BASF Report 2021 Consoli dated Financial Statements – Notes 259 Explanations regarding plan assets the creditworthiness of issuers, the plan asset allocation may be The funding of the plans was as follows: adjusted in the case of a revised market assessment. Alternative The target asset allocation has been defined by using asset liability investments largely comprise investments in private and Current funding situation of the pension plans as of December 31 studies and is reviewed regularly. Accordingly, plan assets are infrastructure equity, absolute return funds and senior secured Million € aligned with the long-term development of the obligations, taking loans. 2021 2020 into consideration the risks associated with the specific asset Defined Defined benefit Pension benefit Pension classes and the regulations relating to the investment of plan assets. Almost all of the equities are priced on active markets. The category obligation assets obligation assets The existing portfolio structure is based on the target asset debt instruments includes promissory notes and debentures Unfunded pension plans 2,121 – 1,840 – allocation. In addition, current market assessments are taken into (Pfandbriefe) acquired through private placements with a market Funded pension plans 26,508 23,130 28,000 21,400 consideration. In order to mitigate risks and maximize returns, a value in the amount of €188 million as of December 31, 2021, and widely spread global portfolio of individual assets is held. €110 million as of December 31, 2020. For such securities, Total 28,629 23,130 29,840 21,400 especially those held by domestic pension plans, there is no active Liability-driven investment (LDI) techniques, such as hedging the risk market. There is also no fungible market price for the additional Defined contribution plans and government pensions of changes in interest rates and inflation, are used in some pension amount of €387 million, especially in the category of alternative plans, especially for U.K. and U.S. plans. investments and real estate. The capital market compensates for The contributions to defined contribution plans recognized in this lack of fungibility with yield premiums depending on the maturity. income from operations amounted to €308 million in 2021 and Structure of plan assets €306 million in 2020. % Plan assets as of the balance sheet date contained securities issued 2021 2020 by BASF Group companies with a market value of €0 million in 2021 Contributions to government pension plans were €578 million in Equities 26 28 and €1 million in 2020. The market value of the properties of legally 2021 and €557 million in 2020. Debt instruments 45 47 independent pension funds rented to BASF Group companies of which for government debtors 18 19 remained unchanged from the previous year at €112 million. for other debtors 27 28 Real estate 6 5 Since 2010, an agreement has existed between BASF SE and BASF Pensionskasse VVaG on the granting of profit participation Alternative investments 21 17 capital with a nominal value of €80 million to strengthen the financing Cash and cash equivalents 2 3 of the BASF Pensionskasse VVaG. The existing profit participation Total 100 100 capital was paid back to BASF SE in 2021. To enable Pensions- kasse VVaG to meet future regulatory solvency requirements and The asset class debt instruments comprises promissory notes and strengthen its risk-bearing capacity, BASF SE temporarily provided debentures (Pfandbriefe) as well as corporate and government the pension fund with capital in the form of a retrospective initial fund bonds. Government bonds primarily relate to bonds from countries loan with a nominal value of €220 million in 2021. The pension fund with very high credit ratings, such as the United States, the United utilized €80 million of that amount in 2021. Furthermore, BASF Pen- Kingdom, Germany and Switzerland. Government bonds from sionstreuhand e.V. reimbursed BASF SE in 2021 with €250 million in emerging countries are also held to a limited extent. Corporate pension payments relating to 2020. bonds mainly comprise bonds from creditworthy debtors, although particular high-yield bonds are also held to a limited extent. In connection with the continuous monitoring of default risk based on a given risk budget and on the observation of the development of