UBS Global Asset Management US Pension Fund Fitness Tracker Finds Funding Ratios Endured Bumpy Ride in First Quarter 2007.

CHICAGO -- UBS Global Asset Management today announced that its US Pension Fund Fitness Tracker, a quarterly estimate of the overall health of a typical US defined benefit pension plan, finds that pension plan funding ratios went on a wild ride, caused by volatility in both equity markets and interest rates.

The typical pension fund started 2007 with a funding ratio of approximately 103% and ended the quarter at a slightly improved funding ratio of approximately 105%. "While the overall numbers were positive, the first quarter of 2007 points out an area of concern for pension managers: namely, significant funding ratio volatility due to interest rate swings, and plans' over-reliance on equity market risk," said Aaron Meder, UBS Global Asset Management's Head of Asset Liability Investment Solutions in the Americas.

Much like in 2006, the improved health of the typical US defined benefit pension plan in the first quarter was due largely to strong equity market returns. UBS Global Asset Management estimates that the typical large corporate defined benefit plan saw an increase in assets for the quarter of almost 2%, outperforming liabilities, which were roughly flat for the quarter, as measured by the iBoxx US Pension Liability indices.

While a brief interruption in the equity market advance caused some of the funding ratio volatility, interest rates had a far bigger impact in the quarter. For example, liabilities were down 2% in January as interest rates moved higher, but regained all and more of that decline, increasing by almost 4% in February as rates reversed course. Of most interesting note was the single day volatility in the funding ratio experienced on February 27th. On that day, equity markets gave up about 2%, with interest rates falling at the same time.

"We have found this to be a recurring phenomenon in recent years. In this particular case, it resulted in funding ratios deteriorating by almost 4% in a single day. This single-day volatility should make pension managers take heed," said Meder.

While many plans are currently exposed to this risk, there are alternative investment approaches that can help to better align assets and liabilities. "Plans can implement liability-driven strategies that may significantly reduce the uncertainty in their future pension contributions - often without reducing expected plan returns. The improvement in overall pension health in 2006 and the first quarter of 2007 provides many with an excellent opportunity to hedge some of their liability risk," said Meder.

The funding ratio measures a pension fund's ability to meet future payouts to plan participants. The main factors impacting the funding ratio of a typical US defined benefit plan are equity market returns, which grow (or shrink) the asset pool from which plan participants' benefits are paid; and liability returns, which move inversely to interest rates.

Liability Indices: Methodology

The iBoxx US Pension Liability Index - Aggregate mimics the overall performance of a model defined benefit plan in the US, taking into consideration the passage of time and changes in the term structure of interest rates. The index is based on actual liability profiles, and mimics the investment grade yield curve. It is therefore more appropriate than most existing indices for measuring the performance of defined benefit plans. This index, (along with its related active member and retired member indices) is published daily, using the LIBOR interest rate swap curve as the discount curve, a highly liquid universe. This provides the flexibility to use combinations of the indices in order to accurately represent customized liability profiles based on a plan's specific participant population.

Asset Index: Methodology

UBS Global Asset Management approximates the return for the "typical" US defined benefit plan using the reported asset allocation of the corporate plan subset of the Pension & Investments 1000. The series is constructed using the reported asset allocation weightings and publicly available benchmark information; with geometrically linked monthly total returns.

The views expressed are those of UBS Global Asset Management as of March 31, 2007.

Additional information about the indices

The iBoxx US Pension Liability Indices include data provided by International Index Company (IIC). The information and opinions contained in this document have been complied or arrived at based upon information obtained from sources believe to be reliable and in good faith. All such information and opinions are subject to change without notice. A number of the comments in this document are based on current expectations and are considered "forward-looking statements." Actual future results, however, may prove to be different from expectations. The opinions expressed are a reflection of UBS Global Asset Management's best judgment at the time this release is compiled, and any obligation to update or alter forward-looking statement as a result of new information, future events, or otherwise is disclaimed

About UBS Global Asset Management

UBS Global Asset Management is one of the world's leading asset managers, providing traditional, alternative and real estate investment management solutions to private clients, financial intermediaries and institutional investors worldwide. Invested assets totalled some USD 710 billion at 31 December 2006, making the firm one of the largest global institutional asset managers and a leading fund house in Europe.

With just under 3,500 employees, located in 23 countries, UBS Global Asset Management is a truly global firm. The main offices are in Basel, Chicago, Frankfurt, Grand Cayman, Hartford, Hong Kong, London, Luxembourg, New York, Rio de Janeiro, Sydney, Tokyo, Toronto and Zurich.