For far too long banks have extracted remarkable returns for shareholders through opaquely priced and poorly presented products and services for customers. As those customers have understandably grown more restless so the sustainability of returns has been called into question.

The Halifax is setting itself apart as the leading provider of value on the high street so as to earn the right to retain mortgage and savings customers and to win over many more customers from our banking and insurance competitors. Through value, a focus on simple products, and clear and honest communication with customers, we are transforming our existing businesses. As I wrote this time last year, that transformation is our number one strategic priority.

In our core mortgage and savings businesses, unlike any of our competitors, we have taken the initiative in helping our customers to find a better deal with the Halifax. In both we have as a result produced the best results since conversion. Our offer of 4% interest on high street current accounts is indicative of initiatives which are already delivering growth for the Halifax in banking and which are set to break the clearing banks' traditional stranglehold.

Long term savings has long been our most important and most successful area for diversification and growth. Last year was no exception with Clerical Medical delivering another outstanding performance. The performance of St. James's Place Capital, in which we acquired a controlling interest during the year, was so strong that today its shares stand fully 50% above our bid. The acquisition of the operating businesses of The Equitable Life gives new impetus to our long term savings business in sales, in profits and most particularly in assets under management which will double. We now have a real opportunity to establish ourselves as number one in UK long term savings - something we couldn't have dreamt of a couple of years ago.

Last year's report was written against a sharply declining share price, ultimately falling to around £4 before climbing again to today's level above £7. Investor concern about the threat posed by technology driven new entrants has been replaced by the hard reality that it was the newcomers themselves who were most challenged.

Only market leaders, such as Halifax, can muster the financial and human resources needed for success in new economy financial services. Even then, however, ultimate success calls for an entrepreneurial flair not associated with our industry coupled with the absolute determination to use technology to its best effect by delivering something really special for the customer.

In this context, I am particularly pleased by the progress we are making with the second leg of our strategy; namely our ambition to be one of the leaders in new channels.

Intelligent Finance's capability to offset customers' assets against their liabilities for their advantage is a genuinely revolutionary banking concept. Unlike internet only banks it also offers a parallel telephone banking service, a combination that sets apart our offering from the herd. Although later to market than we had hoped, this new business has made an encouraging start and is gathering momentum by the day. As it commences its phased launch, the new insurance venture, esure, also enjoys the benefits of an entrepreneurial team delivering innovation for the benefit of both customers and shareholders.

But so far most of the growth in new channel customer numbers has come in Halifax Direct, our direct telephone operation, and Halifax Online where we now have full online capability across all products. Services made all the more accessible to customers through the introduction of Click and Call pods inside our branches.

I am also delighted with the rapid progress we are making towards assembling a truly world class management team - the third leg of our strategy. Senior management across the Group has been strengthened by a series of new signings, but also by internal appointments in a culture re-energised by the clarity of strategy linked to performance led rewards.

Sometimes of course we have also brought in outstanding leaders and their teams; the team at esure that Peter Wood assembled during the year has unrivalled experience of direct and online insurance, whilst James Corcoran and his team who joined us via the acquisition of Bank One's UK credit card operations have already had a significant impact.

2000 has been an exhilarating year for me as Chairman. I have seen colleagues right across the Halifax achieve so much. And yet nothing emphasises the importance of the contribution made by our front line colleagues better than the television advert featuring Howard Brown from our Sheldon branch. In a way that corporate language cannot convey, Howard epitomises the enthusiasm our people have for what they are doing. Growthand enhanced shareholder value cannot become a reality until people like Howard, Halifax people, make it happen.

I also want to thank the Directors who retired this year for their outstanding contribution. John Kay and John Wood have both been part of the tremendous changes that have seen Halifax cross the conversion threshold into life as a plc. As Vice Chairman, John Wood played a particularly important role in much of what we have achieved in recent years, most recently as Chairman of Clerical Medical.

Shareholders, I am sure, recognise that a great change is underway at the Halifax. We are transforming the performance and diversity of our existing businesses whilst implementing aggressive new channel strategies. Across the Halifax Group we have established a platform for the growth that will drive enduring shareholder value.

Dennis Stevenson Chairman