The Management Board is currently authorized by a resolution of the Extraordinary General Meeting dated February 8, 2006 regarding item 5 of the Agenda, to issue by February 7, 2011, bonds carrying conversion or option rights and/or conversion obligations for registered shares in the Company, once or several times, upon approval by the Supervisory Board. Accordingly, bonds carrying conversion and/or option rights can be issued up to a nominal value of EUR 10,000,000,000, with or without a defined period, and be equipped with conversion or option rights and/or conversion obligations for shares in the Company in a proportionate share of the capital stock of up to EUR 250,000,000. Under certain circumstances, the Management Board shall be authorized to exclude subscription rights, upon the approval of the Supervisory Board.

Up until the publication of this invitation, the Management Board has made no use of this authorization. In view of the fact that the current authorization expires on February 7, 2011, the Management Board proposes that the Annual General Meeting approve a new authorization and a new conditional capital for the issue of bonds carrying conversion rights, bonds carrying option rights and/or convertible participation rights (hereinafter collectively referred to as "bonds"). The current authorization to issue bonds carrying option rights and/or participation rights is to be cancelled as it has not been utilized. Accordingly, Conditional Capital 2006, which was created for the previous authorization, is also to be cancelled.

We believe that setting the maximum issue volume allowed by the authorization at EUR 10,000,000,000 again would be useful in exploiting the spectrum of capital-market instruments that securitize conversion or option rights. The conditional capital, which serves to meet the obligations arising from the exercise of conversion and option rights, shall again be EUR 250,000,000. This ensures that the scope of the authorization can be utilized in full. The number of shares required to settle the obligations arising from the exercise of option or conversion rights of a bond with a specific issue volume generally depends on the market price of Allianz shares at the time the bond is issued. If sufficient conditional capital is available, the scope of authorization for issuing bonds carrying conversion or option rights can be exploited in full.

The proposed scope of the issue volume and of the conditional capital will enable a return to the level resolved by the Extraordinary General Meeting held on 8 February 2006 in financial terms.

Adequate capital resources are an important prerequisite for the Company's development. By issuing bonds carrying conversion or option rights, the Company can make use of attractive financing opportunities, depending on the market situation, to obtain low-interest capital. The issue of convertible participation rights allows the interest rates to be based, for example, on the Company's current dividend. The Company benefits from the conversion or option premium. Some financing instruments can only be placed if option or conversion rights can be granted.

Shareholders will generally be given subscription rights when bonds carrying conversion or option rights and convertible participation rights are issued.

The Management Board shall, however, upon an issue against cash contributions, be authorized in corresponding application of § 186 (3) sentence 4 of the German Stock Corporation Act to exclude these subscription rights, upon approval of the Supervisory Board, if the issue price of the bonds is not substantially lower than their market value. This can be a suitable way to take advantage of favorable stock market conditions and to place bonds quickly and flexibly at attractive conditions on the market. The stock markets have become much more volatile. Achieving the most beneficial outcome possible from an issue therefore depends increasingly on the ability to respond to market developments at short notice. Favorable terms that correspond as much as possible to market conditions can generally only be secured if the Company is not tied to them for too long an offer period. In the case of issues with subscription rights, a considerable discount is generally required to guarantee the chance of the issue being successful over the entire offer period. Even though § 186 (2) of the German Stock Corporation Act allows the subscription price to be published (and, as such, the terms and conditions of bonds carrying conversion or option rights) up to the third day before the end of the subscription period, there still exists, due to the volatility of the equity markets, a market risk over several days leading to discounts when determining the terms and conditions of the bond and, hence, resulting in terms that are not close to market conditions. Furthermore, when subscription rights are granted, an alternative placement with third parties is more difficult or entails additional effort, given the uncertainty surrounding the exercise (subscription behavior). After all, the Company cannot react to changes in market conditions at short notice when granting subscription rights, given the duration of the subscription period. This could lead to the Company procuring capital on less favorable terms.

Shareholders' interests are protected by the bonds being issued on terms that are not substantially lower than the market value. The market value must be determined using recognized finance-mathematical methods. When determining the price, the Management Board will take into consideration the prevailing conditions on the capital markets and keep the discount on the market value as low as possible. This would result in the computed value of the subscription rights being close to zero, thus, ensuring that the shareholders will not suffer any material economic disadvantages from the exclusion of subscription rights.

If the Management Board carries out what is known as a book-building process, it can also set terms in line with the general market environment and thereby largely avoid dilution. In book-building, investors are invited to submit bids on the basis of provisional bond terms and conditions, specifying among other things what they consider to be a fair market interest rate and/or other economic components. When the book-building period ends, the investors' bids are evaluated in order to determine the terms that still remain unresolved at that point in time, such as interest rate, according to supply and demand, thereby ensuring that the total value of the bond issue is in keeping with conditions prevailing in the market. By conducting a book-building process, the Management Board can ensure that shares are not appreciably diluted by the exclusion of subscription rights.

Moreover, shareholders can maintain their share of the capital stock of the Company through purchases on virtually the same terms and conditions via the stock exchange. This ensures reasonable protection of their economic interests. The authorization to exclude subscription rights as provided for in § 186 (3) sentence 4 of the German Stock Corporation Act only applies to bonds with rights to shares that account for a proportionate share of the capital stock of not more than 10%, neither at the time of this authorization becoming effective, nor at the time of its exercise.

The sale of treasury stock must be counted towards this limit if it occurs during the term of this authorization under exclusion of subscription rights in accordance with § 186 (3) sentence 4 of the German Stock Corporation Act. In addition, shares issued from Authorized Capital under exclusion of subscription rights in accordance with § 186 (3) sentence 4 of the German Stock Corporation Act during the term of this authorization must be counted towards this limit. These provisions serve the interests of shareholders by minimizing the dilution of their investment as much as possible.

Moreover, the Management Board shall be authorized, upon the approval of the Supervisory Board, to exclude subscription rights with respect to fractional amounts. Such fractional amounts can be the result of the amount of the relevant issuing volume and the need to fix a practicable exchange ratio. In such cases, excluding subscription rights simplifies the execution of the capital increase.

Furthermore, the Management Board shall be given the authority to exclude, upon the approval of the Supervisory Board, the subscription rights of the shareholders in order to grant the holders of conversion or option rights or the holders of mandatory convertible bonds (or the holders of mandatory convertible participation rights) the same subscription rights which they would be entitled to if they were to exercise their conversion or option rights, or following fulfillment of a conversion obligation, as applicable. Instead of lowering the option or conversion price, this ensures that holders of option or conversion rights already existing at this point in time or the holders of mandatory convertible bonds (or the holders of mandatory convertible participation rights) can be offered subscription rights as dilution protection. Providing bonds with such a dilution protection is standard market practice.

Bonds can also be issued against contributions in kind if this is in the interest of the Company. In such cases, the Management Board shall be authorized to exclude the subscription rights of the shareholders with the approval of the Supervisory Board provided that the value of the contribution in kind is appropriate in relation to the theoretical market value of the bonds as calculated using recognized financial mathematical methods. This makes it possible to use bonds in individual cases as acquisition currency, for example when acquiring companies, interests in companies, or other assets. In negotiations, there may be situations in which consideration is to be provided in a form other than cash. This option will increase the Company's competitive position with respect to potential acquisition targets and increase its flexibility to take advantage of opportunities with respect to the acquisition of companies, interests in companies, or other assets, while maintaining its liquidity levels. This can also be advantageous when optimizing the financing structure. The Management Board will carefully examine each individual case to decide whether to make use of the authorization to issue bonds (or participation rights) with conversion or option rights against contributions in kind under exclusion of subscription rights. It will only do so if such an action is in the interest of the Company and, thus, of its shareholders.

The total shares to be issued under bonds that were issued, excluding subscription rights, pursuant to this authorization, may not exceed a pro rata amount of the capital stock of EUR 232,396,800 (corresponds to 20% of the current capital stock). Shares that were issued during the term of this authorization, excluding subscription rights, using Authorized Capital 2010/I shall count towards this limitation. This means that subscription rights will be excluded pursuant to the Authorized Capital 2010/I that is to be resolved pursuant to Agenda item 7 and the authorization on the issue of bonds to be resolved under Agenda item 9, at the very most in respect of shares accounting for a maximum of EUR 232,396,800 of the capital stock (corresponds to 20% of the current capital stock) in total. This restriction ensures a corresponding upper limit on the exclusion of subscription rights, and limits possible dilution for the shareholders excluded from subscription rights.

The proposed conditional capital is needed to meet the obligations arising from the conversion or option rights issued with the bonds or to fulfill conversion obligations on shares of the Company, to the extent that the bonds were issued against cash. Other forms of fulfillment can also be used for the conversion or option rights/conversion obligations instead, for example the delivery of treasury shares or shares from authorized capital.

The obligations arising from conversion or option rights from bonds issued against contributions in kind cannot, however, be met by using conditional capital. In such cases, the Company must turn either to treasury shares or to an increase of capital stock against contributions in kind. For an increase of capital stock against contributions in kind, the Authorized Capital 2010/I, as proposed for resolution under item 7 of the Agenda, will be available. The claims of the bondholders under the bond would be included as a contribution in kind, whereby the valuation review must also include confirmation that the claim is not impaired, and that the underlying contribution in kind was appropriate to the issue price.

The Management Board will report on the extent to which it has made use of the authorization to issue bonds at the respective next General Meeting following such issue.