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Allianz Annual Report 2012

As of 31 December 2012, the M-options outstanding have an exercise price of between € 6,447.21 and € 14,913.53 and a weighted average remaining contractual life of 2.91 years. The shares settled by delivery of PIMCO LLC shares are ac- counted for as equity-settled plans by PIMCO LLC. Therefore, PIMCO LLC measures the total compensation expense to be recognized for the equity-settled shares based upon their fair value as of the grant date. The total compensation ex- pense is recognized over the vesting period. During the year ended 31 December 2012, the­­­Allianz Group recordedacompensationexpenseof€ 78 mn(2011:€ 52 mn; 2010: € 28 mn) related to these share options. ­­Allianz France share option plan ­­Allianz France, formerlyAGF, awarded options on its former Holding (AGF S.A.) quoted shares to eligible AGF Group ex- ecutives,managersofsubsidiaries,aswellastosomeofthe employees, whose performance justified grants. During the year ended 31 December 2007, ­­­Allianz acquired all of the remaining AGF shares from non-controlling inter- ests in the context of the Tender Offer and Squeeze-out. Un- der the terms of an agreement (the ”Liquidity Agreement”) between ­­­Allianz SE, AGF and the beneficiaries of the AGF share option plans 2003-2006 (AGF employees), ­­­Allianz has the right to purchase all AGF shares issued through the ex- ercise of these AGF share option plans after the put period (where the beneficiaries have the right to sell to ­­­Allianz). The price payable by ­­­Allianz per AGF share is a cash consid- eration equal to the ­­­Allianz 20-day-average share price prior to the date the right to buy or to sell is exercised, mul- tiplied by a ratio representing the consideration proposed in the Tender Offer for each AGF share (€ 126.43) divided by the ­­­Allianz share price on 16 January 2007 (€ 155.72). This ratio is subject to adjustments in case of transactions im- pacting ­­­Allianz or AGF share capital or net equity. The cash settlement is based upon the initial offer proposed for each AGF share during the Tender Offer. As of 31 December 2007, all shares issued under these plans were fully vested and exercisable. Due to the change in settlement arising from the Liquidity Agreement, the ­­­Allianz Group accounts for the AGF share option plans as cash settled plans, as all AGF employees will receive cash for their AGF shares. Therefore, the ­­­Allianz Group recognizes any change in the fair value of the unex- ercised plans as a compensation expense. During the year ended 31 December 2012, the­­­Allianz Group recognized total compensation expenses related to the modified share option plans of € 7  mn (2011: income of € 4  mn; 2010: income of € 0.4  mn). As of 31 December 2012, the ­­­Allianz Group recorded a provision for these plans of € 9  mn (2011: € 4 mn). ­­­­Allianz SE share option plan of former RAS Group (modified RAS Group share option plan 2005) The former RAS Group awarded eligible members of senior management with share purchase options on RAS ordinary shares. The fair value of the options at grant date was measured using a trinomial option pricing model. Volatility was de- rived from observed historical market prices aligned with the expected life of the options. The expected life was esti- mated to be equal to the term to maturity of the options. On the effective date of the merger between ­­­Allianz SE and RAS, the RAS share option plan was modified. The outstand- ing share options, which were granted in 2005, were re- placedwith­­­AllianzSEshareoptionsonthebasisof1 ­­­Allianz SE option for every 5.501 RAS share options outstanding. The outstanding RAS Group options of 953,000 were replaced by 173,241 ­­­Allianz SE options. The ­­­Allianz SE share options have the same vesting period of 2 years; however, the former market conditions were replaced with a performance con- dition, which was already achieved on the date of the mod- ification. Annual Report 2012    Allianz Group348