ALLIANZ GROUP 112 1 Issuance of the Declaration of Compliance with the German Corporate Governance Code according to § 161 AktG 2 Accounting regulations On December 17, 2003, the Board of Management and the Supervi- sory Board of Allianz AG issued the Declaration of Compliance ac- cording to § 161 AktG and made it available on a permanent basis to the shareholders on the company’s website. The text of the Declara- tion of Compliance is also reproduced in the section Corporate Gov- ernance beginning on page 11 of this Annual Report. The Declaration of Compliance of the two publicly traded group companies Allianz Lebensversicherungs-AG and Oldenburgische Lan- desbank AG were issued on December 15 and 18, 2003, respectively, and were made available to the shareholders. In July 2003, the American Institute of Certified Public Accountants (AICPA) published Statement of Position (SOP) 03-1, Accounting and Reporting by Insurance Enterprises for certain Nontraditional Long- Duration Contracts and for Separate Accounts. SOP 03-1 became ef- fective for the Allianz Group on January 1, 2004. Some of the major provisions of SOP 03-1 include, but are not limited to: In accordance with § 292 a of the German Commercial Code (HGB), the consolidated financial statements have been prepared in con- formity with International Financial Reporting Standards (IFRS). All standards currently in force for the years under review have been adopted in the presentation of the consolidated financial statements. Since 2002, the designation IFRS applies to the overall framework of all standards approved by the International Accounting Standards Board (IASB). Already approved standards continue to be cited as In- ternational Accounting Standards (IAS). IFRS do not provide specific guidance concerning the reporting of insurance transactions in annual financial statements. In such cases as envisioned in the IFRS Framework, the provisions embodied un- der accounting principles generally accepted in the United States of America (U.S. GAAP) have been applied.  In the course of 2004, the IASB will publish a definitive standard based on the Exposure Draft (ED) 3 Business Combinations. When this standard is applied, goodwill will be written down only if it is im- paired (impairment-only approach). When this standard is applied, scheduled amortization of goodwill will be discontinued, as is the case under U.S. GAAP. For existing goodwill, the standard is expected to be first applicable for the fiscal year beginning after March 31, 2004. However, the standard will also permit early application. In 2003, the IASB published a draft standard for the evaluation and accounting of insurance contracts (ED5 insurance contracts). The IASB project for the introduction of this new standard is divided into two phases. Material changes in valuation and accounting will most likely arise in phase 2, for which no definitive content or date of ap- plication has yet been defined. As of September 30, 2003, we adjusted the accounting for this arrangement. Previously, we had intended to recognize compensation expense associated with these equity transactions only following a vesting period. However, the accounting and valuation provisions of Accounting Principles Board Opinion (APB) 25 and Statement of Fi- nancial Accounting Standards (SFAS) 123 require that such expense be recognized ratably over the vesting period. The adjustment of the accounting was made in the 3rd quarter of 2003. For the past, the following effects have been recognized: revenue reserves and, ac- cordingly, shareholders’ equity as of December 31, 2001 and De- cember 31, 2002 were reduced by  ¤ 51 mn and  ¤ 99 mn respectively. Net income for 2001 and 2002 were adjusted for an after-tax charge of  ¤ 38 mn and  ¤ 62 mn, respectively. This change also resulted in  an after-tax charge of  ¤ 112 mn for fiscal 2003. Of this amount,  ¤ 80 mn was recognized for the first 9 months of 2003. This accounting adjustment had no effect on Allianz’s cash posi- tion. Beginning in the 3rd quarter of 2003, we adopted SFAS 123 to ac- count for all stock-based employee compensation plans. Compensa- tion expense measured according to the fair value method of SFAS 123 for the PIMCO arrangements described above approximates that measured under APB 25. The present report otherwise follows the same accounting and valuation principles as the most recent annual financial statements. The Group’s stock-based remuneration plans are described in note 43. When acquiring PIMCO in 2000, it was agreed that PIMCO manage- ment would acquire PIMCO equity annually through 2004 subject to a vesting arrangement, and, following a blackout period, PIMCO man- agement and Allianz would hold reciprocal rights to put or call such equity, enabling Allianz to increase its economic interest in the earn- ings of PIMCO in future periods. _ Separate account assets and liabilities (Investments held on account and at risk of life insurance policyholders and insurance reserves for life insurance where the investment risk is carried by policy- holders) are reported and valuated as assets and liabilities of the Allianz Group when specified criteria are not met; and _ Establishing an additional liability for guaranteed minimum death and similar mortality and morbidity benefits in certain cases.