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Allianz Annual Report 2012

As of 31 December 2012, the ­­­Allianz Group recorded a provi- sionof€ 117 mn(2011:€ 42 mn)fortheseRSUinotherliabilities. 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, ­­­AllianzSEcausedPacificInvestmentManagementCompany 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 par- ticipants 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 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 exer- cisable 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 eq- uity units being repurchased. As the Class B equity units are puttable by the plan participants, 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 compensa- tion expense. During the year ended 31 December 2012, the ­­­Allianz Group recognized a compensation expense related to the Class B equity units of € 62 mn (2011: € 167 mn; 2010: € 367  mn). In addition, the ­­­Allianz Group recognized an ex- pense related to the priority claim on the adjusted operat- ing profits of PIMCO LLC of € 32 mn (2011: € 47 mn; 2010: € 74  mn). The ­­­Allianz Group called in total 11,800 Class B equity units during the year ended 31 December 2012, whereby 4,399 of these Class B equity units were converted into promissory notes. Additionally, plan participants put 96 Class B equity units during the year ended 31 December 2012. All of them were converted into promissory notes. The promissory notes are recorded in liabilities to banks and customers with a total amount of € 190  mn. The payout of the promissory notes is planned for the first quarter of 2013. The total amount paid related to the call of the remaining Class B equity units was € 262  mn. Allianz Equity Incentive Plan Since the 2011 grant year, the ­­Allianz Equity Incentive Plan (AEI) has replaced the GEI plans. The AEI is granted in the form of restricted stock units (RSU) and is part of a new vari- able compensation component for the plan beneficiaries. The RSU granted to a plan participant obligate the ­­­Allianz Group to pay in cash the average closing price of an ­­­Allianz SE share on the last day of the vesting period and the prior nine trading days or to convert one RSU into one ­­­Allianz SE share. The payout is capped at a 200 % share price growth above the grant price. The RSU are subject to a vesting period of four years and will be released on the last day of the vesting period. The ­­­Allianz Group can choose the settlement method for each unit. In addition, upon death of a plan participant, a change of control or notice for operational reason, the RSU vest im- mediately and will be exercised by the company. The RSU are virtual stocks without dividend payments and a capped payout. The fair value is calculated by subtracting thenetpresentvalueofexpectedfuturedividendpayments until maturity and the fair value of the cap from the prevail- ing share price as of the valuation date. The cap is valued as a European short call option, using prevailing market data as of the valuation date. The following table provides the assumptions used in cal- culating the fair value of the RSU at grant date: Assumptions of AEI plans D 139 20131 2012 2011 Share price € 105.70 88.29 102.00 Average dividend yield % 4.6 5.3 4.8 Average interest rate % 0.6 1.2 2.0 Expected volatility % 20.6 22.0 18.5 1 The RSU 2013 are deemed to have been granted to participants as part of their 2012 remu- neration. Consequently, the assumptions for RSU grants delivered in March 2013 are based on best estimation. The RSU are accounted for as cash settled plans as the ­­­Allianz Group intends to settle in cash. Therefore, the ­­­Allianz Group accrues the fair value of the RSU as a compen- sation expense over the service period of one year and af- terwards over the vesting period. During the year ended 31 December 2012, the ­­­Allianz Group recognized a compensa- tion expense related to the AEI plans of € 79 mn (2011: € 29 mn; 2010: € 17 mn). Annual Report 2012    Allianz Group346

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