GERMANY - German energy firm E.ON is targeting an equity allocation of up to 65% for its 4.9 billion euros of pension arrangements in 2004 as it seeks "real-time coverage" for its obligations.
According to E.ON's 2003 annual report, the target allocation of equities is 50%-65% in 2004. That compares with allocations of 53% and 57% at the end of 2003 and 2002 respectively.
The debt securities' target is 28%-50%, against an actual 40% and 35% in the last two years.
"The investment objective for the pension plan assets is the real-time coverage of benefit obligations for the corresponding pension plans," the report said.
"The long-term investment strategy for the various pension plans takes into consideration, among other things, the scope of the benefit obligations, the maturity structure, the minimum capital reserve requirements and, if applicable, other relevant factors."
"Current investment strategy is focused on equity securities, as well as on high-quality government bonds and selected corporate bonds."
The company said the average rate of return on plan assets was 13% in 2003 - above the expected 7.25%. And it added that it expects to pay 113 million euros in 2004 "to guarantee the minimum plan asset values" stipulated.
Most of E.ON's plan assets relate to the Powergen scheme in the UK and the LG&E Energy scheme in the US. The company's projected benefit obligation fell to 13.3 billion euros from 15.8 billion euros in 2002.