ALLIANZ GROUP 32 Ratings  Borrowing Outstanding bonds of Allianz AG *) – overview In the spring and summer of 2003  the Allianz Group’s ratings were slightly downgraded by several rating agencies. This was a reaction to the reticent attitude of the capital markets and our weak prior-year operating result. The deterioration of our capital base in the previous year was also reflected in this evaluation. But the rating agencies did acknowledge the substantial in- crease of our shareholders’ equity after the capital increase in April 2003. While ratings across the insurance industry were generally declining  our ratings stabilized. Standard & Poor’s  for example  attests to our “very strong” financial status and con- tinues to maintain its “AA–” rating. A. M. Best assigns Allianz Group an “A+”  the second highest rating. But Standard & Poor’s still links this evaluation to a negative outlook. We are striving to change this perception through lasting improvements of our earnings performance. The Allianz Group still has recourse to short-term financing instruments  predominantly commercial papers. At the end of the year  these liabilities added up to approximately 3 billion eu- ros. Interest paid on commercial papers amounted to 53.4 mil- lion euros in 2003. See table in note 32 “Interest and similar expenses”  table 15 “Participation certificates and sub- ordinated liabilities”  table in note 19 “Certificated liabilities” in the Notes to the Consolidated  Financial Statements. In the reporting year  we repaid a first tranch (50 percent) of the index-linked convertible MILES bond by exchanging these bonds for shares of Munich Re. The number of shares to be re- paid related to the average level of the German stock index DAX and the average share price of Munich Re during a twenty-day reference period. On August 25  2003  5.5 million Munich Re shares were delivered to MILES investors. This transaction low- ered our interest in Munich Re by approximately 3 percent. The bonds still outstanding  were repaid in cash on March 2  2004. In February 2003  the Deutsche Bank convertible bond reached maturity. Since the share price of Deutsche Bank was below the striking price  the 1-billion euro bond was repaid in cash. Another 767-million euro bond  which reached maturity in May 2003  was repaid on time. In February 2004 we issued a perpetual subordinated bond with a nominal value of 1.5 billion euros. We thereby took advan- tage of the low interest environment and the high liquidity in the market to refinance short-term by long-term debt at attrac- tive conditions. The bond is issued as part of the Debt Issuance Program launched in December 2003. This program provides a framework for issuing debt  and in particular long-term debt; the technical processing is considerably simplified by standard- ized documentation requirements. Certificated liabilities by maturity  Nominal values in  ¤ mn 2004 2005 2006 2007 2008 2012 2022 2025 Per- petual 0 500 1 000 1 500 2 000 2 500 3 000 Exchangeable Bonds Senior Bonds Subordinated Bonds 990 1  70 0 1 075 962 2 200 1 632 900 2 000 1 000 396 Standard & Moody’s A. M. Best Poor’s Category Insurer Financial Strength AA– not rated A+ Outlook Negative Negative Counterpart Credit AA– not applicable not applicable Outlook Negative Senior Unsecured Debt AA– Aa3 aa– Outlook stable Negative Subordinated Debt A A2 not rated Outlook stable Commercial Paper  A-1+ P-1 not rated (Short Term)  Volume Interest paid  in 2003 ¤  bn  ¤  mn Senior straight bonds 5.7 303 Convertible bonds 3.8 155 Subordinated bonds 3.4 223 *) Bonds and convertible bonds issued or guaranteed by Allianz AG in the capital market.