In the first half of the year, DBS was directly affected by SARS when two of our employees in Hong Kong were infected with the disease and family members were quarantined. DBS was among the first in Asia to implement business contingency plans. We separated units to backup locations to protect our staff and continue operations. I am pleased that as we handled the internal processes to cope with SARS, we also reached out to our health workers in Singapore and Hong Kong by offering them special services to meet their banking needs during the crisis. DBS’ employees also made personal donations that were matched by the bank to provide assistance to those who became ill and to aid the universities in their research on the SARS virus.

To my great relief, our SARS affected employees recovered and all our staff and their family members were able to put that stressful period behind and move forward.

Regional Focus
DBS achieved a solid rebound from the adverse market environment in the first half of 2003. I am encouraged that our staff demonstrated partnership and teamwork in adversity and responded well to the challenges. We see clear evidence of that teamwork in our second half performance. We are thinking and acting more like a regional organisation and increasingly, our clients are turning to us to service their financial needs outside of Singapore.

In consumer banking, we achieved record sales in distributing our treasury structured products to our Singapore and Hong Kong clients. Our investment product sales in Hong Kong were so strong that total sales surpassed Singapore, where we have maintained a commanding market leadership. We also announced a consumer finance joint venture in Thailand that leverages our credit card and unsecured credit platform, allowing us to tap into the more than 12 million customer base of the affiliate of our joint venture partner, Shin Corporation.

We completed the legal merger and rebranding of our Hong Kong subsidiaries on July 21, 2003. We had already integrated the management, businesses, back offices and systems of our Hong Kong operations in 2002. With the completion of the merger, we now present ourselves as one banking group to our customers. Though the "DBS" name was virtually an unrecognised brand in Hong Kong a few years ago, it is now becoming a name that carries the promise of a certain level of service.

A stronger regional focus contributed to a satisfactory year for DBS' investment banking and treasury and markets businesses. We won some high-profile mandates in competition against global banks in structured finance, securitisation and loan syndication activities. We extended our loans syndication capabilities to Hong Kong, China, Korea, Thailand, Indonesia and Malaysia, and brought our Real Estate Investment Trust product structuring and distribution capabilities to Hong Kong and Thailand.

Financial Review
In the year ended December 31, 2003, Group net profit was $1.03 billion, down 7% from 2002. The decline was mainly due to changes in accounting policy for the classification and valuation of trading and investment securities. Without the changes, net profit stayed flat compared to the previous year. I am disappointed we did not achieve net profit growth for the full year but I am encouraged by the pick-up in performance in the second half of the year.

The key underlying profit drivers were improved moderately during the year. Operating income grew to an all time high of $4.2 billion and expenses declined to $1.8 billion.

I am also pleased that DBS Hong Kong operations achieved net profit growth of 33% to $440 million. Most performance ratios of DBS Bank (Hong Kong) were stronger than the Group as a whole. We are pleased with the synergies achieved from the streamlining of branches and staff that have resulted in new revenue opportunities in wealth management sales and better operating efficiency. We continue to sharpen our competitive edge and to enhance our capacity to innovate and provide memorable service to our customers.

We continue to address how best to deploy our pool of excess funds to higher earning assets, and how to efficiently allocate capital to different businesses while judiciously balancing risk with reward. Finally, we continue to control our costs as we invest appropriately and responsibly for growth.

Shareholder Returns
In the first half, DBS’ share price appreciated by a modest 1%, underperforming the Straits Times Index by 11%. But in the second half of the year, DBS' share price increased by 41%, outperforming the Straits Times Index by 20%.

DBS declared an interim dividend at $0.14 per share and a final dividend of $0.16 per share, making a total payout ratio of 36%.

Governance
Ernst & Young was appointed the new external auditors at the Annual General Meeting in April 2003, after an overlapping transition with our previous auditors, PriceWaterhouseCoopers. DBS changed external auditors two years earlier than required by our regulators, the Monetary Authority of Singapore. With corporate governance in the public spotlight, we are pleased to have accelerated the change in auditors and to have had two outside parties scrutinise our books, procedures and operations.

During the year, we also instituted formal Board assessments. While this process is still new, our aim is to improve the effectiveness of our Board oversight, our Board committees, and to improve our ability to deliver on our fiduciary responsibilities to shareholders.

Prospects for 2004
The progress of our businesses in the second half of 2003 is significant enough that we believe this economic recovery is not transient. But we are still in the early stages and there remain risks of global events that can set back the progress made.

For our key markets of Hong Kong and Singapore, we believe that GDP growth, loan growth, interest rates, unemployment, bankruptcy rates and the property markets are likely to see modest improvements from the troughs in 2003.

Acknowledgements
I would like to express my appreciation to the Board for providing strategic guidance and governance oversight to DBS. I would especially like to thank the two Board members who retired this year. Vice Chairman, Ng Kee Choe, retired this year from both management and the Board after more than 30 years of exceptional service, and Tommy Koh, retired from the DBS board after nine years of service. I am immensely grateful to them for their wise counsel and guidance.

We also welcomed three new Board members: Kwa Chong Seng, Chairman and Managing Director, Exxon Mobil Asia-Pacific, N R Narayana Murthy, Chairman of Infosys Technologies Ltd, and Frank Wong, Vice Chairman of DBS Bank and Chairman of DBS Bank (Hong Kong).

I would again like to thank our staff at all levels and in all our geographies for their dedication and passion without whom we would not have made so much progress over the past few years. I also thank our customers, business partners and shareholders for their continued support. DBS looks forward to serving you better.