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Allianz Annual Report 2012

The total recognized compensation expense for Class B eq- uity units that are outstanding is recorded as a liability in other liabilities. As of 31 December 2012, the ­­­Allianz Group recorded a liability for the Class B equity units of € 206  mn (2011: € 614 mn). PIMCO LLC Class M-unit Plan In 2008, ­­­Allianz Global Investors of America L.P. (­AllianzGI L.P.) launched a new management share-based payment incentive plan for certain senior level executives and affili- ates of PIMCO LLC. Participants in the plan are granted op- tions to acquire a new class of equity instruments (M-units), which vest in one-third increments on approxi- mately the third, fourth and fifth anniversary of the option grant date. Upon vesting, options will be automatically ex- ercised in a cashless transaction. Participants may elect to defer the receipt of M-units through the M-unit Deferral Plan until termination of their service as a maximum. With the M-unit Plan, participants can directly participate in PIMCO’s performance. Class M-units are non-voting com- mon 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 quarterly 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 ex- pected 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 cal- culating the fair value of the M-options at grant date: Assumptions of Class M-Unit plan D 140 2012 2011 2010 Weighted average fair value of options granted € 1,600.50 1,719.35 1,462.84 Assumptions: Expected term (years) 3.84 3.84 3.83 Expected volatility % 43.6 42.1 45.9 Expected dividend yield % 13.0 11.1 10.9  Risk free rate of return % 0.7 1.5 1.9  The number and weighted average exercise price of the M- options outstanding and exercisable are as follows: Reconciliation of outstanding M-options D 141 2012 2011 2010 Number of options Weighted average exercise price Number of options Weighted average exercise price Number of options Weighted average exercise price € € € Outstanding as of 1 January 156,285 11,266.93 96,451 8,478.86 66,889 6,323.40 Granted 71,916 14,299.31 72,050 14,187.52 36,010 11,489.07 Exercised (19,819) 6,861.28 (7,780) 7,365.13 — — Forfeited (4,291) 12,828.34 (4,436) 11,089.64 (6,448) 7,487.13 Outstanding as of 31 December 204,091 12,597.93 156,285 11,266.93 96,451 8,478.86 Exercisable as of 31 December – – – – – – The aggregate intrinsic value of share options outstanding was € 175 mn and € 202 mn for the years ended 31 December 2012 and 2011, respectively. Annual Report 2012    Allianz Group D Consolidated Financial Statements 219 Consolidated Balance Sheets 220 Consolidated Income Statements 221 Consolidated Statements of Comprehensive Income 222 Consolidated Statements of Changes in Equity 223 Consolidated Statements of Cash Flows 226 Notes to the Consolidated Financial Statements 347