FORM 6-K
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For September 30, 2008

Commission File Number: 001-14624

ABN AMRO HOLDING N.V.

Gustav Mahlerlaan 10
1082 PP Amsterdam
The Netherlands
________________________________________________
(Address of principal executive offices)


Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
Form 20-F    X      Form 40-F _____

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):            

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):            

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  _____    No    X   
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _____
 
 
TABLE OF CONTENTS

Item
  
1
Interim Financial Report for the Six Months Ended 30 June 2008

 

Item 1
 
 
 
 
 
 
ABN AMRO Holding N.V.

 
 
Interim Financial Report for the six months
ended 30 June 2008


30 September 2008
 
 
 
 
 
 
1
 
Forward-looking statements

Certain sections in this document contain ‘forward-looking statements’ as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include the words ‘expect’, ‘estimate’, ‘project’, ‘anticipate’, ‘should’, ‘intend’, ‘plan’, ‘probability’, ‘risk’, ‘Value-at-Risk (“VaR”)’, ‘target’, ‘goal’, ‘objective’, ‘will’, ‘endeavour’, ‘outlook’, 'optimistic', 'prospects' and similar expressions or variations on such expressions and sections such as ‘Management review of the six months ended 30 June 2008’.

In particular, this document includes forward-looking statements relating, but not limited, to the Group’s potential exposures to various types of market risks, such as counterparty risk, interest rate risk, foreign exchange rate risk and commodity and equity price risk. Such statements are subject to risks and uncertainties. For example, certain of the market risk disclosures are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated.

Other factors that could cause actual results to differ materially from those estimated by the forward looking statements contained in this document include, but are not limited to: the extent and nature of future developments in the credit markets, including the sub-prime market, and their impact on the financial industry in general and the Group in particular; the effect on the Group’s capital of write downs in respect of credit market exposures; risks related to ABN AMRO’s transition and separation process following its acquisition by the consortium banks; general economic conditions in the Netherlands and in other countries in which the Group has significant business activities or investments, including the United Kingdom and the United States; the monetary and interest rate policies of the European Central Bank, the Board of Governors of the Federal Reserve System and other G-7 central banks; inflation; deflation; unanticipated turbulence in interest rates, foreign currency exchange rates, commodity prices and equity prices; changes in Dutch and foreign laws, regulations and taxes; changes in competition and pricing environments; natural and other disasters; the inability to hedge certain risks economically; the adequacy of loss reserves; technological changes; changes in consumer spending and saving habits; and the success of the Group in managing the risks involved in the foregoing.

The forward-looking statements contained in this document speak only as of the date of this report, and the Group does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
 
2
 
Table of Content

 
Chairman’s review
4
Introduction
5
Management Review
5
Condensed consolidated income statement
8
Condensed consolidated balance sheet
9
Condensed consolidated statement of changes in equity
10
Condensed consolidated cash flow statement
11
Notes to the interim financial report
12
   
Appendix
  
   
Credit market and related exposures – additional information 
32
 
3
 
Chairman’s Review

To fulfill its filing obligations in the Netherlands and in the US, ABN AMRO is today issuing an interim report for the six months ending 30 June 2008.   ABN AMRO’s financial results for the half year have been previously reported as part of the RBS Group half year results, published on 8 August 2008.  In the first half of 2008 ABN AMRO recorded a profit of EUR 2,885 million after tax and gains on disposal of businesses.

Following the acquisition by the consortium, client activity of ABN AMRO’s businesses acquired by RBS has been redirected and some portfolios have been transferred to RBS.  As a result, the financial performance, business and risk profile are neither directly comparable with, nor representative of those of the originally acquired businesses and can only be appropriately evaluated in combination with the performance of the respective businesses within RBS.

Santander acquired businesses have been sold in May and July 2008 and are shown as discontinued operations.

The businesses acquired by Fortis including the Dutch retail business and Private Clients activities of ABN AMRO have continued to perform in line with the prior year.

The announcement by Fortis of its intention to sell its interests in RFS Holdings does not affect the capital, liquidity or performance of ABN AMRO including the businesses that were to be acquired by Fortis. The financial consequences of any sale would lie with Fortis.

ABN AMRO is separately governed by its Managing Board and Supervisory Board and regulated by the Dutch Central Bank. As at 30 June 2008 it had a Tier 1 capital ratio of 15.8%.


Mark Fisher
Chairman of the Managing Board of ABN AMRO
Amsterdam, 30 September 2008
 
4
 
Introduction

On 17 October 2007 the majority of the share capital of ABN AMRO Holding N.V. (‘ABN AMRO’ or ‘the Group’) was acquired by the consortium of banks through RFS Holdings B.V. (‘RFS Holdings’). The consortium consists of The Royal Bank of Scotland Group plc (‘RBS’), Fortis and Banco Santander S.A (‘Santander’). At the request of the Dutch Central Bank, RBS has assumed the lead responsibility for ensuring that ABN AMRO is managed in compliance with all applicable regulatory requirements. RBS consolidates ABN AMRO in its financial statements.

The de-listing of the ABN AMRO issued shares was effected on 25 April 2008 for the Euronext Amsterdam and the New York Stock Exchange. A ‘squeeze-out’ procedure to buy out the remaining ABN AMRO shareholders was completed on 22 September 2008.

On 29 September Fortis announced its intention to sell its interest in RFS Holdings, the financial consequences of which will remain with Fortis.


Management review of the six months ended 30 June 2008

Plans and proposals for ABN AMRO

In 2007 the consortium banks agreed the businesses to be acquired and a plan for the transfer of the businesses. During 2008, many shared assets and liabilities have either been sold or economically allocated to an individual consortium bank following further agreements between them. Debt securities continue to be issued by ABN AMRO with no change in terms and conditions. Any activities that form part of Group Functions continue to be reported in Group Functions.

The process of separating the ABN AMRO businesses and transferring them to their ultimate owners is proceeding in line with the transition plan.

Transfers and sales of businesses to the consortium banks
The process of transferring business and client activity from ABN AMRO to RBS started in the first half of 2008 and is set to gather pace through the second half of 2008.

Asset Management was sold to Fortis during the first half year. Further transfers to Fortis are suspended following the announcement by Fortis of its intention to sell its interest in RFS Holdings.

The sale of Banco Real and other businesses allocated to Santander was concluded in July 2008.

Transfers and sales of businesses outside the consortium banks
On 30 May 2008 Banca Antonveneta was sold by ABN AMRO to Banca Monte dei Paschi di Siena. On 2 July 2008, ABN AMRO and Deutsche Bank signed an agreement by which Deutsche Bank will acquire from ABN AMRO parts of its commercial banking activities in the Netherlands, the so-called EC Remedy businesses. The transaction was executed to comply with European Commission requirements to divest part of ABN AMRO’s activities before integrating Fortis with ABN AMRO in the Netherlands. The transaction’s closing is planned for early October 2008, however the transaction is subject to approval by the Dutch Central Bank, the European Commission and other regulatory bodies. These approvals have not yet been granted.
 
5
 
Results of operations for the six months ended 30 June 2008
 
As a result of the above mentioned transfers and sales of businesses, the capital and liquidity positions have improved compared with 31 December 2007. At 30 June 2008 the Group’s tier 1 capital ratio was 15.8% (December 2007: 12.4%). The upward repatriation of the reserves and profits of the Group to ultimately the consortium banks will start after the finalization of the squeeze out. Dividend resolutions are subject to approval by the Dutch Central Bank.

In the first half of 2008 the net profit attributable to shareholders amounted to EUR 2,870 million and includes the gains on the sale of Asset Management (EUR 3,065 million) and Antonveneta (EUR 2,317 million). Results from continuing operations were impacted by the credit crisis and losses on various equity investments. Results from continuing operations for the period was a loss of EUR 2,870 million (2007 profit EUR 1,046 million). As indicated above, client activity is being redirected to RBS and certain risk positions and inventory are being transferred from ABN AMRO to RBS, which will reduce significantly the ongoing business and exposures in ABN AMRO. As a result, the financial performance is increasingly unrepresentative of the business performance of the originally acquired businesses and can only be appropriately evaluated in combination with the performance of the respective businesses within RBS.

Please refer to note 3 Segment reporting of the Notes to the interim financial report.

Europe
The result for the six months ended 30 June 2008 was a loss of EUR 2,549 million, a decrease of EUR 2,913 million compared with the same period in 2007 (profit of EUR 364 million).  The loss of EUR 2,549 million is mainly caused by negative valuation adjustments against credit trading positions. Operating income decreased EUR 4,153 million, reflecting a decrease in net trading income of EUR 3,906 million and a decrease in results from financial transactions of EUR 550 million. The decrease in net trading income is caused by valuation adjustments to asset back securities with underlying US residential mortgage related exposures (of approximately EUR 1,100 million) and to exposures to financial guarantors (approximately EUR 1,500 million). Results from financial transactions includes a loss on the sale of the structured real estate loan portfolio to RBS (EUR 400 million negative), limited impairment losses on equity investments and losses on the sale of leveraged loans. These losses are partly offset by a gain of EUR 509 million related to changes in fair value of financial liabilities designated at fair value caused by changes in ABN AMRO’s own credit risk.

Operating expenses decreased by EUR 330 million mainly as a result of lower performance-related staff costs resulting from the decreased trading performance and a reduction in headcount.

Loan impairment and other credit risk provisions increased EUR 81 million reflecting current market conditions.

Americas
The result for the six months ended 30 June 2008 was a loss of EUR 177 million, a decrease of EUR 753 million compared with the same period in 2007 (profit of EUR 576 million) which included the results of LaSalle Bank. Current market conditions and the previously mentioned redirection of client activities to RBS resulted in a decrease in total operating income of EUR 210 million and in an increase of loan impairments of EUR 80 million. Operating expenses decreased by EUR 205 million as a result of lower performance-related staff costs and the absence of costs related to the sale of LaSalle Bank which were reported in the same period in 2007.

Asia
The profit for the six months ended 30 June 2008 was EUR 134 million, EUR 66 million lower than the same period in 2007 (profit of EUR 200 million). The decrease is primarily due to lower total operating income (EUR 235 million lower period-on-period) as a result of negative equity valuation adjustments, the previously mentioned redirection of client activities to RBS and negative foreign exchange rate differences. Total operating expenses decreased (EUR 181 million), mainly due to lower performance-related staff costs and movements in exchange rates.

Netherlands
The Profit for the six months ended 30 June 2008 (EUR 437 million) is in line with the results reported for the same period in 2007. Total operating income increased by EUR 48 million. Lower interest and commission income due to
 
6
 
current market circumstances was offset by a positive result realised on the unwinding of some guarantee transactions. Operating expenses increased with EUR 27 million due to integration and restructuring costs as well as costs related to the preparation for the sale resulting from the EC Remedy. The increase in loan impairment of EUR 35 million is mainly related to the Corporate Clients portfolio.

Private Clients
The Profit for the six months ended 30 June 2008 was EUR 124 million, a decrease of EUR 101 million compared to the same period in 2007 (EUR 225 million). This decrease is mainly caused by assets under management levels being under pressure year-on-year, given lower values of investments.  The decrease in operating income is partly offset by lower operating expenses.

Group Functions
Group Functions includes the results of discontinued operations as these do not qualify as a business activity. The Profit for the six months ended 30 June 2008 of EUR 4,916 million is representing an increase of EUR 4,497 million compared to the same period in 2007 (EUR 419 million), reflecting the gains on the disposal of Asset Management (EUR 3,065 million) and Antonveneta (EUR 2,317 million). Net operating profit decreased due to higher funding costs reflecting developments in the financial markets and by negative results from the private equity portfolio and other equity investments.
 
7
 
 
 
Condensed consolidated income statement for the six months ended 30 June (unaudited)


(in millions of euros)
  
6 months ended 30
June 2008
    
6 months ended 30
June 2007
  
             
Interest income
     11,223       10,850  
Interest expense
     8,576       8,625  
Net interest income 4
     2,647       2,225  
                 
Fee and commission income
     1,554       2,094  
Fee and commission expense
     228       161  
Net fee and commission income 5
     1,326       1,933  
                 
Net trading income 6
     (2,282 )     1,844  
Results from financial transactions 7
     (704 )     450  
Share of result in equity accounted investments
     84       114  
Other operating income 8
     191       215  
Income from consolidated private equity holdings
     1,033       2,783  
Total operating income
     2,295       9,564  
                 
Personnel expenses 9
     2,544       3,285  
General and administrative expenses 10
     1,864       2,486  
Depreciation and amortisation
     411       440  
Goods and materials of consolidated private equity holdings
     780       1,949  
Operating expenses
     5,599       8,160  
Loan impairment and other credit risk provisions 16
     479       282  
Total expenses
     6,078       8,442  
                 
Operating profit/(loss) before tax
     (3,783 )     1,122  
Income tax (benefit)/expense 11
     (913 )     76  
Profit/(loss) from continuing operations
     (2,870 )     1,046  
Profit/(loss) from discontinued operations net of tax 12
     5,755       1,174  
Profit/(loss) for the period
     2,885       2,220  
                 
                 
Attributable to:
                
Shareholders of the company
     2,870       2,165  
Minority interest
     15       55  
                 

Earnings per share
(in euros)
            
             
From continuing operations:
            
Basic earnings per ordinary share (in euros)
     (1.56 )     0.62  
Fully diluted earnings per ordinary share (in euros)
     (1.56 )     0.61  
                 
From continuing and discontinued operations:
                
Basic earnings per ordinary share (in euros)
     1.56       1.17  
Fully diluted earnings per ordinary share (in euros)
     1.56       1.16  


Numbers stated against items refer to the notes.
 
8
 
Condensed consolidated balance sheet (unaudited)
 

(in millions of euros)
  
30 June
2008
    
31 December
2007
  
             
Assets
            
Cash and balances at central banks
     32,448       16,750  
Financial assets held for trading 13
     243,954       242,277  
Financial investments 14
     84,502       96,435  
Loans and receivables- banks 15
     117,180       175,696  
Loans and receivables- customers 16
     331,512       398,331  
Equity accounted investments
     825       871  
Property and equipment 17
     2,178       2,747  
Goodwill and other intangibles 18
     1,202       1,424  
Assets of businesses held for sale 12
     70,663       60,458  
Accrued income and prepaid expenses
     8,520       12,580  
Other assets 19
     19,760       17,644  
Total assets
     912,744       1,025,213  
                 
Liabilities
                
Financial liabilities held for trading 13
     193,110       155,476  
Due to banks 20
     158,489       239,334  
Due to customers 21
     277,683       330,352  
Issued debt securities 22
     162,079       174,995  
Provisions
     3,989       6,544  
Liabilities of businesses held for sale 12
     53,124       39,780  
Accrued expenses and deferred income
     7,436       12,244  
Other liabilities 23
     9,654       20,163  
Liabilities (excluding subordinated liabilities)
     865,564       978,888  
Subordinated liabilities 24
     14,008       15,616  
Total Liabilities
     879,572       994,504  
                 
Equity
                
Share capital
     1,085       1,085  
Share premium
     5,342       5,332  
Treasury shares
     (2,640 )     (2,640 )
Retained earnings
     28,520       25,650  
Net gains/(losses) not recognised in the income statement
     (33 )     148  
Equity attributable to shareholders of the parent company
     32,274       29,575  
Equity attributable to minority interests
     898       1,134  
Total equity
     33,172       30,709  
                 
Total equity and liabilities
     912,744       1,025,213  
                 
Guarantees and other commitments
     50,008       55,140  
Committed credit facilities
     92,668       104,137  


Numbers stated against items refer to the notes.
 
9
 
Condensed consolidated statement of changes in equity for the six months ended 30 June (unaudited)
 
(in millions of euros)
  
6 months ended 30
June 2008
    
6 months ended 30
June 2007
  
Share capital
            
Balance at 1 January
     1,085       1,085  
Balance at 30 June
     1,085       1,085  
                 
Share premium
                
Balance at 1 January
     5,332       5,245  
Share-based payments
     10       70  
Dividend paid in shares
     -       (58 )
Balance at 30 June
     5,342       5,257  
                 
Treasury shares
                
Balance at 1 January
     (2,640 )     (1,829 )
Share buy back
     -       (1,241 )
Utilised for dividends paid in shares
     -       412  
Utilised for exercise of options and performance share plans
     -       445  
Balance at 30 June
     (2,640 )     (2,213 )
                 
Retained earnings
                
Balance at 1 January
     25,650       18,599  
Profit attributable to shareholders of the parent company
     2,870       2,165  
Cash dividends paid
     -       (469 )
Dividends paid in shares
     -       (586 )
Other
     -       134  
Balance at 30 June
     28,520       19,843  
                 
Net gains/(losses) not recognised in the income statement
                
Currency translation account
                
Balance at 1 January
     597       408  
Transfer to income statement relating to disposals
     50       -  
Currency translation differences
     (15 )     284  
Subtotal – Balance at 30 June
     632       692  
                 
Net unrealised gains/(losses) on available-for-sale assets
                
Balance at 1 January
     (543 )     364  
Net unrealised gains/(losses) on available-for-sale assets
     (717 )     (307 )
Realised (gains)/losses reclassified to the income statement
     59       (109 )
Subtotal Balance at 30 June
     (1,201 )     (52 )
                 
Cash flow hedging reserve
                
Balance at 1 January
     94       (275 )
Net unrealised gains/(losses) on cash flow hedges
     457       231  
Net losses/(gains) reclassified to the income statement
     (15 )     113  
Subtotal Balance at 30 June
     536       69  
Net gains /(losses) not recognised in the income statement at 30 June
     (33 )     709  
Equity attributable to shareholders of the parent company at 30 June
     32,274       24,681  
                 
Minority interests
                
Balance at 1 January
     1,134       2,298  
Additions/reductions
     (205 )     (190 )
Profit attributable to minority interests
     15       55  
Currency translation differences and other movements
     (46 )     (14 )
Equity attributable to minority interests at 30 June
     898       2,149  
                 
Total equity at 30 June
     33,172       26,830  

10
 
Condensed consolidated cash flow statement for six months ended 30 June (unaudited)
 

(in millions of euros)
  
6 months
ended 30
June 2008
    
6 months
ended 30
June 2007 *
  
Operating activities
            
Profit/(loss) from continuing operations net of tax
     (2,870 )     1,046  
Profit/(loss) from discontinued operations net of tax
     5,755       1,174  
                 
Adjustment for non-cash items
     828       689  
Net cash inflow from operating activities
     3,713       2,909  
Changes in operating assets and liabilities
     5,246       (12,459 )
Income taxes paid
     (355 )     (191 )
                 
Net cash flows from operating activities
     8,604       (9,741 )
                 
Cash flows from investing activities
     12,733       6,635  
                 
Cash flows from financing activities
     (5,869 )     7,615  
                 
Effects of exchange rate changes on cash and cash equivalents
     172       341  
                 
Movement in cash and cash equivalents
     15,640       4,850  
Cash and cash equivalents at 1 January
     12,752       4,872  
Cash and cash equivalents at 30 June
     28,392       9,722  

             
Determination of cash and cash equivalents:
            
Cash and balances at central banks
     37,419       15,644  
Loans and receivables – banks
     8,754       12,724  
Due to banks
     (17,781 )     (18,646 )
Cash and cash equivalents at 30 June
     28,392       9,722  

 
*The condensed consolidated cash flow statement for the six months ended 30 June 2007 has been restated to conform to the presentation applied for the six months ended 30 June 2008.
 

Cash and balance at central banks at 30 June 2008 includes EUR 4,971 million of cash related to businesses classified as held for sale (see note 12).
 
11
 
1
Basis of presentation
 
This interim financial report for the period ended 30 June 2008 is prepared to provide consolidated financial information of ABN AMRO Holding N.V. (‘ABN AMRO’). It is prepared in accordance with IAS 34 – Interim Financial Reporting. It does not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of ABN AMRO for the year ended 31 December 2007 as included in the Annual Report 2007. ABN AMRO’s 2007 consolidated financial statements are prepared in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union (‘EU’) and do not utilise the portfolio hedging carve out permitted by the EU. Accordingly, the accounting policies applied by the Group comply fully with IFRS as issued by the IASB.
 
In preparing this interim financial report, the same accounting principles and methods of computation are applied as in the consolidated financial statements for the year ended 31 December 2007. In some instances presentation of comparative amounts has been amended to align with the current presentation. The income statement and related notes and the cash flow statement for the year ended 31 December 2007 have been restated to reflect the reclassification of Banco Real and other Santander businesses as discontinued operations.

Unless otherwise stated all amounts are expressed in millions of euros.

In the opinion of management, all adjustments necessary for a fair presentation of the results of operations for the interim periods have been made.
 
This interim financial report is unaudited. The report will also be filed as ABN AMRO’s Interim Financial Report for the six months period ended 30 June 2008 on Form 6-K with the United States Securities and Exchange Commission (‘SEC’).
 

2
Developments

2.1
Disposals and transfers

Sale of Asset Management
The sale of Asset Management to Fortis was completed in April 2008, resulting in a gain on sale of EUR 3,065 million.

Sale of Banca Antonveneta
The sale of Banca Antonveneta to Banca Monte dei Paschi di Siena was completed in May 2008, resulting in a gain on sale of EUR 2,317 million.

Transfer of business to RBS
In June 2008 a portfolio of structured real estate loans with a book value of EUR 4,993 million was sold to RBS at a loss of EUR 400 million.

2.2
Update on status of US Department of Justice investigation

As previously disclosed, the United States Department of Justice has been conducting a criminal investigation into the Bank’s dollar clearing activities, OFAC compliance procedures and other Bank Secrecy Act compliance matters. The Bank has cooperated and continues to cooperate fully with the investigation. Although no written agreement has yet been reached and negotiations are ongoing, the Bank has reached an agreement in principle with the Department of Justice that would resolve all presently known aspects of the ongoing investigation.
 
12
 
Under the terms of the agreement in principle the Bank would also agree to continue cooperating in the United States’ ongoing investigation and to settle all known civil and criminal claims currently held by the United States for the sum of USD 500 million, recorded in the first half year of 2007. The precise terms of the deferred prosecution agreement are still under negotiation.

In consideration for the foregoing provisions, as well as the Bank’s extensive remedial actions to date and its willingness to demonstrate future good conduct and full compliance with all applicable federal laws, the United States Department of Justice would recommend to the United States District Court that the prosecution of the Bank under the information be deferred for a fixed period. At the end of that fixed period, provided the Bank is in full compliance with all of its obligations under the deferred prosecution agreement, the United States would seek dismissal with prejudice of the information filed against the Bank. The precise terms of the deferred prosecution agreement and agreed factual statement are still under negotiation.

On 10 September 2008 the Board of Governors of the Federal Reserve System, the New York State Banking Department and the Illinois Department of Financial and Professional Regulation, have lifted the Cease & Desist Order dated 19 December 2005. The Cease & Desist Order included a Written Agreement, dated 23 July 2004, issued by the Federal Reserve Bank of New York, the Federal Reserve Bank of Chicago, the New York State Banking Department and the Illinois Department of Financial and Professional Regulation.


3
Segment reporting

From 1 January 2008 the management and control structure of ABN AMRO has been aligned with the consortium ownership of the bank. This change in management structure has been reflected in the externally reported segments. The resulting segments follow more closely the consortium ownership structure of ABN AMRO. Consequently, the RBS acquired businesses are segmented into: Europe, Americas and Asia. The Fortis acquired businesses are divided into: Netherlands and Private Clients. Group Functions includes activities that do not qualify as a business activity and the items that are not allocated to individual consortium members such as the private equity portfolio and the investment in Saudi Hollandi. If an entire business unit is sold and qualifies as a discontinued operation, its results are included in Group Functions. Discontinued operations comprise the Santander acquired businesses and Asset Management.

In the course of 2008, the majority of the Group Asset and Liability Management portfolios have been allocated to the businesses acquired by the respective consortium banks. These, however, continue to be governed within ABN AMRO in accordance with policies for capital, liquidity and market risk of the Group and therefore continue to be reported in Group Functions.

The former regional business unit Netherlands, reported in 2007 as an operating segment, is no longer managed as a single component. To reflect the consortium ownership, the operating segment Netherlands now excludes Dutch wholesale clients which have been added to the operating segment Europe.

The basis for measurement of revenues and expenses in segment reporting is the same as used for measurement of revenues and expenses in the consolidated income statement. The business segment information for the six months ended 30 June 2007 has been restated.

The redirection of client activity to RBS along with the transfer of risk positions and inventory from ABN AMRO to RBS reduces significantly the ongoing business and exposures in ABN AMRO. As a result the financial performance is increasingly unrepresentative of the business performance of the originally acquired businesses.
 
13
 
                           
Business segment information – for the six months ended 30 June 2008
  
                                           
(in millions of euros)
                                          
   
Europe
    
Americas
    
Asia
    
Nether-lands
    
Private Clients
    
Group Functions
    
TOTAL
  
                                           
                                           
Net interest income
     794       116       350       1,469       224       (306 )     2,647  
Net fee and commission income
     348       66       286       369       271       (14 )     1,326  
Net trading income
     (2,562 )     51       373       51       37       (232 )     (2,282 )
Result from financial transactions
     (558 )     (4 )     (76 )     116       5       (187 )     (704 )
Share of result in equity accounted investments
     13       -       1       40       1       29       84  
Other operating income
     22       7       13       85       41       23       191  
Income of consolidated private equity holdings
     -       -       -       -       -       1,033       1,033  
Total operating income
     (1,943 )     236       947       2,130       579       346       2,295  
                                                         
Operating expenses
     1,462       270       645       1,332       412       1,478       5,599  
Loan impairment and other credit risk provisions
     81       67       91       232       5       3       479  
Total operating expenses
     1,543       337       736       1,564       417       1,481       6,078  
                                                         
Operating profit before taxes
     (3,486 )     (101 )     211       566       162       (1,135 )     (3,783 )
Income tax expense/(benefit)
     (937 )     76       77       129       38       (296 )     (913 )
Net operating profit/(loss)
     (2,549 )     (177 )     134       437       124       (839 )     (2,870 )
Results from discontinued operations
     -       -       -       -       -       5,755       5,755  
Profit for the period
     (2,549 )     (177 )     134       437       124       4,916       2,885  
                                                         
Total assets
     492,256       54,499       65,805       141,381       19,544       139,259       912,744  

14
 
                           
Business segment information – for the six months ended 30 June 2007
  
                                           
(in millions of euros)
                                          
   
Europe
    
Americas
    
Asia
    
Nether-lands
    
Private Clients
    
Group Functions
    
TOTAL
  
                                           
                                           
Net interest income
     478       143       340       1,501       241       (478 )     2,225  
Net fee and commission income
     401       177       499       401       338       117       1,933  
Net trading income
     1,344       108       311       39       35       7       1,844  
Result from financial transactions
     (8 )     3       22       31       4       398       450  
Share of result in equity accounted investments
     5       -       10       22       -       77       114  
Other operating income
     (10 )     15       -       88       115       7       215  
Income of consolidated private equity holdings
     -       -       -       -       -       2,783       2,783  
Total operating income
     2,210       446       1,182       2,082       733       2,911       9,564  
                                                         
Operating expenses
     1,792       475       808       1,305       450       3,330       8,160  
Loan impairment and other credit risk provisions
     -       (13 )     109       197       (3 )     (8 )     282  
Total operating expenses
     1,792       462       917       1,502       447       3,322       8,442  
                                                         
Operating profit before taxes
     418       (16 )     265       580       286       (411 )     1,122  
Income tax expense
     54       (43 )     65       146       61       (207 )     76  
Net operating profit
     364       27       200       434       225       (204 )     1,046  
Results from discontinued operations
     -       549       -       2       -       623       1,174  
Profit for the period
     364       576       200       436       225       419       2,220  
                                                         
Total assets
     583,439       176,389       80,204       137,218       19,188       123,621       1,120,059  
 
15
 
4
Net interest income
 
   
6 months ended 30
June 2008
    
6 months ended 30
June 2007
  
             
Interest income from:
            
Cash and balances at central banks
     167       133  
Financial investments available-for-sale
     2,022       1,794  
Financial investments held-to-maturity
     52       66  
Loans and receivables - banks
     561       659  
Loans and receivables - customers
     8,421       8,198  
Subtotal
     11,223       10,850  
                 
Interest expense from:
                
Due to banks
     1,943       2,161  
Due to customers
     4,143       4,366  
Issued debt securities
     2,840       3,155  
Subordinated liabilities
     418       393  
Internal funding of the trading business
     (768 )     (1,450 )
Subtotal
     8,576       8,625  
                 
Total
     2,647       2,225  

The reduction in the funding of the trading business is in line with a reduction in trading book funding requirements.
 
 
5
Net fee and commission income
 
   
6 months ended 30
June 2008
    
6 months ended 30
June 2007
  
             
Fee and commission income
            
Securities brokerage fees
     506       720  
Payment and transaction service fees
     395       380  
Asset management and trust fees
     149       192  
Fees generated on financing arrangements
     60       142  
Advisory fees
     198       292  
Other fees and commissions
     246       368  
Subtotal
     1,554       2,094  
                 
Fee and commission expense
                
Securities brokerage expense
     52       37  
Other fee and commission expense
     176       124  
Subtotal
     228       161  
                 
Total
     1,326       1,933  

The general decrease in net fee and commission income is mainly attributable to current market circumstances.
 
16
 
6
Net trading income
 
   
6 months ended 30
June 2008
    
6 months ended 30
June 2007
  
             
Interest instruments trading
     (3,044 )     384  
Foreign exchange trading
     490       491  
Equity and commodity trading
     272       969  
                 
Total
     (2,282 )     1,844  

The loss in interest instruments trading is mainly due to valuation adjustments to US residential mortgage related exposures such as Asset Backed Securities CDOs and credit valuation adjustments against exposures to monoline insurers, in combination with the redirection of client activity from ABN AMRO to RBS.
 
 
7
Results from financial transactions
 
   
6 months ended 30
June 2008
    
6 months ended 30
June 2007
  
             
Net gain/(loss) from the disposal of loans and available for sale debt securities
     (544 )     176  
Net gain/(loss) from the sale of available-for-sale equity investments
     (49 )     3  
Net change in the fair value of own debt carried at fair value
     520       -  
Net gain/(loss) on other equity investments
     (589 )     387  
Hedging ineffectiveness
     (20 )     20  
Other
     (22 )     (136 )
                 
Total
     (704 )     450  

The net loss from the disposal of loans and available for sale debt securities includes a loss of EUR 400 million on the sale of structured real estate loans to RBS, in accordance with the transition plan. The net loss on other equity investments includes disposals and changes in fair value of private equity investments and other equity investments held at fair value with changes reported through income.
 
 
8
Other operating income
 
   
6 months ended 30
June 2008
    
6 months ended 30
June 2007
  
             
Insurance activities
     28       20  
Leasing activities
     40       33  
Net income on disposal of operating activities and equity accounted investments
     20       78  
Other
     103       84  
                 
Total
     191       215  

17

9
Personnel expenses
 
   
6 months ended 30
June 2008
    
6 months ended 30
June 2007
  
             
Salaries (including bonuses and allowances)
     1,746       2,576  
Social security expenses
     164       200  
Other employee costs
     634       509  
                 
Total
     2,544       3,285  

Personnel expenses have fallen as a result of lower performance-related staff costs and a reduction in headcount.  Other employee costs include redundancy costs.
 
 
10
General and administrative expenses
 
   
6 months ended 30
June 2008
    
6 months ended 30
June 2007
  
             
Information, communication and technology
     514       625  
Professional fees
     456       557  
Property costs
     242       241  
Expenses of consolidated private equity holdings
     77       236  
Other general and administrative expenses
     575       827  
                 
Total
     1,864       2,486  

The six months ended 30 June 2007 included a charge of EUR 365 million within sundry expenses with respect to the United States Department of Justice investigation
 
 
11
Income tax expense
 
The effective tax rate on operating profit from continuing operations for the six months ended  30 June 2008 is 24.1% (the six months ended 30 June 2007: 6.8%) compared to a nominal tax rate in the Netherlands of 25.5%.  The low effective tax rate for the six months ended 30 June 2007 was mainly due to tax exempt gains reported on equity investments.
 
18
 

12
Profit from discontinued operations net of tax and assets and liabilities of businesses held for sale
 
Antonveneta and BU Asset Management were sold in the period and are reported as discontinued operations. The remaining entities to be transferred to Santander are reported as held-for sale and discontinued operations as of 30 June 2008 due to the planned sale to Santander, which was completed in July 2008. Private Equity is also presented as held-for-sale but is not a discontinued operation as it is not a major line of business. Profits from discontinued operations include the related operating results and when sold the applicable gain on sale.

Income statement of discontinued operations:
   
6 months ended
 30 June 2008
    
6 months ended
30 June 2007
  
             
Operating income
     3,577       5,413  
Operating expenses
     2,113       3,115  
Loan impairment and other credit risk provisions
     823       649  
Operating profit before tax
     641       1,649  
Gain on disposal
     5,380       147  
Profit before tax
     6,021       1,796  
Tax on operating profit
     266       622  
Tax arising on disposal
     –       –  
Profit from discontinued operations net of tax
     5,755       1,174  


The tables below provide a further breakdown of the operating result.

Asset Management
  
6 months ended
30 June 2008
    
6 months ended
 30 June 2007
  
             
Operating income
     223       485  
Operating expenses
     183       316  
Operating profit before tax
     40       169  
Gain on disposal
     3,065       –  
Profit before tax
     3,105       169  
Tax on operating profit
     14       43  
Profit from discontinued operations net of tax
     3,091       126  


Antonveneta, Banco Real & other Santander businesses (including Interbanca)
  
6 months ended
30 June 2008
    
6 months ended
 30 June 2007
  
             
Operating income
     3,354       3,240  
Operating expenses
     1,930       1,829  
Loan impairment and other credit risk provisions
     823       604  
Operating profit before tax
     601       807  
Gain on disposal
     2,317       –  
Profit before tax
     2,918       807  
Tax on operating profit
     252       313  
Profit/(loss) from discontinued operations net of tax
     2,666       494  


19

ABN AMRO North America Holdings
  
6 months ended
 30 June 2008
    
6 months ended
 30 June 2007
  
             
Operating income
     –       1,617  
Operating expenses
     –       928  
Loan impairment and other credit risk provisions
     –       45  
Operating profit before tax
     –       644  
Gain on disposal
     (2 )     –  
Profit before tax
     (2 )     644  
Tax on operating profit
     –       202  
Profit/(loss) from discontinued operations net of tax
     (2 )     442  


ABN AMRO Mortgage Group Inc.
  
6 months ended
 30 June 2008
    
6 months ended
 30 June 2007
  
             
Operating income
     –       71  
Operating expenses
     –       44  
Operating profit before tax
     –       27  
Gain on disposal
     –       147  
Profit before tax
     –       174  
Tax on operating profit
     –       64  
Profit/(loss) from discontinued operations net of tax
     –       110  

The major classes of assets and liabilities of businesses classified as held-for-sale are as follows:
   
30 June
2008
    
31 December
2007
  
             
Assets
            
Cash and balances at central banks
     4,971       427  
Financial assets held for trading
     2,810       1,071  
Financial investments
     9,119       3,230  
Loans and receivables-banks
     9,566       6,249  
Loans and receivables-customers
     37,368       37,336  
Equity accounted investments
     98       24  
Property and equipment
     873       1,054  
Goodwill and other intangible assets
     1,066       6,124  
Accrued income and prepaid expenses
     1,561       386  
Other assets
     3,231       4,557  
                 
Assets of businesses held for sale
     70,663       60,458  
                 
Liabilities
                
Financial assets held for trading
     571       379  
Due to banks
     4,697       4,280  
Due to customers
     34,043       19,937  
Issued debt securities
     4,528       8,177  
Provisions
     3,231       1,429  
Accrued expenses and deferred income
     2,031       495  
Other liabilities
     2,724       3,993  
Subordinated liabilities
     1,299       1,090  
                 
Liabilities of businesses held for sale
     53,124       39,780  
                 
Net assets directly associated with disposal business
     17,539       20,678  

Net assets directly associated with disposal business represent the balance of net assets and net intercompany funding.
 
20
 
13
Financial assets and liabilities held for trading
 

   
30 June
2008
    
31 December
2007
  
Financial assets held for trading
            
Government
     14,815       32,424  
Mortgage-backed securities
     8,549       11,994  
Financial institutions
     9,325       13,428  
Non financial institutions
     2,621       11,823  
Other
     3,068       3,196  
Interest earning financial assets
     38,378       72,865  
                 
Trading book loans
     1,982       -  
Equity instruments
     26,983       45,947  
Derivative financial instruments
     176,611       123,465  
Total assets held for trading
     243,954       242,277  
                 
Financial liabilities held for trading
                
Funding loans
     3       -  
Short positions in financial assets
     14,316       35,988  
Derivative financial instruments
     178,791       119,488  
Total liabilities held for trading
     193,110       155,476  

The increase in both derivative assets and derivative liabilities is mainly due to the application of revised netting criteria consistent with those used by RBS Group and a general increase in derivative fair values (both debit and credit) due to the volatility of the credit markets. The impact of the revised netting criteria on 31 December 2007 would be to increase derivative assets and derivative liabilities by EUR 20 billion.

The Group enters into master netting agreements with respect to its derivatives activities. These arrangements, which give the Group a legal right to set-off derivative assets and liabilities with the same counterparty, do not result in a net presentation in the Group’s balance sheet for which IFRS requires an intention to settle net or to realise the asset and settle the liability simultaneously as well as a legally enforceable right to set off. They are, however, effective in reducing the Group’s credit exposure from derivative assets. The Group has executed master netting agreements with the majority of its derivative counterparties resulting in a significant reduction in its net exposure to derivative assets. The extent of netting under such agreements amounted to EUR 206 billion at 30 June 2008.  Furthermore the Group holds substantial collateral against this net derivative asset exposure.

Financial assets held for trading include CDS contracts with financial guarantors. See the appendix for more details. As part of the planned migration of the credit trading activities, RBS has agreed to purchase contracts closed with certain credit derivative protection companies, CDOs and exposures to financial guarantors before 31 December 2008.
 
21
 
14
Financial investments
 
   
30 June
2008
    
31 December
2007
  
             
Interest-earning securities: available-for-sale
            
Dutch Government
     2,063       1,844  
US Treasury and US Government
     4,086       2,202  
Other OECD governments
     26,913       31,502  
Non-OECD governments
     3,793       8,316  
Mortgage-backed securities
     29,393       27,063  
Financial institutions
     9,593       16,007  
Non financial institutions
     1,707       1,073  
Other interest-earning securities
     2,287       2,442  
Subtotal
     79,835       90,449  
                 
Interest-earning securities: held-to-maturity
                
Dutch Government
     1,270       1,275  
Other OECD governments
     1,195       1,128  
Other interest-earning securities
     142       231  
Subtotal
     2,607       2,634  
                 
Total
     82,442       93,083  
                 
Equity instruments
                
Available for sale
     1,153       1,013  
Designated at fair value through income
     907       2,339  
Subtotal
     2,060       3,352  
                 
Total
     84,502       96,435  
                 

Mortgage-backed securities also include bonds issued by financial institutions covered by mortgages, including some guaranteed by the Dutch government.

15
Loans and receivables – banks
 
Amounts due from or deposited with banking institutions comprise:

   
30 June
2008
    
31 December
2007
  
             
Current accounts
     8,635       9,295  
Time deposits placed
     10,496       9,286  
Professional securities transactions
     94,833       150,338  
Loans
     3,217       6,779  
Subtotal
     117,181       175,698  
Allowances for impairment
     (1 )     (2 )
                 
Total
     117,180       175,696  

22

16
Loans and receivables – customers
 
This item is comprised of amounts receivable, mainly loans and mortgages balances with non-bank customers.

   
30 June
2008
    
31 December
2007
  
             
Public sector
     8,611       5,739  
Commercial
     134,303       144,534  
Consumer
     108,679       123,332  
Professional securities transactions
     54,085       98,270  
Multi-seller conduits
     27,894       29,457  
Subtotal
     333,572       401,332  
Allowances for impairment
     (2,060 )     (3,001 )
                 
Total
     331,512       398,331  

The decrease in loans and receivables from customers is principally due to the current period presentation of Banco Real as an asset held for sale. See note 12.


Loans and receivables allowances for impairment
   
Banks
    
Commercial
    
Consumer
    
Total
  
                         
Balance at 1 January 2008
     2       1,774       1,227       3,003  
Reclassifications related to discontinued operations
     -       (335 )     (700 )     (1,035 )
      2       1,439       527       1,968  
                                 
New impairment allowances
     -       419       193       612  
Reversal of impairment allowances no longer required
     -       (106 )     (5 )     (111 )
Recoveries of amounts previously written off
     -       (19 )     (3 )     (22 )
Total loan impairment and other credit risk provisions
     -       294       185       479  
                                 
Amount recorded in interest income from unwinding of discounting
     -       (11 )     -       (11 )
Currency translation differences
     -       (26 )     (1 )     (27 )
Recoveries of amounts previously written off
     -       19       3       22  
Amounts written off (net)
     (1 )     (201 )     (199 )     (401 )
Reserve for unearned interest accrued on impaired loans
     -       25       15       40  
Business combinations
     -       (18 )     9       (9 )
                                 
Balance at 30 June 2008
     1       1,521       539       2,061  

As of 30 June 2008, Banco Real is reported as discontinued operations. As a result, the related opening balances of loans and receivables allowances have been reclassified as assets held for sale.

23
 
17
Property and equipment

   
Property used
 in operations
    
Other
    
Equipment
    
Total
  
                         
Balance at 1 January 2008
     1,802       68       877       2,747  
Reclassifications related to discontinued operations
     (304 )     (40 )     (168 )     (512 )
      1,498       28       709       2,235  
                                 
Movements:
                                
Additions
     49       -       138       187  
Disposal of businesses
     (9 )     (15 )     (11 )     (35 )
Investments
     -       -       18       18  
Divestments
     (5 )     -       (12 )     (17 )
Impairment losses
     (4 )     -       -       (4 )
Depreciation
     (52 )     -       (130 )     (182 )
Currency translation differences
     (13 )     -       (13 )     (26 )
Other
     (4 )     -       6       2  
Balance at 30 June 2008
     1,460       13       705       2,178  
                                 
Representing:
                                
Cost
     2,514       16       2,055       4,585  
Cumulative impairment
     (24 )     -       (1 )     (25 )
Cumulative depreciation
     (1,030 )     (3 )     (1,349 )     (2,382 )

As of 30 June 2008, Banco Real is reported as discontinued operations. As a result, the related opening balances of property and equipment have been reclassified as assets held for sale.


18
Goodwill and other intangible assets
 

   
Goodwill
    
Software
    
Other
intangibles
    
Total
  
                         
Balance at 1 January 2008
     474       904       46       1,424  
Reclassifications related to discontinued operations
     (69 )     (79 )     -       (148 )
      405       825       46       1,276  
                                 
Movements:
                                
Additions
     -       176       -       176  
Investments
     -       3       4       7  
Impairment losses
     -       (67 )     -       (67 )
Disposals
     -       (4 )     (3 )     (7 )
Amortisation
     -       (152 )     (6 )     (158 )
Currency translation differences
     (17 )     (12 )     -       (29 )
Other
     -       7       (3 )     4  
Balance at 30 June 2008
     388       776       38       1,202  
                                 
Representing:
                                
Cost
     388       1,947       43       2,378  
Cumulative impairment
     -       (67 )     -       (64 )
Cumulative amortisation
     -       (1,104 )     (5 )     (1,112 )

Impairment of capitalised software costs relate to projects or systems no longer required due to the acquisition of ABN AMRO by the consortium banks.
 
24
 
19
Other assets
 
   
30 June
2008
    
31 December
2007
  
             
Current and deferred tax assets
     4,937       4,875  
Derivative assets used for hedging
     2,681       2,464  
Unit-linked investments held for policyholder accounts
     4,194       4,609  
Pension assets
     31       15  
Sundry assets and other receivables
     7,917       5,681  
                 
Total
     19,760       17,644  

20
Due to banks
 
This item is comprised of amounts due to banking institutions, including central banks and multilateral development banks.

   
30 June
2008
    
31 December
2007
  
             
Professional securities transactions
     74,240       123,537  
Current accounts
     14,212       19,058  
Time deposits
     68,394       94,075  
Other
     1,643       2,664  
                 
Total
     158,489       239,334  

21
Due to customers
 
This item is comprised of amounts due to non-banking customers.
   
30 June
2008
    
31 December
2007
  
             
Consumer current accounts
     19,549       20,343  
Commercial current accounts
     66,353       62,284  
Consumer savings accounts
     68,227       75,311  
Commercial deposit accounts
     72,137       93,384  
Professional securities transactions
     48,118       74,556  
Other
     3,299       4,474  
                 
Total
     277,683       330,352  

In addition to lower professional securities balances, the general decrease is due to the current period presentation of Banco Real as a business held for sale. See note 12.
 
25

22
Issued debt securities
 
   
30 June
 2008
    
31 December
2007
  
             
Bonds and notes issued
     92,574       102,708  
Certificates of deposit and commercial paper
     43,467       43,396  
Cash notes, savings certificates and bank certificates
     1,222       1,533  
Subtotal
     137,263       147,637  
Commercial paper issued by multi-seller conduits
     24,816       27,358  
                 
Total
     162,079       174,995  

Bonds and notes are issued in the capital markets with a focus on the euro market and are denominated mostly in euros and US dollars. The commercial paper programs are issued globally with the majority issued in the United States and Europe.

The balance above includes various structured liabilities that have been designated at fair value through income (EUR 49,086 million) due to the inclusion of embedded derivative features. The change during the year in fair value of issued debt securities attributable to changes in credit risk is EUR 522 million.  The cumulative change is EUR 785 million (December 2007 EUR 263 million).

23
Other liabilities
 
   
30 June
2008
    
31 December
2007
  
             
Current and deferred tax liabilities
     2,230       2,091  
Derivative liabilities used for hedging
     2,090       1,971  
Liability to unit-linked policyholders
     4,194       4,609  
Sundry liabilities and other payables
     1,140       11,492  
                 
Total
     9,654       20,163  
 
26
 
24
Subordinated liabilities

Issued liabilities qualify as subordinated debt if claims by the holders are subordinated to all other current and future liabilities of, respectively, ABN AMRO Holding N.V., ABN AMRO Bank N.V. and other ABN AMRO Group companies. These liabilities qualify as capital, taking into account remaining maturities, for the purpose of determining the consolidated capital adequacy ratio for the Dutch Central Bank.

EUR 769 million of subordinated liabilities are designated as held at fair value. The change during the year in fair value attributable to changes in credit risk is EUR 2 million negative. The cumulative changes are EUR 96 million (31 December 2007: EUR 98 million).

The maturity profile of subordinated liabilities is as follows:
 
   
30 June
2008
    
31 December
2007
  
             
Within one year
     381       700  
After one and within two years
     1,956       2,161  
After two and within three years
     18       810  
After three and within four years
     24       19  
After four and within five years
     24       118  
After five years
     11,605       11,808  
                 
Total
     14,008       15,616  


The following table analyses subordinated liabilities by issuer:
   
30 June
2008
    
31 December
2007
  
             
ABN AMRO Holding N.V. preference financing shares
     768       768  
ABN AMRO Bank N.V.
     11,154       12,616  
Other Group companies
     2,086       2,232  
                 
Total
     14,008       15,616  

Total subordinated liabilities include EUR 3,816 million (2007: EUR 4,253 million) which qualifies as tier 1 capital for capital adequacy purposes. The majority of financing preference shares are held by RFS Holdings B.V.
 
25
Commitments and contingent liabilities
 
The Group’s main commitment and contingent liabilities arise in the normal course of business through the issuance of credit guarantees and committed facilities, as noted in the balance sheet.

26 
Capital adequacy
 
To monitor the adequacy of capital the Group uses ratios established by the Basel Committee and agreed with the Dutch Central Bank. These ratios measure capital adequacy by comparing the Group’s eligible capital with its balance sheet assets, off-balance sheet commitments and market and other risk positions at weighted amounts to reflect their relative risk. The market risk approach covers the general market risk and the risk of open positions in currencies and debt and equity securities primarily in the trading book. Assets are weighted according to broad categories of notional risk, being assigned a risk weighting according to the amount of capital deemed to be necessary to support them.
 
27
 
Tier 1 capital consists of shareholders’ equity and qualifying subordinated liabilities less goodwill and some intangible assets. Tier 2 capital represents additional qualifying subordinated liabilities, taking into account the remaining maturities.
 
Core tier 1 capital is tier 1 capital excluding preference shares.
 
The following table provides actual capital levels as determined for supervisory purposes.
 
   
30 June
2008
    
31 December
 2007
  
             
Total risk-weighted assets
     210,109       232,312  
                 
Total capital
     40,397       33,938  
Total capital ratio
     19.23 %     14.61 %
                 
Tier 1 capital
     33,209       28,850  
Tier 1 capital ratio
     15.81 %     12.42 %
                 
Core tier 1
     31,713       24,597  
Core tier 1 ratio
     15.09 %     10.59 %

27
Principal risks and uncertainties

The principal risks and uncertainties for the Group in the second half of 2008 are the following.
 
Market Conditions
Since August 2007, the global financial system has experienced difficult credit and liquidity conditions and disruptions leading to less liquidity, greater volatility, general widening of spreads and, in some cases, lack of price transparency in interbank lending rates. Following the bankruptcy filing by Lehman Brothers in September 2008, global financial markets deteriorated sharply and it became apparent that a number of other major financial institutions, including some of the largest commercial banks, investment banks, mortgage lenders, mortgage guarantors and insurance companies in the United States, were experiencing difficulties.  In response, the United States government has intervened on an unprecedented scale to prevent the failure of some of these institutions and to provide support to the money market mutual fund industry. Governments in Europe including the United Kingdom have recently nationalised a number of financial institutions.  Central banks worldwide have agreed to act in concert to increase liquidity in the financial markets by taking measures such as increasing temporary reciprocal currency arrangement (or “swap lines”) by many billions of dollars. Despite these measures, investor confidence remains very low.
 
In a further effort to bolster the financial markets and provide relief to financial institutions, the members of the executive and legislative branches of the United States government negotiated an emergency spending measure which would give the Secretary of the Treasury the power to use public funds to purchase non-performing or illiquid assets from distressed financial institutions. The proposal, which was intended to increase liquidity in the credit markets and prevent further collapses of major financial institutions, was rejected by the House of Representatives on 29 September 2008. It is impossible to predict how the financial markets will react to this rejection or the form of any measures the United States Government may take.
 
The Group is subject to the risks posed by the effects of the credit crisis on the global financial system and the economies in which the Group operates The precise nature of these risks cannot be predicted and the majority are outside the Group’s control. The Group is also exposed to the risk of loss if financial institutions fail or are otherwise unable to meet their obligations.
 
28
 
Credit risk
Risks arising from changes in credit quality and the recoverability of loans and amounts due from counterparties are inherent in a wide range of the Group’s businesses. As a result of current market conditions described above, the Group may see adverse changes in the credit quality of its borrowers and counterparties in the second half of 2008 with increasing delinquencies and defaults leading to higher impairment charges.

In 2007 and the first half of 2008, the Group recorded significant write-downs on its credit market positions. The Group continues to have exposure to these markets and as market conditions change the fair value of the Group’s instruments could fall further. Furthermore, market volatility and illiquidity have made it difficult to value certain of the Group’s financial instruments. Valuations in future periods, reflecting prevailing market conditions, may result in significant changes in the fair values of these instruments.

Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet its obligations as they fall due. Credit markets continue to experience a severe reduction in liquidity due to current market conditions as described above. The Group’s liquidity management focuses on maintaining a diverse and appropriate funding strategy for its assets, controlling the mismatch of maturities and carefully monitoring its undrawn commitments and contingent liabilities. In addition liquidity management includes ensuring that in the event of either a firm-specific or general market event, the bank is able to generate sufficient liquidity to withstand a short term liquidity crisis. For this purpose, the bank maintains a liquidity buffer and has contingent funding plans in place.

Market risk
The most significant market risks the Group faces are counterparty, interest rate, foreign exchange and bond and equity price risks. Changes in interest rate levels, yield curves and spreads in the second half of 2008 may affect the interest rate margin realised between lending and borrowing costs. Changes in currency rates, particularly in the euro-dollar exchange rates, affect the value of assets and liabilities denominated in foreign currencies and affect earnings reported by the Group’s non-EU subsidiaries and may affect income from foreign exchange dealing. The performance of financial markets during the second half of 2008 may cause reductions in the value of the Group’s investment and trading portfolios.

Transition risk
The transition of ABN AMRO is complex involving substantial reorganisation of ABN AMRO’s operations and legal structure. The transition plan is being implemented and significant elements have been completed within the planned timescales and the separation of the Group’s businesses is underway. However, risks remain that the Group‘s operations are affected by the transfer and integration activities.

As recently announced and as part of the concerted action to support Fortis of the governments of Belgium, Luxembourg and the Netherlands and the respective supervisory authorities, Fortis intends to sell its interest in RFS Holdings B.V. Further transfers to Fortis have been suspended.

Regulatory risk
The Group is subject to financial services laws, regulations, administrative actions and policies in each location in which it operates. Changes during the second half of 2008 in the regulatory and supervisory framework, in particular in Europe and the US, could materially affect the Group’s business.

Litigation
The outcome of existing and future legal actions, claims against and by the Group and arbitrations could affect the financial performance of the Group in the second half of 2008.
 
29
 
28
Subsequent events

Transfer of businesses to RBS
The process of transfer and sale of businesses to RBS which started during the six months ended 30 June 2008 is set to continue. As financial instruments held at fair value are transferred, the use of different models in particular for the more complex structures, as well as applying reserving policies in line with the portfolio structure of RBS and the transfer of amortised cost items at fair value, may lead to losses being realised within the books of ABN AMRO, while neutral on a RBS Group level. A portfolio of available-for-sale asset backed securities with a book value of EUR 6,600 million was sold to RBS in July, leading to a realised loss of approximately EUR 900 million. The negative fair value of this available-for-sale portfolio was reflected in equity at 30 June 2008 within the available-for-sale reserve. Further, credit portfolios have been identified and agreed for transfer in 2008. In addition, new business is already flowing directly to RBS. Although neutral from a RBS Group perspective, these business transfers will over time reduce the risk and balance sheet profile of ABN AMRO.

Transfer of remaining businesses to Santander and capital repatriation
Banco ABN AMRO Real S.A., Interbanca SpA and other entities acquired by Santander have been presented as a business held for sale as at 30 June 2008. On 24 July 2008 these entities were sold to Santander for an amount of EUR 15.3 billion resulting in a gain on sale of approximately EUR 9 billion.

ABN AMRO has resolved to settle the receivable on Santander resulting from the sale through a dividend distribution to RFS Holdings B.V. in October 2008. The sale and the subsequent dividend distribution do not materially affect the capital ratio’s of ABN AMRO.

Furthermore, in relation to the sale of Banca Antonveneta, the Managing Board have proposed an interim distribution to RFS Holdings B.V. for onward distribution to Santander, subject to confirmation of the resolution and approval by the Managing Board and the Supervisory Board of ABN AMRO Holding N.V. respectively and subject to approval by the Dutch Central Bank.

Sale of NewBank to Deutsche Bank (EC Remedy)
On 2 July 2008 ABN AMRO signed an agreement with Deutsche Bank for the sale of certain assets and liabilities of HBU, two Corporate Clients units and thirteen advisory branches, and IFN Finance B.V. The agreed sales price is determined by reference to the fair value of the assets and liabilities acquired less EUR 300 million. The sale is planned to close in October 2008 and is subject to approval by the European Commission and other regulatory bodies, such as the Dutch Central Bank, which have not yet been granted. This sale is set up to comply with European Commission requirements to divest part of ABN AMRO’s activities before Fortis could commence the integration of its activities with those of ABN AMRO.

Squeeze-out
De-listing of preference shares from Euronext Amsterdam and distributions from ABN AMRO Holding N.V. to the consortium banks can only be effected after completion of the squeeze-out of the remaining minority interest holders in ABN AMRO Holding N.V. which was completed on 22 September 2008.

Treasury share acquisition by RFS
As part of the squeeze-out of the minority shareholders of Holding, RFS Holdings B.V. has acquired the treasury shares held by ABN AMRO Group. A total of 92,719,820 ordinary shares were previously held by ABN AMRO Holding N.V. itself and 13,800,624 financing preference shares of ABN AMRO Holding N.V. were held by ABN AMRO Bank N.V. The total purchase price of these shares held by ABN AMRO Group itself, including statutory interest of 6% until 19 September 2008 (EUR 195 million), was EUR 3,717 million, being equal to the price to be paid to the minority shareholders according to the squeeze-out judgement plus 6% interest since 17 October 2007.

The Managing Board has in accordance with article 37 paragraph 5 of the articles of association of ABN AMRO Holding resolved and the Supervisory Board approved an interim dividend distribution, to RFS Holdings B.V. in an amount equal to the aggregate consideration for the ABN AMRO Group treasury shares to be acquired by RFS Holdings B.V. of EUR 1.92 per ordinary share, in total EUR 3,717 million, which was paid on 22 September 2008 to RFS Holdings B.V.
 
30
 
Sale of Fortis interest in RFS Holdings
Fortis announced on 29 September, that it planned to sell its interest in RFS Holdings, as part of the concerted action to support Fortis by the governments of Belgium, Luxembourg and the Netherlands and the respective supervisory authorities. The sale will represent the acquired activities of ABN AMRO excluding Asset Management, which was sold to Fortis in the second quarter of 2008.
 
31
 
APPENDIX


 Credit market and related exposures – additional information

The ABN AMRO Group is involved in investing and trading in financial instruments, including asset-backed securities (‘ABS’s) and other structured investments, backed by US residential mortgages and other collateral with exposure to the current credit environment.

Certain portfolios of ABS CDO’s (‘Collateralised debt obligations’), exposures to financial guarantors and positions with credit derivative product companies are agreed to be sold to RBS during 2008, in line with the merging of business and risk functions in this area.
 
Exposure to ABS CDOs

Wherever possible, the ABN AMRO Group values ABS positions using market prices.  However, following rising mortgage delinquencies and expectations of declining house prices in the US, illiquidity in the market has meant that market data has been increasingly difficult to source. In line with our policy on fair value determination, where quoted market prices and recent market transactions are not available, valuation techniques are employed that involve benchmarking against market prices for similar instruments or the use of valuation models, giving priority to observable market inputs where available.

The following table provides an overview of the main US residential mortgage related net exposures at 30 June 2008:

(net exposure, in millions of euros)
  
30 June
2008
    
31 December
 2007
  
             
Retained CDOs
     934       1,988  
                 
Other CDOs
                
§ Held for trading
     214       224  
§ Available for sale
     1,526       1,850  
                 
 
Retained CDOs

The Group is involved in buying mortgage-backed securities; including securities backed by US mortgages, and repackaging them into collateralised debt obligations (CDOs) for subsequent sale to investors. As a result of worsening credit conditions, the Group has retained the exposure to the super senior tranches of US related ABS CDOs.

At 30 June 2008, the Group’s net exposure to unsold tranches of US related ABS CDOs totalled EUR 934 million to high grade CDOs, which include commercial loan collateral as well as prime and sub-prime mortgage collateral.  The change in the net exposure compared to 31 December 2007 is largely due to lower valuations based on current market assumptions concerning mortgage delinquencies and house prices in the US. The loss on these exposures is reported in trading income. Mezzanine and equity tranches of the US ABS CDOs continue to be valued at zero.
 
32
 
The valuations of the super senior tranches of ABS CDOs exposures takes into consideration outputs from a proprietary model, market data and appropriate valuation adjustments.  Valuation involves significant subjectivity as there is very little market activity to provide evidence of the price at which willing buyers and sellers would transact. The model forecasts the expected cash flows from the underlying mortgages using assumptions about future macroeconomic conditions (including house price appreciation and depreciation) and delinquencies on these underlying mortgages derived from publicly available data.  The resulting cash flows are discounted using a risk adjusted rate.  Additionally, prices implied by the model have been evaluated against observable market data, such as the ABX index, a series of credit default swaps based upon bonds that consist of sub-prime mortgages.

Approximately 2% of ABN AMRO’s positions in high grade ABS CDOs refer to mortgage loans of vintage 2005 and earlier (31 December 2007: 5%), whilst 98% refer to 2006 and 2007 vintages (31 December 2007: 95%).
 
Other CDOs
Trading book exposures are marked to market using individual market prices, where available, or against market benchmarks.

Within our available-for-sale assets are US prime residential mortgage-backed CDOs. Fair value movements on these assets are recognised directly in equity.  If there are impairments to these assets, the cumulative loss is transferred to income. The majority of these assets were sold to RBS in July 2008.

Exposure to financial guarantors

The Group’s exposures to financial guarantors mainly relates to monoline insurers. The exposure arises from the over-the-counter derivative contracts, principally credit default swaps (‘CDS’). The direct exposure to monolines is the sum of the fair value of the CDSs.  Towards the end of 2007, financial guarantors were adversely affected by their exposure to the US sub-prime mortgage market and this development continued in the first half of 2008. The following table provides an overview of the Group’s credit derivative exposure to the monoline sector in the US and Europe.

(in millions of euros)
  
30 June
2008
    
31 December
 2007
  
             
Gross exposure to monolines
     3,657       1,692  
Hedges with bank counterparties
     (381 )     –  
Credit valuation adjustment
     (1,953 )     (559 )
                 
Net exposure to monolines
     1,323       1,133  

At 30 June 2008 the Group had EUR 1,323 million of credit derivative exposure to financial guarantors, mainly relating to CDSs on a range of ABS positions. As the fair value of the reference asset declines, the exposure to the guarantor increases. The gross exposure to financial guarantors has increased during the first half of 2008 as a result of a decline in the fair value and changes in the ratings of some reference assets.

Additionally, ABN AMRO has an indirect exposure to financial guarantors through financial guarantees (or “wraps”), purchased or embedded within various securities in the trading and available-for-sale portfolios. These securities are traded with the benefit of this credit enhancement and any
 
33
 
deterioration in the credit rating of the financial guarantor is reflected in the market price of these securities.


Other portfolios affected by the current credit environment

The Group’s leveraged finance inventory, which is held at amortised cost, totalled EUR 1,989 million at 30 June 2008 (December 2007: EUR 2,457 million).

The majority of the Group’s structured commercial real estate mortgage book of EUR 5,878 million reported at December 2007 was sold to RBS in June 2008, at a loss of EUR 400 million.
 
34
 
Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

   
ABN AMRO HOLDING N.V.
  
       
       
Date:
September 30, 2008  
By:
 /s/ John Hourican  
       
Name:
 John Hourican  
       
Title:
 Chief Financial Officer  
             
             
     
By:
 /s/ Petri Hofste  
       
Name:
 Petri Hofste  
       
Title:
 Chief Accounting Officer