The Board is proposing a full year dividend of 17.5p per share. This will be paid on 11 May 1998 subject to approval by shareholders at the Annual General Meeting on 21 April 1998.

These results demonstrate another year of progress in a period of unprecedented change and activity associated with conversion to public limited company status in June 1997.

Of the members of Halifax Building Society who exercised their right to vote, over 97% voted in favour of conversion. The subsequent issue of shares to over 7m qualifying members in June 1997 represented the largest single extension of private share ownership in the UK. By 31 December 1997 institutional shareholders had built a combined holding of some 35% of the issued share capital.

To this end, the Board has decided to initiate an on-market share buy-back programme up to a value of £1bn over the next 12 months. The Board intends to commence this programme under the existing authority to purchase shares and will be seeking a renewal of this authority at the Annual General Meeting in April.

Over the longer term, the Board is committed to managing the Group balance sheet and capital resources and the programme will be kept under review against this background.

Competitive Environment

The UK retail financial services market is highly competitive. The nature of the businesses serving personal customers is changing and 1997 saw the arrival of competition from non-traditional suppliers.

As a growing number of building societies have converted to plc status, remaining mutual providers have been advocating mutuality against the concept of giving customers ownership benefits through the distribution of shares. However, their performance is likely to have benefited from continued speculation on the part of customers who may now consider themselves 'locked-in' pending future developments.

We pay careful attention to existing and new competitors who seek to build a foothold in personal financial services. Our pricing strategies reflect our objectives of winning and retaining customers for the longer term by developing strengths in distribution, information technology and the understanding of our customers' needs.

The demand for quality mortgage advice grows steadily. The Government, consumer groups and customers themselves expect lenders (and others involved in the industry) to deliver clear and unambiguous information about the largest single purchase most individuals are ever likely to enter into.

An important step in the response to this demand was the introduction of the Code of Mortgage Lending Practice in July last year. This aims to ensure that consumers receive a professional service from their lender or adviser. Its extension to include intermediaries and enhancement to ensure that a product confirmation letter is issued comes into force in April 1998.

On the wider stage, providers of financial services in many countries have been affected by rationalisation, consolidation and convergence within their industry.

We see powerful groupings being proposed or formed which combine the previously separate disciplines of consumer lending, banking, insurance and fund management. The pace of restructuring has been particularly notable in pan-European deals, perhaps reflecting the imminence of Economic and Monetary Union.

We expect this process to continue accelerating and we anticipate significant change in the UK financial services market. We plan to be one of the leaders in shaping this change.