2011 Annual Report - OTCIQ.com

122 Notes
To implement the investment objective, the E.ON Group generally
pursues a liability-driven investment (LDI) approach that
takes into account the structure of the benefit obligations.
This long-term LDI strategy seeks to manage the funded status,
with the result that any changes in the defined benefit
obli gation, especially those caused by fluctuating inflation and
interest rates are, to a certain degree, covered by simultaneous
corresponding changes in the fair value of plan assets. The
LDI strategy may also involve the use of derivatives (for example,
interest rate swaps and inflation swaps). In order to
improve the funded status of the E.ON Group as a whole, a portion
of the plan assets will also be invested in a diversified
portfolio of asset classes that are expected to provide for longterm
returns in excess of those of fixed-income investments.
Provisions for Pensions and Similar Obligations
The E.ON Group’s recognized net obligation is derived from
the difference between the present value of the defined
bene fit obligation and the fair value of plan assets, adjusted
for unrecognized past service cost, and is determined as
shown in the following table:
The determination of the target portfolio structure for the
individual plan assets is based on regular asset-liability studies.
In these studies, the target portfolio structure is reviewed
under consideration of existing investment principles, the current
level of financing of existing benefit obligations, the
condition of the capital markets and the structure of the benefit
obligations, and is adjusted as necessary. The expected
long-term returns for the individual plan assets are derived
from the portfolio structure targeted and from the expected
long-term returns for the individual asset classes in the assetliability
studies.
Plan assets were invested in the asset classes shown in the
following table as of the dates indicated:
Classification of Plan Assets
December 31, 2011 December 31, 2010
Percentages
Total Domestic Foreign Total Domestic Foreign
Equity securities 11 13 8 16 13 18
Debt securities 64 65 63 66 70 62
Real estate 9 12 6 9 11 7
Other 16 10 23 9 6 13
Derivation of the Provisions for Pensions and Similar Obligations
€ in millions
December 31
2011 2010
Defined benefit obligation—fully or partially funded by plan assets 14,128 16,080
Fair value of plan assets -11,359 -13,263
Defined benefit obligation—unfunded plans 479 434
Funded status 3,248 3,251
Unrecognized past service cost -9 -11
Net amount recognized 3,239 3,240
Operating receivables -6 -10
Provisions for pensions and similar obligations 3,245 3,250