ALLIANZ GROUP 88 Market risks Dresdner Bank uses a proprietary value-at-risk model that takes into account all aspects of general and specific risks. Value-at-risk is defined as the potential loss which may oc- cur during a specific period of time and with a given confidence level. In 1998, the German Federal Supervisory Authority for Financial Service Providers (BaFin) first approved Dresdner Bank’s value-at-risk model for purposes of reporting in accor- dance with Principle I of the German Banking Act. It also ap- proved the improvements made in 2001 and 2002. The value- at-risk data used to calculate capital adequacy requirements for regulatory purposes must take into account potential market movements within a confidence level of 99 percent, based on an assumed holding period of 10 trading days. The value-at-risk model is complemented by stress testing. (99 % confidence level, 10-day holding period) Value-at-risk statistics 1) No diversification effect can be taken into account since the maximum and minimum values were measured at different dates. For purposes of setting internal limits and risk determination, we calculate value-at-risk with a confidence level of 95 percent and a one-day holding period. Unlike the value-at-risk calcula- tion required by the supervisory authority, which is based on market data from the past, we thus assign greater weight to the most recent market fluctuation. This ensures that value-at-risk data more accurately reflect current market developments. Year-end 2003 annual statistics Year-end 2003 Mean value Maximum  Minimum  2002 ¤ mn ¤ mn ¤ mn ¤ mn ¤ mn Aggregate risk 96 120 185 79 81 Interest rate risk 88 117 188 66 65 Equity risk 29 26 58 11 45 Currency/ commodity risk 19 11 28 1 13 Diversification effect 1) –40 –54 – – –42