<PAGE>

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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-Q

(Mark One)

(X)            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the Quarterly Period Ended June 30, 1999

                                      OR

( )            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
              For the transition period from          to

                         Commission file number 1-6522

                            BANKBOSTON CORPORATION
            (Exact name of Registrant as specified in its charter)

            Massachusetts                         04-2471221
   (State or other jurisdiction of             (I.R.S. Employer
   incorporation or organization)             Identification No.)

         100 Federal Street,                         02110
        Boston, Massachusetts                     (Zip Code)
   (Address of principal executive
               office)

      Registrant's telephone number, including area code  (617) 434-2200

   Former name, former address and former fiscal year, if changed since last
                            report: Not Applicable

  Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes  X   No

  Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of July 30, 1999:

  Common Stock, $1.00 par value                                     297,260,752

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<PAGE>

                             BANKBOSTON CORPORATION

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
CONSOLIDATED SELECTED FINANCIAL DATA......................................   3
PART I  FINANCIAL INFORMATION
     Management's Discussion and Analysis of Financial Condition and
      Results of Operations...............................................   4
     Financial Statements
     BankBoston Corporation
      Consolidated Balance Sheet..........................................  35
      Consolidated Statement of Income....................................  37
      Consolidated Statement of Changes in Stockholders' Equity...........  38
      Consolidated Statement of Cash Flows................................  39
     Notes to Financial Statements........................................  40
PART II  OTHER INFORMATION
Item 4.Submission of Matters to a Vote of Security Holders................  50
Item 6.Exhibits and Reports on Form 8-K...................................  50
Signatures................................................................  51
LIST OF TABLES
  Consolidated Average Balance Sheet--Nine Quarters.......................  45
  Consolidated Statement of Income--Nine Quarters.........................  46
  Average Balances and Interest Rates--Quarter............................  47
  Average Balances and Interest Rates--Six Months.........................  48
  Change in Net Interest Revenue--Volume and Rate Analysis................  49
</TABLE>

                                       2
<PAGE>

                             BANKBOSTON CORPORATION

                      CONSOLIDATED SELECTED FINANCIAL DATA

                (dollars in millions, except per share amounts)

<TABLE>
<CAPTION>
                                                        1999        1998
Quarters Ended June 30                                 -------     -------
<S>                                                    <C>         <C>
Income Statement Data
Net interest revenue.................................. $   678     $   640
Provision for credit losses...........................      95          60
Noninterest income....................................     712         457
Noninterest expense...................................     899         647
Net income............................................     250         242
Per common share
  Basic...............................................     .84         .81
  Diluted.............................................     .83         .80
Market value per common share
  High................................................     51 7/8       58
  Low.................................................     43 1/16     51 15/16
Return on average common equity.......................   19.92%      20.70%
Return on average total assets........................    1.25        1.36

Six Months Ended June 30
Income Statement Data
Net interest revenue.................................. $ 1,313     $ 1,243
Provision for credit losses...........................     165         200
Noninterest income....................................   1,307       1,046
Noninterest expense...................................   1,705       1,308
Net income............................................     473         480
Per common share
  Basic...............................................    1.60        1.61
  Diluted.............................................    1.58        1.58
Market value per common share
  High................................................     51 7/8       58
  Low.................................................     34 1/2      43 15/16
Return on average common equity.......................   19.25%      21.01%
Return on average total assets........................    1.22        1.37

At June 30
Balance Sheet Data
Loans and lease financing............................. $41,789     $43,254
Total assets..........................................  77,564      70,499
Deposits..............................................  49,036      45,196
Total stockholders' equity............................   5,074       4,980
Book value per common share...........................   17.08       15.99
Regulatory capital ratios
 Risk-based capital ratios
  Tier 1..............................................     7.4%        8.4%
  Total...............................................    11.7        13.0
 Leverage ratio.......................................     6.8         7.8
</TABLE>

                                       3
<PAGE>

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

                             RESULTS OF OPERATIONS

  This discussion and analysis updates, and should be read in conjunction
with, Management's Discussion and Analysis included in both the previously
filed BankBoston Corporation (the Corporation) Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999, and the Corporation's 1998 Annual Report
to Stockholders, which is incorporated by reference into its 1998 Annual
Report on Form 10-K.

  On March 14, 1999, the Corporation and Fleet Financial Group, Inc. (Fleet)
entered into an Agreement and Plan of Merger pursuant to which the Corporation
will merge with Fleet. Under the terms of this agreement, on the closing date
of the merger, each outstanding share of the Corporation's common stock will
be converted into 1.1844 shares of common stock of the combined company. The
merger is intended to constitute a tax-free reorganization for federal income
tax purposes and to be accounted for as a pooling of interests. At June 30,
1999, Fleet had total assets of $107 billion and total stockholder's equity of
$9.7 billion. The transaction, which was approved by stockholders of both
companies at special meetings held on August 11, 1999 but remains subject to
regulatory approval, is expected to be completed late in the third quarter or
early in the fourth quarter of 1999. As a prerequisite to obtaining regulatory
approval, it is expected that the combined organization will be required to
divest approximately $13 billion of deposits. Additional information with
respect to this merger can be found in Note 2 to the Financial Statements.

Second Quarter 1999 Financial Highlights

  .  The Corporation's net income for the quarter ended June 30, 1999 was
     $250 million, compared with $242 million for the same period in 1998.
     Net income per common share was $.84 and diluted net income per common
     share was $.83 for the second quarter of 1999, compared with $.81 and
     $.80, respectively, for the second quarter of 1998.

  .  Net income for the first six months of 1999 was $473 million, compared
     with $480 million for the same period in 1998. Net income per common
     share was $1.60 and diluted net income per common share was $1.58 for
     the first six months of 1999, compared with $1.61 and $1.58,
     respectively, for the same period of 1998.

  .  Noninterest income in the second quarter of 1999 increased $255 million,
     or 56 percent, compared with the same period in 1998, while noninterest
     income in the first six months of 1999 increased $261 million, or 25
     percent, compared with the same six-month period in 1998. Financial
     service fees and commissions increased $261 million in the quarterly
     comparison and $429 million in the six-month comparison. These increases
     were mainly due to expansion activities, primarily the acquisition of
     Robertson Stephens, an investment bank with equity underwriting and
     research capabilities, acquired in the third quarter of 1998, and, to a
     lesser extent, acquisitions and branch expansion programs in Latin
     America. Other events impacting noninterest income comparisons were the
     Corporation's $50 million gain in connection with the sale of its
     minority interest in Partners First (a credit card company) and
     valuation writedowns of $25 million relating to the transfer of
     commercial loans into an accelerated disposition portfolio, both
     recorded in the second quarter of 1999, and a $165 million gain from the
     Corporation's sale of its 26 percent interest in HomeSide, Inc.
     (HomeSide), an independent mortgage banking company, in the first
     quarter of 1998.

  .  In the second quarter of 1999, net interest revenue on a taxable
     equivalent basis increased $39 million, or 6 percent, from the same
     period in 1998. Net interest margin for the second quarter of 1999 was
     4.03 percent, compared with 4.17 percent for the same period in 1998.

  .  For the quarter ended June 30, 1999, the Corporation's Argentine and
     Brazilian operations reported increases in net income of 88 percent and
     48 percent, respectively, from the second quarter of 1998. For the six-
     month period ended June 30, 1999, the Corporation's Argentine and
     Brazilian operations reported increases in net income of 63 percent and
     43 percent, respectively, from the first six months of 1998. Both
     operations benefited from wider spreads and other revenue opportunities
     arising from

                                       4
<PAGE>

     market volatility, as well as from higher fee income. In addition,
     Argentina benefited from a higher level of average earning assets.

  .  Noninterest expense in the second quarter of 1999 increased $252
     million, or 39 percent, compared with the same period in 1998, while
     noninterest expense in the first six months of 1999 increased $397
     million, or 30 percent, compared with the same six-month period in 1998.
     These increases primarily reflect the third quarter 1998 acquisition of
     Robertson Stephens, the 1998 expansion programs in Argentina and Brazil,
     as well as higher levels of incentive compensation associated with the
     growth in revenue.

  .  The provision for credit losses was $95 million in the second quarter of
     1999, compared with $60 million in the second quarter of 1998. Net
     credit losses in the second quarter of 1999 were $61 million, compared
     with $51 million for the second quarter of 1998. The increased quarterly
     net credit losses in 1999 reflected higher charge-offs of $50 million,
     which included charges related to the transfer of certain domestic
     commercial loans to an accelerated disposition portfolio, partially
     offset by increased recoveries of $40 million related to a partial
     insurance recovery associated with international private bank loans that
     were charged off in the first quarter of 1998. On an annualized basis,
     net credit losses as a percentage of average loans and lease financing
     were .57 percent in the second quarter of 1999, compared with .46
     percent in the same period of 1998.

  .  Total nonaccrual loans and leases and OREO at June 30, 1999 decreased
     $16 million to $386 million from $402 million at December 31, 1998.
     Nonaccrual loans and leases and OREO represented .9 percent of related
     assets at both June 30, 1999 and December 31, 1998.

  .  Return on average common equity was 19.92 percent and 19.25 percent for
     the second quarter and first six months of 1999, respectively. This
     compares with return on average common equity of 20.70 percent and 21.01
     percent for the second quarter and first six months of 1998,
     respectively. Return on average assets was 1.25 percent and 1.22 percent
     for the second quarter and first six months of 1999, respectively. This
     compares with return on average assets of 1.36 percent and 1.37 percent
     for the second quarter and first six months of 1998, respectively.

Forward-Looking Statements

  The Corporation may from time to time make written or oral statements that
are considered "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements may
include financial projections, statements of plans and objectives for future
operations, estimates of future economic performance and assumptions relating
thereto.

  The Corporation may include forward-looking statements in its filings with
the Securities and Exchange Commission, in its reports to stockholders,
including this Quarterly Report, in other written materials, and in statements
made by senior management to analysts, rating agencies, institutional
investors, representatives of the media and others.

  By their very nature, forward-looking statements are subject to
uncertainties, both general and specific, and risk exists that predictions,
forecasts, projections and other estimates contained in forward-looking
statements will not be achieved. The following factors, among others, could
cause actual results to differ materially from any forward-looking statements:
significant changes and developments in world financial markets, particularly
in Latin America and Asia; the ability of various countries in Asia and Latin
America to institute timely and effective economic policies; the uses of
monetary, fiscal and tax policy by various governments; political developments
in the United States and other countries; developments in general economic
conditions, both domestic and international, including interest rate and
currency fluctuations, market fluctuations and perceptions, and inflation;
demand for various forms of credit; legislative or regulatory developments,
including changes in laws concerning taxes, banking, securities, insurance and
other aspects of the financial services industry; changes in the competitive
environment for financial services organizations and the Corporation's
responses to those changes; the Corporation's ability to retain key personnel,
especially in view of the pending merger with Fleet;

                                       5
<PAGE>

the Corporation's ability and resources in both its domestic and international
operations to effectively execute its articulated business strategies and
manage risks associated with the integration of acquisitions and other
expansion activities; changes in technology and the successful allocation of
technology resources across multiple projects, including efforts to address
the Year 2000 issue and demands for greater automation; and the ability of the
Corporation's competitors, credit customers, wholesale fund providers,
treasury and capital markets counterparties, and vendors and service providers
to respond effectively to the Year 2000 issue. When relying on forward-looking
statements to make decisions with respect to the Corporation, investors and
others are cautioned to consider these and other risks and uncertainties.

            NET INTEREST REVENUE--(Fully Taxable Equivalent Basis)

  This discussion of net interest revenue should be read in conjunction with
Average Balances and Interest Rates and Change in Net Interest Revenue--Volume
and Rate Analysis, presented elsewhere in this report. For this review of net
interest revenue, interest income that is either exempt from federal income
taxes or taxed at a preferential rate has been adjusted to a fully taxable
equivalent basis. This adjustment has been calculated using a federal income
tax rate of 35 percent, plus applicable state and local taxes, net of related
federal tax benefits.

  The following table presents a summary of consolidated net interest revenue,
on a fully taxable equivalent basis, and related average loans and lease
financing and average earning asset balances and net interest margin.

<TABLE>
<CAPTION>
                              Second Quarter                Six Months
                          -------------------------   -------------------------
                           1999     1998    Change     1999     1998    Change
                          -------  -------  -------   -------  -------  -------
                                       (dollars in millions)
<S>                       <C>      <C>      <C>       <C>      <C>      <C>
Net interest revenue....  $   684  $   645  $    39   $ 1,324  $ 1,252  $    72
Average loans and lease
 financing..............   42,538   44,196   (1,658)   42,537   43,952   (1,415)
Average earning assets..   68,146   61,961    6,185    66,223   61,228    4,995
Net interest margin.....     4.03%    4.17%    (.14)%    4.03%    4.12%    (.09)%
</TABLE>

  On a consolidated basis, net interest revenue increased $39 million and $72
million in the quarterly and six-month comparisons, respectively. The
comparative improvement in net interest revenue for both periods was primarily
driven by Argentina, which benefited from wider spreads and an increase in
average assets of approximately $1 billion. The improvement in Argentina's
spreads resulted from interest rate strategies that benefited from volatility
in the local markets. The growth in Argentina's average assets was primarily
driven by the Corporation's expansion activities in the country, including the
acquisition of Deutsche Bank Argentina S.A. (Deutsche Argentina) and branch
expansion. Both net interest revenue comparisons also benefited from higher
fees on loans, higher levels of dividends from the Corporation's Private
Equity business and the acquisition of the OCA Companies (OCA), a credit card
and consumer finance company in Uruguay, in the third quarter of 1998.

  Consolidated average loans and lease financing decreased $1.7 billion and
$1.4 billion in the quarterly and six-month comparisons, respectively. The
comparative declines were primarily driven by a reduction in domestic
consumer-related loans. During the second half of 1998, the Corporation
securitized approximately $.8 billion of home equity loans. In addition, the
Corporation experienced run-off in its residential mortgage and indirect auto
portfolios. An increase in commercial loans was offset by a $2.2 billion
securitization in the fourth quarter of 1998.

  Consolidated average earning assets increased $6.2 billion and $5.0 billion
in the quarterly and six-month comparisons, respectively. The increases were
primarily driven by a higher level of liquid, lower-yielding assets in the
Corporation's Section 20 subsidiary to support the investment banking
activities of Robertson Stephens. Average earning assets from the Section 20
subsidiary grew approximately $6.5 billion and $5.5 billion in the quarterly
and six-month comparisons, respectively.


                                       6
<PAGE>

  The decline in consolidated net interest margin for both comparative periods
was primarily attributable to the growth of lower-yielding earning assets
related to Robertson Stephens, a reduction in domestic consumer-related loans,
and the impact of funding costs associated with an investment in bank owned
life insurance policies, the revenues from which are recorded in noninterest
income.

                          PROVISION FOR CREDIT LOSSES

  The provision for credit losses was $95 million in the second quarter of
1999, compared with $60 million in the second quarter of 1998. In the first
six months of 1999, the provision was $165 million, compared with $200 million
in the first six months of 1998. The provision for credit losses reflects
management's assessment of the adequacy of the reserve for credit losses,
considering the current risk characteristics of the loan portfolio and
economic conditions. See the section entitled "Reserve for Credit Losses" for
a discussion of the factors which impacted the level of provision for 1999.
The amount of future provisions will continue to be a function of management's
assessment of risks based upon its quarterly review of the reserve for credit
losses. These risks include the longer-term impact of continued economic
instability in world financial markets and the status of implementing
necessary economic reforms in various countries. As such, there can be no
assurance as to the level of future provisions.

                                       7
<PAGE>

                              NONINTEREST INCOME

  The following table presents the components of noninterest income.

<TABLE>
<CAPTION>
                                         Second Quarter         Six Months
                                        ------------------ ---------------------
                                        1999  1998  Change  1999    1998  Change
                                        ----  ----  ------ ------  ------ ------
                                                    (in millions)
<S>                                     <C>   <C>   <C>    <C>     <C>    <C>
Financial service fees and commissions
  Deposit and electronic banking
   fees...............................  $ 94  $ 76   $ 18  $  174  $  146 $  28
  Investment banking fees and
   commissions........................   235    24    211     369      38   331
  Syndication and agent fees..........    26    20      6      54      35    19
  Other financial service fees........   101    75     26     192     141    51
                                        ----  ----   ----  ------  ------ -----
                                         456   195    261     789     360   429
Trust and investment management fees..    82    82            161     161
Net securities gains (losses).........    (3)   11    (14)     (5)     36   (41)
Trading profits and commissions.......    41    (4)    45      80      30    50
Net foreign exchange profits..........    37    32      5      82      61    21
Net equity and mezzanine profits......    26    84    (58)     59     136   (77)
Gain on sale of businesses............    50           50      50     165  (115)
Valuation writedowns--commercial loans
 transferred into an accelerated
 disposition portfolio................   (25)         (25)    (25)          (25)
Other income..........................    48    57     (9)    116      97    19
                                        ----  ----   ----  ------  ------ -----
                                        $712  $457   $255  $1,307  $1,046 $ 261
                                        ====  ====   ====  ======  ====== =====
</TABLE>

Financial Service Fees and Commissions

Deposit and Electronic Banking Fees

<TABLE>
<CAPTION>
                                                                         Six
                                                    Second Quarter     Months
                                                    ----------------  ---------
                                                     1999     1998    1999 1998
                                                    -------  -------  ---- ----
                                                          (in millions)
   <S>                                              <C>      <C>      <C>  <C>
   Service charges on deposits..................... $    73  $    61  $136 $118
   Electronic banking fees.........................      21       15    38   28
                                                    -------  -------  ---- ----
                                                    $    94  $    76  $174 $146
                                                    =======  =======  ==== ====
</TABLE>

  In both comparisons, the increase in service charges on deposits was due, in
part, to higher fees from Argentina and Brazil. Electronic banking fees
increased from 1998, mainly due to a higher level of domestic activity and the
re-pricing of certain domestic services.

Investment Banking Fees and Commissions

<TABLE>
<CAPTION>
                                                              Second      Six
                                                              Quarter   Months
                                                             --------- ---------
                                                             1999 1998 1999 1998
                                                             ---- ---- ---- ----
                                                                (in millions)
   <S>                                                       <C>  <C>  <C>  <C>
   Advisory fees............................................ $ 72 $11  $ 91 $16
   Brokerage fees and commissions...........................   74   3   129   6
   Underwriting fees........................................   89  10   149  16
                                                             ---- ---  ---- ---
                                                             $235 $24  $369 $38
                                                             ==== ===  ==== ===
</TABLE>

                                       8
<PAGE>

  The significant improvement in each of the above categories was primarily
attributable to the acquisition of Robertson Stephens. Business volumes were
very strong during the first half of 1999, particularly in the second quarter.

Syndication and Agent Fees

  Syndication and Agent Fees increased in the quarterly and six-month
comparisons mainly due to a higher level of sales activity.

Other Financial Service Fees

<TABLE>
<CAPTION>
                                                             Second      Six
                                                             Quarter   Months
                                                            --------- ---------
                                                            1999 1998 1999 1998
                                                            ---- ---- ---- ----
                                                               (in millions)
   <S>                                                      <C>  <C>  <C>  <C>
   Letter of credit and acceptance fees.................... $ 19 $19  $ 39 $ 38
   Credit card fees........................................   23  12    44   22
   Other loan-related fees.................................   19  17    37   31
   Other...................................................   40  27    72   50
                                                            ---- ---  ---- ----
                                                            $101 $75  $192 $141
                                                            ==== ===  ==== ====
</TABLE>

  The improvement in credit card fees was mainly due to fee growth in Brazil
and Uruguay, the latter resulting from the acquisition of OCA. The increase in
other miscellaneous financial service fees included a higher level of service
fees, primarily from Argentine and Brazilian operations.

Trust and Investment Management Fees

<TABLE>
<CAPTION>
                                                                            Six
                                                       Second Quarter     Months
                                                       ----------------  ---------
                                                        1999     1998    1999 1998
                                                       -------  -------  ---- ----
                                                             (in millions)
   <S>                                                 <C>      <C>      <C>  <C>
   Mutual fund fees................................... $    35  $    32  $ 67 $ 62
   Personal trust fees................................      41       41    81   82
   Other agency fees..................................       6        9    13   17
                                                       -------  -------  ---- ----
                                                       $    82  $    82  $161 $161
                                                       =======  =======  ==== ====
</TABLE>

  Mutual fund fees increased in both comparisons due to a higher level of fees
from Brazil and Argentina. The combined level of mutual fund assets under
management in Argentina and Brazil was $6.3 billion at June 30, 1999 compared
with $7.0 billion at June 30, 1998. The volume has grown in both countries;
however, devaluation in Brazil has reduced the U.S. dollar amount of the
assets.

Net Securities Gains (Losses)

  Net securities losses were recorded in the current year periods while net
gains, which were due to stronger domestic and international markets, were
recorded in the same periods of 1998.

Trading Profits and Commissions and Net Foreign Exchange Profits

  The improvement in trading profits and commissions for all prior periods was
mainly due to profits from Robertson Stephens. Also contributing to the
improvement were profits earned by the Boston-based emerging markets trading
unit, which had incurred losses during 1998.

                                       9
<PAGE>

  In addition, net foreign exchange profits continued to increase as the
Corporation's Boston-based business benefited from a greater volume of
customer transactions, partly due to volatile market conditions in 1999.
Higher profits from the foreign exchange businesses in Chile and Mexico also
contributed to the increase.

Net Equity and Mezzanine Profits

  Net equity and mezzanine profits mainly relate to the sale of investments
made by the Private Equity business. In both the quarterly and six-month
comparisons, income declined primarily due to a lower level of sales activity.
At June 30, 1999, this portfolio had a carrying value of $1.5 billion,
compared with $1.2 billion at June 30, 1998.

Other

  In the second quarter of 1999, gain on sale of businesses reflected a $50
million gain in connection with the sale of the Corporation's minority
interest in Partners First. In addition, the Corporation also recorded
valuation writedowns of $25 million from the transfer of commercial loans into
an accelerated disposition portfolio. In the first quarter of 1998, the
Corporation recorded a $165 million gain in connection with the sale of its 26
percent interest in HomeSide.

  Both the quarterly and six-month comparisons of other income were affected
by higher levels of equity earnings in consolidated subsidiaries; increased
revenue from bank-owned life insurance, the carrying costs of which were
recorded in net interest revenue; the recognition of translation losses in the
second quarter of 1999, which had previously been included in the translation
component of equity; and a gain in the second quarter of 1998 from the sale of
the Corporation's minority interest in a Mexican pension company. In addition,
the six-month comparison was affected by gains that arose in the first quarter
of 1999 from currency positions maintained in Brazil, as the Brazilian
government devalued its currency by allowing it to float freely against the
U.S. dollar.

                                     * * *

  The Corporation's capital markets-related businesses, including activity
from its trading, investment banking, syndications, and equity and mezzanine
businesses, are sensitive to volatile market and economic conditions. As such,
it is not possible to predict their levels of revenue in the future.

                                      10
<PAGE>

                              NONINTEREST EXPENSE

  The following table presents the components of noninterest expense.

<TABLE>
<CAPTION>
                                           Second Quarter       Six Months
                                          ---------------- --------------------
                                          1999 1998 Change  1999   1998  Change
                                          ---- ---- ------ ------ ------ ------
                                                      (in millions)
   <S>                                    <C>  <C>  <C>    <C>    <C>    <C>
   Employee costs........................ $547 $368  $179  $1,021 $  722  $299
   Occupancy and equipment...............  113   96    17     221    190    31
   Professional fees.....................   25   22     3      52     46     6
   Advertising and public relations......   32   32            56     54     2
   Communications........................   37   31     6      72     61    11
   Software costs........................   18   14     4      38     33     5
   Amortization of goodwill..............   13    8     5      25     16     9
   Other.................................  114   76    38     220    186    34
                                          ---- ----  ----  ------ ------  ----
                                          $899 $647  $252  $1,705 $1,308  $397
                                          ==== ====  ====  ====== ======  ====
</TABLE>

  In the quarterly and six-month comparisons, the growth in noninterest
expense was primarily attributable to the Corporation's 1998 expansion
activities, including the acquisition of Robertson Stephens, acquisitions and
branch expansion in Argentina and Brazil, and the acquisition of OCA in
Uruguay. In addition, higher levels of incentive compensation associated with
the growth in revenue also contributed to the increase. Noninterest expense
from wholesale banking increased $196 million for the quarter and $316 million
for the first six months, reflecting the acquisition of Robertson Stephens in
the third quarter of 1998. Brazil and Argentina noninterest expense increased
approximately $24 million for the quarter and $63 million for the first six
months. The six month increase was partially offset by the absence of
approximately $48 million of charges recorded in the first quarter of 1998 in
connection with the realignments of the Corporation's European operations, its
private banking business and the Regional Bank, including costs related to the
merger of Rhode Island Hospital Trust National Bank into BankBoston, N.A. and
the Corporation's redesign project.

  At June 30, 1999, the Corporation had approximately 24,800 equivalent full-
time employees, reflecting growth of 1,900 from June 30, 1998. This growth was
primarily driven by the abovementioned 1998 expansion activities, partially
offset by decreases due to initiatives in the Regional Bank, including the
sale of the domestic institutional custody business, as well as various branch
closings during 1998.

                          PROVISION FOR INCOME TAXES

  The provision for income taxes was $146 million in the second quarter of
1999, compared with $148 million in the second quarter of 1998. For the first
six months of 1999, the provision for income taxes was $277 million, compared
to $301 million for the first half of 1998. In both the second quarter and
first six months of 1999, the Corporation's effective tax rate was 37 percent.
The effective tax rates were 38 percent and 39 percent in the second quarter
and the first six months of 1998, respectively.

                                      11
<PAGE>

                         LINE OF BUSINESS INFORMATION

  The Corporation is managed through the Office of the Chief Executive Officer
(the OCEO), which is the senior decision making group in the company. The OCEO
consists of five members, including the Chairman and Chief Executive Officer
(CEO), the President and Chief Operating Officer (COO), the Chief Financial
Officer, the head of the Regional Bank and the head of the Wholesale Bank. The
latter three individuals are also Vice Chairs of the Corporation. The OCEO
meets periodically to discuss important matters of strategy and review the
operating performance of the Corporation's businesses. The group maintains
close contact with key administrative heads and business managers throughout
the Corporation, including the management teams in Argentina and Brazil.

  The COO has primary responsibility for the Corporation's revenue producing
businesses. In assessing the performance of the Corporation, the COO divides
the company into four major business lines: the Wholesale Bank, the Regional
Bank, Argentina and Brazil. The Wholesale and Regional Bank lines cover the
vast majority of the Corporation's domestic operations, while the Argentina
and Brazil lines cover the vast majority of the Corporation's international
operations. Operating results and other key financial measures of these four
major business lines for the second quarters and first six months of 1999 and
1998 are presented below. All other businesses not encompassed in the four
major lines have been combined and are presented below in "Other Businesses."
Information related to major business lines shown for the 1998 periods is
presented on a basis consistent with 1999 and, as such, has been restated for
changes in the Corporation's organizational structure and internal management
reporting methodologies implemented during 1999.

  The line of business information shown below reflects assignments and
allocations of items made within the Corporation's internal management
reporting process. A discussion of these individual items is included on page
28 of the Corporation's 1998 Annual Report to Stockholders, which is
incorporated by reference into its 1998 Annual Report on Form 10-K.

  Certain revenue and expense items, which are not included in the business
line results evaluated by management, are included in Corporate Adjustments. A
summary of the significant items included in Corporate Adjustments follows:

  .  Included in net interest revenue for all periods are net funding costs
     for certain noninterest bearing assets and liabilities.

  .  Noninterest income for the second quarter and first six months of 1999
     includes a gain of $50 million related to the sale of the Corporation's
     minority interest in Partners First and losses related to the writedown
     of certain assets, including loans that were transferred into an
     accelerated disposition portfolio during the second quarter. The first
     quarter of 1998 includes a gain of $165 million related to the sale of
     the Corporation's minority interest in HomeSide.

  .  Net interest revenue has been increased, and noninterest income has been
     decreased, to eliminate transfers between these components related to
     compensating balance arrangements with certain customers.

  .  Reductions to consolidated balance sheet and income statement totals
     stemming from the fourth quarter 1998 securitization of $2.2 billion of
     commercial loans are included in Corporate Adjustments.

  .  The expenses shown in Corporate Adjustments for the current year periods
     include charges for bonus payments due to employees in connection with
     the Robertson Stephens acquisition, while the first six months of 1998
     includes costs related to the realignment and downsizing of certain
     businesses. Also included in expenses for all periods presented is the
     amortization of goodwill.

  Selected financial information for the Corporation's lines of business for
the second quarters and first six months of 1999 and 1998 is presented in the
tables shown below. This information is presented on a fully taxable
equivalent basis. Consolidated net interest revenue and income tax provision
include tax-equivalent adjustments of $6 million in the second quarter of
1999, $5 million in the second quarter of 1998, $11 million in the first six

                                      12
<PAGE>

months of 1999 and $9 million in the first six months of 1998. Intersegment
revenue and expense for the second quarters and first six months of both 1999
and 1998 were not significant.

<TABLE>
<CAPTION>
                         Wholesale Regional                      Other     Corporate  Consolidated
Quarter Ended              Bank      Bank    Argentina Brazil  Businesses Adjustments    Totals
 June 30, 1999           --------- --------  --------- ------  ---------- ----------- ------------
                                                  (dollars in millions)
<S>                      <C>       <C>       <C>       <C>     <C>        <C>         <C>
Net interest revenue....  $   191  $   238    $  103   $   95   $    53     $     4     $   684
Noninterest income......      422      117        70       65        74         (36)        712
                          -------  -------    ------   ------   -------     -------     -------
Total revenue...........      613      355       173      160       127         (32)      1,396
Noninterest expense.....      348      250       104       94        75          28         899
                          -------  -------    ------   ------   -------     -------     -------
Operating income........      265      105        69       66        52         (60)        497
Provision for credit
 losses.................       32       15        20        6         9          13          95
                          -------  -------    ------   ------   -------     -------     -------
Pre-tax income (loss)...      233       90        49       60        43         (73)        402
Income tax provision
 (benefit)..............       95       33        17       23         7         (23)        152
                          -------  -------    ------   ------   -------     -------     -------
Net income (loss).......  $   138  $    57    $   32   $   37   $    36     $   (50)    $   250
                          =======  =======    ======   ======   =======     =======     =======
Average loans and lease
 financing..............  $25,467  $ 5,994    $6,129   $2,665   $ 4,492     $(2,209)    $42,538
Average assets..........  $40,362  $ 7,439    $9,049   $6,287   $18,280     $  (873)    $80,544
Average deposits........  $ 5,899  $26,449    $4,790   $2,361   $ 8,357     $   244     $48,100
RAROE...................       23%      28%       22%      42%       28%                     20%

Quarter Ended
 June 30, 1998

Net interest revenue....  $   159  $   238    $   78   $   89   $    52     $    29     $   645
Noninterest income......      231      120        63       38        40         (35)        457
                          -------  -------    ------   ------   -------     -------     -------
Total revenue...........      390      358       141      127        92          (6)      1,102
Noninterest expense.....      152      256        96       78        58           7         647
                          -------  -------    ------   ------   -------     -------     -------
Operating income........      238      102        45       49        34         (13)        455
Provision for credit
 losses.................       28       19        15        6         6         (14)         60
                          -------  -------    ------   ------   -------     -------     -------
Pre-tax income..........      210       83        30       43        28           1         395
Income tax provision
 (benefit)..............       85       33        13       18        (1)          5         153
                          -------  -------    ------   ------   -------     -------     -------
Net income (loss).......  $   125  $    50    $   17   $   25   $    29     $    (4)    $   242
                          =======  =======    ======   ======   =======     =======     =======
Average loans and lease
 financing..............  $23,010  $ 6,573    $5,470   $3,571   $ 5,580     $    (8)    $44,196
Average assets..........  $27,940  $ 8,295    $8,075   $6,814   $18,372     $ 1,740     $71,236
Average deposits........  $ 5,762  $25,569    $4,503   $2,346   $ 7,104     $   120     $45,404
RAROE...................       26%      24%       13%      29%       20%                     21%

</TABLE>


                                       13
<PAGE>

<TABLE>
<CAPTION>
                         Wholesale Regional                      Other     Corporate  Consolidated
Six Months Ended           Bank      Bank    Argentina Brazil  Businesses Adjustments    Totals
 June 30, 1999           --------- --------  --------- ------  ---------- ----------- ------------
                                                  (dollars in millions)
<S>                      <C>       <C>       <C>       <C>     <C>        <C>         <C>
Net interest revenue....  $   363  $   473    $  201   $  170   $   107     $    10     $ 1,324
Noninterest income......      745      222       129      139       144         (72)      1,307
                          -------  -------    ------   ------   -------     -------     -------
Total revenue...........    1,108      695       330      309       251         (62)      2,631
Noninterest expense.....      605      500       206      190       146          58       1,705
                          -------  -------    ------   ------   -------     -------     -------
Operating income........      503      195       124      119       105        (120)        926
Provision for credit
 losses.................       61       32        41       11        18           2         165
                          -------  -------    ------   ------   -------     -------     -------
Pre-tax income (loss)...      442      163        83      108        87        (122)        761
Income tax provision
 (benefit)..............      181       57        31       42        15         (38)        288
                          -------  -------    ------   ------   -------     -------     -------
Net income (loss).......  $   261  $   106    $   52   $   66   $    72     $   (84)    $   473
                          =======  =======    ======   ======   =======     =======     =======
Average loans and lease
 financing..............  $25,305  $ 6,071    $6,087   $2,676   $ 4,591     $(2,193)    $42,537
Average assets..........  $38,653  $ 7,501    $9,063   $5,815   $18,266     $  (960)    $78,338
Average deposits........  $ 6,007  $26,278    $4,832   $2,054   $ 8,426     $   163     $47,760
RAROE...................       23%      26%       18%      37%       27%                     19%

Six Months Ended
 June 30, 1998

Net interest revenue....  $   303  $   476    $  147   $  172   $   104     $    50     $ 1,252
Noninterest income......      416      229       116       73       111         101       1,046
                          -------  -------    ------   ------   -------     -------     -------
Total revenue...........      719      705       263      245       215         151       2,298
Noninterest expense.....      289      505       180      153       125          56       1,308
                          -------  -------    ------   ------   -------     -------     -------
Operating income........      430      200        83       92        90          95         990
Provision for credit
 losses.................       59       40        26       12        30          33         200
                          -------  -------    ------   ------   -------     -------     -------
Pre-tax income..........      371      160        57       80        60          62         790
Income tax provision....      149       64        25       34         4          34         310
                          -------  -------    ------   ------   -------     -------     -------
Net income..............  $   222  $    96    $   32   $   46   $    56     $    28     $   480
                          =======  =======    ======   ======   =======     =======     =======
Average loans and lease
 financing..............  $22,723  $ 6,695    $5,325   $3,450   $ 5,786     $   (27)    $43,952
Average assets..........  $27,452  $ 8,441    $7,782   $6,659   $18,493     $ 1,649     $70,476
Average deposits........  $ 5,938  $25,548    $4,267   $2,239   $ 7,479     $   116     $45,587
RAROE...................       24%      23%       13%      27%       17%                     21%
</TABLE>

Wholesale Bank

  The Wholesale Bank provides a full range of commercial and investment
banking products to its predominately middle market, non-investment grade
corporate customer base. The geographic reach of this business is national in
scope, with approximately three quarters of the profits from this business not
dependent on the New England economy. The Wholesale Bank seeks to establish
and maintain lead bank status with its clients by offering a variety of
products and services which cover the full spectrum of a company's needs.

  Within the Wholesale Bank there are three major sub-businesses: the
Commercial Bank, the Investment Bank and Private Equity. Each of these sub-
businesses seeks to leverage the strengths of the other two in creating
business opportunities. They also look to leverage the Corporation's
international franchise, particularly in Latin America, to attract customers
doing business abroad. A detailed discussion of the products and services
offered by these sub-businesses is included on pages 30 and 31 of the
Corporation's 1998 Annual Report to Stockholders, which is incorporated by
reference into its 1998 Annual Report on Form 10-K. The approximate

                                      14
<PAGE>

contribution from each sub-business to the Wholesale Bank's operating income
(pre-tax income before provision for credit losses) for the first six months
of 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                                                      1999  1998
Six Months Ended June 30                                              ----  ----
<S>                                                                   <C>   <C>
Commercial Bank......................................................  79%   78%
Investment Bank......................................................  15
Private Equity.......................................................   6    22
                                                                      ---   ---
  Total Wholesale Bank............................................... 100%  100%
                                                                      ===   ===
</TABLE>

  The growth in the contribution to operating income from the Investment Bank
reflects the acquisition of Robertson Stephens, an investment bank that was
purchased by the Corporation during the third quarter of 1998. The
contribution to operating income from Private Equity declined due to a lower
level of gains from sales of investments.

  Net income from the Wholesale Bank for the first six months of 1999 was $261
million, which represented an improvement of $39 million, or 18 percent, from
the first six months of 1998. Net income in the second quarter of 1999 was
$138 million, which represented an improvement of $13 million, or 10 percent,
from the second quarter of 1998. Net interest revenue improved $60 million in
the six month comparison and $32 million in the quarterly comparison
reflecting an increase in average loans and leases of approximately $2.5
billion. In addition, the acquisition of Robertson Stephens contributed to the
improvement in both comparisons. The loan growth came from a variety of the
Commercial Bank's lending divisions, including Energy and Utilities, Media and
Communications, Multinational, Transportation, and Business Credit.
Noninterest income increased $329 million in the six month comparison and $191
million in the quarterly comparison as revenue recorded by Robertson Stephens
in 1999, mainly underwriting, brokerage and advisory fees, was partially
offset by lower gains from sales of Private Equity investments. Also
contributing to the improvement in noninterest income were higher syndication
fees and net foreign exchange profits. Noninterest expense grew $316 million
in the six month comparison and $196 million in the quarterly comparison, with
a substantial portion of these increases due to the acquisition of Robertson
Stephens. Quarterly charges related to goodwill amortization and bonus
payments paid annually to employees in connection with the Robertson Stephens
acquisition are, as mentioned previously, included within Corporate
Adjustments. Average assets in the Wholesale Bank grew over $10 billion in
both comparisons due to a higher level of liquid, lower-yielding assets in the
Corporation's Section 20 subsidiary, which was needed to support the high
level of revenue being earned by Robertson Stephens, as well as the increase
in loans noted above.

Regional Bank

  The Regional Bank is a New England-based business that provides for the
financial services needs of its three major customer groups: consumers, high
net worth individuals and small businesses. The Regional Bank operates through
franchises in Massachusetts, Rhode Island, Connecticut and New Hampshire. The
Massachusetts banking franchise is the largest in that state.

  The major sub-businesses of the Regional Bank are Consumer and Community
Banking, Business Banking, and Private Banking. A detailed discussion of the
Regional Bank's sub-businesses, distribution system and product groups is
included on pages 31 and 32 of the Corporation's 1998 Annual Report to
Stockholders, which is incorporated by reference into its 1998 Annual Report
on Form 10-K. The approximate contribution from each sub-business to the
Regional Bank's operating income for the first six months of 1999 and 1998 is
as follows:

<TABLE>
<CAPTION>
                                                                     1999  1998
Six Months Ended June 30                                             ----  ----
<S>                                                                  <C>   <C>
Consumer and Community Banking......................................  64%   61%
Business Banking....................................................  16    16
Private Banking.....................................................  20    23
                                                                     ---   ---
  Total Regional Bank............................................... 100%  100%
                                                                     ===   ===
</TABLE>

                                      15
<PAGE>

  Net income from the Regional Bank for the first six months of 1999 was $106
million, which represented an improvement of $10 million, or 10 percent, from
the first six months of 1998. Net income in the second quarter of 1999 was $57
million, which represented an improvement of $7 million, or 14 percent, from
the second quarter of 1998. The improvements in net income were primarily due
to an increase in deposit and electronic banking fees, a higher volume of
deposits, a lower provision for credit losses, and a lower effective income
tax rate. The decline in the provision for credit losses was due, in part, to
the continued runoff of the indirect auto portfolio. These improvements were
partially offset by the absence of operating income in the 1999 periods from
the Berkshire branch network and institutional custody business, both of which
were sold in the fourth quarter of 1998.

Argentina

  The Corporation has maintained a presence in Argentina since 1917. As a
result of an expansion program undertaken in 1998, which included the
acquisition of Deutsche Argentina and the opening of 64 new branches in
various parts of the country, the Corporation now operates one of the largest
banks in the country. The expansion effort is the main reason why the
Corporation's total average assets in Argentina grew to approximately $9
billion in 1999, from approximately $8 billion in 1998.

  The Corporation's Argentine operations consist of three main sub-businesses:
Corporate Banking, Retail Banking and Treasury/Other. A detailed discussion of
these sub-businesses, as well as the products and services offered by the
Corporation in Argentina, is included on page 32 of the Corporation's 1998
Annual Report to Stockholders, which is incorporated by reference into its
1998 Annual Report on Form 10-K. The approximate contribution from each sub-
business to operating income from Argentine operations in the first six months
of 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                                                      1999  1998
Six Months Ended June 30                                              ----  ----
<S>                                                                   <C>   <C>
Corporate Banking....................................................  34%   37%
Retail Banking.......................................................  34    35
Treasury/Other.......................................................  32    28
                                                                      ---   ---
  Total Argentina.................................................... 100%  100%
                                                                      ===   ===
</TABLE>

  Net income from Argentine operations for the first six months of 1999 was
$52 million, which represented an improvement of $20 million, or 63 percent,
from the first six months of 1998. Net income in the second quarter of 1999
was $32 million, which represented an improvement of $15 million, or 88
percent, from the second quarter of 1998. This improvement was mainly due to
revenue growth as net interest revenue increased $54 million in the six month
comparison and $25 million in the quarterly comparison, reflecting wider
spreads from market volatility and a higher level of average earning assets,
mainly loans. In addition, noninterest income increased in the six month and
quarterly comparisons by $13 million and $7 million, respectively, mainly due
to a higher level of financial service fees. Partially offsetting the revenue
growth was an increase in the provision for credit losses, which grew $15
million in the six month comparison and $5 million in the quarterly
comparison. The higher provision for credit losses was mainly related to an
increase in credit losses on consumer loans due to recessionary conditions in
the country and growth in that loan portfolio. Total net credit losses from
Argentine operations were $39 million in the first half of 1999, compared with
$18 million in the first half of last year, with most of the increase related
to the consumer portfolio. Noninterest expense increased $26 million compared
with the first half of last year and $8 million compared to the second quarter
of last year primarily due to the aforementioned expansion program.

Brazil

  The Corporation has maintained a presence in Brazil since 1947. While
Brazil's population is much larger than Argentina's, the Corporation's balance
sheet in Brazil is smaller than the size of its balance sheet in Argentina and
the branch network is about half as large. This reflects the Corporation's
Brazilian strategy of

                                      16
<PAGE>

operating in focused and targeted up-tier markets, a strategy that is not
conducive to maintaining a large balance sheet. To further penetrate this
targeted customer base, the Corporation embarked on a branch expansion program
during 1998, which has nearly doubled the size of the branch network.

  The Corporation's Brazilian operations consist of three main sub-businesses:
Corporate Banking, Retail Banking and Treasury. A detailed discussion of these
sub-businesses, as well as the products and services offered by the
Corporation in Brazil, is included on page 33 of the Corporation's 1998 Annual
Report to Stockholders, which is incorporated by reference into its 1998
Annual Report on Form 10-K. The approximate contribution from each sub-
business to operating income from Brazilian operations in the six months of
1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                                                      1999  1998
Six Months Ended June 30                                              ----  ----
<S>                                                                   <C>   <C>
Corporate Banking....................................................  46%   55%
Retail Banking.......................................................  11    20
Treasury.............................................................  43    25
                                                                      ---   ---
  Total Brazil....................................................... 100%  100%
                                                                      ===   ===
</TABLE>

  The relative contribution to operating income from Treasury increased from
1998 due to higher revenue in 1999 stemming from volatile market conditions.
This, in turn, resulted in a decline in the relative contributions to
operating income from Corporate Banking and Retail Banking.

  Net income from Brazilian operations for the first six months of 1999 was
$66 million, which represented an improvement of $20 million, or 43 percent,
from the first six months of 1998. Net income in the second quarter of 1999
was $37 million, which represented an improvement of $12 million, or 48
percent, from the second quarter of 1998. Revenue increased $64 million in the
six month comparison and $33 million in the quarterly comparison due, in part,
to higher levels of fee income, including higher fees from credit card,
deposit, mutual fund and trade finance transactions. Wider spreads also
contributed to the overall growth in revenue, partially offset by a decline in
average loans and leases, reflecting the current recessionary environment. In
addition, the revenue growth from the first half of 1998 was helped by gains
that arose in Brazil from currency positions maintained during the first
quarter of 1999, as the Brazilian government devalued its currency by allowing
it to float freely against the U.S. dollar. These gains, however, were
partially offset by other factors, mainly related to various aspects of fiscal
reforms recently passed by the Brazilian government, including certain tax
measures. Noninterest expense increased $37 million in the six month
comparison and $16 million in the quarterly comparison, primarily due to costs
related to the 1998 expansion program.

Other Businesses

  Individual businesses that have been combined in Other Businesses include
Global Treasury, Other Latin America, Asia, the International Private Bank,
Emerging Markets Sales, Trading and Research (EMSTR), and various joint
ventures. In addition, the first quarter of 1998 includes the national credit
card business, which was contributed to a joint venture in January 1998. The
Corporation sold its interest in this joint venture, known as Partners First,
during the second quarter of 1999. Further information on these businesses is
included on page 34 of the Corporation's 1998 Annual Report to Stockholders,
which is incorporated by reference into its 1998 Annual Report on Form 10-K.

  Net income from Other Businesses for the first six months of 1999 was $72
million, compared with $56 million for the first six months of 1998. Net
income from Other Businesses was $36 million in the second quarter of 1999,
compared with $29 million for the second quarter of last year. Operating
income increased $15 million in the six month comparison and $18 million in
the quarterly comparison as an increase from Other Latin America, which
includes the acquisition of OCA and improvements from EMSTR and Asia, was
partially offset by the absence of a second quarter 1998 gain from the sale of
the Corporation's minority interest in a Mexican pension company and lower
securities gains in Global Treasury. The six month comparison was also
affected by

                                      17
<PAGE>

the absence of a net operating loss in the first quarter of 1998 from the
national credit card business. This had a negative impact on the operating
income comparison but a favorable impact on the provision for credit loss
comparison. The low effective tax rates for both periods in 1998 and 1999
resulted from the tax treatment of various Global Treasury investments. Total
revenue from international operations included in Other Businesses was $93
million and $189 million in the second quarter and first six months of 1999,
respectively, and $52 million and $132 million, respectively, in the 1998
periods.

                              FINANCIAL CONDITION
                          CONSOLIDATED BALANCE SHEET

  At June 30, 1999, the Corporation's total assets were $77.6 billion,
reflecting a $4.1 billion increase from total assets of $73.5 billion at
December 31, 1998. This increase was mainly attributable to a $3.8 billion
increase in federal funds sold and securities purchased under agreements to
resell and a $1.3 billion increase in available for sale securities,
particularly U.S. government agency mortgage-backed securities, used to manage
portfolio risk. Total loans and lease financing at June 30, 1999 decreased by
approximately $1.0 billion, principally due to a decline in the domestic
portfolio, which resulted from lower levels of commercial and home equity
loans due, in part, to syndication and securitization activity, respectively,
as well as continued runoff of the indirect auto portfolio.

  The increase in assets was primarily funded by interest bearing deposits,
federal funds purchased and securities sold under agreements to repurchase and
other funds borrowed, mainly demand notes. Notes payable increased $6 million
from December 31, 1998, reflecting the issuance of $300 million of senior
medium-term notes by the Corporation and $90 million of notes by the
Corporation's overseas offices under various note programs, offset by the
maturity of $165 million of senior medium-term notes previously issued by the
Corporation and the maturity or repayment of $219 million of notes previously
issued by the Corporation's overseas offices under various note programs.

  The Corporation's tangible common equity and common equity to total assets
ratios were 5.6 percent and 6.5 percent, respectively, at June 30, 1999,
compared with 5.5 percent and 6.6 percent, respectively, at December 31, 1998.
The Corporation's Tier 1 and total capital ratios were 7.4 percent and 11.7
percent, respectively, at June 30, 1999, compared with 7.1 percent and 11.7
percent, respectively, at December 31, 1998. The Corporation's leverage ratio
at June 30, 1999 was 6.8 percent, compared with 6.7 percent at December 31,
1998.

  The Corporation has a capital planning process that is designed to maintain
appropriate regulatory capital levels and ratios. As of June 30, 1999, the
Corporation and its bank subsidiaries met all capital adequacy requirements to
which they are subject.

                                RISK MANAGEMENT

  The Corporation has a risk management process in place for the
identification, measurement, monitoring and control of the risks inherent in
its business, including credit, liquidity, market, transaction, strategic,
compliance, reputation and transfer risks. One transitory event that continues
to impact these primary risk factors is the Year 2000.

                                   Year 2000

  The following Year 2000 statements constitute a Year 2000 Readiness
Disclosure within the meaning of the Year 2000 Readiness and Disclosure Act of
1998. This disclosure should be read in conjunction with the Year 2000
disclosure in the Corporation's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 and in the Corporation's 1998 Annual Report to
Stockholders on pages 35 through 37, which is incorporated by reference into
its 1998 Annual Report on Form 10-K.

                                      18
<PAGE>

  The Corporation has implemented a comprehensive and integrated plan designed
to achieve Year 2000 readiness across its critical systems (whether owned or
licensed by the Corporation), and believes it is well positioned to address
the issues associated with the event and to have its systems and operations in
compliance.

Information Technology

  The information technology elements of the Corporation's Year 2000 program
have proceeded through the following phases: Awareness, Inventory, Assessment,
Remediation, Certification (including unit, system and interface testing) and
Readiness Testing. As of June 30, 1999, the Corporation has completed
certification and the testing required by banking regulators for all critical
application systems, technology infrastructure and desktop application
systems.

Readiness Testing

  Readiness testing, including application integration testing and external
testing, validates that a business's critical core process, and the
application systems, infrastructure and service providers on which it depends,
will continue to operate beyond 1999. Application systems included in
readiness testing are those which the Corporation has deemed critical, and
which have a significant degree of integrated processing with other
application systems. Mission critical application systems have been
categorized into five integrated testing segments, of which four had been
completed successfully and the fifth is expected to be completed in the third
quarter of 1999. At June 30, 1999, mission critical service provider testing
and external testing with the Corporation's material third parties was
approximately 97 percent complete domestically. Brazil and Southern Cone
service provider testing was well underway. While the Corporation expects to
substantially complete its readiness testing by September 1999, it also
anticipates some continuation of this testing through the end of 1999 since it
is deemed a valuable tool for detection of currently unknown potential Year
2000 issues.

Customers, Counterparties and Wholesale Funds Providers

  The Corporation is working to identify and limit potential credit, liquidity
and operational risks posed by the Corporation's significant customers and
counterparties. In 1998, the Corporation evaluated over 90 percent of its
significant non-consumer credit risk, over 90 percent of its significant
wholesale funds provider risk and over 80 percent of its significant treasury
and capital markets counterparty risk. Results showed that a significant
majority of entities surveyed did not expect a material adverse impact to
their businesses. The Corporation is in the process of updating this 1998
information through additional surveys of selected customers, counterparties
and wholesale funds providers. The results of the Corporation's surveys have
been and are continuing to be incorporated into the Corporation's credit risk
management processes, including customer risk ratings, as well as into
liquidity and cash settlement planning strategies to limit exposure around
critical dates. Throughout the remainder of 1999, the Corporation will
continue to monitor and assess, through refined surveys, the potential impact
of its customers and counterparties on the Corporation's Year 2000 readiness.

Non-Technology Vendors and Service Providers

  The success of the Corporation's Year 2000 efforts depends not only upon the
Year 2000 readiness of its systems but also those of its critical vendors and
service providers. The Corporation's Year 2000 plan includes analyzing the
risk presented by its dependency upon critical vendors and other third parties
and developing contingency plans based upon these assessments. The level of
assessment is dictated by the relative importance of vendors and products to
core business processes, as defined through Year 2000 contingency planning
efforts. At June 30, 1999, substantially all vendors deemed "core process
critical" have been certified. A remaining small number of core process
critical service providers will be monitored throughout 1999. Vendor
assessments may include reviews of published materials and websites,
discussions about Year 2000 readiness plans and requests for Year 2000
warranties to the Corporation. Additionally, the Corporation is continuing a
process to identify and certify non-core process critical vendor supplied
products. The Corporation expects this element of the program to remain
challenging due to the complexities of vendor management. Consequently, the
Corporation will continue to monitor and assess, throughout 1999, the
potential impact of the Year 2000 issue on its vendor supplied products and
services.

                                      19
<PAGE>

Facilities

  In domestic operations, all site and facility vendors have been inventoried
and assessed for criticality. Substantially all critical sites have completed
certification at June 30, 1999. The remaining critical sites are expected to
be certified by September 1999. The Corporation currently has business
resumption contingency plans in place that have been updated and tested
annually, and have been revised to reflect considerations specific to the Year
2000 issue.

Final Readiness Efforts and Contingency Planning

  The Corporation has developed a strategy to combine the various efforts
within the Year 2000 program and assess and report upon the readiness of
mission critical elements by the core processes of business units. This
strategy includes validating core processes, linking the interdependencies
between critical application systems, technical infrastructure and non-
technology elements, including vendors and service providers, identifying weak
links and planning around known and unknown risks. In this regard, the
Corporation has developed business resumption contingency plans as well as
event plans to prepare for potential systems failures at critical dates,
failures of critical third parties to effectively remediate and certify their
technologies, as well as any other anticipated events that could arise with
the date change. The development of these plans includes the assessment of
failure scenarios on the core business processes critical to the Corporation's
business and operations. These plans have been subject to independent internal
reviews. The Corporation's contingency planning for the Year 2000 issue was
substantially completed by the end of June 1999. Additionally, as previously
discussed, the Corporation will continue readiness testing through 1999 to
detect currently unknown risks.

Risks and Uncertainties

  The Corporation expects to successfully complete its Year 2000 program in a
timely and effective manner that mitigates risk. However, the Corporation is
subject to risks and uncertainties due to the uniqueness of the Year 2000
issue, the significant interdependencies in business and financial markets and
the range of activities and events outside of the Corporation's control.
Furthermore, the progress of mission critical elements has been impacted by
resource prioritization within its Year 2000 program and across other business
initiatives, including mergers and acquisitions, as well as by the level of
Year 2000 awareness in various countries. As a result of the risks and
uncertainties associated with the Year 2000 issue, particularly with respect
to vendors, service providers and other third parties, the Corporation is
unable to predict with any certainty the extent of potential Year 2000
failures that could result, nor quantify the potential effect that such
failures could have on the Corporation's operations and financial condition.
Those risks and uncertainties could result in service delays, inaccurate and
untimely information processing, funding delays, contract settlement and
counterparty failures, and increased credit losses.

Costs

  As of June 30, 1999, the Corporation continues to expect that its total
incremental costs for its Year 2000 program, including costs already incurred,
will be approximately $75 million. It is estimated that these incremental
costs represent over half of the Corporation's total program costs, which
include the redeployment of internal resources from all areas of the
Corporation. The Corporation continues to expect capital expenditures of
approximately $20 million, including costs incurred for accelerated and out of
cycle replacements of technology. As of June 30, 1999, the Corporation had
incurred approximately 70 percent of its Year 2000 costs. The Corporation has
not incurred, and is not likely to incur, project costs that are material to
any reporting period. The majority of remaining costs are expected to be
directed to the testing phase as well as final readiness efforts to mitigate
both currently known and subsequently discovered risks. Throughout the
remainder of the project, the Corporation will also continue to allocate
internal resources to address the Year 2000 issue.

                                      20
<PAGE>

  The Corporation's estimated costs and expected timetables with respect to
its Year 2000 initiative represent forward-looking statements that could
differ materially from actual results due to changes in assumptions as the
program evolves and new information becomes available; the Corporation's
ability and resources to effectively execute its Year 2000 program; the impact
of external market pressures on technology resources; the ability of critical
third parties to mitigate their Year 2000 risks; and the extent to which
unanticipated issues arise late in the program.

                                      21
<PAGE>

                            CREDIT RISK MANAGEMENT

  Credit risk is defined as the risk of loss from a counterparty's failure or
inability to meet the payment or performance terms of a contract with the
Corporation. The Corporation's risk management process includes the management
of all forms of credit risk, including balance sheet and off-balance sheet
exposures. A discussion of the Corporation's credit risk management policies
is included on page 37 of the Corporation's 1998 Annual Report to
Stockholders, which is incorporated by reference into its 1998 Annual Report
on Form 10-K.

                                CREDIT PROFILE

  The components of the lending portfolio are as follows:

<TABLE>
<CAPTION>
                                 June 30,  March 31, Dec. 31,  Sept. 30, June 30,
                                   1999      1999      1998      1998      1998
                                 --------  --------- --------  --------- --------
                                                 (in millions)
<S>                              <C>       <C>       <C>       <C>       <C>
United States operations
  Commercial, industrial and
   financial.................... $16,603    $17,028  $16,294    $18,218  $16,275
  Commercial real estate
    Construction................     353        228      215        209      219
    Other.......................   3,323      3,531    3,871      4,089    3,876
  Consumer-related loans
    Residential mortgages.......   1,729      1,840    2,035      2,111    2,229
    Home equity loans...........   2,051      2,325    2,294      2,672    2,871
    Credit card.................     375        379      404        393      412
    Other.......................   2,357      2,433    2,532      2,693    2,753
  Lease financing...............   1,810      1,768    1,801      1,607    1,609
  Unearned income...............    (282)      (291)    (275)      (231)    (232)
                                 -------    -------  -------    -------  -------
                                  28,319     29,241   29,171     31,761   30,012
                                 -------    -------  -------    -------  -------
International operations
  Commercial and industrial.....   9,158      9,288    9,295      9,320    9,065
  Banks and other financial
   institutions.................     472        523      597        835      696
  Governments and official
   institutions.................     144        138       95         73       82
  Consumer related
    Residential mortgages.......   1,281      1,249    1,251      1,383    1,318
    Credit card.................     351        327      362        339      248
    Other.......................   1,166      1,162    1,192      1,164    1,087
  Lease financing...............     677        705      725        652      519
  All other.....................     396        359      369        408      375
  Unearned income...............    (175)      (217)    (251)      (188)    (148)
                                 -------    -------  -------    -------  -------
                                  13,470     13,534   13,635     13,986   13,242
                                 -------    -------  -------    -------  -------
      Total loans and lease
       financing................ $41,789    $42,775  $42,806    $45,747  $43,254
                                 =======    =======  =======    =======  =======
</TABLE>

  Total loans and lease financing decreased approximately $1.0 billion from
December 31, 1998, reflecting a $.9 billion decrease in the domestic loan and
lease financing portfolio. The international credit portfolio remained
relatively unchanged from December 31, 1998. The decrease in the domestic
portfolio included a $.8 billion decrease in consumer-related loans, including
a $.4 billion home equity loan securitization, and a $.4 billion decrease in
commercial real estate loans. The decreases in the domestic portfolio were
partially offset by a $.3 billion increase in commercial, industrial and
financial loans.

  The Corporation's total loan portfolio at June 30, 1999 and December 31,
1998 included $1.4 billion and $1.3 billion of highly leveraged transaction
(HLT) loans to 115 and 108 customers, respectively. The average HLT loan size
at both June 30, 1999 and December 31, 1998 was approximately $12 million. The
amount of

                                      22
<PAGE>

unused commitments for HLT's at June 30, 1999 was $703 million, compared with
$765 million at December 31, 1998. The amount of unused commitments does not
necessarily represent the actual future funding requirements of the
Corporation, since a portion can be syndicated or assigned to others or may
expire without being drawn upon. At June 30, 1999, the Corporation had one
nonaccrual HLT loan of approximately $3 million compared with one nonaccrual
HLT loan of approximately $4 million at December 31, 1998. There was one
credit loss of approximately $3 million from HLT loans in the second quarter
of 1999 and one credit loss of approximately $2 million from HLT loans in the
second quarter of 1998. A discussion of the Corporation's HLT lending
activities and policies, and the effect of these activities on results of
operations, is included on page 39 of the Corporation's 1998 Annual Report to
Stockholders, which is incorporated by reference into its 1998 Annual Report
on Form 10-K.

                     NONACCRUAL LOANS AND LEASES AND OREO

  The details of consolidated nonaccrual loans and leases and OREO are as
follows:

<TABLE>
<CAPTION>
                                 June 30, March 31, Dec. 31, Sept. 30, June 30,
                                   1999     1999      1998     1998      1998
                                 -------- --------- -------- --------- --------
                                             (dollars in millions)
<S>                              <C>      <C>       <C>      <C>       <C>
United States
  Commercial, industrial and
   financial....................   $ 54     $ 81      $ 86     $ 71      $ 63
  Commercial real estate
    Construction................               2         2        2         2
    Other.......................      9       17        19       30        33
  Consumer-related
    Residential mortgages.......     29       30        36       36        42
    Home equity.................     15       16        17       18        15
    Credit card.................      5        6         6        6         6
    Other.......................     14       16        20       21        18
                                   ----     ----      ----     ----      ----
                                    126      168       186      184       179
                                   ----     ----      ----     ----      ----
International
  Commercial and industrial.....    121       77        86      103       107
  Consumer-related
    Residential mortgages.......     58       56        50       39        36
    Credit card.................      6        8         6        7         6
    Other.......................     53       49        47       33        26
                                   ----     ----      ----     ----      ----
                                    238      190       189      182       175
                                   ----     ----      ----     ----      ----
    Total nonaccrual loans and
     leases.....................    364      358       375      366       354
OREO............................     22       24        27       29        28
                                   ----     ----      ----     ----      ----
    Total.......................   $386     $382      $402     $395      $382
                                   ====     ====      ====     ====      ====
Nonaccrual loans and leases and
 OREO as a percent of related
 asset categories...............    0.9%     0.9%      0.9%     0.9%      0.9%
</TABLE>

  Total nonaccrual loans and leases and OREO at June 30, 1999 decreased $16
million from December 31, 1998, reflecting a $60 million decrease in the
domestic portfolio, offset by a $49 million increase in the international
portfolio. The domestic decline included a $32 million decrease in nonaccrual
commercial, industrial and financial loans and a $16 million decrease in
nonaccrual consumer-related loans. The increase in international nonaccrual
loans was mainly due to the placement of one large Argentine credit on
nonaccrual and the ongoing recession in that country.

  The level of nonaccrual loans and leases and OREO is influenced by the
economic environment, including interest rate trends and other internal and
external factors. As such, no assurance can be given as to future levels of
nonaccrual loans and leases and OREO.

                                      23
<PAGE>

                           RESERVE FOR CREDIT LOSSES

  The Corporation determines the level of its reserve for credit losses
considering evaluations of individual credits, net losses charged to the
reserve, changes in quality of the credit portfolio, levels of nonaccrual
loans and leases, current economic conditions, cross-border risks, changes in
the size and character of credit risks, and other pertinent factors. The
credit risk of off-balance-sheet exposures is managed as part of the overall
extension of credit to individual customers and is considered in assessing the
overall adequacy of the reserve for credit losses. The amount of the reserve
for credit losses associated with off-balance-sheet exposures is not
significant. The amount of the reserve for credit losses is reviewed by
management quarterly.

  The reserve for credit losses at June 30, 1999 was $792 million, compared
with $754 million at December 31, 1998. At June 30, 1999, the reserve for
credit losses represented 1.89 percent of outstanding loans and lease
financing, compared with 1.76 percent at December 31, 1998. The reserve for
credit losses was 218 percent of nonaccrual loans and leases at June 30, 1999,
compared to 201 percent at December 31, 1998. The increase in the reserve
reflects some downturn in the credit cycle, as well as the recessionary
environments in the various markets in which the Corporation operates. The
future level of the reserve for credit losses will continue to be a function
of management's evaluation of the Corporation's credit exposures existing at
the time, which will be affected by future events and general economic
conditions in the United States, Latin America, Asia and various other
overseas markets; the impact of the Corporation's strategic decisions on
various credit portfolios; and the potential impact that the Year 2000 issue
could have on the ability of the Corporation's customers to repay their
obligations. Therefore, no assurance can be given as to future levels of the
reserve.

  Net credit losses were as follows:

<TABLE>
<CAPTION>
                                 June 30, March 31, Dec. 31, Sept. 30, June 30,
                                   1999     1999      1998     1998      1998
Quarters Ended                   -------- --------- -------- --------- --------
                                                 (in millions)
<S>                              <C>      <C>       <C>      <C>       <C>
United States
  Commercial, industrial and
   financial....................   $ 49      $21      $ 38      $ 9      $ 5
  Commercial real estate........              (3)                (1)      (1)
  Consumer-related
    Residential mortgages.......                         2        1        1
    Home equity.................      1        1         2        1        1
    Credit card.................      4        4         5        6        6
    Other.......................      9       13        13       13       11
                                   ----      ---      ----      ---      ---
                                     63       36        60       29       23
                                   ----      ---      ----      ---      ---
International
  Commercial and industrial.....    (26)       8        34        7       13
  Consumer-related
    Credit card.................      5        4         5        6        2
    Other.......................     19       18        14       17       13
                                   ----      ---      ----      ---      ---
                                     (2)      30        53       30       28
                                   ----      ---      ----      ---      ---
    Total.......................   $ 61      $66      $113      $59      $51
                                   ====      ===      ====      ===      ===
</TABLE>

  Net credit losses in the second quarter of 1999 increased $10 million
compared with the second quarter of 1998. The increase in domestic credit
losses was due to higher gross charge-offs of $50 million, primarily in the
commercial, industrial and financial portfolios, including charge-offs on
loans transferred into an accelerated disposition portfolio. The carrying
value of this portfolio was approximately $100 million at June 30, 1999. The
increase in charge-offs was offset by increased recoveries of $40 million, due
to a partial insurance recovery related to international private banking loans
that were charged off in the first quarter of 1998.


                                      24
<PAGE>

  The future level of charge-offs will continue to be affected by the impact
of global economic events on various domestic and international portfolios, as
well as the mix and size of various portfolios. As such, there can be no
assurance as to the level of future charge-offs.

                           CROSS-BORDER OUTSTANDINGS

  In accordance with bank regulatory rules, cross-border outstandings are
amounts payable to the Corporation by residents of foreign countries
regardless of the currency in which the claim is denominated and local country
claims in excess of local country obligations. Excluded from cross-border
outstandings are the following:

  .  Local country claims that are funded by local country obligations
     payable only in the country where issued.

  .  Local country claims funded by non-local country obligations (typically
     U.S. dollars or other non-local currency) where the providers of funds
     agree that, in the event their claims cannot be repaid in the designated
     currency due to currency exchange restrictions in a given country, they
     may either accept payment in local currency or wait to receive the non-
     local currency until such time as it becomes available in the local
     market. At June 30, 1999, such outstandings related to emerging markets
     countries totaled $2.4 billion, compared with $2.2 billion at December
     31, 1998.

  .  Claims reallocated as a result of external guarantees, cash collateral
     or insurance contracts issued primarily by U.S. government agencies.

  Cross-border outstandings include deposits in other banks, resale
agreements, trading securities, securities available for sale, securities held
to maturity, loans and lease financing, amounts due from customers on
acceptances, accrued interest receivable and revaluation gains on trading
derivatives. At June 30, 1999 and December 31, 1998, total cross border
outstandings were approximately $9.3 billion and $8.7 billion, respectively,
which included outstandings to emerging markets countries of $6.2 billion and
$5.9 billion, respectively.

  In addition to credit risk, cross-border outstandings have the risk that, as
a result of political or economic conditions in a country, borrowers are
unable to meet their contractual repayment obligations of principal and/or
interest when due because of the unavailability of, or restrictions on,
foreign exchange needed by borrowers to repay their obligations.

  The following table summarizes by country the Corporation's approximate
cross-border outstandings to countries that individually amounted to 1 percent
or more of consolidated total assets at June 30, 1999 and December 31, 1998.

<TABLE>
<CAPTION>
                                                   Percentage of
                        Public Banks Other  Total  Total Assets  Commitments(1)
                        ------ ----- ------ ------ ------------- --------------
                                         (dollars in millions)
<S>                     <C>    <C>   <C>    <C>    <C>           <C>
June 30, 1999(2)
  Argentina............ $1,105 $ 60  $  970 $2,135      2.8%          $ 5
  Brazil...............  1,255   35     260  1,550      2.0            95
  United Kingdom.......         530     280    810      1.0            95
December 31, 1998(2)
  Argentina............ $  775 $ 50  $1,155 $1,980      2.7%          $10
  Brazil...............    405          495    900      1.2            40
</TABLE>
--------
(1) Included within commitments are letters of credit, guarantees and the
    undisbursed portions of loan commitments.
(2) Cross-border outstandings in countries which fell between .75% and 1% of
    consolidated total assets were approximately as follows: June 30, 1999 --
     None; December 31, 1998 -- Chile, $690 million; United Kingdom, $630
    million.


                                      25
<PAGE>

Latin America

  At June 30, 1999, approximately $5.7 billion, or 61 percent, of total cross-
border outstandings were to countries in Latin America, compared with $5.3
billion, or 61 percent, at December 31, 1998. Substantially all of these
cross-border outstandings were to customers in countries in which the
Corporation maintained branch networks and/or subsidiaries.

  The Corporation's total assets in Argentina at both June 30, 1999 and
December 31, 1998 amounted to approximately $9 billion. Included in these
total assets were the Argentine cross-border outstandings presented in the
table above. At both June 30, 1999 and December 31, 1998, Argentine loans and
lease financing was approximately $6 billion.

  The Corporation's nonaccrual Argentine loans were $184 million at June 30,
1999, compared with $140 million at both March 31, 1999 and December 31, 1998.
The change was due to increased commercial and industrial nonaccruals,
including one large credit placed on nonaccrual in the second quarter of 1999.
The percentage of nonaccrual loans to total Argentine loans and lease
financing was 3.0 percent at June 30, 1999, compared with 2.3 percent at
December 31, 1998.

  The Corporation's total assets in Brazil at June 30, 1999 amounted to
approximately $7 billion, compared with approximately $6 billion at December
31, 1998. Included in these total assets were the Brazilian cross-border
outstandings presented in the table above. At both June 30, 1999 and December
31, 1998, Brazilian loans and lease financing was approximately $3 billion.

  The Corporation's nonaccrual Brazilian loans were $22 million at June 30,
1999, compared with $12 million at March 31, 1999 and $18 million at December
31, 1998. The change was due to increases in nonaccrual consumer loans. The
percentage of nonaccrual loans to total Brazilian loans and lease financing
was .7 percent at June 30, 1999, compared with .6 percent at December 31,
1998.

  For additional information on Argentina and Brazil, see the "Line of
Business Information" section. For further discussion of the Corporation's
nonaccrual loans and leases and net credit losses, see the "Nonaccrual Loans
and Leases and OREO" and "Reserve for Credit Losses" sections.

  During 1998, world financial markets experienced significant volatility due
to the Asian and Russian crises. These crises also impacted the economies of
Latin America, and, in particular, contributed to the economic instability
recently experienced by Brazil. The financial pressures created by the Asian
and Russian turmoil led to a significant deterioration in the level of
Brazil's foreign currency reserves starting in August 1998. The reduction in
foreign currency reserves and the Brazilian government's need to reduce both
its current account and fiscal deficits led the government to allow Brazil's
currency, the Real, to float freely against the U.S. dollar beginning in mid-
January 1999, which resulted in a significant devaluation of the Real against
the U.S. dollar. Since then the Real has regained some of its value against
the U.S. dollar, due in part to the passage by the Brazilian government of a
number of fiscal reforms aimed at controlling the public deficit and meeting
the requirements of its agreement with the International Monetary Fund. While
Brazil has been influenced by these events, the extent of contraction and
inflation has been less than expected, particularly with the inflow of foreign
investment into the country in response to the positive actions taken by the
Brazilian government.

  The conditions described above in world markets and in Brazil have also
affected economic conditions in Argentina. Argentina is currently experiencing
a significant slowdown in economic activity. In addition, a presidential
election is scheduled for October 1999. By law, there will be a new president
elected since the incumbent is not allowed to serve another term. The specter
of a new government has led to some uncertainty regarding the new government's
economic policy. Such uncertainty is also contributing to the country's
economic situation.

  The Corporation has not experienced collection problems as a result of world
economic volatility, currency restrictions or foreign exchange liquidity
problems in its current portfolio of cross-border outstandings to Latin

                                      26
<PAGE>

America. However, if actions implemented by the Brazilian government and other
Latin American governments are not effective over time, the Corporation's
operations could experience adverse effects. It is expected that the economic
situation in Latin America, including the effect of world financial markets on
these economies, will continue to be unsettled. In addition, as described
above, the upcoming presidential election in Argentina creates the potential
for change in economic policy, both before and after the election. The impact
that these events will ultimately have on Latin American economies and,
therefore, the Corporation's operations in that region, is uncertain. The
Corporation will continue to monitor the economies of the Latin American
countries in which it has local operations and cross-border outstandings, as
well as the economies of other emerging markets countries which could impact
the performance of the Corporation, and will take actions as it deems
appropriate. Each emerging markets country is at a different stage of
development with a unique set of economic fundamentals; therefore, it is not
possible to predict what developments will occur and what impact these
developments will ultimately have on the economies of these countries or on
the Corporation's financial statements.

Asia

  At June 30, 1999, approximately $690 million, or approximately 7 percent, of
total cross-border outstandings were to countries in Asia, compared with
approximately $800 million, or approximately 9 percent, at December 31, 1998.
This decrease reflects the impact of the Corporation's efforts to actively
manage and reduce its Asian exposures, including the closing of four offices
in early 1999. A significant portion of these cross-border outstandings were
to customers in countries in which the Corporation maintains branch networks
and/or subsidiaries.

  At June 30, 1999, the Corporation had Asian nonaccrual loans of $12 million,
compared with $14 million at December 31, 1998. The Corporation had Asian net
credit losses of $4 million in the second quarter of 1999, compared with $10
million in the second quarter of 1998.

  The Corporation continues to closely monitor the situation in Asian markets
and to manage its portfolio in order to maximize its future results, all
within the parameters of the Corporation's established risk management
processes.

                           LIQUIDITY RISK MANAGEMENT

  Liquidity risk is defined as the risk of loss from the Corporation's
inability to meet its obligations when they come due, without incurring
unacceptable costs. For additional information related to the Corporation's
liquidity risk management, see pages 47 and 48 of the Corporation's 1998
Annual Report to Stockholders, which is incorporated by reference into its
1998 Annual Report on Form 10-K.

  The Corporation's liquid assets, which consist primarily of interest bearing
deposits in other banks, federal funds sold and resale agreements, money
market loans and unencumbered U.S. Treasury and government agency securities,
were $10.8 billion at June 30, 1999, compared with $8.2 billion at December
31, 1998. This increase reflected an increase in the Corporation's available
for sale portfolio used to manage interest rate risk. The Corporation also has
access to additional funding through the public markets. Management considers
overall liquidity at June 30, 1999 to be adequate to meet current obligations,
to support expectations for future changes in asset and liability levels and
to carry on normal operations.

                            MARKET RISK MANAGEMENT

  Market risk is defined as the risk of loss arising from adverse changes in
market prices, such as interest rates and foreign exchange rates, on financial
instruments. The Corporation's market risk management process includes the
management of all forms of market risk, including balance sheet and off-
balance-sheet exposures.

                                      27
<PAGE>

Market risk is managed within policies and limits established by the Asset,
Liability and Capital Committee (ALCCO) and the Market Risk Committee (MRC)
and approved by the Corporation's Board of Directors (the Board). The MRC is
responsible for allocating the overall market risk limits set by ALCCO to the
Corporation's market risk-taking activities, considering the results of its
risk modeling process as well as other internal and external factors. Further
information with respect to the Corporation's management of market risk is
included on pages 48 through 51 of the Corporation's 1998 Annual Report to
Stockholders, which is incorporated by reference into its 1998 Annual Report
on Form 10-K.

Trading Activities

  The Corporation's trading activities involve providing risk management and
capital markets products and services to its customers, including interest
rate derivatives, foreign exchange contracts, and debt and equity underwriting
and distribution capabilities. In addition, the Corporation takes proprietary
trading positions, including positions in domestic equity securities, high
yield and emerging markets fixed income securities, and local currency debt
and equity securities and related derivatives. The risk positions taken by the
Corporation in these financial instruments are subject to ALCCO and MRC
approved limits.

  The Corporation manages the market risk related to its trading businesses on
a daily basis using a Value-at-Risk (VAR) methodology. VAR is defined as the
statistical estimate of the potential loss that the Corporation could incur
from an adverse movement in market prices. The Corporation uses a 99 percent
confidence level, which means that the Corporation would not expect to exceed
the potential loss as calculated by VAR more than once out of every 100
trading days. The VAR methodology requires a number of key assumptions
including those relating to the time to liquidate positions, the confidence
level for losses, the number of days of price and rate history to be used, the
impact of credit spread risk, and the treatment of event risk.

  The following table shows the aggregate VAR for the Corporation's trading
businesses at June 30, 1999 and December 31, 1998.

<TABLE>
<CAPTION>
                                                           June 30, December 31,
                                                             1999     1998 (1)
Quarters Ended                                             -------- ------------
                                                               (in millions)
<S>                                                        <C>      <C>
VAR.......................................................   $46        $30
Average VAR...............................................    41         33
VAR limit.................................................    56         56
</TABLE>

(1) The December 31, 1998 VAR limit has been restated for comparability.

  The VAR calculations above include the effects of various interest rate and
foreign exchange rate risks. The VAR exposure can vary at any given point in
time depending upon market conditions. The aggregate VAR and average VAR
associated with the Corporation's foreign exchange activities were
approximately $7 million and $5 million, respectively, for the second quarter
of 1999 and $7 million and $6 million, respectively, for the fourth quarter of
1998. The calculations do not take into account the potential diversification
benefits of the different positions taken across trading portfolios.

  In addition to the VAR methodology, the Corporation employs other market
risk management tools which include loss limits and overall portfolio size
limits, as well as monthly stress tests and scenario analyses. While the VAR
methodology and supplementary risk management tools are effective for managing
market risk, they do not preclude the occurrence of trading losses during
periods of extreme volatility.

Asset and Liability Management (ALM)

  The Corporation's U.S. dollar denominated assets and liabilities are exposed
to interest rate risk, which can be defined as the exposure of the
Corporation's net income or financial condition to adverse movements in
interest rates. At June 30, 1999, U.S. dollar denominated assets comprised the
majority of the Corporation's

                                      28
<PAGE>

balance sheet. The Corporation's U.S. dollar denominated positions are
evaluated and managed centrally through the Global Treasury group, utilizing
several modeling methodologies. The two principal methodologies used are
market value sensitivity and net interest revenue at risk. The results of
these models are reviewed monthly with ALCCO and at least quarterly with the
Board.

  Market value sensitivity is defined as the potential change in market value,
or the economic value, of the Corporation's assets and liabilities resulting
from changes in interest rates. Net interest revenue at risk is defined as the
exposure of the Corporation's net interest revenue over the next twelve months
to an adverse movement in interest rates. Both of these methodologies are
designed to isolate the effects of market changes in interest rates on the
Corporation's existing positions, and they exclude other factors such as
competitive pricing considerations, future changes in the asset and liability
mix and other management actions. Therefore, they are not by themselves
measures of future levels of net interest revenue.

  These two methodologies provide different but complementary measures of the
level of interest rate risk; the longer-term view is modeled through market
value sensitivity, while the shorter-term view is evaluated through net
interest revenue at risk over the next twelve months. Under current ALCCO
directives, market value sensitivity cannot exceed 3.6 percent of total risk-
based capital and net interest revenue at risk cannot exceed 2 percent of
annual net interest revenue.

  The following table illustrates the Corporation's quarter-end and average
U.S. dollar denominated positions for market value sensitivity and net
interest revenue at risk at June 30, 1999 and December 31, 1998.

<TABLE>
<CAPTION>
                                             June 30, 1999    December 31, 1998
                                           ------------------ ------------------
                                           Quarter- Quarterly Quarter- Quarterly
                                             End     Average    End     Average
                                           -------- --------- -------- ---------
                                                   (dollars in millions)
<S>                                        <C>      <C>       <C>      <C>
Market value sensitivity(1)...............   $236     $245      $145     $124
Percent of risk-based capital.............    2.8%     3.0%      1.8%     1.5%
Net interest revenue at risk(2)...........   $ 32     $ 28      $ 21     $ 18
Percent of net interest revenue...........    1.2%     1.1%       .9%      .7%
</TABLE>
--------
(1) Based on a 100 basis point adverse interest rate shock. At both June 30,
    1999 and December 31, 1998, the Corporation's market value sensitivity was
    negatively biased to rising interest rates. The increase in market value
    sensitivity was primarily attributable to the growth in the Corporation's
    available for sale securities portfolio.
(2) Based on the greater of a 100 basis point adverse interest rate shock or a
    200 basis point adverse change in interest rates over the next twelve-
    month period. At June 30, 1999, the adverse position was based on a 200
    basis point increase in interest rates over the next twelve-month period,
    and at December 31, 1998, the adverse position was based on a 200 basis
    point decline in interest rates over the next twelve-month period.

  The Corporation's non-U.S. dollar denominated assets and liabilities are
exposed to interest rate and foreign exchange rate risks. Non-U.S. dollar
denominated interest rate and foreign exchange rate risks are managed by the
Corporation's overseas units, with oversight by the Boston-based Global
Treasury group. ALCCO establishes overall limits for each country in which the
Corporation has local market interest rate risk and foreign exchange rate
risk. Limits are updated at least annually for current market conditions,
considering business and economic conditions in the country at a particular
point in time. The overseas units report as to compliance with these limits on
a regular basis.

  The majority of the Corporation's non-U.S. dollar denominated interest rate
and foreign exchange rate risk exposure stems from its operations in Latin
America, primarily Argentina and Brazil. The Corporation's Argentine balance
sheet and off-balance-sheet ALM positions primarily relate to its corporate
lending and retail businesses. At June 30, 1999, the market value sensitivity
and net interest revenue at risk of the Corporation's Argentine non-U.S.
dollar denominated ALM positions were approximately $12 million and $5
million,

                                      29
<PAGE>

respectively, and the limits were $18 million and $22 million, respectively.
At December 31, 1998, the market value sensitivity and net interest revenue at
risk of the Corporation's Argentine non-U.S. dollar denominated ALM positions
were approximately $6 million and $5 million, respectively.

  The Corporation's Brazilian balance sheet and off-balance-sheet ALM
positions, which are mostly short-term in nature, primarily relate to
corporate lending, trade financing and treasury activities. The interest rate
risk related to these ALM positions is managed using a VAR methodology, which
is discussed above in the "Trading Activities" section. The VAR positions are
calculated on a daily basis. The VAR exposure for the Corporation's Brazilian
non-U.S. dollar denominated ALM positions was approximately $4 million and $7
million at June 30, 1999 and December 31, 1998, respectively. The total VAR
limit was $16 million. The Corporation's Brazilian operation also utilizes
other market risk management tools such as stress testing, scenario analyses,
and concentration and notional limits to manage the interest rate exposure in
its ALM portfolio.

  When deemed appropriate, the Corporation will take positions in certain
currencies with the intention of taking advantage of movements in currency and
interest rates. Whenever these positions are taken, they are subject to limits
established by ALCCO and the MRC, as discussed above. Compliance with these
limits is reviewed regularly by the Corporation's independent capital markets
risk management function. The majority of the Corporation's foreign exchange
risk is generated by its operations in Argentina and Brazil, and is managed
within the overall currency positions.

  The average currency positions during the quarters ended June 30, 1999 and
December 31, 1998 were as follows:

<TABLE>
<CAPTION>
                                                             Quarterly Average
                                                           ---------------------
                                                           June 30, December 31,
                                                             1999       1998
                                                           -------- ------------
                                                               (in millions)
<S>                                                        <C>      <C>
Argentina(1)..............................................   $329       $350
Brazil(2).................................................      5         95
</TABLE>
--------
(1) Positions represent local currency assets funded by U.S. dollar
    denominated liabilities.
(2) Positions represent U.S. dollar assets funded by local currency
    liabilities.

  To date, the Corporation's currency positions have been liquid in nature and
management has been able to close and re-open these positions as necessary.

  The level of U.S. dollar and non-U.S. dollar exposure maintained by the
Corporation is a function of the market environment and may change from period
to period based on interest rate and other economic expectations.

                                      30
<PAGE>

                       DERIVATIVE FINANCIAL INSTRUMENTS

  Derivatives provide the Corporation with significant flexibility in managing
its interest rate risk and foreign exchange exposures, enabling it to manage
risk efficiently and respond quickly to changing market conditions while
minimizing the impact on balance sheet leverage. The Corporation routinely
uses non-leveraged rate-related derivative instruments, primarily interest
rate swaps, as part of its asset and liability management practices. The level
and term of such contracts may be modified as necessary, in response to
balance sheet changes and other management actions, while complying with ALCCO
directives for market value sensitivity and net interest revenue at risk.
Derivatives not used for asset and liability management are included in the
derivative trading portfolio and principally relate to providing risk
management products to the Corporation's customers.

  The following table is a summary of the Corporation's notional amounts and
fair values of interest rate derivatives and foreign exchange contracts
included in its trading and ALM portfolios.

<TABLE>
<CAPTION>
                                                      June 30, 1999
                         ----------------------------------------------------------------------------
                             Trading Portfolio(1)                   ALM Portfolio(1)
                         ------------------------------ ---------------------------------------------
                                  Fair Value(2)(3)(4)            Fair Value(2)(3)
                         Notional --------------------- Notional --------------------   Unrecognized
                          Amount   Asset     Liability   Amount  Asset     Liability   Gain (Loss)(5)
                         -------- --------- ----------- -------- --------  ----------  --------------
                                                      (in millions)
<S>                      <C>      <C>       <C>         <C>      <C>       <C>         <C>
Interest rate contracts
  Futures and forwards.. $  6,971 $       6             $   618                             $ (4)
  Interest rate swaps...   30,143       303  $     309   12,693  $    242    $    317        (28)
  Interest rate options
    Purchased(6)........   46,909       415               2,281        42                     42
    Written or sold(6)..   33,256                  414    1,781                    26        (26)
                         -------- ---------  ---------  -------  --------    --------       ----
                         $117,279 $     724  $     723  $17,373  $    284    $    343       $(16)
                         ======== =========  =========  =======  ========    ========       ====
Foreign exchange
 contracts
  Spot and forward
   contracts............ $113,768 $   1,572  $   1,635  $ 4,096  $     80    $     89       $  1
  Options purchased.....    3,772        59
  Options written or
   sold.................    3,523                   66
                         -------- ---------  ---------  -------  --------    --------       ----
                         $121,063 $   1,631  $   1,701  $ 4,096  $     80    $     89       $  1
                         ======== =========  =========  =======  ========    ========       ====
</TABLE>

                                      31
<PAGE>

<TABLE>
<CAPTION>
                                                   December 31, 1998
                         ----------------------------------------------------------------------
                             Trading Portfolio(1)                  ALM Portfolio(1)
                         ------------------------------ ---------------------------------------
                                                                      Fair
                                  Fair Value(2)(3)(4)              Value(2)(3)
                         Notional --------------------- Notional ---------------  Unrecognized
                          Amount   Asset     Liability   Amount  Asset Liability Gain (Loss)(5)
                         -------- --------- ----------- -------- ----- --------- --------------
                                                     (in millions)
<S>                      <C>      <C>       <C>         <C>      <C>   <C>       <C>
Interest rate contracts
  Futures and forwards.. $ 4,037  $       2             $   734                       $ (6)
  Interest rate swaps...  29,164        471  $     470    8,366  $219    $ 81          110
  Interest rate options
    Purchased(6)........  32,640        191               2,411    89                   89
    Written or sold(6)..  24,199                   200    1,911            66          (66)
                         -------  ---------  ---------  -------  ----    ----         ----
                         $90,040  $     664  $     670  $13,422  $308    $147         $127
                         =======  =========  =========  =======  ====    ====         ====
Foreign exchange
 contracts
  Spot and forward
   contracts............ $48,206  $   1,221  $   1,274  $ 3,469  $ 35    $ 22         $ 13
  Options purchased.....   3,581         68                  68
  Options written or
   sold.................   3,711                    54
                         -------  ---------  ---------  -------  ----    ----         ----
                         $55,498  $   1,289  $   1,328  $ 3,537  $ 35    $ 22         $ 13
                         =======  =========  =========  =======  ====    ====         ====
</TABLE>
--------
(1) Contracts under master netting agreements are shown on a net basis for
    both the trading and ALM portfolios.
(2) Fair value represents the amount at which a given instrument could be
    exchanged in an arm's length transaction with a third party as of the
    balance sheet date. The fair value amounts of the trading portfolio are
    included in trading assets or funds borrowed, as applicable. The majority
    of derivatives that are part of the ALM portfolio are accounted for on the
    accrual basis, and are not carried at fair value. When certain contracts,
    such as futures, are subject to daily cash settlements, the fair value of
    these instruments is zero.
(3) The current credit exposure from interest rate derivatives and foreign
    exchange contracts at June 30, 1999 and December 31, 1998 is represented
    by the fair value of contracts reported in the "Asset" column.
(4) The average asset and liability fair value amounts for interest rate
    derivatives included in the trading portfolio for the quarters ended June
    30, 1999 and December 31, 1998 were approximately $640 million and $663
    million, respectively, and $635 million and $657 million, respectively.
    The average asset and liability fair value amounts for foreign exchange
    contracts included in the trading portfolio were both approximately $1.5
    billion for the quarter ended June 30, 1999. The average asset and
    liability fair value amounts for foreign exchange contracts included in
    the trading portfolio were both approximately $1.1 billion for the quarter
    ended December 31, 1998.
(5) Unrecognized gain or loss represents the amount of gain or loss, based on
    fair value, which has not been recognized in the income statement as of
    the balance sheet date. This includes amounts related to contracts that
    have been terminated. Such amounts are recognized as an adjustment of
    yield over the period being managed. At June 30, 1999, there were $3
    million of unrecognized gains related to terminated contracts that are
    being amortized to net interest revenue over a weighted average period of
    53 months. At December 31, 1998, there were $4 million of unrecognized
    gains related to terminated contracts that were being amortized to net
    interest revenue over a weighted average period of 46 months.
(6) The ALM portfolio includes equity contracts entered into by the
    Corporation's Argentine operations. These contracts are linked to
    Argentine deposit products, where the holder receives payment based on
    changes in the prices of underlying Argentine securities. The majority of
    these contracts are scheduled to mature prior to the end of 1999.

                                      32
<PAGE>

  The decrease of $220 million in the net fair value of interest rate
contracts included in the ALM portfolio was primarily due to an increase in
domestic interest rates, which resulted in a decrease in the fair value of the
domestic receive fixed interest rate swap portfolio.

  Net trading gains or losses from interest rate derivatives are recorded in
trading profits and commissions. The Corporation's interest rate derivative
trading activities primarily include providing risk management products to
customers. Net trading gains from interest rate derivatives for the quarter
and six months ended June 30, 1999 were $9 million and $12 million,
respectively, and for the quarter and six months ended June 30, 1998 were $6
million and $12 million, respectively. Derivatives are also used to manage
risk in other trading portfolios, such as emerging markets securities. The
results of these derivative activities are combined with the results of the
respective trading portfolio to determine the overall performance of the
trading business and, as such, are not included in the results of derivative
trading activities.

  Net trading gains from foreign exchange activities, which include foreign
exchange spot, forward and options contracts, for the quarter and six months
ended June 30, 1999 were $37 million and $82 million, respectively, and for
the quarter and six months ended June 30, 1998 were $32 million and $61
million, respectively, and are recorded in other income.

  The following table summarizes the remaining maturity and notional amount of
interest rate derivatives as of June 30, 1999, and the notional amount of
interest rate derivatives as of December 31, 1998, entered into for asset and
liability management purposes.

<TABLE>
<CAPTION>
                                     Remaining Maturity-Notional Amount
                            ----------------------------------------------------
                                                   Greater June 30, December 31,
                            Less than  1-3    3-5   than     1999       1998
                             1 year   years  years 5 years  Total      Total
                            --------- ------ ----- ------- -------- ------------
                                               (in millions)
<S>                         <C>       <C>    <C>   <C>     <C>      <C>
Futures and forwards(1)....  $   618                       $   618    $   734
Interest rate swaps(2).....    8,160  $1,341 $626  $2,566   12,693      8,366
Interest rate options(3)
  Purchased................    2,189      92                 2,281      2,411
  Written or sold..........    1,689      92                 1,781      1,911
                             -------  ------ ----  ------  -------    -------
                             $12,656  $1,525 $626  $2,566  $17,373    $13,422
                             =======  ====== ====  ======  =======    =======
</TABLE>
--------
(1) At June 30, 1999 and December 31, 1998, represents contracts entered into
    by the Corporation's Brazilian operations in the local market which are
    linked to short-term interest bearing assets and liabilities.
(2) At June 30, 1999, includes $6.0 billion and $6.7 billion of interest rate
    swap contracts entered into by the Corporation's domestic and
    international operations, respectively. Of the domestic interest rate
    swaps, approximately $3.4 billion are linked to notes payable, $.7 billion
    to deposits and $1.0 billion to loans. Of the international interest rate
    swaps, approximately $6.6 billion were entered into by the Brazilian
    operations and are scheduled to mature in less than one year. The
    Brazilian interest rate swaps typically include the exchange of floating
    rate indices that are indigenous to the Brazilian market.
(3) At June 30, 1999 and December 31, 1998, includes equity contracts entered
    into by the Corporation's Argentine operations. These contracts are linked
    to Argentine deposit products, where the holder receives payment based on
    changes in the prices of underlying Argentine securities. The majority of
    these contracts are scheduled to mature prior to the end of 1999.

  The Corporation routinely reviews its asset and liability derivative
positions to determine that such instruments continue to function as effective
risk management tools. Additional information on the Corporation's derivative
products, including accounting policies, is included on pages 51 and 52, and
in Notes 1 and 22 to the Financial Statements, in the Corporation's 1998
Annual Report to Stockholders, which is incorporated by reference into its
1998 Annual Report on Form 10-K.

                                      33
<PAGE>

                       RECENT ACCOUNTING PRONOUNCEMENTS

  In June 1998, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 requires that all
derivative instruments, including certain derivative instruments embedded in
other contracts, be recorded on the balance sheet as either an asset or
liability measured at its fair value. Changes in the derivative's fair value
should be recognized currently in earnings unless the derivative is designated
as a hedge. When designated as a hedge, the fair value should be recognized
currently in earnings or in other nonowner changes in equity, depending on
whether such designation is as a fair value or as a cash flow hedge. With
respect to fair value hedges, the fair value of the derivative, as well as
changes in the fair value of the hedged item, are reported in the income
statement. With cash flow hedges, changes in the derivative's fair value are
reported in other nonowner changes in equity and reclassified to the income
statement in periods in which earnings are affected by the hedged variable
cash flows or forecasted transaction. SFAS No. 133 also requires a company to
formally document, designate and assess the effectiveness of transactions that
receive hedge accounting treatment.

  In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective date of FASB
Statement No. 133." SFAS No. 137 deferred the effective date of SFAS No. 133
to fiscal years beginning after June 15, 2000. The Corporation intends to
adopt the SFAS No. 133 as of January 1, 2001; however, it has not yet
quantified the financial statement impact of adoption, nor determined the
method of adoption. The Corporation anticipates that adoption could increase
volatility in earnings and other nonowner changes in equity, and could result
in certain modifications to systems and hedging methodologies.

                                      34
<PAGE>

                             BANKBOSTON CORPORATION

                           CONSOLIDATED BALANCE SHEET

               (in millions, except share and per share amounts)

<TABLE>
<CAPTION>
                                                            June
                                                             30,    December 31,
                                                            1999        1998
                                                           -------  ------------
<S>                                                        <C>      <C>
                          ASSETS
Cash and due from banks................................... $ 2,877    $ 3,773
Interest bearing deposits in other banks..................   1,605      1,533
Federal funds sold and securities purchased under
 agreements to resell.....................................   6,271      2,463
Trading assets............................................   4,422      3,802
Securities
  Available for sale......................................  13,427     12,118
  Held to maturity (fair value of $395 in 1999 and $464 in
   1998)..................................................     397        459
Loans and lease financing
  United States operations................................  28,319     29,171
  International operations................................  13,470     13,635
                                                           -------    -------
    Total loans and lease financing (net of unearned
     income of $457 in 1999 and $526 in 1998).............  41,789     42,806
Reserve for credit losses.................................    (792)      (754)
Premises and equipment, net...............................   1,295      1,319
Due from customers on acceptances.........................     410        338
Accrued interest receivable...............................     664        561
Other assets..............................................   5,199      5,095
                                                           -------    -------
TOTAL ASSETS.............................................. $77,564    $73,513
                                                           =======    =======
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                       35
<PAGE>

                             BANKBOSTON CORPORATION

                           CONSOLIDATED BALANCE SHEET

               (in millions, except share and per share amounts)

                                  (continued)

<TABLE>
<CAPTION>
                                                        June 30,  December 31,
                                                          1999        1998
                                                        --------  ------------
<S>                                                     <C>       <C>
         LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
  Domestic offices
    Noninterest bearing................................ $ 6,387     $ 6,554
    Interest bearing...................................  28,147      28,371
  Overseas offices
    Noninterest bearing................................   1,322       1,144
    Interest bearing...................................  13,180      12,431
                                                        -------     -------
      Total deposits...................................  49,036      48,500
Funds borrowed
  Federal funds purchased..............................     869         628
  Term federal funds purchased.........................   1,004       1,468
  Securities sold under agreements to repurchase.......   5,384       3,145
  Other funds borrowed.................................   7,732       6,775
Acceptances outstanding................................     410         338
Accrued expenses and other liabilities.................   2,461       2,254
Notes payable..........................................   4,599       4,593
Guaranteed preferred beneficial interests in
 Corporation's junior subordinated debentures..........     995         995
                                                        -------     -------
TOTAL LIABILITIES......................................  72,490      68,696
                                                        -------     -------

Commitments and contingencies
Stockholders' equity
 Preferred stock without par value
  Authorized shares--10,000,000
  Issued and outstanding shares--none
 Common stock, par value $1.00
  Authorized shares--500,000,000
  Issued shares--306,869,982 in 1999 and 307,317,780 in
   1998
  Outstanding shares--297,041,235 in 1999 and
   294,971,900 in 1998.................................     307         307
 Surplus...............................................   1,101       1,118
 Retained earnings.....................................   4,143       3,895
 Accumulated other nonowner changes in equity
  Net unrealized loss on securities available for sale,
   net of tax..........................................    (100)        (19)
  Cumulative translation adjustments, net of tax.......      (2)        (14)
 Treasury stock, at cost (9,828,747 shares in 1999 and
  12,345,880 shares in 1998)...........................    (375)       (470)
                                                        -------     -------
TOTAL STOCKHOLDERS' EQUITY.............................   5,074       4,817
                                                        -------     -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............. $77,564     $73,513
                                                        =======     =======
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       36
<PAGE>

                             BANKBOSTON CORPORATION

                        CONSOLIDATED STATEMENT OF INCOME

                (dollars in millions, except per share amounts)

<TABLE>
<CAPTION>
                                            Quarter Ended    Six Months Ended
                                               June 30            June 30
                                           ----------------  ------------------
                                            1999     1998      1999      1998
                                           -------  -------  --------  --------
<S>                                        <C>      <C>      <C>       <C>
Interest Income
  Loans and lease financing, including
   fees................................... $ 1,027  $ 1,032  $  2,061  $  2,043
  Securities..............................     234      202       440       380
  Trading assets..........................      30       36        53        66
  Federal funds sold and securities
   purchased under agreements to resell...     129       94       210       179
  Deposits in other banks.................      28       26        55        60
                                           -------  -------  --------  --------
    Total interest income.................   1,448    1,390     2,819     2,728
                                           -------  -------  --------  --------
Interest Expense
  Deposits of domestic offices............     226      237       455       476
  Deposits of overseas offices............     233      227       477       450
  Funds borrowed..........................     221      210       401       417
  Notes payable...........................      90       76       173       142
                                           -------  -------  --------  --------
    Total interest expense................     770      750     1,506     1,485
                                           -------  -------  --------  --------
Net interest revenue......................     678      640     1,313     1,243
  Provision for credit losses.............      95       60       165       200
                                           -------  -------  --------  --------
  Net interest revenue after provision for
   credit losses..........................     583      580     1,148     1,043
                                           -------  -------  --------  --------
Noninterest Income
  Financial service fees and commissions..     456      195       789       360
  Trust and investment management fees....      82       82       161       161
  Trading profits and commissions.........      41       (4)       80        30
  Securities gains/(losses), net..........      (3)      11        (5)       36
  Other income............................     136      173       282       459
                                           -------  -------  --------  --------
    Total noninterest income..............     712      457     1,307     1,046
                                           -------  -------  --------  --------
Noninterest Expense
  Salaries................................     482      305       884       598
  Employee benefits.......................      65       63       137       124
  Occupancy expense.......................      68       56       132       110
  Equipment expense.......................      45       40        89        80
  Other expense...........................     239      183       463       396
                                           -------  -------  --------  --------
    Total noninterest expense.............     899      647     1,705     1,308
                                           -------  -------  --------  --------
  Income before income taxes..............     396      390       750       781
  Provision for income taxes..............     146      148       277       301
                                           -------  -------  --------  --------
NET INCOME................................ $   250  $   242  $    473  $    480
                                           =======  =======  ========  ========
NET INCOME APPLICABLE TO COMMON STOCK..... $   250  $   238  $    473  $    471
                                           =======  =======  ========  ========
Per common share
Net income
  Basic................................... $   .84  $   .81  $   1.60  $   1.61
  Diluted................................. $   .83  $   .80  $   1.58  $   1.58
Dividends declared........................ $   .32  $   .29  $    .64  $    .58
Average number of common shares (in
 thousands)
  Basic................................... 296,832  293,769   296,386   293,159
  Diluted................................. 301,662  298,275   300,095   297,579
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       37
<PAGE>

                             BANKBOSTON CORPORATION

           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                                 (in millions)

<TABLE>
<CAPTION>
                                                                 1999    1998
Six Months Ended June 30                                        ------  ------
<S>                                                             <C>     <C>
Balance, beginning of period................................... $4,817  $4,610
Net income.....................................................    473     480
Other nonowner changes in equity
  Change in unrealized loss on securities available for sale,
   net of tax and reclassification adjustment..................    (81)     (8)
  Change in foreign currency translation adjustment, net of
   tax.........................................................     12
                                                                ------  ------
    Total nonowner changes in equity...........................    404     472
                                                                ------  ------
Common stock issued in connection with
  Exercise of stock options....................................     12      33
  Dividend reinvestment and common stock purchase plan.........     11      11
  Restricted stock grants, net of forfeitures..................      2      11
  Other, principally employee benefit plans....................     18      22
Cash dividends declared
  Preferred stock..............................................             (9)
  Common stock.................................................   (190)   (170)
                                                                ------  ------
Balance, end of period......................................... $5,074  $4,980
                                                                ======  ======
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                       38
<PAGE>

                             BANKBOSTON CORPORATION

                      CONSOLIDATED STATEMENT OF CASH FLOWS

                                 (in millions)

<TABLE>
<CAPTION>
                                                              1999     1998
Six Months Ended June 30                                     -------  -------
<S>                                                          <C>      <C>
Cash Flows From Operating Activities
Net income.................................................. $   473  $   480
Reconciliation of net income to net cash provided from
 operating activities
 Provision for credit losses................................     165      200
 Depreciation and amortization..............................     113       90
 Provision for deferred taxes...............................       4       35
 Net gains on sales of securities available for sale and
  other assets..............................................     (44)    (324)
 Change in trading assets...................................    (431)     (33)
 Net change in interest receivable and payable..............     (88)      24
 Other, net.................................................     409     (171)
                                                             -------  -------
   Net cash provided from operating activities..............     601      301
                                                             -------  -------
Cash Flows From Investing Activities
Net cash provided from (used for) interest bearing deposits
 in other banks.............................................     (72)     368
Net cash used for federal funds sold and securities
 purchased under agreements to resell.......................  (3,808)    (597)
Securities available for sale
 Sales......................................................   3,872    5,387
 Maturities.................................................   1,763    1,504
 Purchases..................................................  (6,980)  (8,128)
Securities held to maturity
 Maturities.................................................      67       45
 Purchases..................................................      (5)     (31)
Net cash provided from lending and lease activities.........     253      172
Proceeds from sales of loan portfolios......................     400    1,207
Proceeds from sales of other real estate owned..............      15       28
Expenditures for premises and equipment.....................    (150)    (179)
Proceeds from sales of businesses and premises and
 equipment..................................................     133      400
Payment for purchase business combination, net of cash
 acquired...................................................             (207)
Purchases of investment in bank-owned life insurance........             (400)
Other, net..................................................      20      213
                                                             -------  -------
   Net cash used for investing activities...................  (4,492)    (218)
                                                             -------  -------
Cash Flows From Financing Activities
Net cash provided from (used for) deposits..................     536   (2,016)
Net cash provided from funds borrowed.......................   2,660      784
Repayment/repurchase of notes payable.......................    (384)    (172)
Net proceeds from issuance of notes payable.................     390      913
Net proceeds from issuance of guaranteed preferred
 beneficial interest in Corporation's junior subordinated
 debentures.................................................              248
Net proceeds from issuance of common stock..................      40       66
Dividends paid..............................................    (190)    (179)
                                                             -------  -------
   Net cash provided from (used for) financing activities...   3,052     (356)
Effect of foreign currency translation on cash..............     (57)      (6)
                                                             -------  -------
NET CHANGE IN CASH AND DUE FROM BANKS.......................    (896)    (279)
Cash and Due from Banks at January 1........................   3,773    4,006
                                                             -------  -------
Cash and Due from Banks at June 30.......................... $ 2,877  $ 3,727
                                                             =======  =======
Interest payments made...................................... $ 1,491  $ 1,467
Income tax payments made.................................... $   137  $   207
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       39
<PAGE>

                            BANKBOSTON CORPORATION

                         NOTES TO FINANCIAL STATEMENTS

1.The accompanying interim consolidated financial statements of BankBoston
Corporation (the Corporation) are unaudited. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the information contained herein have been made. Certain
amounts reported in prior periods have been reclassified for comparative
purposes. This information should be read in conjunction with the
Corporation's 1998 Annual Report on Form 10-K.

2.Merger Agreement

  In March 1999, the Corporation entered into an Agreement and Plan of Merger
with Fleet Financial Group, Inc. (Fleet), a bank holding company based in
Boston with assets of $107 billion at June 30, 1999, pursuant to which the
Corporation will merge with Fleet. On the closing date of the merger, each
share of common stock of the Corporation outstanding immediately prior to the
merger will be converted into 1.1844 shares of common stock of the combined
company. Outstanding options to purchase common stock of the Corporation will
be converted into options to purchase common stock of Fleet on the same basis.
The merger is expected to be accounted for as a pooling of interests. The
Corporation expects to complete the merger, which was approved by the
stockholders of both companies on August 11, 1999 but remains subject to
regulatory approvals, late in the third quarter or early in the fourth quarter
of 1999. The Corporation anticipates that, as a prerequisite to obtaining
regulatory approval of the transaction, the combined entity will be required
to divest approximately $13 billion of deposits. It is expected that the
combined entity will record merger and restructuring charges of approximately
$1 billion (on a pre-tax basis) in connection with the merger.

3.Securities

  A summary comparison of securities available for sale by type is as follows:

<TABLE>
<CAPTION>
                                                                  December 31,
                                                June 30, 1999         1998
                                               ---------------- ----------------
                                                       Carrying         Carrying
                                                Cost    Value    Cost    Value
                                               ------- -------- ------- --------
                                                         (in millions)
<S>                                            <C>     <C>      <C>     <C>
U.S. Treasury................................. $   563 $   547  $   704 $   711
U.S. government agencies and corporations--
 mortgage-backed securities...................   8,010   7,817    7,065   7,095
States and political subdivisions.............      36      36       34      34
Foreign debt securities.......................   2,360   2,333    2,184   2,111
Other debt securities.........................   1,374   1,369    1,178   1,188
Marketable equity securities..................     566     643      346     339
Other equity securities.......................     682     682      640     640
                                               ------- -------  ------- -------
                                               $13,591 $13,427  $12,151 $12,118
                                               ======= =======  ======= =======
</TABLE>

  Other equity securities include securities which are not traded on
established exchanges and are carried at cost.

  A summary comparison of securities held to maturity by type is as follows:

<TABLE>
<CAPTION>
                                                                  December 31,
                                                  June 30, 1999       1998
                                                 --------------- ---------------
                                                 Amortized Fair  Amortized Fair
                                                   Cost    Value   Cost    Value
                                                 --------- ----- --------- -----
                                                          (in millions)
<S>                                              <C>       <C>   <C>       <C>
U.S. Treasury...................................   $  3    $  3    $  7    $  7
U.S. government agencies and corporations--
 mortgage-backed securities.....................    381     379     439     444
Foreign debt securities.........................     13      13      13      13
                                                   ----    ----    ----    ----
                                                   $397    $395    $459    $464
                                                   ====    ====    ====    ====
</TABLE>


                                      40
<PAGE>

                             BANKBOSTON CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (continued)

4.Loans and Lease Financing

  The following are the details of loans and lease financing balances:

<TABLE>
<CAPTION>
                                                          June 30,  December 31,
                                                            1999        1998
                                                          --------  ------------
                                                              (in millions)
<S>                                                       <C>       <C>
United States operations
  Commercial, industrial and financial................... $16,603     $16,294
  Commercial real estate
    Construction.........................................     353         215
    Other................................................   3,323       3,871
  Consumer-related
    Residential mortgages................................   1,729       2,035
    Home equity..........................................   2,051       2,294
    Credit card..........................................     375         404
    Other................................................   2,357       2,532
  Lease financing........................................   1,810       1,801
  Unearned income........................................    (282)       (275)
                                                          -------     -------
                                                           28,319      29,171
                                                          -------     -------
International operations
  Commercial and industrial..............................   9,158       9,295
  Banks and other financial institutions.................     472         597
  Governments and official institutions..................     144          95
  Consumer-related
    Residential mortgages................................   1,281       1,251
    Credit card..........................................     351         362
    Other................................................   1,166       1,192
  Lease financing........................................     677         725
  All other..............................................     396         369
  Unearned income........................................    (175)       (251)
                                                          -------     -------
                                                           13,470      13,635
                                                          -------     -------
                                                          $41,789     $42,806
                                                          =======     =======
</TABLE>

                                       41
<PAGE>

                            BANKBOSTON CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (continued)


5.Reserve for Credit Losses

  An analysis of the reserve for credit losses is as follows:

<TABLE>
<CAPTION>
                                            Quarters Ended   Six Months Ended
                                               June 30,          June 30,
                                            ---------------- ------------------
                                             1999     1998     1999      1998
                                            -------  ------- --------  --------
                                                     (in millions)
<S>                                         <C>      <C>     <C>       <C>
Balance, beginning of period............... $   758  $  725  $    754  $    712
Provision..................................      95      60       165       200
Reserves of entities acquired..............                                  14
Domestic credit losses
  Commercial, industrial and financial.....     (51)     (8)      (73)      (24)
  Commercial real estate...................      (1)     (3)       (1)       (4)
  Consumer-related
    Residential mortgages..................              (1)       (1)       (4)
    Credit card............................      (4)     (6)       (9)      (27)
    Home equity............................      (2)     (2)       (3)       (4)
    Other..................................     (13)    (17)      (30)      (40)
International credit losses................     (52)    (36)      (89)     (126)
                                            -------  ------  --------  --------
      Total credit losses..................    (123)    (73)     (206)     (229)
                                            -------  ------  --------  --------
Domestic recoveries
  Commercial, industrial and financial.....       2       3         3         6
  Commercial real estate...................       1       4         4         6
  Consumer-related
    Residential mortgages..................                         1         1
    Credit card............................                         1         1
    Home equity............................       1       1         1         1
    Other..................................       4       6         8        10
International recoveries...................      54       8        61        12
                                            -------  ------  --------  --------
      Total recoveries.....................      62      22        79        37
                                            -------  ------  --------  --------
Net credit losses..........................     (61)    (51)     (127)     (192)
                                            -------  ------  --------  --------
Balance, end of period..................... $   792  $  734  $    792  $    734
                                            =======  ======  ========  ========
</TABLE>

  During the second quarter of 1999, the Corporation transferred certain lower
quality domestic commercial loans to an accelerated disposition portfolio.
These loans were transferred at their estimated disposition value of
approximately $100 million; credit losses resulting from certain of these
transfers are included in net credit losses for the period.

  At June 30, 1999, loans for which impairment has been recognized in
accordance with Statement of Financial Accounting Standards (SFAS) No. 114,
"Accounting by Creditors for Impairment of a Loan," totaled $177 million, of
which loans totaling $6 million required no valuation reserve and loans
totaling $171 million required a valuation reserve of $42 million. At December
31, 1998, impaired loans totaled $191 million, of which loans totaling $15
million required no valuation reserve and loans totaling $176 million required
a valuation reserve of $40 million. For the six months ended June 30, 1999 and
1998, average impaired loans were approximately $175 million and $180 million,
respectively. Interest recognized on impaired loans during these periods was
not significant.

                                      42
<PAGE>

                            BANKBOSTON CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (continued)


6.Guaranteed Preferred Beneficial Interests in Corporation's Junior
Subordinated Debentures

  Since November 1996, the Corporation has formed five wholly-owned grantor
trusts, BankBoston Capital Trust I, II, III, IV and V (collectively, the
Trusts), for the exclusive purpose of issuing capital securities (Trust
Securities) and investing the proceeds from the sale of such securities in
junior subordinated debentures issued by the Corporation. The aggregate amount
of such debentures outstanding totaled $995 million at both June 30, 1999 and
December 31, 1998.

  There have been no issuances of Trust Securities by BankBoston Capital Trust
V. A summary of the Trust Securities issued and outstanding, net of discount,
is as follows:

<TABLE>
<CAPTION>
                           BankBoston       BankBoston       BankBoston        BankBoston
                         Capital Trust I Capital Trust II Capital Trust III Capital Trust IV
                         --------------- ---------------- ----------------- ----------------
<S>                      <C>             <C>              <C>               <C>
Amount outstanding (in
 millions)..............           $250            $250             $248             $247
Original issue date.....       11/26/96        12/10/96           6/4/97           6/8/98
Rate....................           8.25%           7.75%     Libor + .75%     Libor + .60%
Earliest prepayment
 option date............       12/15/06        12/15/06          6/15/07           6/8/03
Stated maturity.........       12/15/26        12/15/26          6/15/27           6/8/28
Distribution payment
 frequency..............  semi-annually   semi-annually        quarterly        quarterly
Liquidation preference
 per Trust Security.....         $1,000          $1,000           $1,000           $1,000
</TABLE>

  All of the Trust Securities may be prepaid at the option of the Trusts, in
whole or in part, on or after the prepayment option dates listed above. At
June 30, 1999, the interest rates on the Capital Trust III and IV floating
rate Trust Securities were 5.89% and 5.70%, respectively. The Corporation's
guarantees of the Trust Securities, together with the other obligations of the
Corporation with respect to the Trust Securities, constitute a full and
unconditional guarantee by the Corporation of all of the Trusts' obligations
under the Trust Securities.

  The Corporation owns all of the common securities of the Trusts, the sole
assets of which are their respective subordinated debentures. The principal
amount of subordinated debentures held by each Trust equals the aggregate
liquidation amount of its Trust Securities and its common securities. The
subordinated debentures bear interest at the same rate, and will mature on the
same date, as the corresponding Trust Securities.

7.Business Segment Information

  Effective December 31, 1998, the Corporation adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." This
new standard requires disclosure of financial and descriptive information
about an entity's reportable operating segments. In accordance with the new
standard, the Corporation has presented financial and descriptive information
for four principal operating segments--the Wholesale Bank, the Regional Bank,
Argentina and Brazil. For information about these segments, as well as other
segments not individually reportable, see Management's Discussion and Analysis
under the section entitled "Line of Business Information."

                                      43
<PAGE>

                            BANKBOSTON CORPORATION

                   NOTES TO FINANCIAL STATEMENTS (continued)


8.Earnings per Share

  A summary of the Corporation's calculation of earnings per share follows:

<TABLE>
<CAPTION>
                                              Quarters Ended  Six Months Ended
                                                 June 30,         June 30,
                                              --------------- -----------------
                                               1999    1998     1999     1998
                                              ------- ------- -------- --------
                                                        (in millions)
<S>                                           <C>     <C>     <C>      <C>
Net income................................... $   250 $   242 $    473 $    480
Less preferred dividends.....................               4                 9
                                              ------- ------- -------- --------
Net income applicable to common stock........ $   250 $   238 $    473 $    471
                                              ======= ======= ======== ========

<CAPTION>
                                                       (in thousands)
<S>                                           <C>     <C>     <C>      <C>
Weighted average number of common shares
 outstanding used in calculation of basic
 earnings per share.......................... 296,832 293,769  296,386  293,159
Incremental shares from the assumed exercise
 of dilutive stock options as of the
 beginning of the period.....................   4,830   4,506    3,709    4,420
                                              ------- ------- -------- --------
Weighted average number of common shares
 outstanding used in calculation of diluted
 earnings per share.......................... 301,662 298,275  300,095  297,579
                                              ======= ======= ======== ========

  Basic earnings per common share............ $   .84 $   .81 $   1.60 $   1.61
                                              ======= ======= ======== ========
  Diluted earnings per common share.......... $   .83 $   .80 $   1.58 $   1.58
                                              ======= ======= ======== ========
</TABLE>

9.Contingencies

  The Corporation and its subsidiaries are defendants in a number of legal
proceedings arising in the normal course of business. Management, after
reviewing all actions and proceedings pending against or involving the
Corporation and its subsidiaries, considers that the aggregate loss, if any,
resulting from the final outcome of these proceedings should not be material
to the Corporation's financial condition or results of operations.

10.Nonowner Changes in Equity

  The Corporation reports nonowner changes in equity in accordance with SFAS
No. 130, "Reporting Comprehensive Income." Nonowner changes in equity consist
of net income and other nonowner changes, composed of unrealized gains and
losses on securities available for sale and foreign currency translation
adjustments. The Corporation has reported nonowner changes in equity for the
six months ended June 30, 1999 and 1998 in the accompanying consolidated
statement of changes in stockholders' equity on a net-of-tax basis. The
changes in unrealized gain (loss) on securities available for sale have also
been presented net of reclassification adjustments related to net securities
gains (losses) that were realized from sales and writedowns of such securities
during the respective periods. These gains (losses), on an after-tax basis,
amounted to $(3) million and $22 million for the six months ended June 30,
1999 and 1998, respectively. Tax provisions (benefits) related to other
nonowner changes in equity for the six months ended June 30, 1999 and 1998
were as follows: change in unrealized gain (loss) on securities available for
sale, $(52) million and $7 million, respectively; reclassification adjustment,
$(2) million and $14 million, respectively; and change in foreign currency
translation, $7 million and zero, respectively.

                                      44
<PAGE>

Consolidated Balance Sheet Averages by Quarter

Last Nine Quarters

<TABLE>
<CAPTION>
                                   1997                        1998                    1999
                          ----------------------- ------------------------------- ---------------
                             2       3       4       1       2       3       4       1       2
                          ------- ------- ------- ------- ------- ------- ------- ------- -------
                                                       (in millions)
<S>                       <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
         ASSETS
Interest bearing
 deposits in other
 banks..................  $ 1,748 $ 1,737 $ 1,683 $ 1,579 $ 1,077 $   962 $ 1,238 $ 1,100 $ 1,150
Federal funds sold and
 securities purchased
 under agreements to
 resell.................    1,896   2,018   2,322   2,524   3,252   3,483   3,470   5,523   8,583
Trading assets..........    1,590   1,924   1,769   2,072   2,248   1,663   1,594   1,874   1,977
Securities..............    9,488   9,661  10,538  10,606  11,188  11,692  12,171  13,247  13,898
Loans and lease
 financing..............   42,112  42,429  43,242  43,706  44,196  45,069  45,731  42,536  42,538
                          ------- ------- ------- ------- ------- ------- ------- ------- -------
 Total earning assets...   56,834  57,769  59,554  60,487  61,961  62,869  64,204  64,280  68,146
Other assets............    7,112   7,935   8,538   9,223   9,275   9,632  11,127  11,830  12,398
                          ------- ------- ------- ------- ------- ------- ------- ------- -------
 TOTAL ASSETS...........  $63,946 $65,704 $68,092 $69,710 $71,236 $72,501 $75,331 $76,110 $80,544
                          ======= ======= ======= ======= ======= ======= ======= ======= =======
    LIABILITIES AND
  STOCKHOLDERS' EQUITY
Deposits
Domestic offices
 Noninterest bearing....  $ 7,229 $ 7,182 $ 7,535 $ 7,482 $ 7,031 $ 6,186 $ 5,763 $ 5,688 $ 6,053
 Interest bearing.......   24,657  24,713  24,825  25,594  25,786  26,147  28,618  28,750  28,607
Overseas offices
 Noninterest bearing....      626     709     883   1,134   1,178   1,019   1,091   1,350   1,371
 Interest bearing.......    9,734  10,385  11,009  11,564  11,409  11,187  11,917  11,628  12,069
                          ------- ------- ------- ------- ------- ------- ------- ------- -------
 Total deposits.........   42,246  42,989  44,252  45,774  45,404  44,539  47,389  47,416  48,100
Federal funds purchased
 and repurchase
 agreements.............    5,776   6,047   6,318   5,337   5,358   6,825   7,267   8,448  12,080
Other funds borrowed....    5,690   6,320   6,412   6,972   7,696   7,598   6,012   4,928   4,870
Notes payable(1)........    3,351   3,336   3,524   3,749   4,392   5,149   5,477   5,526   5,586
Other liabilities.......    2,216   2,464   3,106   3,148   3,508   3,618   4,417   4,915   4,869
Stockholders' equity....    4,667   4,548   4,480   4,730   4,878   4,772   4,769   4,877   5,039
                          ------- ------- ------- ------- ------- ------- ------- ------- -------
 TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY..  $63,946 $65,704 $68,092 $69,710 $71,236 $72,501 $75,331 $76,110 $80,544
                          ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
--------
(1)Amounts include guaranteed preferred beneficial interests in Corporation's
  junior subordinated debentures.

                                       45
<PAGE>

Consolidated Statement of Income by Quarter--Taxable Equivalent Basis

Last Nine Quarters

<TABLE>
<CAPTION>
                                  1997                     1998                    1999
                          --------------------  -----------------------------  --------------
                            2      3      4       1      2       3       4       1       2
                          ------ ------ ------  ------ ------  ------  ------  ------  ------
                                     (in millions, except per share amounts)
<S>                       <C>    <C>    <C>     <C>    <C>     <C>     <C>     <C>     <C>
Net Interest Revenue....  $615.9 $571.1 $621.5  $603.3 $639.5  $624.9  $658.9  $634.8  $678.2
Taxable equivalent
 adjustment.............     4.5    5.4    9.6     3.7    5.4     4.7     9.3     4.3     6.4
                          ------ ------ ------  ------ ------  ------  ------  ------  ------
 Total net interest
  revenue...............   620.4  576.5  631.1   607.0  644.9   629.6   668.2   639.1   684.6
Provision for credit
 losses.................    60.0   40.0   40.0   140.0   60.0    60.0   120.0    70.0    95.0
                          ------ ------ ------  ------ ------  ------  ------  ------  ------
 Net interest revenue
  after provision for
  credit losses.........   560.4  536.5  591.1   467.0  584.9   569.6   548.2   569.1   589.6
                          ------ ------ ------  ------ ------  ------  ------  ------  ------
Noninterest Income
Financial service fees
 and commissions........   157.6  170.4  195.7   165.1  194.6   222.8   294.5   333.5   455.7
Trust and investment
 management fees........    69.4   72.8   74.8    79.3   82.1    82.3    82.4    79.1    81.6
Trading profits and
 commissions............    27.9   19.9   (8.6)   34.0   (3.7)  (52.1)   19.0    39.0    40.9
Securities
 gains/(losses), net....    31.9   11.3   27.4    24.8   11.4    16.6   (12.2)   (2.0)   (2.7)
Other income............    90.0  173.8  119.1   285.8  173.0   115.5   216.8   145.1   136.2
                          ------ ------ ------  ------ ------  ------  ------  ------  ------
 Total noninterest
  income................   376.8  448.2  408.4   589.0  457.4   385.1   600.5   594.7   711.7
                          ------ ------ ------  ------ ------  ------  ------  ------  ------
Noninterest Expense
Salaries................   260.2  263.8  283.0   292.7  305.1   384.4   390.9   401.9   482.5
Employee benefits.......    51.3   54.0   56.3    60.9   63.3    64.1    68.2    71.5    65.1
Occupancy expense.......    52.1   49.6   51.3    54.4   55.8    58.3    62.9    64.0    67.9
Equipment expense.......    35.8   36.1   38.4    40.1   39.6    40.8    45.9    44.6    44.8
Other expense...........   178.5  197.8  171.5   212.9  183.6   238.0   248.0   223.5   239.1
                          ------ ------ ------  ------ ------  ------  ------  ------  ------
 Total noninterest
  expense...............   577.9  601.3  600.5   661.0  647.4   785.6   815.9   805.5   899.4
                          ------ ------ ------  ------ ------  ------  ------  ------  ------
Income before income
 taxes..................   359.3  383.4  399.0   395.0  394.9   169.1   332.8   358.3   401.9
Provision for income
 taxes..................   142.8  152.3  154.7   153.0  147.6    59.4   116.6   131.0   145.3
Taxable equivalent
 adjustment.............     4.5    5.4    9.6     3.7    5.4     4.7     9.3     4.3     6.4
                          ------ ------ ------  ------ ------  ------  ------  ------  ------
 Taxable equivalent
  provision.............   147.3  157.7  164.3   156.7  153.0    64.1   125.9   135.3   151.7
                          ------ ------ ------  ------ ------  ------  ------  ------  ------
NET INCOME..............  $212.0 $225.7 $234.7  $238.3 $241.9  $105.0  $206.9  $223.0  $250.2
                          ====== ====== ======  ====== ======  ======  ======  ======  ======
Per Common Share
Net Income
 Basic..................  $  .68 $  .75 $  .79  $  .80 $  .81  $  .35  $  .70  $  .75  $  .84
 Diluted................     .68    .73    .78     .79    .80     .35     .70     .75     .83
Cash dividends
 declared...............     .26    .26    .26     .29    .29     .29     .29     .32     .32
</TABLE>

                                       46
<PAGE>

         AVERAGE BALANCES AND INTEREST RATES, Taxable Equivalent Basis

<TABLE>
<CAPTION>
                                     1999                        1998
Quarters Ended June 30    --------------------------- ---------------------------
                          Average             Average Average             Average
                          Volume  Interest(1)  Rate   Volume  Interest(1)  Rate
                          ------- ----------- ------- ------- ----------- -------
         ASSETS                            (dollars in millions)
<S>                       <C>     <C>         <C>     <C>     <C>         <C>
Interest Bearing
 Deposits with Other
 Banks
 U.S....................  $   173    $   2      5.27% $    84    $   1      5.61%
 International..........      977       26     10.50      993       25     10.15
                          -------    -----            -------    -----
   Total................    1,150       28      9.71    1,077       26      9.80
                          -------    -----     -----  -------    -----     -----
Federal Funds Sold and
 Resale Agreements
 U.S....................    6,706       85      5.10    1,105       15      5.67
 International..........    1,877       44      9.35    2,147       79     14.75
                          -------    -----            -------    -----
   Total................    8,583      129      6.03    3,252       94     11.66
                          -------    -----     -----  -------    -----     -----
Trading Assets
 U.S....................    1,379       20      5.69    1,210       18      5.78
 International..........      598       10      6.84    1,038       18      7.11
                          -------    -----            -------    -----
   Total................    1,977       30      6.04    2,248       36      6.40
                          -------    -----     -----  -------    -----     -----
Securities
 U.S.
  Available for
   sale(2)..............   10,686      177      6.60    8,692      150      6.96
  Held to maturity......      403        6      6.76      613       10      6.62
 International
  Available for
   sale(2)..............    2,809       55      7.79    1,883       47      9.96
                          -------    -----            -------    -----
   Total................   13,898      238      6.89   11,188      207      7.40
                          -------    -----     -----  -------    -----     -----
Loans and Lease
 Financing (Net of
 Unearned Income)
 U.S....................   29,107      581      8.01   30,255      630      8.36
 International..........   13,431      448     13.38   13,941      402     11.56
                          -------    -----            -------    -----
   Total(3).............   42,538    1,029      9.70   44,196    1,032      9.37
                          -------    -----     -----  -------    -----     -----
  Total earning
   assets...............   68,146    1,454      8.56   61,961    1,395      9.03
                                     -----     -----             -----     -----
  Nonearning assets.....   12,398                       9,275
                          -------                     -------
   Total Assets.........  $80,544                     $71,236
                          =======                     =======
    LIABILITIES AND
  STOCKHOLDERS' EQUITY
Deposits
 U.S.
  Savings deposits......  $17,860    $ 102      2.29% $15,274    $ 101      2.66%
  Time deposits.........   10,747      134      4.98   10,512      145      5.52
 International..........   12,069      223      7.42   11,409      218      7.67
                          -------    -----            -------    -----
   Total................   40,676      459      4.52   37,195      464      5.01
                          -------    -----     -----  -------    -----     -----
Federal Funds Purchased
 and Repurchase
 Agreements
 U.S....................   11,885      133      4.49    5,103       68      5.32
 International..........      195        6     12.30      255        3      4.15
                          -------    -----            -------    -----
   Total................   12,080      139      4.61    5,358       71      5.26
                          -------    -----     -----  -------    -----     -----
Other Funds Borrowed
 U.S....................    3,184       39      4.90    5,870       86      5.91
 International..........    1,686       43     10.33    1,826       53     11.70
                          -------    -----            -------    -----
   Total................    4,870       82      6.78    7,696      139      7.28
                          -------    -----     -----  -------    -----     -----
Notes Payable
 U.S.(4)................    5,359       84      6.23    4,051       67      6.70
 International..........      227        6     10.86      341        9     10.31
                          -------    -----            -------    -----
   Total................    5,586       90      6.42    4,392       76      6.98
                          -------    -----     -----  -------    -----     -----
  Total interest
   bearing
   liabilities..........   63,212      770      4.88   54,641      750      5.51
                                     -----     -----             -----     -----
Demand deposits--U.S....    6,053                       7,031
Demand deposits--
 International..........    1,371                       1,178
Other noninterest
 bearing liabilities....    4,869                       3,508
Stockholders' equity....    5,039                       4,878
                          -------                     -------
   Total Liabilities and
    Stockholders'
    Equity..............  $80,544                     $71,236
                          =======                     =======
NET INTEREST REVENUE AS
 A PERCENTAGE OF AVERAGE
 INTEREST EARNING ASSETS
 U.S....................  $48,454    $ 425      3.52% $41,959    $ 431      4.12%
 International..........   19,692      259      5.29%  20,002      214      4.29%
                          -------    -----            -------    -----
   Total................  $68,146    $ 684      4.03% $61,961    $ 645      4.17%
                          =======    =====            =======    =====
</TABLE>
--------
(1)Income is shown on a fully taxable equivalent basis.
(2)Average rates for securities available for sale are based on the securities'
  amortized cost.
(3)Loans and lease financing includes nonaccrual balances.
(4)Amounts include guaranteed preferred beneficial interests in Corporation's
  junior subordinated debentures.

                                       47
<PAGE>

         AVERAGE BALANCES AND INTEREST RATES, Taxable Equivalent Basis

<TABLE>
<CAPTION>
                                     1999                        1998
Six Months Ended June 30  --------------------------- ---------------------------
                          Average             Average Average             Average
                          Volume  Interest(1)  Rate   Volume  Interest(1)  Rate
                          ------- ----------- ------- ------- ----------- -------
         ASSETS                            (dollars in millions)
<S>                       <C>     <C>         <C>     <C>     <C>         <C>
Interest Bearing
 Deposits with Other
 Banks
 U.S....................  $   185   $    5      5.41% $   101   $    3      5.69%
 International..........      940       50     10.78    1,226       57      9.38
                          -------   ------            -------   ------
   Total................    1,125       55      9.90    1,327       60      9.10
                          -------   ------     -----  -------   ------     -----
Federal Funds Sold and
 Resale Agreements
 U.S....................    5,569      135      4.88      867       25      5.75
 International..........    1,493       75     10.17    2,023      154     15.36
                          -------   ------            -------   ------
   Total................    7,062      210      6.00    2,890      179     12.48
                          -------   ------     -----  -------   ------     -----
Trading Assets
 U.S....................    1,328       33      4.95    1,179       33      5.71
 International..........      597       21      7.17      982       33      6.74
                          -------   ------            -------   ------
   Total................    1,925       54      5.64    2,161       66      6.18
                          -------   ------     -----  -------   ------     -----
Securities
 U.S.
  Available for
   sale(2)..............   10,533      331      6.31    8,536      283      6.76
  Held to maturity......      420       13      6.39      624       20      6.44
 International
  Available for
   sale(2)..............    2,621      102      7.76    1,738       85      9.77
                          -------   ------            -------   ------
   Total................   13,574      446      6.63   10,898      388      7.17
                          -------   ------     -----  -------   ------     -----
Loans and Lease
 Financing (Net of
 Unearned Income)
 U.S....................   29,113    1,171      8.11   30,321    1,271      8.45
 International..........   13,424      894     13.43   13,631      773     11.44
                          -------   ------            -------   ------
   Total(3).............   42,537    2,065      9.79   43,952    2,044      9.38
                          -------   ------     -----  -------   ------     -----
  Total earning
   assets...............   66,223    2,830      8.62   61,228    2,737      9.01
                                    ------     -----            ------     -----
  Nonearning assets.....   12,115                       9,248
                          -------                     -------
   Total Assets.........  $78,338                     $70,476
                          =======                     =======
    LIABILITIES AND
  STOCKHOLDERS' EQUITY
Deposits
 U.S.
  Savings deposits......  $17,671   $  200      2.28% $15,003   $  199      2.67%
  Time deposits.........   11,007      276      5.06   10,687      295      5.56
 International..........   11,850      456      7.75   11,486      432      7.59
                          -------   ------            -------   ------
   Total................   40,528      932      4.64   37,176      926      5.02
                          -------   ------     -----  -------   ------     -----
Federal Funds Purchased
 and Repurchase
 Agreements
 U.S....................   10,066      222      4.44    5,153      142      5.56
 International..........      208        9      8.68      194        5      5.42
                          -------   ------            -------   ------
   Total................   10,274      231      4.53    5,347      147      5.56
                          -------   ------     -----  -------   ------     -----
Other Funds Borrowed
 U.S....................    3,475       85      4.94    5,634      168      5.99
 International..........    1,424       85     12.10    1,702      102     12.11
                          -------   ------            -------   ------
   Total................    4,899      170      7.02    7,336      270      7.41
                          -------   ------     -----  -------   ------     -----
Notes Payable
 U.S.(4)................    5,292      161      6.15    3,740      126      6.79
 International..........      264       12      8.89      333       16      9.49
                          -------   ------            -------   ------
   Total................    5,556      173      6.28    4,073      142      7.01
                          -------   ------     -----  -------   ------     -----
  Total interest
   bearing
   liabilities..........   61,257    1,506      4.96   53,932    1,485      5.55
                                    ------     -----            ------     -----
Demand deposits--U.S....    5,872                       7,255
Demand deposits--
 International..........    1,360                       1,156
Other noninterest
 bearing liabilities....    4,892                       3,330
Stockholders' equity....    4,957                       4,803
                          -------                     -------
   Total Liabilities and
    Stockholders'
    Equity..............  $78,338                     $70,476
                          =======                     =======
NET INTEREST REVENUE AS
 A PERCENTAGE OF AVERAGE
 INTEREST EARNING ASSETS
 U.S....................  $47,148   $  826      3.53% $41,628   $  853      4.13%
 International..........   19,075      498      5.26%  19,600      399      4.11%
                          -------   ------            -------   ------
   Total................  $66,223   $1,324      4.03% $61,228   $1,252      4.12%
                          =======   ======            =======   ======
</TABLE>
--------
(1)Income is shown on a fully taxable equivalent basis.
(2)Average rates for securities available for sale are based on the securities'
  amortized cost.
(3)Loans and lease financing includes nonaccrual balances.
(4)Amounts include guaranteed preferred beneficial interests in Corporation's
  junior subordinated debentures.

                                       48
<PAGE>

            CHANGE IN NET INTEREST REVENUE--VOLUME AND RATE ANALYSIS

  The following table presents, on a fully taxable equivalent basis, an
analysis of the effect on net interest revenue of volume and rate changes. The
change due to the volume/rate variance has been allocated to volume.

             Second Quarter 1999 Compared With Second Quarter 1998

<TABLE>
<CAPTION>
                                              Increase (Decrease)
                                                Due to Change in
                                              ----------------------
                                                Volume      Rate      Net Change
                                              ----------  ----------  ----------
                                                       (in millions)
<S>                                           <C>         <C>         <C>
Interest income
  Loans and lease financing
    U.S......................................  $     (22) $      (27)   $ (49)
    International............................        (17)         63       46
                                                                        -----
                                                                           (3)
                                                                        -----
  Other earning assets
    U.S......................................        114         (18)      96
    International............................          5         (39)     (34)
                                                                        -----
                                                                           62
                                                                        -----
Total interest income........................        132         (73)      59
Total interest expense.......................         70         (50)      20
                                                                        -----
Net interest revenue.........................         61         (22)   $  39
                                                                        =====


  Six Months Ended June 30, 1999 Compared With Six Months Ended June 30, 1998

<CAPTION>
                                              Increase (Decrease)
                                                Due to Change in
                                              ----------------------
                                                Volume      Rate      Net Change
                                              ----------  ----------  ----------
                                                       (in millions)
<S>                                           <C>         <C>         <C>
Interest income
  Loans and lease financing
    U.S......................................  $     (48) $      (52)   $(100)
    International............................        (14)        135      121
                                                                        -----
                                                                           21
                                                                        -----
  Other earning assets
    U.S......................................        193         (40)     153
    International............................        (15)        (66)     (81)
                                                                        -----
                                                                           72
                                                                        -----
Total interest income........................        213        (120)      93
Total interest expense.......................        113         (92)      21
                                                                        -----
Net interest revenue.........................         98         (26)   $  72
                                                                        =====
</TABLE>

                                       49
<PAGE>

                          PART II--OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders.

 (a) A Special Meeting of the Stockholders of the Corporation was held on
    August 11, 1999 (the Special Meeting).

 (b) Not applicable.

 (c) The following matter was submitted to a vote of the Stockholders of the
    Corporation at the Special Meeting:

  (1)To approve the Agreement and Plan of Merger between the Corporation and
  Fleet and the consummation of the transactions contemplated by that
  agreement

<TABLE>
      <S>                  <C>
      Total Votes For      234,258,865
      Total Votes Against    8,124,929
      Total Abstentions      1,697,411
</TABLE>

Item 6. Exhibits and Reports on Form 8-K.

 (a) Exhibits.

<TABLE>
   <C>   <S>
   12(a) --Computation of the Corporation's Consolidated Ratio of Earnings to
          Fixed Charges (excluding interest on deposits).
   12(b) --Computation of the Corporation's Consolidated Ratio of Earnings to
          Fixed Charges (including interest on deposits).
   12(c) --Computation of the Corporation's Consolidated Ratio of Earnings to
          Fixed Charges and Preferred Stock Dividend Requirements (excluding
          interest on deposits).
   12(d) --Computation of the Corporation's Consolidated Ratio of Earnings to
          Fixed Charges and Preferred Stock Dividend Requirements (including
          interest on deposits).
   27    --Financial Data Schedule.
</TABLE>

 (b) Current Reports on Form 8-K.

  During the second quarter of 1999, the Corporation filed three Current
Reports on Form 8-K, dated April 2, 1999, April 15, 1999 and May 14, 1999,
respectively, which contained information pursuant to Items 5 and 7 of Form 8-
K. The Corporation also filed a Current Report on Form 8-K, dated July 15,
1999, which contained information pursuant to Items 5 and 7 of Form 8-K.

                                      50
<PAGE>

                                  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.

                                          BANKBOSTON CORPORATION

                                                   /s/ Charles K. Gifford
                                          _____________________________________
                                                     Charles K. Gifford
                                                 Chairman of the Board and
                                                  Chief Executive Officer

                                                  /s/ Susannah M. Swihart
                                          _____________________________________
                                                    Susannah M. Swihart
                                               Vice Chairman, Chief Financial
                                                          Officer
                                                       and Treasurer

Date: August 12, 1999

                                      51