Financial and Operational Review Brussels/Utrecht, 10 August 2006

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(1)Financial and Operational Review. First half year 2006 results. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Brussels/Utrecht, 10 August 2006.

(2) WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. 2. ❲This page has intentionally been left blank❳.

(3) 3. Contents 5 5 6 7. 2. Banking 2.1. Retail Banking 2.2. Merchant Banking 2.3. Commercial & Private Banking 2.4. Other Banking. 9 14 18 22 26. 3. Insurance 3.1. Insurance Belgium 3.2. Insurance Netherlands 3.3. Insurance International. 28 31 36 41. 4. General (including eliminations). 47. Annexes - Quarterly fi gures. 49. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. 1. Fortis Income Statement 1.1. Analysis 1.2. Strategic and operational developments 1.3. Solvency.

(4) 4. Fortis Net profit before results on divestments +29% versus first half 2005 to EUR 2,718 million. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Brussels/Utrecht, 10 August 2006.

(5) 5. 1. Fortis Income Statement Key fi gures Fortis H1 2006. 2,718. - Banking. 2,105. Change. 29%. Q2 2006. 1,390. Q1 2006. 1,328. Change. 5%. 2,051. 1,503. 36%. 1,015. 1,036. (2%). - Insurance. 720. 684. 5%. 381. 339. 12%. - General (incl eliminations). (53). (82). (35%). (6). (47). (88%). Results on divestments. 443. - Assurant (General). Net profit attributable to shareholders. EPS (in EUR) - Before results on divestments Net equity per share. Return on equity (in %). 443. 2,718. 2,548. 7%. 1,390. 1,328. 5%. 2.11. 1.99. 6%. 1.08. 1.03. 5%. 2.11. 1.64. 29%. 1.08. 1.03. 5%. 14.39. 14.75 (1). (2%). 14.39. 15.29. (6%). 22.3% (2). 23.0% (3). 1.1. Analysis Net profi t Fortis. Net profi t Banking. Net profit before results on divestments went up 29% to EUR 2,718 million in the first half of 2006. Results improved across Banking, Insurance and General. Net profit increased by 7% from EUR 2,548 million to EUR 2,718 million as the first half of 2005 benefited from the transactions relating to Assurant.. Net profit before results on divestments advanced 36%, from EUR 1,503 million to EUR 2,051 million. This excellent performance was achieved thanks to strong top-line revenue growth, continued modest impairments and a low tax rate, clearly outpacing the growing expenses resulting from the consolidation of acquisitions and investments in growth.. (1) Year-end (2) Rolling average, based on last four quarters (3) Full-year 2005. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Net profit attributable to shareholders before results on divestments. H1 2005.

(6) 6. Net profit at Banking of EUR 1,015 million in the second quarter was slightly lower than the very strong previous quarter. Higher commissions and fees, better trading results and lower expenses were offset by lower realised capital gains on investments and a higher change in impairments.. 1.2. Strategic and operational developments. Net profi t Insurance. One way Fortis focuses on customers is by internationally leveraging its core skills developed in the Benelux countries. Expansion of Retail Banking’s activities in Turkey is a good illustration of this point. Now that the integration and the rebranding into Fortis have been completed, the local strategy is being implemented at full speed. Forty new branches will be opened in 2006, in line with the aim to have around 300 branches by 2009.. Whereas the integration in the Netherlands is entering its final stage, the integration of Fortis AG and FB Insurance into Fortis Insurance Belgium is still in an early stage, driving up nonrecurrent costs. Other drivers of the overall 6% cost increase were continued growth of international activities such as the broker operations in the UK and the absorption of volume growth in Belgium.. Net profi t General The unusually high net profit at General in 2005 was due to the positive impact of the transaction relating to Assurant in the first quarter of 2005. Excluding the impact of this transaction, the net loss at General went down from EUR 82 million to a net loss of EUR 53 million. The change in net loss at General was driven mainly by a oneoff penalty fee recorded in net interest income related to the repayment of an internal financing agreement between Fortis Finance and Fortis Bank.. The acquisition of Von Essen KG Bankgesellschaft, finalised in the first quarter, marked a major step forward in the development of Retail Banking outside the Benelux countries. The opening of two credit shops in Duisburg and Bonn in early July saw the launch of a new service concept in Germany. These credit shops offer a wide range of consumer finance-related products. Fortis plans to roll out this concept throughout Germany by opening a total of 20 shops by the end of 2006. In April, Fortis signed a Memorandum of Understanding with An Post that will lead to the creation of a joint venture with a view to providing financial services in Ireland through An Post’s network of 1,450 post offices. In July, a provider of integrated core banking systems was selected to support Fortis’s entire retail banking operations. This was the first in a series of agreements to build a cross-border IT platform that will allow the bank to standardise its processes across its European operations and that will encourage collaboration across divisions. The bank will implement the system in stages, with operations in the Netherlands expected to go live at the end of 2008. Commercial & Private Banking continues to invest in the expansion of its pan-European offer for Specialized Financial Services. Fortis Lease has acquired Dreieck Industrie Leasing, one of Switzerland’s top three leasing companies. This acquisition fits perfectly in Fortis’s growth strategy to grow as-. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Net profit went up 5% to EUR 720 million. The increase was driven by the Life business, with net profit growing 14% to EUR 475 million, generated by higher non-allocated income. Life technical results were adversely affected by the introduction of a result-related commission paid to the Banking segment. Non-life continued to display sound results, with net profit coming down 9%, to EUR 245 million, compared with the excellent first half of 2005. However, the combined ratio of 94.5% indicates very healthy underwriting results.. In the first half of the year Fortis continued to make progress in executing its growth strategy. Fortis aims to generate 30% of net profit outside the Benelux countries by 2009. In the first half of 2006 this figure amounted to 20%..

(7) 7. In June, Merchant Banking announced that it had signed an agreement with Duke Energy, whereby Fortis will acquire Cinergy Marketing & Trading, LP, a Delaware limited partnership, and Cinergy Canada, Inc., an Alberta corporation, both wholly-owned subsidiaries of Duke and together referred to as CMT. CMT is a Texas-based marketing and trading platform with operations in all key North American power and gas markets. The transaction will strengthen Merchant Banking’s growing product and service offering to companies active in the energy, commodities and transportation sectors. The CMT platform in physical gas and power trading, combined with the marketing and structuring capabilities of Fortis, will be a key component of Fortis Merchant Banking’s growing energy practice.. announced in the first half of 2006 that it is in exclusive negotiations with IDBI and Federal Bank with the aim of establishing an insurance joint venture, of which IDBI will initially own 48%, Federal Bank 26% and Fortis 26%, with a multichannel distribution focus. In Malaysia, the bid for Malaysia National Insurance Holdings (MNIH) was successful. Mayban Fortis now owns 99% of MNIH. This transaction transforms Mayban Fortis from a predominantly bancassurance player into a multi-channel insurer with a leading position in Malaysia’s Life, Non-life and Takaful (Islamic) insurance markets.. 1.3. Solvency Shareholders’ equity decreased to EUR 18.6 billion, down EUR 0.4 billion compared with the end of last year. The downward movement in the revaluation of bonds included in the investment portfolio and the EUR 0.8 billion final dividend paid in June more than offset retained profits. In view of the legal merger of the legal entities FB Insurance and Fortis AG, FB Insurance has been transferred from Fortis Bank to Fortis Insurance NV. This transfer has resulted in an increase in net equity at the Banking level and a similar decrease at the Fortis Insurance NV level, and is visible in the increase of the negative net equity at General as of the end of the first quarter of 2006. On a consolidated Fortis level, the transfer has had no impact on shareholders’ equity.. Fortis Insurance Netherlands, through its subsidiary Fortis Vastgoed Ontwikkeling (FVO - Fortis Real Estate Development) has signed an agreement to acquire in a cash transaction 100% of the shares of William Properties, a leading independent Dutch real estate developer. Fortis Insurance Netherlands is one of the biggest institutional investors in the Netherlands. It has built up a well-diversified, high-grade EUR 4.2 billion investment portfolio in rural, residential and commercial property in the Netherlands. Its investment policy is to extend the portfolios managed on behalf of third parties. The acquisition of William Properties will transform Fortis Vastgoed Ontwikkeling into a full-scale developer able to operate efficiently in the rapidly consolidating Dutch real estate development market.. On 30 June 2006 net core capital stood at EUR 24.9 billion, or 124% of Fortis’s own floor and EUR 1.8 billion higher than at year-end 2005. Net core capital excludes any unrealised capital gains on the bond portfolio, goodwill and any elements of embedded value. In the second quarter net core capital increased by EUR 0.1 billion on the end of the previous quarter. Achieved net profits of EUR 1.4 billion and the issuance of EUR 0.5 billion in hybrids were largely offset by the final dividend of EUR 0.8 billion and the downward revaluation of equity investments in particular.. Fortis Insurance International followed up on the execution of its strategy to further build its existing businesses and expand in selected markets in Europe and Asia. Fortis. The Tier 1 ratio at Fortis Bank decreased from 7.4% at year-end 2005 to 7.3% at the end of the first half of 2006. The positive impact of the transfer of FB Insurance to Fortis. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. set-based finance activities, while at the same time leveraging Commercial & Private Banking’s growth outside the Benelux region. It also strengthens Fortis Lease’s position in the seventh largest European market. Fortis Lease also acquired two Hungarian leasing companies – Innotrade Leasing Rt., which targets mainly small enterprises, and Takleasing Rt., which specialises in financial leasing and real estate leasing. MeesPierson Intertrust was rebranded into Fortis Intertrust as of the end of May. This renaming is part of Fortis’s brand strategy designed to bring together all Fortis businesses under one name..

(8) 8. Insurance NV and retained profits were more than offset by a change in computation (from Belgian GAAP to IFRS) of the Tier 1 ratio, an increase of 5% of risk-weighted commitments to EUR 223 billion and the interim dividend 2006 to be paid in. the third quarter. As of the first quarter of 2006, in accordance with Belgian regulations, the Tier 1 ratio has been computed based on IFRS figures rather than on Belgian GAAP figures.. Solvency. 30 June 2006. 31 December 2005. 18,551. 18,929. 698. 727. Hybrid loans. 4,606. 4,080. Revaluation real estate to fair value. 1,708. 1,678. Revaluation of bonds, net of shadow accounting. (608). (2,582). 523. 696. (720). (715). 187. 313. Net core capital. 24,945. 23,126. Solvency requirements floor. 20,198. 19,300. 124%. 120%. 25,355. 24,238. 24,906. 22,210. 222,739. 212,095. 7.3%. 7.4%. 11.2%. 10.5%. Fortis Shareholders' equity Minority interests. Reversal non trade derivatives and hedge accounting Goodwill participations Treasury shares. - Net Core Capital as % of Floor. Solvency requirements cap. Bank Risk-bearing capital Risk-weighted commitments Tier 1 ratio (in %) Total capital ratio (in %). WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. in EUR million.

(9) 9. 2. Banking Income Statement in EUR million H1 2005. Change. Q2 2006. Q1 2006. Change. Net interest income. 2,642.9. 2,196.7. 20%. 1,342.6. 1,300.3. 3%. Net commissions and fees. 1,412.1. 1,053.6. 34%. 724.3. 687.8. 5%. 264.9. 621.3. (57%). 16.0. 248.9. ( 94%). 1,006.0. 457.6. *. 582.4. 423.6. 37%. Dividend and other investment income. 162.4. 122.7. 32%. 100.9. 61.5. 64%. Other income. 144.7. 168.7. (14%). 70.0. 74.7. (6%). Total income. 5,633.0. 4,620.6. 22%. 2,836.2. 2,796.8. 1%. (50.2). (37.0). 36%. (40.8). (9.4). *. Net revenues. 5,582.8. 4,583.6. 22%. 2,795.4. 2,787.4. 0%. Staff expenses. (1,748.8). (1,546.9). 13%. (862.3). (886.5). (3%). Other expenses. (1,258.5). (1,021.3). 23%. (631.9). (626.6). 1%. Total expenses. (3,007.3). (2,568.2). 17%. (1,494.2). (1,513.1). (1%). 2,575.5. 2,015.4. 28%. 1,301.2. 1,274.3. 2%. (518.7). (505.7). 3%. (280.2). (238.5). 17%. 2,056.8. 1,509.7. 36%. 1,021.0. 1,035.8. (1%). 6.2. 6.4. (3%). 5.9. 0.3. *. 2,050.6. 1,503.3. 36%. 1,015.1. 1,035.5. (2%). Realised capital gains (losses) on investments Other (un)realised gains and losses. Change in impairments. Profit before taxation Income tax expenses Net profit for the period Net profit attributable to minority interests Net profit attributable to shareholders. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. H1 2006.

(10) 10. Key Performance Indicators H1 2006. H1 2005. Cost / Income ratio. 53.4%. Operating leverage. 4.8%. Change. 55.6%. Q2 2006. Q1 2006. Change. 52.7%. 54.1%. 207,637. 204,088. 8. 2. 207,637. 198,241 (1). 5. 10 (1). 296,897. 280,233 (1). 6%. 296,897. 292,803. 1%. - Non-performing loans. 6,054. 6,371 (1). (5%). 6,054. 6,398. (5%). As a % of total loans to customers. 2.0%. 2.3%. 2.0%. 2.2%. Credit RWCs (in EUR million) - Credit loss ratio (basis points). (2). 5%. 2%. Credit Quality (in EUR million) - Total loans to customers. Overall Banking reported EUR 2,051 million net profi t in the first half of 2006, an increase of EUR 547 million or 36% compared with the same period last year. These excellent results were driven essentially by very strong top-line growth. Expenses also increased as a result of acquisitions and higher investments, which partly offset but also supported revenue growth. The year-on-year comparison also reflects a modest increase in impairments compared with the historically low levels in the first half of last year. Second quarter net profit, amounting to EUR 1,015 million, is just EUR 20 million lower than the previous record quarter. This slight decrease is mainly the result of higher tax than in the first quarter, which benefited from higher non-taxable gains realised on equities. The quarter-on-quarter comparison shows 1% revenue growth, despite very limited net realised (1) Year-end 2005 (2) As a % of average Credit RWCs. capital gains in the current quarter, and a 1% reduction in expenses, partly compensated by higher impairments after the exceptionally low level in the first quarter. Total revenues of EUR 5,633 million in the first half of the year were EUR 1,012 million or 22% higher than in the same period last year. It is noteworthy that the larger part of this increase was generated by strong customer activity reflected in net interest income from interest-margin products and in commissions and fees. Revenue growth was also supported by high Treasury and financial markets results and the inclusion of acquired businesses. Excluding the impact of the acquisitions, total income grew 16.5% compared with last year. The table on the next page gives activity-based figures for the relevant income lines.. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Analysis.

(11) 11. Banking (accounting- vs. activity-based) in EUR million H1 2006. H1 2005. Change. Q2 2006. Q1 2006. Change. Accounting-based Net interest income. 2,643. 2,197. 20%. 1,343. 1,300. 265. 621. (57%). 16. 249. (94% ). Other (un)realised gains and losses. 1,006. 458. 120%. 582. 424. 37%. Total. 3,914. 3,276. 19%. 1,941. 1,973. (2%). 2,518. 2,116. 19%. 1,264. 1,254. 1%. 261. 401. (35%). 14. 247. (94% ). Treasury and financial markets. 1,135. 759. 50%. 663. 472. 41%. Total. 3,914. 3,276. 19%. 1,941. 1,973. (2%). Realised capital gains (losses) on investments. 3%. Net interest income on interest-margin products Capital gains on investment portfolio. Net interest income on interest-margin products rose to EUR 2,518 million in the first half of the year; a 19% increase compared with the same period last year, reflecting mainly the positive contribution from customer activity and the consolidation of acquisitions. Commercial activity growth is reflected in all of our banking businesses with organic net interest income growth of 7% at Retail Banking, 12% at Commercial and Private Banking, and 10% at Merchant Banking. We continue to see the positive impact of volume growth, partly offset by lower margins. Net interest income from interest-margin products showed a 1% increase in the second quarter compared with the first, essentially reflecting slight margin erosion more than offset by volume growth. Buoyant customer activity has resulted in significant balance sheet growth. Loans to customers reached EUR 297 billion at the end of June 2006, up EUR 17 billion or 6% from EUR. 280 billion at the end of 2005. About 60% of the increase was generated by double-digit growth in our Retail Banking loan portfolio (EUR 7 billion or 10%) and in Corporate Lending (EUR 3 billion or 13%), the balance coming from Specialised Finance (EUR 3 billion or 26%) and Commercial and assetbased lending (EUR 3 Billion or 6%). More specifically, retail mortgage loans contributed almost EUR 5 billion to growth; an increase of 10% since the end of last year, fuelled mainly by strong mortgage acquisition in the Netherlands. While the commercial volume growth of all business continued in the second quarter, total loans grew by only EUR 4 billion, as the outstandings for the seasonal Global Securities Financing activity declined substantially. Credit risk-weighted commitments therefore rose a further 2% on the prior quarter to EUR 208 billion, resulting in a 5% increase from year-end 2005. Market risk-weighted commitments grew a further 3% during the quarter to EUR 15 billion, bringing total risk-weighted commitments to EUR 223 billion, up 5% compared with year-end 2005.. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Activity-based.

(12) 12. Net commissions and fee income at EUR 1,412 million in the first half of 2006 was up 34% on the same period last year. All banking businesses contributed to this increase, thanks to the successful implementation of cross-selling strategies and strong intakes in the first half of the year. Retail Banking experienced strong campaign-driven sales of investment products earlier in the year as well as a robust performance by Fortis Investments. At Commercial and Private Banking, the increase was driven by Private Banking with strong intake and the introduction of innovative products, only partly offset by the recent drop in the stock markets. Merchant Banking increased its fees and commissions significantly due to strong underlying business at Securities and Funds Solutions and more cross-selling with Global Markets at Specialised Finance, resulting from a coordinated sales approach across business units. The result-related commission introduced this year that Fortis Insurance Belgium pays to Retail Banking Belgium (EUR 42 million in the first half) and the consolidation of new acquisitions also contributed to the increase. Excluding these factors, organic growth in net commissions and fees was still a very strong 26%. Second quarter commissions and fees at EUR 724 million were 5% up on the prior quarter, driven mainly by growth at Private Banking and Merchant Banking, in line with the continued growth being sought at the fee-related businesses. Commissions and fees at Retail remained stable after a very strong first quarter, driven by the successful Save & Invest campaign in Belgium. Capital gains not linked to fi nancial markets activity at EUR 261 million were EUR 140 million lower than in the first half last year and were essentially equity based, while last year’s capital gains were largely realised on bond sales. Almost no net capital gains were realised in the second quarter. The Treasury and Financial Markets activity generated. EUR 1,135 million in revenues in the first half of the year, an increase of EUR 376 million or 50% on the year. The increase was driven by very good trading results, strong global securities financing activities and a EUR 220 million non-recurring gain (of which EUR 47 million was in the second quarter) as a result of non-qualifying hedges. These Treasury results are in fact mitigated as they include a one-off EUR 77 million intercompany surrender penalty related to early repayment of a loan, the impact of which is nil at Fortis level as it is offset by income booked in the General segment. Other income at EUR 145 million was EUR 24 million down on the first half of last year, which benefited from a EUR 48 million exceptional reimbursement from the Belgian Deposit Protection Fund. The change in provisions for impairments remained low at EUR 50 million in the first half of 2006, albeit EUR 13 million higher than the same period last year. Second quarter impairments include a EUR 30 million provision due to a change in parameters used when calculating IBNR for SME customers, mainly impacting Retail and Commercial Bank. First half impairments at Merchant Banking amounted to a net release. The annualised credit loss ratio (calculated as a percentage of average Credit Risk-Weighted Commitments) was still a low 5 basis points for the first half of 2006 compared with 10 basis points for full year 2005. Barring unforeseen circumstances, credit losses for full year 2006 are not expected to exceed 15 basis points, which is considerably below the 25 to 30 basis points that is the expected credit loss ratio over the cycle. Total expenses of EUR 3,007 million in the first half of 2006 were 17% higher than in the same period last year. The increase excluding the impact of acquisitions was only 8.7%, giving a 7.8% organic operating leverage. Staff expenses amounted to EUR 1,749 million, an increase of 13% on last year, or 6% excluding acquisitions (mainly Fortis Bank Turkey, Dryden Wealth Management and Atradius Factoring). Two percent of the organic expense increase was due to staff hirings. The remaining part of increase can be explained by wage drift and performance related pay rises, partly compensated by a one-off provision release of EUR 31 million booked in the second quarter. This release is related to the employer's contribution to the health care costs of retired. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Customer deposits also grew by 6% or EUR 16 billion to reach EUR 280 billion at the end of June 2006. Total retail deposits increased 7% and contributed EUR 6 billion, driven by strong growth in term deposits and mounting savings, helped by a successful commercial campaign in Belgium in the first quarter. The remainder of the growth in customer deposits was essentially at Merchant banking, driven by the global markets activity..

(13) 13. employees following a change in Dutch legislation. Total FTEs at the Banking businesses rose by 19% to 42,640, mostly due to the integration of acquisitions (Fortis Bank Turkey being the most important). Organic FTE hirings accounted for 2% of FTE growth, essentially at Commercial & Private Banking and Merchant Banking. Other expenses went up by 23% to EUR 1,259 million. Excluding the impact of the integration of the acquired companies, other expenses grew by 13%, reflecting strong investments, particularly in IT. In addition, the inclusion of the facility costs of Fortis ASR in the scope of the COO office (recorded in Banking) also impacted expenses. Second quarter total expenses at EUR 1,494 million were essentially flat or 1% down on the prior quarter.. The 20% tax rate in the first half of 2006 was lower than last year’s tax rate due mainly to higher tax-exempt capital gains on equities. Net inflow remained strong in the first half with Private Banking contributing EUR 2.0 billion and Fortis Investments EUR 7.1 billion. The performance of Financial Markets offset this positive net inflow in the second quarter, so Total Funds under Management at EUR 172 billion remained flat compared to the prior quarter, but 5% up on the end of last year.. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. The cost/income ratio for the first half of the year stands at 53.4%, improving from 55.6% last year, as revenue growth exceeded expense growth. In line with this, operating leverage is highly positive at 480 basis points..

(14) 14. 2.1. Retail Banking Income Statement in EUR million. Net interest income. H1 2005. Change. Q2 2006. Q1 2006. Change. 1,338.9. 1,183.5. 13%. 672.5. 666.4. 1%. 691.2. 508.7. 36%. 345.9. 345.3. 0%. 6.5. 56.2. (88%). 4.0. 2.5. 60%. Other (un)realised gains and losses. 22.3. 17.3. 29%. 10.4. 11.9. (13%). Dividend and other investment income. 11.3. 9.5. 19%. 5.6. 5.7. (2%). Other income. 430.2. 344.2. 25%. 156.1. 274.1. (43%). Total income. 2,500.4. 2,119.4. 18%. 1,194.5. 1,305.9. (9%). (72.8). (55.4). 31%. (51.1). (21.7). *. Net revenues. 2,427.6. 2,064.0. 18%. 1,143.4. 1,284.2. (11%). Staff expenses. (607.8). (532.1). 14%. (297.1). (310.7). (4%). Other operating and administrative expenses. (225.2). (159.1). 42%. (122.2). (103.0). 19%. Allocated expenses. (670.3). (614.2). 9%. (320.9). (349.4). (8%). (1,503.3). (1,305.4). 15%. (740.2). (763.1). (3%). Profit before taxation. 924.3. 758.6. 22%. 403.2. 521.1. (23%). Income tax expenses. (257.0). (222.0). 16%. (106.6). (150.4). (29%). 667.3. 536.6. 24%. 296.6. 370.7. (20%). Net commissions and fees Realised capital gains (losses) on investments. Change in impairments. Total expenses. Net profit for the period Net profit attributable to minority interests Net profit attributable to shareholders. *. 667.3. 536.6. 24%. *. 296.6. 370.7. (20%). WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. H1 2006.

(15) 15. Key Performance Indicators H1 2006 Cost / Income ratio. 60.1%. Operating leverage. 2.8%. - # of FTEs. H1 2005. Change. 61.6%. Q2 2006. Q1 2006. 62.0%. 58.4%. Change. 16,710. 14,186 (1). 18%. 16,710. 16,562. 1%. 1,109. 1,128 (1). (2%). 1,109. 1,118. (1%). 160. 163 (1). (2%). 160. 161. (1%). 37. 37 (1). 0%. 37. 37. 0%. 187. 174 (1). 7%. 187. 178. 5%. 117.9. 110.6 (1). 7%. 117.9. 118.6. (1%). - # of Fortis Bank branches - Belgium - Netherlands - Luxembourg - Turkey. (2). Funds under management (in EUR billion). • Net profit for first half 2006 up 24% to EUR 667 million • Total income increases by 18%, driven by robust growth in net interest income (+13%) and net commissions and fees (+36%), plus some scope changes • Net fund inflows at Fortis Investments remain significant – up EUR 7.1 billion in the year to date due to strong performance in both institutional and retail markets • Launch of new distribution channels to support growth ambitions Retail Banking’s first-half net profi t went up 24% to EUR 667 million. The first half of 2005 benefited from a capital gain on real estate, the sale of the ICS acquiring business and a reimbursement from the deposit protection fund; excluding these exceptional items, net profi t increased to EUR 667 million from EUR 478 million (+40%), driven by robust revenue growth.. (1) Year-end 2005 (2) Year-end 2005 and Q1 2006 have been restated. The 18% increase in total income was largely due to higher net interest income and robust growth in net commissions and fees. Excluding the consolidation of Von Essen and Retail Bank Turkey, total income was still 13% higher than in the first half of 2005. Net interest income in the first half of 2006 was up 13% on the same period last year, driven by significantly higher volumes, the inclusion of Retail Bank Turkey and the consolidation of Von Essen (as from the second quarter). Excluding the impact of the last two elements – which added EUR 76 million – growth was still a healthy 7%. Net interest income was slightly higher in the second quarter than in the first. Excluding the contribution of Von Essen, it decreased by EUR 15 million as higher volumes in Belgium and the Netherlands failed to offset the margin pressure in those. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Analysis.

(16) 16. Volumes continued to move upward on both the asset and liability side. The successful promotional campaign in Belgium in the first two months of 2006 increased savings deposits by EUR 2 billion to EUR 46 billion, pushing up the total for Retail Banking to EUR 58 billion. The mortgage portfolio grew by EUR 4.7 billion to EUR 54 billion – 10% up on year-end 2005 – with the increase equally divided between the two quarters. The majority of the increase originated in the Netherlands, where a continuous focus on mortgages added to market share. Belgium contributed EUR 1 billion to the increase, and announced higher mortgage rates as of 6 July in line with market developments. Net commissions and fees reached EUR 691 million, an impressive 36% increase compared to the first half of 2005. Excluding the impact of acquisitions, they advanced by 29% to EUR 654 million. Rising asset management commission and result-related commission on insurance sales (EUR 42 million pre-tax in the first six months) received from Fortis Insurance Belgium since the start of the year were the reasons for this increase. The first quarter of 2006 saw a boost in mutual fund sales commission following the successful Save & Invest campaign in Belgium; net commissions and fees maintained the same high level in the second quarter as well. Management fees on the increased asset base and higher sales commission on insurance products in Belgium following a commercial campaign were the main drivers of these strong results. At the same time, Turkey recorded higher service fees on credit cards and increased home loan production in April and May. The liquidity crisis hampered the growth of Turkish home loans as from mid May 2006 when we doubled the monthly interest rate in line with market movements.. Fortis Investments enjoyed a strong first half, reporting net profit of EUR 46 million. This was some 85% ahead of the same period in 2005, reflecting strong increases in both standard management fees and performance fees. Operating expenses remained under control, enabling the business to gain significant operating leverage. Fortis Investments has also seen excellent net new inflow continuing in both the institutional and the retail channel, and in all international geographies. Net asset inflow of EUR 7.1 billion in the first six months clearly underlines the strength of recent performance, product innovation, and the diversified product offering developed by Fortis Investments. This broad product offering enables Fortis Investments to meet demand from its client base throughout the market cycle. We witnessed our clients’ obvious appetite for our Absolute Return, Guaranteed and CDO products in the first half of 2006. Third-party distribution remained a driving force of new asset gathering, while distribution through Fortis retail channels was also strong during the period under review. Despite negative capital markets in the second quarter, these positive flows and continued low churn rates enabled overall assets under management to move ahead 6% to Euro 111 billion. Product performance remains strong, with 76% of our flagship funds outperforming their benchmark on a one-year basis. Other income lines recorded a 10% increase, as a higher ALM contribution more than compensated for the capital gain realised on real estate and the reimbursement of the contribution to the deposit protection fund in Belgium in the first half of last year. The 31% increase in the change in provisions for impairments compared to the first half of 2005 related to the inclusion of Von Essen and Turkey in 2006, and a change in the methodology for computing the IBNR for SME business in line with Basle II guidelines. The change in provisions for impairments was EUR 30 million higher in the second quarter than in the first, owing to the inclusion of Von Essen (EUR 8 million) and the above-mentioned change in methodology. The underlying provisioning level remained low overall, reflecting the sound quality of our credit portfolio.. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. countries. The Netherlands witnessed lower mortgage penalty fees, while the savings deposit campaign launched in the first quarter compressed margins in Belgium. The impact of the promotional campaign in Belgium will disappear in the third quarter. In the context of rising interest rates and to protect its market share, Retail Banking Belgium increased its savings base rate by 25 basis points to 1.50% on 1 July 2006..

(17) 17. Total expenses decreased by EUR 23 million on a quarterly basis. Excluding Von Essen, staff costs declined by 7% (EUR 20 million) helped by the devaluation of the Turkish lira and the EUR 12 million release from provisions in the Netherlands in the second quarter. The EUR 9 million decrease in non-staff costs related to marketing expenses in the Netherlands and Consumer Finance. Customer approach The Personal Banking approach, targeting customers with high savings and investment potential (threshold is EUR 250,000 in investable assets) has produced good results in Belgium. Since the end of 2005, more than 3,700 new clients have taken up the personal banking offering, bringing the total personal banking portfolio close to 64,000 customers. Consumer Finance initially offered the personalised picture card in Poland and the Netherlands. With rollout scheduled in Belgium and Germany in the coming months, it will approach target customers with a personalised offering in four different European countries by year end. Distribution channels Retail Banking continuously extends and deepens its multichannel network abroad as well in its mature home market. Retail Banking has 1,109 bricks-and-mortar Fortis Bank branches in Belgium, down from 1,128 in December 2005. The Direct Service concept has been rolled out at 141 of the 160 branches in the Netherlands, and is highly appreciated by our customers. Thirteen new branches were opened in Turkey in the first six months of 2006, bringing the total to 187.. At the same time, the number of on-line banking customers keeps growing. In Belgium, it reached 1,068,000 in June, 10% higher than at year-end 2005. A further 230,000 or so retail customers actively use Online Banking in the Netherlands. Consumer Finance implemented further its international expansion strategy in the second quarter of 2006 when it opened credit shops in Poland (2) and Germany (2). This alternative network of smaller points of sale – called 'credit4me' in Germany and 'twojkredit' in Poland – has the same look and feel as other retail outlets and offers a range of credit products. The credit shops supply consumers with a wealth of information on consumer finance products while qualified credit advisers provide personal consultations. The guiding principle behind this service concept is that obtaining credit should be just like acquiring any other consumer product, i.e. it should be easy, fast and above all reliable. By the end of the year, 20 credit shops should be open in Germany and five in Poland. Consumer Finance has extended the co-branding card model from the Netherlands to Belgium, signing up three cobranding partners in agreements that will become effective in the next few months. Legislative changes Several European countries recently increased regulatory supervision on Consumer Finance activities by capping the interest rates charged on consumer credit. Regulators in Belgium, the Netherlands and Poland focus mainly on the sub-prime consumer segments, so thanks to the pricing strategy of Fortis's Consumer Finance, its business is only marginally affected.. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Total expenses grew by 15% in the first half of 2006, reflecting the recent acquisitions. Excluding scope changes, total expenses rose by 6% on the back of both higher staff costs and higher other expenses. The 14% increase in staff costs was due mainly to the reallocation of credit staff from COO to the business. Excluding this reallocation and scope changes, staff costs rose by 4% owing to larger bonuses at Asset Management and wage drift, which were only partly offset by a EUR 14 million release from provisions in the Netherlands. Investment in the growth of Consumer Finance plus the expanding mortgage business and higher marketing costs in the Netherlands explain the 16% increase in other expenses..

(18) 18. 2.2. Merchant Banking Income Statement in EUR million H1 2005. Change. Q2 2006. Q1 2006. Change. Net interest income. 583.8. 410.6. 42%. 353.0. 230.8. 53%. Net commissions and fees. 291.8. 206.3. 41%. 154.4. 137.4. 12%. 68.2. 292.1. (77%). 0.9. 67.3. (99%). 645.3. 293.6. *. 424.4. 220.9. 92%. 49.1. 51.9. (5%). 26.7. 22.4. 19%. Other income. 104.7. 84.2. 24%. 40.2. 64.5. (38%). Total income. 1,742.9. 1,338.7. 30%. 999.6. 743.3. 34%. 73.5. 97.7. (25%). 43.9. 29.6. 48%. Net revenues. 1,816.4. 1,436.4. 26%. 1,043.5. 772.9. 35%. Staff expenses. (304.9). (282.7). 8%. (154.7). (150.2). 3%. Other operating and administrative expenses. (179.5). (138.8). 29%. (99.5). (80.0). 24%. Allocated expenses. (189.0). (190.8). (1%). (85.2). (103.8). (18%). Total expenses. (673.4). (612.3). 10%. (339.4). (334.0). 2%. Profit before taxation. 1,143.0. 824.1. 39%. 704.1. 438.9. 60%. (161.7). (148.4). 9%. (154.5). (7.2). *. 981.3. 675.7. 45%. 549.6. 431.7. 27%. 3.6. 5.0. (28%). 4.4. (0.8). *. 977.7. 670.7. 46%. 545.2. 432.5. 26%. Realised capital gains (losses) on investments Other (un)realised gains and losses Dividend and other investment income. Change in impairments. Income tax expenses Net profit for the period Net profit attributable to minority interests Net profit attributable to shareholders. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. H1 2006.

(19) 19. Key Performance Indicators H1 2006 Cost / Income ratio. 38.6%. Operating leverage. 20.2%. Net profit per FTE (in EUR). - # of FTEs. (1). H1 2005. Change. 45.7%. Q2 2006. Q1 2006. 34.0%. 44.9%. Change. 222,259. 168,811. 32%. 120,726. 98,469. 23%. 4,399. 3,973. 11%. 4,516. 4,392. 3%. Analysis. Merchant Banking net profit for the first half of 2006 jumped 46% to EUR 978 million from EUR 671 million. Excluding lower capital gains realised in the first half of 2006, the increase was even steeper. All underlying businesses contributed strongly in the second quarter, on top of a solid first quarter. Over the first six months of 2006, net profit at Global Markets shot up 61% to EUR 466 million and the combined net profit of Corporate & Institutional Banking (C&IB) and Specialised Finance (SFI) rose 23% to EUR 302 million. Private Equity & Structured Finance ended the first six months with a net profit of EUR 169 million (+71%), while net profit of Securities and Funds Solutions reached EUR 64 million (+161%). Including results from Support functions brings the total net profit to EUR 978 million, up 46%. Net profit in the second quarter reached EUR 545 million, up 26% on the previous quarter. The second quarter benefited. (1) Period average. from a strong seasonal performance of securities lending and arbitrage and good underlying growth in Corporate & Institutional Banking and Specialised Finance. Global Markets (GMK) turned in a strong performance in the first half, with total revenues at EUR 756 million, up 37% on the first half of 2005. Second-quarter revenues were 143% higher than the previous quarter, driven by the excellent performance of Global Securities Financing Group (GSFG). GSFG ongoing efforts to obtain exclusive rights with institutional investors drove up volume in the first half of the year. All other divisions of GMK – in particular the Equity & Trading desk, the Structured Credit Group and the Global Energy & Commodities Group – performed well. Recent market volatility and higher interest rates were beneficial for the trading operations, whereas the negative impact on cost of funding remained limited. GMK net profit jumped 61% in the first half of 2006, and this is compared with the very strong first half of 2005, which benefited from capital gains on the liquidation of non-qualifying hedges. Global Markets’ excellent results should be seen in the light of an average daily Value at Risk (VaR) that increased from a low EUR 14.4 million in 2005 to EUR 25.9 million over the first half of 2006, driven by increasing trading volumes and higher volatility. Solid results show Global Markets’ ability to reap. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. • Solid second quarter on top of buoyant Q1 profi t and in absence of major capital gains • Global Markets benefi ted from strong performance of securities lending and arbitrage • Higher commission income driven by Specialised Finance • Release of provisions in a consistently benign credit environment.

(20) 20. The combined net profit of Corporate & Institutional Banking (C&IB) and Specialised Finance (SFI) advanced 23% to EUR 302 million despite a lower release of provisions for credit booked in the first half of 2006. Good loan growth largely offset the margin compression: the Corporate loan book (Corporate Banking and Specialised Finance outstanding loans) recorded double-digit growth compared with year-end 2005, mainly driven by sectors such as Commodities and Oil & Gas. We are now seeing a slowdown in margin pressure on our total Corporate Banking loan book. Global Securities and Funds Solutions (GSF) (i.e. Prime Funds Solutions and Global Clearing & Custody) experienced vigorous growth in the first half of 2006, with net profit soaring 161% to EUR 64 million. Assets under custody went up 17% to EUR 289 billion in one year, while funds under administration increased 33% to USD 105 billion. The excellent results in the first half of the year at Global Private Equity and Structured Finance (net profit up 71% to EUR 169 million) were driven by high capital gains realised on exits (mainly in the first quarter) and the increase in value of our investments. Net interest income in the first half of 2006 increased by 42% to EUR 584 million. Net interest income benefited from the trading impact of derivatives at Global Markets and from the seasonal effect of securities lending and arbitrage. Excluding these factors, net interest income actually showed a 10% underlying increase thanks to higher volume at Corporate Banking and Specialised Finance. In sectors such as Aviation & Intermodal, net interest income was driven by interest-related income resulting from arrangement fees on new deals and new line utilisations. Net commissions and fees were 41% higher on increased commissions at Corporate Banking and Specialised Finance. Capitalising on its long-standing relationships with its corporate and institutional clients, Merchant Banking strategy of. pursuing a coordinated sales approach across all business units and countries is steadily yielding higher cross-selling. Specialised Finance continued to benefit from higher fee income on the back of cross-selling of Global Markets and Investment Banking products to corporate customers. For example, in the second quarter Specialised Finance (Aviation & Intermodal) together with Fortis Global Markets (Structured Credit Group) successfully arranged and managed a major ABS securitisation deal in the US. Global Markets also earned structuring fees from the successful launch of the first US Collateralised Loan Obligation solely arranged and led by Fortis. Net commissions and fees income at Corporate Banking and Specialised Finance represented 27% of their total revenues in the first half of 2006, up from 22% in the same period last year. This reflects our focus on heightened cross-selling and the growing importance of commissions and fees earned on interest-generating deals. Global Securities and Funds Solutions also continued to benefit from higher net commissions on strong underlying business as well as from the first-time consolidation of O’Connor. Realised capital gains amounted to EUR 68 million in the first half of 2006, much lower than the EUR 292 million recorded in the first half of 2005. Last year realised capital gains benefited from strong one-off gains on the liquidation of hedges at Global Markets as well as a high level of non-recurrent capital gains in C&IB sectors like Shipping and Telecom, Media & Technology. Other (un)realised gains (losses) increased from EUR 294 million to EUR 645 million on very strong results of the Global Securities Financing Group and good underlying trading results at Global Markets, combined with positive revaluations of participating interests at Global Private Equity. The release in provisions for impairment amounted to EUR 44 million in the second quarter, bringing the total release of provisions to EUR 74 million over the first half of 2006 compared with EUR 98 million in the same period in 2005. The sustained low level of provisions for credit losses reflects the benign credit environment combined with the positive impact from the sale or repayment of certain facilities. Credit risk is being increasingly actively managed via one Credit Portfolio Management group.. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. the benefits of its diversified product portfolio and strategy of making the transformation from a niche/product focus to an integrated customer focus. Going forward, the business will span the entire energy and commodities value chains and the support of related flows..

(21) 21. Commercial developments Close cooperation across businesses further enhanced crossselling both geographically and in terms of products/skills. In the US, Aviation & Intermodal Finance (Specialised Finance) acted together with Structured Credit Group as Sole Arranger and Joint Lead Manager for an ABS securitisation deal in container leasing with a major client of Aviation & Intermodal, one of the world’s largest and oldest lessors of intermodal freight containers. This transaction is the largest ever issued in the industry. Also in the US, the global effort coordinated by ABS/CDO Syndication and the Sales and Marketing Group at Global Markets resulted in the completion of the first Collaterised Loan Obligation (CLO) arranged by Fortis. This assignment required Fortis to provide the full chain of services to the client by warehousing the assets and structuring, underwriting and distributing the various tranches of the CLO. The client is also recognised by the market as a tier 1 player in the belowgrade asset management business and served as collateral manager for seven comparable transactions prior to teaming up with Fortis. Fortis advised a US-listed shipping company on the acquisition of 17 dry bulk carriers for a purchase price of around USD 735 million and acted as placement agent. Global Shipping Group, in co-operation with Corporate Finance & Capital Markets, was underwriter for the USD 735 million debt financing. Finally, Global Markets provided the interest rate swaps. The truly Merchant Banking approach, whereby Global Shipping Group, Corporate Finance & Capital Markets and Global Markets worked together, made this deal a success.. Corporate Finance played an important role in the successful capital increase with a major C&IB client, one of the world’s leading suppliers of cement and aggregates. This deal once again confirms Fortis ability to leverage synergies across Merchant Banking businesses. Merchant Banking strengthened its market position in the Benelux region, both in Belgium (where it once again ranks first) and in the Netherlands (where it ranks third). Customer satisfaction ratings improved markedly (source: third-party research). Merchant Banking announced on 27 June 2006 that it reached agreement with Duke Energy to purchase Cinergy Marketing & Trading (CMT). The combination transforms Fortis into a powerful North American leader in energy trading with significant and unique opportunities. CMT’s scalable physical platform, along with Merchant Banking marketing and structuring capabilities, will offer many innovative opportunities to Fortis, CMT and their respective clients and serve as a source of diversification and growth. CMT is a Texas-based marketing and trading platform with physical and financial activities in all key North American power and gas markets. CMT maintains a leading physical presence in the wholesale market as the ninth largest US gas marketer. The company has some 200 employees in its Houston offices and around 25 employees in Calgary, Alberta. CMT will be a significant part of Fortis US operations and Energy & Commodities Trading business. This acquisition will enable our well-established energy presence in North America to accelerate expansion of our product offering and allow us to become a leading provider of financial and physical energy trading products.. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Total expenses rose by 10% in the first half of 2006, improving the cost/income ratio from 45.7% to a low 38.6%. Total FTEs of 4,639 were 16% higher than at the end of the first half 2005 due to the first-time consolidation of O’Connor and new hirings, mainly in the US. Excluding acquisitions, the number of FTEs increased by 8%. Staff expenses went up 8% as the impact of hirings and acquisitions was partly offset by the release of some excess provisions. The operating leverage eventually came to 20.2%, well above the 2.5% target..

(22) 22. 2.3. Commercial & Private Banking Income Statement in EUR million H1 2005. Change. Q2 2006. Q1 2006. Change. Net interest income. 577.4. 492.5. 17%. 294.6. 282.8. 4%. Net commissions and fees. 425.8. 332.3. 28%. 222.9. 202.9. 10%. 7.6. 5.0. 50%. 4.4. 3.2. 38%. Other (un)realised gains and losses. 42.9. 24.4. 76%. 21.4. 21.5. (0%). Dividend and other investment income. 24.8. 18.3. 36%. 12.9. 11.9. 8%. Other income. 189.6. 136.1. 39%. 70.1. 119.5. (41%). Total income. 1,268.1. 1,008.6. 26%. 626.3. 641.8. (2%). (47.0). (44.9). 5%. (32.2). (14.8). *. Net revenues. 1,221.1. 963.7. 27%. 594.1. 627.0. (5%). Staff expenses. (350.4). (253.9). 38%. (174.0). (176.4). (1%). Other operating and administrative expenses. (156.4). (107.5). 45%. (79.6). (76.8). 4%. Allocated expenses. (196.3). (207.6). (5%). (93.3). (103.0). (9%). Total expenses. (703.1). (569.0). 24%. (346.9). (356.2). (3%). 518.0. 394.7. 31%. 247.2. 270.8. (9%). Income tax expenses. (112.9). (105.4). 7%. (45.0). (67.9). (34%). Net profit for the period. 405.1. 289.3. 40%. 202.2. 202.9. (0%). Realised capital gains (losses) on investments. Change in impairments. Profit before taxation. Net profit attributable to minority interests Net profit attributable to shareholders. *. 405.1. 289.3. 40%. *. 202.2. 202.9. (0%). WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. H1 2006.

(23) 23. 23. Key Performance Indicators H1 2006. H1 2005. Cost / Income ratio. 55.4%. Operating leverage. 2.2%. - # of FTEs. 7,518. 6,119 (1). 70.5. 69.8 (1). Funds under management (in EUR billion). Change. 56.4%. Q2 2006. Q1 2006. Change. 55.4%. 55.5%. 23%. 7,518. 7,279. 3%. 1%. 70.5. 71.0. (1%). • Net profi t up 40% to EUR 405 million in the fi rst half of 2006 • Total revenues increased by 26% of which 18% organic • Change in impairments remained low at EUR 47 million • Strong net new inflow: EUR 2 billion in funds under management in the fi rst half of 2006 Net profi t came in at EUR 405 million in the first half of 2006, up 40% over the period, supported by strong commercial activity and 2.2% operating leverage. Total revenues were up 26% to EUR 1,268 million. Excluding acquisitions, revenues increased by 18%, driven mainly by increases in net interest income and net commissions and fees, while comparable cost growth amounted to 10%. Total revenues went down 2% in the second quarter as the 4% increase in net interest income and 10% rise in net commissions and fees did not fully compensate for lower ALM income. Total expenses were 3% lower quarter-on-quarter. Net profit remained stable in the second quarter compared with the very good first quarter, as a higher change in impairments was offset by lower taxes.. (1) Year-end 2005. Net interest income reached EUR 577 million over the first six months of 2006, up 17% on the same period last year. Excluding acquisitions, organic growth was 12%. The positive trend was underpinned by a strong volume increase in credits to EUR 57 billion, up 13% on the end of June 2005. Higher credits to Private Banking customers accounted for one quarter of the total increase, going from EUR 4.2 billion in the first half of 2005 to EUR 5.8 billion in the same period this year. Asset-based finance accounted for one third of total growth. The stronger-than-average growth rate of credits outside the Benelux countries validates the extended reach and depth of our international Business Centre network, which also shows up as a strength in client satisfaction surveys. Stiff competition in almost all countries put pressure on credit margins at Commercial and Private Banking, with margins on new production slightly lower than those on the existing portfolio. However, the product mix of new production (asset-based finance and credits to Private Banking customers) helped to contain overall margin erosion. In the Netherlands, Commercial Banking registered both increasing credit volumes and stable interest margins, indicating its good po-. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Analysis.

(24) 24. Net interest income increased by 4% in the second quarter of 2006 compared with the first quarter. Volumes of client deposits, an area where market pressure is comparatively lighter, increased on average at the same pace as those of credits. Among the countries where we have a stronger presence, the Netherlands showed good growth and increasing margins. Net commissions and fees increased by 28% (16% organically) compared with the first half 2005 and by 10% compared with the previous quarter, largely on the back of Private Banking. Funds under management grew by 24% over the year (half of this growth originating from Dryden) and credits by 37%. The sharp 28% increase in net commissions and fees was due to our positioning in favourable market segments, strong net new intake and the launch of innovative products. The second quarter also benefited from an adjustment to the way in which Dryden Asia is consolidated. Funds under management stood at EUR 70.5 billion at the end of June, EUR 0.5 billion lower than in the first quarter of the year. Strong net new intake of EUR 1.2 billion in the second quarter (or a total of EUR 2 billion for the first six months) was partially offset by the recent drop in stock markets. One quarter of the net new CAL (Combined Assets and Liabilities) at Private Banking in the first half of 2006 came from referrals by Commercial Banking. This demonstrates the strength of our ‘Act as One’ mindset and, above all, the appropriateness of our customer-centric model. Total costs increased by 24% compared with the first half of 2005, to EUR 703 million. Excluding acquisitions, organic cost growth was actually 10%, driven mainly by staff expenses and other operating charges. Excluding acquisitions and the transfer of staff from the Central Credit department to business, staff expenses actually increased by 9% in line with organic FTE growth of about 500 and our expansion plans. New hirings underpinned Commercial and Private Banking’s ongoing commitment to increasing the number of client-fac-. ing staff. Quarter-on-quarter, total costs were 3% lower in the second quarter 2006. With a EUR 47 million charge, the change in impairments remained low in this first half. The gradual implementation of Basel II compliant models and a change in computation methodology had a EUR 8 million one-off impact on IBNR provisions. There are no signs of a downturn in credit quality. While total loans to customers (EUR 57 billion) are growing, non-performing loans remain stable. Integration The integration of the former Dryden organisation into Fortis continued steadily. The teams in Singapore moved to one common location following the integration of Dryden Asia into Fortis Private Banking Singapore. Hong Kong has been looking to hire additional staff. Products and services were introduced successfully to the respective client bases throughout the Asian region. Overall staff retention was satisfactory and continued to be monitored closely. The integration of Dryden Bank in Switzerland into Fortis Banque (Suisse) was completed at the end of April. Switzerland also saw the merger of the Swiss Leasing units: Dreieck Industrie Leasing SA (acquired in January 2006) became Fortis Lease Switzerland on 22 June. This turned Fortis Lease Suisse into the third largest player on the Swiss leasing market, with a total leasing volume of EUR 600 million (CHF 930 million) and 50 employees. Fortis Lease Suisse has elected to establish its headquarters in Lausanne at the former offices of Dreieck Industrie Leasing. French operations Batical, FLIF and Fortis Lease France merged into one legal entity, as did the German companies, FCF Germany and Atradius Factoring Germany. Act as One As part of Fortis’s brand strategy, MeesPierson Intertrust was rebranded Fortis Intertrust. Rebranding took place worldwide at the end of May. To enhance our skill-driven approach and Act as One strategy, we are developing an integrated customer relationship management and sales coaching tool, covering Private Banking, Commercial Banking and Specialised Financial Services. The. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. sitioning in the competitive market. Client satisfaction surveys have indicated that a growing number of clients appreciate our range of solutions and speed of credit processing. The recent election as "Commercial Bank of the year" is another illustration of the very high client appreciation..

(25) 25. FINE (Fortis International Network Enhancement) project, now at the pilot stage in Leuven (Belgium) and Milan (Italy), aims to design and implement a sales process that facilitates co-operation. Various sales and IT projects are endeavouring to increase operational effectiveness, freeing up commercial time to increase client focus. Client focus A new International Desk supports our customers and Commercial Banking network in Turkey, assisting foreign clients who want to start up or expand their business there. The Desk will advise on a wide variety of issues including account opening, trade opportunities and local culture, also acting as liaison with Business Centres and retail branches across Turkey. It will provide services in English, German, Dutch, French and Turkish. All sales management systems became operational in Turkey on 1 April 2006, giving all our Turkish team members full access to our ‘Act as One’ tools.. Fortis Merchant Banking and Commercial Banking are working on the design and implementation of a common sales and transactional portal. Its functionalities will be gradually built up and access to the platform will be made possible via a ‘single sign-on’ procedure for both Fortis customers and Fortis employees. The first step has been taken towards a common sales and transactional portal (Fortis Forpro) with a pilot for on-line derivatives trading.. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Soon after Fortis Commercial Finance was launched in Spain, it signed its first factoring agreement with a Spanish company introduced by FCF Netherlands, using a multi-local factoring solution already provided to other companies in the client’s group..

(26) 26. 2.4. Other Banking Income Statement in EUR million. Net interest income. H1 2005. Change. Q2 2006. Q1 2006. Change. 142.8. 110.1. 30%. 22.5. 120.3. (81%). 3.3. 6.3. (48%). 1.1. 2.2. (50%). Realised capital gains (losses) on investments. 182.6. 268.0. (32%). 6.7. 175.9. (96%). Other (un)realised gains and losses. 295.5. 122.3. *. 126.2. 169.3. (25%). 77.2. 43.0. 80%. 55.7. 21.5. *. Other income. (579.8). (395.8). 46%. (196.4). (383.4). (49%). Total income. 121.6. 153.9. (21%). 15.8. 105.8. (85%). (3.9). (34.4). (89%). (1.4). (2.5). (44%). 117.7. 119.5. (2%). 14.4. 103.3. (86%). Staff expenses. (485.7). (478.2). 2%. (236.5). (249.2). (5%). Other operating and administrative expenses. (697.4). (615.9). 13%. (330.6). (366.8). (10%). Allocated expenses. 1,055.6. 1,012.6. 4%. 499.4. 556.2. (10%). Total expenses. (127.5). (81.5). 56%. (67.7). (59.8). 13%. Profit before taxation. (9.8). 38.0. *. (53.3). 43.5. *. Income tax expenses. 12.9. (29.9). *. 25.9. (13.0). *. Net profit for the period. 3.1. 8.1. (62%). (27.4). 30.5. *. Net profit attributable to minority interests. 2.6. 1.4. 86%. 1.5. 1.1. 36%. Net profit attributable to shareholders. 0.5. 6.7. (93%). (28.9). 29.4. *. Net commissions and fees. Dividend and other investment income. Change in impairments Net revenues. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. H1 2006.

(27) 27. Other Banking includes all shared-service entities and corporate centre functions at Banking, Asset and Liability Management (ALM), Fortis Hypotheek Bank, and Belgolaise. Income from ALM and shared-services related expenses are allocated to Banking business lines (which explain why Other income items are negative and Allocated expenses items are positive). Net interest income increased by EUR 33 million to EUR 143 million in the first half of 2006. This was predominately due to the impact of increased volumes at ALM combined with an interest penalty of EUR 77 million paid by Fortis Hypotheek Bank in relation to the arm’s length repayment of intercompany loans to Fortis Finance (this has been cancelled out under General). This contrasts with the interest movement between the first and second quarters of 2006 where net interest income fell by EUR 98 million to EUR 23 million. The main factors here were the above-mentioned interest penalty paid by Fortis Hypotheek Bank, coupled with the erosion of their interest margin, the running down of the portfolio at Belgolaise and some one-off technical factors. Realised capital gains on investments were EUR 85 million lower in the first half of 2006 than in the same period in 2005. This was the result of lower gains on the bond portfolio partially offset by gains realised on equity holdings, of which the most significant was the disposal of our remaining stake in Euronext in the first quarter of 2006. Other (un)realised gains. increased by EUR 173 million during the same period, predominately as a result of non-qualifying hedges on part of the mortgage portfolio. The change in provision for impairments improved by EUR 30 million during the first half of 2006 due to recoveries at Belgolaise and a reduction in impairments at Fortis Hypotheek Bank. Total expenses before allocations, comprising staff expenses and other operating and administrative expenses, increased by EUR 89 million in the first half of 2006. This was almost entirely due to scope changes, the most important of which were ASR Facility and IST activities (which have been offset in Other Income), Fortis Bank Turkey, Credits and Belgolaise. IFRS has also necessitated a change in the reporting of certain interest-related staff benefits that were previously included in the Net Interest Margin. The total expenses of the COO Office excluding the above scope changes remained flat in the first half of 2006 when compared with the first half of 2005. The significant EUR 49 million reduction in Total expenses (before allocations) between the first and the second quarter of 2006 was due, amongst others, to the release of a pension-related provision. The positive movement in income tax expenses between the first of half 2006 and the first half of 2005 can be explained largely by lower taxation on intra-group funding and on capital gains.. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Analysis.

(28) 28. 3. Insurance Income Statement in EUR million H1 2006. H1 2005. Change. Q2 2006. Q1 2006. Change. Life - Gross written premiums. 3,909.0. 3,862.1. 1%. 1,931.5. 1,977.5. (2%). - Investment contracts without dpf. 1,341.4. 1,497.0. (10%). 567.0. 774.4. (27%). Gross inflow. 5,250.4. 5,359.1. (2%). 2,498.5. 2,751.9. (9%). Gross written premiums Non-Life. 2,789.9. 2,688.3. 4%. 1,176.9. 1,613.0. (27%). Operating costs. (650.4). (616.3). 6%. (328.2). (322.2). 2%. - Life. 300.5. 392.1. (23%). 151.1. 149.4. 1%. - Non-Life. 299.3. 306.3. (2%). 154.9. 144.4. 7%. 82.1. 123.7. (34%). 44.7. 37.4. 20%. Operating margin. 681.9. 822.1. (17%). 350.7. 331.2. 6%. - Life. 374.8. 492.8. (24%). 192.8. 182.0. 6%. - Non-Life. 307.1. 329.3. (7%). 157.9. 149.2. 6%. Non-allocated other income and expenses. 247.3. 153.6. 61%. 136.6. 110.7. 23%. Profit before taxation. 929.2. 975.7. (5%). 487.3. 441.9. 10%. Income tax expenses. (187.3). (276.1). (32%). (95.2). (92.1). 3%. 21.7. 15.6. 39%. 11.1. 10.6. 5%. Net profit attributable to shareholders. 720.2. 684.0. 5%. 381.0. 339.2. 12%. - Life. 474.5. 415.3. 14%. 253.2. 221.3. 14%. - Non-Life. 245.7. 269.0. (9%). 127.8. 117.9. 8%. (0.3). *. Allocated capital gains. Net profit attributable to minority interests. - Other. *. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Technical result.

(29) 29. Key Performance Indicators H1 2006 - # of FTEs. Operating leverage. 12,874. H1 2005 13,083 (1). Change. Q2 2006. Q1 2006. Change. (2%). 12,874. 12,799. 1%. 0%. 316. 284. 11%. (12.9%). Life: New business life - APE (in EUR million). 600. 598. Claims ratio. 60.2%. 58.8%. 59.0%. 61.4%. Expense ratio. 34.3%. 35.2%. 35.2%. 33.5%. Combined ratio. 94.5%. 94.0%. 94.2%. 94.9%. Claims ratio. 57.9%. 56.1%. 56.6%. 59.2%. Expense ratio. 39.9%. 38.8%. 39.9%. 39.9%. Combined ratio. 97.8%. 94.9%. 96.5%. 99.1%. Claims ratio. 65.1%. 64.7%. 64.2%. 66.0%. Expense ratio. 22.2%. 27.2%. 24.7%. 19.6%. Combined ratio. 87.3%. 91.9%. 88.9%. 85.6%. Non-Life total:. Non-Life Accident & Health:. (1) Year-end 2005. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Non-Life Property & Casualty:.

(30) 30. Further progress has been made in the implementation of the Insurance strategy. The integration process at Insurance Belgium is on track, while the nearly completed integration at Insurance Netherlands is yielding cost benefits and profitable growth. Continued investments are being made to enter new product/market combinations at Insurance International. These efforts contributed to the increase in net profit of 5% to EUR 720 million in the first half of 2006. Life was the main contributor, with net profit growing 14% to EUR 475 million, driven by higher financial income. Non-life net profit decreased by 9% to EUR 245 million as a result of slightly lower technical results, lower capital gains and lower non-allocated income. Higher claim frequency and severity in property insurance in Belgium impacted Non-life technical results. Net profit at Insurance improved to EUR 381 million in the second quarter, up 12% on the first quarter, driven by seasonality both in claims at Non-Life and in dividends. The nearly finalised integration in the Netherlands has reduced this business’ operating costs by 5% and improved its competitive position. The integration of Fortis AG and FB Insurance into Fortis Insurance Belgium, however, is still at an early stage and drove up non-recurrent costs. Another driver of the overall 6% cost increase was the continued pursuit of the international growth strategy. Life Gross inflow came in slightly lower at EUR 5,250 million. Higher premiums in Belgium were offset by a decrease in single premiums in Portugal due to a deliberate choice to decrease the emphasis on single premium product campaigns. Universal Life continued to advance significantly in Belgium, despite the 1.1% insurance premium tax on most individual life contracts with effect from 1 January 2006. Both the banking and the broker distribution channels again performed strongly. In the Netherlands, the strategic focus on more profitable regular premium products resulted in virtually stable gross inflow and higher new business expressed as APE. Growth of new regular premium production was supported by the steep increase in mortgage production. Higher regular premium products combined with a decrease in price-sensitive single premium products led to a more profitable product mix. Gross inflows. at the Asian operations (non-consolidated) more than doubled in the first half of 2006 compared to the same period last year. Fortis Insurance International will continue to actively investigate the possibilities of new and fast-growing product/market combinations in both Europe and Asia, based on multi-distribution with the focus on Life. Technical results decreased 23%, adversely affected by the introduction of a result-related commission that Fortis Insurance Belgium pays to Fortis Retail Bank Belgium, and non-comparable allocation of investment results in the Netherlands. Net profit advanced 14% to EUR 475 million in the first half of 2006, driven by the excellent net profits of Insurance Netherlands (+28%) and Insurance International (+48%). In Belgium, lower taxation contributed to stable net profit despite the much higher commissions paid to Retail Banking. Non-life Gross written premiums for Property and Casualty increased 5% as a result of sustained growth rates in Belgium and a successful affinity marketing strategy in the UK. Gross written premiums for Accident & Health ended up 4% higher, benefiting from strong healthcare growth in Belgium linked to large group contracts signed in 2005, while Insurance Netherlands expressly refrained from participating in the price war for medical expense insurance. Overall, gross written premiums ended 4% higher, at EUR 2,790 million. Gross written premiums at non-consolidated companies doubled. Higher results in Accident & Health and other lines were offset by a less favourable claims environment in Fire, depressing technical results by 2%. Fire declined at most entities owing to weather conditions in the first quarter and higher top claim frequency. Accident & Health in the Netherlands benefited from excellent underwriting results and a reinsurance-related profit commission that more than offset higher claim frequencies for Workers’ Compensation in Belgium. Motor ended somewhat lower in Belgium. The continuation of a strict underwriting process in combination with adequate claims management resulted in an improved performance of Insurance Netherlands, as demonstrated by a low combined ratio of 87.0%. Despite a higher combined ratio at Property & Casualty, the non-life combined ratio of all insurance companies taken together remained at a more than satisfactory level, inching up to 94.5% from 94.0%.. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Overall Insurance Analysis.

(31) 31. 3.1. Insurance Belgium Income Statement Insurance Belgium - Life in EUR million. Gross written premiums. H1 2005. Change. Q2 2006. Q1 2006. Change. 1,866.1. 1,866.9. (0%). 1,046.5. 819.6. 28%. 495.8. 362.8. 37%. 252.1. 243.7. 3%. 2,361.9. 2,229.7. 6%. 1,298.6. 1,063.3. 22%. 164.0. 212.7. (23%). 87.2. 76.8. 14%. 51.7. 55.4. (7%). 23.0. 28.7. (20%). 215.7. 268.1. (20%). 110.2. 105.5. 4%. 36.1. 46.4. (22%). 19.5. 16.6. 17%. Profit before taxation. 251.8. 314.5. (20%). 129.7. 122.1. 6%. Income tax expenses. (31.0). (92.1). (66%). (19.1). (11.9). 61%. 1.4. 2.1. (34%). 0.8. 0.6. 33%. 219.4. 220.3. (0%). 109.8. 109.6. 0%. Investment contracts without dpf Gross inflow. Technical result Allocated capital gains Operating margin Non-allocated other income and expenses. Net profit attributable to minority interests Net profit attributable to shareholders. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. H1 2006.

(32) 32. Income Statement Insurance Belgium - Non-Life in EUR million. Gross written premiums. Technical result Allocated capital gains Operating margin Non-allocated other income and expenses Profit before taxation Income tax expenses Net profit attributable to minority interests Net profit attributable to shareholders. H1 2005. Change. Q2 2006. Q1 2006. Change. 664.5. 611.9. 9%. 294.8. 369.7. (20%). 62.4. 96.4. (35%). 38.3. 24.1. 59%. 9.3. 6.0. 54%. 5.1. 4.2. 21%. 71.7. 102.4. (30%). 43.4. 28.3. 53%. 8.1. 10.3. (21%). 3.4. 4.7. (28%). 79.8. 112.7. (29%). 46.8. 33.0. 42%. (26.1). (36.4). (28%). (15.0). (11.1). 35%. 0.3. 0.5. (41%). 0.2. 0.1. 100%. 53.4. 75.8. (30%). 31.6. 21.8. 45%. Income Statement Insurance Belgium in EUR million H1 2006 Operating costs. Net profit. H1 2005. Change. Q2 2006. Q1 2006. Change. (191.1). (175.9). 9%. (95.2). (95.9). (1%). 272.8. 296.1. (8%). 141.4. 131.4. 8%. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. H1 2006.

(33) 33. Key Performance Indicators H1 2006 - # of FTEs. Change. Q2 2006. Q1 2006. Change. 5,003. 0%. 5,016. 4,963. 1%. 220. 207. 7%. 127. 93. 36%. Claims ratio. 60.1%. 54.9%. 58.2%. 61.9%. Expense ratio. 38.9%. 37.2%. 39.1%. 38.7%. Combined ratio. 99.0%. 92.1%. 97.3%. 100.6%. Claims ratio. 51.8%. 49.2%. 49.0%. 54.8%. Expense ratio. 45.2%. 42.6%. 44.9%. 45.6%. Combined ratio. 97.0%. 91.8%. 93.9%. 100.4%. Claims ratio. 79.2%. 69.1%. 80.6%. 77.7%. Expense ratio. 24.2%. 23.8%. 25.2%. 23.2%. 103.4%. 92.9%. 105.8%. 100.9%. Operating leverage. 5,016. H1 2005. (21.1%). Life: New business life - APE (in EUR million). Non-Life total:. Non-Life Accident & Health:. Combined ratio. (1) Year-end 2005. WorldReginfo - de36811e-bdd0-4c4e-a4aa-535f49fff9f7. Non-Life Property & Casualty:.