2007 was a disappointing year for our company. While our financial performance was very strong in the first half of the year, results in the second half were severely depressed by rising credit costs and the impact of the unprecedented turbulence in the financial markets.

Despite the short-term fallout from the so-called credit crunch, I remain confident and optimistic about our competitive position and our ability to generate attractive financial results in the future. Our long-term growth strategy is working and has not changed: We are using market insight to drive innovation that creates opportunity and value for our customers and shareholders.

Our earnings power from our core business activities is strong and growing. We are bringing innovative new products to market, taking market share and expanding customer relationships across the company. We plan to invest more in growth initiatives in 2008 than we did in 2007. And we have taken steps to build up our capital strength and liquidity, enhancing our ability to be opportunistic in the future.

This was the first down year our company has suffered during my time as chief executive officer. And although I take comfort in the fact that our diversity of income, tremendous scale and efficiency will help us weather this storm better than most, it has still been a difficult time for our company.

While the credit crunch and housing market recession in the United States have hit the entire industry hard, we offer no excuses for our performance. We escaped direct losses from subprime lending, which we had exited years ago. But we did experience large writedowns in the value of structured products backed by such loans, and our trading results were poor.

As these issues became apparent, we moved decisively to mitigate our losses and reposition our businesses for growth. In October, we launched a strategic review of our capital markets business, the results of which I discuss below.

In my career, I have not experienced a business cycle in which size, scale, revenue diversity and the ability to execute have been more important. Each of these attributes is a strength of our company. Each will play a role in determining the winners in our industry. And we are leveraging each of these strengths to our greatest advantage.

I will review some of the ways we are pursuing our vision for Bank of America in this letter, and you can read in more detail about our work in the articles that follow. First, I'd like to review our financial results and the market developments that affected our performance so profoundly.

Next: A challenging year