"Given the challenges the Group faced in 2000, we would characterise this year's results as reasonably satisfactory. Though we face an uncertain economic environment, there should be no question that DBS Group is today far better prepared to manage whatever challenges the market and economic conditions thrust upon us."

To Our Shareholders:

Overall, 2000 was a positive year for DBS. Net Income climbed 30% to S$1.389 billion, achieved largely by a 95% reduction in loan provisions. Income Before Operating Expenses was flat, however, and we reported no significant Exceptional Profits as we did in 1999. Our continuing heavy investment in technology and skills, which we believe will pay off in the medium term, helped fuel a 14% decline in Operating Profit.

The very significant reduction in loan provisions followed a gradual recovery of Asian markets after the financial crisis that began in mid-1997. This did not happen by chance, but through our active management of Non-Performing Loans (NPLs) in Thailand and other countries in Asia outside Singapore. During the course of the year, we wrote back S$50 million in loans to Singapore borrowers, compared to provisions of S$131 million in 1999. At year-end, the Group's total NPLs were 46% lower than a year ago, and now stand at 7.6% of non-bank customer loans (compared to peak NPLs totalling 13% at year-end 1999).

The lower provisions reflect an improvement in credit standards and asset quality throughout the DBS Group. And, we expect procedures now in place will be reflected in continuing improvements to asset quality as we move forward. Our goal is to bring asset quality back to pre-Asian crisis levels as soon as possible.

During the year, we invested significantly in people, processes and systems, resulting in a higher level of operating expenses. The increase was both planned and expected, and reflects management's continuing commitment to re-train staff and upgrade technology to deliver enhanced banking products, and automate processes. In addition, there has been greater focus on promoting the Group's brand in the Asian region. These investments will result in a broader product range and improved service levels as we strive to meet global standards. The industry will be subjected to increasingly global competition as barriers to entry fall in response to more demanding consumers.

In November, we unveiled a new Treasury & Markets Centre in Singapore, a state-of-the-art trading environment that places DBS on par with the best world-class banks. The Centre enhances our ability to monitor currency and security movements as we make markets in a wider-variety of instruments and sophisticated hedging strategies for an increasingly diverse customer base.

In January, we began to align staff compensation to market levels - a necessity if one expects to attract talented people and operate successfully in the global war for talent. We also added significantly to our senior management team, adding experience and depth. Diversity is a strength of forward-looking institutions.

Spending on advertising and marketing increased, reflecting a new aggressiveness in product initiation and rollout. During 2000, we introduced more successful new financial products than in any year in our history. These included new credit card products; segment-targeted funds from DBS Asset Management; MoneyPlus, which re-packages low-yielding debt instruments into a higher-yielding short-term note issues for retail investors; online trading capabilities at DBS Securities; internet-based business-to-business cash management services; and wireless banking capabilities via WAP-enabled devices.

To support electronic distribution, DBS continues to focus on technology applications, and to enhance the capacity and reliability of our operating platform. Alliances have been established with suppliers and consultants aimed at improving our processes and updating systems to drive unit costs lower over the Internet and other electronic media.

The results of many of these efforts have only begun to be realised. In July, the London-based Lafferty Research Group rated DBS the 'Best Internet Bank in Asia'. During the year, DBS' Internet Banking customer base increased from 80,000 in January to more than 200,000 at year-end. We have been closely monitoring session times and usage patterns against to international standards, which seem to bear out the sophistication of the Singapore consumer. We fully intend to use Singapore as a laboratory and leverage this experience to advantage as broadband access is expanded throughout the region in the years to come.

Also during 2000, DBS received recognition from Euromoney, AsiaMoney, The Asset, and IFR Asia as Singapore's top domestic bank, the top debt underwriter and the top equity house. For the year, DBS Debt Capital Markets led the league tables in debt issuance, outdistancing its nearest competitor by 50%. We maintained our market share as lead manager for Singapore initial public offerings. And for the first time, DBS entered the ranks of the 'Top Ten Banks in Asia' in trading derivatives and foreign exchange.

Our Capital Adequacy Ratio (CAR) remains strong at 19% (14.5% in the form of Tier I capital), and exceeds by considerable margins the minimum requirements of both the Bank for International Settlements (BIS) and The Monetary Authority of Singapore (MAS). Nonetheless, we expect to be in the capital markets on a regular basis to capitalise on our credit standing and lower funding costs. We will continue a more assertive capital management program aimed at lowering the long-term cost of capital, and balancing our overall capital funds position in domestic and international markets. In April, a US$500 million subordinated debt issue was well received by international investors. And in August, we redeemed S$600 million of non-voting redeemable convertible preference shares.

We continue to make progress on many of the ambitious goals we established in the first of our rolling three-year plans in 1998. DBS Group Return On Equity (ROE) increased from 10.35% for 1999 to 12.89% in 2000, keeping us on track to achieve a 15% ROE by year-end 2001. An increase in Return On Assets to 1.28% from 1.04% in 1999, earnings per share growth to S$1.13 (versus S$0.96 in 1999) and a dividend increase to 30 cents per share are further signs that we are doing things right, and doing the right things.

A major commitment continues on the training front, with average training days spent rising to 6.6 per employee in 2000. One major initiative - a comprehensive customer quality service training programme within the Consumer Banking Group - will, over the next 18 months, reach every DBS employee who comes in direct contact with customers. Harnessing our intranet and 'new' media such as CD-ROM make available a broader array of training opportunities to all staff, on subjects as fundamental as Effective Public Speaking and as complex as Effective Treasury Management. In total, we invested S$9.5 million on staff training during 2000, and we expect this level of investment to continue if not increase. Only by investing in skills and knowledge will we be able to establish a deep repository of skills, and continue to attract the best and the brightest.

If we were disappointed, it was with a lack of progress in deploying more capital for greater growth on the acquisition front. To justify the deployment of a broader product offering through people and technology, a sufficiently large base for future organic growth must be established. And to be the world-class regional bank we have set out to be, we know we must rank among the top banks in the markets we serve.

Our dominance in Singapore is undisputed, but we continue to look for opportunities to expand our presence in Hong Kong, where we rank thirteenth, and Thailand, where we today rank seventh. Though many financial institutions exhibit practices that are out-of-step with the demands of their customers and the capabilities of modern banking technology, only a handful of leverageable franchises have come onto the market to date.

We hold the view that the future of financial services in the Asian region rests fundamentally on a highly trained people, real-time systems and transparent business processes. Singapore has been an early adopter of these principles. It appears to us only a matter of time before customers - both individual and corporate - begin to hold their banks to global standards. So, we remain a committed but patient acquirer, willing to dedicate capital and other resources where the cost of entry justifies. While strategic acquisitions in key market centres and customer segments are central to our plans, we are not prepared to pay any price to make it happen. "Deep pockets, but short arms" characterises DBS' position, though we continue to be opportunistic.

One question that often arises when we explore cross-border acquisitions is the Singapore Government's 38% shareholding in DBS. Some are confused about DBS' unique status: Are we pursuing strictly commercial ends? Or are we an instrument of national policy, as our heritage and ownership sometimes suggest?

Clearly, we have drawn strength from our original mission as well as our linkage with Singapore. But we have grown beyond any requirement for this and have been operating on a commercial basis for years, making decisions for the benefit of all of our shareholders and our diverse customers base. There has been no active Government involvement at DBS for some time. And we are quite comfortable - and successful -- standing on our own two feet. What we achieve in the future depends entirely on the strengths of our Board, management and employees and our ability to serve our customers.

Our largest shareholder would accept nothing less. As a major investor in the world's capital markets, the Singapore Government is acutely aware of the forces of globalisation and commercial imperatives. And despite its major interest in returns rather than control, we expect that over a relatively short period of time Singapore's passive shareholding will continue to decline. The benefits of attracting and retaining a base of large, forward-looking investors that shares our vision and goals are unambiguous.

DBS today is very different from the company of just a few years ago. Our shares have traded at levels three times higher than at the end of 1997. We have improved asset quality, capital and overall financial strength. An exceptionally strong, internationally experienced management team is in place, as are the building blocks essential to our continuing expansion in the region and development as a world-class financial institution operating in Asia. And we believe the fruits of our efforts are just now beginning to show.

To recognise the support of shareholders who share our vision, the Board of Directors has recommended an increase in the dividend payout for 2000 from 25% to 30% and a one-time award of an additional 15%. The increase in the existing dividend payout and the special dividend to shareholders of record on May 18, 2001 moves DBS to a higher, but sustainable, dividend payout rate as we converge with the payout levels of other world-class financial institutions and around the world. While this report covers our financial and operating performance for 2000, it is important to make note here of an important transition announced on January 22, 2001.

After nearly three years of strong leadership, John Olds has decided to step down as Vice Chairman and Chief Executive Officer of DBS. His tenure, while relatively brief, has been among the most significant of any who have led DBS. He has established a clear vision, guided development of internal changes in systems and processes that have markedly improved the bank's financial position and ability to compete, helped attract world-class talent at all levels and laid a strong foundation for future growth. We value his leadership and counsel, and look forward to continuing our association with him as he moves to the newly created role of Special Advisor to the Chairman.

Effective January 22, 2001 Philippe Paillart became Vice Chairman and Chief Executive Officer. Philippe joined DBS in July 2000 as Senior Managing Director of DBS' Consumer Banking Group, and brings to the Group many years of international experience in the banking and financial services with world-class institutions.

Together with Philippe and Jackson Tai, who has been appointed DBS' President and Chief Operating Officer, all of us in DBS' Corporate Office look forward to continuing the pursuit of the plan laid out by John Olds to put in place a world-class regional bank, and the best bank in Asia.