In the year that marks the tenth anniversary of the publication of the bank's original Ethical Policy, I am delighted to be able to report another year of excellent business performance. For eight consecutive years, the bank has produced record pre-tax profits. Profit before tax was £107.5 million, higher than 2000 by 11.6%. Earnings attributable to Co-operative Group (CWS) Limited, after tax, were £68.5 million, an increase of 15.7%.

2001 also saw the publication of the findings and recommendations of The Co-operative Commission, a forward-looking strategy designed to underpin the co-operative movement's future success. The Co-operative Bank has continued to demonstrate just what can be achieved by using co-operative values to create business advantage, and to meet co-operative social goals.

It is important, therefore, that the bank measures its success not just in financial terms. Alongside this financial report is published the annual Partnership Report, which demonstrates equally satisfactory progress in delivering value to all the bank's partners, as well as maintaining the highest standards of environmental and social responsibility.

The bank has continued to demonstrate its ability to innovate - launching new credit cards, mortgages, savings and current accounts. smile, our internet bank now in its third year, continues to impress both customers and independent commentators alike, with its new services, faster download times, and its enviable record on security, service and transparency. From its early roots as banker to the movement, The Co-operative Bank now also provides financial services to co-operative retail customers; for example, it has built a substantial network of cash machines based in co-operative retail stores; and it has established a brand proposition that continues to inspire. Closer working with the Co-operative Insurance Society (CIS) now promises to provide many new opportunities for both these co-operative financial services businesses, as well as for the wider retail movement.

Achieving excellent results year after year becomes an ever greater challenge, particularly in such a competitive marketplace. The clear sense of motivation, purpose and involvement shown by the bank's staff and leaders, together with their pride in their work, gives me confidence that the bank will continue to make progress in 2002.

I would like to take this opportunity to express my appreciation to Bob Burlton, who stood down from the board during 2001 after 8 years service as a Non-executive Director, and at the same time to welcome Kathryn Smith to the board as his replacement. I would also like to thank Michael Woodward who, at the end of the year, retired as Executive Director, Corporate and Commercial Banking, for his contribution to the bank's success over the last ten years.

Finally, on behalf of the Board, I would like to congratulate Sir Graham Melmoth on the knighthood he received in the 2002 New Year's Honours list; a fitting recognition of the enormous contribution he has made to the Co-operative Movement over the years.

Graham Bennett, Chairman