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Allianz Annual Report 2013

D Consolidated Financial Statements 127 Consolidated Balance Sheets 128 Consolidated Income Statements 129 Consolidated Statements of Comprehensive Income 130 Consolidated Statements of Changes in Equity 131 Consolidated Statements of Cash Flows 134 Notes to the Consolidated Financial Statements Annual Report 2013    Allianz Group 227 Share-based compensation plans of subsidiaries of the ­Allianz Group PIMCO LLC Class B Unit Purchase Plan When acquiring ­Allianz Global Investors of America L.P. (­AllianzGI L.P.) during the year ended 31 December 2000, ­Allianz SE caused Pacific Investment Management Company LLC (PIMCO LLC), a subsidiary of ­AllianzGI L.P., to enter into a Class B Purchase Plan (the “Class B Plan”) for the benefit of members of the management of PIMCO LLC. The plan participants of the Class B Plan have rights to a 15 % priority claim on the adjusted operating profits of PIMCO LLC. The Class B equity units issued under the Class B Plan vest over 3 to 5 years and are subject to repurchase by ­AllianzGI L.P. upon the death, disability or termination of the participant prior to vesting. Starting 1 January 2005, ­AllianzGI L.P. has the right to repurchase, and the participants have the right to cause ­AllianzGI L.P. to repurchase, a portion of the vested Class B equity units each year. The call or put right is exercisable for the first time 6 months after the initial vesting of each grant. On the repurchase date, the repurchase price will be based upon the determined value of the Class B equity units being repurchased. As the Class B equity units are puttable by the plan par- ticipants, the Class B Plan is accounted for as a cash settled plan. Therefore, the ­Allianz Group accrues the fair value of the Class B equity units as a compensation expense over the vesting period. Upon vesting, any changes in the fair value of the Class B equity units are recognized as a compensation expense. During the year ended 31 December 2013, the ­Allianz Group recognized a compensation expense related to the Class B equity units of € 16  mn (2012: € 62  mn). In addition, the ­Allianz Group recognized an expense related to the priorityclaimontheadjustedoperatingprofitsofPIMCOLLCof€ 16  mn (2012: € 32  mn). The ­Allianz Group called in total 224 Class B equity units during the year ended 31 December2013. The total amount paid related to the call of the Class B equity units was € 10  mn. The total recognized compensation expense for Class B equity units that are outstanding is recorded as a liability in other liabilities. As of 31 December 2013, the ­Allianz Group recorded a liability for the Class B equity units of € 196 mn (2012: € 206 mn). PIMCO LLC Class M-unit Plan In2008,­AllianzGlobalInvestorsofAmericaL.P.(­AllianzGIL.P.)launched a new management share-based payment incentive plan for certain senior level executives and affiliates of PIMCO LLC. Participants in the plan are granted options to acquire a new class of equity instruments (M-units), which vest in one-third increments on approx-imately the third, fourth and fifth anniversary of the option grant date. Upon vesting, options will be automatically exercised in a cashless trans­ action, but only if they are in the money. Participants may elect to defer the receipt of M-units through the M-unit Deferral Plan until termination of their service at a maximum. With the M-unit Plan, participants can directly participate in PIMCO’s performance. Class M-units are non-voting common equity with limited information rights. They bear quarterly distributions equal to a pro-rata share of PIMCO’s net distributable income. Deferred M-units have a right to receive a quarterly cash compensation equal to and in lieu of quar- terly dividend payments. A maximum of 250,000 M-units are authorized for issuance under the M-unit Plan. The fair value of the underlying M-options was measured using the Black-Scholes option pricing model. Volatility was derived in part by considering the average historical and implied volatility of a selected group of peers. The expected life of one granted option was calculated based upon treating the three vesting tranches (one third in years 3, 4, and 5) as three separate awards. The following table provides the assumptions used in calculating the fair value of the M-options at grant date: Assumptions of Class M-Unit plan 2013 2012 Weighted average fair value of options granted € 1,047.87 1,600.50 Assumptions: Expected term (years) 3.84 3.84 Expected volatility % 31.6 43.6 Expected dividend yield % 13.2 13.0 Risk free rate of return % 0.7 0.7 The number and weighted average exercise price of the M-options outstanding and exercisable are as follows: Reconciliation of outstanding M-options 2013 2012 Number of options Weighted average exercise price Number of options Weighted average exercise price € € Outstanding as of 1 January 204,091 12,597.93 156,285 11,266.93 Granted 50,600 16,959.07 71,916 14,299.31 Exercised (30,412) 8,213.51 (19,819) 6,861.28 Forfeited (10,170) 13,069.76 (4,291) 12,828.34 Outstanding as of 31 December 214,109 13,709.98 204,091 12,597.93 Exercisable as of 31 December – – – – The aggregate intrinsic value of share options outstanding was € 232 mn and € 175 mn for the years ended 31 December 2013 and 2012, respectively.

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