SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549



                                    FORM 10-Q



(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 For the quarterly period ended June 30, 1998

                                       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 1-3410


                          AMERICAN BANKNOTE CORPORATION

             (Exact name of Registrant as specified in its charter)


                    A Delaware               I.R.S. Employer
                    Corporation               No. 13-0460520


                 200 Park Avenue, New York, New York 10166-4999

                       Telephone - Area Code 212-557-9100


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 for the
past 90 days.        Yes  [X]         No  [  ]

At July 28, 1998 - 22,079,787 shares of common stock were outstanding.


<PAGE>

                          AMERICAN BANKNOTE CORPORATION

                                    FORM 10-Q

                                    I N D E X

                                                                PAGE
                                                                NO.

PART I - FINANCIAL INFORMATION

 Item 1.  Financial Statements

   Unaudited Condensed Consolidated Balance Sheets
      June 30, 1998 and December 31, 1997 . . . . . . . . .      3

   Unaudited Condensed Consolidated Statements of Operations
      For the Six and Three Months Ended June 30, 1998
      and 1997. . . . . . . . . . . . . . . . . . . . . .        4

   Unaudited Condensed Consolidated Statements of Cash Flows
      For the Six Months Ended June 30, 1998 and 1997 . . .      5

   Unaudited Condensed Consolidated Statement of Stockholders'
      Equity For the Six Months Ended June 30, 1998 . . . .      6

   Notes to Unaudited Condensed Consolidated
      Financial Statements. . . . . . . . . . . . . . . . .      7

 Item 2. Management's Discussion and Analysis of
      Financial Condition and Results of Operations . . . .     12

PART II - OTHER INFORMATION

 Item 1. Legal Proceedings. . . . . . . . . . . . . . . . .     19

 Item 4. Submission of Matters to a Vote of
         Security Holders . . . . . . . . . . . . . . . . .     19

 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . .     20


<PAGE>

PART I - Financial Information
ITEM 1.  Financial Statements
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)

                                                            June       December
                                                          30, 1998     31, 1997
                                                          --------     --------
                                                         (Unaudited)
ASSETS
Current assets
  Cash and cash equivalents . . . . . . . . . . . . .     $  6,980     $ 17,323
  Accounts receivable, net of allowance for
    doubtful accounts of $947 and $986. . . . . . . .       57,947       57,422
  Costs in excess of billings, of $10,916 and
    $2,848, on uncompleted contracts. . . . . . . . .        4,197        5,442
  Inventories . . . . . . . . . . . . . . . . . . . .       47,526       41,686
  Deferred income taxes . . . . . . . . . . . . . . .        3,759        3,046
  Prepaid expenses and other. . . . . . . . . . . . .       17,998       11,371
                                                          --------     --------
      Total current assets  . . . . . . . . . . . . .      138,407      136,290
Property, plant and equipment, at cost,
  net of accumulated depreciation and
  amortization of $121,377 and $113,939 . . . . . . .      249,485      258,724
Other assets  . . . . . . . . . . . . . . . . . . . .       26,324       25,918
Excess of cost of investment in subsidiaries
  over net assets acquired, net of accumulated
  amortization of $10,165 and $8,863  . . . . . . . .       79,555       82,604
                                                          --------     --------
                                                          $493,771     $503,536
                                                          ========     ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Revolving credit facilities . . . . . . . . . . . .     $  9,872     $  7,523
  Current portion of long-term debt . . . . . . . . .       13,416       17,886
  Accounts payable and accrued expenses . . . . . . .       66,782       54,761
                                                          --------     --------
      Total current liabilities . . . . . . . . . . .       90,070       80,170
Long-term debt  . . . . . . . . . . . . . . . . . . .      295,229      293,215
Other liabilities . . . . . . . . . . . . . . . . . .       19,372       21,466
Deferred income taxes . . . . . . . . . . . . . . . .       28,640       32,808
Minority interest . . . . . . . . . . . . . . . . . .       19,202       20,836
                                                          --------     --------
                                                           452,513      448,495
Commitments and Contingencies

Stockholders' equity
  Preferred Stock, authorized 5,000,000 shares,
    no shares issued or outstanding . . . . . . . . .            -            -
  Zero Coupon Convertible Subordinated Debentures . .        7,193        8,326
  Common Stock, par value $.01 per share,
    authorized 50,000,000 shares; issued
    22,360,787 shares and 21,134,769 shares . . . . .          224          211
  Capital surplus . . . . . . . . . . . . . . . . . .       79,143       74,713
  Retained-earnings (deficit) . . . . . . . . . . . .      (34,485)     (23,282)
  Unearned compensation . . . . . . . . . . . . . . .       (1,889)
  Treasury stock, at cost (281,000 shares)  . . . . .       (1,253)      (1,253)
  Cumulative currency translation adjustment  . . . .       (7,675)      (3,674)
                                                          --------     --------
      Total stockholders' equity  . . . . . . . . . .       41,258       55,041
                                                          --------     --------
                                                          $493,771     $503,536
                                                          ========     ========

See Notes to Condensed Consolidated Financial Statements.

<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(Amounts in thousands, except per share data)



                                      Six Months Ended     Three Months Ended
                                           June 30              June 30
                                        1998     1997       1998       1997
                                      -------  -------     ------     -----


Sales. . . . . . . . . . . . . . .   $164,006  $160,264    $87,166   $79,168
                                     --------  --------    -------   -------

Costs and expenses:
  Cost of goods sold . . . . . . .    121,310   107,828     64,408    52,457
  Selling and administrative . . .     26,620    22,919     14,037    10,994
  Depreciation and amortization. .     11,817    11,453      6,117     5,706
                                     --------   -------    -------   -------
                                      159,747   142,200     84,562    69,157
                                     --------   -------    -------   -------

                                        4,259    18,064      2,604    10,011
Other (expense) income:
  Interest expense . . . . . . . .    (17,550)  (15,902)    (8,868)   (8,130)
  Other, net . . . . . . . . . . .        200     1,552        (51)    1,035
                                     --------   -------    -------   -------
                                      (17,350)  (14,350)    (8,919)   (7,095)
                                     --------   -------    -------   -------

Income (loss) before taxes on income
  (benefit) and minority interest.    (13,091)    3,714     (6,315)    2,916

Taxes on income (benefit). . . . .     (4,134)     (436)    (2,582)     (269)
                                     --------   -------    -------   -------

  Income (loss) before
    minority interest. . . . . . .     (8,957)    4,150     (3,733)    3,185

Minority interest. . . . . . . . .        310     1,894        255     1,046
                                     --------   -------    -------   -------

  Net income (loss). . . . . . . .   $ (9,267)  $ 2,256    $(3,988)  $ 2,139
                                     ========   =======    =======   =======



  Accreted interest of other
    equity security. . . . . . . .   $   (281)  $  ---     $  (128)  $  ---
                                     ========   =======    =======   ======

Net income (loss) available for
    common stockholders. . . . . .   $ (9,548)  $ 2,256    $(4,116)  $ 2,139
                                     ========   =======    =======   =======


  Net income (loss) per share:
    Basic. . . . . . . . . . . . .   $  (0.45)  $   .11    $ (0.19)  $   .11
                                     ========   =======    =======   =======
    Diluted. . . . . . . . . . . .   $  (0.45)  $   .11    $ (0.19)  $   .10
                                     ========   =======    =======   =======

  Shares used in computing per share amounts:
      Basic. . . . . . . . . . . .     21,130    19,820     21,420    19,840
                                     ========   =======    =======   =======
      Diluted. . . . . . . . . . .     21,130    20,630     21,420    20,650
                                     ========   =======    =======   =======


See Notes to Condensed Consolidated Financial Statements.

<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Dollars in thousands)
                                                          Six Months Ended
                                                              June 30
                                                         1998        1997
                                                         ----        ----

Operating Activities:
  Net cash from operations, after adjustments
    to reconcile income (loss) to net cash
    provided by operating activities. . . . . . . . .   $(2,492)   $ 12,738
  Changes in operating assets and labilities,
    net of effects from acquisitions:
    Marketable securities.  . . . . . . . . . . . . .                 1,175
    Accounts receivables. . . . . . . . . . . . . . .     1,411       7,333
    Inventories . . . . . . . . . . . . . . . . . . .    (7,386)     (3,140)
    Prepaid and other assets. . . . . . . . . . . . .    (5,210)     (3,666)
    Accounts payable and accrued expenses . . . . . .     8,683      (8,667)
    Other . . . . . . . . . . . . . . . . . . . . . .    (1,882)     (1,336)
                                                        -------    --------

Net cash provided by (used in)
    operating activities  . . . . . . . . . . . . . .    (6,876)      4,437
                                                        -------    --------

Investing Activities:
  Acquisitions of subsidiaries. . . . . . . . . . . .    (1,047)     (2,520)
  Capital expenditures. . . . . . . . . . . . . . . .    (2,515)     (4,117)
                                                        -------    --------

Net cash used in investing activities . . . . . . . .    (3,562)     (6,637)
                                                        -------    --------

Financing Activities:
  Long-term borrowings (net of related
    expenses in 1998 of $1,520) . . . . . . . . . . .    54,224       6,191
  Payment of long-term debt . . . . . . . . . . . . .   (56,029)     (7,854)
  Revolving credit facilities, net. . . . . . . . . .     2,606       1,946
  Dividend to minority shareholder. . . . . . . . . .      (839)     (2,533)
  Other . . . . . . . . . . . . . . . . . . . . . . .       127
                                                        -------    --------

Net cash provided by or (used in)
  financing activities  . . . . . . . . . . . . . . .        89      (2,250)
                                                        -------    --------

Effect of foreign currency exchange rate
  changes on cash and cash equivalents. . . . . . . .         6          80
                                                        -------    --------


Decrease in cash and cash equivalents . . . . . . . .   (10,343)     (4,370)

Cash and cash equivalents beginning of period . . . .    17,323      14,256
                                                        -------    --------

Cash and cash equivalents end of period . . . . . . .   $ 6,980     $ 9,886
                                                        =======    ========


Supplemental cash payments:
  Taxes . . . . . . . . . . . . . . . . . . . . . . .   $ 4,100     $ 3,400
  Interest  . . . . . . . . . . . . . . . . . . . . .   $15,700     $14,800


See Notes to Condensed Consolidated Financial Statements.

<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - UNAUDITED
SIX MONTHS ENDED JUNE 30, 1998
(Amounts in thousands)

<TABLE>
<CAPTION>

                        Zero Coupon                                                      Cumulative
                        Convertible                    Retained                           Currency
                       Subordinated Common   Capital   Earnings     Unearned    Treasury   Transl.   Total
                        Debentures   Stock   Surplus   (Deficit)   Compensation   Stock    Adjust.   Equity
                        ----------   -----   -------   ---------   ------------   -----    -------   ------
<S>                         <C>       <C>      <C>       <C>          <C>         <C>        <C>       <C>
Balance-
  January 1, 1998          $8,326    $211    $74,713   $(23,282)                $(1,253)  $(3,674)  $55,041

Issuances in
  connection with:
  Options exercised                     1         99                                                    100
  Compensation
    plans                               6      2,270                  $(1,889)                          387
  Acquisition                           2        651                                                    653

Zero coupon
  convertible
  subordinated
  debentures:
  Accreted interest           281                         (281)
  Conversion               (1,414)      4      1,410

Foreign
  currency
  translation
  adjustments                                            (1,655)                           (4,001)   (5,656)

Net loss                                                 (9,267)                                     (9,267)
                        ----------   -----   -------   ---------   ------------  -------  --------   ------
Balance-
 June 30, 1998             $7,193    $224    $79,143   $(34,485)      $(1,889)  $(1,253)  $(7,675)   $41,258
                        ==========   =====   =======   =========   ============  =======  ========   =======
</TABLE>


See Notes to Condensed Consolidated Financial Statements.

<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED


Note A - Basis of Presentation

The accompanying  unaudited condensed  consolidated  financial statements do not
contain all disclosures  required by generally accepted  accounting  principles.
Reference  should be made to the  Company's  Annual  Report on Form 10-K for the
year ended December 31, 1997. The accompanying  unaudited condensed consolidated
financial  statements  reflect all adjustments  (consisting of normal  recurring
adjustments)  which are,  in the  opinion of  management,  necessary  for a fair
statement  of  the  results  of  the  interim  periods  presented  and  are  not
necessarily indicative of the results which may be expected for a full year.

The 1998 basic and diluted income (loss) per share was computed after  deducting
the  accretion  of  interest   attributable  to  the  Zero  Coupon   Convertible
Subordinated  Debentures.  The shares  used to  compute  loss per share for 1998
excludes approximately 4.9 million shares of Common Stock that are reserved for:
conversion of zero coupon subordinated convertible debentures into approximately
2.3 million  shares,  the  exercise of  warrants to purchase  approximately  1.6
million shares and the exercise of  approximately  1.0 million stock options and
other stock  awards.  The exercise or conversion  prices of these  securities is
greater  than  the  average  market  price  of the  common  shares  and or their
inclusion would be antidilutive to diluted loss per share in 1998. In the fourth
quarter of 1997, the Company adopted Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share" and all prior period earnings per share data have been
restated to conform to the provisions of this statement.


Note B - Changes in Common Stock Outstanding

   Balance January 1, 1998                     21,135
     Stock options exercised                       54
     Restricted stock compensation plans          585
     Acquisitions                                 156
     Conversion of zero coupon convertible
       subordinated debenture                     431
                                               ------
   Balance June 30, 1998                       22,361
                                               ======

On March 23, 1998, a total of  approximately  585,000 shares of restricted stock
was awarded to various employees under the Company's Long Term Performance Plan.
Restrictions on the shares lapse over three years. The aggregate market value of
the shares on the date of issuance ($2.2 million) is being charged to operations
over the period that the restrictions lapse.

<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED


Note C - Translation of ABNB's Financial Statements
         Change in Accounting

As a result of the  decreased  inflation  rate in Brazil,  effective  January 1,
1998,  the method of  translating  the  financial  statements  of the  Company's
subsidiary in Brazil,  American Bank Note Grafica e Servicos Ltda. ("ABNB"), was
changed to reflect  translation  gains and  losses as a  separate  component  of
equity.  Prior to 1998,  ABNB's  financial  statements were translated using the
method  applicable  to  hyperinflationary  economies  in which  gains and losses
resulting from translation and transactions  were determined using a combination
of current and  historical  rates and were  reflected in  earnings.  Such charge
included in the  condensed  consolidated  statement  of  operations  for the six
months  ended  June 30,  1997 was  approximately  $107,000.  As a result of this
change in  accounting  method,  the Company  adjusted  its  deferred  income tax
liability  with  a  corresponding   charge  of  approximately  $1.7  million  to
stockholders' equity as of the beginning of 1998.

Note D - Acquisitions

As of March 31,  1998,  the  Company  acquired  check  and card  personalization
businesses in France.  The  acquisition  purchase  price of  approximately  $3.3
million was financed with  approximately $1.6 million of non-recourse term loans
in France,  $1.0 million of cash and the  issuance of and 155,503  shares of the
Company's  Common Stock valued at approximately  $0.7 million.  The acquisitions
were accounted for by the purchase method of accounting.  The purchase price was
allocated on a preliminary  basis as follows:  assets  acquired  $14.4  million;
liabilities assumed $11.7 million; and excess cost of investment in subsidiaries
over net assets acquired $0.6 million.

Note E - Accounting Pronouncements

The  AICPA  Accounting  Standards  Executive  Committee  issued  in April  1998,
Statement  of  Position  ("SOP")  98-5,  "Reporting  on the  Costs  of  Start-Up
Activities,"  and is effective for the fiscal years beginning after December 15,
1998.  SOP 98-5 provides  guidance on the financial  reporting of start-up costs
and organization costs. It requires cost of start-up activities and organization
costs to be expensed as incurred.  The Company is evaluating  the effect of this
pronouncement.  Effective  January 1, 1998,  the Company  adopted  Statement  of
Financial  Accounting  Standards  ("SFAS")  No.  130,  "Reporting  Comprehensive
Income."  The  comprehensive  loss for the six months  ended  June 30,  1998 was
approximately  $15.0  million,  inclusive  of the foreign  currency  translation
adjustments of $5.7 million.


<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED


Note E - Accounting Pronouncements - continued

SFAS No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities,"
issued in June 1998, is effective for periods  beginning after June 15, 1999 The
Company is currently evaluating the effect of this standard.


Note F - Inventories
                                               June     December
                                             30, 1998   31, 1997
                                             --------   --------
                                                (in thousands)
   Finished goods. . . . . . . . . . . . .    $ 5,706    $ 6,454
   Work in process . . . . . . . . . . . .     19,767     17,356
   Raw materials and supplies. . . . . . .     22,053     17,876
                                              -------    -------
                                              $47,526    $41,686
                                              =======    =======
Note G - Commitments and Contingencies

The Company is involved in various litigation, reference is made to
"Part II - Other Information, Item 1. Legal Proceedings."

On June 10, 1998, the Company  reached  agreement with De La Rue, plc concerning
the  settlement of the three pending  lawsuits with De La Rue and its affiliated
companies.  Such  actions  have  been  dismissed  with  prejudice.  Terms of the
settlement are subject to a confidentiality agreement and the amounts previously
provided are sufficient to cover the settlement.

The Company and its subsidiaries are parties to various additional  lawsuits (as
both plaintiff and defendant) related to various matters in the normal course of
business,  which in the opinion of  management,  are not  anticipated  to have a
material  adverse impact on its  consolidated  financial  position or results of
operations.

<PAGE>

AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED


Note H - Subsequent Events

Effective July 20, 1998, the Company  completed its previously  announced public
offering of all of the shares of its wholly-owned subsidiary, American Bank Note
Holographics,  Inc. The Company received  approximately $107 million in proceeds
from the offering  before taxes,  and certain  legal,  accounting,  printing and
miscellaneous expenses. The Company estimates its pre-tax gain on the sale to be
approximately $78 million.

The  following  operations  of ABNH are included in the  Condensed  Consolidated
Statement of Operations:
                                               Six Months Ended
                                                    June 30
                                                 1998     1997
                                                 ----     ----

    Sales. . . . . . . . . . . . . . . . .     $16,616  $11,537
                                               -------  -------
    Costs and expenses:
      Cost of goods sold . . . . . . . . .       6,445    5,220
      Selling and administrative . . . . .       2,758    2,413
      Depreciation and amortization  . . .         584      581
                                               -------  -------
        Total costs and expenses                 9,787    8,214
                                               -------  -------
    Operating income . . . . . . . . . . .       6,829    3,323
    Other income, net. . . . . . . . . . .          72       63
    Intercompany interest income . . . . .         152      152
    Interest expense . . . . . . . . . . .        (245)       -
                                               -------  -------
      Income before taxes on income  . . .       6,808    3,538
    Taxes on income . . . . . .. . . . . .       2,736    1,459
                                               -------  -------
          Net income . . . . . . . . . . .     $ 4,072  $ 2,079
                                               =======  =======

The  following  balance  sheet  amounts of ABNH are  included  in the  Condensed
Consolidated Balance Sheet as of June 30, 1998:

    Current assets . . . . . . . . . . . .      $23,614
    Total assets  . . . .. . . . . . . . .      $37,806

    Current liabilities  . . . . . . . . .      $ 8,651
    Total liabilities  . . . . . . . . . .      $10,687
    Total liabilities and
      stockholders' equity . . . . . . . .      $37,806

The Company and ABNH have entered into several agreements in connection with the
offering  pursuant to which certain services may continue to be performed by the
Company for ABNH  following  the Offering,  and the  companies  will continue to
maintain certain business ties. The Company and ABNH have also exchanged certain
releases and indemnification agreements and following the date of the sale, ABNH
will no longer be a member of the Company's consolidated group for tax purposes.

On June 9, 1998, in connection with its  authorization  of the sale of ABNH, the
Board of  Directors  of the Company  approved  an  amendment  to the  employment
arrangements  for Mr.  Weissman  pursuant to which he may serve up to 20% of his
time in the  capacity of Chairman  of the Board and Chief  Executive  Officer of
ABNH.


<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

General

     Consolidated  operations in 1998 include the operations of the Sati Group's
check  personalization,  electronic printing and document  management  business,
acquired in August 1997,  and the Menno plastic card  business,  acquired in May
1997,  for the entire  1998  period.  The  acquisitions  were  accounted  for as
purchase  transactions.  In addition,  on March 31, 1998 the Company acquired in
France the check and card personalization business of MCE and CPS.

     The Company  operates in both Brazil and  Australia  which had  significant
foreign  exchange  rate  fluctuations  in 1998 and 1997.  The  comparison  below
reflects the effect of changes in foreign exchange rates.

COMPARISON OF RESULTS OF THE SIX MONTHS ENDED JUNE 30, 1998 WITH THE
SIX MONTHS ENDED JUNE 30, 1997

     The Company  operates in a single  industry,  secured products and systems,
with three principal  product lines.  The following table presents these product
lines for the six-months ended June 30 (Dollars in millions):
                                                 1998             1997
                                               $      %         $      %
                                             ----   ----      ----   ---
Transaction Cards & Systems . . . . .        46.0   28.0      55.5   34.6
Printing Services
  & Document Management . . . . . . .        41.5   25.3      26.7   16.7
Security Printing Solutions . . . . .        76.5   46.7      78.1   48.7
                                            -----  -----     -----  -----
                                            164.0  100.0     160.3  100.0
                                            =====  =====     =====  =====

     Sales increased by $3.7 million or 2.3% from 1997 after giving effect to an
$11.8  million  reduction in sales  resulting  from changes in foreign  exchange
rates.  Transaction  Cards & Systems  ("TCS")  sales  decreased  $9.5 million or
17.1%.  Printing Services & Document  Management  ("PSDM") sales increased $14.8
million or 55.4% and Security  Printing  Solutions  ("SPS") sales decreased $1.6
million or 2.0%.

     The decrease in TCS sales was principally due to lower volume  requirements
for  stored-value  telephone  cards in  Brazil($13.8  million) and in Australia,
lower  equipment  sales  ($2.0  million)  and  lower  volume   requirements  for
transaction  cards and card  personalization  ($0.8 million).  This decrease was
partially  offset by a stronger demand in Brazil for  transaction  cards and the
acquisition  in May 1997 of the Menno card business  ($2.4  million),  increased
sales  of  optical   variable   devices  ($3.0   million)  and  increased   card
personalization  sales resulting from the March 1998 acquisition in France ($1.1
million).


<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS - CONTINUED

     The increase in PSDM sales is primarily due to the  acquisition  of Sati in
France  ($12.5  million) and the award of a new  outsourcing  contract in Brazil
($2.3 million).

     The decrease in SPS sales ($1.6 million) is principally due to lower volume
requirements  at ABN on  travelers  checks and foreign and  domestic  government
products, partially offset by increased currency sales.

     Sales by  foreign  subsidiaries  represented  70% and 72% of the  Company's
consolidated sales in 1998 and 1997, respectively.

     Cost of goods sold increased $13.5 million or 12.5%, after giving effect to
a $9.3 million  reduction in costs  resulting  from changes in foreign  exchange
rates.  As a  percentage  of  sales,  cost of goods  sold  was  74.0% in 1998 as
compared to 67.3% in 1997. This increase is primarily attributable to a shift in
product mix primarily in Brazil and Australia.  In Brazil,  lower volumes on the
higher margin  stored-  value  telephone  cards was partially  offset with lower
margin PSDM sales. In Australia,  higher costs associated with new customers and
products  resulted in lower margins.  The product mix in any given period is not
indicative of the expected product mix in any future period.

     Selling and  administrative  expenses  increased $3.7 million  (16.1%) from
1997 after giving effect to a $1.0 million  reduction  resulting from changes in
foreign exchange rates. The increase was principally due to the inclusion of the
Sati  Group's  operations  in  1998  ($1.4  million),   higher  amortization  of
restricted  stock and severance  payments ($0.9 million),  a reversal of pre-tax
liabilities no longer required in 1997 ($0.8 million) and higher  commissionable
sales ($0.6  million).  As a  percentage  of sales,  selling and  administrative
expenses increased to 16.2% in 1998 from 14.3% in 1997.

     Depreciation  expense  increased  by $0.4  million  from 1997 after  giving
effect to a $0.6 million  reduction  resulting from changes in foreign  exchange
rates.

     Interest  expense  increased $1.6 million in 1998,  primarily due to higher
incremental  borrowings  resulting  from the sale of $95  million 11 1/4% Senior
Subordinated Notes in December 1997.


<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS - CONTINUED

     Other  income,  net  decreased by $1.4 million  primarily  due to decreased
interest and investment income when compared to 1997.

     Taxes  on  income  (benefit)  are  calculated  using  an  estimated  annual
effective  income  tax  rate at the end of each  reporting  period.  The rate is
reviewed  and  adjusted  periodically  to reflect  changes in  estimates  by tax
jurisdictions in regulations,  rates, deductibility of expenses,  utilization of
tax credits, potential tax exposures, and state and local taxes.

COMPARISON OF RESULTS OF THE THREE MONTHS ENDED JUNE 30, 1998 WITH THE
THREE MONTHS ENDED JUNE 30, 1997

The following table presents the three product lines for the three-month periods
ended June 30:
                                          1998           1997
                                              (in millions)
                                        $      %        $      %
                                      ----  -----     ----  -----
Transaction Cards & Systems . . . .   25.7   29.4     28.9   36.5
Printing Services
  & Document Management . . . . . .   22.0   25.2     11.5   14.5
Security Printing Solutions . . . .   39.5   45.4     38.8   49.0
                                      ----  -----     ----  -----
                                      87.2  100.0     79.2  100.0
                                      ====  =====     ====  =====

     Sales increased by $8.0 million or 10.1% from 1997 after giving effect to a
$6.6 million  reduction  in sales  resulting  from  changes in foreign  exchange
rates.  Transaction  Cards & Systems  ("TCS")  sales  decreased  $3.2 million or
11.1%.  Printing Services & Document  Management  ("PSDM") sales increased $10.5
million or 91.3% and Security  Printing  Solutions  ("SPS") sales increased $0.7
million or 1.8%.

     The decrease in TCS sales was principally due to lower volume  requirements
for  stored-value  telephone  cards ($5.3 million) in Brazil and lower equipment
sales in  Australia  ($0.9  million).  This  decrease  was  partially  offset by
increased  sales of optical  variable  devices ($2.2 million) and increased card
personalization  sales resulting from the March 1998 acquisition in France ($1.1
million).

     The increase in PSDM sales is primarily due to the  acquisition  of Sati in
France ($7.8 million) and the award of a new outsourcing bank contract in Brazil
($2.5 million).


<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS - CONTINUED

     The increase in SPS sales ($0.7 million) is principally  due to an increase
in sales of currency and product authentication products offset in part by lower
sales of domestic government products and checks in Brazil.

     Sales by  foreign  subsidiaries  represented  70% and 71% of the  Company's
consolidated sales in 1998 and 1997, respectively.

     Cost of goods sold increased $12.0 million or 22.8%, after giving effect to
a $5.4 million  reduction in costs  resulting  from changes in foreign  exchange
rates.  As a  percentage  of  sales,  cost of goods  sold  was  73.9% in 1998 as
compared to 66.3% in 1997. This increase is primarily attributable to a shift in
product mix primarily in Brazil and Australia.  In Brazil,  lower volumes on the
higher margin  stored-  value  telephone  cards was partially  offset with lower
margin PSDM sales. In Australia,  higher costs associated with new customers and
products  resulted in lower margins.  The product mix in any given period is not
indicative of the expected product mix in any future period.

             Selling and administrative  expenses increased $3.0 million (27.7%)
from 1997 after giving effect to a $0.8 million reduction resulting from changes
in foreign  exchange rates. The increase was principally due to the inclusion of
the Sati's operations in 1998 ($0.9 million),  higher amortization of restricted
stock and severance  payments  ($0.9  million) and higher  commissionable  sales
($0.7 million).  As a percentage of sales,  selling and administrative  expenses
increased to 16.1% in 1998 from 13.9% in 1997.

     Depreciation  expense  increased by $0.4  million  from 1997,  after giving
effect to a $0.4 million  reduction  resulting from changes in foreign  exchange
rates.

     Interest  expense  increased $0.7 million in 1998,  primarily due to higher
incremental  borrowings  resulting  from the sale of $95  million 11 1/4% Senior
Subordinated Notes in December 1997.

     Other  income,  net  decreased by $1.1 million  primarily  due to decreased
interest and investment income when compared to 1997.

     Taxes  on  income  (benefit)  are  calculated  using  an  estimated  annual
effective  income  tax  rate at the end of each  reporting  period.  The rate is
reviewed  and  adjusted  periodically  to reflect  changes in  estimates  by tax
jurisdictions in regulations,  rates, deductibility of expenses,  utilization of
tax credits, potential tax exposures, and state and local taxes.

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

     Operating cash flows  decreased $15.2 million for the six months ended June
30, 1998 as compared to the same  period in 1997  (before  changes in  operating
assets and liabilities) primarily as a result of decreased earnings.

     Operating assets and liabilities also affected cash flows. The net increase
in operating cash flows from such changes of $4.0 million in 1998 as compared to
1997 is primarily due to the timing of payments of accounts  payable and accrued
expenses offset in part by the timing of accounts receivable  collections and an
increase in inventories.

     Investing  activities  for 1998 included $1.0 million for an acquisition in
France  as  compared  to  $2.5  million  during  1997  in  Brazil  of a  leading
manufacturer of personalized  financial  transaction  cards.  The acquisition in
1998 did not have a significant  effect on the Company's  results of operations.
The reduction in the level of capital  expenditures to $2.5 million in 1998 from
$4.1 million in 1997 reflected the completion of the expansion of  manufacturing
capacity in Brazil in 1997.

     Financing  activities  for the six months ended June 30, 1998  included the
refinancing  of the  Leigh-Mardon  ("LM") debt in Australia,  increased  working
capital  revolver  borrowings and reduced  dividend  payments to ABNB's minority
shareholder.  The LM refinancing  included a five-year $55.3 million  amortizing
revolving credit  facility.  The revolving credit facility expires in March 2003
with semi-annual  commitment step downs and is initially priced at the bank bill
rate  plus  1.75%.  On March  26,  1998,  in  connection  with the  refinancing,
Leigh-Mardon entered into a three-year floating-to-fixed interest rate swap with
two of the syndicate banks.  The notional  principal amount of the swap is equal
to 75% of the initial  borrowings  under the facilities or  approximately  $37.3
million.  The notional  principal  amount of the swap will amortize in line with
the  semi-annual  commitment  reductions  under the five-year  revolving  credit
facility.  Under  the  terms of the swap  agreement,  Leigh-Mardon  will pay the
counterparty  an average fixed rate of 5.62% and will receive an amount equal to
the 90-day bank bill rate (approximately 5.1% at June 30, 1998).

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES - CONTINUED

     At June 30, 1998,  the Company had  approximately  $7.0 million in cash and
cash  equivalents.  The Company's  subsidiaries,  ABN and ABNH, are parties to a
three-year,  $20.0 million revolving credit facility for general working capital
purposes and letters of credit which expires on October 30,1998.  The Company is
currently  negotiating  an extension or a new  facility.  At June 30, 1998,  the
Company  had  approximately  $12.8  million  of  availability  under its  Credit
Facility before reductions for $3.5 million of outstanding letters of credit and
$8.3 million of  borrowings.  In addition,  LM and the Sati Group had  available
unused  lines  of  credit  of  approximately  $2.6  million  and  $1.4  million,
respectively.

     The  Syndicate  Banks  for the LM  credit  facility  have  amended  certain
covenants as of June 30, 1998.  LM is in  compliance  with the  covenants of the
credit facility, as amended, as of June 30, 1998.

     The  Company's  long-term  debt included  $126.5  million of 10 3/8% Senior
Notes, $95.0 million principal amount of 11 1/4% Senior Subordinated Notes, $8.0
million of 11 5/8% Senior Notes,  $50.4 million of LM revolving credit facility,
$12.3 million of borrowings in Brazil,  $12.3 million of the Sati Group debt and
$4.1 million of other debt.

     Management of the Company believes that cash flows from operations together
with cash  balances  and  availability  of funds under its and its  subsidiaries
credit  facilities  and asset sales will be  sufficient to service debt and fund
capital  expenditures for the foreseeable future. The Company also believes that
it and its subsidiaries  possess  sufficient  unused debt capacity and access to
debt and equity markets to pursue additional acquisition  opportunities and meet
extraordinary working capital needs as they arise.

     Reference is made to the Company's  Annual Report on Form 10-K for the year
ended December 31, 1997 "Liquidity and Capital Resources."

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES - CONTINUED

IMPACT OF INFLATION

     Reference is made to the  Company's  Form 10-K for the year ended  December
31, 1997 "Impact of Inflation."

     Effective January 1, 1998, as a result of substantial decrease in inflation
rates in Brazil,  the method of  translating  ABNB's  financial  statements  was
changed to reflect  gains and losses as a separate  component  of  stockholders'
equity.  Prior to 1998, the Company translated ABNB's financial statements as if
ABNB were  operating in a  hyperinflationary  economy.  In prior years gains and
losses  resulting from  translation and  transactions  were  determined  using a
combination of current and historical  rates and are reflected in earnings.  The
effect of the change reduced  stockholders' equity by approximately $1.7 million
with a corresponding  credit to deferred income taxes.  The Company's  domestic,
Australian,  New Zealand and French operations are not significantly affected by
inflation.  ABNB's sales  represented 38% and 45% of consolidated  sales in 1998
and 1997, respectively.

YEAR 2000 ISSUE

     The Year 2000 issue involves the risk that computer systems using two-digit
date fields will fail to properly recognize the Year 2000, resulting in computer
system failures for businesses,  government agencies, service providers, vendors
and  customers.  The  Company  has  formed a  cross-functional  task  force  for
assessing the Company's Year 2000 readiness. The task force has developed a plan
to assess the Company's  Year 2000 risk and is in the process of performing  its
review.  The  Company  has  initiated  discussions  with its key  suppliers  and
customers to determine whether they have any Year 2000 issues which could impact
the Company.

     The Company  anticipates that certain software will require  replacement or
modification.  However, based on its review to date, the Company does not expect
the cost of software replacement or modification to be material to its financial
position or results of  operations.  Estimates of the related costs are based on
assumptions,  including the continued  availability  of certain  resources,  the
ability to correct all relevant applications and third party modification plans.
There is no guarantee that the estimates will be achieved and actual costs could
differ materially from those anticipated.

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RECENT DEVELOPMENTS

     Effective  July 20, 1998, the Company  completed its  previously  announced
public offering of all of the shares of its  wholly-owned  subsidiary,  American
Bank Note Holographics,  Inc. The Company received approximately $107 million in
proceeds from the offering before taxes, and certain legal, accounting, printing
and miscellaneous  expenses.  The Company estimates its pre-tax gain on the sale
to be approximately $78 million.

     The Company  plans to use the net proceeds  from the offering in accordance
with the terms of the  indentures  governing  the  Company's  indebtedness.  The
Company  will use the net proceeds it received to repay  indebtedness  on its 10
3/8% Senior Notes due 2002 and for general corporate purposes.


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Certain statements in this Form 10-Q and in certain documents  incorporated
by reference herein constitute  "forward-looking"  statements within the meaning
of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
"forward-looking"  statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company,  or industry  results,  to be materially  different from any future
results,   performance,   or   achievements   expressed   or   implied  by  such
"forward-looking"  statements.  Such  factors  are more fully  described  in the
Company's  Annual Report on Form 10-K for the year ended December 31, 1997 which
should be considered in connection with a review of this report.

<PAGE>

Part II  Other Information

Item 1.  Legal Proceedings

     On June  10,  1998,  the  Company  reached  agreement  with De La Rue,  plc
concerning the  settlement of the three pending  lawsuits with De La Rue and its
affiliated companies. Such actions have been dismissed with prejudice.  Terms of
the  settlement  are  subject to a  confidentiality  agreement  and the  amounts
previously provided are sufficient to cover the settlement.

     Reference is made to the Company's  Annual Report on Form 10-K for the year
ended December 31, 1997.


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

     As a result of a vote of stockholders at the Annual Meeting of Stockholders
held on June 9, 1998, it was resolved that:

     1. The Directors nominated for election were elected with the votes cast as
follows:

     Nominee                   Votes In Favor    Votes Withheld
     Bette B. Anderson           20,269,443          262,077
     Dr. Oscar Arias S.          18,678,612        1,852,908
     C. Gerald Goldsmith         20,269,492          268,028
     Ira J. Hechler              20,269,045          262,475
     Sidney Levy                 20,270,534          260,986
     David S. Rowe-Beddoe        20,270,787          260,733
     Alfred Teo                  20,270,761          260,759
     Morris Weissman             20,268,291          263,229

     2. The  proposal  to  approve  the  proposed  appointment  by the  Board of
Directors of Deloitte & Touche LLP as  independent  auditors for the Company for
the fiscal year ending December 31, 1998 was approved by a vote of 20,243,040 in
favor, 61,512 against and 226,968 abstained.

<PAGE>

Item 6. Exhibits and Reports on Form 8-k

(a) Exhibits:
Exhibit
Number

10.1  Form of Separation Agreement by and between American Banknote
      Corporation and American Bank Note Holographics, Inc. dated
      as of  1998.                                    **
10.2  American Bank Note Holographics, Inc. Form of Underwriting
      Agreement dated June 1998     **
27    Article 5 Financial Data Schedule     **

  **  Filed electronically herewith

(b)   Report on Form 8-K - Form 8-K filed August 3, 1998
        Items 2 and 7


                                    SIGNATURE


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


American Banknote Corporation


By /s/ Patrick J. Gentile
   ----------------------
   Patrick J. Gentile
   Senior Vice President and
   Chief Accounting Officer
   Date: August 14, 1998


<PAGE>


                                  Exhibit Index


List of Exhibits Pursuant to Item 601 of Regulation S-K:
Exhibit

10.1  Form of Separation Agreement by and between American Banknote
      Corporation and American Bank Note Holographics, Inc. dated
      as of  1998.
10.2  American Bank Note Holographics, Inc. Form of Underwriting
      Agreement dated June 1998
27    Article 5 Financial Data Schedule