Dear Fellow Shareholder,

In my report to you last year, I said that ANZ was undergoing a period of renewal and change focused on our strategy to become a super regional bank that delivers out performance for shareholders.

Since that time, ANZ has weathered an extraordinary year. Global financial markets have been in turmoil and world economic activity has slowed dramatically impacting many aspects of our business, including our customers and the financial markets we rely on to raise funds.

Despite the challenges, it is clear from our performance in the first half of the year that ANZ has a diversified set of businesses which are continuing to perform well with strong revenue trends. Importantly, we are also delivering against the milestones we set for the first two years in our strategy.

• We are turning around the Institutional Division, restoring it to system performance and setting up a foundation for the future.
• Across the Group, we have established a strategic approach to cost management. This includes the introduction of a simpler customer focused business model with fewer management layers.
• We are selectively investing in organic growth and delivering a substantial increase in profit in Asia which is now over 15% of ANZ’s earnings.
• And finally, we are capturing existing opportunities by maintaining our high quality domestic franchises in Australia and New Zealand.

At the same time, we have taken a realistic view of the impact of the global financial crisis and the economic slowdown on ANZ.

We have faced up to a number of legacy issues in the business and have been preparing the balance sheet for the global recession and the weakening credit environment that has come with it.

In this situation, we are continuing to focus on four key drivers for the bank: maintaining a strong capital and liquidity position; anticipating the impacts of the economic environment by ensuring we have adequate provisions; systematically completing the remediation in parts of the business; and driving our strategic growth agenda to become a super regional bank in the Asia Pacific region.

Our focus on Asia is driven by the reality that over the next two decades, economic growth in many parts of Asia – particularly in China and India – will outpace the rest of the world by a factor of three or four. At the same time, the trade and investment links between Australia and New Zealand and Asia are continuing to deepen.

The aspiration we set, however, is not simply about Asia – it is also about building and investing in our presence in Australia and maintaining our leading position in New Zealand.

Globally, banks are operating in an extraordinarily difficult environment. However, these results demonstrate ANZ is making good progress with its strategy and is uniquely positioned to take advantage of the opportunities now emerging in our region.

There is still much to be done at ANZ, but we are now on a much stronger footing than a year ago. Importantly, we have the right strategy to come through this period as one of the strongest, best positioned and most successful banks in the Asia Pacific region.