of interest-earning
   people and systems or external events; and                       assets and interest-bearing liabilities, private equity and seed
p Liquidity risk: inability to fund assets or meet obligations at   money and emerging market country exposures. Risk limits
   a reasonable price.                                              allocated to lower organizational levels within the businesses
                                                                    also include a system of individual counterparty credit limits.
Management risks are difficult to quantify. While management        CARMC limits are binding and generally set at a tight level to
of strategy risk is at the Board and Executive Board level, a       ensure that any meaningful increase in risk exposures is
process has been implemented to globally capture and man-           promptly escalated. The head of SRM for the relevant division
age reputational risk. Chosen risks are, in general, highly         or certain other members of senior management have the
122




      authority to temporarily increase the CARMC limits by an            management purposes, including emerging markets and pri-
      approved percentage for a period not to exceed 90 days. Any         vate banking corporate & retail lending position risks. For
      CARMC limit excess is subject to a formal escalation proce-         emerging market exposures, we made fundamental changes
      dure and must be remediated or expressly approved by senior         to the position risk modeling. Previously, all emerging market
      management. Senior management approval is valid for a stan-         exposures and associated risks were modeled in a separate
      dard period of ten days (or fewer than ten days for certain limit   emerging markets risk category capturing market risk and
      types) and approval has to be renewed for additional standard       country event risk. We now calculate and report these risks in
      periods if an excess is not remediated within the initial stan-     their respective position risk categories (e.g., fixed income
      dard period. The majority of these limits are monitored on a        trading). We continue to separately report position risk for
      daily basis. Limits for which the inherent calculation time is      emerging markets, which captures country event risks, such
      longer (such as those for economic capital) are monitored on a      as sovereign default risk. The changes to private banking cor-
      weekly basis. A smaller sub-set of limits relating to exposures     porate & retail lending reflected an increase in the granularity
      for which the risk profile changes more infrequently (for exam-     of the credit parameters (e.g., default rate volatilities) and
      ple, those relating to illiquid investments) is monitored on a      increases to the severity of spread shocks for loans, reflecting
      monthly basis. In 2010, over 90% of CARMC limit excesses            observations over the market crisis. Prior-period balances have
      were resolved within the approved standard period.                  been restated for methodology changes in order to show
          In December 2010, we revised our limit framework with           meaningful trends. The total impact of 2010 methodology
      the objective of further strengthening the process around limit     changes on year-end 2009 position risk was an increase of
      management. The new process simplifies the ownership and            CHF 404 million, or 3%.
      structure of the limit framework, further develops the policy
      around temporary limit increases and expands formal escala-         Limit management
      tion procedures for significant limit excesses.                     Position risk is managed through a system of integrated risk
                                                                          limits to control the range of risks inherent in business activi-
                                                                          ties. The limit structure restricts overall risk-taking capacity
      Economic capital and position risk                                  and triggers senior management risk discussions in the event
                                                                          of substantial changes in our overall risk profile. The calibra-
      Concept                                                             tion of limits is performed in conjunction with the annual plan-
      Economic capital is our core Group-wide risk management             ning process in order to ensure our risk appetite is in line with
      tool. It represents good current market practice for measuring      our financial resources.
      and reporting all quantifiable risks and measures risk in terms         The Board and senior management are regularly provided
      of economic realities rather than regulatory or accounting          with economic capital results, trends and ratios to provide risk
      rules. It also provides a common terminology for risk across        transparency and facilitate the decision-making process of the
      the Group, which increases risk transparency and improves           firm.
      knowledge sharing. The development and usage of economic
      capital methodologies and models have evolved over time             Key position risk trends
      without a standardized approach within the industry, therefore      Compared to 2009, position risk for risk management pur-
      comparisons across firms may not be meaningful.                     poses decreased 10%. Excluding the US dollar translation
          q Position risk, which is a component of the economic cap-      impact, position risk decreased 2%. In addition to the US dol-
      ital framework, is used to assess, monitor and report risk          lar translation impact, fixed income trading decreased follow-
      exposures throughout the Group. Position risk is the level of       ing a reduction in credit spread exposures, partially offset by
      unexpected loss in economic value on our portfolio of posi-         higher foreign exchange exposures. Equity trading & invest-
      tions over a one-year horizon which is exceeded with a given        ments decreased mainly due to lower traded equity derivative
      small probability (1% for risk management purposes; 0.03%           exposures, and private banking corporate & retail lending
      for capital management purposes). For further details of the        declined due to updated loan default and recovery parameters
      economic capital framework, refer to Treasury management –          reflecting improved economic conditions. These reductions
      Economic capital.                                                   were partially offset by increases in real estate & structured
          We regularly review the economic capital methodology in         assets, due to higher q RMBS exposures, international lending
      order to ensure that the model remains relevant as markets          & counterparty exposures (excluding the US dollar translation
      and business strategies evolve. In 2010, we made a number           impact), due to higher loan and derivative exposures in Invest-
      of enhancements to the position risk methodology for risk           ment Banking, and emerging markets country event risk, due
                                                                                                   Treasury, Risk, Balance sheet and Off-balance sheet                                        123
                                                                                                                                                              Risk management




to higher foreign exchange exposures in Latin America and                                     on the hedges which offset losses or gains on the portfolios
higher loan exposures in Asia.                                                                they were designated to hedge. Due to the varying nature and
     As part of our overall risk management, we hold a portfolio                              structure of hedges, these gains or losses may not wholly off-
of hedges. Hedges are impacted by market movements, simi-                                     set the losses or gains on the portfolio.
lar to other trading securities, and may result in gains or losses


Group position risk

                                                                                                                                                     end of                   % change

                                                                                                                         2010          2009          2008        10 / 09       09 / 08

Position risk (CHF million)
Fixed income trading 1                                                                                                  2,424         3,090          2,359           (22)               31
Equity trading & investments                                                                                            2,363         2,839          2,902           (17)               (2)
Private banking corporate & retail lending                                                                              2,072         2,284          2,253             (9)               1
International lending & counterparty exposures                                                                          4,255         4,512          4,765             (6)              (5)
Emerging markets country event risk                                                                                       632           512            831             23           (38)
Real estate & structured assets 2                                                                                       2,597         2,473          2,841              5           (13)
Simple sum across risk categories                                                                                     14,343         15,710        15,951              (9)              (2)
Diversification benefit 3                                                                                             (2,692)        (2,803)       (2,891)             (4)              (3)
Position risk (99% confidence level
for risk management purposes)                                                                                         11,651         12,907        13,060            (10)               (1)

Position risk (99.97% confidence level
for capital management purposes)                                                                                      20,783         22,921        23,807              (9)              (4)

Prior balances have been restated for methodology changes in order to show meaningful trends.
1
  This category comprises fixed income trading, foreign exchange and commodity exposures. 2 This category comprises commercial and residential real estate (including RMBS and
CMBS), ABS exposure, real estate acquired at auction and real estate fund investments. 3 Reflects the net difference between the sum of the position risk categories and the position
risk on the total portfolio.



                                                                                              closure purposes. The principal measurement methodologies
Market risk
                                                                                              are VaR and scenario analysis. Additionally, our market risk
                                                                                              exposures are reflected in our economic capital calculations.
Market risk is the risk of loss arising from adverse changes in
                                                                                              The risk management techniques and policies are regularly
interest rates, foreign exchange rates, equity prices, commod-
                                                                                              reviewed to ensure they remain appropriate.
ity prices and other relevant parameters, such as market
volatility. We define our market risk as potential changes in the
                                                                                              VaR
q fair value of financial instruments in response to market
                                                                                              q VaR measures the potential loss in fair value of financial
movements. A typical transaction may be exposed to a number
                                                                                              instruments due to adverse market movements over a defined
of different market risks.
                                                                                              time horizon at a specified confidence level. VaR as a concept
    We devote considerable resources to ensure that market
                                                                                              is applicable for all financial risk types with valid regular price
risk is comprehensively captured, accurately modeled and
                                                                                              histories. Positions are aggregated by risk type rather than by
reported and effectively managed. Trading and non-trading
                                                                                              product. For example, interest rate risk includes risk arising
portfolios are managed at various organizational levels, from
                                                                                              from interest rate, foreign exchange, equity and commodity
the overall risk positions at the Group level down to specific
                                                                                              options, money market and swap transactions and bonds. The
portfolios. We use market risk measurement and management
                                                                                              use of VaR allows the comparison of risk in different busi-
methods designed to meet or exceed industry standards.
                                                                                              nesses, such as fixed income and equity, and also provides a
These include general tools capable of calculating comparable
                                                                                              means of aggregating and netting a variety of positions within
exposures across our many activities and focused tools that
                                                                                              a portfolio to reflect actual correlations and offsets between
can specifically model unique characteristics of certain instru-
                                                                                              different assets.
ments or portfolios. The tools are used for internal market risk
                                                                                                  Historical financial market rates, prices and volatilities
management, internal market risk reporting and external dis-
                                                                                              serve as the basis for the statistical VaR model underlying the
124




      potential loss estimation. We use a ten-day holding period and                 and methodologies, we revised the scaled VaR methodology
      a confidence level of 99% to model the risk in our trading                     for q regulatory VaR and implemented a new scaled q risk
      portfolios. These assumptions are compliant with the stan-                     management VaR measure in the first quarter of 2010, follow-
      dards published by the BCBS and other related international                    ing FINMA approval. VaR has been restated for prior periods
      standards for market risk management. For some purposes,                       to show meaningful trends.
      such as q backtesting, disclosure and benchmarking with                            We have approval from FINMA, as well as from certain
      competitors, the resulting VaR figures are calculated to a one-                other regulators of our subsidiaries, to use our regulatory VaR
      day holding period level or scaled down.                                       model in the calculation of trading book market risk capital
          We use a historical simulation model for the majority of risk              requirements. We continue to receive regulatory approval for
      types and businesses within our trading portfolios. Where                      ongoing enhancements to the methodology, and the model is
      insufficient data is available for such an approach, an                        subject to regular reviews by regulators. In 2008, the signifi-
      “extreme-move” methodology is used. The model is based on                      cant market turmoil gave rise to many VaR model backtesting
      the profit and loss distribution resulting from historical changes             exceptions; since then we have made numerous enhance-
      in market rates, prices and volatilities applied to evaluate the               ments to the VaR methodology to further improve the model
      portfolio.                                                                     accuracy and performance.
          To ensure the VaR model is responsive in times of market                       For both risk management VaR and regulatory VaR, we
      volatility, we calculate a q scaled VaR, which uses a scaling                  present one-day, 99% VaR, which is ten-day VaR adjusted to
      technique that adjusts the VaR when short-term market volatil-                 a one-day holding period based on a 99% confidence level.
      ity is different than the long-term volatility in the three-year               This means there is a 1-in-100 chance of incurring a daily
      historical dataset. This results in a more responsive VaR                      mark-to-market trading loss at least as large as the reported
      model, as the impact of changes in overall market volatility is                VaR. In order to show the aggregate market risk in our trading
      reflected almost immediately in the scaled VaR model. As part                  books, the chart entitled “Daily VaR” shows the trading-related
      of the ongoing review to improve risk management approaches                    market risk on a consolidated basis.

      Daily VaR

      CHF million

      250


      200


      150


      100


       50


        0

                               1Q10                                      2Q10                      3Q10                           4Q10

         One-day risk management VaR (99%)            One-day regulatory VaR (99%)
      Excludes risks associated with counterparty and own credit exposures




          The VaR model uses assumptions and estimates that we                       p VaR relies on historical data to estimate future changes in
      believe are reasonable, but VaR only quantifies the potential                    market conditions, which may not capture all potential
      loss on a portfolio under normal market conditions. Other risk                   future outcomes, particularly where there are significant
      measures, such as scenario analysis, are used to estimate                        changes in market conditions, such as increases in volatil-
      losses associated with unusually severe market movements.                        ities;
      The main assumptions and limitations of VaR as a risk meas-
      ure are:
                                                                      Treasury, Risk, Balance sheet and Off-balance sheet               125
                                                                                                                 Risk management




p Although VaR captures the relationships between risk fac-        ing explanations as an integral part of the risk management
  tors, these relationships may be affected by stressed mar-       framework and to support risk appetite decisions.
  ket conditions;                                                      The scenario analysis framework is periodically reviewed
p VaR provides an estimate of losses at a 99% confidence           and expanded to ensure that it remains relevant to evolving
  level, which means that it does not provide any information      portfolio composition and market conditions. Although back-
  on the size of losses that could occur beyond that confi-        testing of existing scenarios applied across the Group indi-
  dence level;                                                     cated that the scenario analysis framework, which was recali-
p VaR is based on either a ten-day (for internal risk manage-      brated during 2008 and 2009, was still relevant, we
  ment and regulatory capital purposes) or one-day (for            implemented several new business level scenarios during
  backtesting and disclosure purposes) holding period. This        2010 in response to the evolution of our portfolio composition
  assumes that risks can be either sold or hedged over the         and market developments.
  holding period, which may not be possible for all types of
  exposure, particularly during periods of market illiquidity or   Trading portfolios
  turbulence; and                                                  Risk measurement and management
p VaR is calculated using positions held at the end of each        We assume market risk in our trading portfolios primarily
  business day and does not include intra-day exposures.           through the trading activities of the Investment Banking seg-
                                                                   ment. Our other segments also engage in trading activities,
Scenario analysis                                                  but to a much lesser extent.
We regularly perform scenario analysis to estimate the loss            For the purposes of this disclosure, VaR is used to quantify
that could arise from extreme, but plausible, stress events in     market risk in the trading portfolio, which includes those finan-
the economy or in financial markets, by applying predefined        cial instruments treated as part of the trading book for regula-
scenarios to the relevant portfolios. Scenarios are typically      tory capital purposes. This classification of assets as trading is
defined in light of past economic or financial market stress       done for purposes of analyzing our market risk exposure, not
periods, however, as past events rarely recur in exactly the       for financial statement purposes.
same way, we also apply business expertise to select the most          We are active in most of the principal trading markets of
meaningful scenarios and to assess the scenario results in         the world, using the majority of common trading and hedging
light of current economic and market conditions. In addition to    products, including q derivatives such as swaps, futures,
scenarios built around historically observed events, we also       options and structured products (some of which are cus-
consider the impact of hypothetical adverse events. This is        tomized transactions using combinations of derivatives and
done in collaboration with our research functions based on the     executed to meet specific client or proprietary needs). As a
Group’s view of possible macroeconomic developments.               result of our broad participation in products and markets, our
    Key scenarios include significant movements in credit          trading strategies are correspondingly diverse and exposures
spreads, interest rates, equity and commodity prices and for-      are generally spread across a range of risks and locations.
eign exchange rates, as well as adverse changes in counter-
party default and recovery rates. The majority of scenario         Development of trading portfolio risks
analysis calculations performed are specifically tailored toward   The table entitled “One-day, 99% VaR” shows our trading-
the risk profile within particular businesses, and limits are      related market risk exposure, as measured by one-day, 99%
established if they are considered the most appropriate con-       VaR. VaR has been calculated using a three-year historical
trol. In addition, to identify areas of risk concentration and     dataset. As we measure trading book VaR for internal risk
potential vulnerability to stress events across the Group, we      management purposes using the US dollar as the base cur-
use a set of scenarios which are consistently applied across all   rency, the VaR figures were translated into Swiss francs using
businesses and assess the impact of significant, simultaneous      daily foreign exchange translation rates. VaR estimates are
movements across a broad range of markets and asset                computed separately for each risk type and for the whole port-
classes. Finally, the scenario analysis framework considers the    folio using the historical simulation methodology. The diversifi-
impact of various scenarios on key capital adequacy measures       cation benefit reflects the net difference between the sum of
such as regulatory capital and economic capital ratios.            the 99th percentile loss for each individual risk type and for
    The Board and senior management are regularly provided         the total portfolio.
with scenario analysis results, trend information and support-
126




      One-day, 99% VaR

                                                                                                                                                                  Risk Management    Regulatory
                                                                                                                                                                              VaR          VaR

                                                                                              Interest rate                                                   Diversi-
                                                                                                          &       Foreign                                     fication
      in / end of                                                                            credit spread      exchange Commodity                Equity      benefit        Total       Total

      2010 (CHF million)
      Average                                                                                          122              19             14             24         (69)         110         142
                                                                                                                                                                         1
      Minimum                                                                                            81              4              7              9            –          72         103
                                                                                                                                                                         1
      Maximum                                                                                          165              73             28             55            –         157         205
      End of period                                                                                      95             21             10             18         (57)          87         124

      2009 (CHF million)
      Average                                                                                          161              16             21             37         (98)         137         143
                                                                                                                                                                         1
      Minimum                                                                                          104               4             14             16            –          73           80
                                                                                                                                                                         1
      Maximum                                                                                          269              56             33           106             –         269         269
      End of period                                                                                    116               5             17             41         (75)         104         131

      2008 (CHF million)
      Average                                                                                          207              31             50             90        (129)         249         249
                                                                                                                                                                         1
      Minimum                                                                                          135              11             27             44            –         154         154
                                                                                                                                                                         1
      Maximum                                                                                          318              79             84           186             –         372         372
      End of period                                                                                    160              24             27             59         (85)         185         185

      Excludes risks associated with counterparty and own credit exposures.
      1
        As the maximum and minimum occur on different days for different risk types, it is not meaningful to calculate a portfolio diversification benefit.



      Average q risk management VaR in 2010 decreased 20% to                                            daily trading revenues. Actual daily trading revenues are com-
      CHF 110 million from 2009, reflecting a decline in risk due to                                    pared with regulatory VaR calculated using a one-day holding
      a reduction in market volatility. This was partially offset by                                    period. A backtesting exception occurs when the daily loss
      increased risk in support of our client-flow businesses, prima-                                   exceeds the daily VaR estimate.
      rily interest rate, foreign exchange and RMBS activity within                                         We had no backtesting exceptions in 2010 and 2009,
      fixed income following the 2009 risk reduction.                                                   compared with 25 in 2008. The backtesting exceptions in
           Period-end risk management VaR as of December 31,                                            2008 were primarily driven by extreme movements in US mort-
      2010 decreased 16% to CHF 87 million from December 31,                                            gage markets, particularly in the first quarter, coupled with
      2009. The decrease in period-end risk management VaR                                              contagion effects across the wider credit, equity, interest rate
      reflected decreased interest rate and equity exposures com-                                       and foreign exchange markets throughout 2008. The VaR
      bined with a reduction in market volatility.                                                      model is subject to regular assessment and evaluation to seek
           Average q regulatory VaR in 2010 was CHF 142 million, a                                      to maintain accuracy given current market conditions and posi-
      decrease of 1% from December 31, 2009. During 2010, risk                                          tions.
      decreased due to a reduction in market volatility. This was par-                                      The output of our VaR model is used in the calculation of
      tially offset by increased risk in support of our client-flow busi-                               our regulatory capital requirement for market risk. For further
      nesses, primarily interest rate, foreign exchange and q RMBS                                      information, refer to Treasury management – Capital manage-
      activity within fixed income following the 2009 risk reduction.                                   ment – Basel II – Description of regulatory approaches.
           Period-end regulatory VaR as of December 31, 2010                                                The histogram entitled “Actual daily trading revenues” com-
      decreased 5% to CHF 124 million from 2009. The decrease                                           pares the actual trading revenues for 2010 with those for
      in period-end regulatory VaR from 2009 reflected decreased                                        2009 and 2008. The dispersion of trading revenues indicates
      interest rate and equity exposures.                                                               the day-to-day volatility in our trading activities. During 2010,
           Various techniques are used to assess the accuracy of the                                    we had six days of trading losses, compared to 22 days in
      VaR model used for trading portfolios, including backtesting. In                                  2009, with no trading losses exceeding CHF 25 million.
      line with industry practice, we present backtesting using actual
                                                                                                                                                                                                                       Treasury, Risk, Balance sheet and Off-balance sheet                                                                                                                                            127
                                                                                                                                                                                                                                                                                                                                                        Risk management




Actual daily trading revenues

Days      2008                                                                                                                                2009                                                                                                                                2010
100
                                                                                                                                                                                                                                                                                                                                                                 94



  75
                                                                                                                                                                                                                                                                                                                                                       69


                                                                                                                                                                                                                             52
  50      49
                                                                                                                                                                                                                                       44                                                                                                                                  44
                                                                                                                                                                                                                   41
                                                                      35
                                                            29                                                                                                                                                                                    30
                                                                                                                                      28                                                                  27                                                              27                                                                  28
  25                              22                                                     23
                                                                               19                             18                                                                                                                                              17
                                                                                                   13                                                                                           11
                       9                         8                                                                          8                                                                                                                                                                                                                                                         10
                                                                                                                                                                                                                                                                                                                                     6                                                                        6
                                                                                                                                                2          3             3            3                                                                                             0           0            0          0                                                                           3
   0
                                  (75)– (50)




                                                                                                                                                                      (75)– (50)




                                                                                                                                                                                                                                                                                                          (75)– (50)
          < (100)




                                               (50)– (25)




                                                                                                                                              < (100)




                                                                                                                                                                                   (50)– (25)




                                                                                                                                                                                                                                                                                  < (100)




                                                                                                                                                                                                                                                                                                                       (50)– (25)
                    (100)– (75)




                                                                                                                                                        (100)– (75)




                                                                                                                                                                                                                                                                                            (100)– (75)
                                                                               25 – 50




                                                                                                                                                                                                                   25 – 50




                                                                                                                                                                                                                                                                                                                                                       25 – 50
                                                                      0 – 25




                                                                                         50 – 75




                                                                                                              100 – 125

                                                                                                                          125 – 150




                                                                                                                                                                                                          0 – 25




                                                                                                                                                                                                                             50 – 75




                                                                                                                                                                                                                                                  100 – 125

                                                                                                                                                                                                                                                              125 – 150
                                                            (25)– 0




                                                                                                                                                                                                (25)– 0




                                                                                                                                                                                                                                                                                                                                    (25)– 0

                                                                                                                                                                                                                                                                                                                                              0 – 25




                                                                                                                                                                                                                                                                                                                                                                 50 – 75




                                                                                                                                                                                                                                                                                                                                                                                      100 – 125

                                                                                                                                                                                                                                                                                                                                                                                                  125 – 150
                                                                                                                                      > 150




                                                                                                                                                                                                                                                                          > 150




                                                                                                                                                                                                                                                                                                                                                                                                              > 150
                                                                                                   75 – 100




                                                                                                                                                                                                                                       75 – 100




                                                                                                                                                                                                                                                                                                                                                                           75 – 100
CHF
million


Excludes Clariden Leu and Neue Aargauer Bank.

Trading revenues do not include valuation adjustments associated with counterparty and own credit exposures.




Banking portfolios                                                                                                                                                                                            Development of non-trading portfolio risks
Risk measurement and management                                                                                                                                                                               We assume non-trading interest rate risks through interest
The market risks associated with our non-trading portfolios                                                                                                                                                   rate-sensitive positions originated by Private Banking and risk-
primarily relate to asset and liability mismatch exposures,                                                                                                                                                   transferred to Treasury, money market and funding activities
equity instrument participations and investments in bonds and                                                                                                                                                 by Treasury and the deployment of our consolidated equity as
money market instruments. All of our businesses and the Cor-                                                                                                                                                  well as other activities, including market making and trading
porate Center have non-trading portfolios that carry some                                                                                                                                                     activities involving banking book positions at the divisions, pri-
market risks.                                                                                                                                                                                                 marily Investment Banking. Savings accounts and many other
    The market risks associated with the non-trading portfolios                                                                                                                                               retail banking products have no contractual maturity date or
are measured, monitored and limited using several tools,                                                                                                                                                      direct market-linked interest rate and are risk-transferred from
including economic capital, scenario analysis, sensitivity analy-                                                                                                                                             Private Banking to Treasury on a pooled basis using replicating
sis and VaR. For the purpose of this disclosure, the aggre-                                                                                                                                                   portfolios (approximating the re-pricing behavior of the under-
gated market risks associated with our non-trading portfolios                                                                                                                                                 lying product). Treasury and other desks running interest rate
are measured using sensitivity analysis. The sensitivity analysis                                                                                                                                             risk positions actively manage the positions within approved
for the non-trading activities measures the amount of potential                                                                                                                                               limits.
change in economic value resulting from specified hypothetical                                                                                                                                                    The impact of a one basis point parallel increase in yield
shocks to market factors. It is not a measure for the potential                                                                                                                                               curves on the fair value of interest rate-sensitive non-trading
impact on reported earnings in the current period, since the                                                                                                                                                  book positions would have been an increase of CHF 8.5 mil-
non-trading activities generally are not marked to market                                                                                                                                                     lion as of December 31, 2010, compared to an increase of
through earnings.                                                                                                                                                                                             CHF 7.7 million as of December 31, 2009. The increase from
                                                                                                                                                                                                              2009 was mainly due to the issuance of tier 1 capital securi-
                                                                                                                                                                                                              ties secured by participation securities issued by the Bank.
128




      One-basis-point parallel increase in yield curves by currency – non-trading positions

      end of                                                                              CHF       USD        EUR       GBP       Other      Total

      2010 (CHF million)
      Fair value impact of a one-basis-point parallel increase in yield curves             0.1       7.8        0.1       0.1       0.4        8.5

      2009 (CHF million)
      Fair value impact of a one-basis-point parallel increase in yield curves             1.3       6.1      (0.1)       0.2       0.2        7.7




      Non-trading interest rate risk is also assessed using other                points moves in the yield curves (as interest rates are currently
      measures including the potential value change resulting from a             very low, the downward changes are capped to ensure that the
      significant change in yield curves. The following table shows              resulting interest rates remain non-negative).
      the impact of immediate 100 basis points and 200 basis


      Interest rate sensitivity – non-trading positions

      end of                                                                              CHF       USD        EUR       GBP       Other      Total

      2010 (CHF million)
      Increase(+)/decrease(-) in interest rates
        +200 basis points                                                                  27      1,574         4         18        83      1,706
        +100 basis points                                                                  (7)       687        17         14         9        720
        -100 basis points                                                                  49       (642)      (30)      (13)        (3)     (639)
        -200 basis points                                                                  20     (1,375)      (30)       (6)       (71)    (1,462)

      2009 (CHF million)
      Increase(+)/decrease(-) in interest rates
        +200 basis points                                                                 235      1,249       (70)        21        72      1,507
        +100 basis points                                                                 118        617       (18)        15        31        763
        -100 basis points                                                                (155)      (620)      (15)      (20)       (17)     (827)
        -200 basis points                                                                (289)    (1,258)      (37)      (43)       (31)   (1,658)




      As of December 31, 2010, the fair value impact of an adverse                    Our non-trading equity portfolio includes positions in pri-
      200-basis-point move in yield curves was a loss of CHF 1.5                 vate equity, hedge funds, strategic investments and other
      billion compared to a loss of CHF 1.7 billion as of December               instruments managed by Investment Banking. These positions
      31, 2009. This risk is monitored on a daily basis. The monthly             may not be strongly correlated with general equity markets.
      analysis of the potential impact resulting from a significant              Equity risk on non-trading positions is measured using sensi-
      change in yield curves indicated that as of the end of 2010                tivity analysis that estimates the potential change in value
      and 2009, the fair value impact of an adverse 200 basis point              resulting from a 10% decline in the equity markets of devel-
      move in yield curves and adverse interest rate moves cali-                 oped nations and a 20% decline in the equity markets of
      brated to a 1-year holding period with a 99% confidence level              emerging market nations. The estimated impact of this sce-
      in relation to the total eligible regulatory capital, was signifi-         nario would be a decrease of CHF 731 million in the value of
      cantly below the 20% threshold used by regulators to identify              the non-trading portfolio as of December 31, 2010, compared
      banks that potentially run excessive levels of non-trading inter-          to a decrease of CHF 702 million in the value of the non-trad-
      est rate risk.                                                             ing portfolio as of December 31, 2009.
                                                                          Treasury, Risk, Balance sheet and Off-balance sheet               129
                                                                                                                     Risk management




    Commodity risk on non-trading positions is measured using              Our credit risk management framework covers virtually all
sensitivity analysis that estimates the potential change in value      of the credit exposures in the banking business and comprises
resulting from a 20% weakening in commodity prices. The                the following core components:
estimated impact of this scenario would be a decrease of CHF           p individual counterparty rating systems;
11 million in the value of the non-trading portfolio as of             p transaction rating systems;
December 31, 2010, compared to a decrease of CHF 14 mil-               p a counterparty credit limit system;
lion as of December 31, 2009.                                          p country concentration limits;
    For more information, refer to Treasury management –               p risk-based pricing methodologies;
Foreign exchange exposure and interest rate management.                p active credit portfolio management; and
                                                                       p a credit risk provisioning methodology.
Credit and debit value adjustments
VaR excludes the impact of changes in both counterparty and            We employ a set of credit rating models tailored for different
our own credit spreads on derivative products. The estimated           client segments for the purpose of internally rating counter-
sensitivity to a one basis point increase in credit spreads            parties to whom we are exposed to credit risk as the contrac-
(counterparty and our own) on derivatives in Investment Bank-          tual party to a loan, loan commitment or q OTC derivative con-
ing was a CHF 0.6 million loss as of December 31, 2010. In             tract. The models are built from statistical data and then
addition, the estimated sensitivity to a one basis point increase      subject to a thorough business review before implementation.
in our own credit spreads on our fair valued structured notes          Credit rating models are validated independently prior to imple-
was a CHF 5.6 million gain (including the impact of hedges)            mentation and on a regular basis. Relevant quantitative data
as of December 31, 2010.                                               and qualitative factors relating to the counterparty result in the
                                                                       assignment of a credit rating or q probability of default (PD),
                                                                       which measures the counterparty’s risk of default over a one-
Credit risk                                                            year period. To ensure that ratings are consistent and compa-
                                                                       rable across all businesses, we use an internal rating scale,
Credit risk is the possibility of a loss being incurred as the         which we annually review and calibrate to the external rating
result of a borrower or counterparty failing to meet its financial     agencies using the historical PD associated with external rat-
obligations or as a result of deterioration in the credit quality of   ings.
the borrower or counterparty. In the event of a customer                    We assign an estimate of expected loss in the event of a
default, a bank generally incurs a loss equal to the amount            counterparty default based on the structure of each transac-
owed by the debtor, less any recoveries resulting from foreclo-        tion. The counterparty credit rating is used in combination with
sure, liquidation of collateral or the restructuring of the debtor     credit (or credit equivalent) exposure and the q loss given
company. A change in the credit quality of a counterparty has          default (LGD) assumption to estimate the potential credit loss.
an impact on the valuation of assets eligible for q fair value         LGD represents the expected loss on a transaction should
measurement, with valuation changes recorded in the consol-            default occur and takes into account structure, collateral, sen-
idated statements of operations.                                       iority of the claim and, in certain areas, the type of counter-
    Our credit risk is concentrated in Private Banking and             party. We use credit risk estimates consistently for the pur-
Investment Banking. Credit risk exists within lending products,        poses of business and credit portfolio management, credit
commitments and letters of credit, and results from counter-           policy, approval and monitoring, management reporting, risk-
party exposure arising from derivatives, foreign exchange and          adjusted performance measurement, economic capital meas-
other transactions, and may be on or off-balance sheet.                urement and allocation and certain financial accounting pur-
                                                                       poses. The overall internal credit rating system has been
Credit risk management approach                                        approved by FINMA for application under the q Basel II A-IRB
Effective credit risk management is a structured process to            approach. This approach also allows us to price transactions
assess, quantify, price, monitor and manage risk on a consis-          involving credit risk more accurately, based on risk/return esti-
tent basis. This requires careful consideration of proposed            mates.
extensions of credit, the setting of specific limits, monitoring            Credit limits are used to manage individual counterparty
during the life of the exposure, active use of credit mitigation       credit risk. A system of limits is also established to address
tools and a disciplined approach to recognizing credit impair-         concentration risk in the portfolio, including a comprehensive
ment.                                                                  set of country limits and limits for certain products. In addi-
                                                                       tion, credit risk concentration is regularly supervised by credit
130




      and risk management committees, taking current market con-                                   transactions are further classified as potential problem expo-
      ditions and trend analysis into consideration. A rigorous credit                             sure, non-performing exposure or non-interest-earning expo-
      quality review process provides an early identification of possi-                            sure, and the exposures are generally managed within credit
      ble changes in the creditworthiness of clients and includes                                  recovery units. The Credit Portfolio and Provisions Review
      regular asset and collateral quality reviews, business and                                   Committee regularly determines the adequacy of allowances.
      financial statement analysis and relevant economic and indus-
      try studies. Regularly updated watch lists and review meetings                               Credit risk overview
      are used for the identification of counterparties where adverse                              All transactions that are exposed to potential losses due to a
      changes in creditworthiness could occur.                                                     counterparty failing to meet an obligation are subject to credit
          Our regular review of the creditworthiness of clients and                                risk exposure measurement and management. The following
      counterparties does not depend on the accounting treatment                                   table represents credit risk from loans, loan commitments and
      of the asset or commitment. We regularly review the appropri-                                certain other contingent liabilities, loans held-for-sale, traded
      ateness of allowances for credit losses. Changes in the credit                               loans and derivative instruments before consideration of q risk
      quality of counterparties of loans held at fair value are                                    mitigation such as cash collateral and marketable securities or
      reflected in valuation changes recorded in revenues, and                                     credit hedges.
      therefore are not part of the impaired loans balance. Impaired


      Credit risk

      end of                                                                                                                                             2010           2009     % change

      Credit risk (CHF million)
      Balance sheet
      Gross loans                                                                                                                                     219,891       238,600               (8)
        of which reported at fair value                                                                                                                18,552        36,246              (49)
      Loans held-for-sale                                                                                                                              24,925        14,287               74
      Traded loans                                                                                                                                       4,346         5,249             (17)
      Derivative instruments 1                                                                                                                         50,477        57,153              (12)
      Total balance sheet                                                                                                                             299,639       315,289               (5)
      Off-balance sheet
      Loan commitments 2                                                                                                                              209,553       228,484               (8)
      Credit guarantees and similar instruments                                                                                                          7,408         8,067              (8)
      Irrevocable commitments under documentary credits                                                                                                  4,551         4,583              (1)
      Total off-balance sheet                                                                                                                         221,512       241,134               (8)
      Total credit risk                                                                                                                               521,151       556,423               (6)

      Before risk mitigation, for example, collateral, credit hedges.
      1
        Positive replacement value after netting agreements. 2 Includes CHF 136,533 million and CHF 148,074 million at the end of 2010 and 2009, respectively, of unused credit limits
      which were revocable at our sole discretion upon notice to the client.
                                                                                                      Treasury, Risk, Balance sheet and Off-balance sheet                                         131
                                                                                                                                                                    Risk management




Selected European credit risk exposures
The following table presents our risk-based credit risk expo-
sure to selected European countries as of December 31,
2010.


Selected European credit risk exposures

end of 2010                                                                                                           Sovereigns       Financial institutions           Corporates & Other
                                                                                                                                   1                            1                             1
                                                                                                              Gross         Net        Gross            Net            Gross            Net

Credit risk exposure (EUR billion)
Portugal                                                                                                        0.1         0.0          0.1            0.0              0.3            0.1
Italy                                                                                                           2.5         0.2          1.6            0.5              1.9            0.9
Ireland                                                                                                         0.0         0.0          0.5            0.2              0.7            0.2
Greece                                                                                                          0.1         0.0          0.1            0.1              0.6            0.1
Spain                                                                                                           0.0         0.0          0.9            0.6              1.4            0.5
Total                                                                                                           2.7         0.2          3.2            1.4              4.9            1.8

1
    Net of collateral and CDS hedges.



On a gross basis, before taking into account collateral and                                       Loans and loan commitments
CDS hedges, our risk-based sovereign credit risk exposure to                                      Loans where we have the intention and ability to hold to matu-
Portugal, Italy, Ireland, Greece and Spain as of December 31,                                     rity are valued at amortized cost less any allowance for loan
2010 was EUR 2.7 billion. Our net exposure to these sover-                                        losses. Loan commitments include irrevocable credit facilities
eigns was EUR 0.2 billion. Our non-sovereign risk-based                                           for Investment Banking and Private Banking and, additionally
credit risk exposure in these countries as of December 31,                                        in Private Banking, unused credit limits that can be revoked at
2010 included net exposure to financial institutions of EUR                                       our sole discretion upon notice to the client. Loans and loan
1.4 billion and to corporates and other counterparties of EUR                                     commitments for which the fair value option is elected are
1.8 billion, respectively.                                                                        reported at fair value with changes in fair value reported in
                                                                                                  trading revenues.


Loans and loan commitments

end of                                                                                                                                                2010             2009        % change

Loans and loan commitments (CHF million)
Gross loans                                                                                                                                       219,891            238,600            (8)
    of which Private Banking                                                                                                                      183,664            176,925             4
    of which Investment Banking                                                                                                                    36,235             61,679           (41)
Loan commitments                                                                                                                                  209,553            228,484            (8)
Total loans and loan commitments                                                                                                                  429,444            467,084            (8)
    of which Private Banking                                                                                                                      326,870            333,571            (2)
                                                                                                                                                                               1
    of which Investment Banking                                                                                                                   102,467            133,113           (23)

1
    Excludes non-rated positions of CHF 108 million representing unsettled positions in non-broker-dealer entities.
132




      Risk mitigation                                                                                      monetizable collateral. Credit hedges represent the notional
      We actively manage our credit exposure utilizing credit hedges                                       exposure that has been transferred to other market counter-
      and collateral, such as cash and marketable securities. A large                                      parties, generally through the use of q credit default swaps
      part of the Private Banking lending portfolio, primarily within                                      (CDS).
      the BBB counterparty rating classes, is collateralized by secu-                                         The following tables illustrate the effects of risk mitigation
      rities that can be readily liquidated. In Investment Banking, we                                     on a combined exposure of loans and loan commitments.
      manage credit exposures primarily with credit hedges and


      Loans and loan commitments – Private Banking

      end of                                                                                                                                           2010                                           2009

                                                                                                                                   Cash                                          Cash
                                                                                                                               collateral                                    collateral
                                                                                                                                     and                                           and
                                                                                                                       Gross marketable               Net            Gross marketable                Net
      Internal ratings                                                                                              exposure  securities         exposure         exposure  securities          exposure

      Risk mitigation (CHF million)
      AAA                                                                                                              1,603             (78)         1,525          1,432             (19)         1,413
      AA                                                                                                               6,879           (509)          6,370          4,431            (105)         4,326
      A                                                                                                              18,582          (1,006)        17,576          19,106         (1,683)         17,423
      BBB                                                                                                           223,681       (129,985)         93,696        229,767       (137,014)          92,753
      BB                                                                                                             69,275          (6,219)        63,056          72,135         (5,261)         66,874
      B                                                                                                                5,055           (331)          4,724          4,654            (276)         4,378
      CCC                                                                                                                371                0           371             502            (34)            468
      D                                                                                                                1,424           (173)          1,251          1,544            (142)         1,402
                                                                                                                                                              1                                              1
      Total loans and loan commitments                                                                              326,870      (138,301)         188,569        333,571       (144,534)        189,037

      Includes irrevocable credit facilities and unused credit limits which can be revoked at our sole discretion upon notice to the client.
      1
        In addition, we have a synthetic collateralized loan portfolio, the Clock Finance transaction, which effectively transfers the first loss credit risk on a CHF 4.8 billion portfolio of originated
      loans within Corporate & Institutional Clients to capital market investors.
                                                                                                      Treasury, Risk, Balance sheet and Off-balance sheet                                 133
                                                                                                                                                             Risk management




Loans and loan commitments – Investment Banking

end of                                                                                                                      2010                                                 2009

                                                                                                         Cash                                                    Cash
                                                                                                     collateral                                              collateral
                                                                                                           and                                                     and
                                                                              Gross         Credit marketable                Net      Gross         Credit marketable            Net
Internal ratings                                                           exposure        hedges   securities          exposure   exposure        hedges   securities      exposure

Risk mitigation (CHF million)
AAA                                                                           8,240               0         (124)          8,116    11,036         (4,141)        (153)         6,742
AA                                                                            8,691        (2,070)                  0      6,621    22,539         (1,476)             0      21,063
A                                                                           19,237         (4,183)                  0     15,054    18,310         (4,078)        (233)       13,999
BBB                                                                         24,239         (6,937)          (189)         17,113    34,398         (9,504)      (3,618)       21,276
BB                                                                          20,903         (2,469)        (2,084)         16,350    21,418         (3,038)        (877)       17,503
B                                                                           17,383         (1,316)          (135)         15,932    19,354         (2,431)        (156)       16,767
CCC                                                                           1,906          (350)             (9)         1,547     3,206         (1,002)        (114)         2,090
CC                                                                              286            (59)                 0       227        449           (211)             0          238
C                                                                               246            (96)                 0       150        181            (69)             0          112
D                                                                             1,336          (291)                  0      1,045     2,222           (284)        (258)         1,680
                                                                                                                                              1
Total loans and loan commitments                                           102,467       (17,771)        (2,541)          82,155   133,113        (26,234)      (5,409)      101,470

Includes undrawn irrevocable credit facilities.
1
  Excludes non-rated positions of CHF 108 million representing unsettled positions in non-broker-dealer entities.



Loss given default                                                                              by the seniority ranking of the exposure, with the exposure
The Private Banking LGD measurement takes into account                                          adjusted for risk mitigation and guarantees received. The LGD
collateral pledged against the exposure and guarantees                                          measurement system is validated independently on a regular
received, with the exposure adjusted for risk mitigation. The                                   basis and has been approved by the regulatory authorities for
concentration in BBB and BB rated counterparties with low                                       application in the Basel II A-IRB approach. The tables below
LGD exposure largely reflects the Private Banking residential                                   present our loans, net of risk mitigation, across LGD buckets
mortgage business, which is highly collateralized. In Invest-                                   for Private Banking and Investment Banking.
ment Banking, the LGD measurement is primarily determined


Loans – Private Banking

end of 2010                                                                                                                                                  Loss given default buckets

                                                                           Funded         Funded
                                                                             gross           net
Internal ratings                                                         exposure       exposure          0-10%          11-20%    21-40%         41-60%       61-80%       81-100%

Loss given default (CHF million)
AAA                                                                             893            892            295           126        216            241              2            12
AA                                                                            4,051          4,022         1,309           1,770       451            446            23             23
A                                                                           14,488         14,169          3,858           6,355     3,158            727            26             45
BBB                                                                        103,111         72,844         21,182          31,377    14,544          3,588         1,701           452
BB                                                                          55,071         52,400          8,168          21,959    15,246          3,895         1,756         1,376
B                                                                             4,415          4,146            761          1,502     1,448            391            43              1
CCC                                                                             362            362                  7       325         29              1              0             0
D                                                                             1,273          1,210            111           265        452            218           109             55
Total loans                                                                183,664        150,045         35,691          63,679    35,544          9,507         3,660         1,964
134




      Loans – Investment Banking

      end of 2010                                                                                                            Loss given default buckets

                                                              Funded      Funded
                                                                gross        net
      Internal ratings                                      exposure    exposure      0-10%    11-20%    21-40%    41-60%      61-80%       81-100%

      Loss given default (CHF million)
      AAA                                                      2,185         2,061        0          0     1,741       320             0             0
      AA                                                       1,108          639         0          0       314       325             0             0
      A                                                        3,110         2,943      124         0      1,159     1,660             0             0
      BBB                                                      7,509         4,848      174         0      1,608     3,065             1             0
      BB                                                      13,502         9,959       19         0      6,792     3,148             0             0
      B                                                        5,863         4,876       64         0      3,159     1,647             6             0
      CCC                                                      1,148          833         0          0       573       257             3             0
      CC                                                         283          224         0         0        160        51             3            10
      C                                                          202          106         0         0         59        32           15              0
      D                                                        1,325         1,034        0          0       932        91           11              0
      Total loans                                             36,235      27,523        381         0     16,497    10,596           39             10




      Loans                                                                    est at the date the loan is deemed non-performing, a corre-
      Compared to the end of 2009, gross loans decreased 8% to                 sponding provision is booked against the accrual through the
      CHF 219.9 billion. In Investment Banking, gross loans                    consolidated statements of operations. At the time a loan is
      decreased 41% to CHF 36.2 billion, due to a significant                  deemed non-performing and on a regular basis, the remaining
      decline in loans to financial institutions, primarily related to the     principal is evaluated for collectability and an allowance is
      consolidation of Alpine in the first quarter of 2010, a decline in       established for any shortfall between the net recoverable
      commercial and industrial loans and the US dollar translation            amount and the remaining principal balance.
      impact. This decrease was partially offset by a 4% increase in               A loan can be further downgraded to non-interest-earning
      gross loans in Private Banking to CHF 183.7 billion, primarily           when the collection of interest is so doubtful that further
      due to higher exposures in consumer loans collateralized by              accrual of interest is deemed inappropriate. At that time and
      securities and in commercial and industrial loans.                       on a quarterly or more frequent basis thereafter depending on
          For further information on our loan portfolio, refer to Note         various risk factors, the outstanding principal balance, net of
      18 – Loans, allowance for loan losses and credit quality in V –          provisions previously recorded, is evaluated for collectability
      Consolidated financial statements – Credit Suisse Group and              and additional provisions are established as required. Write-
      IX – Additional information – Statistical information.                   off of a loan occurs when it is considered certain that there is
                                                                               no possibility of recovering the outstanding principal. Write-
      Impaired loans                                                           offs occur due to the sale, settlement or restructuring of a
      A loan held-to-maturity, valued at amortized cost, is consid-            loan, or when uncertainty as to the repayment of either princi-
      ered impaired when we believe it is probable that we will be             pal or accrued interest exists. A loan may be restored to per-
      unable to collect all amounts due in accordance with the con-            forming status when all delinquent principal and interest pay-
      tractual terms of the loan agreement. Impaired loans exclude             ments become current in accordance with the terms of the
      loans that are reported at fair value. A loan is classified as           loan agreement and certain performance criteria are met.
      non-performing no later than when the contractual payments                   Loans that are not already classified as non-performing or
      of principal and/or interest are more than 90 days past due.             non-interest-earning but were modified in a troubled debt
      However, management may determine that a loan should be                  restructuring are reported as restructured loans. Generally, a
      classified as non-performing notwithstanding that contractual            restructured loan would have been considered impaired and an
      payments of principal and/or interest are less than 90 days              associated allowance for loan losses established prior to the
      past due. We continue to accrue interest for collection pur-             restructuring. Loans that have been restructured in a troubled
      poses; however, a corresponding provision against the accrual            debt restructuring and are performing according to the new
      is booked through the consolidated statements of operations              terms continue to accrue interest.
      at the same time. In addition, for any accrued but unpaid inter-
                                                                                              Treasury, Risk, Balance sheet and Off-balance sheet                                       135
                                                                                                                                                       Risk management




Loans
                                                                                                                                                                                    1
                                                                                                          Private Banking        Investment Banking                 Credit Suisse

end of                                                                                               2010           2009        2010          2009          2010           2009

Loans (CHF million)
Mortgages                                                                                          84,625          82,642            0            0       84,625        82,642
Loans collateralized by securities                                                                 24,552          21,778            0            0       24,552        21,778
Consumer finance                                                                                    5,026           4,269         682         1,033        5,708          5,302
Consumer loans                                                                                   114,203          108,689         682         1,033     114,885        109,722
Real estate                                                                                        21,209          21,648       2,153         3,410       23,362        25,058
Commercial and industrial loans                                                                    39,812          37,081     14,861        22,535        54,673        59,616
Financial institutions                                                                              7,309           8,373     17,463        30,637        24,764        39,006
Governments and public institutions                                                                 1,131           1,134       1,076        4,064         2,207          5,198
                                                                                                              2
Corporate and institutional loans                                                                  69,461          68,236 2   35,553        60,646      105,006        128,878
Gross loans                                                                                      183,664          176,925     36,235        61,679      219,891        238,600
    of which reported at fair value                                                                      –              –     18,552        36,246        18,552        36,246
Net (unearned income) / deferred expenses                                                               (2)            21         (30)          (46)         (32)           (25)
Allowance for loan losses 3                                                                          (782)          (937)       (235)         (458)       (1,017)       (1,395)
Net loans                                                                                        182,880          176,009     35,970        61,175      218,842        237,180

Impaired loans (CHF million)
Non-performing loans                                                                                  626             676         335           621          961          1,297
Non-interest-earning loans                                                                            321             336          19             0          340            336
Total non-performing and non-interest-earning loans                                                   947           1,012         354           621        1,301          1,633
Restructured loans                                                                                       4              0          48             6            52              6
Potential problem loans                                                                               397             448         113           210          510            658
Total other impaired loans                                                                            401             448         161           216          562            664
Gross impaired loans 3                                                                              1,348           1,460         515           837        1,863          2,297
    of which loans with a specific allowance                                                        1,164           1,141         487           805        1,651          1,946
    of which loans without a specific allowance                                                       184             319          28            32          212            351

Allowance for loan losses (CHF million)
Balance at beginning of period 3                                                                      937             912         458           727        1,395          1,639
Net movements recognized in statements of operations                                                    26            118       (119)           197          (93)           315
Gross write-offs                                                                                     (202)          (167)         (92)        (507)         (294)          (674)
Recoveries                                                                                              40             43          23            20            63             63
Net write-offs                                                                                       (162)          (124)         (69)        (487)         (231)          (611)
Provisions for interest                                                                                  2              5            0           38             2             43
Foreign currency translation impact and other adjustments, net                                        (21)             26         (35)          (17)         (56)              9
Balance at end of period 3                                                                            782             937         235           458        1,017          1,395
    of which individually evaluated for impairment                                                    585             704         164           280          749            984
    of which collectively evaluated for impairment                                                    197             233          71           178          268            411

Loan metrics (%)
Total non-performing and non-interest-earning loans / Gross loans 4                                    0.5            0.6          2.0          2.4           0.6            0.8
Gross impaired loans / Gross loans 4                                                                   0.7            0.8          2.9          3.3           0.9            1.1
Allowance for loan losses / Total non-performing and non-interest-earning loans 3                     82.6           92.6        66.4          73.8          78.2          85.4
Allowance for loan losses / Gross impaired loans 3                                                    58.0           64.2        45.6          54.7          54.6          60.7

1
 Includes Asset Management and Corporate Center. 2 Of which CHF 47,912 million and CHF 47,597 million were secured by financial collateral and mortgages at the end of 2010 and
2009, respectively. 3 Impaired loans and allowance for loan losses are only based on loans which are not carried at fair value. 4 Excludes loans carried at fair value.
136




      Potential problem loans are impaired loans not already classi-      Provision for credit losses
      fied as non-performing, non-interest earning or restructured        Provision for credit losses improved significantly, with releases
      loans where contractual payments have been received accord-         of CHF 79 million in 2010 compared to net new provisions of
      ing to schedule, but where doubt exists as to the collection of     CHF 506 million in 2009. In Private Banking, the net provision
      future contractual payments. Potential problem loans are eval-      for credit losses in 2010 was CHF 18 million, compared to
      uated for impairment on an individual basis and an allowance        CHF 180 million in 2009. In Investment Banking, the release
      for loan losses is established as necessary. Potential problem      of provision for credit losses in 2010 was CHF 97 million,
      loans continue to accrue interest.                                  compared to net new provisions of CHF 326 million in 2009.
          Gross impaired loans decreased CHF 434 million to CHF           In Investment Banking, the release of provision resulted prima-
      1.9 billion in 2010. Total non-performing and non-interest-         rily from loan sales and releases related to the reclassification
      earning loans decreased CHF 332 million to CHF 1.3 billion          of impaired loans to non-impaired status. Both in Private
      and total other impaired loans decreased CHF 102 million to         Banking and Investment Banking, the release of provision also
      CHF 562 million. In Private Banking, the reduction of gross         resulted from a reduction of the inherent loan loss provision,
      impaired loans to CHF 1.3 billion was mainly the result of          partially offset by very few new or increased specific provisions
      reduced and written-off non-performing and non-interest-            due to the improved credit outlook.
      earning loans combined with the effect of fewer defaults in
      2010. In Investment Banking, the reduction of CHF 322 mil-          Loans held-for-sale
      lion of gross impaired loans to CHF 515 million was mainly          Loans, which we have the intent to sell in the foreseeable
      the result of a decline in non-performing loans, primarily relat-   future, are considered held-for-sale and are carried at the
      ing to loan sales, repayments and reclassifications to non-         lower of amortized cost or market value determined on either
      impaired status.                                                    an individual method basis, or in the aggregate for pools of
                                                                          similar loans if sold or securitized as a pool. As there is no liq-
      Allowance for loan losses                                           uid market for these loans, they do not meet the criteria for
      We maintain valuation allowances on loans valued at amortized       trading assets. Loans held-for-sale are included in other
      cost which we consider adequate to absorb losses inherent in        assets. Gains and losses on loans held-for-sale are recorded
      the existing credit portfolio. We provide for loan losses based     in other revenues.
      on a regular and detailed analysis of all counterparties, taking
      collateral value into consideration. If uncertainty exists as to    Traded loans
      the repayment of either principal or interest, a valuation          Traded loans are carried at fair value and meet the criteria for
      allowance is either created or adjusted accordingly. Allowance      trading assets. These loans are secondary trading loans held
      for loan losses are reviewed on a quarterly basis by senior         with the intention to sell. Unrealized and realized gains and
      management.                                                         losses on trading positions are recorded in trading revenues.

      Allowance for inherent loan losses                                  Derivative instruments
      In accordance with US GAAP, an inherent loss allowance is           We enter into derivative contracts in the normal course of busi-
      estimated for all loans not specifically identified as impaired,    ness for market making, positioning and arbitrage purposes,
      which, on a portfolio basis, are considered to contain inherent     as well as for our own risk management needs, including mit-
      losses. Inherent losses in the Private Banking lending portfolio    igation of interest rate, foreign exchange and credit risk.
      are determined based on current risk ratings, collateral and            Derivatives are either privately negotiated OTC contracts or
      exposure structure, applying historical default and loss experi-    standard contracts transacted through regulated exchanges.
      ence in the ratings and loss parameters. In Investment Bank-        The most frequently used derivative products include interest
      ing, loans are segregated by risk, industry or country rating in    rate, cross-currency swaps and CDS, interest rate and foreign
      order to estimate inherent losses. Inherent losses on loans are     exchange options, foreign exchange forward contracts and
      estimated based on historical loss and recovery experience          foreign exchange and interest rate futures.
      and recorded in allowance for loan losses. A provision for              The replacement values of derivative instruments corre-
      inherent losses on off-balance sheet lending-related exposure,      spond to their fair values at the dates of the consolidated bal-
      such as contingent liabilities and irrevocable commitments, is      ance sheets and arise from transactions for the account of
      also determined, using a methodology similar to that used for       customers and for our own account. Positive replacement val-
      the loan portfolio.                                                 ues constitute a receivable, while q negative replacement val-
                                                                          ues constitute a payable. Fair value does not indicate future
                                                                         Treasury, Risk, Balance sheet and Off-balance sheet               137
                                                                                                                    Risk management




gains or losses, but rather the unrealized gains and losses           ment by the seller of the swap following a credit event of a ref-
from marking to market all derivatives at a particular point in       erence entity. A credit event is commonly defined as bank-
time. The fair values of derivatives are determined using vari-       ruptcy, insolvency, receivership, material adverse restructuring
ous methodologies, primarily observable market prices where           of debt or failure to meet payment obligations when due. Cur-
available and, in their absence, observable market parameters         rency swaps are contractual agreements to exchange pay-
for instruments with similar characteristics and maturities, net      ments in different currencies based on agreed upon notional
present value analysis or other pricing models as appropriate.        amounts and currency pairs. Equity swaps are contractual
                                                                      agreements to receive the appreciation or depreciation in value
Forwards and futures                                                  based on a specific strike price on an equity instrument in
We enter into forward purchase and sale contracts for mort-           exchange for paying another rate, which is usually based on an
gage-backed securities, foreign currencies and commitments            index or interest rate movements.
to buy or sell commercial and residential mortgages. In addi-
tion, we enter into futures contracts on equity-based indices         Options
and other financial instruments, as well as options on futures        We write options specifically designed to meet the needs of
contracts. These contracts are typically entered into to meet         customers and for trading purposes. These written options do
the needs of customers, for trading and for hedging purposes.         not expose us to the credit risk of the customer because, if
    On forward contracts, we are exposed to counterparty              exercised, we and not our counterparty are obligated to per-
credit risk. To mitigate this credit risk, we limit transactions by   form. At the beginning of the contract period, we receive a
counterparty, regularly review credit limits and adhere to inter-     cash premium. During the contract period, we bear the risk of
nally established credit extension policies.                          unfavorable changes in the value of the financial instruments
    For futures contracts and options on futures contracts, the       underlying the options. To manage this market risk, we pur-
change in the market value is settled with a clearing broker in       chase or sell cash or derivative financial instruments. Such
cash each day. As a result, our credit risk with the clearing         purchases and sales may include debt and equity securities,
broker is limited to the net positive change in the market value      forward and futures contracts, swaps and options.
for a single day.                                                         We also purchase options to meet customer needs, for
                                                                      trading purposes and for hedging purposes. For purchased
Swaps                                                                 options, we obtain the right to buy or sell the underlying instru-
Our swap agreements consist primarily of interest rate swaps,         ment at a fixed price on or before a specified date. During the
CDS, currency and equity swaps. We enter into swap agree-             contract period, our risk is limited to the premium paid. The
ments for trading and risk management purposes. Interest rate         underlying instruments for these options typically include fixed
swaps are contractual agreements to exchange interest rate            income and equity securities, foreign currencies and interest
payments based on agreed upon notional amounts and matu-              rate instruments or indices. Counterparties to these option
rities. CDS are contractual agreements in which the buyer of          contracts are regularly reviewed in order to assess creditwor-
the swap pays a periodic fee in return for a contingent pay-          thiness.
138




      The table below illustrates how credit risk on derivatives                   tle net with the counterparty. Replacement values are dis-
      receivables is reduced by the use of legally enforceable q net-              closed net of such agreements in the consolidated balance
      ting agreements and collateral agreements. Netting agree-                    sheets. Collateral agreements are entered into with certain
      ments allow us to net balances from derivative assets and lia-               counterparties based upon the nature of the counterparty
      bilities transacted with the same counterparty when the netting              and/or the transaction and require the placement of cash or
      agreements are legally enforceable and there is intent to set-               securities with us.


      Derivative instruments by maturity

                                                                                                       2010                                    2009

                                                                                                    Positive                                Positive
                                                                         Less               More    replace-    Less                More    replace-
                                                                          than   1 to 5      than      ment      than    1 to 5      than      ment
      end of / due within                                               1 year    years   5 years      value   1 year     years   5 years      value

      Derivative instruments (CHF billion)
      Interest rate products                                             38.9    175.0     269.0      482.9     51.0     204.9     269.5      525.4
      Foreign exchange products                                          44.2     25.0      15.8       85.0     30.2      23.0      12.4       65.6
      Precious metals products                                            1.6      0.8       0.0        2.4      1.2       0.9       0.1        2.2
      Equity/index-related products                                       7.2      9.3       3.8       20.3     10.7       9.4       4.5       24.6
      Credit derivatives                                                  4.5     26.0      19.0       49.5      2.1      37.5      28.6       68.2
      Other products                                                      9.6      7.6       2.1       19.3     11.3       9.9       1.4       22.6
      OTC derivative instruments                                        106.0    243.7     309.7      659.4    106.5     285.6     316.5      708.6
      Exchange-traded derivative instruments                                                           22.4                                     4.5
      Netting agreements 1                                                                           (631.4)                                 (656.0)
      Total derivative instruments                                                                     50.4                                    57.1
          of which recorded in trading assets                                                          47.7                                    55.1
          of which recorded in other assets                                                             2.7                                     2.0

      1
          Taking into account legally enforceable netting agreements.



      Derivative transactions exposed to credit risk are subject to a              following table represents the rating split of our credit expo-
      credit request and approval process, ongoing credit and coun-                sure from derivative instruments.
      terparty monitoring and a credit quality review process. The


      Derivative instruments by counterparty credit rating

      end of                                                                                                                       2010        2009

      Derivative instruments (CHF billion)
      AAA                                                                                                                            5.5        5.9
      AA                                                                                                                            11.9       12.3
      A                                                                                                                             15.3       13.1
      BBB                                                                                                                            7.9        9.9
      BB or lower                                                                                                                    8.2       11.8
      OTC derivative instruments                                                                                                    48.8       53.0
      Exchange-traded derivative instruments 1                                                                                       1.6        4.1
      Total derivative instruments 1                                                                                                50.4       57.1

      1
          Taking into account legally enforceable netting agreements.
                                                                        Treasury, Risk, Balance sheet and Off-balance sheet              139
                                                                                                                  Risk management




Derivative instruments by maturity and by counterparty credit        quate resources and procedures for the management of those
rating for the Bank are not materially different, neither in         risks. Businesses are supported by designated operational risk
absolute amounts nor in terms of movements, from the infor-          functions at the divisional and Group levels.
mation for the Group presented above.                                     The central BORO team within the CRO function focuses
    Derivative instruments are categorized as exposures from         on the coordination of consistent policy, tools and practices
trading activities (trading) and those qualifying for hedge          throughout the firm for the management, measurement, mon-
accounting (hedging). Trading includes activities relating to        itoring and reporting of relevant operational risks. This team is
market making, positioning and arbitrage. It also includes eco-      also responsible for the overall operational risk framework,
nomic hedges where the Group enters into derivative contracts        measurement methodology and capital calculations.
for its own risk management purposes, but where the con-                  Business divisions and Shared Services specialist opera-
tracts do not qualify for hedge accounting under US GAAP.            tional risk teams are responsible for the implementation of the
Hedging includes contracts that qualify for hedge accounting         operational risk management framework, tools, reporting and
under US GAAP, such as fair value hedges, cash flow hedges           methodologies within their areas as well as working with man-
and net investment hedges.                                           agement on any operational risk issues that arise.
    For further information on derivatives, including an                  Operational risk issues, metrics and exposures are dis-
overview of derivatives by products categorized for trading and      cussed at the quarterly CARMC meetings covering operational
hedging purposes, refer to Note 30 – Derivatives and hedging         risk and at divisional risk management committees, which have
activities in V – Consolidated financial statements – Credit         senior staff representatives from all the relevant functions. We
Suisse Group.                                                        utilize a number of firm-wide tools for the management and
                                                                     reporting of operational risk. These include risk and control
                                                                     self-assessments, scenario analysis, key risk indicator report-
Operational risk                                                     ing and the collection, reporting and analysis of internal and
                                                                     external loss data. Knowledge and experience are shared
Operational risk is the risk of loss resulting from inadequate or    throughout the Group to maintain a coordinated approach.
failed internal processes, people and systems or from external            We have employed the same methodology to calculate
events. Our primary aim is the early identification, recording,      economic capital for operational risk since 2000, and have
assessment, monitoring, prevention and mitigation of opera-          approval from FINMA to use a similar methodology for the
tional risks, as well as timely and meaningful management            q advanced measurement approach (AMA) under the q Basel II
reporting. Where appropriate, we transfer operational risks to       Accord. The economic capital/AMA methodology is based
third-party insurance companies.                                     upon the identification of a number of key risk scenarios that
    Operational risk is inherent in most aspects of our activities   describe all of the major operational risks that we face. Groups
and is comprised of a large number of disparate risks. While         of senior staff review each scenario and discuss the likelihood
market and credit risk are often chosen for the prospect of          of occurrence and the potential severity of loss. Internal and
gain, operational risk is normally accepted as a necessary con-      external loss data, along with certain business environment
sequence of doing business. In comparison to market or credit        and internal control factors, such as self-assessment results
risk, the sources of operational risk are difficult to identify      and key risk indicators, are considered as part of this process.
comprehensively and the amount of risk is also inherently dif-       Based on the output from these meetings, we enter the sce-
ficult to measure. We therefore manage operational risk differ-      nario probabilities and severities into an event model that gen-
ently from market and credit risk. We believe that effective         erates a loss distribution. Insurance mitigation is included in
management of operational risk requires a common firm-wide           the capital assessment where appropriate, by considering the
framework with ownership residing with the management                level of insurance coverage for each scenario and incorporat-
responsible for the relevant business process.                       ing q haircuts as appropriate. Based on the loss distribution,
    Under this framework, each individual business area takes        the level of capital required to cover operational risk can then
responsibility for its operational risks and the provision of ade-   be calculated.
140




      Reputational risk                                                    to be submitted through the globally standardized reputational
                                                                           risk review process. This involves a vetting of the proposal by
      Our policy is to avoid any transaction or service that brings        senior management and, by agreement, its subsequent refer-
      with it the risk of a potentially unacceptable level of damage to    ral to one of the four regional reputational risk approvers, each
      our reputation.                                                      of whom is an experienced and high-ranked senior manager,
          Reputational risk may arise from a variety of sources,           independent of the business segments, who has authority to
      including the nature or purpose of a proposed transaction or         approve, reject, or impose conditions on our participation on
      service, the identity or activity of a controversial potential       the transaction or service. In order to inform our stakeholders
      client, the regulatory or political climate in which the business    about how we manage some of the environmental and social
      will be transacted and the potentially controversial environ-        risks inherent to the banking business, we publish our Corpo-
      mental or social impacts of a transaction or significant public      rate Responsibility Report, in which we also describe our
      attention surrounding the transaction itself. Where the pres-        efforts to conduct our operations in a manner that is environ-
      ence of these or other factors gives rise to potential reputa-       mentally and socially responsible and broadly contributes to
      tional risk, the relevant business proposal or service is required   society.

      Reputational risk process

      Responsible                                                          Tasks


                                                                            p Representation on Executive Board
       Policy




                  Reputational Risk / Sustainability Committee
                                                                            p Sets policy, reviews key issues, can overrule a rejection
       Veto




                  Regional CEO                                              p Can veto an approval but cannot overrule a rejection



                  Regional reputational risk approver                       p Reviews, approves, rejects or modifies a submission
       Approval




                  Business area head or designee                            p Endorses submission


                  Originator (any employee)                                 p Initiates approval process
                                                                                                           Corporate Governance and Compensation                    153
                                                                                                                                     Corporate Governance




Board of Directors                                                                        which they reach the age of 70 or after having served on the
                                                                                          Board for 15 years. The Board may in certain circumstances
Membership and qualifications                                                             propose to the shareholders to elect a particular Board mem-
The AoA provide that the Board shall consist of a minimum of                              ber for a further term of a maximum of three years despite the
seven members. The Board currently consists of 15 members.                                respective Board member having reached the age or term lim-
We believe that the size of the Board must be such that the                               itation. None of our directors has a service contract with us or
committees can be staffed with qualified members. At the                                  any of our subsidiaries providing for benefits upon termination
same time, the Board must be small enough to ensure an                                    of service.
effective and rapid decision-making process. The members                                       The Board has four committees: the Chairman’s and Gov-
are elected individually for a period of three years and are eli-                         ernance Committee, the Audit Committee, the Compensation
gible for re-election. There is no requirement in the AoA for a                           Committee and the Risk Committee. The committee members
staggered board. One year of office is understood to be the                               are appointed by the Board for a term of one year. An overview
period of time from one ordinary AGM to the close of the next                             of the Board and committee membership is shown below. The
ordinary AGM. While the AoA do not provide for any age or                                 composition of the Boards of the Group and the Bank is iden-
term limitations, our OGR specify that the members of the                                 tical.
Board shall generally retire at the ordinary AGM in the year in


Members of Board and Board committees

                                                                  Board        Current                  Chairman’s and
                                                                 member          term                      Governance        Audit   Compensation       Risk
                                                                   since          end      Independence     Committee    Committee     Committee    Committee

December 31, 2010
Hans-Ulrich Doerig, full-time Chairman                              2003         2011       Independent      Chairman           –              –           –
Urs Rohner, full-time Vice-Chairman                                 2009         2012    Not independent      Member            –              –      Member
Peter Brabeck-Letmathe, Vice-Chairman                               1997         2011       Independent       Member            –         Member           –
Jassim Bin Hamad J.J. Al Thani 1                                    2010         2013    Not independent            –           –              –        Guest   2


Robert H. Benmosche 1                                               2010         2013       Independent             –           –         Member           –
Noreen Doyle                                                        2004         2013       Independent             –           –              –      Member
Walter B. Kielholz                                                  1999         2012       Independent             –           –         Member           –
Andreas N. Koopmann                                                 2009         2012       Independent             –           –              –      Member
Jean Lanier                                                         2005         2011       Independent             –      Member              –           –
Anton van Rossum                                                    2005         2011       Independent             –           –              –      Member
Aziz R.D. Syriani                                                   1998         2012       Independent       Member            –        Chairman          –
David W. Syz                                                        2004         2013       Independent             –      Member              –           –
Richard E. Thornburgh                                               2006         2012       Independent       Member            –              –     Chairman
John Tiner                                                          2009         2012       Independent             –      Member              –           –
Peter F. Weibel                                                     2004         2012       Independent       Member      Chairman             –           –

1                                                    2
    Appointed member as of the April 30, 2010 AGM.       Non-voting committee member.



As of the AGM on April 30, 2010, Ernst Tanner stepped down                                Board composition
as a member of the Board and Jassim Bin Hamad J.J. Al                                     The Chairman’s and Governance Committee regularly consid-
Thani and Robert H. Benmosche were elected as new mem-                                    ers the composition of the Board as a whole and in light of
bers. The Board proposes the following members to be re-                                  staffing requirements for the committees. The Chairman’s and
elected to the Board as of the AGM on April 29, 2011: Peter                               Governance Committee recruits and evaluates candidates for
Brabeck-Letmathe, Jean Lanier and Anton van Rossum. Vice-                                 Board membership based on criteria established by the com-
Chairman Urs Rohner will succeed Hans-Ulrich Doerig as                                    mittee. The committee may also retain outside consultants
Chairman.                                                                                 with respect to the identification and recruitment of potential
                                                                                          new Board members. In assessing candidates, the Chairman’s
                                                                                          and Governance Committee considers the requisite skills and
154




      characteristics of Board members as well as the composition            background, skills and experience of our Board members are
      of the Board as a whole. Among other considerations, the               diverse and broad and include holding top management posi-
      committee takes into account independence, diversity, age,             tions at financial services and industrial companies in Switzer-
      skills and management experience in the context of the needs           land and abroad and having held leading positions in govern-
      of the Board to fulfill its responsibilities. The Board also con-      ment and international organizations. The Board is composed
      siders other activities and commitments of an individual in            of individuals with diverse experience, geographic origin and
      order to be satisfied that a proposed member of the Board can          tenure.
      devote enough time to a Board position at the Group. The

      Board composition

      Industry experience                              Geographical origin                      Length of tenure

            3                                                2
                                                                                                      3

                                                                         6                                          6

                            8
       3                        p Financial services    5                     p Switzerland
                                p Food products                               p North America                           p Less than 5 years
                1               p Manufacturing                               p Europe                6                 p Between 5 and 10 years
                                p Other services                   2
                                                                              p Middle East                             p 10 years or more



      To maintain a high degree of diversity and independence in the         and the committees of the Board regularly ask a specialist
      future, we have a succession planning process in place to              within the Group to speak about a specific topic to improve
      identify potential candidates for the Board at an early stage.         the Board members’ understanding of issues that already are
      With this, we are well prepared when Board members rotate              or may become of particular importance to our business.
      off the Board. Besides more formal criteria consistent with
      legal and regulatory requirements, we believe that other               Meetings
      aspects including team dynamics and personal reputation of             In 2010, the Board held six full-day meetings in person and
      Board members play a critical role to ensure the effective             two additional meetings. From time to time, the Board may
      functioning of the Board. This is why we place utmost impor-           also take certain urgent decisions via circular resolution,
      tance on the right mix of personalities which also are fully           unless a member asks that the matter be discussed in a meet-
      committed to making their blend of specific skills and experi-         ing and not decided upon by way of written consent.
      ence available to the Board.                                               All members of the Board are expected to spend the nec-
                                                                             essary time outside these meetings needed to discharge their
      New members                                                            responsibilities appropriately. The Chairman calls the meeting
      Any newly appointed director participates in an orientation pro-       with sufficient notice and prepares an agenda for each meet-
      gram to become familiar with our organizational structure,             ing. However, any other Board member has the right to call an
      strategic plans, significant financial, accounting and risk            extraordinary meeting, if deemed necessary. The Chairman
      issues and other important matters. The orientation program is         has the discretion to invite members of management or others
      designed to take into account the new Board member’s indi-             to attend the meetings. Generally, the members of the Execu-
      vidual background and level of experience in each specific             tive Board attend part of the meetings to ensure effective
      area. Moreover, the program’s focus is aligned with any com-           interaction with the Board. The Board also holds separate pri-
      mittee memberships of the person concerned. Board members              vate sessions, without management present. Minutes are kept
      are encouraged to engage in continuing training. The Board             of the proceedings and resolutions of the Board.
                                                                                     Corporate Governance and Compensation                 155
                                                                                                                Corporate Governance




Meeting attendance

                                                                                   Chairman’s and
                                                                       Board of       Governance        Audit   Compensation       Risk
                                                                       Directors       Committee    Committee     Committee    Committee

in 2010
Total number of meetings held                                                 8                9           9              8           6
  Number of members who missed no meetings                                   10                2           2              3           4
  Number of members who missed one meeting                                    6                3           2              1           1
  Number of members who missed two or more meetings                           0                1           1              0           0
Meeting attendance, in %                                                     95               91          89             96          97




Meeting attendance                                                 ber. The length of tenure a Board member has served is not a
The members of the Board are expected to attend all meetings       criterion for independence. Significant shareholder status is
of the Board and the committees on which they serve. The           also not considered a criterion for independence unless the
Chairman may approve exceptions. The Chairman and the full-        shareholding exceeds 10% of the Group’s share capital.
time Vice-Chairman attend selected committee meetings as           Board members with immediate family members who would
guests. The meeting attendance statistics for the Board and        not qualify as independent are also not considered independ-
committee meetings are shown in the “Meeting attendance”           ent. Our definition of independence is in line with the Swiss
table.                                                             Code of Best Practices and the NYSE definitions. In addition
                                                                   to measuring Board members against the independence crite-
Independence                                                       ria, the Chairman’s and Governance Committee also considers
The Board consists solely of directors who have no executive       whether other commitments of an individual Board member
functions within the Group. As of December 31, 2010, 13            prevent the person from devoting enough time to his or her
members of the Board were deemed independent, and two              Board mandate.
members, Urs Rohner and Jassim bin Hamad J.J. Al Thani,                 Whether or not a relationship between the Group and a
were deemed not independent. In its independence determina-        member of the Board is considered material depends in partic-
tion, the Board takes into account the factors set forth in the    ular on the following factors:
OGR, the committee charters and applicable laws and listing        p the volume and size of any transactions concluded in rela-
standards. Our independence standards are also periodically             tion to the financial status and credit standing of the Board
measured against other emerging best practice standards.                member concerned or the organization in which he or she
    The Chairman’s and Governance Committee performs an                 is a partner, significant shareholder or executive officer;
annual assessment of the independence of each Board mem-           p the terms and conditions applied to such transactions in
ber and reports its findings to the Board for the final determi-        comparison to those applied to transactions with counter-
nation of independence of each individual member. In general,           parties of a similar credit standing;
a director is considered independent if the director:              p whether the transactions are subject to the same internal
p is not, and has not been for the prior three years,                   approval processes and procedures as transactions that
    employed as an executive officer of the Group or any of its         are concluded with other counterparties;
    subsidiaries;                                                  p whether the transactions are performed in the ordinary
p is not and has not been for the prior three years an                  course of business; and
    employee or affiliate of our external auditor; and             p whether the transactions are structured in such a way and
p does not maintain a material direct or indirect business              on such terms and conditions that the transaction could be
    relationship with the Group or any of its subsidiaries.             concluded with a third party on comparable terms and con-
                                                                        ditions.
Moreover, a Board member is not considered independent if
the Board member is, or has been at any time during the prior      Urs Rohner, full-time Vice-Chairman, was deemed not inde-
three years, part of an interlocking directorate in which a        pendent due to his former role as Chief Operating Officer
member of the Executive Board serves on the compensation           (COO) and General Counsel of the Group until the AGM in
committee of another company that employs the Board mem-           April 2009. Jassim bin Hamad J.J. Al Thani, Chairman of
156




      Qatar Investment Bank, was deemed not independent due to            Chairman has no executive function within the Group. With the
      the scope of various business relationships between the Group       exception of the Chairman’s and Governance Committee, the
      and Qatar Investment Authority (QIA), a state-owned company         Chairman is not a member of any of the Board’s standing
      that has close ties to the Al Thani family, and between the         committees. However, he may attend all or part of selected
      Group and the Al Thani family. The Group has deemed these           committee meetings, as well as the meetings of the Executive
      various business relationships could constitute a material busi-    Board, as a guest. The Chairman is actively involved in devel-
      ness relationship.                                                  oping the strategic business plans and objectives of the
          The Group is a global financial services provider. Many of      Group. Furthermore, he works closely with the CEO in estab-
      the members of the Board or companies associated with them          lishing succession plans for key management positions.
      maintain banking relations with us. With the exception of the           The Chairman takes an active role in representing the
      transactions described below and in Compensation – Loans to         Group to the general public, regulators, investors, industry
      members of the Board, all relationships with members of the         associations and other stakeholders.
      Board or such companies are in the ordinary course of busi-
      ness and are entered into on an arm’s length basis. For further     Board responsibilities
      information on relationships with members of the Board, refer       In accordance with the OGR, the Board delegates certain
      to Note 28 – Related parties in V – Consolidated financial          tasks to Board committees and delegates the management of
      statements – Credit Suisse Group.                                   the company and the preparation and implementation of Board
          In February 2011, we entered into definitive agreements         resolutions to certain management bodies or executive officers
      with affiliates of QIA and The Olayan Group, which have signif-     to the extent permitted by law, in particular article 716a and
      icant holdings of Group shares, to issue an aggregate of CHF        716b of the Swiss Code of Obligations, and the AoA.
      5.9 billion Tier 1 Buffer Capital Notes for cash or in exchange          With responsibility for the overall direction, supervision and
      for tier 1 capital notes issued in 2008. The purchase or            control of the company, the Board regularly assesses our com-
      exchange will occur no earlier than October 2013, the first call    petitive position and approves our strategic and financial plans.
      date of the Tier 1 Capital Notes. The Tier 1 Buffer Capital         At each ordinary meeting, the Board receives a status report
      Notes will be converted into our ordinary shares if our reported    on our financial results, risk and capital situation. In addition,
      common equity tier 1 ratio falls below 7%. For more informa-        the Board receives, on a monthly basis, management informa-
      tion about the terms of the transaction, refer to III – Treasury,   tion packages, which provide detailed information on our per-
      Risk, Balance sheet and Off-balance sheet – Treasury man-           formance and financial status, as well as quarterly risk reports
      agement – Capital management – Capital issuances. The               outlining recent developments and outlook scenarios. Manage-
      Group determined that this was a material transaction and           ment also provides the Board members with regular updates
      deemed QIA and The Olayan Group to be related parties of            on key issues and significant events, as deemed appropriate
      Jassim bin Hamad J.J. Al Thani and Aziz R. D. Syriani,              or requested. In order to appropriately discharge its responsi-
      respectively, for purposes of evaluating the terms and corpo-       bilities, the members of the Board have access to all informa-
      rate governance of the transaction. The Group and the Board         tion concerning the Group.
      (except for Jassim bin Hamad J.J. Al Thani and Aziz R. D.                The Board also reviews and approves significant changes
      Syriani, who recused themselves) determined that the terms of       in our structure and organization and is actively involved in sig-
      the transaction, given its size, the nature of the contingent       nificant projects including acquisitions, divestitures, invest-
      buffer capital, for which there was no established market, and      ments and other major projects. The Board and its commit-
      the terms of the tier 1 capital notes issued in 2008 and held       tees are entitled, without consulting with management and at
      by QIA and The Olayan Group, were fair.                             the Group’s expense, to engage independent legal, financial or
                                                                          other advisors, as they deem appropriate, with respect to any
      Chairman of the Board                                               matters within their authority. The Board performs a self-
      The Chairman coordinates the work of the Board and its com-         assessment once a year, where it reviews its own performance
      mittees and ensures that the Board members are provided             and sets objectives and a work plan for the coming year.
      with the information relevant for performing their duties. The
                                                                                  Corporate Governance and Compensation                 157
                                                                                                            Corporate Governance




Board committees                                                   advisory or other compensatory fees from us other than their
                                                                   regular compensation as members of the Board and its com-
At each Board meeting, the committee chairmen report to the        mittees. The Audit Committee charter stipulates that all Audit
Board about their activities. In addition, the minutes and doc-    Committee members must be financially literate. In addition,
umentation of the committee meetings are accessible to all         they may not serve on the Audit Committee of more than two
Board members.                                                     other companies, unless the Board deems that such member-
                                                                   ship would not impair their ability to serve on our Audit Com-
Chairman’s and Governance Committee                                mittee.
The Chairman’s and Governance Committee consists of the                In addition, the US Securities and Exchange Commission
Chairman, the Vice-Chairmen and the chairmen of the com-           (SEC) requires disclosure about whether a member of the
mittees of the Board and other members appointed by the            Audit Committee is an audit committee financial expert within
Board. It may include non-independent members.                     the meaning of SOX. The Board has determined that Peter F.
     The Chairman’s and Governance Committee has its own           Weibel and John Tiner are audit committee financial experts.
charter, which has been approved by the Board. It generally            Pursuant to its charter, the Audit Committee holds meet-
meets eight to ten times per year. The meetings are usually        ings at least once each quarter, prior to the publication of our
attended by the CEO. It is at the Chairman’s discretion to ask     consolidated financial statements. Typically, the Audit Commit-
other members of management or specialists to attend a             tee convenes for a number of additional meetings and confer-
meeting.                                                           ence calls throughout the year. The meetings are attended by
     The Chairman’s and Governance Committee acts as an            management representatives, as appropriate, the Head of
advisor to the Chairman and supports him in the preparation of     Internal Audit and senior representatives of the external audi-
the Board meetings. In addition, the Chairman’s and Gover-         tor. At most Audit Committee meetings, a private session with
nance Committee is responsible for the development and             Internal Audit and the external auditors is scheduled to pro-
review of corporate governance guidelines, which are then          vide them with an opportunity to discuss issues with the Audit
recommended to the Board for approval. At least once annu-         Committee without management being present. The Head of
ally, the Chairman’s and Governance Committee evaluates the        Internal Audit reports directly to the Chairman of the Audit
independence of the Board members and reports its findings         Committee.
to the Board for final determination. The Chairman’s and Gov-          The primary function of the Audit Committee is to assist
ernance Committee is also responsible for identifying, evaluat-    the Board in fulfilling its oversight role by:
ing, recruiting and nominating new Board members in accor-         p monitoring and assessing the integrity of the consolidated
dance with the Group’s internal criteria, subject to applicable        financial statements as well as disclosures of the financial
laws and regulations.                                                  condition, results of operations and cash flows;
     In addition, the Chairman’s and Governance Committee          p monitoring processes designed to ensure an appropriate
guides the Board’s annual performance assessment of the                internal control system, including compliance with legal
Chairman, the CEO and the members of the Executive Board.              and regulatory requirements;
The Chairman does not participate in the discussion of his own     p monitoring the qualifications, independence and perform-
performance. The Chairman’s and Governance Committee                   ance of the external auditors and of Internal Audit; and
proposes to the Board the appointment, promotion, dismissal        p monitoring the adequacy of financial reporting processes
or replacement of members of the Executive Board. The                  and systems of internal accounting and financial controls.
Chairman’s and Governance Committee also reviews succes-
sion plans for senior executive positions in the Group with the    The Audit Committee is regularly informed about significant
Chairman and the CEO.                                              projects aimed at further improving processes and receives
                                                                   regular updates on major litigation matters as well as signifi-
Audit Committee                                                    cant regulatory and compliance matters. The Audit Committee
The Audit Committee consists of not fewer than three mem-          also oversees the work of our external auditor and pre-
bers, all of whom must be independent.                             approves the retention of, and fees paid to, the external audi-
    The Audit Committee has its own charter, which has been        tor for all audit and non-audit services. For this purpose, it has
approved by the Board. The members of the Audit Committee          developed and approved a policy that is designed to help
are subject to additional independence requirements. None of       ensure that the independence of the external auditor is main-
the Audit Committee members may be an affiliated person of         tained at all times. The policy limits the scope of services that
the Group or may, directly or indirectly, accept any consulting,   the external auditor may provide to us or any of our sub-
158




      sidiaries to audit and certain permissible types of non-audit       decides on the attendance of management or others at the
      services, including audit-related services, tax services and        committee meetings.
      other services that have been pre-approved by the Audit Com-             The Compensation Committee is assisted in its work by
      mittee. The Audit Committee pre-approves all other services         external legal counsel and an independent global compensa-
      on a case-by-case basis. The external auditor is required to        tion consulting firm, Johnson Associates, Inc. Johnson Associ-
      report periodically to the Audit Committee about the scope of       ates does not provide other services to the Group other than
      the services it has provided and the fees for the services it has   assisting the Compensation Committee. For information on our
      performed to date. Furthermore, the Audit Committee has             compensation approach, principles and objectives, refer to
      established procedures for the receipt, retention and treatment     Compensation – Compensation governance. The Compensa-
      of complaints regarding accounting, internal controls or audit-     tion Committee performs a self-assessment once a year where
      ing matters, including a whistleblower hotline to provide the       it reviews its own performance against the responsibilities
      option to report complaints on a confidential, anonymous            listed in the charter and the committee’s objectives and deter-
      basis. The Audit Committee performs a self-assessment once          mines any special focus objectives for the coming year.
      a year where it critically reviews its own performance and
      determines objectives, including any special focus objectives,      Risk Committee
      and a work plan for the coming year.                                The Risk Committee consists of not fewer than three mem-
                                                                          bers. It may include non-independent members.
      Compensation Committee                                                  The Risk Committee has its own charter, which has been
      The Compensation Committee consists of not fewer than               approved by the Board, and holds at least four meetings a
      three members, all of whom must be independent.                     year. In addition, the Risk Committee usually convenes for
          The Compensation Committee has its own charter, which           additional meetings throughout the year in order to appropri-
      has been approved by the Board. Pursuant to its charter, the        ately discharge its responsibilities. The Chairman of the Risk
      Compensation Committee holds at least four meetings per             Committee invites members of management or others to
      year. Additional meetings may be scheduled at any time. The         attend the committee meetings, as appropriate.
      main meeting is held in January with the primary purpose of             The Risk Committee’s main duties are to assist the Board
      reviewing the performance of the businesses and the respec-         in assessing the different types of risk to which we are
      tive management teams and determining and/or recommend-             exposed, as well as our risk management structure, organiza-
      ing to the Board for approval the overall variable compensation     tion and processes. The Risk Committee approves selected
      pools and the compensation payable to the members of the            risk limits and makes recommendations to the Board regarding
      Board, the Executive Board, the head of Internal Audit and          all of its risk-related responsibilities, including the review of
      certain other members of senior management. Other duties            major risk management and capital adequacy requirements.
      and responsibilities of the Compensation Committee include          The Risk Committee performs a self-assessment once a year
      reviewing newly established compensation plans or amend-            where it reviews its own performance against the responsibili-
      ments to existing plans and recommending them to the Board          ties listed in the charter and the committee’s objectives and
      for approval. The Chairman of the Compensation Committee            determines any special focus objectives for the coming year.
                                                                                   Corporate Governance and Compensation                159
                                                                                                             Corporate Governance




Biographies of the Board members

                                 Hans-Ulrich Doerig                                                  Urs Rohner
                                 Born 1940                                                           Born 1959
                                 Swiss Citizen                                                       Swiss Citizen




Hans-Ulrich Doerig has been the full-time Chairman of the            Urs Rohner has been the full-time Vice-Chairman of the Board
Board and the Chairman’s and Governance Committee since              and a member of the Chairman’s and Governance Committee
2009. Prior to that, he served as full-time Vice-Chairman of         and Risk Committee since the AGM in 2009. He was a mem-
the Board and Chairman of the Risk Committee since 2003.             ber of the Executive Boards of Credit Suisse Group and Credit
He served as Vice-Chairman of the Group Executive Board              Suisse from 2004 to 2009 and served as General Counsel of
from 1998 to 2003 and as CRO from 1998 until 2002. The               Credit Suisse Group from 2004 to 2009 and as COO and
Board has determined him to be independent under the                 General Counsel of Credit Suisse from 2006 to 2009. His
Group’s independence standards. Hans-Ulrich Doerig will              term as a member of the Board expires at the AGM in 2012.
remain Chairman until the AGM in April 2011 when he will be          Urs Rohner will succeed Hans-Ulrich Doerig in the position of
succeeded by the current full-time Vice-Chairman, Urs                Chairman at the AGM in April 2011. Due to his former execu-
Rohner.                                                              tive function at Credit Suisse, the Board has determined that
    After completing his studies at the University of St. Gallen     he is not independent under the Group’s independence stan-
with degrees in economics and law, including a doctorate he          dards. For further information, refer to Independence.
received in 1968, and after five years at JP Morgan in New               Mr. Rohner studied law at the University of Zurich and
York, Mr. Doerig joined Credit Suisse in 1973. In 1982, he           graduated in 1983. He was admitted to the bar of the canton
was appointed a member of the Executive Board of Credit              of Zurich in 1986 and to the bar of the state of New York in
Suisse with responsibility for the multinational division, securi-   1990. From 1983 to 1988, he was an attorney with the law
ties trading, capital markets, corporate finance and commer-         firm Lenz & Stähelin in Zurich and, between 1988 and 1989,
cial banking in Asia. From 1993 to 1996, he served as Vice-          with Sullivan & Cromwell LLP in New York. From 1990 to
Chairman of the Board of Credit Suisse. In 1996, he became           1999, he was a partner at Lenz & Stähelin. Between 2000
President of the Executive Board of Credit Suisse. During            and 2004, Mr. Rohner served as Chairman of the Executive
1997, he served as CEO of Credit Suisse First Boston.                Board and CEO of ProSiebenSat.1 Media AG.
    Mr. Doerig has been a member of the Board of Directors               Mr. Rohner is a member of the Board of Directors of the
of the University of Zurich since 1998. He also serves on the        Institute of International Finance and of the Institute Interna-
Board of Directors of the International Red Cross museum in          tional d’Etudes Bancaires and served on the Committee of
Geneva. Furthermore, he is a member of the supervisory bod-          Experts of the Swiss Federal Council on limiting economic risk
ies of several foundations and academic, arts, charitable and        associated with large companies. Mr. Rohner is also a member
professional organizations, as well as the author of a number        of the Board of Directors of the Zurich Opera House and a
of publications on finance, education and management.                member of the Board of Trustees of the Lucerne Festival.
160




                                    Peter Brabeck-Letmathe                                           Jassim Bin Hamad J.J.
                                    Born 1944                                                        Al Thani
                                    Austrian Citizen                                                 Born 1982
                                                                                                     Qatar Citizen




      Peter Brabeck-Letmathe has been Vice-Chairman of the            Jassim Bin Hamad J.J. Al Thani has been a member of the
      Board since 2008, a function he also held from 2000 to          Board since 2010. His term as a member of the Board expires
      2005. He has been a member of the Board since 1997. He          at the AGM in 2013. The Board has determined him to be not
      has served on the Compensation Committee and the Chair-         independent under the Group’s independence standards. For
      man’s and Governance Committee since 2008 and has been a        further information, refer to Independence.
      member of both committees at previous times. He served from         Since April 2005, Mr. Al Thani has been Chairman of the
      2000 to 2005 on the Compensation Committee and from             Board of Directors of Qatar Islamic Bank. He is also the Chair-
      2003 to 2005 on the Chairman’s and Governance Committee.        man of: QInvest, the first Islamic investment bank founded in
      His term as a member of the Board expires at the AGM in         Qatar; European Finance House, an Islamic investment bank
      2011. The Board has determined him to be independent under      founded by the Qatar Islamic Bank in London; Al Zaman
      the Group’s independence standards.                             Islamic Insurance Co.; and Q-RE LLC, an insurance and rein-
          Mr. Brabeck-Letmathe studied economics at the University    surance company. He is a member of the Board of Directors
      of World Trade in Vienna. After graduating in 1968, he joined   of Qatar Navigation Company, Qatar Insurance Company and
      Nestlé’s sales operations in Austria. His career at Nestlé SA   ARCAPITA Bank and the CEO of Special Projects Company,
      includes a variety of assignments in several European coun-     Qatar, a family enterprise.
      tries as well as in Latin America. Since 1987, he has been          Mr. Al Thani completed his studies in the State of Qatar
      based at Nestlé’s headquarters in Vevey. Mr. Brabeck-Let-       and graduated as an Officer Cadet from the Royal Military
      mathe has been the Chairman of the Board of Directors of        Academy, Sandhurst, UK.
      Nestlé SA since 2005. From 1997 to 2008, he was also the
      CEO of Nestlé SA.
          Mr. Brabeck-Letmathe has been a member of the Boards
      of Directors of L’Oréal SA, Paris, since 1997 and Exxon Mobil
      Corporation and Delta Topco (Formula 1) both since 2010. He
      is also a member of the Foundation Board of the World Eco-
      nomic Forum and a member of the European Round Table of
      Industrialists.
                                                                              Corporate Governance and Compensation             161
                                                                                                      Corporate Governance




                               Robert H. Benmosche                                             Noreen Doyle
                               Born 1944                                                       Born 1949
                               US Citizen                                                      Irish and US Citizen




Robert H. Benmosche has been a member of the Board since         Noreen Doyle has been a member of the Board since 2004
2002 and a member of the Compensation Committee since            and a member of the Risk Committee since 2009. During
2003. In August 2009, Mr. Benmosche stepped down as a            2007 and 2008, she served on the Audit Committee and from
member of the Board as a result of his appointment as Presi-     2004 to 2007, she served on the Risk Committee. Her term
dent and CEO of American International Group, Inc. (AIG).        as a member of the Board expires at the AGM in 2013. The
Changes in AIG’s business made it possible for Mr. Ben-          Board has determined her to be independent under the
mosche to rejoin the Board in April 2010. His term as a mem-     Group’s independence standards.
ber of the Board expires at the AGM in 2013. The Board has           Ms. Doyle was the First Vice President and Head of Bank-
determined him to be independent under the Group’s inde-         ing of the European Bank for Reconstruction and Develop-
pendence standards.                                              ment (EBRD) from 2001 to 2005. She joined the EBRD in
    Mr. Benmosche is the President and CEO of AIG, New           1992 as Head of Syndications, was appointed Chief Compli-
York. He was the Chairman of the Board and the CEO of            ance Officer in 1994 and became Deputy Vice President of
MetLife, Inc., New York, from the demutualization of the com-    Risk Management in 1997. Prior to joining the EBRD, Ms.
pany in 2000, and of Metropolitan Life Insurance Company,        Doyle spent 18 years at Bankers Trust Company with assign-
New York, from 1998 until his retirement in 2006. Before join-   ments in Houston, New York and London.
ing MetLife in 1995, Mr. Benmosche was with PaineWebber,             Ms. Doyle received a BA in Mathematics from The College
New York, for 13 years. He received a BA degree in Mathe-        of Mount Saint Vincent, New York, in 1971, and an MBA from
matics from Alfred University, New York, in 1966.                Dartmouth College, New Hampshire, in 1974.
    Mr. Benmosche does not hold any other significant board          Ms. Doyle currently serves on the Boards of Directors of
memberships.                                                     the Newmont Mining Corporation, QinetiQ Group Plc, a UK-
                                                                 based defense technology and security company, and Rexam
                                                                 Plc, a global consumer packaging company, all since 2005.
                                                                 Moreover, she is a member of the Advisory Board of the Mac-
                                                                 quarie European Infrastructure Fund and the Macquarie
                                                                 Renaissance Infrastructure Fund.
162




                                      Walter B. Kielholz                                               Andreas N. Koopmann
                                      Born 1951                                                        Born 1951
                                      Swiss Citizen                                                    Swiss Citizen




      Walter B. Kielholz has been a member of the Board since            Andreas N. Koopmann has been a member of the Board and
      1999 and a member of the Compensation Committee since              the Risk Committee since the AGM in 2009. His term as a
      2009. He served as Chairman of the Board and the Chair-            member of the Board expires at the AGM in 2012. The Board
      man’s and Governance Committee from 2003 to 2009 and as            has determined him to be independent under the Group’s
      Chairman of the Audit Committee from 1999 to 2002. His             independence standards.
      term as a member of the Board expires at the AGM in 2012.              From 1982 to 2009, Mr. Koopmann held various leading
      The Board has determined him to be independent under the           positions at Bobst Group S.A., Lausanne, one of the world’s
      Group’s independence standards.                                    leading suppliers of equipment and services to packaging
          Mr. Kielholz studied business administration at the Univer-    manufacturers. He was a member of its Board of Directors
      sity of St. Gallen and graduated in 1976 with a degree in          from 1998 to 2002 and Group CEO, from 1995 to May 2009.
      Business Finance and Accounting.                                       Mr. Koopmann holds a Master’s Degree in Mechanical
          Mr. Kielholz’s career began at the General Reinsurance         Engineering from the Swiss Federal Institute of Technology in
      Corporation, Zurich, in 1976. After working in the US, the UK      Zurich and an MBA from IMD in Lausanne, Switzerland.
      and Italy, Mr. Kielholz assumed responsibility for the company’s       Since 2010, Mr. Koopmann is the Chairman of the Board
      European marketing. In 1986, he joined Credit Suisse,              of Directors of Alstom (Suisse) SA and a member of the Board
      responsible for client relations with large insurance groups in    of Directors of Georg Fischer AG. Since 2003, Mr. Koopmann
      the Multinational Services department.                             is a member of the Board of Directors of Nestlé SA, its 1st
          Mr. Kielholz joined Swiss Re, Zurich, in 1989. He became       Vice-Chairman and a member of its Chairman’s and Corporate
      a member of Swiss Re’s Executive Board in 1993 and was             Governance Committee. Mr. Koopmann is also a member of
      Swiss Re’s CEO from 1997 to 2002. A board member since             the Board of Directors of the CSD Group, an engineering con-
      1998, he became the Executive Vice-Chairman of the Board           sultancy enterprise in Switzerland and serves as the Vice-
      of Directors of Swiss Re in 2003, Vice-Chairman in 2007 and        Chairman of Swissmem, the association of Swiss Mechanical
      since May 2009, he has served as the Chairman.                     and Electrical Engineering Industries. From 1995 to 1999, he
          Mr. Kielholz is a Board of Directors member of the Geneva      served as member of the Board of Directors of Credit Suisse
      Association, the European Financial Roundtable and the Insti-      First Boston. He was a member of Credit Suisse’s Advisory
      tute of International Finance. From 1998 to 2005 and again         Board from 1999 to 2007.
      since 2009, Mr. Kielholz is a member of the International Busi-
      ness Leader Advisory Council and a member of the Interna-
      tional Advisory Panel, advising the Monetary Authority of Sin-
      gapore’s financial section on reforms and strategies. In
      addition, Mr. Kielholz is a member and former Chairman of the
      Supervisory Board of Avenir Suisse. Mr. Kielholz is a member
      of the Zurich Friends of the Arts, the Lucerne Festival Foun-
      dation Board and Chairman of the Zürcher Kunstgesellschaft
      (Zurich Art Society), which runs Zurich’s Kunsthaus museum.
                                                                                Corporate Governance and Compensation                163
                                                                                                          Corporate Governance




                               Jean Lanier                                                        Aziz R.D. Syriani
                               Born 1946                                                          Born 1942
                               French Citizen                                                     Canadian Citizen




Jean Lanier has been a member of the Board and the Audit          Aziz R.D. Syriani has been a member of the Board since 1998
Committee since 2005. His term as a member of the Board           and Chairman of the Compensation Committee since 2004.
expires at the AGM in 2011. The Board has determined him to       He has been a member of the Chairman’s and Governance
be independent under the Group’s independence standards.          Committee since 2003 and served on the Audit Committee
    Mr. Lanier is the former Chairman of the Managing Board       from 2003 to 2007. His term as a member of the Board
and Group CEO of Euler Hermes, Paris. He also chaired             expires at the AGM in 2012. The Board has determined him to
boards of the principal subsidiaries of the group. He held        be independent under the Group’s independence standards.
these functions from 1998 until 2004. Prior to that, he was           Mr. Syriani holds a degree in Law from the University of St.
the COO and Managing Director of SFAC, which later became         Joseph in Beirut (1965) and a Master of Laws degree from
Euler Hermes SFAC, from 1990 to 1997, and of the Euler            Harvard University, Massachusetts (1972). He has been with
Group from 1996 to 1998.                                          The Olayan Group since 1978 and has served as the Presi-
    Mr. Lanier started his career at the Paribas Group in 1970,   dent since 1978 and the CEO since 2002. The Olayan Group
where he worked until 1983 and held, among others, the            is a private multinational enterprise engaged in distribution,
functions of Senior Vice President of Paribas Group Finance       manufacturing and global investment and a significant share-
division and Senior Executive for North America of the Paribas    holder of the Group.
Group in New York. In 1983, he joined the Pargesa Group,              Mr. Syriani has served on the Board of Directors of Occi-
where he held the positions of President of Lambert Brussells     dental Petroleum Corporation, Los Angeles, since 1983,
Capital Corporation in New York, from 1983 to 1989, and           where he is currently the Lead Independent Director and
Managing Director of Pargesa, based in Paris and Geneva,          Chairman of the Audit Committee, as well as a member of the
from 1988 to 1990.                                                Executive and the Corporate Governance Committees.
    Mr. Lanier holds a Masters of Engineering from the Ecole
Centrale des Arts et Manufactures, Paris (1969), and a Mas-
ters of Sciences in Operations Research and Finance from
Cornell University, New York (1970).
    Mr. Lanier is the Chairman of the Boards of Directors for
Swiss RE Europe SA, Swiss RE International SE and Swiss
RE Europe Holdings SA and also serves on their respective
audit and risk committees. He is a Chevalier de la Légion
d’Honneur in France and a Member of the Board of the Foun-
dation “La Fondation Internationale de l’Arche.”
164


              Walter Kielholz



                                                                                    Jassim Bin Hamad J. J. Al Thani




      David Syz




                                                     Urs Rohner




                                                                                                                      Peter Weibel
                                Richard Thornburgh




                                                           Peter Brabeck-Letmathe
                                                                            Corporate Governance and Compensation           165
                                                                                                     Corporate Governance

                           Noreen Doyle and Jean Lanier




                                                                                            John Tiner




                                                                                  Anton van Rossum




      Hans-Ulrich Doerig




                                                          Aziz Syriani




Jean Lanier

                                                                         Andreas Koopmann




                           Robert Benmosche
166




                                      David W. Syz                                                      Richard E. Thornburgh
                                      Born 1944                                                         Born 1952
                                      Swiss Citizen                                                     US Citizen




      David W. Syz has been a member of the Board and the Audit          Richard E. Thornburgh has been a member of the Board and
      Committee since 2004. His term as a member of the Board            the Risk Committee since 2006 and the Chairman of the Risk
      expires at the AGM in 2013. The Board has determined him to        Committee and a member of the Chairman’s and Governance
      be independent under the Group’s independence standards.           Committee since 2009. His term as a member of the Board
          After completing his studies at the Law School of the Uni-     expires at the AGM in 2012. The Board has determined him to
      versity of Zurich and receiving a doctorate from the same uni-     be independent under the Group’s independence standards.
      versity in 1972 and an MBA at INSEAD, Fontainebleau, in                Mr. Thornburgh has been Vice-Chairman of Corsair Capi-
      1973, Mr. Syz started his career as Assistant to the Director at   tal, New York, a private equity investment company since
      the Union Bank of Switzerland in Zurich and subsequently held      2006.
      the equivalent position at Elektrowatt AG, Zurich. In 1975, he         Mr. Thornburgh received a BBA from the University of
      was appointed Head of Finance at Staefa Control System AG,         Cincinnati, Ohio, in 1974, and an MBA from the Harvard Busi-
      Stäfa, and became Managing Director after four years. From         ness School, Massachusetts, in 1976, and then began his
      1982 to 1984, he was the CEO of Cerberus AG, Männedorf.            investment banking career in New York with The First Boston
      In 1985, Mr. Syz returned to Elektrowatt AG as Director and        Corporation, a predecessor firm of Credit Suisse First Boston.
      Head of Industries and Electronics. In 1996, he was appointed      In 1995, Mr. Thornburgh was appointed Chief Financial and
      CEO and Managing Director of Schweizerische Industrie-             Administrative Officer and a member of the Executive Board of
      Gesellschaft Holding AG, Neuhausen.                                Credit Suisse First Boston. In 1997, he was appointed mem-
          Appointed State Secretary in 1999, Mr. Syz took charge of      ber of the Group Executive Board, where he served until
      the new State Secretariat for Economic Affairs, a function         2005. From 1997 to 1999, Mr. Thornburgh was the CFO of
      from which he retired in 2004.                                     Credit Suisse Group and, from 1999 to 2002, he was Vice-
          Mr. Syz has been the Chairman of the Board of Directors        Chairman of the Executive Board of Credit Suisse First
      of Huber & Suhner AG, Pfäffikon, since 2005, Vice-Chairman         Boston. In addition, he performed the function of CFO of
      from 2004 to 2005, and the Chairman of the Board of Direc-         Credit Suisse First Boston from May 2000 through 2002.
      tors of ecodocs AG, Zollikon, since 2004. Moreover, he has         From 2003 to 2004, he was the CRO of Credit Suisse Group.
      been the Chairman of the Supervisory Board of the Climate          In 2004, he was appointed Executive Vice-Chairman of Credit
      Cent Foundation since 2005, an organization mandated with          Suisse First Boston.
      the implementation of the carbon dioxide reduction program             Mr. Thornburgh has also served on the Boards of Directors
      according to the Kyoto Protocol.                                   of New Star Financial Inc., Boston, since 2006, and CapStar
                                                                         Bank, Nashville, since 2008. Furthermore, he serves on the
                                                                         Executive Committee of the University of Cincinnati Founda-
                                                                         tion and the Investment Committee of the University of Cincin-
                                                                         nati.
                                                                                 Corporate Governance and Compensation              167
                                                                                                          Corporate Governance




                                John Tiner                                                        Anton van Rossum
                                Born 1957                                                         Born 1945
                                British Citizen                                                   Dutch Citizen




John Tiner has been a member of the Board and the Audit            Anton van Rossum has been a member of the Board since
Committee since the AGM in 2009. His term as member of             2005 and a member of the Risk Committee since 2008. From
the Board expires at the AGM in 2012. The Board has deter-         2005 to 2008, he served on the Compensation Committee.
mined him to be independent under the Group’s independence         His term as a member of the Board expires at the AGM in
standards.                                                         2011. The Board has determined him to be independent under
    Mr. Tiner is the CEO of Resolution Operations LLP, a pri-      the Group’s independence standards.
vately owned advisory firm which provides services to Resolu-          Mr. van Rossum was the CEO of Fortis from 2000 to
tion Ltd., a company listed on the London Stock Exchange           2004. He was also a member of the Board of Directors of
that acquires and restructures businesses in the life insurance,   Fortis and chaired the boards of the principal subsidiaries of
asset management, general insurance, banking and diversified       the group during this time.
general financial sectors to realize value for its shareholders.       Prior to that, Mr. van Rossum worked for 28 years with
He has held this position since September 2008.                    McKinsey and Company, where he led a number of top man-
    Mr. Tiner was previously CEO of the FSA, a position he         agement consulting assignments with a focus on the banking
held from 2003 to 2007. He initially joined the FSA in 2001        and insurance sectors. He was elected Principal and a Direc-
as Managing Director of the Consumer Insurance and Invest-         tor of the firm in 1979 and 1986, respectively.
ment Directorate. While at the FSA, he was also a member of            Mr. van Rossum studied Economics and Business Adminis-
the Managing Board of the Committee of European Insurance          tration at the Erasmus University in Rotterdam, where he
and Occupational Pensions Regulators and Chairman of the           obtained a bachelor’s degree in 1965 and a master’s degree
Committee of European Securities Regulators – Standing             in 1969.
Committee on Accounting and Auditing. Before joining the               Mr. van Rossum is a member of the Supervisory Board of
FSA, Mr. Tiner was a Managing Partner at Arthur Andersen and       Munich Re AG, an international re-insurance and primary
was responsible for its worldwide financial services practice.     insurance group, and chairs the Supervisory Board of Royal
    Mr. Tiner is a member of the Boards of Directors of Lucida     Vopak NV, Rotterdam, an international oil, chemicals and LNG
Plc, a UK-based insurance company, and of Friends Provident        storage group. In addition, he is a member of the Board of
Holdings and Friends Provident Plc, UK-based life and pen-         Directors of Solvay SA, Brussels, an international chemicals
sion company, and a member of the Advisory Board of Corsair        and plastics company, a member of the Supervisory Board of
Capital, a private equity investment company. He is also a         Rodamco Europe NV, Amsterdam, a commercial real estate
member of the Advisory Board of the Centre for Corporate           investment group, and chairs the Supervisory Board of Eras-
Reputation and Visiting Fellow of Oxford University.               mus University, Rotterdam. He also chairs the Board of
    In recognition of his contribution to the financial services   Trustees of the Netherlands Economics Institute and sits on
industry, Mr. Tiner was awarded Commander of the British           the boards of several cultural, philanthropic and educational
Empire in 2008 and he was made an Honorary Doctor of Let-          institutions.
ters at his former college, Kingston University, in 2010.
168




                                     Peter F. Weibel                    Honorary Chairman of Credit Suisse Group
                                     Born 1942                          Rainer E. Gut
                                     Swiss Citizen                      Born 1932
                                                                        Swiss Citizen
                                                                        Rainer E. Gut was appointed the Honorary Chairman of Credit
                                                                        Suisse Group in 2000, after he retired as Chairman, a position
                                                                        he held since 1986. Mr. Gut was a member of the Board of
                                                                        Directors of Nestlé SA, Vevey, from 1981 to 2005, whereof
                                                                        Vice-Chairman from 1991 to 2000 and Chairman from 2000
                                                                        to 2005.
                                                                            As Honorary Chairman, Mr. Gut does not have any function
                                                                        in the governance of the Group and does not attend the meet-
                                                                        ings of the Board.
      Peter F. Weibel has been a member of the Board and the
      Chairman’s and Governance Committee and the Chairman of           Secretaries of the Board
      the Audit Committee since 2004. His term as a member of           Pierre Schreiber
      the Board expires at the AGM in 2012. The Board has deter-        Joan E. Belzer
      mined him to be independent under the Group’s independence
      standards and a financial expert within the meaning of SOX.
          After completing his studies in Economics at the University
      of Zurich in 1968, including a doctorate in 1972, and after
      working as a consultant at IBM Switzerland for three years,
      Mr. Weibel joined the Central Accounting Department at UBS
      in 1975 and later became a Senior Vice President in its Cor-
      porate Banking division. In 1988, he was appointed CEO of
      Revisuisse, one of the predecessor companies of Pricewater-
      houseCoopers AG, Zurich, and served as a member of the
      PricewaterhouseCoopers Global Oversight Board from 1998
      to 2001. He retired from his function as the CEO of Pricewa-
      terhouseCoopers AG, Zurich, in 2003.
          Mr. Weibel is the chairman of the Executive MBA Program
      of the University of Zurich, a member of the Board of Direc-
      tors of the Greater Zurich Area AG, serves on the Swiss Advi-
      sory Council and the Executive Committee of the American
      Swiss Foundation and is a member of the Senior Advisory
      Council of the Swiss-American Chamber of Commerce. He
      also serves on the Board of Directors of the Careum Founda-
      tion and chairs the Pestalozzi Foundation, the Braille without
      Borders Foundation (Switzerland) and the Zurich Art Festival.
                                                                                                                     Corporate Governance and Compensation                         169
                                                                                                                                                   Corporate Governance




Executive Board

Members of the Executive Board                                                                   ects and business developments in the divisions, regions and
The Executive Board is responsible for the day-to-day opera-                                     in the Shared Services functions and establishes Group-wide
tional management of the Group. It develops and implements                                       policies.
the strategic business plans for the Group overall as well as                                        The composition of the Executive Board of the Group and
for the principal businesses, subject to approval by the Board.                                  the Bank is identical.
It further reviews and coordinates significant initiatives, proj-


Members of the Executive Board

                                                                                                                                        Executive Board              Organiza-
                                                                                                                                          member since               tional role

December 31, 2010
Brady W. Dougan, CEO                                                                                                                             2003                     CEO
Osama S. Abbasi, CEO Credit Suisse Asia Pacific 1                                                                                                2010           Regional Head
Walter Berchtold, CEO Credit Suisse Private Banking                                                                                              2003           Divisional Head
Romeo Cerutti, General Counsel                                                                                                                   2009     Shared Services Head
Tobias Guldimann, CRO                                                                                                                            2004     Shared Services Head
Fawzi Kyriakos-Saad, CEO Credit Suisse EMEA 2                                                                                                    2010           Regional Head
Karl Landert, CIO                                                                                                                                2009     Shared Services Head
David R. Mathers, CFO 1                                                                                                                          2010     Shared Services Head
Hans-Ulrich Meister, CEO Credit Suisse Switzerland                                                                                               2008           Regional Head
Antonio C. Quintella, CEO Credit Suisse Americas 2                                                                                               2010           Regional Head
Robert S. Shafir, CEO Asset Management                                                                                                           2007           Divisional Head
Pamela A. Thomas-Graham, Chief Talent, Branding and Communications Officer 3                                                                     2010     Shared Services Head
Eric M. Varvel, CEO Investment Banking                                                                                                           2008           Divisional Head

1                                             2                                          3
    Appointed member as of October 1, 2010.       Appointed member as of July 1, 2010.       Appointed member as of January 10, 2010.



In September 2010, Renato Fassbind, CFO, and Kai S. Nar-
golwala, CEO Credit Suisse Asia Pacific, stepped down from
the Executive Board. In November 2010, Paul Calello, Chair-
man of Investment Banking, passed away.
170




      Biographies of the Executive Board members                             Mr. Abbasi holds a Bachelor of Science in Economics from
                                                                         the Wharton School of Business at the University of Pennsyl-
                                      Brady W. Dougan                    vania. Prior to assuming the role of CEO of Credit Suisse Asia
                                      Born 1959                          Pacific, he was head of the Equity department in Asia Pacific
                                      US Citizen                         and a member of the Global Equity Management Committee
                                                                         and the Investment Banking Division Management Committee.
                                                                         Prior to this, Mr. Abbasi was Head of Global Securities for
                                                                         Non-Japan Asia and Australia, responsible for both the Equi-
                                                                         ties and Fixed Income departments, and Head of European
                                                                         Securities.
                                                                             Mr. Abbasi joined Credit Suisse Financial Products, the
                                                                         former derivatives subsidiary of Credit Suisse First Boston, in
                                                                         1996, from Bankers Trust, where he worked in various trading
                                                                         and marketing positions in Fixed Income and Equities.
                                                                             Mr. Abbasi does not hold any significant board member-
      Brady W. Dougan has been the CEO since 2007. Prior to that,        ships.
      he was the CEO Investment Banking and the CEO of Credit
      Suisse Americas. He has served on the Executive Board since                                        Walter Berchtold
      2003.                                                                                              Born 1962
          Mr. Dougan received a BA in Economics in 1981 and an                                           Swiss Citizen
      MBA in finance in 1982 from the University of Chicago, Illi-
      nois. After starting his career in the derivatives group at
      Bankers Trust, he joined Credit Suisse First Boston in 1990.
      He was the Head of the Equities division for five years before
      he was appointed the Global Head of the Securities division in
      2001. From 2002 to July 2004, he was the Co-President of
      Institutional Securities at Credit Suisse First Boston, and from
      2004 until 2005, he was CEO of Credit Suisse First Boston
      and, after the merger with Credit Suisse in May 2005, he was
      the CEO of Investment Banking until 2007.
          Mr. Dougan has been a member of the Board of Directors         Walter Berchtold has been the CEO of Private Banking at
      of Humacyte Inc., a biotechnology company, since 2005.             Credit Suisse since 2006 and a member of the Executive
                                                                         Board since 2003.
                                      Osama S. Abbasi                        After obtaining a commercial diploma, Mr. Berchtold joined
                                      Born 1968                          Credit Suisse First Boston Services AG, Zurich, in 1982, and,
                                      British Citizen                    a year later, transferred as a trader to the precious metal and
                                                                         currency options unit of Valeurs White Weld SA, in Geneva,
                                                                         which was later renamed Credit Suisse First Boston Futures
                                                                         Trading SA. In 1987, he was given the task of heading the
                                                                         Japanese convertible notes trading team, and in 1988, he
                                                                         assumed shared responsibility for all the business activities of
                                                                         Credit Suisse First Boston Futures Trading AG in Zurich.
                                                                             In 1991, Mr. Berchtold joined Credit Suisse in Zurich as
                                                                         the Head of Arbitrage in the Securities Trading department. In
                                                                         the following year, he became the Head of the Equity Deriva-
                                                                         tives Trading department. In 1993, he managed the Equity
      Osama S. Abbasi has been the CEO of Credit Suisse’s Asia           Trading unit and, in 1994, he took on overall responsibility for
      Pacific region and a member of the Executive Board since           Credit Suisse’s Securities Trading & Sales activities globally.
      October 2010.                                                          From 1997 to 2003, Mr. Berchtold was the Head of Trad-
                                                                         ing and Sales of Credit Suisse First Boston, Switzerland and
                                                                                   Corporate Governance and Compensation              171
                                                                                                            Corporate Governance




thereafter became the Country Manager of Credit Suisse First                                        Tobias Guldimann
Boston, where he was responsible for the entire Swiss busi-                                         Born 1961
ness of Credit Suisse First Boston. From 2003 to July 2004,                                         Swiss Citizen
he was the Head of Trading and Sales at Credit Suisse Finan-
cial Services and, in April 2004, he was appointed CEO of
Banking at Credit Suisse Financial Services. In July 2004, he
was the CEO of the former Credit Suisse, a position he held
until the merger with Credit Suisse First Boston in May 2005.
Between May and December, 2005, he was the CEO of Credit
Suisse.
    Mr. Berchtold is a member of the Board of the Swiss
Bankers Association and several philanthropic and cultural
foundations.
                                                                     Tobias Guldimann has been the CRO of Credit Suisse since
                                 Romeo Cerutti                       June 2009. He has been a member of the Executive Board in
                                 Born 1962                           the role of Group CRO since 2004.
                                 Swiss and Italian Citizen               Mr. Guldimann studied Economics at the University of
                                                                     Zurich and received a doctorate from the same university in
                                                                     1989. He joined Credit Suisse’s Internal Audit Department in
                                                                     1986 before transferring to Investment Banking in 1990. He
                                                                     later became the Head of Derivatives Sales in 1992, the Head
                                                                     of Treasury Sales in 1993 and the Head of Global Treasury
                                                                     Coordination at Credit Suisse in 1994. In 1997, he became
                                                                     responsible for the management support of the CEO of Credit
                                                                     Suisse First Boston before becoming the Deputy CRO of
                                                                     Credit Suisse Group, a function he held from 1998 to July
                                                                     2004. From 2002 to 2004, he also served as the Head of
Romeo Cerutti has been the Group General Counsel and a               Strategic Risk Management at Credit Suisse.
member of the Executive Board since April 2009. Prior to that,           Mr. Guldimann has been a member of the Foundation
he was General Counsel of the Private Banking division from          Board of the International Financial Risk Institute and Chair-
2006 to 2009 and the global Co-Head of Compliance of                 man since 2010.
Credit Suisse from 2008 to 2009.
    Before joining Credit Suisse, Mr. Cerutti was a partner of
the Group Holding of Lombard Odier Darier Hentsch & Cie,
from 2004 to 2006, and the Head of Corporate Finance at
Lombard Odier Darier Hentsch & Cie from 1999 to 2006.
    Prior to that position, Mr. Cerutti was in private practice as
an attorney-at-law with Homburger Rechtsanwälte in Zurich
from 1995 to 1999 and with Latham and Watkins in Los
Angeles from 1993 to 1995.
    Mr. Cerutti studied law at the University of Fribourg and
obtained his doctorate in 1990. He was admitted to the bar of
the canton of Zurich in 1989 and the bar of the state of Cali-
fornia in 1992. Mr. Cerutti also holds a Master of Laws from
the University of California, School of Law, Los Angeles.
    Mr. Cerutti has been a member of the Board of Trustees of
the University of Fribourg since 2006.
172




                                                                    Brady Dougan




                     Walter Berchtold




      Karl Landert




                                                 Tobias Guldimann


                          Pamela Thomas-Graham
                                                                               Corporate Governance and Compensation      173
                                                                                                   Corporate Governance

          Tobias Guldimann and Romeo Cerutti




                                                                                Robert Shafir




           David Mathers




                                                                                     Eric Varvel




Osama Abbasi, Fazwi Kyriakos-Saad, Hans-Ulrich Meister and Antonio Quintella
174




                                     Fawzi Kyriakos-Saad                   Before joining Credit Suisse, Mr. Landert served as the
                                     Born 1962                         CIO and Head of Global IT Management of Novartis Pharma
                                     British and Lebanese Citizen      AG (Switzerland) from 1998 to 2001. Between 1985 and
                                                                       1998, he held various management positions in sales and sys-
                                                                       tems engineering at IBM Switzerland.
                                                                           Mr. Landert studied at the Swiss Federal Institute of Tech-
                                                                       nology in Zurich and received his degree in Physics in 1984.
                                                                           Mr. Landert is a member of the Boards of Directors of the
                                                                       Swiss IT Leadership Forum, ICT Switzerland and the Founda-
                                                                       tion for IT Professional Education.

                                                                                                      David R. Mathers
                                                                                                      Born 1965
      Fawzi Kyriakos-Saad has been the CEO of Credit Suisse                                           British Citizen
      EMEA and a member of the Executive Board since July 2010.
      He is also the Co-Head of the Global Emerging Markets
      Council.
          Mr. Kyriakos-Saad holds a Bachelor of Civil Engineering
      from the American University of Beirut and an MBA from
      Columbia University, New York.
          Prior to assuming the role of CEO of the EMEA region in
      July 2010, Mr. Kyriakos-Saad was the CEO of Russia, the
      countries of the Commonwealth of Independent States and
      Turkey for Credit Suisse. He joined Credit Suisse in 2006 from
      JPMorgan Chase, where he worked in a variety of senior fixed     David Mathers has been the CFO of Credit Suisse Group and
      income and emerging market management roles. Before join-        a member of the Executive Board since October 2010.
      ing JPMorgan Chase, he spent eight years at Goldman Sachs            Mr. Mathers holds an MA in Natural Sciences from the
      in New York and London.                                          University of Cambridge, England.
          Mr. Kyriakos-Saad is a member of the Board of Directors          Prior to his appointment as CFO, Mr. Mathers was the
      of the Lebanese International Finance Executives, a non-profit   Head of Finance and the COO for Investment Banking in New
      organization.                                                    York and London from 2007 to 2010. In this role, he was
                                                                       responsible for Investment Banking Finance, Operations,
                                     Karl Landert                      Expense Management and Strategy. Mr. Mathers started his
                                     Born 1959                         career as a research analyst at HSBC James Capel in 1987
                                     Swiss Citizen                     and became Global Head of Equity Research in 1997. He
                                                                       joined Credit Suisse in 1998, working in a number of senior
                                                                       positions in Credit Suisse’s Equity business, including the
                                                                       Director of European Research and the Co-Head of European
                                                                       Equities.
                                                                           Mr. Mathers does not hold any significant board member-
                                                                       ships.




      Karl Landert has been the CIO of Credit Suisse since 2008
      and a member of the Executive Board since June 2009. Pre-
      viously, he was the CIO of Private Banking. He joined Credit
      Suisse in 2001 as the Head of Application Development and
      he was appointed the Head of IT in 2004.
                                                                               Corporate Governance and Compensation               175
                                                                                                        Corporate Governance




                               Hans-Ulrich Meister                   Mr. Quintella holds a BA in Economics from Pontifícia Uni-
                               Born 1959                         versidade Católica of Rio de Janeiro and an MBA from the
                               Swiss Citizen                     London Business School. Mr. Quintella joined Credit Suisse in
                                                                 1997 from ING Barings as a senior relationship banker in the
                                                                 Investment Banking department and was named CEO of
                                                                 Credit Suisse Brazilian operations, in 2003. As the CEO of
                                                                 Brazil, he oversaw the expansion of the Bank’s presence in
                                                                 the Brazilian market, including the acquisition of Hedging-
                                                                 Griffo, a leading independent asset management and private
                                                                 banking firm in Brazil, in 2006.
                                                                     Mr. Quintella is a member of the Board of Directors of
                                                                 Febraban, the Brazilian bank association, and is a member of
                                                                 the global advisory council of the London Business School.
Hans-Ulrich Meister has been the CEO of Credit Suisse
Switzerland, the Head of Private and Business Banking                                           Robert S. Shafir
Switzerland and a member of the Executive Board since Sep-                                      Born 1958
tember 2008.                                                                                    US Citizen
    Mr. Meister graduated from the University of Applied Sci-
ences in Zurich, in 1987, majoring in Economics and Business
Administration. In addition, he attended Advanced Manage-
ment Programs at the Wharton School, University of Pennsyl-
vania in 2000 and the Harvard Business School in 2002.
    Before joining Credit Suisse in 2008, Mr. Meister spent 25
years with UBS. Among the roles he had were the Head of
Corporate Banking Region Zurich from 1999 to 2002, the
Head of Large Corporates and Multinationals from 2003 to
2005 and the Head of Business Banking from 2005 to 2007.
From 2002 to 2003, he worked on group projects in the area of    Robert Shafir has been the CEO of Asset Management since
Wealth Management, based in New York. From 2004 to 2007,         April 2008 and a member of the Executive Board since August
Mr. Meister was a member of UBS’s Group Managing Board.          2007. He held the position of CEO of Credit Suisse Americas
    Mr. Meister has been a member of the Foundation Board        until July 2010.
of the Swiss Finance Institute since 2008.                           Mr. Shafir received a BA in Economics from Lafayette Col-
                                                                 lege, Pennsylvania, in 1980, and an MBA from Columbia Uni-
                               Antonio C. Quintella              versity, Graduate School of Business, New York, in 1984.
                               Born 1966                             Mr. Shafir joined Credit Suisse from Lehman Brothers,
                               Brazilian Citizen                 where he worked for 17 years, having served as the Head of
                                                                 Equities as well as a member of their Executive Committee.
                                                                 He also held other senior roles, including the Head of Euro-
                                                                 pean Equities and the Global Head of Equities Trading, and
                                                                 played a key role in building Lehman’s equities business into a
                                                                 global, institutionally focused franchise. Prior to that, he
                                                                 worked at Morgan Stanley in the preferred stock business
                                                                 within the fixed income division.
                                                                     Mr. Shafir is a member of the Board of Directors of the
                                                                 Cystic Fibrosis Foundation and the Dwight School Foundation.

Antonio Quintella has been the CEO of Credit Suisse Americas
and a member of the Executive Board since July 2010. He is
also the Co-Head of the Global Emerging Markets Council.
176




                                    Pamela A. Thomas-Graham                                           Eric M. Varvel
                                    Born 1963                                                         Born 1963
                                    US Citizen                                                        US Citizen




      Pamela Thomas-Graham has been the Chief Talent, Branding        Eric Varvel has been the CEO Investment Banking since Sep-
      and Communications Officer and a member of the Executive        tember 2009 (acting CEO between September 2009 until July
      Board since January 2010.                                       2010) and a member of the Executive Board since February
          Prior to joining the Group, Ms. Thomas-Graham was a         2008.
      Managing Director in the private equity group of Angelo, Gor-       Mr. Varvel holds a BA in Business Finance from Brigham
      den & Co., a New York-based investment management firm,         Young University, Utah.
      from 2008 to 2010. She previously served as Group Presi-            Prior to his current function, Mr. Varvel was the CEO of
      dent of Liz Claiborne Inc.’s women’s wholesale apparel busi-    Credit Suisse EMEA, the Co-Head of the Global Investment
      ness from 2005 to 2008. Ms. Thomas-Graham was at NBC            Banking department and the Head of the Global Markets
      for six years from 1999 to 2005, where she served as Presi-     Solutions Group in the Investment Banking division of Credit
      dent, CEO and Chairwoman of CNBC television and a Director      Suisse for over three years, based in New York. Before that,
      of CNBC International. She also served as the President and     Mr. Varvel spent 15 years in the Asia Pacific region in a variety
      CEO of CNBC.com. Prior to that, she worked at McKinsey &        of senior roles, including the Head of Investment Banking and
      Company for ten years from 1989 to 1999.                        Emerging Markets Coverage for the Asia Pacific region ex-
          Ms. Thomas-Graham obtained a BA in Economics from           Japan and the Head of Fixed Income Sales and Corporate
      Harvard University in 1985, a JD from Harvard Law School in     Derivative Sales. During that time, Mr. Varvel was based in
      1989 and an MBA from Harvard Business School in 1989.           Tokyo, Jakarta and Singapore.
          Ms. Thomas-Graham is a member of the Board of Direc-            Mr. Varvel joined Credit Suisse in 1990. Previously, he
      tors of the Clorox Company. She is also a member of the         worked as an analyst for Morgan Stanley in its investment
      Council on Foreign Relations and the Economic Club of New       banking department in New York and Tokyo.
      York, and sits on the Boards of the New York City Opera and         Mr. Varvel is a member of the Board of Directors of the
      the Parsons School of Design. She is a member of the Visiting   Qatar Exchange.
      Committee for Harvard Business School.
                                                                                    Corporate Governance and Compensation             177
                                                                                                            Corporate Governance




Remembering Paul Calello (1961 – 2010)

In November, Paul Calello, Chairman of Investment Banking
and a member of our Executive Board, passed away from non-
Hodgkin’s Lymphoma at the age of 49. It is a great loss for
Credit Suisse, the entire financial community and all those who
were touched by Paul’s remarkable drive and energy.
    CEO Brady Dougan, who worked with Paul Calello for over
25 years, described him as: “An outstanding leader, and a
down-to-earth, very human colleague who forged strong rela-
tionships and made a positive difference in the world around
him. He will be missed greatly, but his spirit and accomplish-
ments will remain a part of Credit Suisse.”
    Mr. Dougan continued: “Paul made an enormous contribu-
tion to Credit Suisse and the financial industry over many
years. He played a pivotal role in the creation of the equity
derivatives market, and as a founding member of Credit
Suisse Financial Products, helped build it into one of the most
significant derivatives firms in the industry. He ran many
important businesses for Credit Suisse and expanded our
presence globally, most notably in Asia Pacific, where he led
Credit Suisse’s dramatic growth across the region. In 2007,
Paul was named CEO of Investment Banking and did an
incredible job, working with his management team, to navigate
the market crisis and bring the franchise out of the downturn
stronger and well positioned for the new environment.”
    In addition to his business achievements, Paul will also be       In October 2010, Columbia Business School announced the
remembered for his engagement on policy issues affecting the          establishment of the Paul Calello Professorship in Leadership
global financial system. He was the first industry leader to          and Ethics. This permanent professorship was endowed by a
advocate consistent, effective regulation of derivative instru-       small group of Credit Suisse colleagues who worked with Paul
ments globally, at a time when this was highly controversial.         over the years, and who wanted to honor his contribution to
Earlier this year, he co-authored with Wilson Ervin, a Credit         the Bank and its people. The Calello Professorship will
Suisse colleague who serves as Special Advisor to the CEO,            advance academic scholarship and research on aspects of
an op-ed outlining a “bail-in” concept to address the failure of      business life that Paul exemplified throughout his career and
a large financial institution without a costly tax-payer “bail-out”   that are of critical importance to the future.
– an innovative idea that has continued to gain ground in sen-            With his extraordinary energy and enthusiasm, he was able
ior policy circles.                                                   to achieve much in the short time he was given.
    Paul represented Credit Suisse with many leading policy,
educational and cultural organizations. He served as a trustee
of the Credit Suisse Foundation and was a member of the
Board of Overseers of the Columbia Business School and the
Board of Directors of the New York Philharmonic. Paul also
served on the International Board of Advisors to Former Philip-
pines President Arroyo, the Council on Foreign Relations and
the Economic Club of New York.
178




      Additional information                                                  Internal Audit performs an independent and objective
                                                                         assurance and consulting function that is designed to add
      Changes of control and defense measures                            value to our operations. Using a systematic and disciplined
      Duty to make an offer                                              approach, the Internal Audit team evaluates and enhances the
      Swiss law provides that anyone who, directly or indirectly or      effectiveness of our risk management, control and governance
      acting in concert with third parties, acquires 33 1/3% or more     processes.
      of the voting rights of a listed Swiss company, whether or not          Internal Audit is responsible for carrying out periodic audits
      such rights are exercisable, must make an offer to acquire all     in line with the Regulations of Internal Audit approved by the
      of the listed equity securities of such company, unless the AoA    Audit Committee. It regularly and independently assesses the
      of the company provides otherwise. Our AoA does not include        risk exposure of our various business activities, taking into
      a contrary provision. This mandatory offer obligation may be       account industry trends, strategic and organizational decisions,
      waived under certain circumstances by the Swiss Takeover           best practice and regulatory matters. Based on the results of
      Board or the Swiss Financial Market Supervisory Authority          its assessment, Internal Audit develops detailed annual audit
      (FINMA). If no waiver is granted, the mandatory offer must be      objectives, defining areas of audit concentration and specify-
      made pursuant to procedural rules set forth in the SESTA and       ing resource requirements for approval by the Audit Commit-
      the implementing ordinances.                                       tee.
                                                                              As part of its efforts to achieve best practice, Internal Audit
      Clauses on changes of control                                      regularly benchmarks its methods and tools against those of
      Subject to certain provisions in the Group’s employee compen-      its peers. In addition, it submits periodic internal reports and
      sation plans providing for the treatment of outstanding awards     summaries thereof to the management teams as well as the
      in the case of a change of control, there are no provisions that   Chairman and the Chairman of the Audit Committee. The
      require the payment of extraordinary benefits in the case of a     Head of Internal Audit reports to the Audit Committee at least
      change of control in the agreements and plans benefiting           quarterly and more frequently as appropriate. Internal Audit
      members of the Board and the Executive Board or any other          coordinates its operations with the activities of the external
      members of senior management. Specifically, there are no           auditor for maximum effect.
      contractually agreed severance payments in the case of a
      change of control of the Group. Moreover, none of the              External auditors
      employment contracts with members of the Executive Board or        Our statutory auditor is KPMG AG, Badenerstrasse 172, 8004
      other members of senior management provides for extraordi-         Zurich, Switzerland. The mandate was first given to KPMG for
      nary benefits that would be triggered by a change of control.      the business year 1989/1990. The lead Group engagement
                                                                         partners are Marc Ufer, Global Lead Partner (since 2010),
      Internal and external auditors                                     Simon Ryder, Group Engagement Partner (since 2010), and
      Auditing forms an integral part of corporate governance at the     Philipp Rickert, Leading Bank Auditor (since 2006).
      Group. Both internal and external auditors have a key role to          In addition, we have mandated BDO AG, Fabrikstrasse 50,
      play by providing an independent assessment of our opera-          8031 Zurich, Switzerland, as special auditor for the purposes
      tions and internal controls.                                       of issuing the legally required report for capital increases in
                                                                         accordance with Article 652f of the Swiss Code of Obliga-
      Internal Audit                                                     tions, mainly relating to the valuation of companies in consid-
      Our Internal Audit function comprises a team of around 250         eration of the qualified capital increases involving contributions
      professionals, more than 220 of whom are directly involved in      in kind.
      auditing activities. The Head of Internal Audit, Heinz Lei-            The Audit Committee monitors and pre-approves the fees
      bundgut, reports directly to the Chairman of the Audit Commit-     to be paid to KPMG for its services.
      tee.
                                                                                                                         Corporate Governance and Compensation                                         179
                                                                                                                                                               Corporate Governance




Fees paid to external auditors

                                                                                                                                                             2010           2009      % change

Fees paid to external auditors (CHF million)
Audit services 1                                                                                                                                              44.0           42.0                  5
Audit-related services 2                                                                                                                                      13.8           16.0            (14)
Tax services 3                                                                                                                                                  7.8            8.4             (7)

1
  Audit fees include the integrated audit of the Group’s consolidated and statutory financial statements, interim reviews and comfort and consent letters. Additionally it includes all
assurance and attestation services related to the regulatory filings of the Group and its subsidiaries. 2 Audit-related services are primarily in respect of: (i) reports related to the Group’s
compliance with provisions of agreements or calculations required by agreements; (ii) accounting advice; (iii) audits of private equity funds and employee benefit plans; and (iv) regulatory
advisory services. 3 Tax services are in respect of tax compliance and consultation services, including: (i) preparation and/or review of tax returns of the Group and its subsidiaries; (ii)
assistance with tax audits and appeals; and (iii) confirmations relating to the Qualified Intermediary status of Group entities.



KPMG attends all meetings of the Audit Committee. At each                                          permissible types of non-audit services, including audit-related
meeting, KPMG reports on the findings of its audit and/or                                          and tax services that have been pre-approved by the Audit
interim review work. The Audit Committee reviews on an                                             Committee. The Audit Committee pre-approves all other serv-
annual basis KPMG’s audit plan and evaluates the perform-                                          ices on a case-by-case basis. All KPMG services in 2010
ance of KPMG and its senior representatives in fulfilling its                                      were pre-approved. KPMG is required to report to the Audit
responsibilities. Moreover, the Audit Committee recommends                                         Committee periodically regarding the extent of services pro-
to the Board the appointment or replacement of the external                                        vided by KPMG and the fees for the services performed to
auditor, subject to shareholder approval as required by Swiss                                      date.
law.
    KPMG provides a report as to its independence to the                                           American Depositary Share fees
Audit Committee at least once a year. In addition, our policy on                                   Fees and charges for holders of ADS
the engagement of public accounting firms, which has been                                          In accordance with the terms of the Deposit Agreement,
approved by the Audit Committee, strives to further ensure an                                      Deutsche Bank Trust Company Americas, as depositary for
appropriate degree of independence of our external auditor.                                        the q ADS (the Depositary), may charge holders of our ADS,
The policy limits the scope of services that may be provided to                                    either directly or indirectly, fees or charges up to the amounts
us or any of our subsidiaries by KPMG to audit and certain                                         described below.


Fees and charges for holders of ADS

Fees
USD 5 (or less) per 100 ADS                     For the issuance of ADS, including issuances resulting from a distribution of shares, share dividends, share splits
(or portion thereof)                            and other property; for ADS issued upon the exercise of rights; and for the surrender of ADS for cancellation
                                                and withdrawal of shares.
USD 2 per 100 ADS                               For any distribution of cash to ADS registered holders, including upon the sale of rights or other entitlements.
Registration or transfer fees                   For the transfer and registration of shares on our share register to or from the name of the Depositary or its agent
                                                when the holder deposits or withdraws shares.

Charges
Expenses of the Depositary                      For cable, telex and facsimile transmissions (when expressly provided in the deposit agreement); and for converting
                                                foreign currency to US dollars.
Taxes and other governmental                    Paid, as necessary, to the Depositary or the custodian who pays certain charges on any ADS or share underlying
charges                                         an ADS, for example, stock transfer taxes, stamp duty or applicable interest or penalty thereon.
Other charges                                   Paid, as necessary, to the Depositary or its agents for servicing the deposited shares.
180




      The Depositary collects its fees for delivery and surrender of      Liquidation
      ADS directly from investors depositing shares or surrendering       Under Swiss law and our AoA, we may be dissolved at any
      ADS for the purpose of withdrawal or from intermediaries act-       time by a shareholders’ resolution which must be passed by:
      ing for them. The Depositary collects fees for making distribu-     p a supermajority of at least three quarters of the votes cast
      tions to holders by deducting those fees from the amounts dis-         at the meeting in the event we are to be dissolved by way
      tributed or by selling a portion of distributable property to pay      of liquidation; and
      the fees. The Depositary may generally refuse to provide fee        p a supermajority of at least two thirds of the votes repre-
      services until its fees for those services are paid.                   sented and an absolute majority of the par value of the
                                                                             shares represented at the meeting in other events.
      Amounts paid by the Depositary to the Group
      The Depositary has reimbursed the Group for NYSE listing            Dissolution by court order is possible if we become bankrupt.
      fees in recent years. This payment is not a contractual obliga-     Under Swiss law, any surplus arising out of liquidation (after
      tion, and the determination by the Depositary whether to reim-      the settlement of all claims of all creditors) is distributed to
      burse the Group for these fees is made on a yearly basis. For       shareholders in proportion to the paid-up par value of shares
      the years ending December 31, 2010 and 2009, the Deposi-            held.
      tary paid the Group USD 53,307 and USD 130,590, respec-
      tively, as reimbursement for its NYSE listing fees.
                                                                                  Corporate Governance and Compensation              181
                                                                                                                   Compensation




Compensation
Overview                                                            and reward their people, with more detailed regulation and
                                                                    guidance issued in various jurisdictions. Amid emerging regu-
This Compensation Report explains our compensation                  lation and market practices and in close dialogue with regula-
approach and provides our compensation disclosure for 2010.         tors and shareholders, we further modified our compensation
It is composed of the following sections:                           design for 2010 to make plans simpler and more transparent
p Objectives and governance;                                        and to strengthen the link between compensation and long-
p Compensation design;                                              term, sustainable performance.
p Compensation to members of the Executive Board;                       The changes we implemented for 2010 included an
p Compensation to members of the Board of Directors;                increase in base salaries and a corresponding decrease in per-
p Compensation awards and expenses for the Group; and               formance-based discretionary variable incentive awards to
p Compensation plans from prior years.                              ensure a more balanced mix between fixed and variable com-
                                                                    pensation. A higher proportion of variable awards was
The Group is committed to fair, balanced, performance-ori-          deferred, the vesting period was extended to four years and
ented compensation practices that align long-term employee          continue to be subject to future performance provisions. For
and shareholder interests. We believe in rewarding our              the Group overall, 60% of the variable awards for 2010 were
employees for performing in a way that creates sustainable          deferred compared to 40% for 2009. For the Executive
value for the Group and its shareholders over time. We strive       Board, all variable awards for 2010 were deferred. In order to
to take a leadership position in the industry in implementing       enhance transparency for all stakeholders, we simplified our
responsible compensation practices.                                 instruments for deferred awards, using share awards with no
    For 2010, we reduced total compensation, reflecting the         leverage and simplifying certain features of our cash-based
lower absolute performance of the Group compared to 2009.           Adjustable Performance Plan awards. We have enhanced our
Average total compensation for the Group was down 9% and            compensation disclosure for 2010, including the methodology
total discretionary variable incentive awards were down 27%         for determining variable awards for members of our Executive
compared to 2009. Average total compensation was down               Board. We also strengthened our compensation governance
34% for the CEO and down 32% for the Executive Board,               this year by issuing a formal compensation policy and amend-
excluding individuals who joined or left, compared to 2009.         ing our Code of Conduct in order to reinforce the link between
    During 2010, regulators around the world continued to           compensation and behavior, in particular with respect to com-
focus closely on how financial institutions choose to incentivize   pliance and risk management.

2010 compensation at a glance


Performance-based                            Long-term                                    Responsible
p Average total compensation                 p 60% of variable awards deferred            p Compensation approach based
  down 9%                                      and subject to future performance            on creating sustainable value for
p Variable awards down 27% and                 provisions                                   shareholders
  down 15% excluding effect of               p Vesting period extended to four            p Compensation plans simpler and
  increased base salaries                      years for deferred awards                    more transparent. Share awards
p Total compensation for the CEO             p 100% of variable awards for                  with no leverage. Adjustable
  down 34%                                     Executive Board members deferred             Performance Plan awards with
p Average total compensation                                                                claw-back feature
  for Executive Board down 32%                                                            p Maintaining responsible approach to
  (excluding joiners/leavers)                                                               compensation remains key priority
182




      The Compensation Committee is satisfied that this report            p are consistent with and promote effective risk manage-
      reflects the manner in which it has reviewed and set compen-          ment practices as well as our compliance and control cul-
      sation for 2010. The activities of the Compensation Commit-           ture;
      tee were executed in accordance with its mandate under the          p foster teamwork and collaboration across the Group;
      Organizational Guidelines and Regulations (OGR) and the             p take into account the long-term performance of the Group
      Compensation Committee Charter.                                       in order to create sustainable value for our shareholders;
          The Board of Directors (Board) recognizes and supports            and
      the involvement of its shareholders within the compensation         p are reviewed regularly and endorsed by an independent
      discussion. As it did last year, the Board has opted to submit        Compensation Committee.
      this compensation report to its shareholders for a consultative
      ballot at the Annual General Meeting (AGM) in line with the         Consistent with the objectives above, the Group applies a total
      recommendations in the Swiss Code of Best Practice.                 compensation approach. There are two principal components
                                                                          of total compensation, fixed and variable. The individual mix
                                                                          varies according to the employee’s seniority, business and
      Objectives and governance                                           location. Fixed compensation includes base salary, which
                                                                          reflects seniority, experience, skills and market practice. Per-
      Compensation objectives                                             formance-based discretionary variable incentive awards (vari-
      The Group’s ability to implement a comprehensive human cap-         able compensation) are awarded annually at the discretion of
      ital strategy and to attract, retain, reward and motivate tal-      the Group and vary depending on Group, business and individ-
      ented individuals is fundamental to the Group’s long-term suc-      ual performance. Variable compensation is awarded in the
      cess. Compensation is a key component of this strategy and          form of cash and deferred awards, which are subject to vari-
      aims to align employee and shareholder interests. The Group’s       ous deferral provisions and performance criteria. The Group’s
      objectives are to maintain compensation practices and plans         total compensation approach is illustrated below, and further
      that:                                                               details are provided in Compensation design.
      p support a performance culture that is based on merit and              The Group is committed to responsible compensation prac-
           differentiates and rewards excellent performance, both in      tices and plans. The need to reward our employees fairly and
           the short and long term, and recognizes our company val-       competitively based on performance is balanced with the
           ues;                                                           requirement of principled behavior and actions. The compen-
      p enable us to attract and retain employees and motivate            sation design has to contribute to the Group’s objectives in a
           them to achieve results with integrity and fairness;           way that does not encourage excessive risk taking or violation
      p award employees a fair mix of fixed and discretionary vari-       of applicable laws, guidelines and regulations, and also takes
           able incentive awards, which appropriately reflects the        into account the capital position and economic performance of
           value and responsibility of the role they perform day to day   the Group over the long term.
           and as a contribution to influencing appropriate behaviors
           and actions;
                                                                                    Corporate Governance and Compensation                183
                                                                                                                        Compensation




Total compensation approach


        Fixed compensation                                                  Variable compensation



                                                                                Deferred share-                 Deferred cash-
            Base salary                       Cash awards
                                                                                 based awards                   based awards


                                        Short-term incentive awards                        Long-term incentive awards
                                              paid in the first                              subject to performance
                                         quarter for previous year                          adjustment and forfeiture


     Salary level is based on                                 Discretionary variable incentive awards based
           function and                                       on Group, division and individual performance
    market compensation levels                                      and market compensation levels




Compensation governance                                               tion program remains competitive, is responsive to regulatory
The Compensation Committee of the Board is the supervisory            developments and in line with our compensation approach.
and governing body for compensation policy, practices and             Johnson Associates, Inc. is independent from our manage-
plans within the Group and has responsibility for determining,        ment and, in particular, does not provide any other services to
reviewing and proposing compensation for approval by the              us besides supporting the Compensation Committee.
Board. Consistent with its mandate stipulated in the Group’s              The Compensation Committee meets at least four times
OGR and its Charter (available on our website at www.credit-          per year. The Chairman of the Compensation Committee
suisse.com/governance), the Compensation Committee pro-               decides on the attendance of management, the independent
poses the overall pools for variable compensation, based on           compensation consultant and external legal counsel at the
the outcome of its annual performance review for the Group            committee meetings. The main meeting is held in January with
and the businesses. The Compensation Committee also                   the primary purpose of reviewing the performance of the busi-
assesses the individual performance of, and proposes com-             nesses and the respective management teams for the previous
pensation for, members of the Executive Board and Board and           year and determining and/or recommending to the Board for
certain other members of senior management.                           approval the overall compensation pools for the divisions and
    The Compensation Committee consists of not fewer than             the compensation payable to the members of the Board, the
three independent members of the Board. The members of                Executive Board, the head of Internal Audit and certain other
the Compensation Committee are Aziz R.D. Syriani (Chair-              members of senior management. During its performance
man), Robert H. Benmosche, Peter Brabeck-Letmathe and                 review, the Compensation Committee considers input from the
Walter B. Kielholz. Based on the criteria for determining inde-       Group’s internal control functions, including Risk Management,
pendence in the Swiss Code of Best Practice and New York              Legal and Compliance and Internal Audit, regarding control
Stock Exchange, the Group has deemed all four members of              and compliance issues, including any breaches of relevant
the Compensation Committee to be independent. The length              rules and regulations or the Group’s Code of Conduct.
of tenure a Board member has served is not a criterion for                Responding to specific regulatory guidelines set out by the
independence. Significant shareholder status is also not con-         Swiss Financial Market Supervisory Authority (FINMA), the US
sidered a criterion for independence unless the shareholding          Federal Reserve, the UK Financial Stability Authority and the
exceeds 10% of the Group’s share capital. For more informa-           Basel Committee on Banking Supervision regarding compen-
tion on how the Group determines the independence of its              sation for employees engaged in risk-taking activities, the
Board Members, refer to Corporate Governance – Board of               Compensation Committee expanded the scope of its compen-
Directors – Independence.                                             sation review process for 2010. The process now includes two
    The Compensation Committee is assisted in its work by             additional groups of employees, who are considered to have a
external legal counsel and Johnson Associates, Inc., a global         potentially material impact on the Group’s risk profile, and the
compensation consulting firm, to ensure that our compensa-
184




      Risk Committee is formally involved in the process. These                                    For more information on these groups, refer to Incorporating
      groups are:                                                                                  risk within the compensation process. The following table sets
      p senior control function personnel, consisting of senior                                    forth the approval authority for determining compensation pol-
         employees in the Shared Services functions with responsi-                                 icy and setting compensation for different groups of employ-
         bility for risk monitoring and control; and                                               ees.
      p individuals classified as material risk takers, who can
         potentially expose the Group to significant risk, such as
         certain traders.


      Approval authority

      Approval grid                                                                                                                                                              Authority
      Establishment or amendment of the Group’s compensation policy                                                  Board upon recommendation by the Compensation Committee
      Establishment or amendment of compensation plans                                                               Board upon recommendation by the Compensation Committee
      Setting variable compensation pools for the Group and the divisions                                            Board upon recommendation by the Compensation Committee
      Board compensation (including the Chairman’s compensation) 1                                                   Board upon recommendation by the Compensation Committee
      Compensation of the CEO and other Executive Board members                                                             Compensation Committee with information to the Board
      Compensation for the Head of Internal Audit                                        Compensation Committee upon consultation with the Chairman of the Audit Committee
      Compensation for senior control function personnel                                                                                                      Compensation Committee
      Compensation for employees classified as material risk takers                                                                                           Compensation Committee
      Compensation for other selected members of management                                                                                                   Compensation Committee

      1
        Board members with functional duties (including the Chairman): the Board member concerned does not participate in the decision involving his own compensation. Other Board
      members: Compensation comprises a base fee plus a fee for committee activity which may differ from committee to committee. These fees are subject to a decision by the full Board.



      During 2010, the Compensation Committee focused on fur-                                      Compensation policy and amended Code of Conduct
      ther development of our compensation design to ensure com-                                   The vast majority of decisions about individual compensation
      pliance with evolving regulations and increase the trans-                                    awards are made by line managers at all levels throughout the
      parency and understanding of our compensation practices and                                  organization. The Group strives to ensure that all line man-
      plans. Some of the Compensation Committee’s specific                                         agers apply a consistent and high set of standards when
      achievements during 2010 were:                                                               assessing the performance and behavior of employees. To this
      p the development and approval of an amended compensa-                                       aim, we prepared a comprehensive compensation policy during
          tion design for 2010 focused on making plans simpler,                                    2010 and made amendments to our Code of Conduct.
          clearer and non-leveraged;                                                                   The compensation policy reflects our efforts in 2010 to
      p the development, approval and communication of a Group-                                    review, refine and formalize our compensation principles and
          wide compensation policy, including implementation stan-                                 related processes and includes implementation standards. The
          dards;                                                                                   new compensation policy was approved in early 2011 by the
      p strengthening and formalizing the involvement of the inter-                                Board and is available on our website at www.credit-
          nal control functions in the compensation process with                                   suisse.com/compensation. The policy provides the foundation
          respect to considerations of risk, control and legal and                                 for sound compensation practices that support the Group’s
          compliance;                                                                              long-term strategic objectives. The following table summarizes
      p maintaining an active dialogue and consultation with                                       the key features of the compensation policy.
          FINMA about our compensation plans, as well as monitor-
          ing global regulatory and market trends with respect to
          compensation at financial institutions; and
      p increasing the transparency of our compensation disclo-
          sure, including how we determine compensation for mem-
          bers of the Executive Board.
                                                                                                        Corporate Governance and Compensation                            185
                                                                                                                                                  Compensation




The Group’s compensation policy framework


Our vision:
Maintain a responsible, performance-based compensation policy that is aligned with the long-term interests of our
employees and shareholders.

Our promise:
Strike the right balance between meeting shareholders’ expectations, paying our employees competitively and
responding appropriately to the regulatory environment.

Our approach:
Governance                                Performance alignment                      Individual compensation                   Compensation structure and
                                                                                     determination                             instruments

Principles:                               Principles:                                Principles:                               Principles:
p Clearly defined and documented          p Reward annual performance meas-          p Total compensation-based approach.      p Provide the appropriate balance of
governance procedures.                    ured relative to key performance indica-   p Facilitate competitiveness by paying    fixed and variable compensation consis-
p Independent Compensation Commit-        tors, annual performance and perform-      market-informed, competitive compen-      tent with risk alignment, position and
tee and committee advisors.               ance of competitors.                       sation levels for comparable roles and    role in the Group.
p Control functions have strategic and    p Business performance aligned:            experience, subject to performance.       p Significant portion of variable com-
tactical participation in the design of   Strong correlation with the annual per-    p Promote meritocracy by recognizing      pensation deferred and aligned with the
compensation plans.                       formance of a business, including risk-    individual performance, with particular   long-term performance of the Group and
p Policies, processes and plans are       related metrics and the amount of com-     emphasis on contribution, risk manage-    its divisions.
understandable, transparent and           pensation awards to employees.             ment, ethics and control.                 p Promote sound risk management
auditable.                                p Recognize and reward cross-divisional    p Equal compensation opportunity.         practices, and in particular, do not
p The impact and performance of           success.                                                                             create incentives to expose the Group
employees in roles that may expose the    p Award and differentiate compensation                                               to inappropriate material risk.
Group to significant risk are measured    based on individual performance and
by the Risk Committee and the             contributions.
Compensation Committee.
p Mandatory share holding require-
ments for executives.
p Compensation plans and overall
compensation expenses approved by
the Board.




The compensation policy also includes implementation stan-                               During 2010, we also amended our Code of Conduct. The
dards, which provide managers and employees with a detailed                          changes to the Code of Conduct were made to place a greater
description of our principles, programs and the defined stan-                        emphasis on the values and professional standards underpin-
dards and processes relating to the development, manage-                             ning our control and compliance culture. We have also
ment, implementation and governance of compensation. For                             changed the format of the Code of Conduct to better reinforce
line managers, we focused on their responsibilities in manag-                        to individuals what it means to apply it in the course of their
ing, administering and communicating compensation, with a                            daily work. Adherence to the Code of Conduct is mandatory
focus on risk awareness and compliance. For employees, we                            for all employees and Board members. Any breaches will have
provided more transparency on what factors influence com-                            a direct impact on the compensation of those individuals
pensation decisions and on our various practices and plans.                          involved. The revised Code of Conduct was approved by the
The compensation policy adheres to the compensation princi-                          Board in December 2010, and is available on our website at
ples set out by FINMA and other regulators and applies to all                        www.credit-suisse.com/code.
employees and compensation plans of the Group.
186




      Incorporating risk within the compensation process                    p material risk takers – employees with the ability to put
      Building on our initial efforts during 2009, we have strength-          material amounts of the Group’s capital at risk, such as
      ened our processes and governance in 2010 to ensure that                traders and others who are authorized to manage, super-
      our approach to compensation does not encourage excessive               vise or approve risk exposure that could have a material or
      risk taking and that significant attention is given to risk             significant effect on our financial results.
      throughout the performance assessment and compensation
      processes.                                                            The criteria for classifying individuals as covered employees
          At the divisional level, risk is taken into account in deter-     are approved by the Board upon recommendation by the Com-
      mining the variable compensation pools. The key risk-based            pensation and Risk Committees. Given the nature of the
      financial metric used to determine variable compensation pools        investment banking business, a majority of the covered
      of the divisions is economic profit. The economic profit of a         employees identified for 2010 were within the Investment
      division is income before taxes reduced by a charge for capital       Banking division. In addition to the annual performance
      usage. The charge for capital usage is calculated based on            assessment conducted by their direct line managers, the cov-
      three components:                                                     ered employees are also subject to a feedback process by
      p the value of q risk-weighted assets, calculated as set out          control functions, including Legal and Compliance, Risk Man-
          under the Basel II capital requirements, which measures           agement and Human Resources (within Talent, Branding and
          credit, market and operational risk;                              Communications), that are independent of the businesses.
      p the utilization of economic capital under our economic risk         The findings of Internal Audit reports are also considered
          capital framework, which we use as a consistent and com-          within this process. Feedback is provided to line managers for
          prehensive tool for risk management, including off-balance        consideration in the final performance assessment and indi-
          sheet risk, capital management and performance meas-              vidual compensation decision-making processes. The pro-
          urement; and                                                      posed variable compensation amounts for covered employees
      p the utilization of the Group’s balance sheet.                       are then subject to final review and approval by the Compen-
                                                                            sation Committee (refer to the table “Approval authority”). We
      The determination of variable compensation pools for the divi-        expect the process for determining covered employees and
      sions is discussed in further detail below. For more detailed         evaluating their management of risk to develop over time.
      information on risk-weighted assets, economic capital and our             Finally, the strengthening of the alignment of compensa-
      balance sheet statistics, refer to III – Treasury, Risk, Balance      tion with risk is also achieved through the modifications to our
      Sheet and Off-balance sheet.                                          compensation design discussed further below.
          At the individual level, risk is taken into account in the per-
      formance assessment and setting of variable compensation for          Performance alignment, determination and allocation of
      selected employees and groups of employees. Regulators, in            variable compensation
      particular, have placed increased emphasis and requirements           Consistent with our vision to provide responsible, perform-
      on the identification and management of employees who have            ance-based compensation, all employees are eligible for an
      the potential to take or manage risk at firms. In 2010, the           award of discretionary variable compensation. The amount is
      Group introduced a process to identify such employees and             determined by the nature of the business, breadth of role, role
      carry out specific review processes to set variable compensa-         location and performance of the employee and includes
      tion. Those individuals are collectively referred to as covered       detailed performance measurements at the Group, division and
      employees and include:                                                employee level as an integral part of the compensation
      p all members of the Executive Board;                                 process. Decisions about the amounts for variable compensa-
      p senior management – generally employees who report                  tion for individual employees are made within the constraints
          directly to a member of the Executive Board, are respon-          of the variable compensation pools at the Group and divisional
          sible for managing significant lines of business of the           levels. Accruals for the divisional and Group-wide variable
          Group or members of divisional management committees;             compensation pools are made by the Group throughout the
      p senior control function personnel – senior employees in             year. The Board regularly reviews the accruals and related
          the Shared Services functions of Finance, Risk Manage-            financial information, and makes adjustments at its discretion
          ment, Legal and Compliance and Talent, Branding and               to ensure that the overall size of the pool is consistent with
          Communications who have responsibility for monitoring             the Group’s compensation principles. An accrual, at the
          and controlling individuals or groups of individuals that         Group, or any other level, however, does not create legal rights
          manage material amounts of risk for the Group; and
                                                                                  Corporate Governance and Compensation                187
                                                                                                                    Compensation




or entitlements for employees to receive variable compensa-        performance criteria” in Competitive benchmarking and market
tion.                                                              trends. A deduction is also applied to the pool of each division
    The divisional variable compensation pools are not formula     to fund a variable compensation pool for Shared Services and
driven, but are subject to adjustments based on performance,       other support functions, with the total being based on the
the discretion of the CEO and the Compensation Committee.          Group-wide performance and qualitative measurements, rather
The methodology to determine the initial size of the variable      than the performance of the divisions that they support. The
compensation pools varies by division.                             pools may be approved as computed or adjusted, subject to
    For Private Banking, the basis for determining the variable    final review by the Compensation Committee and submission
compensation pool is the division’s income before taxes and        to the Board for final approval. In setting the final variable
before the variable compensation accrual, reduced by a charge      compensation pools, the Compensation Committee also con-
for capital usage. In Private Banking, capital usage is calcu-     siders discretionary factors, including non-financial metrics
lated as the cost of economic risk capital.                        related to ethics, risk, compliance and control. Other discre-
    For Investment Banking, the basis for determining the vari-    tionary factors such as business strategy, overall Group per-
able compensation pool is income before taxes and before the       formance and the market and regulatory environment are also
variable compensation accrual, reduced by a charge for capital     taken into account.
usage. Capital usage is calculated from a combination of risk-         Once the variable compensation pools have been set at the
weighted assets, economic risk capital and utilization of the      Group and divisional levels, each division allocates its pool to
Group’s balance sheet. As a result of this methodology,            business areas, with the same or similar performance metrics,
increased capital usage and transactions with a high risk          which are allocated to individual managers. Line managers
weighting result in an increased charge for capital usage and a    award variable compensation to individual employees based on
reduced variable compensation pool.                                individual and business performance, subject to the constraints
    For Asset Management, the basis for determining the vari-      of the pool available. Performance measurement of individual
able compensation pool for alternative investments is income       employees varies widely across the firm and depends on each
before taxes and before the variable compensation accrual.         individual’s specific function and scope of responsibility. To
For traditional investments, the basis for determining the vari-   measure the performance of employees in revenue-generating
able compensation pool is the short-term and long-term per-        areas, key quantitative factors such as revenue production and
formance against both peer groups and benchmarks.                  profitability will be considered, as well as qualitative factors,
    The initial variable compensation pool for each division is    such as client satisfaction, succession planning, compliance
subject to adjustment based on a detailed performance evalu-       and contribution to teamwork. Other quantitative factors taken
ation at the divisional as well as the Group level, taking into    into account at the individual level include market trends and
account the Group’s and the division’s key performance indi-       competitive levels of compensation.
cators and other absolute and relative performance criteria,           With this approach, variable compensation is not formula
including performance against peers. For specific peer per-        driven, but based on financial and non-financial metrics includ-
formance criteria, refer to the chart “2010 Peer groups and        ing ethics, risk, compliance and control.
188




      Relative distribution by region

      Managing directors                               Net revenues1              Compensation
                                                                                  and benefits

                  12%                                            10%                    13%
                               25%                                          28%                  28%




           38%
                                                        38%
                                                                                  35%                               p Switzerland
                               25%
                                                                                                                    p Europe, Middle East and Africa
                                                                            24%                  24%                p Americas
                                                                                                                    p Asia Pacific
      1
          Based on Core Results net revenues, excluding Corporate Center.




      Competitive benchmarking and market trends                                  peer group for 2010 consisted of UBS, Bank of America, Bar-
      The assessment of the economic and competitive environment                  clays, BNP Paribas, Citigroup, Deutsche Bank, Goldman
      is a further important element of our compensation process as               Sachs, HSBC, JPMorgan Chase and Morgan Stanley. BNP
      we strive for market-informed, competitive compensation lev-                Paribas and HSBC were added in April 2010 following the
      els for comparable roles, experience and geographic location                annual review to better reflect major European markets. Most
      of employees. We use internal expertise and the services pro-               of these peer companies explicitly mention Credit Suisse as
      vided by compensation consulting firms to benchmark our                     one of their peers. The criteria used to define these peer com-
      compensation levels against relevant competitors. Given our                 panies include:
      global presence and the wide range of what is considered                    p comparable scope and complexity of the business plat-
      competitive pay in different regions, there is not a single                     form;
      region or market against which we benchmark compensation                    p comparable business focus and mix;
      levels. We adopt a differentiated approach, looking at pay lev-             p common geographic footprint; and
      els and competitive market players in the various geographical              p companies with which we compete daily for business and
      regions where we do business. For further geographical infor-                   talent.
      mation, refer to the chart “Relative distribution by region”.
          For members of the Executive Board and other key per-                   Market trends observed during 2010 include heightened regu-
      sonnel for the Group and the divisions, we compete for talent               latory activity in all regions and increased competition for talent
      primarily with major banks globally. To benchmark our com-                  across businesses and regions. Consistent with the regulatory
      pensation levels and as a key input for setting the variable                trends, peer organizations have also modified their compensa-
      compensation pools at the Group and divisional levels, we                   tion systems. This has resulted in fixed compensation gener-
      measure ourselves against a set of peer groups, including                   ally increasing, with a corresponding decrease in variable com-
      European and US banks. These peer groups and relevant met-                  pensation, and an increase in the proportion of variable
      rics are reviewed annually in April by the Compensation Com-                compensation that is awarded as deferred compensation.
      mittee and tracked throughout the year. For the Group, the
                                                                                              Corporate Governance and Compensation            189
                                                                                                                                Compensation




2010 peer groups and performance criteria

Credit Suisse Group
Peer group                      UBS, Bank of America, Barclays, BNP Paribas, Citigroup, Deutsche Bank, Goldman Sachs, HSBC,
                                JPMorgan Chase and Morgan Stanley
Performance criteria
Profitability and efficiency    Return on equity, compensation/revenue ratio and share price volatility
Growth                          Earnings per share growth, net revenue growth, total asset under management growth and net new assets growth
Capital and risk                Tier 1 ratio, Value-at-Risk and risk-weighted assets growth
Shareholder satisfaction        Total shareholder return

Private Banking
Peer group                      UBS, Barclays, HSBC, Julius Bär Group and Morgan Stanley
Performance criteria
Profitability and efficiency    Pre-tax income margin and gross margin
Growth                          Net revenue growth, pre-tax income growth and net new assets growth

Investment Banking
Peer group                      UBS, Bank of America, Barclays, Citigroup, Deutsche Bank, Goldman Sachs, JPMorgan Chase and Morgan Stanley
Performance criteria
Profitability and efficiency    Return on economic risk, pre-tax income margin and compensation/revenue ratio
Growth                          Net revenue growth and pre-tax income growth
Capital and risk                Net revenue/Value-at-Risk

Asset Management
Peer group                      UBS, Allianz, Black Rock, Goldman Sachs, JPMorgan Chase and Morgan Stanley
Performance criteria
Profitability and efficiency    Pre-tax income margin and gross margin on assets under management
Growth                          Pre-tax income growth, net revenue growth and net new assets growth




Regulatory trends                                                         adequate consideration of risk in compensation decisions and
During 2010, there was continued focus on compensation                    to better align the interests of our employees with the long-
from various regulators across the world, including many of the           term success of the Group. We continued a regular dialogue
international jurisdictions relevant to the Group, such as the            with FINMA and other regulators in 2010, and we monitored
US, the EU and the UK. Relevant provisions are divergent in               developments in industry compensation best practices and
many aspects and sometimes deviate from the Circular on                   guidance issued by various bodies including the FSB, Com-
Remuneration Schemes, which was issued by FINMA, our reg-                 mittee of European Banking Supervisors and the G-20.
ulator in Switzerland, in the fourth quarter of 2009. However,                Some of the modifications that we have made to our com-
regulatory trends and more detailed guidance provided during              pensation design during 2010, such as increased base
2010 reflect the principles for sound compensation practice               salaries, increased focus on risk and the removal of leverage
issued by the Financial Stability Board (FSB) in 2009 and                 from share awards are specifically in response to these regu-
endorsed by the q G-20.                                                   latory requirements.
    As we took the initiative and began to review our compen-                 While our aim and general practice is to apply our compen-
sation practices in 2008, we implemented fundamental                      sation structure, processes and procedures on a global basis,
changes to our compensation instruments and processes for                 some limited variations to the terms of compensation awards
the Group’s most senior employees, managing directors and                 do apply to comply with local requirements, such as the terms
directors in 2009. These changes were designed to ensure                  specified by certain countries within the EU.
190




      Compensation design                                                                              p Variable deferred awards granted to members of the Exec-
                                                                                                         utive Board, managing directors and directors for 2010
      Compensation structure                                                                             were in the form of share awards and Adjustable Perfor-
      Consistent with the trend towards increased risk alignment,                                        mance Plan awards, both of which vest over four years.
      transparency and shareholder alignment, we implemented                                             50% of the variable deferred awards for these employees
      adjustments to our compensation design and further evolved                                         were in share awards and 50% were in Adjustable Perfor-
      our instruments granted as part of variable compensation for                                       mance Plan awards. Most employees below the level of
      2010. The key features of the 2010 compensation design are:                                        director received variable deferred compensation in the
      p As of January 1, 2010, we increased the fixed compensa-                                          form of share awards.
          tion (salary) for Executive Board members, managing                                          p The cash component of variable compensation granted to
          directors, directors and certain vice-presidents and corre-                                    managing directors in the Investment Banking division is
          spondingly decreased their variable compensation for                                           subject to specific restrictions over a two-year period.
          2010. This shift in the compensation structure was influ-                                      These cash awards must be repaid, either in part or in full,
          enced by regulators to ensure a more balanced mix                                              if claw-back events, such as voluntary termination of
          between fixed and variable compensation, which resulted                                        employment or termination for cause, occur.
          in an increase in our compensation-related fixed cost base                                   p We granted share awards in an effort to make the design
          of approximately CHF 800 million.                                                              of our compensation instruments simpler, more transpar-
      p The threshold for participation in variable deferred com-                                        ent and non-leveraged. The share awards have become
          pensation programs was lowered from CHF 125,000 to                                             our main share-based award instrument, whereas in recent
          CHF 50,000 in variable awards.                                                                 years we awarded SISUs and ISUs.
      p Deferral rates were increased to a range of 35% to 70%,                                        p All deferred awards contain a general cancellation provi-
          which means that a lower portion of employees’ variable                                        sion, which enables the Group to cancel any outstanding
          awards were in cash. The increase in deferral rates was                                        awards granted to any individual or individuals in the event
          also a measure recommended by regulators to ensure that                                        that they engage in any activity that results in, or has the
          a substantial portion of variable compensation is subject to                                   potential to result in, financial, reputational or other harm
          future performance and claw-back provisions. For 2010,                                         to the Group.
          40% of variable compensation was awarded in unre-
          stricted cash and 60% was deferred.

      Employee categories and components of total compensation for 2010


                                                                                                                              Variable compensation



                                                                                                                                                       Deferred compensation

                                                                                                   Value
                                                                                                                                                                            Adjustable Performance
                  Employee category                              Base salary                    CHF/USD                     Cash 1                Share awards 2                 Plan awards 2
                                                                                            or local equivalent


             Managing directors, directors                                                    _
                                                                                              > 50,000
               and covered employees


        Up to, and including, vice presidents                                                 _
                                                                                              > 50,000



                   All other employees                                                        < 50,000


      Deferred compensation is applicable to those with variable awards of CHF 50,000 or higher.
      1
        Variable cash compensation awarded to managing directors in Investment Banking was in the form of restricted cash awards. For all other employees, variable cash compensation was in the
      form of unrestricted cash awards. 2 Awards vest over four years.
                                                                                                                            Corporate Governance and Compensation                                    191
                                                                                                                                                                                 Compensation




Unrestricted cash and variable deferred compensation                                                     The following table shows the deferral rates of variable
For 2010, 44,400 employees received some amount of vari-                                              compensation awards for 2010, followed by an example of
able compensation, of which 11,800, or 27%, received some                                             how to apply the deferral table to calculate the cash and
portion of variable deferred compensation. Variable compensa-                                         deferred portions of a variable compensation award.
tion was paid in cash unless the award was for CHF 50,000 or
more, in which case a portion was paid in cash and the bal-                                           2010 Deferral table
ance was deferred. The portion that was deferred was deter-
mined by reference to a pre-established deferral table, which                                         Award amount                                                                   Deferral rate

increases the deferred portion for higher levels of variable                                          CHF
compensation awards. The amount of variable compensation                                              Up to 125,000                                                                         35%
paid as unrestricted cash was subject to a cap of CHF 2 mil-                                          Between 125,000 and 750,000                                                           65%
lion.                                                                                                 Greater than 750,000                                                                  70%



Example of a CHF 250,000 variable compensation award1


                                               Step                                                         Deferral percentage                                  Amount deferred


       A                                        First 125,000                                                             35%                                             43,750



       B                                        Next 125,000                                                              65%                                             81,250



       C                                                                                                                          Total A+B =                            125,000



                                                                                                             Variable compensation =                                     250,000



                                                                                                          Less deferred portion (C) =                                  (125,000)



                                                                                                                            Cash portion =                               125,000


1
    Only variable compensation of at least CHF/USD 50,000 (or local equivalent) is eligible for deferral. The deferral percentage applies to the entire variable compensation.




Variable deferred compensation instruments                                                            The value that is delivered is solely dependent on the Group
Share awards                                                                                          share price at the time of delivery.
Our share awards align the interests of our employees with                                                We are no longer granting share-based instruments in the
shareholders and with the success of the Group. As the 2010                                           form of Scaled Incentive Share Units (SISUs), Incentive Share
share awards vest over four years, they also encourage the                                            Units (ISUs) and Performance Incentive Plans (PIP), which
retention of employees. Each share award granted entitles the                                         were utilized in prior years. One 2010 share award is equiva-
holder of the award to receive one Group share. The number                                            lent to one Group share at the time of delivery, so 2010 share
of share awards is determined by dividing the deferred compo-                                         awards do not contain the leverage component or multiplier
nent of variable compensation being granted as shares by the                                          effect of these prior-year awards.
average price of a Group share over the twelve business days                                              In order to comply with regulatory requirements, the Group
ended January 19, 2011. One quarter of the share awards                                               awarded an alternative form of share awards as a component
vest on each of the four anniversaries of the date of award.                                          of variable cash compensation to senior employees in a num-
192




      ber of EU countries. For 2010, these employees received           Restricted cash awards
      50% of the amount they otherwise would have received in           The cash component of variable compensation is generally
      cash in the form of blocked shares. The shares remain             free from conditions. However, managing directors in Invest-
      blocked for a period of time, which varies from six months to     ment Banking received restricted cash awards. These
      three years depending on location.                                restricted cash payments are subject to vesting ratably over a
          The Group prohibits employees from entering into transac-     two-year period and other conditions, and any unvested
      tions to hedge the value of unvested share awards.                restricted cash awards will have to be repaid if a claw-back
                                                                        event, such as voluntary termination of employment or termi-
      Adjustable Performance Plan awards                                nation of employment for cause, occurs.
      We introduced Adjustable Performance Plan awards as part of
      variable compensation for 2009. The Adjustable Performance        Other awards and share ownership requirements
      Plan is a deferred cash-based plan that links outstanding bal-    In addition, we may, from time to time, employ other long-term
      ances to future performance through positive and negative         incentive compensation plans or programs to assist in hiring at
      adjustments. By considering emerging trends and feedback,         competitive levels and to support the retention of talent. These
      we amended and simplified certain Adjustable Performance          forms of variation from our standard approach to compensa-
      Plan award features. The 2010 Adjustable Performance Plan         tion are generally applied to small populations of employees
      awards will vest over a period of four years and outstanding      within the Group where the specific circumstances warrant
      awards will be subject to annual adjustments, increasing or       such compensation arrangements. For 2010, such compen-
      decreasing the outstanding balances by a percentage equal to      sation arrangements were applied to approximately 100
      the Group return on equity (ROE), unless the division that        employees, including employees engaged in arbitrage trading
      granted the awards incurs a pre-tax loss. In this case, out-      in Investment Banking and Alternative Investments in Asset
      standing awards in that division will be subject to a negative    Management. Any and all variations from our standard
      adjustment of 15% for every CHF 1 billion of loss, unless a       approach must be approved by the Compensation Committee.
      negative Group ROE applies for that year and is greater than           We may pay commissions to employees operating in spe-
      the divisional adjustment.                                        cific areas of the business where such compensation practices
          For employees in Shared Services and other support func-      are warranted and in line with market practice. The value of
      tions, all outstanding Adjustable Performance Plan awards are     commissions paid is determined by formulas, which are
      linked to the Group ROE. Only a negative Group ROE will trig-     reviewed regularly to ensure that they remain competitive.
      ger a negative adjustment of all outstanding Adjustable Perfor-        We have also continued to apply minimum share ownership
      mance Plan awards for these employees. This link to Group         requirements for members of the divisional and regional man-
      performance is intended to ensure that the compensation of        agement committees and for the Executive Board. For infor-
      employees in support functions is not directly linked to the      mation on the share ownership requirements, refer to Com-
      performance of the businesses they support.                       pensation to members of the Executive Board.
                                                                                                                           Corporate Governance and Compensation                               193
                                                                                                                                                                              Compensation




Potential adjustments of Adjustable Performance Plan awards 1


                                                                Deferred cash-based awards – adjustment ratios



                           Return on balances                                                  unless                                       division has a loss


                                                                                                                         Division pre-tax loss                  Percentage performance
              Group ROE                             Percentage return
                                                                                                                           (in CHF billion)                           adjustment




                  20%                                        20%                                                                  0.0                                         0
                  10%                                        10%                                                                (1.0)                                       (15%)
                   5%                                         5%                                                                (2.0)                                       (30%)
                    0                                          0                                                                (4.0)                                       (60%)
                  (5%)                                       (5%)                                                              (6.0)                                        (90%)
                 (10%)                                      (10%)                                                              (6.7)                                       (100%)
                 (20%)                                      (20%)                                                             >(6.7)                                       (100%)



1
    Relates to employees in revenue-generating divisions. Adjustment is scaled across the above chart. For example, division pre-tax loss of CHF 1.2 billion results in an (18%) adjustment.




Charitable contributions                                                                             sation structure and design. For compensation at regulated
The Group supports charitable giving and encourages                                                  group subsidiaries in Switzerland (Neue Aargauer Bank, Clari-
employee participation. To this aim, we have also introduced a                                       den Leu, BANK-now, Credit Suisse Private Advisors Ltd) in
mandatory charitable contribution program for certain manag-                                         2010, there were no variations from the Group’s overall com-
ing directors in the US and Brazil in connection with their 2010                                     pensation design for 2010 with the exception of Clariden Leu,
variable compensation awards, expanding upon the charitable                                          which applied a different deferred compensation plan. For
contribution made from the variable compensation pool of the                                         Clariden Leu employees, the variable compensation award
Executive Board, introduced last year. For more information on                                       split between unrestricted cash and deferred variable compen-
the Executive Board charitable contributions, refer to Compen-                                       sation was based on the Group deferral table, however, all of
sation to members of the Executive Board.                                                            the deferred compensation was granted in the form of
                                                                                                     deferred cash awards, which vest ratably over three years. The
Compensation at regulated Group subsidiaries                                                         Clariden Leu compensation plan is reviewed annually and
Compensation awarded to all employees at Group regulated                                             approved by the Clariden Leu compensation committee and
subsidiaries is subject to the Group’s compensation policy and                                       board of directors.
all related guidelines and generally follows the same compen-
194




      Compensation to members of the Executive                           formal assessment of the Group’s performance versus the
      Board                                                              goals established in each of the three performance categories
                                                                         in order to determine the final variable compensation pool for
      Objectives and approach                                            the Executive Board.
      In line with our overall approach to compensation, our execu-
      tive compensation policies are designed to promote a long-         Financial performance
      term focus by our executives in all their actions, attract exec-   The financial performance objective reflects achievement of
      utives of the highest quality, and foster retention by rewarding   the 2010 net income plan.
      superior performance and motivate outstanding performance
      in the future. We believe our compensation practices provide a     Non-financial performance
      meaningful alignment with the Group’s strategic goals and the      The non-financial objectives were reviewed on a qualitative
      interests of its shareholders and encourage strong teamwork.       basis in the following five sub-categories:
           Since 2006, the Compensation Committee has applied to         p client;
      the Executive Board, including the CEO, a variable compensa-       p quality of earnings;
      tion pool framework, which is linked directly to the Group’s       p control environment;
      performance. The framework was designed and implemented            p corporate responsibility; and
      in the context of our integrated bank strategy to support col-     p people.
      laboration and to encourage alignment across divisions. A per-
      formance-based variable compensation pool is used to deter-        Relative performance against peers
      mine the aggregate amount of variable compensation to be           The relative performance objectives were evaluated in the fol-
      awarded to the Executive Board. At the start of each year a        lowing three sub-categories:
      baseline variable compensation pool is set assuming specific       p profitability and efficiency;
      financial, non-financial and relative performance goals to be      p growth; and
      achieved by the end of the year.                                   p capital and risk.
           At the end of the year, the Compensation Committee eval-
      uates how well the performance goals were actually achieved        In evaluating the 2010 financial performance, the Compensa-
      and may make adjustments to the baseline pool. Adjustments         tion Committee acknowledged that the 2010 net income plan
      are made to the baseline pool based on three performance           was not achieved. In evaluating the performance of non-finan-
      categories: financial performance; non-financial performance;      cial objectives, the Compensation Committee considered input
      and relative performance against peers. The impact on the          from the Chairman, CEO and senior managers from the inter-
      baseline pool varies by performance in each category, as           nal control functions, which included risk management’s
      financial performance can increase or reduce the baseline pool     assessment of Executive Board performance on q risk mitiga-
      by 75%, and the non-financial and peer performance cate-           tion and overall risk management. Comprehensive information
      gories can each increase or reduce the baseline pool by 25%.       on performance against control metrics, the quality of earn-
      After considering all adjustments to the baseline pool, the        ings and client feedback and performance factored into the
      Compensation Committee approves the final variable compen-         overall results. The performance assessment of the non-finan-
      sation pool for the Executive Board. The final pool can range      cial objectives was that these were above expectations,
      from zero to a maximum of 200% of the baseline pool. The           reflecting achievements such as net new assets of CHF 69.0
      allocation of the variable compensation pool to individual mem-    billion, gains in market share, risk reduction in Investment
      bers of the Executive Board is made on the basis of individual     Banking and good progress on a number of human capital and
      performance evaluations, which review how well the perform-        other initiatives. The assessment of relative performance
      ance goals were achieved with respect to the specific area of      against peers was that these were in line with expectations.
      responsibility for the individual Executive Board member.          For specific performance criteria, refer to the chart “2010
                                                                         Peer groups and performance criteria”.
      Executive Board variable compensation pool 2010                         Based on the assessment of performance across the three
      At the beginning of 2010 the baseline variable compensation        performance categories, the final variable compensation pool
      pool for 2010 was set in accordance with achieving 2010 per-       approved for members of the Executive Board was 25% lower
      formance targets and was lower than the 2009 baseline pool.        than the approved pool for the Executive Board for 2009.
      In January 2011, the Compensation Committee performed a
                                                                                    Corporate Governance and Compensation                  195
                                                                                                                     Compensation




Performance evaluations of individual Executive Board              ing on the Group’s performance, the corresponding size of the
members                                                            variable compensation pool and the executive’s performance.
Variable compensation for 2010 was awarded to members of           The percentage mix of compensation between fixed and vari-
the Executive Board at the discretion of the Compensation          able will also be considered in determining the executive’s total
Committee. The committee reviewed the results of a balanced        compensation.
performance scorecard evaluation performed by the CEO in               Consistent with the lower performance of the Group in
determining compensation for each member. The scorecard            2010 compared to 2009, the average total compensation for
provided information on the 2010 results for the businesses        Executive Board members, excluding individuals who joined or
led by the executive using objective metrics, including any per-   left during 2010, was 32% lower compared to 2009. Variable
centage increases or decreases in the metric from the prior        compensation, excluding the joiners and leavers, was 40%
year, and reflected performance ratings across seven perform-      lower compared to 2009 and 34% lower excluding the effect
ance categories. These categories were:                            of increased base salaries. Each member of the Executive
p business (including financial and risk-related performance       Board had 100% of variable compensation awards deferred,
    objectives relating to the division, such as pre-tax income    50% in share awards and 50% in Adjustable Performance
    margin, net new assets and q risk-weighted assets);            Plan awards. For the CEOs of Private Banking, Investment
p strategic;                                                       Banking and Asset Management, Adjustable Performance
p people;                                                          Plan awards are adjusted as for employees in their divisions.
p client;                                                          The base salary for all Executive Board members in 2010 was
p collaboration;                                                   CHF 1.5 million, except for the CEO, whose base salary was
p control and risk environment; and                                CHF 2.5 million.
p personal development.                                                Across the whole Executive Board (16 individuals including
                                                                   those members who joined or left the Executive Board during
The Compensation Committee reviewed the performance                2010), 13% of total compensation was paid as salaries, 3%
assessment of each Executive Board member across the               as variable cash compensation (only for former member Paul
seven categories and the overall performance rating to each        Calello), 77% as share awards and Adjustable Performance
Executive Board member. In addition to the individual perform-     Plan awards and 7% as other compensation, including pension
ance assessment, the committee also considered input from          and other benefits and dividend equivalents.
the independent compensation consultant with regards to
competitive compensation levels for comparable roles in the        Change in Executive Board compensation
market.
                                                                                                                     Average, excluding
                                                                                                           Average       joiners/leavers
Executive Board compensation for 2010
                                                                   2010 versus 2009 (%)
In line with our total compensation approach, executive com-
                                                                   Total compensation                         (13)                 (32)
pensation consists of a fixed salary and a variable compensa-
                                                                   Variable compensation                      (24)                 (40)
tion component. Salaries for members of the Executive Board
                                                                   Variable compensation, excluding the
are reviewed annually. The variable compensation component         effect of increased base salaries          (19)                 (34)
can represent the most significant part of an executive’s total
compensation package and varies from year to year, depend-
196




      Compensation for the members of the Executive Board for 2010

                                                                                                                                                                        Payments
                                                                                                                                            Pension                    and awards
                                                                                Variable                                                  and similar                       due to
                                                                                   cash                     Value of       Value of         benefits        Dividend contractual            Total
                                                                     Base      compen-           Total        share            APP         and other          equiv-       agree-        compen-
                                                                                                                                                        1
                                                                    salary        sation         cash        awards         awards          benefits          alents 2      ments    3
                                                                                                                                                                                           sation

      2010 (CHF million,
      except where indicated)
      16 individuals 4                                             20.50           4.21    5
                                                                                                24.71          64.65   6
                                                                                                                             58.65    7
                                                                                                                                                3.90           5.70          2.73         160.34
          % of total compensation                                    13%             3%           16%           40%           37%
      of which highest paid:
      Antonio C. Quintella                                           0.79              –          0.79          6.97          6.97              0.08           0.82             –          15.63
          % of total compensation                                     5%                           5%           45%           45%
      of which CEO:
      Brady W. Dougan                                                2.50              –          2.50          4.87          4.87              0.03           0.49             –          12.76
          % of total compensation                                    20%                          20%           38%           38%

      1
        Other benefits consist of housing allowances, lump sum expenses and child allowances. 2 SISUs and ISUs carry the right to an annual payment equal to the dividend of one Group
      share. The dividend equivalents disclosed were paid in respect of SISUs and ISUs granted in prior years. 3 Payments and awards under contractual commitments of CHF 2.73 million are
      comprised of cash of CHF 1.16 million and share-based awards of CHF 1.57 million. 4 Includes pro rata fixed compensation paid to Renato Fassbind and Kai S. Nargolwala, who left the
      Executive Board in 2010, but excludes advisory fees paid to them for their roles after leaving the Executive Board. Includes pro rata fixed compensation paid to Osama S. Abbasi, Fawzi
      Kyriakos-Saad, David R. Mathers and Antonio C. Quintella, who joined the Executive Board in 2010. Includes pro rata fixed compensation for Paul Calello, who passed away in November
      2010. 5 Consists of variable cash compensation paid to former Executive Board member Paul Calello. No other members of the Executive Board as of December 31, 2010 received
      variable cash compensation. 6 The applicable Group share price was CHF 41.40. 7 The value of the Adjustable Performance Plan awards was the value as of the grant date of January
      20, 2011.



      2010 total compensation of the highest paid member of                                        have been awarded as compensation to Executive Board
      the Executive Board                                                                          members. The contributions will benefit eligible registered
      The highest paid member of the Executive Board in 2010 was                                   charities. Some Executive Board members, including the CEO,
      Antonio C. Quintella. Mr. Quintella’s compensation amounted                                  will be able to make recommendations in respect of allocation
      to CHF 15.6 million and was comprised of his salary of CHF                                   of the contributions to various charities.
      0.8 million (pro rated from July 2010), variable compensation
      (share awards and Adjustable Performance Plan awards) of                                     Minimum share ownership requirements
      CHF 13.9 million and other compensation (pension and similar                                 In 2009, the Board approved minimum share ownership
      benefits, dividend equivalents and other benefits) of CHF 0.9                                requirements for members of the Executive Board and mem-
      million. Mr. Quintella’s variable compensation in 2010 was                                   bers of the divisional and regional management committees.
      awarded in consideration of his performance in his former role                               The minimum share ownership threshold for the CEO and
      as CEO of Brazil and his role as CEO of Credit Suisse Ameri-                                 other Executive Board members is 350,000 shares and up to
      cas.                                                                                         150,000 shares, respectively. For members of the divisional
                                                                                                   and regional management committees, the thresholds are
      Other aspects of executive compensation                                                      50,000 shares for executives responsible for the Investment
      Charitable contributions                                                                     Banking, Private Banking and Asset Management divisions
      As in 2009, a portion of the Executive Board variable com-                                   and 20,000 shares for the executives responsible for Shared
      pensation pool for 2010 was approved by the Compensation                                     Services and regional management functions. The thresholds
      Committee to fund charitable contributions on behalf of Exec-                                include all Group shares held by or on behalf of these execu-
      utive Board members. The total amount approved for charita-                                  tive employees, including unvested share-based awards.
      ble contributions was CHF 19 million, which otherwise could
                                                                                                                  Corporate Governance and Compensation                                  197
                                                                                                                                                                    Compensation




Compensation for the members of the Executive Board for 2009

                                                                                                                                                                 Payments
                                                                                                                    Value of         Pension                    and awards
                                                                                        Variable                      share-       and similar                       due to
                                                                                           cash                       based          benefits        Dividend contractual        Total
                                                                             Base      compen-            Total    and other        and other          equiv-       agree-    compen-
                                                                                                                                                 1
                                                                            salary        sation          cash       awards          benefits          alents 2      ments      sation

2009 (CHF million,
except where indicated)
13 individuals 3                                                             9.13           3.40    4
                                                                                                         12.53        132.44   5
                                                                                                                                         3.61           0.32             –     148.90
    % of total compensation                                                    6%            2%             8%          89%
of which highest paid:
Brady W. Dougan, CEO                                                         1.25               –         1.25         17.87             0.03           0.05             –       19.20
    % of total compensation                                                  6.5%                        6.5%         93.1%

1
  Other benefits consist of housing allowances, lump sum expenses and child allowances. 2 SISUs and ISUs carry the right to an annual payment equal to the dividend of one Group
share. The dividend equivalents disclosed were paid in respect of ISUs granted in prior years. 3 Includes pro rata compensation paid to Urs Rohner and D. Wilson Ervin, who left the
Executive Board in 2009, and Romeo Cerutti and Karl Landert, who joined the Executive Board in 2009. No members of the Executive Board in 2009 joined from, or left for, positions
outside the Group. 4 Includes variable cash compensation paid to the two former Executive Board members. No members of the Executive Board as of December 31, 2009 received
variable cash compensation. 5 Share-based and other awards include 1.1 million SISUs, each of which has a base component and a leverage component. The fair value of the base
component was CHF 50.30 and the fair value of the leverage component was CHF 13.44. The total fair value of each SISU was CHF 63.74. Other awards refer to Adjustable
Performance Plan awards. The value of the Adjustable Performance Plan awards was the value as of the grant date of January 20, 2010.



Contract lengths and termination provisions                                                      In the event of the termination of an Executive Board
All members of the Executive Board have employment con-                                      member without cause, for example, the amount and terms of
tracts with the Group. The contracts do not specify a contract                               a severance payment may be agreed between the Group and
length and are valid until terminated. Members of the Execu-                                 the respective Executive Board member. The Executive Board
tive Board are required by contract to give six months notice of                             member, however, does not have a contractual right to a sev-
termination of employment. The Group must also give mem-                                     erance payment arising from forfeited awards.
bers of the Executive Board six months notice of termination
of employment. There are no other contracts, agreements or                                   Former Executive Board members
other arrangements with the members of the Executive Board                                   Generally, former members of our most senior executive body
that provide for payments or benefits in connection with termi-                              who no longer provide services to the Group are still eligible to
nation of employment that are not generally available to other                               receive office infrastructure and secretarial support. These
employees of the Group. In the event of termination, however,                                services are based on existing resources and are not used on
different conditions apply to the balances of outstanding com-                               a regular basis. No additional fees, severance payments or
pensation awards, for example, depending on whether the ter-                                 other forms of compensation were paid to former members of
mination was voluntary, involuntary or the result of a change of                             the Executive Board who no longer provide services to the
control. The different conditions are summarized in the table                                Group or related parties during 2010.
“Termination of employment provisions for Executive Board
members”.
198




      Termination of employment provisions for Executive Board members

                          Voluntary                   Termination                                                  Termination           Change in
                          resignation                 without cause                Retirement                      with cause            control

      Compensation component
      Base salary         Ceases                      Statutory severance          Ceases                          Ceases                No
                          immediately                 based on jurisdiction        immediately                     immediately           incremental
                                                      of employment                                                                      payment
      Share award         Awards not                  Accelerated vesting,         Continues to vest,              All outstanding       Treatment at
                          vested at date              normal payout dates apply    subject to non-compete,         awards                discretion of
                          of termination                                           non-solicit provisions,         are forfeited         Compensation
                          are forfeited                                            normal payout dates apply                             Committee
      Adjustable          Awards not                  Accelerated vesting,         Continues to vest,              All outstanding       Treatment at
      Performance         vested at date              normal payout dates and      subject to non-compete,         awards                discretion of
      Plan award          of termination              metrics apply                non-solicit provisions,         are forfeited         Compensation
                          are forfeited                                            normal payout dates                                   Committee
                                                                                   and metrics apply
      Scaled              Awards not                  Accelerated vesting,         Continues to vest,              All outstanding       Treatment at
      Incentive           vested at date              normal payout dates apply,   subject to non-compete,         awards                discretion of
      Share Unit          of termination              rights to additional         non-solicit provisions,         are forfeited         Compensation
                          are forfeited               shares are forfeited         normal payout dates apply                             Committee
      Incentive           Awards not                  Accelerated vesting,         Continues to vest,              All outstanding       Treatment at
      Share Unit          vested at date              normal payout dates apply,   subject to non-compete,         awards                discretion of
                          of termination              rights to additional         non-solicit provisions,         are forfeited         Compensation
                          are forfeited               shares are forfeited         normal payout dates apply                             Committee
      Performance         Awards not                  Accelerated vesting,         Continues to vest,              Awards                Treatment at
      Incentive           vested at date              normal payout dates          subject to non-compete,         not vested at         discretion of
      Plan II unit        of termination              and metrics apply            non-solicit provisions,         date of termination   Compensation
                          are forfeited                                            normal payout dates apply,      are forfeited,        Committee
                                                                                   awards vested after             limited
                                                                                   termination lose leverage       upside value of
                                                                                                                   vested awards
      Partner Asset       Non-compete,                Rights retained,             Non-compete,                    A portion             Treatment at
      Facility award      non-solicit provisions      normal payout dates apply    non-solicit provisions          is forfeited          discretion of
                          apply until January 21,                                  apply until January 21, 2012,   if termination        Compensation
                          2012, normal payout                                      normal payout dates apply       occurs prior to       Committee
                          dates apply                                                                              January 21, 2012,
                                                                                                                   normal payout
                                                                                                                   dates apply
      Option              Expiration date             Remains                      Remains                         Expires               Treatment at
                          accelerated to 30 days      exercisable up to            exercisable up to               30 days               discretion of
                          from issuance of            its original                 its original                    from date             Compensation
                          notification from the       expiration date              expiration date                 of termination        Committee
                          Group if non-compete
                          or non-solicit provisions
                          are breached
      Other cash award    Forfeited                   No contractual               Eligible to be                  Forfeited             No contractual
                                                      right to award               considered for                                        right to award
                                                                                   discretionary
                                                                                   award
                                                                                                                    Corporate Governance and Compensation                                         199
                                                                                                                                                                     Compensation




Units and values by individual

                                                              Number of                                                                                       Value of             Current
                                               Number of       unvested     Number of          Number of                Number of      Number of             unvested             value of
                                                  vested          share      unvested           unvested   Number of        PIP I         PIP II            awards at            unvested
                                                                                                                                                     1                   2                    2
                                                  shares         awards          ISUs             SISUs      options        units          units          grant (CHF)        awards (CHF)

December 31, 2010
                                                                                           3
Brady W. Dougan                                  951,114                –       90,956          152,207     368,400               –       78,102          31,145,014           9,261,929
Osama S. Abbasi                                  233,801                –       50,193           58,977             –             –       26,110           9,215,028           4,429,732
Walter Berchtold                                 688,210                –     163,197           141,967             –             –      104,167          25,704,435          14,685,664
Romeo Cerutti                                      19,456               –       19,420           46,547             –             –              –         3,982,362           3,050,911
Tobias Guldimann                                      903               –       28,798           58,183      15,640               –       20,834           7,228,240           3,934,143
Fawzi Kyriakos-Saad                              119,177                –     127,142            45,902             –             –       49,849          13,177,674           9,198,782
Karl Landert                                       82,718               –       83,060           60,511             –             –       31,250           9,748,212           7,955,834
David R. Mathers                                   26,617               –       59,008           30,260      14,960               –         5,375          5,538,189           4,735,645
Hans-Ulrich Meister                                 1,720          1,720        88,538           93,093             –             –              –         9,724,068           9,896,890
Antonio C. Quintella                             234,685                –              –              –             –             –       26,002           1,872,144                      –
Robert S. Shafir                                 131,239                –     168,960           124,641             –             –       71,213          19,305,533          17,365,460
Pamela Thomas-Graham                                      –             –              –         28,764             –             –              –        1,931,143            1,102,812
Eric M. Varvel                                      5,614               –     157,085           110,940             –             –       56,953          19,995,068          13,056,709
Total                                          2,495,254           1,720 1,036,357              951,992     399,000               –      469,855         158,567,110          98,674,511

December 31, 2009
Brady W. Dougan                                  424,529                –       90,956                –     408,400       271,898         78,102                     –                    –
Walter Berchtold                                 238,779                –     205,221                 –             –     130,401        104,167                     –                    –
Paul Calello                                     211,762                –       77,149                –     241,184       142,937         57,063                     –                    –
Romeo Cerutti                                      13,805               –       26,682                –             –             –              –                   –                    –
Renato Fassbind                                    98,946               –       73,839                –             –       20,746        41,667                     –                    –
Tobias Guldimann                                   87,212               –       37,197                –      31,640         17,782        20,834                     –                    –
Karl Landert                                       34,965               –     117,099                 –             –       29,347        31,250                     –                    –
Hans-Ulrich Meister                                18,793          3,440      128,290                 –             –             –              –                   –                    –
Kai S. Nargolwala                                145,478                –              –              –             –             –         2,500                    –                    –
Robert S. Shafir                                   83,012               –     253,442                 –             –             –       71,213                     –                    –
Eric M. Varvel                                   137,507                –     196,270                 –             –       75,343        56,953                     –                    –
Total                                          1,494,788           3,440 1,206,145                    –     681,224       688,454        463,749                     –                    –

1
  PIP II settles in May 2011. Based on the current estimate, we do not expect the PIP II awards to have a value at settlement, as it is probable that the Group share price performance
will be below the minimum predefined target of CHF 47 per PIP II unit. 2 Information presented for the first time in 2010. 3 There was no vesting of ISUs in 2010 for Mr. Dougan.



Share-based variable compensation for members of the                                              fully vested, varies depending on the Group share price, the
Executive Board                                                                                   vesting period remaining, and other factors influencing the
The share-based holdings disclosed include the holdings of                                        q fair value of the award. The table “Units and values by indi-
the respective members of the Executive Board, their immedi-                                      vidual” shows the value of the unvested share-based compen-
ate family members and companies where they have a control-                                       sation awards held by members of the Executive Board as of
ling interest. The holdings do not include awards granted after                                   December 31, 2010. The aggregate cumulative value of these
December 31, 2010.                                                                                unvested share-based awards as of December 31, 2010
    The value of share-based compensation awards granted to                                       decreased 38% compared to the value of the awards as of
members of the Executive Board in prior years, but not yet                                        their respective grant dates.
200




      Option holdings by individual

                                                                                                                                                                                  Exercise
                                                                                                         Brady W.        Tobias      David R.                       Expiry            price
      December 31, 2010                                                                                   Dougan     Guldimann       Mathers                         date          in CHF

      Year of grant
      2003                                                                                                       –             –        1,095          January 22, 2013             30.60
      2002                                                                                                       –             –      13,865          December 3, 2012              34.10
      2001                                                                                               368,400        15,640               –         January 25, 2011             84.75
      Total                                                                                              368,400        15,640        14,960                             –               –


                                                                                                                                                                                  Exercise
                                                                                                         Brady W.          Paul        Tobias                       Expiry            price
      December 31, 2009                                                                                   Dougan         Calello   Guldimann                         date          in CHF

      Year of grant
      2001                                                                                               368,400       241,184        15,640           January 25, 2011             84.75
      2000                                                                                                40,000               –      16,000              March 1, 2010             74.00
      Total                                                                                              408,400       241,184        31,640                             –               –

      All options on shares were granted as part of the previous years’ compensation. As of December 31, 2010 and 2009, none of the members of the Executive Board hold options
      purchased from personal funds.



      Loans to members of the Executive Board                                                    Compensation to members of the Board of
      A large majority of loans outstanding to members of the Exec-                              Directors
      utive Board are mortgages or loans against securities. Such
      loans are made on the same terms available to third-party cus-                             Compensation to members of the Board is set in accordance
      tomers or pursuant to widely available employee benefit plans.                             with the Articles of Association and the Compensation Com-
      As of December 31, 2010, 2009 and 2008, outstanding loans                                  mittee Charter. The annual compensation paid to members of
      to the members of the Executive Board amounted to CHF 18                                   the Board is set by the Board based on the recommendation
      million, CHF 19 million and CHF 24 million, respectively. The                              of the Compensation Committee. All members of the Board
      number of individuals with outstanding loans at the beginning                              receive a base fee plus an additional fee that reflects the
      and the end of the year was seven and six, respectively, and                               respective Board member’s role and scope of responsibility on
      the highest loan outstanding was CHF 12 million to Executive                               the Board. For the purposes of compensation, the Group dis-
      Board member Walter Berchtold.                                                             tinguishes between Board members with functional duties (the
          All mortgage loans to members of the Executive Board are                               full-time Chairman, the full-time Vice-Chairman and the three
      granted either with variable or fixed interest rates over a cer-                           committee chairmen) and Board members without functional
      tain period. Typically, fixed-rate mortgages are granted for                               duties (ten individuals). Fees paid to all Board members are in
      periods of up to ten years. Interest rates applied are based on                            the form of cash and Group shares, which are blocked for a
      refinancing costs plus a margin and interest rates and other                               period of four years.
      terms are consistent with those applicable to other employees.                                  Members of the Board without functional duties received
      Loans against securities are granted at interest rates and on                              an annual base fee for 2010 of CHF 250,000 and an annual
      terms applicable to such loans granted to other employees.                                 committee fee for serving on the Audit, Risk or Compensation
      Interest rates applied are based on refinancing costs plus a                               Committees. The committee fees were: CHF 150,000 for the
      margin. When granting a loan to these individuals, the same                                Audit Committee, CHF 100,000 for the Risk Committee and
      credit approval and risk assessment procedures apply as for                                CHF 100,000 for the Compensation Committee. In addition,
      loans to other employees.                                                                  Peter Brabeck-Letmathe, in the role of Vice-Chairman and
                                                                                                 member of both the Compensation and the Chairman’s and
                                                                                                 Governance Committees, received a committee fee of CHF
                                                                                                 250,000. The base and committee fee amounts are set by the
                                                                                                 Compensation Committee for the 12-month period from the
                                                                                                 current AGM to the following year’s AGM.
                                                                                                                  Corporate Governance and Compensation                                     201
                                                                                                                                                                 Compensation




    Members of the Board with the functional duty of serving                                     For the roles of the full-time Chairman and Vice-Chairman,
as a committee chairman receive an annual base fee plus a                                    individuals are paid a base fee plus variable compensation,
variable component, a special compensation fee for functional                                which is proposed by the Compensation Committee and
duties, which reflects the greater responsibility and time com-                              approved by the Board. The base fees for Chairman Hans-
mitment required to perform the role of committee chairman.                                  Ulrich Doerig and Vice-Chairman Urs Rohner for 2010 were
The annual base fee for the chairmen of the Audit and Risk                                   CHF 2.25 million and CHF 1.8 million, respectively. The level
Committees for 2010 was CHF 400,000 and the annual base                                      of variable compensation awarded to these individuals
fee for the chairman of the Compensation Committee was                                       depends on both on the performance of the Group and their
CHF 350,000. The base fees for the committee chairman are                                    personal performance. Such compensation is paid in the form
set by the Compensation Committee for the 12-month period                                    of cash and Group shares, blocked for a period of four years.
from the current AGM to the following year’s AGM. The spe-                                       By compensating Board members to a significant degree in
cial compensation fee for functional duties for the three com-                               the form of blocked Group shares, we ensure alignment of
mittee chairmen varies according to their overall time commit-                               their interests with the interests of our shareholders. The value
ment and is determined and paid for the current year, in                                     of the shares held by our Board members as of the end of
alignment with the annual management variable compensation                                   2010 decreased 26% from the beginning of 2010.
cycle.


Compensation for members of the Board for 2010

                                                                          Variable
                                                                         compen-         Other
                                                Base                    sation for    compen-             Total                  % of total     Awarded      % of total       Number
                                                board   Committee       functional       sation        compen-      Awarded       compen-       in Group      compen-        of Group
                                                                                                   1                                                                                    2
                                                  fee         fee           duties   categories          sation      in cash        sation        shares        sation         shares

2010/2011 (CHF)
Hans-Ulrich Doerig,
full-time Chairman 3                      2,250,000                – 4,000,000          24,000 6,274,000 4,274,000                    68% 2,000,000                32%        48,310
Urs Rohner,
full-time Vice-Chairman 3                 1,800,000                – 4,000,000         234,881 6,034,881 4,034,881                    67% 2,000,000                33%        48,310
Peter Brabeck-Letmathe,
Vice-Chairman 4                             250,000       250,000                –             –       500,000      250,000           50%       250,000            50%          5,031
Jassim Bin Hamad J.J. Al Thani 4            250,000                –             –             –       250,000      125,000           50%       125,000            50%          2,516
Robert H. Benmosche 4                       250,000       100,000                –             –       350,000      175,000           50%       175,000            50%          3,522
Noreen Doyle 4                              250,000       100,000                –             –       350,000      175,000           50%       175,000            50%          3,522
Walter B. Kielholz 4                        250,000       100,000                –                     350,000      175,000           50%       175,000            50%          3,522
Andreas N. Koopmann 4                       250,000       100,000                –             –       350,000      175,000           50%       175,000            50%          3,522
Jean Lanier 4                               250,000       150,000                –             –       400,000      200,000           50%       200,000            50%          4,025
Anton van Rossum 4                          250,000       100,000                –             –       350,000      175,000           50%       175,000            50%          3,522
Aziz R.D. Syriani, Chairman
of the Compensation Committee 3             350,000                –     400,000               –       750,000      522,500           70%       227,500            30%          5,496
David W. Syz 4                              250,000       150,000                –             –       400,000      200,000           50%       200,000            50%          4,025
Richard E. Thornburgh,
Chairman of the Risk Committee 3            400,000                – 1,000,000                 – 1,400,000          900,000           64%       500,000            36%        12,078
John Tiner 4                                250,000       150,000                –             –       400,000      200,000           50%       200,000            50%          4,025
Peter F. Weibel, Chairman
of the Audit Committee 3                    400,000                – 1,395,000          10,000 1,805,000 1,205,000                    67%       600,000            33%        14,493
Total                                     7,700,000 1,200,000 10,795,000               268,881 19,963,881 12,786,381                  64% 7,177,500               36%        165,919

1
  Other compensation included lump sum expenses, child and health care allowances and pension benefits. 2 The value of the Group shares is included in total compensation. Group
shares are subject to a four-year blocking period. 3 Members of the Board with functional duties received an annual base board fee paid in cash. In addition, they received variable
compensation paid in cash and/or share awards as determined by the Board in the course of the regular management compensation process. Generally, variable compensation awarded
for 2010 was paid in Group shares (50%) and cash (50%). The applicable Group share price was CHF 41.40. 4 Members of the Board without functional duties were paid an annual
base board fee and a committee fee for their respective committee membership in advance for the period from one AGM to the other, i.e., from April 30, 2010 to April 29, 2011. The
annual committee fees are CHF 150,000 for the Audit Committee and CHF 100,000 for the Risk and Compensation Committees. For 2010, these total combined fees were paid in
Group shares (50%) and cash (50%). The applicable Group share price was CHF 49.70.
202




      Compensation of the Chairman for 2010                                                          Additional fees and compensation
      For 2010, the Chairman received total compensation of CHF                                      Two former members of the Board are eligible to receive office
      6.3 million. CHF 4.0 million was variable compensation, of                                     infrastructure and secretarial support. These services are
      which CHF 2.0 million was awarded in cash and CHF 2.0 mil-                                     based on existing resources and are not used on a regular
      lion was awarded in Group shares, blocked for a period of four                                 basis. No additional fees, severance payments or other forms
      years.                                                                                         of compensation were paid to current or former members of
          The total 2010 compensation of the full-time Chairman                                      the Board or related parties during 2010.
      was 4% lower than the 2009 total compensation and 24%
      lower than the 2009 compensation for his role as full-time
      Chairman on an annualized basis.


      Compensation for members of the Board for 2009

                                                                     Fixed        Variable                                   Value of                       Other
                                                                      cash           cash                    % of total        Group      % of total     compen-             Total      Number
                                                                  compen-        compen-           Total      compen-          share       compen-          sation        compen-      of Group
                                                                                                                                                                      1                             2
                                                                    sation          sation         cash         sation        awards         sation     categories          sation       shares

      2009/2010 (CHF)
      Hans-Ulrich Doerig, Chairman 3                            1,778,409 2,350,000 4,128,409                     63% 2,350,000                 36%        28,095 6,506,504              43,754
      Urs Rohner, Vice-Chairman 3                               1,200,000 1,000,000 2,200,000                     66% 1,000,000                 30%       146,160 3,346,160              18,619
      Peter Brabeck-Letmathe,
      Vice-Chairman 4                                             250,000                –     250,000            50%       250,000             50%               –       500,000         5,750
      Robert H. Benmosche 4, 5                                    175,000                –     175,000            50%       175,000             50%               –       350,000         4,025
      Noreen Doyle 4                                              175,000                –     175,000            50%       175,000             50%               –       350,000         4,025
      Walter B. Kielholz 3, 4                                     916,667 2,175,000 3,091,667                     59% 2,175,000                 41%          8,000 5,274,667             50,024
      Andreas N. Koopmann 4                                       175,000                –     175,000            50%       175,000             50%               –       350,000         4,025
      Jean Lanier 4                                               200,000                –     200,000            50%       200,000             50%               –       400,000         4,600
      Anton van Rossum 4                                          175,000                –     175,000            50%       175,000             50%               –       350,000         4,025
      Aziz R.D. Syriani, Chairman
      of the Compensation Committee 3                             350,000        172,500       522,500            70%       227,500             30%               –       750,000         4,236
      David W. Syz 4                                              200,000                –     200,000            50%       200,000             50%               –       400,000         4,600
      Ernst Tanner 4                                              200,000                –     200,000            50%       200,000             50%               –       400,000         4,600
      Richard E. Thornburgh,
      Chairman of the Risk Committee 3                            400,000        333,334       733,334            69%       333,333             31%               – 1,066,667             6,207
      John Tiner 4                                                200,000                –     200,000            50%       200,000             50%               –       400,000         4,600
      Peter F. Weibel, Chairman
      of the Audit Committee 3                                    400,000        795,000 1,195,000                66%        600,000            33%        10,000 1,805,000              11,172
      Total                                                     6,795,076 6,825,834 13,620,910                    61% 8,435,833                38%        192,255 22,248,998           174,262

      1
        Other compensation included lump sum expenses, child and health care allowances and pension benefits. 2 The value of the Group shares is included in total compensation. Group
      shares are subject to a four-year blocking period. 3 Members of the Board with functional duties received an annual fee paid in cash. In addition, they received variable compensation paid
      in cash and/or share awards as determined by the Board in the course of the regular management compensation process. The annual fees and variable compensation paid to Walter B.
      Kielholz (former Chairman), Hans-Ulrich Doerig (former full-time Vice-Chairman, current Chairman), Urs Rohner (full-time Vice-Chairman) and Richard E. Thornburgh (Chairman of the
      Risk Committee) reflect the new or changed functional duties they performed in 2009. Variable compensation awarded for 2009 was paid in Group shares (50%) and cash (50%). The
      applicable Group share price was CHF 53.71. Individual amounts of variable compensation (the total of cash and share-based compensation) were as follows: Hans-Ulrich Doerig, CHF
      4,700,000; Urs Rohner, CHF 2,000,000; Walter B. Kielholz, CHF 4,350,000; Aziz R.D. Syriani, CHF 400,000; Richard E. Thornburgh, CHF 666,667; and Peter F. Weibel, CHF
      1,395,000. 4 Members of the Board without functional duties were paid an annual fee in advance for the period from one AGM to the other, i.e., from April 24, 2009 to April 30, 2010.
      For 2009, the fee was paid in Group shares (50%) and cash (50%). The applicable Group share price was CHF 43.48. The annual fee paid to members of the Board without functional
      duties is broken down as follows: base Board fee of CHF 250,000, Audit Committee fee of CHF 150,000, Compensation Committee fee of CHF 100,000 and Risk Committee fee of
      CHF 100,000. In addition, Peter Brabeck-Letmathe received total committee fees of CHF 250,000, whereof CHF 100,000 related to his Compensation Committee membership and
      CHF 150,000 related to his additional role as the Vice-Chairman and member of the Chairman’s and Governance Committee. 5 Robert H. Benmosche stepped down from the Board on
      August 10, 2009.
                                                                                                                  Corporate Governance and Compensation                                        203
                                                                                                                                                                 Compensation




Share and option holdings of members of the Board
The holdings as disclosed below include the holdings of the
respective member of the Board, their immediate family mem-
bers and companies where they have a controlling interest.


Share holdings by individual

December 31                                                                                                                                                       2010          2009

Number of shares 1
Hans-Ulrich Doerig, full-time Chairman                                                                                                                        223,800        155,639
Urs Rohner, full-time Vice-Chairman 2                                                                                                                         144,870         61,394
Peter Brabeck-Letmathe, Vice-Chairman                                                                                                                         103,732         95,201
Jassim Bin Hamad J.J. Al Thani 3                                                                                                                                 2,516                 –
Robert H. Benmosche 3                                                                                                                                           20,252                 –
Noreen Doyle                                                                                                                                                    27,385        23,863
Walter B. Kielholz                                                                                                                                            323,734        420,212
Andreas N. Koopmann                                                                                                                                             16,948        13,426
Jean Lanier                                                                                                                                                     24,552        20,527
Anton van Rossum                                                                                                                                                34,379        30,857
Aziz R.D. Syriani, Chairman of the Compensation Committee                                                                                                       60,889        56,653
David W. Syz                                                                                                                                                    76,105        72,080
Richard E. Thornburgh, Chairman of the Risk Committee 2                                                                                                       296,522         92,500
John Tiner                                                                                                                                                       8,625          4,600
Peter F. Weibel, Chairman of the Audit Committee                                                                                                                52,651        41,479
                                                                                                                                                                                           4
Total                                                                                                                                                       1,416,960 1,088,431

1
  Includes Group shares that are subject to a blocking period of up to four years. 2 Urs Rohner was granted 35,564 PIP I units and 55,556 PIP II units and Richard E. Thornburgh was
granted 98,935 PIP I units, each in his former position as a member of the Executive Board. 3 As of April 30, 2010, Jassim Bin Hamad J.J. Al Thani and Robert H. Benmosche were
elected as members of the Board. 4 As of April 30, 2010, Ernst Tanner stepped down from the Board. He held 46,989 shares as of December 31, 2009.



Option holdings by individual

                                                                                                                                                                             Exercise
                                                                                                                                Richard E.                       Expiry          price
December 31, 2010                                                                                                              Thornburgh                         date        in CHF

Year of grant
2001                                                                                                                              215,116           January 25, 2011            84.75
Total                                                                                                                             215,116                              –               –


                                                                                                                                                                             Exercise
                                                                                                                                Richard E.                       Expiry          price
December 31, 2009                                                                                                              Thornburgh                         date        in CHF

Year of grant
2001                                                                                                                              215,116           January 25, 2011            84.75
2000                                                                                                                              100,000               March 1, 2010           74.00
Total                                                                                                                             315,116                              –               –

The Group’s policy is to compensate members of the Board with Group shares. Option holdings were acquired by the named individuals in their previous capacities as members of senior
management. As of December 31, 2010 and 2009, none of the members of the Board held options purchased from personal funds.
204




      Loans to members of the Board
                                                                                                                                                                              1              1
                                                                                                                                                                       2010          2009

      December 31 (CHF)
      Hans-Ulrich Doerig, Chairman                                                                                                                               1,800,000 1,800,000
      Urs Rohner, Vice-Chairman                                                                                                                                  5,590,000 4,242,000
      Peter Brabeck-Letmathe, Vice-Chairman                                                                                                                     14,163,528 5,761,432
      Walter B. Kielholz                                                                                                                                         5,000,000 2,000,000
      Andreas N. Koopmann                                                                                                                                        3,500,000 3,500,000
      David W. Syz                                                                                                                                               1,500,000 1,500,000
      Richard E. Thornburgh                                                                                                                                          93,186        120,591
      Peter F. Weibel                                                                                                                                            3,850,000 2,865,000
                                                                                                                                                                                             2
      Total                                                                                                                                                     35,496,714 21,789,023

      1                                                 2
          Includes loans to immediate family members.       As of April 30, 2010, Ernst Tanner stepped down from the Board. He had a CHF 3,550,000 loan as of December 31, 2009.



      A large majority of loans outstanding to members of the Board                                   and corporate governance of the transaction. The Group and
      are mortgages or loans against securities. Such loans are                                       the Board (except for Jassim bin Hamad J.J. Al Thani and Aziz
      made to Board members on the same terms available to third-                                     R. D. Syriani, who recused themselves) determined that the
      party customers. As of December 31, 2010, 2009 and 2008,                                        terms of the transaction, given its size, the nature of the con-
      outstanding loans to the members of the Board amounted to                                       tingent buffer capital, for which there was no established mar-
      CHF 35 million, CHF 25 million and CHF 24 million, respec-                                      ket, and the terms of the tier 1 capital notes issued in 2008
      tively.                                                                                         and held by QIA and The Olayan Group, were fair. For more
          Members of the Board are not granted employee condi-                                        information about the terms of the transaction, refer to III –
      tions on any loans extended to them, but such loans are sub-                                    Treasury, Risk, Balance sheet and Off-balance sheet – Trea-
      ject to conditions applied to customers with a comparable                                       sury management – Capital Management – Capital issuances.
      credit standing. Members of the Board who were previously                                           We, together with our subsidiaries, are a global financial
      employees of the Group may still have outstanding loans,                                        services provider and have major corporate banking operations
      which were extended to them at the time at employee condi-                                      in Switzerland. We, therefore, typically have relationships with
      tions. In addition to the loans listed above, the Group or any of                               many large companies including those in which our Board
      its banking subsidiaries have entered into financing and other                                  members assume management functions or board member
      banking agreements with companies in which current mem-                                         responsibilities. Except for the deemed related party transac-
      bers of the Board have a significant influence as defined by                                    tion with QIA and The Olayan Group and the related party
      the US Securities and Exchange Commission. As of Decem-                                         loans as of December 31, 2009 and 2008 described above,
      ber 31, 2010, there was no exposure to such related parties.                                    all relationships between us or our banking subsidiaries and
      As of December 31, 2009 and 2008, the total exposure to                                         members of the Board and their affiliated companies or related
      such related parties amounted to CHF 50,000 and CHF 6 mil-                                      parties are in the ordinary course of business and at arm’s
      lion, respectively, including all advances and contingent liabili-                              length.
      ties. The highest exposure to such related parties for any of
      the years in the three-year period ended December 31, 2010
      did not exceed CHF 10 million in aggregate.                                                     Compensation awards and expenses for the
          In February 2011, the Group entered into definitive agree-                                  Group
      ments with affiliates of Qatar Investment Authority (QIA) and
      The Olayan Group, which have significant holdings of Group                                      Variable compensation awarded for 2010
      shares, to issue an aggregate of CHF 5.9 billion Tier 1 Buffer                                  The following table shows the value of awards granted to
      Capital Notes for cash or in exchange for tier 1 capital notes                                  employees as variable compensation for 2010 and 2009
      issued in 2008. The Group determined that this was a material                                   granted in January 2011 and 2010, respectively. The awards
      transaction and deemed QIA and The Olayan Group to be                                           that are deferred contain future service and performance crite-
      related parties of Jassim bin Hamad J.J. Al Thani and Aziz R.                                   ria that will determine the final payout to employees upon set-
      D. Syriani, respectively, for purposes of evaluating the terms
                                                                                                                  Corporate Governance and Compensation                                        205
                                                                                                                                                                      Compensation




tlement and may be reduced or forfeited if future service or
performance criteria are not achieved.


Variable compensation awards

in                                                                                                                                                                     2010            2009

Variable compensation (CHF million)
Share awards                                                                                                                                                          1,430                –
Adjustable Performance Plan awards                                                                                                                                    1,102            1,187
Restricted cash awards                                                                                                                                                   465               –
Scaled Incentive Share Units                                                                                                                                                –          1,188
Incentive Share Units                                                                                                                                                       –           325
Other share-based awards                                                                                                                                                    –             6
Other cash awards                                                                                                                                                         19             28
Deferred compensation awards                                                                                                                                          3,016            2,734
                                                                                                                                                                                1
Unrestricted cash                                                                                                                                                     2,030            4,140
                                                                                                                                                                                2
Variable compensation                                                                                                                                                 5,046            6,874

1                                                                                                                                     2
  Includes CHF 35 million of unrestricted cash granted in the form of Group shares to comply with European regulatory requirements.       Excluding the effect of the increased base
salaries, variable compensation awarded for 2010 would have been 15% lower than 2009.



All variable compensation was approved by the Board, based                                       On January 20, 2011, we granted 34.5 million share
on senior management’s recommendation and the thorough                                       awards with a total value of CHF 1,430 million. The fair value
assessment of the Group’s performance in 2010 against pre-                                   of each share award was CHF 42.51, equivalent to the
defined absolute and relative performance criteria. In addition,                             Group’s closing share price on the date of grant. The esti-
other factors were taken into consideration, such as the over-                               mated unrecognized compensation expense of CHF 1,424
all economic and competitive environment, the capital and risk                               million was determined based on the fair value of the award at
position of the Group and returns to shareholders. The total                                 the date of grant, including the current estimate of future for-
value of variable compensation for 2010 reflected both the                                   feitures, and will be recognized over the four-year vesting
weaker absolute performance of the Group in 2010 in a chal-                                  period, subject to early retirement rules.
lenging market environment and the solid relative performance                                    On January 20, 2011, we granted Adjustable Performance
compared to peers, including the Group ROE of 14.4% and                                      Plan awards with a total value of CHF 1,102 million. The esti-
net new assets of CHF 69.0 billion. 2010 was also a year of                                  mated unrecognized compensation expense of CHF 1,669
transition towards the new regulatory environment. Variable                                  million was determined based on the fair value of the award at
compensation for 2010 therefore also reflected the shift in our                              the date of grant, including the current estimated outcome of
compensation structure, as we increased base salaries and                                    relevant performance criteria and estimated future forfeitures,
correspondingly reduced variable compensation. The overall                                   and will be recognized over the four-year vesting period, sub-
variable compensation awarded for 2010 was CHF 5.0 billion,                                  ject to early retirement rules.
down 27% compared to 2009, and down 15% excluding the                                            On January 20, 2011, we granted restricted cash awards
effect of increased base salaries. 60% of the total variable                                 with a total value of CHF 465 million. The estimated unrecog-
compensation awarded across the Group for 2010 was                                           nized compensation expense of CHF 465 million was deter-
deferred and subject to future performance and service crite-                                mined based on the fair value of the award at the date of grant
ria.                                                                                         and will be recognized over the two-year vesting period.

Details of share, Adjustable Performance Plan and                                            Compensation and benefits expense
restricted cash awards for 2010                                                              Compensation and benefits expense recognized for a given
The recognition of compensation expense for the share,                                       year in the consolidated statement of operations includes
Adjustable Performance Plan and restricted cash awards                                       salaries, variable compensation, the amortization of share-
granted in January 2011 began in 2011 and had no impact on                                   based and other awards that were granted as variable deferred
the 2010 consolidated financial statements.                                                  compensation in prior years, benefits and employer taxes on
206




      compensation. Variable compensation mainly reflects the unre-                               which is determined by the plan, retirement eligibility of
      stricted performance-based compensation for the current year                                employees, moratorium periods and certain other terms. Com-
      as well as severance, sign-on and commission payments. Vari-                                pensation expense for share-based and other awards that
      able deferred compensation granted for the current year is                                  were granted as variable deferred compensation in prior years
      expensed in future periods and subject to restrictive features                              also includes the current estimated outcome of applicable per-
      such as continued employment with the Group, vesting, forfei-                               formance criteria, estimated future forfeitures and mark-to-
      ture and blocking rules.                                                                    market adjustments for certain awards that are still outstand-
          Compensation expense for share-based and other awards                                   ing.
      that were granted as variable deferred compensation in prior                                    Compensation and benefits expense recognized in the
      years is recognized in accordance with the specific terms and                               consolidated statements of operations for 2009 and 2010 is
      conditions of each respective award and is primarily recog-                                 shown in the following table.
      nized over the future requisite service and vesting period,


      Compensation and benefits expense

                                                                                                                                           2010                                      2009

                                                                                                           Current       Deferred                     Current      Deferred
                                                                                                          compen-        compen-                     compen-       compen-
      December 31                                                                                           sation         sation          Total       sation        sation          Total

      Compensation and benefits (CHF million)
      Salaries                                                                                               6,532               –        6,532         5,326              –        5,326
      Adjustable Performance Plan awards                                                                           –          963 1         963              –             –                –
      Scaled Incentive Share Units                                                                                 –          561           561              –             –                –
      Incentive Share Units                                                                                        –          723           723              –        1,526         1,526
      Cash Retention Awards                                                                                        –          578           578              –          822           822
      Performance Incentive Plans (PIP I and PIP II) 2                                                             –           (1)           (1)             –          (21)          (21)
      Partner Asset Facility 3                                                                                     –           45            45              –          629           629
      Other share-based awards                                                                                     –          294 4         294              –          331 4         331
      Other cash awards                                                                                            –          422           422              –          431           431
      Deferred compensation expense                                                                                –        3,585         3,585              –        3,718         3,718
      Unrestricted cash                                                                                      2,030               –        2,030         4,140              –        4,140
      Net severance payments                                                                                    102              –          102              3             –                3
      Sign-on payments                                                                                           72              –           72            64              –            64
      Commissions                                                                                               161              –          161           161              –          161
      Variable compensation expense                                                                          2,365               –        2,365         4,368              –        4,368
      Salaries and deferred and variable compensation expense                                                8,897          3,585       12,482          9,694         3,718        13,412
      Social security 5                                                                                         928              –          928         1,015              –        1,015
      Other 6                                                                                                1,189               –        1,189           586              –          586
      Compensation and benefits                                                                             11,014          3,585       14,599        11,295          3,718        15,013

      1
        Includes CHF 41 million of expenses associated with special Adjustable Performance Plan awards granted in 2010. 2 Includes claw backs. 3 Represents the change in underlying fair
      value of the indexed assets during the period. In 2009, included the vesting of the remaining 33.3% in the first quarter. 4 Includes CHF 76 million and CHF 69 million of expenses
      associated with other share-based awards granted in 2010 and 2009, respectively. 5 Represents the Group’s portion of employees’ mandatory social security. 6 Includes pension and
      other post-retirement expense of CHF 483 million and the UK levy on variable compensation of CHF 404 million in 2010 and pension and other post-retirement expense of CHF 347
      million in 2009.
                                                                                                               Corporate Governance and Compensation                                        207
                                                                                                                                                                  Compensation




Estimated unrecognized compensation expense                                                each award on the date of grant taking into account the cur-
The following table shows the estimated unrecognized com-                                  rent estimated outcome of relevant performance criteria
pensation expense for variable deferred compensation awards                                (including the assumption of no future losses) and estimated
granted for 2010 and prior years outstanding as of December                                future forfeitures. No estimate has been included for future
31, 2010. These estimates were based on the fair value of                                  mark-to-market adjustments.


Estimated unrecognized compensation expense

                                                                                                                                                                Deferred
                                                                                                                                                  Deferred      compen-
                                                                                                                                                 compen-       sation for
                                                                                                                                                 sation for    prior-year
December 31, 2010                                                                                                                                    2010         awards         Total

Estimated unrecognized compensation expense (CHF million)
Share awards                                                                                                                                        1,424              –        1,424
                                                                                                                                                                            1
Adjustable Performance Plan awards                                                                                                                  1,669           613         2,282
Restricted cash awards                                                                                                                                465              –          465
Scaled Incentive Share Units                                                                                                                             –          782           782
Incentive Share Units                                                                                                                                    –          334           334
                                                                                                                                                                            2
Other share-based awards                                                                                                                                 –          496           496
Other cash awards                                                                                                                                       19            48               67
Estimated unrecognized compensation expense                                                                                                         3,577         2,273         5,850

1                                                                                                                                          2
  Includes CHF 126 million of estimated unrecognized expense associated with special Adjustable Performance Plan awards granted in 2010.       Includes CHF 218 million of estimated
unrecognized expense associated with other share-based awards granted in 2010.



For information about the fair value assumptions used to esti-                             on fair value at the time of grant) reduces equity, however, the
mate the unrecognized compensation expense of unvested                                     recognition of the obligation to deliver the shares increases
awards, refer to Note 27 – Employee variable deferred com-                                 equity by a corresponding amount. When Credit Suisse pur-
pensation in V – Consolidated financial statements – Credit                                chases shares from the market to meet its obligation to
Suisse Group.                                                                              employees, these purchased treasury shares reduce equity by
    In connection with our share-based compensation plans,                                 the amount of the purchase price. Treasury shares are man-
we generally repurchased our own shares in the open market                                 aged in aggregate and are not allocated to specific obligations
to satisfy obligations in connection with share-based compen-                              under any particular share-based compensation program.
sation but may also issue new shares out of available condi-                               Shareholders’ equity also includes, as additional paid-in capi-
tional capital, and we economically hedge our estimated obli-                              tal, the excess tax benefits/charges that arise at settlement of
gation to deliver Group shares at future dates.                                            share-based awards. For further information, refer to the Con-
    For more information about these topics, refer to Note 7 –                             solidated statements of changes in equity, Note 26 – Tax –
Share capital, conditional and authorized capital of Credit                                Tax benefits associated with share-based compensation and
Suisse Group in VI – Parent company financial statements –                                 Note 27 – Employee variable deferred in V – Consolidated
Credit Suisse Group.                                                                       Financial Statements – Credit Suisse Group.



Impact of share-based compensation on                                                      Compensation plans from prior years
shareholders’ equity
                                                                                           Compensation practices in the banking industry have evolved
Our shareholders’ equity reflects the effect of share-based                                over recent years, reflecting business and regulatory trends.
compensation, including the impact of related share repur-                                 For example, prior to 2004, options and other share-based
chases and other hedging activities. Equity is generally unaf-                             awards were used as standard instruments for the industry.
fected by the granting and vesting of share-based awards, as                               For the Group, highly leveraged PIP I awards were granted in
share-based compensation expense (which is generally based                                 early 2005 as part of compensation for 2004, reflecting the
208




      restructuring of the Group at the time. To ensure retention of a    SISUs, a long-term incentive plan with an extended vesting
      relatively small group of senior management, these awards           period of four years and with the ROE of the Group as a fur-
      vested and were deferred over five years. PIP I was expensed        ther performance condition. In the aftermath of the market tur-
      over the vesting period and settled in April 2010 with the deliv-   moil, from 2009, the Group started to award cash-based
      ery of 4.8 shares per unit, which was largely driven by the out-    instruments. Cash Retention Awards were designed to retain
      performance of the Group share price against peers. PIP II          employees over the vesting periods of two years. The Partner
      awards were granted in early 2006 as part of compensation           Asset Facility (PAF) was designed to transfer risks from the
      for 2005 to a larger group of senior management reflecting          Group to senior employees in Investment Banking. The
      the ongoing structural realignment of the Group. PIP II awards      Adjustable Performance Plan awards were designed to align
      also vest over five years and will settle in May 2011. Com-         compensation with future performance and included a claw-
      pared to PIP I, PIP II was less leveraged, but still provided a     back mechanism. For a more detailed description of these
      relatively strong upside potential upon achievement of certain      prior-year awards, refer to Overview of compensation plans
      performance criteria. Based on the current estimate, we do          introduced in prior years.
      not expect the PIP II awards to have a value at settlement, as          Employees experience changes to the values of their
      it is probable that the Group share price performance will be       deferred awards over the vesting period and the final value of
      below the minimum predefined target of CHF 47 per PIP II            a specific award will only be determined at settlement.
      unit.                                                                   A comparison of fair values at grant versus fair values at
           Reflecting the integrated bank strategy, the Group granted     the end of 2010 is provided in the table “Fair values of com-
      the more broadly distributed and moderately leveraged ISU           pensation plans from prior years”. The significant fair value
      between 2007 and 2010. The Group share price was the main           changes against grant values reflected the embedded per-
      performance criteria but thresholds and leverage multipliers        formance criteria, vesting provisions and market conditions at
      varied from year to year, reflecting market conditions at the       grant and as of the end of 2010.
      time of grant. In 2010, senior management was granted


      Fair value of compensation plans from prior years

                                                                                                                         Value per unit

                                                                                                              Year end          Grant
                                                                                                                 2010            date     % change

      Share-based awards (CHF)
      Options 2001                                                                                               0.00           23.12        (100)
      Options 2002                                                                                               3.57           11.37         (69)
      Options 2003                                                                                               7.07           10.20         (31)
      Incentive Share Unit granted for 2007                                                                     37.67           65.59         (43)
      Incentive Share Unit granted for 2008                                                                     62.22           30.68         103
      Incentive Share Unit granted for 2009                                                                     37.87           63.75         (41)
      Scaled Incentive Share Unit granted for 2009                                                              38.34           63.74         (40)
      Performance Incentive Plan II                                                                              0.00          79.87         (100)

      Cash-based awards (CHF)
      Adjustable Performance Plan awards                                                                         1.14            1.00          14
      Partner Asset Facility                                                                                     1.57            1.00          57




      While we believe that the evolution of our compensation             and excess potential leverage. These issues were taken into
      instruments over recent years provides a track record of inno-      account as we simplified our compensation instruments for
      vation and responsiveness, we also acknowledge that the             2010.
      complexity of our compensation instruments gave internal and           A summary of the forms of awards granted in previous
      external stakeholders concerns with regard to transparency          years is shown in the following overview.
                                                                                                            Corporate Governance and Compensation                                209
                                                                                                                                                         Compensation




Overview of compensation plans introduced in prior years
Scaled Incentive Share Unit (SISU)          Incentive Share Unit (ISU)                  Cash Retention Award (CRA)                   Performance Incentive Plan I (PIP I)

Basis Share-based, variable deferred        Basis Share-based, variable deferred        Basis Cash-based, restricted variable        Basis Share-based, variable deferred
compensation                                compensation                                compensation                                 compensation

Vesting start 2010                          Vesting start 2007-2010                     Vesting start 2009                           Vesting start 2005
Vesting end 2013                            Vesting end 2010-2013                       Vesting end 2011                             Vesting end 2010

Applied to                                  Applied to                                  Applied to                                   Applied to
Performance in 2009, which included         Performance in years since 2006 for all     Performance in 2008, which included          Performance in 2004, which included
half of the variable cash compensation      employees.                                  all variable cash compensation awarded       selected managing directors in all divi-
awarded to all managing directors and                                                   to all managing directors across all divi-   sions.
directors across all divisions.             General award conditions                    sions and directors in Investment Bank-
                                            Vesting ratably over a three-year period.   ing; variable cash compensation in           General award conditions
General award conditions                                                                excess of CHF 300,000 awarded to             PIP I units were retention incentive
Vesting ratably over a three-year period.   Other award conditions or                   directors in all other divisions.            awards requiring continued employment
                                            restrictions                                                                             with the Group. PIP I units vested rat-
Other award conditions or                   An ISU is similar to other share-based      General award conditions                     ably over a five-year period. At grant,
restrictions                                awards, but offers additional upside        Vesting ratably over a two-year period.      PIP I units were equivalent to a Group
Value of SISUs is linked to the long-       depending on the development of the                                                      share price of CHF 47.45.
term development of the Group share         Group share price.                          Other award conditions or
price and the Group average ROE.                                                        restrictions                                 Other award conditions or
                                            Program objective/rationale                 Unvested portion subject to repayment        restrictions
Program objective/rationale                 An ISU links employee performance           if claw-back event occurs, such as vol-      PIP I units settled for 4.8 Group shares.
Promoting retention of managing direc-      awards to the long-term performance         untary termination or termination for        PIP I units converted into Group shares
tors and directors.                         of the Group, with an additional incen-     cause.                                       determined by multipliers based on the
                                            tive to increase Group share value for                                                   achievement of pre-defined targets: (i)
                                            the benefit of employees and share-         Program objective/rationale                  earnings performance; (ii) Group share
                                            holders.                                    Promoting retention of senior manage-        price performance (absolute); and (iii)
                                                                                        ment.                                        Group share price performance relative
                                                                                                                                     to peers.

                                                                                                                                     Program objective/rationale
                                                                                                                                     PIP I was designed to compensate,
                                                                                                                                     incentivize and retain senior manage-
                                                                                                                                     ment and executives during 2004 and
                                                                                                                                     2005, a period of fundamental change
                                                                                                                                     for the Group and intense international
                                                                                                                                     competition for employees in some of
                                                                                                                                     our businesses. PIP I units awarded to
                                                                                                                                     senior management were closely linked
                                                                                                                                     to specific achievements in the delivery
                                                                                                                                     of our strategy.
210




      Overview of compensation plans introduced in prior years (continued)
      Performance Incentive Plan II (PIP II)      Partner Asset Facility (PAF)                  Other share-based awards                     Other cash awards

      Basis Share-based, variable deferred        Basis Cash-based, variable deferred           Basis Share-based, non-deferred or           Basis Cash-based, deferred compen-
      compensation                                compensation                                  variable deferred compensation               sation

      Vesting start 2006                          Vesting start 2008. 66.7% vested              Applied to                                   Applied to
      Vesting end 2011                            upon grant                                    Blocked shares: granted to members of        Voluntary deferred compensation plans:
                                                  Vesting end 33.3% vested in March             the Board. For performance prior to          managing directors of former Credit
      Applied to                                  2009                                          2006, granted to employees in Switzer-       Suisse First Boston; arbitrage trading
      Performance in 2005, which included                                                       land. Phantom shares and Longevity           plans: directors and managing directors
      all managing directors in Investment        Applied to                                    Premium Awards (LPA): for perform-           of Investment Banking arbitrage trading
      Banking and selected managing direc-        Performance in year 2008, which               ance prior to 2006, granted to employ-       desks; employee investment plans: var-
      tors and directors in other divisions.      included all managing directors and           ees awarded variable compensation at         ious employees depending on level of
                                                  directors in Investment Banking.              or above CHF 125,000. Special share          variable cash compensation.
      General award conditions                                                                  awards: granted to employees in limited
      PIP II units are retention incentive        General award conditions                      circumstances.                               General award conditions
      awards requiring continued employment       The contractual term of a PAF award is                                                     Voluntary deferred compensation plans:
      with the Group. PIP II units vest ratably   eight years. PAF awards are indexed           General award conditions                     allowed employees to defer a portion of
      over a five-year period. At grant, PIP II   to, and represent a first-loss interest in,   Blocked shares: entitle participants to      their bonus for payout at retirement
      units were equivalent to a Group share      a specified pool of illiquid assets (Asset    receive Group shares that are vested at      age; arbitrage trading plans: both vol-
      price of CHF 72.00. The PIP II pro-         Pool) that originated in Investment           the time of grant but blocked for a four-    untary and mandatory plans based on
      gram includes a two-year moratorium         Banking. The notional value of the            year period. Phantom shares: entitle         the performance of the global arbitrage
      period for early retirement eligibility.    Asset Pool was based on the fair mar-         holders to receive one Group share           trading group and the employee’s indi-
                                                  ket value of the assets within the Asset      subject to continued employment with         vidual group; employee investment
      Other award conditions or                   Pool as of December 31, 2008, and             the Group, restrictive covenants and         plans: allowed employees to defer a
      restrictions                                those assets cannot be substituted            cancellation provisions and vest in three    portion of their bonus in investment
      PIP II units will settle for between zero   throughout the contractual term of the        installments on each of the first, sec-      plans with the Group.
      and six Group shares. PIP II units can      award or until liquidated.                    ond and third anniversaries of the grant
      convert into Group shares determined                                                      date. LPA: have the same general con-        Other award conditions or
      by multipliers based on the achieve-        Other award conditions or                     ditions as phantom shares, except that       restrictions
      ment of pre-defined targets: (i) earn-      restrictions                                  LPA vested in full on the third anniver-     Plans are either fully vested or contain
      ings performance; (ii) Group share price    PAF holders will receive a semi-annual        sary of the grant date. Special share        future service requirements. For certain
      performance (absolute); and (iii) Group     cash interest payment of the London           awards are mostly granted to new             plans, the Group recognizes both mar-
      share price performance relative to         Interbank Offered Rate plus 250 basis         employees.                                   ket and performance adjustments until
      peers.                                      points applied to the notional value of                                                    awards are settled.
                                                  the PAF award granted throughout the          Other award conditions or
      Program objective/rationale                 contractual term of the award. They will      restrictions                                 Program objective/rationale
      PIP II links employee performance           participate in the potential gains on the     Blocked shares: restricted from selling      Voluntary deferred compensation plans
      awards to the long-term performance         Asset Pool if the assets within the pool      until block period has lapsed; Phantom       are special retirement plans; arbitrage
      of the Group, with an additional incen-     are liquidated at prices above the initial    shares: conversion to Group shares           trading plans align the performance of
      tive to increase Group share value for      fair market value. If the assets within       occurred within 120 days of vesting.         arbitrage traders with the results of the
      the benefit of employees and share-         the Asset Pool are liquidated at prices       LPA: conversion to Group shares              Group; employee investment plans pro-
      holders.                                    below the initial fair market value, the      occurred within 120 days of vesting;         vide employees with opportunity to
                                                  PAF holders will bear the first loss on       may be blocked for one year after vest-      invest along side the Group.
                                                  the Asset Pool.                               ing, depending on the location of the
                                                                                                grant recipient. Special share awards:
                                                  Program objective/rationale                   may contain vesting conditions,
                                                  PAF awards were designed to incen-            depending on the terms of employment
                                                  tivize senior managers in Investment          or other factors.
                                                  Banking to effectively manage assets
                                                  which were a direct result of risk taking     Program objective/rationale
                                                  in Investment Banking during this             Blocked share awards made up the
                                                  period. As a result of the PAF program,       Group’s early share-based deferred
                                                  a significant portion of risk positions       compensation for employees based in
                                                  associated with the Asset Pool has            Switzerland and continue to be granted
                                                  been transferred to the employees and         to Board members, with the objective
                                                  removed from the Group’s risk-                of aligning the interest of the recipients
                                                  weighted assets, resulting in a reduc-        to the creation of overall shareholder
                                                  tion in capital usage.                        value. Share awards including phantom
                                                                                                shares, LPA and special awards made
                                                                                                up the Group’s early share-based
                                                                                                deferred compensation, with the objec-
                                                                                                tive of linking employee performance
                                                                                                more closely to the creation of overall
                                                                                                shareholder value. Special share
                                                                                                awards are typically granted to new
                                                                                                employees to compensate for deferred
                                                                                                awards at a previous employer forfeited
                                                                                                as a result of the individual taking up
                                                                                                employment with the Group.
     APPENDIX 5 — OUR FINANCIAL STATEMENTS EXTRACTED FROM
          CREDIT SUISSE GROUP AG ANNUAL REPORT 2010

      We are a wholly owned subsidiary of Credit Suisse Group AG. We have extracted the section
headed “Consolidated financial statements – Credit Suisse (Bank)” from pages 375 to 458 of the
Credit Suisse Group AG annual report 2010 in this appendix 5. References to page numbers in
this appendix 5 are to the pages in the Credit Suisse Group AG annual report 2010 and not to the
pages in this document.


    For further information on our financial statements (including the notes to such statements),
we refer you to the complete Credit Suisse Group AG annual report 2010 on our website at
www.credit-suisse.com.




                                            − 246 −
VII
Consolidated             377 Report of the Statutory Auditor

financial statements     379 Consolidated financial statements

– Credit Suisse (Bank)   387 Notes to the consolidated financial
                             statements
                             (see the following page for a detailed list)

                         457 Controls and procedures

                         458 Report of the Independent
                             Registered Public Accounting Firm
Consolidated financial statements
379   Consolidated   statements of operations
380   Consolidated   balance sheets
382   Consolidated   statements of changes in equity
385   Consolidated   statements of comprehensive
      income
385   Consolidated   statements of cash flows



Notes to the consolidated financial statements
387    1   Summary of significant accounting policies   403   21   Other assets and other liabilities
388    2   Recently issued accounting standards         404   22   Deposits
388    3   Business developments                        404   23   Long-term debt
388    4   Discontinued operations                      405   24   Accumulated other comprehensive income
389    5   Segment information                          406   25   Tax
391    6   Net interest income                          411   26   Employee deferred compensation
391    7   Commissions and fees                         415   27   Related parties
392    8   Trading revenues                             417   28   Pension and other post-retirement benefits
392    9   Other revenues                               425   29   Derivatives and hedging activities
392   10   Provision for credit losses                  431   30   Guarantees and commitments
393   11   Compensation and benefits                    433   31   Transfers of financial assets and variable
393   12   General and administrative expenses                     interest entities
393   13   Securities borrowed, lent and subject to     439   32   Financial instruments
           repurchase agreements                        452   33   Assets pledged or assigned
394   14   Trading assets and liabilities               453   34   Capital adequacy
395   15   Investment securities                        454   35   Litigation
396   16   Other investments                            454   36   Significant subsidiaries and equity method
397   17   Loans, allowance for loan losses and                    investments
           credit quality                               456   37   Significant valuation and income
400   18   Premises and equipment                                  recognition differences between US GAAP
400   19   Goodwill and other intangible assets                    and Swiss GAAP (true and fair view)
402   20   Life settlement contracts                    456   38   Risk assessment
Consolidated financial statements – Credit Suisse (Bank)   377
378
                                                                  Consolidated financial statements – Credit Suisse (Bank)             379




Consolidated financial statements
Consolidated statements of operations

                                                                                          Reference
                                                                                           to notes                               in

                                                                                                         2010       2009       2008

Consolidated statements of operations (CHF million)
Interest and dividend income                                                                     6     24,825     24,522     47,102
Interest expense                                                                                 6    (18,798)   (18,153)   (39,189)
Net interest income                                                                              6      6,027      6,369      7,913
Commissions and fees                                                                             7     13,122     12,770     13,640
Trading revenues                                                                                 8      9,072     12,164    (10,340)
Other revenues                                                                                   9      1,377        690     (3,908)
Net revenues                                                                                           29,598     31,993      7,305
Provision for credit losses                                                                     10      (124)        460        797
Compensation and benefits                                                                       11     14,372     14,706     12,958
General and administrative expenses                                                             12      7,088      7,622      7,299
Commission expenses                                                                                     1,991      1,848      2,090
Total other operating expenses                                                                          9,079      9,470      9,389
Total operating expenses                                                                               23,451     24,176     22,347
Income/(loss) from continuing operations before taxes                                                   6,271      7,357    (15,839)
Income tax expense/(benefit)                                                                    25      1,258      1,794     (4,922)
Income/(loss) from continuing operations                                                                5,013      5,563    (10,917)
Income/(loss) from discontinued operations, net of tax                                           4        (19)       169       (531)
Net income/(loss)                                                                                       4,994      5,732    (11,448)
Less net income/(loss) attributable to noncontrolling interests                                           802       (697)    (3,379)
Net income/(loss) attributable to shareholder                                                           4,192      6,429     (8,069)
  of which from continuing operations                                                                   4,211      6,260     (7,538)
  of which from discontinued operations                                                                   (19)       169       (531)




The accompanying notes to the consolidated financial statements are an integral part of these statements.
380




      Consolidated balance sheets

                                                                                                      Reference
                                                                                                       to notes                 end of

                                                                                                                      2010       2009

      Assets (CHF million)
      Cash and due from banks                                                                                       65,031     52,535
        of which reported from consolidated VIEs                                                                     1,432          –
      Interest-bearing deposits with banks                                                                           4,457      2,200
      Central bank funds sold, securities purchased under
      resale agreements and securities borrowing transactions                                               13     220,708    208,378
        of which reported at fair value                                                                            136,906    128,303
      Securities received as collateral, at fair value                                                              42,100     37,371
        of which encumbered                                                                                         21,305     27,671
      Trading assets, at fair value                                                                         14     321,256    331,307
        of which encumbered                                                                                         87,554    112,994
        of which reported from consolidated VIEs                                                                     8,717          –
      Investment securities                                                                                 15       6,331      9,190
        of which reported at fair value                                                                              6,192      9,190
        of which reported from consolidated VIEs                                                                        72          –
      Other investments                                                                                     16      16,055     23,547
        of which reported at fair value                                                                             13,184     20,865
        of which reported from consolidated VIEs                                                                     2,334          –
      Net loans                                                                                             17     200,748    221,452
        of which reported at fair value                                                                             18,552     36,246
        of which encumbered                                                                                            783      1,105
        of which reported from consolidated VIEs                                                                     3,745          –
        allowance for loan losses                                                                                     (812)    (1,184)
      Premises and equipment                                                                                18       6,220      5,901
        of which reported from consolidated VIEs                                                                        33          –
      Goodwill                                                                                              19       7,450      8,132
      Other intangible assets                                                                               19         304        318
        of which reported at fair value                                                                                 66         30
      Brokerage receivables                                                                                         38,773     41,872
      Other assets                                                                                          21      79,305     68,279
        of which reported at fair value                                                                             39,419     29,097
        of which encumbered                                                                                          2,388      3,262
        of which reported from consolidated VIEs                                                                    19,569          –
      Assets of discontinued operations held-for-sale                                                        4          23          0
      Total assets                                                                                                1,008,761 1,010,482




      The accompanying notes to the consolidated financial statements are an integral part of these statements.
                                                                        Consolidated financial statements – Credit Suisse (Bank)           381




Consolidated balance sheets (continued)

                                                                                                        Reference
                                                                                                         to notes                 end of

                                                                                                                        2010       2009

Liabilities and equity (CHF million)
Due to banks                                                                                                  22      47,675     50,081
  of which reported at fair value                                                                                      3,995      4,914
Customer deposits                                                                                             22     263,767    258,697
  of which reported at fair value                                                                                      2,855      2,038
  of which reported from consolidated VIEs                                                                                54          –
Central bank funds purchased, securities sold under
repurchase agreements and securities lending transactions                                                     13     168,394    191,587
  of which reported at fair value                                                                                    123,697    122,136
Obligation to return securities received as collateral, at fair value                                                 42,100     37,371
Trading liabilities, at fair value                                                                            14     133,937    134,875
  of which reported from consolidated VIEs                                                                               188          –
Short-term borrowings                                                                                                 19,516      6,058
  of which reported at fair value                                                                                      3,308      3,383
  of which reported from consolidated VIEs                                                                             4,333          –
Long-term debt                                                                                                23     171,140    156,676
  of which reported at fair value                                                                                     81,474     70,900
  of which reported from consolidated VIEs                                                                            19,739          –
Brokerage payables                                                                                                    61,862     59,132
Other liabilities                                                                                             21      61,206     70,254
  of which reported at fair value                                                                                     29,040     30,271
  of which reported from consolidated VIEs                                                                               839          –
Total liabilities                                                                                                    969,597    964,731
Common shares / Participation certificates                                                                             4,400      4,400
Additional paid-in capital                                                                                            24,026     24,299
Retained earnings                                                                                                     10,068     11,422
Treasury shares, at cost                                                                                                   0      (487)
Accumulated other comprehensive income/(loss)                                                                 24     (10,711)    (8,406)
Total shareholder’s equity                                                                                            27,783     31,228
Noncontrolling interests                                                                                              11,381     14,523
Total equity                                                                                                          39,164     45,751

Total liabilities and equity                                                                                        1,008,761 1,010,482




end of                                                                                                                  2010       2009

Additional share information
Par value (CHF)                                                                                                       100.00     100.00
Issued shares (million)                                                                                                 44.0       44.0
Shares outstanding (million)                                                                                            44.0       44.0




The accompanying notes to the consolidated financial statements are an integral part of these statements.
382




      Consolidated statements of changes in equity

                                                                                                                        Attributable to shareholder

                                                             Common                                                       Accumu-
                                                              shares/                                                   lated other        Total                                      Number of
                                                            Participa-    Additional                    Treasury           compre-       share-            Non-                         common
                                                          tion certifi-     paid-in        Retained      shares,            hensive     holder’s      controlling        Total            shares
                                                                                                                    1
                                                                cates        capital       earnings       at cost           income        equity       interests        equity       outstanding

      2010 (CHF million)
                                                                                                                                                                                                    2
      Balance at beginning of period                           4,400        24,299          11,422         (487)           (8,406)        31,228        14,523          45,751      43,996,652
      Purchase of subsidiary shares
      from noncontrolling interests,
      changing ownership                                             –             –              –             –                 –              –           (9)            (9)                 –
      Purchase of subsidiary
      shares from noncontrolling
      interests, not changing ownership 3, 4                         –             –              –             –                 –              –      (2,207)         (2,207)                 –
      Sale of subsidiary shares to
      noncontrolling interests,
      not changing ownership 4                                       –             –              –             –                 –              –          471            471                  –
      Net income/(loss)                                              –             –         4,192              –                 –         4,192           802          4,994                  –
      Cumulative effect of
      accounting changes, net of tax 5                               –             –        (2,384)             –              135        (2,249)              –        (2,249)                 –
          Gains/(losses) on cash flow hedges                         –             –              –             –               22             22              –            22                  –
          Foreign currency translation                               –             –              –             –          (2,365)        (2,365)       (1,233)         (3,598)                 –
          Unrealized gains/(losses) on securities                    –             –              –             –               14             14              –            14                  –
          Actuarial gains/(losses)                                   –             –              –             –            (110)          (110)            (1)         (111)                  –
          Net prior service cost                                     –             –              –             –               (1)            (1)             –            (1)                 –
      Total other comprehensive
      income/(loss), net of tax                                      –             –              –             –          (2,440)        (2,440)       (1,234)         (3,674)                 –
      Issuance of common shares/notes                                –       1,567                –             –                 –         1,567              –         1,567                  –
      Sale of treasury shares                                        –          (28)              –        2,110                  –         2,082              –         2,082                  –
      Repurchase of treasury shares                                  –             –              –      (1,623)                  –       (1,623)              –        (1,623)                 –
                                                                                       6
      Share-based compensation, net of tax                           –      (1,725)               –             –                 –       (1,725)             10        (1,715)                 –
      Dividends on share-based compensation,
      net of tax                                                     –          (87)              –             –                 –           (87)             –           (87)                 –
      Cash dividends paid                                            –             –        (3,162)             –                 –       (3,162)          (143)        (3,305)                 –
                                                                                                                                                                    7
      Change in scope of consolidation                               –             –              –             –                 –              –         (911)         (911)                  –
      Other                                                          –             –              –             –                 –              –            79            79                  –
      Balance at end of period                                 4,400        24,026          10,068              0        (10,711)         27,783        11,381          39,164      43,996,652

      1
         Reflects Credit Suisse Group shares which are reported as treasury shares. Those shares are held to economically hedge share award obligations. 2 The Bank’s total share capital is
      fully paid and consists of 43,996,652 registered shares with nominal value of CHF 100 per share. Each share is entitled to one vote. The Bank has no warrants or convertible rights on
      its own shares outstanding. 3 Distributions to owners in funds include the return of original capital invested and any related dividends. 4 Transactions with and without ownership changes
      related to fund activity are all displayed under “not changing ownership”. 5 Represents the impact of the adoption in 1Q10 of new accounting rules governing when an entity is
      consolidated under US GAAP. 6 Includes a tax benefit of CHF 608 million from the excess fair value of shares delivered over recognized compensation expense. 7 Represents primarily
      the impact from the spin-off of a real estate private equity fund in 3Q10.




      The accompanying notes to the consolidated financial statements are an integral part of these statements.
                                                                                Consolidated financial statements – Credit Suisse (Bank)                            383




Consolidated statements of changes in equity (continued)

                                                                                                Attributable to shareholder

                                               Common                                             Accumu-
                                                shares/                                         lated other        Total                               Number of
                                              Participa-    Additional              Treasury       compre-       share-            Non-                  common
                                            tion certifi-     paid-in    Retained    shares,        hensive     holder’s      controlling    Total         shares
                                                  cates        capital   earnings     at cost       income        equity       interests    equity    outstanding

2009 (CHF million)
Balance at beginning of period                   4,400        25,059       5,132          18       (7,741)        26,868        19,281      46,149    43,996,652
Purchase of subsidiary shares
from noncontrolling interests,
changing ownership                                     –            9          –           –              –              9           (9)         0             –
Purchase of subsidiary
shares from noncontrolling
interests, not changing ownership                      –            –          –           –              –              –         (468)     (468)             –
Sale of subsidiary shares to
noncontrolling interests,
changing ownership                                     –           (1)         –           –              –            (1)             5         4             –
Sale of subsidiary shares to
noncontrolling interests,
not changing ownership                                 –            –          –           –              –              –        1,229      1,229             –
Net income/(loss)                                      –            –      6,429           –              –         6,429          (697)     5,732             –
  Gains/(losses) on cash flow hedges                   –            –          –           –            17             17              –        17             –
  Foreign currency translation                         –            –          –           –         (472)          (472)          (303)     (775)             –
  Unrealized gains/(losses) on securities              –            –          –           –            13             13              –        13             –
  Actuarial gains/(losses)                             –            –          –           –         (223)          (223)              –     (223)             –
Total other comprehensive
income/(loss), net of tax                              –            –          –           –         (665)          (665)          (303)     (968)             –
Issuance of common shares                              –         (13)          –           –              –           (13)             –       (13)            –
Sale of treasury shares                                –           50          –      1,645               –         1,695              –     1,695             –
Repurchase of treasury shares                          –            –          –    (2,150)               –       (2,150)              –    (2,150)            –
Share-based compensation, net of tax                   –        (797)          –           –              –         (797)              –     (797)             –
Dividends on share-based compensation,
net of tax                                             –           (5)         –           –              –            (5)             –        (5)            –
Cash dividends paid                                    –            –      (141)           –              –         (141)          (111)     (252)             –
Change in scope of consolidation