Analysis and Trends

Demography as an Investment Opportunity

People are living longer; the global population is growing. This global demographic trend is an investment opportunity when viewed properly

Information for fund distributors

and institutional investors. Not for

circulation to private investors.

Analysis & Trends

2

Analysis & Trends

2

Decisive Insights for forward-looking investment strategies

3

Analysis & Trends

Content

Imprint

Allianz Global Investors Kapitalanlagegesellschaft mbH Mainzer Landstraße 11–1360329 Frankfurt am Main

Capital Market AnalysisHans-Jörg Naumer (hjn)Dennis Nacken (dn)Stefan Scheurer (st)Olivier Gasquet (og)Richard Wolf (rw)

4 Demography as an Investment Opportunity

6 Demographic dividend opportunities

8 Capital markets in the demography trap?

10 Demographic winners

13 Sources

Analysis & Trends

4

Decisive insights

• Demography starts with each individual. Anyone who has 20 years or more until retirement (statistically) should consider making his money work harder and longer.

• Demography is a global trend with long-term implications – a megatrend. While countries in Africa or countries such as India are expected to benefit from a demo-graphic dividend due to their population growth and their young demographic structures, the industrialised countries, in particular, but also some other emerging economies, such as China, are likely to see their economic growth inhibited because of their demographic trends.

• The demographic turning point will probably have a long-term impact on the capital markets as well. A glance at US markets shows an apparent correlation between the trend in people of working age and US equity valuations.

• The investment insight derived from the demographics megatrend is therefore: Invest more globally, betting on industries that will benefit from the demographic changes.

Demography as an Investment Opportunity

People are living longer; the global population is growing. The particularly strong population growth in the emergingeconomies is simultaneously accompanied by dynamic economies. This global demographic trend is an investment opportunity when viewed properly.

Worldwide, the average life expectancy has risen 4.6 months per year since 1950, from 45.4 to 68.2 years. However, we often mix up the average life expectancy at birth, as mentioned here, with our actual life expec-tancy. The joke here is that, the older you are, the longer your life expectancy. Because the more years we have under our belt, the more years we have survived during which other people who are included in the overall statistics have died prematurely. Example: In Japan, for example, whilst the average remaining life expectancy on retirement at the age of 65 was 11 years in 1950, it is almost 22 years today.1 By the middle of

the century, it should increase to 24 years (see Chart 1), reaching 23.7 years in Switzer-land and just under 22 years in Germany. The third stage of life will also become longer in today’s emerging markets, such as South Korea and China. By 2050, a person aged 65will expect to live another 21.6 years in South Korea, whilst in China this figure will be around 18.7 years. The “twilight years” will therefore be a full stage of life!

Demography thus starts with each individual.Anyone who has 20 years or more until retirement (statistically) should consider making his money work harder and longer:

Investment opportunity 1:Make your money work longer and harder.

1 See Part 1 of our series on demographics, “Demographic Turning Point”, at www.allianzgi.de/capitalmarketanalysis

5

in Y

ears

Year

1875 1900 1925 1950 1975 2000 2025 2050

5

10

15

20

25

Germany AustraliaEngland and WalesUSASwitzerlandSweden FranceJapan

• Harder: In order to make up for the gap in pension income, the company pension scheme must be supplemented by private investments that generate the highest possible returns. Money must not be left to lie dormant in savings accounts or in top-rated bonds that will not add any value after inflation and taxes. In many countries, the real returns on these types of investments will even be negative at the end of 2011.

• Because a higher expected return entails higher price risk, the investment period is crucial. The rule of thumb is: The longer the

money has to work, the safer it is to invest it in more volatile types of investment, as the investor is more likely to be able to ride out occasional price corrections.

So there is a risk that the investor will still have too long to live when the money runs out. To put it another way: the question is, shouldn’t one place more emphasis on longevity risk than on investment risk? For today’s investors, providing for a secure future is the order of the day. Here, it would be advisable to take advantage of global demographic trends by viewing them as an investment opportunity.

Chart 1: Increased life expectancy at the ripe old age of 65

Source: UN Population Division, Human Mortality Database (HMD). as of: 08 / 19 / 2011, Allianz Economic Research

5

Analysis & Trends

6

Demographic dividend opportunities

Because: Demography is a global trend with long-term implications – a megatrend. Important insights that have already been analysed in detail in Part 1 of our demographics series2 include:

• By the year 2050, the global population is expected to increase by another 30 %, probably to more than 9 billion people. Only in Europe, Russia and Japan is the population expected to decline.

• This could lead to a “two-pronged ageing” process: whilst overall life expectancy seem-ingly continue to increase, the proportion of elderly people in the global population will increase simultaneously, as fertility rates are expected to drop over the same period (i. e. the number of new-born babies per woman will decrease).

Whilst one part of the world – the industrial-ised countries – is mainly growing older, the other part – the emerging economies – remains relatively young and will likely continue to add population. Along with increasing economic power, the developing countries are turning into growth countries.

Because an important component of an economy’s growth potential is its population growth. Thus, assuming that capital stock and technological progress remain constant, an

economy’s per capita income is the product of labour productivity and the percentage of the overall population that is employed:3

Gross domestic product population

= productivity per employee

x number of people employed

population

The formula shows that an increase in the number of people employed directly affects a country’s growth per capita. Furthermore, an economy’s performance is influenced not only by the size and increase or decrease in population, but also by the age structure of the overall population. Indeed, the various age groups exhibit differing economic behaviour. Here, statistics distinguish between the group of “economically dependent” people – the age cohort from birth to 15 and people over 65, who contribute little in the way of added value, and people who are employed – the 15- to 65-year-olds, who contribute to the strength of the economy by working and saving at the same time. From a purely economic standpoint, countries in which the ratio of people working to the total population is growing benefit from the fact that the pro-ductive segment of the population has to support significantly fewer dependants. In those countries, citizens can consume, save and invest more. In economics, this factor is referred to as the “demographic dividend”.

2 See Part 1 of our series on demographics, “Demographic Turning Point”, at www.allianzgi.de/capitalmarketanalysis

3 Arnott, R. D./Chaves D. B.,2011: Demographic Changes, Financial Markets and the Economy, Research Affiliates, LLC

6

7

Africa

India

Latin America

World

Asia

Brazil

USA

Western Europe

China

Russia

Eastern Europe

Japan

-25% -10%-15%-20% -5% 0% 10% 15%5%

Demographic Costs Demographic Dividend

In other words, the above formula for an economy’s per capita income can also be expressed as follows:

Per capita income =

labour productivity x

demographic dividend (or costs)

Below, we have attempted to quantify the demographic dividend or demographic costs for all sorts of countries and regions. To do so, we used the aforementioned formula and the trend in the number of potential employ-ees for each economy over the period from 2010 to 2050. To simplify the calculations, we kept labour productivity and unemployment constant. The results (see Chart 2) show that, following the demographic turning point, the ratio of people working compared to the total population, and therefore per capita income, is expected to decrease by 4 % (0.1 % p.a.) over the next 40 years. In Japan and Europe in particular, the decline in the number of potential employees over this period will have estimated demographic costs of 20 % and 15 %, respectively. Because demographic costs directly affect an economy’s per capita income, this trend can also be expressed

as follows: Per capita income in Japan and Europe will suffer a demographic cost of 0.6 % and 0.4 % p. a., respectively. Thanks to its favourable demographic trend – the US population is expected to increase by almost 100 million people by 2050 – the US will still be in relatively good shape. There, the demographic costs will amount to only 10 % over the next 40 years (0.3 % p. a.).

The picture is more varied in the emerging economies. While countries in Africa or countries such as India are expected to benefit from a demographic dividend due to their population growth and their young demographic structures, some other emerging economies are likely to see their growth inhibited because of their demo-graphic trends. Accordingly, the ratio of the working-age population to the total popula-tion in Eastern Europe will probably decline by 17 % (0.5 % p. a.) over the next 40 years. At the same time, China’s one-child policy would result in a 16 % (0.4 %) drop in working-age adults over the next few years. Never-theless, the emerging economies should be able to at least partially offset these demographic costs by exploiting productiv-ity reserves that to date have gone largely untapped.

Chart 2: International comparison of demographic dividends / costsChange in the ratio of the working-age population (15- to 64-year-olds) to the total population between 2010 and 2050.

Source: UN World Population Prospects, 2010; Allianz Global Investors Capital Market Analysis

Analysis & Trends

8

Capital markets in the demography trap?

The demographic turning point will probablyhave a long-term impact on the capital markets, as well. Because demographic trends such as population growth, the changing population structure and increasing life expectancy will probably affect growth, sav-ings patterns and the risk appetite associated with the demand for capital in an economy. And as a result, it is quite likely that these trends will also affect asset class price trends on the capital markets.

Now, in particular, when virtually everyone born during the baby-boom years is at the age when their incomes and private savings are approaching their maximum in the life cycle, the capital markets could begin to feel the impact of the demographic factor. In the coming years, this so-called “baby-boom generation” will be retiring, disposing of most of their savings and using the proceeds to finance their retirement. If everyone does this, there will be a substantial decline in the demand for capital market instruments, such as equities and bonds. In addition, the lower number of children being born today means that there will be less future demand. In the literature, this correlation is referred to as the “asset-meltdown hypothesis”.4

True, it is certainly not easy to demonstrate the effects of the demographic factor on the capital markets, least of all in isolation, as many quite diverse factors influence asset price trends. Still, it is interesting to note that there is apparently a connection between the trend in the future size of the working-age population and share price valuations.5

This is illustrated by a glance at the US (Chart 3). Here, we compare changes in the number of working-age people (aged 35 to 59) – the group of people who contribute added value, draw an income, save most of it and therefore can be considered potential customers for securities – to those over 60 – who tend to tie up resources, withdraw savings and therefore are more likely to be sellers of securities. If one assumes that younger people tend to be more willing to take risk than older people, then it is quite reasonable to use this correlation as a yard-

stick for measuring a population’s appetite for risk. From 1960 to 1981, this ratio fell from 2.2 to less than 1.7 and was accompa-nied by a drop in share price valuations. For example, the Standard & Poor’s (S&P) 500 price / earnings ratio (based on average roll-ing company earnings for the last 10 years) dropped substantially during the period from 1965 to 1981, from 24 to under 8. As more and more baby-boomers reached working age in the mid-1980s, the ratio of savers to those spending their savings again rose to approximately 2.1 in the US by the new millennium. At the same time, prices of US corporate equities increased. Both com-ponents have moved downward since 1999 and 2001, respectively. Admittedly, the most recent fall in share prices was due primarily to the financial crisis, i.e. problems in the property and financial industries and in the public sector, but nevertheless certainly appears to have been further exac-erbated by demographic effects. In view of the fact that the baby-boom generation will be retiring over the next few years, the ratio of people of working age to pensioners in the US will further decline; the demo-graphy-driven stress factor may result in a downward trend in the US equity markets.

However, we do not forecast a horror scenario involving a future asset meltdown, i. e. in which millions of baby boomers wishing to sell their financial investments cannot find enough buyers. Arguments against such a scenario include the following:

• Whilst the effects on return on equity of the demographic turning point may begin to be felt, they will be of such negligible size as to make the dramatic term “asset meltdown” appear to be grossly exaggerated.

• An ageing society will need more, not less, An ageing society will need more, not less, capital because increasingly it will be compelled to replace labour with capital.

• In a globalised world, returns on equity will not be dominated by individual countries. Global capital markets are becoming more and more intertwined, with capital imports and exports occurring in ever greater volumes.

4 Mankiw, N. G./Weil D. N., 1989: The Baby Boom, the Baby Bust, and the Housing Market.

See also: Allianz SE, 2009: Demografie: Die Zukunft in eigenen Händen, Allianz (“Demography: the future is in our hands, Allianz”)

5 Federal Reserve Bank of San Francisco, 2011, Boomer-Retirement: Headwinds for US Equity Markets?, Economic Letter 2001 – 26

9

50

45

40

35

30

25

20

15

10

5

01960

2,3

2,2

2,1

2

1,9

1,8

1,7

1,6

1,51963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011

S&P 500 price-earnings ratio (P/E) Ratio of savers to those spending their savings in the US (right hand scale)

• The demography-related shifts on the capital markets were neither sudden nor unexpected. In an efficient market, such a trend will be largely anticipated by capital market participants.

All in all, the worst-case scenario of a demo-graphy-driven stock market collapse would appear to be overblown. However, if the work-ing-age population trends downward and capital in the form of savings trends upward, wages will gradually increase more than the cost of capital. In the industrialised countries, in particular, returns may therefore be weaker than in the past.

The second investment consideration that can be gleaned from all this is: invest more of your capital internationally.

• Some of your funds should be invested in areas where growth is going to take place (today and) tomorrow.

• The easiest way to do this is to invest in a globally invested portfolio, such as a fund that invests worldwide, and / or

• to invest in regions with above-average growth potential with the most favourable demographic trends,

• and / or in companies whose registered offices are still located in ageing countries but whose customers are mostly located in emerging economies.

But there’s more to it than just that. Global demographic trends may lead both to a change in the demand structure and to global shifts in demand. One should therefore consider not only

• biotechnology and pharmaceutical shares, which stand to profit from an ageing popu-lation, but also

• energy shares and commodities, which are becoming increasingly scarce in the face of rising demand.

• As the emerging economies are typically As the emerging economies are typically characterised by urbanisation and strong economic growth, infrastructure and transportation may also present attractive investment opportunities.

Below, we explore in greater detail several potential investment opportunities that could be among the demographic winners

Chart 3: US capital markets in the demography trap?Price/earnings ratio (based on rolling earnings for the last 10 years) and ratio of 30- to 59-year-olds (savers) to those over 60 (those spending their savings) in the US.

Source: Datastream, 2011; Allianz Global Investors Capital market analysis

Investment opportunity 2:Invest globally, rather than locally.

Analysis & Trends

10

Demographic winners

Pharmaceutical and biotechnology – a growth marketGlobal demographic change is likely to result in a changing and rising demand for health-care services in the coming years. Indeed, five new babies are born every two seconds. Over the next 40 years, global population might grow by around 30 %. Not only is the demand for healthcare increasing quantitatively because of the rising world population; there is also “qualitative” growth. The consump-tion of higher-quality healthcare services increases along with higher standards of liv-ing. For example, per capita expenditure on healthcare services in the United States was about USD 8,000 in 2009, while the figure was only about USD 265 in China and USD 122 in India.6 At the same time, healthcare spend-ing will also rise as a result of the increased longevity of the population in the world – it increases by about four months every year – as well as the growing percentage of people over 65 years of age. For example, the pro-portion of the population over 65 in Europe is expected to rise from around 16 % in 2005 to over 27 % in 2050 (see Chart 4). This gives the concept of the “old continent” an entirely new meaning. But the ageing process on the other continents is also irreversible. In Asia, for example, the proportion of pensioners is expected to rise from its current level of about 6 % to just over 17 % in 2050. The result: demand for prescription drugs and medical

interventions will probably increase. Indeed, with increased age, both chronic and acute illnesses worsen, resulting in disproportionate increases in healthcare expenses.

Emerging markets = growth marketsExample: the BRICs. An investment philosophycentred on Brazil, Russia, India and China. The idea behind this acronym is simple: Brazil stands for commodities, Russia for oil and gas, India for software and services and China for a hunger for growth and an enormous army of consumers.

But that’s far from the whole story. The sheer size of the population of these four countries is impressive: in 2010, their total population was just under three billion, a figure that could increase by another 500 million by 2030. By contrast: the seven self-anointed “leading industrialised nations” (G7) com-bined have just under 740 million people – one-quarter of the BRICs’ population. This figure is expected to increase by only around 60 million people by 2030. This will represent an increase of approximately 30 % in the G7 countries over the 1980 level, whilst the BRIC countries will have grown by some 73 % (see Chart 5). But that’s not all. The economic balance of power will also continue to change. Whereas the G7’s combined gross domestic product (GDP) of USD 6.4 trillion in 1980 was three times that of the BRIC countries, the situation will change by 2030, by which time the “Marvellous Four”, with USD 84 tril-

Chart 4: Healthcare market will likely benefit from “two-pronged” ageing. Percentage of the population over 65 years of age by region (2005 and 2050e)

Source: UN Population Report 2010, Allianz Global Investors Capital market analysis

Investment opportunity 3: Healthcare market will likely benefit from “two-pronged” ageing.

6 Source: OECD Health Data 2011; WHO, World Health Statistics 2011

30%

25%

20%

15%

10%

5%

0 %

2005 2050 (estimated)

Europe North America Latin America Oceania Asia Africa

16%

27%

13%

22%

6%

20%

10%

19%

6%

17%

3%

7%

11

Chart 5: B R I C s: the “Marvellous Four”Population trend, in millions

Source: Statistical offices in the respective BRIC countries, 2011; Allianz Global Investors Capital Market Analysis

lion of economic output, will have overtaken the seven industrialised countries, which are expected to have a combined GDP of USD 64 trillion by that time (see Chart 6). Note: this economic output calculation uses each country’s actual purchasing power. Whilst this varies quite a bit from country to country, ultimately the important thing is what people can actually afford, because that is the only thing that affects demand.

Natural resources & energy Commodities are at the end of the demand chain characterised by population and economic growth. Not only is the demand for commodities increasing quantitatively because of the rising world population; there is also “qualitative” growth. Consumption becomes more commodities-intensive as prosperity increases.

Investment opportunity 4:Emerging economies – the centre of gravity in the 21st century

Chart 6: B R I C s: the “Marvellous Four”GDP in real terms (in USD billions) (based on 2010 prices), adjusted to purchasing power parity

Source: Economist Intelligence Unit, 2011; Allianz Global Investors Capital Market Analysis

90 000

80 000

70 000

60 000

50 000

40 000

30 000

20 000

10 000

0

GDP of the BRICs GDP of the G7

1980 1990 2000 2010 2030

3500

3000

2500

2000

1500

1000

500

0

Population of the BRICs Population of the G7

1980 1990 2000 2010 2030

Analysis & Trends

12

The World Bank assumes that low-income countries will grow twice as fast as high-income countries in the coming decades. There is a huge amount of pent-up demand. The appetite for commodities in China alone is steadily pushing up demand. The per capita consumption of aluminium, copper and steel there has almost tripled over the last ten years. Areas where the Middle Kingdom has now become the world’s largest consumer include iron ore, steel, copper and aluminium. Never-theless, the Middle Kingdom still appears to be more or less at the beginning of its catch-up phase. Indeed, China’s per capita consumption of commodities as a percentage of per capita GDP is still low compared with the industri-alised countries and their development cycle following the Second World War (see Chart 7).

Consequently, commodities are likely to become ever scarcer and therefore increas-ingly expensive.7

The environment as a scarce resourceAt the same time, people are becoming increasingly aware of environmental factors: the environment as a source of renewable energy, but also as a resource that is not inex-haustible.

Climate change, in particular, means that environmental protection is becoming increasingly urgent. In addition, factors such as the introduction of CO2 emission rights, rising commodity prices and climate change as a business risk contribute to putting a price tag on the consumption of the environment. The environment itself is becoming a scarce resource.

Consequently, in future greater emphasis will be placed on resource and energy productivityduring the production of economic goods. As a result, new forms of energy have already become increasingly important. The World

12

Chart 7: Per capita aluminium consumption and standard of living International comparison

Source: BHP Billiton; Chart: Allianz Global Investors Capital Market Analysis

0

5

10

15

20

25

30

0 5 10 15 20 25 30 35 40Real per capita GDP (in thousand USD, adjusted to PPP)

Per c

apita

alu

min

ium

cons

umpt

ion

(kg)

Japan USA Euro zone Korea China

Investment opportunity 5:Commodities – an increasingly scarce resource.

7 See our analysis in “Megatrend: Scarce Resources” at http://www.allianzgi.de /capitalmarketanalysis

13

Energy Council (WEC) estimates that by the middle of this century, the global demand for energy will rise by 45 %, whilst the proportion generated from renewal energy sources will increase from 7 % today to around 30 %. At the same time, waste will be recycled to recover valuable raw materials. The Organisation for Economic Co-operation and Development (OECD) countries accumulate over 650 mil-lion tonnes of municipal waste in 2008.8 Fur-thermore, the increasing population means that water infrastructure is becoming more and more urgent. Only around 83 % of the world’s population has access to clean water and only 58 % to sanitary facilities such as a toilet and shower. The OECD forecasts that an annual volume of investment in infrastructure of over USD 600 billion for the next 20 years is needed to ensure the water supply.

While the environmental protection aspect is, of course, key, forward-looking investors should think about how they can benefit from these long-term ecological and economic trends.

Conclusion: The birth of the planet’s seven billionth inhab-itant reminds us of the demographic turning point that will influence our lives over the next few decades. We should prepare for them, both by taking appropriate precautionary measures, but also by taking this turning point into account ourselves as we make investmentdecisions. Considered from the right point of view, demography can be turned into an investment opportunity.

Dennis Nacken and Hans-Jörg Naumer

Sources

→ Allianz SE, 2011: Die Last des langen Lebens, Allianz Demographic Pulse Nr. 5.

→ Allianz SE, 2010: Afrika – Bevölkerungs-prognosen wecken Hoffnung auf wirtschaftlichen Aufschwung, Allianz Demographic Pulse.

→ Allianz SE, 2009: Demografie: Die Zukunft in eigenen Händen, Allianz.

→ Allianz Global Investors, 2011: Demo grafische Zeitenwende, Allianz Economic Research, Kapitalmarktanalyse. http://www.allianzgi.de / kapitalmarktanalyse

→ Allianz Global Investors, 2011: Alters vorsorge im demografischen Wandel, International Pensions, Kapitalmarktanalyse. http://www.allianzgi.de / kapitalmarktanalyse

→ Allianz Global Investors, 2010: The Global Crunch and its Long-term Impact on US Retirement investing, International Pension Studies Nr. 4.

→ Arnott, R. D. / Chaves D. B., 2011: Demographic Changes, Financial Markets, and the Economy, Research Affiliates, LLC

→ Berlin-Institut für Bevölkerung und Entwicklung, 2011: Demografische Dividende

→ Bloom, D. E. / Canning, D. / Fink G., 2011: Implications of Population Aging for Economic Growth, Harvard School of Public Health, PGDA Working Paper No. 64

→ Mankiw, N. G. / Weil D. N., 1989: The Baby Boom, the Baby Bust, and the Housing Market.

→ Federal Reserve Bank of San Francisco, 2011, Boomer-Retirement: Headwinds for US Equity Markets?, Economic Letter 2001 – 26

→ Mason, A. / Lee, S.H., 2004: The Demographic Dividend and Poverty Reduction, Paper No. UN / POP / PD / 2004 / 19

→ Poterba, J., 2001: Demographic Structures and Asset Returns, Review of Economics and Statistics, vol. 83, No. 4 (S. 565 – 584).

→ Ross, J., 2004: Understanding the Demographic Dividend.

Investment opportunity 6: Capitalise on ecological trends, i.e. alternative energy sources, recycling and water

8 Source: OECD Factbook 2010

Analysis & Trends

1414

Do you know the other publications of Capital Market Analysis – the investment think tank?

Analysis & Trends

→ From emerging markets to growth markets

→ Brazil: Local Hero – Global Winner

→ Asia on the move – gravitational centre of the 21st century?

→ The sixth Kondratieff – long waves of prosperity

→ Outsmart yourself!

→ Investing in Scarce Resources

→ Turning Point

→ China - Driving Global Growth

→ Germany: Globalisation Winner

→ Eco-logic: Investing in the Environment

→ Are Takeovers Helping Drive the Equity Market

→ The Renminbi internationalisation gains momentum

→ China Focus – Labor Shortage

→ Tiger and Dragon

→ Fighting inflationary pressure

→ China‘s new age of growth

→ Decisive insights in a „Changing World“

→ Demographic Turning Point (Part 1)

→ Pensions in a Demographic Transition (Part 2)

→ Demography as an Investment Opportunity (Part 3)

PortfolioPractice

→ Sustainable – Responsible – Themed strategies

→ The new Zoology of Investment Risk Management

→ Is small beautiful?

→ Focus: The Omega Factor

→ Active Management

→ Black Swan

→ Sustainable Investing: just a fad?

→ Responsible Investing reloaded

→ My name’s “Bond” – “Corporate Bond

→ Financial assets in Germany

→ Dividend stocks – an attractive addition to a portfolio

→ Fiduciary Management

You can find all the latest publications and podcasts of Capital Market Analysis under: www.allianzgi.de / capitalmarketanalysis

15

This document has been issued and approved by Allianz Global Investors Europe GmbH, a subsidiary of Allianz Global Investors AG (parent company of the Allianz Global Investors Group). Allianz Global Investors Europe GmbH is a limited liabil-ity company incorporated under the laws of the Federal Republic of Germany with its registered office at Mainzer Landstraße 11–13, D-60329 Frankfurt / Main. Allianz Global Investors Europe GmbH is licensed as a provider of financial services (Finanzdienstleistungsinstitut); for the conduct of its business activities, Allianz Global Investors Europe GmbH is subject to the supervision of the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).

Allianz Global Investors Europe GmbH has established branches in Switzerland (Zürich), Italy (Milan), United Kingdom (London), Spain (Madrid) and the Netherlands (Rotterdam). Allianz Global Investors Europe GmbH also has established rep-resentative offices in the Kingdom of Bahrain (Bahrain), Portugal (Lisbon) and Sweden (Stockholm). For these branches and representative offices additional local laws and regulation may be applicable.

This document is meant to provide a broad overview for discussion and / or information purposes. Furthermore, this docu-ment was not prepared with the intention of providing legal or tax advice. The views and opinions expressed in this docu-ment, which are subject to change, are those of Allianz Global Investors Europe GmbH and its affiliated companies at the time of publication. The duplication, publication, or transmission of the contents of this document to unauthorised persons, irrespective of the form, is not permitted.

While some of the data provided herein is derived from various published and unpublished sources, and is assumed to be correct and reliable, it has not been independently verified. Therefore, Allianz Global Investors Europe GmbH does not guarantee the accuracy or completeness of such data / information and will not accept any liability for any direct or consequential losses arising from its use, unless directly caused by willful misconduct or gross negligence.

The investment opportunities described herein are not guaranteed by Allianz Global Investors Europe GmbH or affiliated companies within the Allianz Global Investors Group. This document does not constitute an offer or solicitation to buy securities. Statements made to recipients of this document are subject to the provisions of any underlying offer or contract that may have been, or will be, made or concluded.

Past performance is not a reliable indicator of future performance. Investors should not make any assumptions on the future on the basis of performance information. The value of an investment and the income from it can fall as well as rise as a result of market and currency fluctuations and investors may not get back the amount originally invested.

This document is marketing material.Internet: www.allianzglobalinvestors.eu

Disclaimer

This publication constitutes advertising as defined in Section 31 (2) of the German Securities Trading Act [WpHG].

www.allianzglobalinvestors.de / capitalmarketanalysis

Allianz Global InvestorsKapitalanlagegesellschaft mbHMainzer Landstraße 11–1360329 Frankfurt am Main PEFC/04-31-0745 Oc

tobe

r 201

1