SCOPE OF APPLICATION CAPITAL TREATMENT

Notional values of credit derivatives do not accurately reflect their economic risks. They comprise both beneficiary and guarantor buy and sell protection positions. The Group generally has higher total notional amounts of protection bought than sold as credit derivatives are also used to hedge risks from other instruments, including those from customer flows. The protection sold in credit derivatives are largely matched with the protection bought through other credit derivatives or structured notes issued. The Group actively monitors its counterparty credit risk in credit derivative contracts. More than 95 of the notional value of the Group’s credit derivative positions as at 31 December 2011 is to 15 large, established names with which the Group maintains collateral agreements.

3.5.2 CREDIT EQUIVALENT AMOUNTS FOR

COUNTERPARTY EXPOSURES In millions 2011 Replacement cost 20,797 Potential future exposure 18,093 Gross credit equivalent amount 38,890 Comprising: Interest rate contracts 11,808 Credit derivative contracts 6,977 Equity contracts 109 Foreign exchange contracts and gold 19,964 Commodities contracts 32 Gross credit equivalent amount 38,890 Less: Effect of netting arrangement 18,902 Credit equivalent amount after netting 19,988 Less: Collateral amount Eligible financial collateral 863 Other eligible collateral 11 Net credit equivalent amount 19,114 Counterparty credit exposure is mitigated by exposure netting through ISDA agreements and recognition of eligible collateral, effects of which have been included in regulatory capital calculations where appropriate. 4 EQUITY EXPOSURES IN BANKING BOOK

4.1 SCOPE OF APPLICATION

The Group’s banking book equity investments consist of: •฀ Investments฀held฀for฀yield฀andor฀long-term฀capital฀gains;฀ •฀ ฀Strategic฀stakes฀in฀entities฀held฀as฀part฀of฀growth฀initiatives฀ andor in support of business operations. The Group’s banking book equity investments are classified and measured in accordance with Financial Reporting Standards and are categorised as either AFS investments or Investments in Associates. Refer to Notes 2.2 and 2.7 to the Financial Statements for the Group’s accounting policies. Entities in which the Group holds significant interests are disclosed in Note 49 to the Financial Statements.

4.2 CAPITAL TREATMENT

The Group has adopted the IRBA simple risk weight method to calculate regulatory capital for equity exposures in its banking book. The following tables summarise the Group’s equity exposures in the banking book, including investments in Tier 1 capital instruments of financial institutions: Deductions from Exposures Tier 1 or 2011 Total risk- Tier 2 In millions exposures weighted Capital Risk weights 300 1,195 1,195 – 400 1,195 1,195 – Deducted 137 – 137 Total 2,527 2,390 137 Exposure- weighted Exposures average risk risk-weighted weight a 2011 in millions Major stake companies approved under section 32 of the Banking Act 819 326 Capital investments in financial institutions incorporated in Singapore, approved, licensed, registered or otherwise regulated by the Authority = 2 of Eligible Total Capital 32 300 Other equity exposures 1,539 364 Total 2,390 350 a Percentages disclosed are before the application of IRBA scaling factor Details of the Group’s investments in AFS securities and Associates are set out in Notes 21 and 25 to the Financial Statements respectively while realised gains arising from sale and liquidation of equity exposures are set out in Note 9 to the Financial Statement. The amount of unrealised gains for equity that have not been reflected in the Group’s income statement, but have been included in Tier 2 Capital is 29 million. BASEL II PILLAR 3 DISCLOSURES Year Ended 31 December 2011 76 DBS Group Holdings Ltd its Subsidiaries 78 Consolidated Income Statement 79 Consolidated Statement of Comprehensive Income 80 Balance Sheets 81 Consolidated Statement of Changes in Equity 82 Consolidated Cash Flow Statement Notes to the Financial Statements 83 Domicile and Activities Summary of Significant Accounting Policies 91 Effects on Financial Statements on Adoption of New or Revised FRS 92 Critical Accounting Estimates Income Statement 93 Net Interest Income Net Fee and Commission Income 94 Net Trading Income Net Loss from Financial Instruments Designated at Fair Value Net Income from Financial Investments Other Income Employee Benefits Other Expenses Allowances for Credit and Other Losses 95 Income Tax Expense 96 Earnings Per Ordinary Share Balance Sheet: Assets 97 Measurement Basis of Financial Instruments 99 Cash and Balances with Central Banks Singapore Government Securities and Treasury Bills Financial Assets at Fair Value through Profit or Loss 100 Loans and Advances to Customers 103 Financial Investments 104 Securities Pledged Subsidiaries Joint Ventures Investments in Associates Goodwill on Consolidation 105 Properties and Other Fixed Assets 107 Deferred Tax AssetsLiabilities 108 Other Assets Balance Sheet: Liabilities 108 Due to Non-Bank Customers 109 Financial Liabilities at Fair Value through Profit or Loss 110 Other Liabilities 112 Other Debt Securities in Issue 113 Subordinated Term Debts Balance Sheet: Share Capital and Reserves 114 Share Capital and Treasury Shares 115 Other Reserves and Revenue Reserves 117 Non-controlling Interests Off-Balance Sheet Information 118 Contingent Liabilities and Commitments 119 Financial Derivatives Additional Information 122 Cash and Cash Equivalents Share-based Compensation Plans 124 Related Party Transactions 125 Fair Value of Financial Instruments 129 Credit Risk 137 Market Risk 139 Liquidity Risk 142 Capital Management 144 Segment Reporting 147 List of Subsidiaries, Joint Ventures, Associates and Special Purpose Entities DBS Bank Ltd 151 Income Statement 152 Statement of Comprehensive Income 153 Balance Sheet 154 Notes to the Supplementary Financial Statements 156 Directors’ Report 160 Statement by the Directors 161 Independent Auditor’s Report FINANCIAL STATEMENTS 77 DBS Annual Report 2011 In millions Note 2011 2010 Income Interest income 6,555 5,699 Interest expense 1,730 1,381 Net interest income 5 4,825 4,318 Net fee and commission income 6 1,542 1,397 Net trading income 7 698 915 Net loss from financial instruments designated at fair value 8 18 20 Net income from financial investments 9 454 310 Other income 10 130 146 Total income 7,631 7,066 Expenses Employee benefits 11 1,712 1,422 Other expenses 12 1,591 1,503 Goodwill charges 26 – 1,018 Allowances for credit and other losses 13 722 911 Total expenses 4,025 4,854 Share of profits of associates 127 102 Profit before tax 3,733 2,314 Income tax expense 14 443 454 Net profit for the year 3,290 1,860 Attributable to: Shareholders 3,035 1,632 Non-controlling interests 255 228 3,290 1,860 Basic earnings per ordinary share 15

1.30 0.70