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Exhibit 1: Positive Asset Returns Drove Funding Ratio Higher During The Fourth Quarter - US Pension Fund Fitness Tracker Of The Typical US Corporate Plan's Funding Ratio (Photo: Business Wire)

Stocks in this article: UBS

During the fourth quarter of 2013, the UBS Global Asset Management US Pension Fund Fitness Tracker saw the funding ratio of the typical corporate US pension plan rise by about three percentage points to 95%. Overall, 2013 was a very strong year for corporate pension plans, as we estimate that the average funding ratio rose by about 17 percentage points.

Strong investment returns of 4.7% were the main contributor to the improvement in the funding ratio during the quarter. Liability values are estimated to have increased by 1.1%. These estimates are based on the average corporate plan’s reported asset allocation weightings from the UBS Global Asset Management Pension 500 Database and publicly available benchmark information.

The US equity market finished the year with a final surge upwards, as the S&P 500 Index recorded a 10.5% total return over the quarter. In October, the prospect of a US default had virtually no impact on the equity markets, which continued their rally once a deal was reached. The rest of the quarter was dominated by investors' bets on the timing of the US Federal Reserve (Fed) reduction of its quantitative easing (QE) program. In the US, the economic outlook remains positive, with the Chicago PMI level strongly above consensus, while employment data showed moderate, but stable growth. In Europe, the European Central Bank (ECB) responded to deflationary pressures by cutting rates by 25 basis points (bps) to 0.25%. In US dollar (USD) terms, the Euro Stoxx Index was up 9.6% over the quarter. In the last three months of the year, China's economic data met expectations, and the MSCI Emerging Markets Index was up 1.9% in USD terms.

After a volatile quarter, the yield on 10-year US Treasury bonds increased by 42 bps, ending at 3.03%. The yield on 30-year US Treasury bonds increased 29 bps, ending at 3.97%. High-quality corporate bond credit spreads, as measured by the Barclays Capital Long Credit A+ option-adjusted spread, ended the quarter 27 bps tighter. As a result, pension discount rates (which are based on the yield of high-quality investment grade corporate bonds) were flat. The passage of time caused liabilities for a typical pension plan to increase by about one percentage point over the quarter. Together, these effects caused liabilities to increase 1.1% for the quarter. (Please see disclosures for assumptions and methodology.)

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