ALLIANZ GROUP 168 Following a 2-year vesting period, the stock appreciation rights may be exercised at any time between the 2nd and the 7th anniversary of the effective date of the relevant plan, provided that Under the conditions of the SAR plans, Group companies are obli- gated to pay, in cash, the difference between the stock market price of Allianz shares on the day the rights are exercised and the reference price as specified in the respective plan. The maximum difference is capped at 150 % of the reference price. Upon exercise of the appre- ciation rights, payment is made in the relevant local currency by the company granting the stock appreciation rights. Stock appreciation rights not exercised by the last day of a plan will be exercised auto- matically where the necessary conditions have been met. Where these conditions have not been met or a plan participant ceases to by employed, the plan participant’s appreciation rights are forfeited. SAR plan awards have been granted as follows: No rights were exercised for any SAR plan grant as of December 31, 2003. As of year end 2003, none of the awards currently exerci- sable have met the second condition defined above (20 % increase of the share price). As of December 31, 2003, a total of 3,061,673 (2002: 1,507,414; 2001: 825,979) appreciation rights were outstan- ding under SAR award grants. The fair value as of the grant date of the SARs granted in 2003 was ¤ 41 (2002: 69; 2001: 31) mn based on standard valuation methods (Black-Scholes or Binomial Method). The total compensation expense related to the RSU plan is cal- culated as the amount of the quoted Allianz AG share price and is re- measured at each reporting period based on changes in the Allianz AG share price and is accrued over the 5-year vesting period. As of December 31, 2003, the total compensation expense related to the 541,394 outstanding RSUs was  ¤ 55 mn. Taking into account the ex- pired portion of the vesting period, a reserve of  ¤ 6 mn was esta- blished on December 31, 2003, and reported under the heading  “Other accrued liabilities”. The fair value as of the grant date of the 542,141 RSUs granted in 2003 was  ¤ 36 mn based on standard option valuation methods (Black-Scholes or Binomial Method). Under this plan, 542,141 RSUs have been granted to senior manage- ment as of May 13, 2003, 541,394 of which remain outstanding as of December 31, 2003. The Group will exercise these rights uniformly for all plan participants on the first stock exchange day that succeeds the 5-year vesting period. At the date of exercise, the Group can choose to settle the plan by: In 2003, the Group established a Restricted Stock Unit (RSU) incen- tive compensation plan. The RSU plan is designed to increase cor- porate value and to align shareholders’ and managements’ interests by linking the remuneration of key personnel to the performance of Allianz AG’s share price. As of December 31, 2003, there was one RSU award authorized, the 2003 award grant. The Group has entered into call options on Allianz AG stock to hedge its future obligations under the SAR plans. The total compensation expense related to the SAR plan is cal- culated as the amount by which the quoted Allianz AG share price exceeds the SAR reference price. The total compensation expense is remeasured at each reporting period based on changes in the Allianz AG share price and is accrued over the 2-year vesting period. As of December 31, 2003 the total compensation expense related to the 3,061,673 outstanding appreciation rights was  ¤ 54 mn. Taking into account the expired portion of the vesting period, a reserve of  ¤ 18 mn was established on December 31, 2003, and reported under the heading “Other accrued liabilities”, with a corresponding  ¤ 18 mn of expense recognized in 2003. No liability or expense was recorded in 2001 and 2002, as the Allianz AG share price did not exceed the re- ference price of outstanding appreciation rights at that time. _  issuing 1 Allianz AG share, or other equivalent equity instrument(s), per RSU to the beneficiaries. _  Cash payment to the grantees in the amount of the average closing price of Allianz AG’s share in the 10 trading days preceding the end of the vesting period, or by _  the Allianz share price outperforms the reference price by at least 20.0 % at the time when the rights are exercised. The reference price for the 2003 SAR plan award ( ¤ 65.91) is the average closing price of Allianz shares for the first 10 trading days after April 29, 2003, the date of the Annual General Meeting 2003. _  during their contractual term, the price of Allianz AG shares has outperformed the Dow Jones Europe STOXX Price Index (600) at least once for a period of 5 consecutive stock exchange days, and Restricted Stock Units Plan (RSU plans) Stock Appreciation Rights plans (SAR plans) Grant Vesting Reference SARs SARs date period price granted forfeited years ¤ April 1999 2  264.23 294,341 13,405 April 2000 2  332.10 303,169 41,095 April 2001 2  322.14 445,462 38,831 April 2002 2  239.80 681,778 76,177 May 2003 2  65.91 1,508,209 1,778