Capital Market Presentation

August 2011:

Real Assets

Hans-Jörg Naumer, Dennis Nacken,

Stefan Scheurer

Not for circulation to

private investors
Where Do I Invest My Money?

Performance of different asset classes (in %)

Gold

Commoditiy Futures

Equities USA

Equities World

Bonds Emerging Markets

Bonds Advanced Economies

Equities Germany

Equities Emerging Markets

Corporate Bonds

Equities Japan

Equities Europe

-10 -7 -4 -1 2 5 8 11 14 17 20

Performance -1 Month Performance ytd

Source: Datastream; Allianz Global Investors Capital Market Analysis 2

Concern 1: Fear of Escalation of European Debt Crisis

Risk premia of 10y European government bonds vs. German government bonds (-1 year)
1M
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Debt as % of Debt as % of GDP GDP Public Budget Public Budget

GDP 2011 GDP 2012 2011 2012 Balance 2011 Balance 2012
Euro area (EU-17) 87,7% 88,5% 1,6% 1,8% -4,3% -3,5%
Germany 82,4% 81,1% 2,6% 1,9% -2,0% -1,2%
France 84,7% 86,8% 1,8% 2,0% -5,8% -5,3%
Italy 120,3% 119,8% 1,0% 1,3% -4,0% -3,2%
Spain 68,1% 71,0% 0,8% 1,5% -6,3% -5,3%
Netherlands 63,9% 64,0% 1,9% 1,7% -3,7% -2,3%
Belgium 97,0% 97,5% 2,4% 2,2% -3,7% -4,2%
Austria 73,8% 75,4% 2,4% 2,0% -3,7% -3,3%
Greece 157,7% 166,1% -3,5% 1,1% -9,5% -9,3%
Finland 50,6% 52,2% 3,7% 2,6% -1,0% -0,7%
Portugal 101,7% 107,4% -2,2% -1,8% -5,9% -4,5%
Ireland 112,0% 117,9% 0,6% 1,9% -10,5% -8,8%
Slovakia 44,8% 46,8% 3,5% 4,4% -5,1% -4,6%
Luxembourg 17,2% 19,0% 3,4% 3,8% -1,0% -1,1%
Slovenia 42,8% 46,0% 1,9% 2,5% -5,8% -5,0%
Cyprus 62,3% 64,3% 1,5% 2,4% -5,1% -4,9%
Estonia 6,1% 6,9% 4,9% 4,0% -0,6% -2,4%
Malta 68,0% 67,9% 2,0% 2,2% -3,0% -3,0%

Source: European Commission, Datastream; Allianz Global Investors Capital Market Analysis 3
Concern 2: US Debt

US debt in % of GDP since 1792

Great depression
130 & World War II
122%
120 Forecast 2015
~100%
110

100

90
Financial Crisis
80
70%
70

60

50
Civil War
40
27%
30

20

10

0
1792 1802 1812 1822 1832 1842 1852 1862 1872 1882 1892 1902 1912 1922 1932 1942 1952 1962 1972 1982 1992 2002 2012

Source: Congressional Budget Office; Allianz Global Investors Capital Market Analysis 4
Concern 2: US Economy

US labor market recovering slowly; US housing market lagging behind

1
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Source: Datastream; Allianz Global Investors Capital Market Analysis 5

Concern 3: Growth – Sliding into a New Recession?

Leading indicators suggest cooling down but remain largely on expansionary side.
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Source: Datastream; Allianz Global Investors Capital Market Analysis 6

Concern 4: Inflation – Especially for China

Expansive monetary policy in industrial nations, restrictive monetary policy in growth countries.
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Source: Datastream; Allianz Global Investors Capital Market Analysis 7

Valuations Continue to Suggest Equity Investments

P/E ratios 12 months forward

1
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89
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Source: Datastream; Allianz Global Investors Capital Market Analysis 8

Earnings Season: Excessive Expectations

71% of S&P 500 Q2 2011 reports exceeded analysts‘ expectations.

100%
Consumer Discret. 14%
19% 19% 16%
90% 22% 20%
Consumer Staples 24%
8%
Energy 80% 9%
10% 10%
10% 8% 14%
Financials 70%

(thereof: Banks) 60%

Healthcare
50%
Industrials
40% 78%
Information Tech. 75%
71% 68% 68% 71%
66%
Materials 30%

Telecom Services 20%

Utilities 10%
Total
0%
Q2 2011 Q1 2011 Q4 2010 Q3 2010 Q2 2010 Q1 2010 Average
0% 20% 40% 60% 80% 100%
2002-2010
Positive Neutral Negative
better than expected as expected worse than expected

Source: Bloomberg; Allianz Global Investors Capital Market Analysis 9

Earnings Season: Sales Growth but Margin Pressure on the Horizon

Sales growth & EBITDA margins (12m fwd) in the US, Europe and Emerging Markets.
30
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Source: Datastream; Allianz Global Investors Capital Market Analysis 10

Market Participants Remain on the Sidelines

Robust equity market despite reticent investors.

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Source: Datastream; Allianz Global Investors Capital Market Analysis 11

Investment Theme: Small Caps

Small caps continue to drive performance vs. average premium paid in the US.
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80%
Ø premium Small Caps: 24,2%
70%
Ø premium Mid Caps: 27,3%
Ø premium Large Caps: 7,6%
60%

50%

40%

30%
Ø Mid Caps
Ø Small Caps
20%

10%
Ø Large Caps

0%

-10%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Small-Caps Mid-Caps Large-Caps

Source: Datastream, Bloomberg; Allianz Global Investors Capital Market Analysis 12

Decisive Insights:

 Despite weaker leading indicators, the underlying trend in the global economy
seemingly continues to be positive, making it seem unlikely that the global economy will
slip into a second recession.
 The EU rescue package is likely to provide a boost to the capital markets, although
concerns about the US and its debt problems displaced the relief felt following the EU
summit.
 The artificial growth created through debt and an increasing risk of inflation present
unfavourable conditions for bond investors.
 In spite of the continued uncertainty, we believe that a slight overweight in equities is
advisable. The reasons for this include the attractive valuation of equities versus bonds
and the confidence resulting from the second quarter reporting season

In spite of the continued uncertainty, we believe that a slight overweight in equities is advisable.

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www.allianzglobalinvestors.de/capitalmarketanalysis

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Disclaimer

This presentation has been issued and approved by Allianz Global Investors Europe GmbH, a subsidiary of Allianz Global Investors AG (part of the Allianz Group).

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