UBS AG — Capital/Financing Update 2011

Mar 14, 2011

Medium Term Securities Linked to the UBS V10 Currency Index with Volatility Cap

UBS AG

March 14, 2011

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT (To Prospectus dated January 13, 2009)

Prospectus Supplement

Medium Term Securities Linked to the UBS V10 Currency Index with Volatility Cap

UBS AG from time to time may offer and sell medium term securities (the “Securities”) with a return linked to the performance of the UBS V10 Currency Index with Volatility Cap (which we sometimes refer to as the “UBS V10 Currency Index” or the “Index”). The UBS V10 Currency Index is a proprietary index, developed and administered by UBS, that reflects the notional performance of an automated algorithmic trading strategy designed to identify and exploit trends in certain foreign exchange forward rates. This prospectus supplement describes the UBS V10 Currency Index, as well as some of the general terms that may apply to the Securities and the general manner in which they may be offered. The specific terms of any Securities that we offer, including the manner in which payments on the Securities will be calculated, the extent, if at all to which the principal amount of such Securities will be repaid at maturity and any additional terms of such Securities will be described in a free writing prospectus and a pricing supplement to this prospectus supplement (together, the “applicable terms supplement”). If there is any inconsistency between the terms described in the applicable terms supplement and those described in this prospectus supplement or in the accompanying prospectus, the terms described in the applicable terms supplement will control. The general terms of the Securities we may offer are described in this prospectus supplement and, unless otherwise specified in the applicable terms supplement, may include the following:

Issuer:

UBS AG. The booking branch of UBS AG will be set forth in the applicable terms supplement.

Principal Amount:

Each Security will have a principal amount of $10.00, unless otherwise specified in the applicable terms supplement.

Index:

UBS V10 Currency Index with Volatility Cap (Bloomberg Ticker: UBFSV10V ). See the discussion under “The UBS V10 Currency Index with Volatility Cap” commencing on page PS- 19 .

Repayment of Principal:

The Securities differ from ordinary debt securities in that UBS AG may not necessarily be obligated to repay any of the principal amount of the Securities at maturity. The applicable terms supplement will specify the Payment at Maturity Formula, Coupon Payment Formula and Payment at Call Formula, each as applicable and as defined below (collectively, the “Payment Formulas”) which determine, among other things, whether, the extent to which and under what circumstances UBS will be obligated to repay the principal amount of any such Securities. Depending on the Payment Formulas for a Security and the performance of the Index, you may lose all or a substantial portion of your investment in the Securities. Any payment on the Securities, including any repayment of principal, is subject to the creditworthiness of the Issuer.

Coupon Payments:

If specified in the applicable terms supplement, during the term of the Securities you may receive periodic cash payments. These payments will be calculated according to a formula specified in the applicable terms supplement (the “Coupon Payment Formula”). The Coupon Payment Formula may be based on a measure of the performance of the Index over the relevant valuation period, as may be specified in the applicable terms supplement.

Payment at Maturity:

At maturity, you will receive a cash payment that will be calculated according to a formula that will be specified in the applicable terms supplement (the “Payment at Maturity Formula”). The Payment at Maturity Formula may be based on the performance of the Index, as specified in the applicable terms supplement.

Payment on Call Date:

For Securities with an autocall feature, unless otherwise specified in the applicable terms supplement, if the Securities are called, you will receive a cash payment on the Call Settlement Date (as specified in the applicable terms supplement) according to a formula that will be specified in the applicable terms supplement (the “Payment at Call Formula”).

See “General Terms of the Securities — Payment at Maturity or Upon Automatic Call” beginning on page PS- 25 .

Final Valuation Date:

As specified in the applicable terms supplement.

Trade Date:

The date on which the offering of Securities is priced, as specified in the applicable terms supplement.

Participation Rate:

UBS AG may or may not offer a Participation Rate for the Securities. The Participation Rate, if applicable, will be specified in the applicable terms supplement.

Hedging Disruption Event:

The Securities will be automatically redeemed if a hedging disruption event occurs and is continuing for ten consecutive Index business days following such occurrence, as described in “General Terms of the Securities — Hedging Disruption Event.”

No Listing:

Unless otherwise specified in the applicable terms supplement, the Securities will not be listed or displayed on any securities exchange or any electronic communications network.

(cover continued on next page)

UBS Investment Bank

Prospectus supplement dated March 14, 2011

TABLE OF CONTENTS

Calculation Agent:

UBS AG, acting through the London branch, the Zurich branch, the New York branch or such other branch as may be specified in the applicable terms supplement, unless otherwise specified in the applicable terms supplement.

The applicable terms supplement will describe the specific terms of the Securities, including any changes to the terms specified in this prospectus supplement.

To help investors identify appropriate structured products, UBS organizes its structured products into four categories: Protection Strategies, Optimization Strategies, Performance Strategies and Leverage Strategies. The applicable terms supplement will specify the category that applies to the Securities. For a more detailed description of each of the four categories, please see “Structured Product Characterization” in the applicable terms supplement.

See “Risk Factors” beginning on page PS-9 of this prospectus supplement for risks related to an investment in the Securities.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.

The Securities are not deposit liabilities of UBS AG and are not FDIC insured.

TABLE OF CONTENTS

ADDITIONAL INFORMATION ABOUT THE MEDIUM TERM SECURITIES LINKED TO THE UBS V10 CURRENCY INDEX WITH VOLATILITY CAP

You should read this prospectus supplement together with the prospectus dated January 13, 2009, relating to our Medium Term Securities, Series A, of which the Securities are a part, the Currency and Commodity Supplement dated January 13, 2009, and any free writing prospectus or pricing supplement relating to the Securities that we may file with the Securities and Exchange Commission (the “SEC”) from time to time. You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):

Ø Prospectus dated January 13, 2009:

http://www.sec.gov/Archives/edgar/data/1114446/000095012309000556/y73628b2e424b2.htm

Ø Currency and Commodity Supplement dated January 13, 2009:

http://www.sec.gov/Archives/edgar/data/1114446/000139340109000045/v136621_69520-424b2.htm

Our Central Index Key, or CIK, on the SEC website is 0001114446.

TABLE OF CONTENTS

INDEX

Prospectus supplement

●
Prospectus Supplement Summary	PS-1
Risk Factors	PS-9
The UBS V10 Currency Index with Volatility Cap	PS-19
General Terms of the Securities	PS-25
Use of Proceeds and Hedging	PS-32
Supplemental U.S. Tax Considerations	PS-33
Benefit Plan Investor Considerations	PS-39
Supplemental Plan of Distribution (Conflicts of Interest)	PS-40

Prospectus

●
Introduction	1
Cautionary Note Regarding Forward-Looking Information	3
Incorporation of Information About UBS AG	4
Where You Can Find More Information	5
Presentation of Financial Information	6
Ratio of Earnings to Fixed Charges	6
Limitations on Enforcement of U.S. Laws Against UBS AG, Its Management and Others	7
Capitalization of UBS	7
UBS	8
Use of Proceeds	10
Description of Debt Securities We May Offer	11
Description of Warrants We May Offer	33
Legal Ownership and Book-Entry Issuance	49
Considerations Relating to Indexed Securities	54
Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency	57
U.S. Tax Considerations	60
Tax Considerations Under the Laws of Switzerland	71
Benefit Plan Investor Considerations	73
Plan of Distribution	75
Validity of the Securities	78
Experts	78

TABLE OF CONTENTS

Prospectus Supplement Summary

This prospectus supplement describes terms that will apply generally to the Securities. On the date on which an offering of Securities is priced (the “Trade Date”), UBS AG will prepare a pricing supplement that will include the specific pricing terms for that issuance, including the relevant Payment Formulas which determine, among other things, whether, the extent to which and under what circumstances UBS will be obligated to repay the principal amount of any such Securities, as well as any changes or additions to the general terms specified in this prospectus supplement. Any pricing supplement should be read in connection with this prospectus supplement and the accompanying prospectus and Currency and Commodity Supplement.

References to “UBS,” “we,” “our” and “us” refer only to UBS AG and not to its consolidated subsidiaries. In this prospectus supplement, when we refer to the “Securities,” we mean the Medium Term Securities linked to the UBS V10 Currency Index. References to the “accompanying prospectus” mean the UBS prospectus dated January 13, 2009, references to the “Currency and Commodity Supplement” mean the Currency and Commodity Supplement dated January 13, 2009 and references to the “applicable terms supplement” mean any free writing prospectus and the pricing supplement that describe the specific terms of your Securities.

What are the Medium Term Securities linked to the UBS V10 Currency Index?

The Medium Term Securities linked to the UBS V10 Currency Index with Volatility Cap are medium-term securities issued by UBS AG, the return on which is linked to the performance of the UBS V10 Currency Index. The UBS V10 Currency Index notionally invests in a dynamically adjusted basket consisting of positions in foreign exchange forward contracts on the U.S. dollar with tenors of up to approximately six months (which we refer to as “foreign exchange forward contracts”) against six currencies (which we refer to as the “Selected Currencies”) with the three highest and the three lowest one-month interest rates for such currencies from a group of ten currencies, including the U.S. dollar (which we refer to as the “Eligible Currencies”). We refer to those currencies with the highest interest rates as the “high yielding currencies” and those with the lowest interest rates as the “low yielding currencies.” Initially, the notional basket will consist of hypothetical long positions in forward contracts on the high yielding currencies and hypothetical short positions in forward contracts on the low yielding currencies, or short positions in forward contracts on the high yielding currencies and long positions in forward contracts on the low yielding currencies, depending on the volatility of the Eligible Currencies in the foreign exchange market, as measured by the Volatility Filter (which we describe in more detail below).

The notional basket will be reconstituted approximately every six months such that a new equally weighted notional basket of hypothetical long and short forward positions is created, with the notional size of the basket reflecting the increase or decrease in the value of the notional basket over the prior six-month period. In addition, if on any Index business day the rankings of the Eligible Currencies based on prevailing interest rates shift such that the composition of Selected Currencies changes, then the notional basket will be adjusted by notionally closing out at prevailing market rates the forward positions in the currencies to be replaced and notionally entering into new forward positions in the new or changed Selected Currencies. The new hypothetical forward positions will be deemed to settle on the same day as the forward positions that they replaced.

Generally, the design of the UBS V10 Currency Index reflects a view that foreign exchange forward rates are biased estimators of future foreign exchange spot rates and that currencies that trade at a forward discount ( i.e. , currencies whose forward exchange rate is lower than the current spot exchange rate) tend to outperform, on average and over time, currencies that trade at a forward premium ( i.e. , currencies whose forward exchange rate is higher than the current spot exchange rate). This is commonly referred to as “forward rate bias.” The Index also reflects a view that this tendency may be reversed during periods of high volatility in foreign exchange markets when exchange rates may be likely to reverse directions. When considering an investment in the Securities, you should be aware that while historically there has been some empirical evidence to support these views, the basis for these views is not entirely clear. In

PS-1

TABLE OF CONTENTS

addition, historical performance is not an indicator of future performance. A full description of the Index and its methodology may be found below under the caption “The UBS V10 Currency Index with Volatility Cap” beginning on page PS- 19 .

We may issue separate offerings of Securities, with each offering subject to the particular terms set forth in the applicable terms supplement related to such offering. Each Security is a separate and distinct security, and you may invest in one or more of the Securities. The performance of each Security will depend upon the performance of the UBS V10 Currency Index and will not depend on the performance of any other Securities previously or subsequently offered.

What payments will you receive on the Securities?

The amount payable to you at maturity, if any, will be based on the performance of the Index and will be calculated according to a formula specified in the applicable terms supplement (the “Payment at Maturity Formula”).

If so specified in the applicable terms supplement, you may receive periodic payments during the term of your Securities. These periodic payments may be based on the performance of the UBS V10 Currency Index for the relevant period and will be calculated according to a formula specified in the applicable terms supplement (the “Coupon Payment Formula”).

For Securities with an autocall feature, unless otherwise specified in the applicable terms supplement, the amount payable to you on the Call Settlement Date (as specified in the applicable terms supplement) will be based on the level of the Index at approximately 3:00 p.m., London time, on the Observation Date (as specified in the applicable terms supplement), and calculated according to a formula specified in the applicable terms supplement (the “Payment at Call Formula”).

Unless otherwise specified in the applicable terms supplement, the Securities will be automatically redeemed if the Calculation Agent determines that a hedging disruption event has occurred and is continuing for ten consecutive Index business days following such occurrence, as described in “General Terms of the Securities — Hedging Disruption Event.” If a hedging disruption event is deemed to have occurred, but ceases to be occurring on or before the tenth consecutive Index business day following the date of such hedging disruption event, the Securities will not be redeemed. In the case of such an automatic redemption, the tenth Index business day following the date determined by the Calculation Agent to be a day on which a hedging disruption event has begun (or the following Index business day if the hedging disruption event occurs on a day that is not an Index business day) will be deemed to be the Final Valuation Date. You will then receive a cash payment per Security, determined pursuant to the Payment at Maturity Formula, on the fifth note business day immediately following the Final Valuation Date (such fifth note business day, the “early redemption settlement date”), unless otherwise specified in the applicable terms supplement. After the Securities are redeemed pursuant to an automatic redemption, no further amounts will be owed to you under the Securities and you will not benefit from any subsequent change in the level of the Index. In addition, if the Securities are redeemed prior to their scheduled maturity, there is no guarantee that you will be able to reinvest the proceeds from an investment in the Securities, if any, in a comparable investment with similar characteristics as the Securities. You may have a loss of all or a substantial portion of your investment in the Securities in case of an automatic redemption.

Is the Index subject to a fee?

Unless otherwise specified in the applicable terms supplement, there will be no index fee for the Securities. If an index fee is so specified in the applicable terms supplement, the Payment Formulas for your Securities will provide for a fee payable to our affiliate that acts as the index sponsor, which will be deducted from amount(s), if any, payable on your Securities. Any such index fee will be equal to a percentage per annum of the principal amount of your Securities specified in the applicable terms supplement or will be determined pursuant to such other formula specified in the applicable terms supplement, in each case calculated by the Calculation Agent.

PS-2

TABLE OF CONTENTS

Who Calculates and Publishes the Level of the UBS V10 Currency Index?

The Index is calculated and published by UBS. The level of the Index as of approximately 3:00 p.m., London time, is published by UBS on each Index business day. Daily Index levels are available under the symbol “UBFSV10V ” from Bloomberg. UBS and Bloomberg have no obligation to continue to provide daily levels of the Index. Either may discontinue doing so at any time in its sole discretion. The historical performance of the Index is not indicative of the future performance of the Index or the level of the Index on the Final Valuation Date or any other applicable valuation date.

Will UBS Fully Repay Your Investment in the Securities?

The Securities differ from ordinary debt securities in that we may not necessarily be obligated to repay the principal amount of the Securities at maturity. We will specify in the applicable terms supplement the relevant Payment Formulas which determine, among other things, whether, the extent to which and under what circumstances UBS will be obligated to repay the principal amount of any such securities. Depending on the Payment Formulas for a Security and the performance of the Index, you may lose all or a substantial portion of your investment in the Securities. Because the Securities are unsecured obligations of UBS, any payment on the Securities, including any repayment of principal, is subject to UBS’s ability to pay its obligations as they become due. See “— What are some of the risks of the Securities?” on page PS-4 and “Risk Factors” starting on page PS-9.

Participation Rate and Multiplier

We may offer the Securities with the opportunity for enhanced upside exposure to the UBS V10 Currency Index. In such cases, a measure of the performance of the Index may be multiplied by a certain number (the “Participation Rate” or “Multiplier”) when calculating the payments due on your Securities. We will specify the Participation Rate or Multiplier, if any, applicable to your Securities in the applicable terms supplement.

The Securities Are Part of a Series.

The Securities are part of a series of debt securities entitled “Medium Term Securities, Series A” that we may issue from time to time under our indenture, which is described in the accompanying prospectus. This prospectus supplement summarizes general financial and other terms that apply to the Securities. Terms that apply generally to all Medium Term Securities, Series A, are described in “Description of Debt Securities We May Offer” in the accompanying prospectus. The terms described here ( i.e. , in this prospectus supplement) supplement those described in the accompanying prospectus and, if the terms described here are inconsistent with those described there, the terms described here are controlling.

The Specific Terms of Each Issuance of Securities Will Be Described in the Applicable Terms Supplement.

The specific terms of your Securities will be described in the applicable terms supplement accompanying this prospectus supplement. The terms described there supplement those described here and in the accompanying prospectus. If the terms described in the applicable terms supplement are inconsistent with those described here or in the accompanying prospectus, the terms described in the applicable terms supplement will control.

Any applicable terms supplement, including any free writing prospectus, should be read in connection with this prospectus supplement and the accompanying prospectus.

Selected Purchase Considerations

Subject to the specific terms of your Securities as described in the applicable terms supplement, an investment in the Securities may offer the following features:

Ø Growth Potential — The Issuer may pay you an amount on the Securities at maturity linked to the growth of the UBS V10 Currency Index, if any, multiplied by the Participation Rate or Multiplier, and subject to any maximum gain, as specified in the applicable terms supplement.

PS-3

TABLE OF CONTENTS

Ø Repayment of Principal — The applicable terms supplement will specify the Payment Formulas, which determine, among other things, whether, the extent to which and under what circumstances UBS will be obligated to repay the principal amount of any such Securities. Depending on the Payment Formulas for a Security and the performance of the Index, you may lose all or a substantial portion of your investment in the Securities. Any payment on the Securities, including any repayment of principal, is subject to the creditworthiness of the Issuer.

Ø Diversification — The Securities may provide diversification within the foreign exchange portion of your portfolio through exposure to the UBS V10 Currency Index and its constituents.

Ø U.S. Dollar Denominated — Unless otherwise specified in the applicable terms supplement, the Securities trade in and are settled in U.S. dollars.

Investing in the Securities involves significant risks. You should review the applicable terms supplement carefully to determine the purchase considerations relevant to your Securities. Your Securities may not provide some of the features outlined above. Any payment on the Securities, including any repayment of principal, is subject to the creditworthiness of UBS. If UBS were to default on its payment obligations, you may not receive any amounts owed to you under the Securities and you could lose your entire investment.

What are some of the risks of the Securities?

Because the Securities we may offer are expected to have different terms with different features — such as different repayment of principal, participation and other features — such Securities may have different risk profiles that may be suitable for some investors, but not others, depending upon their risk tolerance. It is important that you review the applicable terms supplement carefully to understand fully the specific risks that apply to your Securities, some of which are summarized generally below. Other general risks summarized below may not apply to your Securities. Accordingly, we urge you to read the more detailed explanation of the risks that apply to your Securities as set forth in the applicable terms supplement, together with the general risks described in the “Risk Factors” starting on page PS-9 of this prospectus supplement.

Ø Risk of loss at maturity — The Securities differ from ordinary debt securities in that we may not necessarily be obligated to repay the principal amount of the Securities at maturity. We will specify in the applicable terms supplement the relevant Payment Formulas which determine, among other things, whether, the extent to which and under what circumstances UBS will be obligated to repay the principal amount of any such securities. Depending on the Payment Formulas for a Security and the performance of the Index, you may lose all or a substantial portion of your investment in the Securities. Because the Securities are unsecured obligations of UBS, any payment on the Securities, including any repayment of principal, is subject to UBS’s ability to pay its obligations as they become due.

Ø You may incur a loss on your investment if you sell your Securities prior to maturity — To the extent we are obligated to repay any of the principal amount of the Securities, such payment will only be due at maturity (unless otherwise specified in the pricing supplement). The market value of the Securities may fluctuate between the date you purchase them and the Final Valuation Date. If you sell your Securities in the secondary market prior to maturity, you may incur a loss on your investment even if you would otherwise have received a full return of principal at maturity based on the terms specified in the applicable terms supplement. Any payment on the Securities, including any repayment of principal, is subject to the creditworthiness of the Issuer.

Ø Market risk — The return on the Securities, which may be positive or negative, is linked to the performance of the UBS V10 Currency Index and will depend on whether, and the extent to which, the performance of the Index specified in the applicable terms supplement is positive or negative. The level of the Index is dependent upon the performance of the underlying foreign exchange forward contracts, which, in turn, will be affected by fluctuations in the markets for the Eligible

PS-4

TABLE OF CONTENTS

Currencies relative to the U.S. dollar. The value of the Securities may be affected by a number of economic and market factors that will affect the market for the Securities and foreign exchange markets generally.

Ø Foreign exchange market risks — Foreign exchange markets may be highly volatile. Significant changes, including changes in liquidity and prices, can occur in foreign exchange markets within very short periods of time. Foreign exchange rate risks include, but are not limited to, convertibility risk, transferability risk, market volatility and potential interference by governments through regulation of local markets, foreign investment or particular transactions in foreign exchange. These factors may affect the values of the underlying foreign exchange forward contracts, the level of the UBS V10 Currency Index and the value of your Securities in varying ways. Different factors may cause the values of the UBS V10 Currency Index components and the volatility of their prices to move in inconsistent directions at inconsistent rates.

Ø Owning the Securities is not the same as owning the underlying foreign exchange forward contracts — The return on your Securities may differ from the return you would realize if you actually purchased the underlying foreign exchange forward contracts and converted your gains and losses into U.S. dollars on the Final Valuation Date. In addition, if so specified in the relevant terms supplement, the Securities may be subject to an index fee equal to a percentage per annum of the principal amount of the Securities. Favorable movement of the level of the UBS V10 Currency Index during the term of the Securities does not guarantee that the market value of the Securities will increase. It is also possible for the level of the UBS V10 Currency Index to move in a manner that is favorable to your position while the market value of the Securities declines.

Ø No assurance that the investment view implicit in the Securities will be successful — It is impossible to predict whether and to what extent the foreign exchange forward contracts underlying the Index will rise or fall. The level or price of the underlying foreign exchange contracts will be influenced by complex and interrelated political, economic, financial and other factors. You should be willing to accept the risks of owning the Securities, and the risk of losing some or all of your initial investment.

Ø Exposure to the credit of UBS — The Securities are senior unsecured debt obligations of the issuer, UBS, and are not, either directly or indirectly, an obligation of any third party. Any payment or delivery to be made on the Securities, including any repayment of principal, depends on the ability of UBS to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness of UBS may affect the market value of the Securities and, in the event UBS were to default on its obligations, you may not receive any amounts owed to you under the terms of the Securities and you could lose your entire investment.

Ø No interest payments or income from the Securities — Unless so specified in the applicable terms supplement, you will not receive any interest or other payments during the term of your Securities.

Ø Automatic Early Redemption — The Securities will be automatically redeemed if the Calculation Agent determines that a hedging disruption event has occurred and is continuing for ten consecutive Index business days following such occurrence. If a hedging disruption event is deemed to have occurred, but ceases to be occurring on or before by the tenth consecutive Index business day following the date of such hedging disruption event, the Securities will not be redeemed. In the case of such an automatic redemption, the tenth Index business day following the date determined by the Calculation Agent to be a day on which a hedging disruption event has begun (or the following Index business day if the hedging disruption event occurs on a day that is not an Index business day) will be deemed to be the Final Valuation Date. You will then receive a cash payment per Security, determined pursuant to the Payment at Maturity Formula, on the early redemption settlement date, unless otherwise specified in the applicable terms supplement. After the Securities are redeemed pursuant to an automatic redemption, no further amounts will be owed to you under the Securities and you will not benefit from any subsequent change in the level of the Index. In addition, if the Securities are redeemed prior to their scheduled maturity, there is no guarantee that you would be able to reinvest the proceeds from an investment in the Securities, if any, in a comparable investment

PS-5

TABLE OF CONTENTS

with similar characteristics as the Securities. You may have a loss of all or a substantial portion of your investment in the Securities in case of an automatic redemption.

Ø There may be little or no secondary market for the Securities — Unless otherwise specified in the applicable terms supplement, the Securities will not be listed or displayed on any securities exchange or any electronic communications network. A secondary trading market for the Securities may not develop. UBS Securities LLC and other affiliates of UBS may make a market in each offering of the Securities, although they are not required to do so and may stop making a market at any time. The price, if any, at which you may be able to sell your Securities prior to maturity could be at a substantial discount from the issue price and to the intrinsic value of the product; as a result, you may suffer substantial losses.

Ø Price of Securities prior to maturity — The secondary market price of the Securities will be influenced by many unpredictable and interrelated factors including the level of the UBS V10 Currency Index, volatilities, the supply and demand for the Securities and interest rates.

Ø Potential conflicts — UBS and its affiliates play a number of roles in connection with the Securities, including publishing and disseminating the level of the Index as the Index Sponsor, acting as Calculation Agent and hedging our obligations under the Securities. For example, as Calculation Agent, UBS or an affiliate will have the discretion to determine that a hedging disruption event shall have occurred with respect to any Securities. The economic interests of the Calculation Agent and other affiliates in performing these duties may be adverse to your interests as a holder of the Securities. In addition, UBS or its affiliates may publish research, express opinions or make recommendations that are inconsistent with investing in or holding the Securities. Such research, opinions or recommendations could affect the performance of the UBS V10 Currency Index, the volatility of foreign exchange markets or the market value of the Securities. We encourage you to consult your own financial advisors and make your own independent investigation regarding the merits of the UBS V10 Currency Index and an investment in the Securities. See “Supplemental Plan of Distribution (Conflicts of Interest) on PS- 40 .

Subject to the specific terms of your Securities, as specified in the applicable terms supplement, the Securities may not be a suitable investment for you.

Because the Securities we may offer are expected to have different terms with different features — such as different repayment of principal, participation and other features — each offering of Securities may have a different risk profile that may be suitable for some investors, but not others, depending upon their risk tolerance. The applicable terms supplement for your Securities will set forth the specific terms of your Securities as well as the relevant risks. We will describe in the applicable terms supplement features to consider when determining whether a particular Security might be suitable for you. We strongly recommend that you consult your own advisor in determining whether or not a particular Security may be suitable for you.

Structured Product Categorization

To help investors identify appropriate Structured Products, UBS organizes its Structured Products, including the Securities, into four categories: Protection Strategies, Optimization Strategies, Performance Strategies and Leverage Strategies. The description below is intended to describe generally the four categories of Structured Products and the types of principal repayment features, if any, which may be offered on those products. This description should not be relied upon as a description of any particular Structured Product.

Ø Protection Strategies are structured to complement and provide the potential to outperform traditional fixed income instruments. These Structured Products are generally designed for investors with low to moderate risk tolerances.

PS-6

TABLE OF CONTENTS

Ø Optimization Strategies provide the opportunity to enhance market returns or yields and can be structured with full downside market exposure or with buffered or contingent downside market exposure. These Structured Products are generally designed for investors who can tolerate downside market risk.

Ø Performance Strategies provide efficient access to markets and can be structured with full downside market exposure or with buffered or contingent downside market exposure. These Structured Products are generally designed for investors who can tolerate downside market risk.

Ø Leverage Strategies provide leveraged exposure to the performance of an underlying asset. These Structured Products are generally designed for investors with high risk tolerances.

In order to benefit from any type of limited market exposure, investors must hold the security to maturity, and any element of limited market exposure will be subject to the creditworthiness of the Issuer.

Classification of structured products into categories is for informational purposes only and is not intended to guarantee particular results or performance.

PS-7

TABLE OF CONTENTS

Hypothetical Payment Amounts on Your Securities

The applicable terms supplement will include hypothetical calculations, which may be presented in tables, charts or other formats, showing hypothetical examples of the performance of your Securities on the stated maturity date, on a Coupon Payment Date, or on a Call Settlement Date, as the case may be, and the cash payment that would be delivered for each of your Securities on such dates, based on the applicable Payment Formulas, a range of hypothetical levels for the Index and on various key assumptions shown in the applicable terms supplement such as no hedging disruption event occurring, and continuing for ten consecutive Index business days following such occurrence, during the term of the Securities.

Any table, chart or calculation showing hypothetical payment amounts will be provided for purposes of illustration only. It should not be viewed as an indication or prediction of future investment results. Rather, it is intended merely to illustrate the impact that various hypothetical levels of the Index on the Final Valuation Date or certain other applicable valuation dates could have on the payments you receive on your Securities. Such hypothetical table, chart or calculation will be based on hypothetical levels of the UBS V10 Currency Index that may not be achieved on the Final Valuation Date or any other applicable valuation date and on assumptions regarding terms of the Securities that will not be set until the Trade Date.

As calculated in the applicable terms supplement, the hypothetical payment amounts on your Securities on the Maturity Date, the Coupon Payment Date, or the Call Settlement Date, as the case may be, may bear little or no relationship to the actual market value of your Securities on such dates or at any other time, including any time over the term of the Securities that you might wish to sell your Securities. In addition, you should not view the hypothetical payment amounts as an indication of the possible financial return on an investment in the Securities, since the financial return will be affected by various factors, including taxes, which the hypothetical illustrations do not take into account. Moreover, whatever the financial return on your Securities might be, it may bear little or no relation to — and may be much less than — the financial return that you might achieve were you to invest directly in the underlying foreign exchange forward contracts. Among other factors, an investment directly in the underlying foreign exchange forward contracts is likely to have tax consequences that are different from an investment in the Securities, which may cause the financial return on your Securities to differ from the financial return you would receive by investing directly in the underlying foreign exchange forward contracts.

We describe various risk factors that may affect the market value of the Securities, and the unpredictable nature of that market value, under “Risk Factors” beginning on page PS-9 of this prospectus supplement.

We cannot predict the performance of the UBS V10 Currency Index during the term of your Securities. Moreover, the assumptions we make in connection with any hypothetical illustrations included in the applicable terms supplement may not reflect actual events. Consequently, such hypothetical illustrations may give little or no indication of the payment that will be delivered in respect of your Securities on the Maturity Date, Coupon Payment Date, or Call Settlement Date, as the case may be, nor should it be viewed as an indication of the financial return on your Securities or of how that return might compare to the financial return if you were to invest directly in underlying foreign exchange forward contracts.

PS-8

TABLE OF CONTENTS

Risk Factors

The return on the Securities is linked to the performance of the UBS V10 Currency Index. Investing in the Securities is not equivalent to investing directly in the UBS V10 Currency Index or the underlying foreign exchange forward contracts. This section describes the most significant risks relating to the Securities. We urge you to read the following information about these risks, together with the other information in this prospectus supplement, the accompanying prospectus and the applicable terms supplement before investing in the Securities.

UBS may not guarantee any return of principal on the Securities at maturity and you may lose some or all of your initial investment in the Securities.

The Securities differ from ordinary debt securities in that UBS may not necessarily be obligated to repay the principal amount of the Securities at maturity. UBS will specify in the applicable terms supplement the relevant Payment Formulas which determine, among other things, whether, the extent to which and under what circumstances UBS will be obligated to repay the principal amount of any such securities. Depending on the Payment Formulas for a Security and the performance of the Index, you may lose all or a substantial portion of your investment in the Securities. Because the Securities are unsecured obligations of UBS, any payment on the Securities, including any repayment of principal, is subject to UBS’s ability to pay its obligations as they become due.

You may incur a loss on your investment if you sell your Securities prior to maturity.

To the extent we are obligated to repay any of the principal amount of the Securities, such payment will only be due at maturity (unless otherwise specified in the pricing supplement). The market value of the Securities may fluctuate between the date you purchase them and the Final Valuation Date. If you sell your Securities in the secondary market prior to maturity, you may incur a loss on your investment even if you would otherwise have received a full return of principal at maturity based on the terms specified in the applicable terms supplement.

Any payment or delivery on the Securities is subject to the creditworthiness of UBS.

Any payment or delivery on the Securities, including any repayment of principal, is subject to the creditworthiness of UBS. The Securities are unsubordinated, unsecured debt obligations of UBS and are not, either directly or indirectly, an obligation of any third party. Any payment or delivery to be made on the Securities depends on the ability of UBS to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness of UBS may affect the market value of the Securities and, in the event UBS were to default in its obligations, you may not receive any amounts owed to you under the terms of the Securities and you could lose your entire initial investment.

No assurance that the investment view implicit in the Securities will be successful.

The UBS V10 Currency Index seeks to capitalize on opportunities resulting from an assumed forward rate bias in foreign exchange markets through investment in foreign exchange forward contracts. The performance of the Index will be determined by reference to spot and forward exchange rates, volatility and interest rates associated with the Eligible Currencies. If the Eligible Currencies perform in a manner different than anticipated by the UBS V10 Currency Index, the Index may perform poorly or produce a negative return. No assurance can be given that the UBS V10 Currency Index will outperform any alternative index based on the same group of Eligible Currencies. It is impossible to predict whether and to what extent the underlying foreign exchange forward contracts will rise or fall. The level or price of the underlying foreign exchange contracts will be influenced by complex and interrelated political, economic, financial and other factors. You should be willing to accept the risks of owning the Securities, and the risk of losing some or all of your initial investment.

PS-9

TABLE OF CONTENTS

Risk Factors

The amount you receive at maturity may result in an investment return that is less than the yield on a standard debt security of comparable maturity.

The amount you receive at maturity may result in an investment return that is less than the return you could earn on other investments. For example, your return on the Securities may be lower than the yield you would earn if you bought a standard United States dollar-denominated senior non-callable debt security of UBS with the same stated maturity date. As a result, your investment in the Securities may not reflect the full opportunity cost to you when you consider factors that affect the time value of money.

The applicable formulas for determining any payments on the Securities will not take into account all developments in the Index.

Changes in the level of the UBS V10 Currency Index during the term of the Securities before the applicable valuation date may not be reflected in the calculation of the amounts payable on your Securities. Generally, the Calculation Agent will calculate the payment upon a call or at maturity by comparing only the level of the UBS V10 Currency Index on the trade date, and the level of the UBS V10 Currency Index on the applicable valuation date or observation date. In such case, no other levels or prices will be taken into account. As a result, you may lose some of your investment even if the UBS V10 Currency Index has moved favorably at certain times during the term of the Securities before moving to an unfavorable level on the applicable valuation date.

The Securities are subject to an automatic early redemption feature due to the occurrence of a hedging disruption event.

The Securities will be automatically redeemed prior to the Maturity Date if the Calculation Agent determines that a hedging disruption event has occurred and is continuing for ten consecutive Index business days following such occurrence. If a hedging disruption event is deemed to have occurred, but ceases to be occurring on or before the tenth consecutive Index business day following the date of such hedging disruption event, the Securities will not be redeemed. In the case of such an automatic redemption, the tenth Index business day following the date determined by the Calculation Agent to be a date on which a hedging disruption event has begun (or the following Index business day if the hedging disruption event occurs on a day that is not an Index business day) will be deemed to be the Final Valuation Date. You will then receive a cash payment per Security, determined pursuant to the Payment at Maturity Formula, on the early redemption settlement date (as defined herein), unless otherwise specified in the applicable terms supplement. After the Securities are redeemed pursuant to an automatic redemption, no further amounts will be owed to you under the Securities and you will not benefit from any subsequent change in the level of the Index. In addition, if the Securities are redeemed prior to their scheduled maturity, there is no guarantee that you would be able to reinvest the proceeds from an investment in the Securities, if any, in a comparable investment with similar characteristics as the Securities. You may have a loss of all or a substantial portion of your investment in the Securities in case of an automatic redemption.

The UBS V10 Currency Index’s volatility cap may not be successful in limiting its volatility and may have an adverse impact on its performance.

If, on any Index business day, the volatility of the UBS V10 Currency Index over the prior 65 Index business days (without giving effect to the volatility cap) exceeds a certain threshold, a leverage factor of less than one will be applied to the Index with the goal of reducing its future volatility. The specific leverage factor to be applied will depend on the extent to which the historical volatility has exceeded the threshold and will continue to be applied until the volatility of the Index, as measured over the prior 65 Index business days (without giving effect to the volatility cap), no longer exceeds the specified threshold. However, the volatility cap may be unsuccessful in effectively limiting the volatility of the Index. In addition, use of a leverage factor of less than one where the historical volatility has exceeded the specified

PS-10

TABLE OF CONTENTS

Risk Factors

threshold may have an adverse impact on the return on your Securities where the Index exhibits positive performance. See “The UBS V10 Currency Index with Volatility Cap — Application of the Volatility Cap.”

UBS will determine the market price of the foreign exchange forward contracts underlying the Index.

The foreign exchange forward contracts underlying the Index are foreign exchange forward contracts traded in the over-the-counter market with tenors of up to approximately six months. The prices of such contracts used to calculate gains and losses from notional settlement of hypothetical positions will be based on the market prices at 3:00 p.m. London time (or shortly thereafter taking into consideration available prices for the notional foreign exchange forward contracts that would need to be hypothetically settled as a result of such determination), on the applicable valuation date. See “The UBS V10 Currency Index with Volatility Cap.”

The return on your Securities may be limited by the maximum gain on the Securities or by an absolute return barrier or a similar feature of the Securities.

You will receive cash payments based on the performance of the UBS V10 Currency Index according to the applicable Payment Formulas. The applicable Payment Formulas may be based on the performance of the Index, which may be enhanced by a Participation Rate greater than 100%, subject to a maximum gain on the Securities, if applicable. Accordingly, in such cases, the maximum payment amount on the Securities may be capped and you will not benefit from a favorable performance of the Index (as enhanced by the Participation Rate) in excess of the maximum gain.

Alternatively, the applicable Payment at Maturity Formula may limit the appreciation potential of the Securities to an “absolute return barrier” (a percentage to be specified in the applicable terms supplement), regardless of the performance of the UBS V10 Currency Index. In such a case, if the relevant level of the UBS V10 Currency Index is beyond the “upper barrier” or beyond the “lower barrier” during the observation period (as specified in the applicable terms supplement), your payment will be limited to the principal amount of your Securities. Accordingly, should the applicable Payment at Maturity Formula contemplate such an absolute return barrier or a similar feature, you may earn a return less than the return on a direct investment in a security whose return is based solely on the performance of the UBS V10 Currency Index over the term of your Securities without such limitation.

Actions by the Index Sponsor could result in changes to the level of the Index.

UBS, as Index Sponsor, is responsible for calculating and publishing the level of the UBS V10 Currency Index according to the methodology described under “The UBS V10 Currency Index with Volatility Cap” beginning on page PS- 19 . In its discretion, the Index Sponsor may modify the methodology used to calculate the level of the Index, as it deems appropriate, if the Index Sponsor is of the view that (i) events or circumstances make the calculation of the Index according to the current Index methodology impossible or impracticable (including but not limited to any changes to or any suspension or termination of trading in any Eligible Currency or certain other events affecting the Eligible Currencies) or (ii) such modification is required to address any ambiguity, error or omission in the Index methodology. If the Calculation Agent determines that the method of calculating the Index has been changed for any reason other than an event or circumstance that made the calculation of the Index according to the prior Index methodology impossible or impracticable such that the value of the Index does not, in the opinion of the Calculation Agent, fairly represent the value of the Index had such changes or modifications not been made, the Calculation Agent will make such calculations and adjustments as may be necessary to determine the applicable level of the UBS V10 Currency Index on the Final Valuation Date, in accordance with the formula for and method of calculating the Index level last in effect prior to such modification, as practicable.

PS-11

TABLE OF CONTENTS

Risk Factors

The Index Sponsor may also discontinue publication of the Index, including after events or circumstances that the Index Sponsor determines would make calculation of the Index impossible or impracticable. If the Index Sponsor suspends or discontinues publication of the Index, and such suspension or discontinuation occurs or is continuing on the Final Valuation Date and continues for more than ten Index business days thereafter, the Calculation Agent will determine the relevant level of the UBS V10 Currency Index on such tenth Index business day after the Final Valuation Date in accordance with the formula for and method of calculating the Index level last in effect prior to such suspension or discontinuation, as practicable, and UBS will redeem the Securities within three note business days.

Although the Calculation Agent will calculate the Index values in a commercially reasonable manner designed to determine the values of the Index that would have existed were it not for such modification, suspension or discontinuation, there can be no assurance that such modification, suspension or discontinuation will not adversely affect the value of your Securities. UBS has no obligation to consider your interests in taking such actions.

The liquidity, trading value and amounts payable on the Securities are subject to foreign exchange rate and foreign exchange control risks. Such risks include, but are not limited to, convertibility risk, transferability risk, market volatility and potential interference by the governments of the United States and other foreign countries.

Foreign exchange markets may be highly volatile, particularly in relation to emerging or developing nations’ currencies but also in relation to developed nations’ currencies, and significant changes, including changes in liquidity and prices, can occur in such markets within very short periods of time.

The value of any currency may be affected by complex political and economic factors. The foreign exchange rate of any currency relative to the U.S. dollar is at any moment a result of the supply and demand for the two currencies, and changes in the foreign exchange rate result, over time, from the interaction of many factors directly or indirectly affecting economic and political conditions in the originating country, the United States and other countries. Of particular importance are the relative rates of inflation, interest rate levels, the balance of payments and the extent of governmental surpluses or deficits in the originating country and in the United States, all of which are in turn sensitive to the monetary, fiscal and trade policies pursued by the governments of the originating country, the United States and other countries important to international trade and finance.

The actions of the government of the United States and other sovereign nations could affect the value of the Securities.

Foreign exchange rates can either float or be fixed by sovereign governments. Foreign exchange rates of most economically developed nations are permitted to fluctuate in value relative to the U.S. dollar. From time to time, governments use a variety of techniques, such as intervention by a country’s central bank or imposition of regulatory controls or taxes, to affect the exchange rate of their currencies. Governments may also issue a new currency to replace an existing currency or alter the exchange rate or exchange characteristics by devaluation or revaluation of a currency. Thus, a special risk in purchasing the Securities is that their liquidity, trading value and amounts payable could be significantly and unpredictably affected by the actions of sovereign governments. Such actions could change or interfere with freely determined currency valuation, fluctuations in response to other market forces and the movement of currencies across borders. In addition, certain actions by the government of the United States and other sovereign nations could result in changes to the methodology used by the Index Sponsor to calculate the level of the Index. See “UBS V10 Currency Index with Volatility Cap — Index Administration” on PS- 22 and “Actions by the Index Sponsor could result in changes to the level of the Index” on PS-11 for more information.

PS-12

TABLE OF CONTENTS

Risk Factors

The interest rates used in the UBS V10 Currency Index may be volatile.

The UBS V10 Currency Index designates Selected Currencies from among the Eligible Currencies based on interest rates on each Index business day, generally seeking to create gains by taking long positions in currencies with higher interest rates and short positions in currencies with lower interest rates or vice versa, as determined by the volatility filter. Such interest rates, however, are subject to volatility due to a variety of factors, including:

Ø sentiment regarding underlying strength in the economies of the countries whose currencies are Eligible Currencies;

Ø expectations regarding the level of price inflation in the countries whose currencies are Eligible Currencies;

Ø sentiment in global credit markets regarding credit quality in countries whose currencies are Eligible Currencies;

Ø the policies of worldwide central banks regarding interest rates; and

Ø performance of capital markets.

Fluctuations in interest rates could affect the value of the foreign exchange forward contracts underlying the UBS V10 Currency Index and in turn the value of the Securities.

The market value of your Securities may be influenced by a number of unpredictable factors.

The market value of your Securities may fluctuate between the date you purchase them and the Final Valuation Date, when the Calculation Agent will determine your payment at maturity. Therefore, you may sustain a significant loss if you sell the Securities in the secondary market. Several factors, many of which are beyond our control, will influence the market value of the Securities. We expect that generally the level of the UBS V10 Currency Index on any day, and whether the level of the Index has previously fallen or risen, will affect the market value of the Securities more than any single factor. Other factors that may influence the market value of the Securities include:

Ø supply and demand for the Securities, including inventory positions with UBS Securities LLC or any other market maker;

Ø the perceived validity of the assumptions underlying the V10 Currency Index (including forward rate bias);

Ø the applicable spot or forward exchange rates for the Eligible Currencies;

Ø the applicable interest rates for the Eligible Currencies;

Ø the expected volatility of the foreign exchange markets;

Ø economic, financial, political, regulatory, geographical, agricultural, judicial, force majeure or other events that affect the exchange rates of the Eligible Currencies and the currency market rates generally;

Ø interest and yield rates in the market;

Ø the time remaining to the maturity of the Securities; and

Ø the creditworthiness of UBS.

These factors interrelate in complex ways, and the effect of one factor on the market value of your Securities may offset or enhance the effect of another factor.

PS-13

TABLE OF CONTENTS

Risk Factors

Owning the Securities is not the same as owning the underlying foreign exchange forward contracts that constitute the UBS V10 Currency Index.

The return on your Securities may not reflect the return you would realize if you actually invested in the UBS V10 Currency Index or owned the applicable underlying foreign exchange forward contracts. Security-holders will not have any direct or indirect rights or interests in any currency positions. Favorable movement of the level of the UBS V10 Currency Index during the term of the Securities does not guarantee that the market value of the Securities will increase. It is also possible for the level of the UBS V10 Currency Index to move in a manner that is favorable to your position while the market value of the Securities declines.

The value of your notional investment in the UBS V10 Currency Index may reflect the deduction of the index fee.

If so specified in the applicable terms supplement, UBS may deduct an index fee. The index fee will be equal to a percentage per annum of the principal amount of your Securities, if any, or will be determined pursuant to another formula provided in the applicable terms supplement, and will, in each case, be calculated by the Calculation Agent. In such a case, the value of the Securities will be less than the value of an identical portfolio of foreign exchange forward contracts from which no index fee was deducted. The index fee may be deducted from the amount payable at maturity for the Securities regardless of whether the return on the Securities is positive or negative.

Historical performance of the UBS V10 Currency Index should not be taken as an indication of the future performance of the Index during the term of the Securities.

The historical performance of the UBS V10 Currency Index should not be taken as an indication of the future performance of the Index. As a result, it is impossible to predict whether the level of the Index will rise or fall. The performance of the Index will be influenced by complex and interrelated political, economic, financial and other factors, as discussed above.

Trading in currencies and related futures contracts and over-the-counter instruments are subject to legal and regulatory regimes that may change in ways that could adversely affect the return on the Securities.

The futures market may have an effect on the over-the-counter foreign exchange and commodity markets. U.S. futures exchanges and some non-U.S. exchanges have regulations that limit the amount of fluctuation in futures contract prices that may occur during a single trading day. These limits are generally referred to as “daily price fluctuation limits” and the maximum or minimum price of a contract on any given day as a result of these limits is referred to as a “limit price”. Once the limit price has been reached in a particular contract, no trades may be made at a different price. Limit prices have the effect of precluding trading in a particular contract or forcing the liquidation of contracts at disadvantageous times or prices. These circumstances could adversely affect the value of the Eligible Currencies, the performance of the Index, and therefore the value of your Securities.

Additionally, the level of certain foreign exchange rates may be determined by reference to spot transactions or transactions in off-exchange instruments executed in the over-the-counter currency and commodities markets. Certain rules, regulations or other features of the U.S. futures market are not present in the context of trading on such over-the-counter markets. For instance, there are no daily price limits, which would otherwise restrict the extent of daily fluctuations in foreign exchange rates. In a declining market, it is possible that the value of the particular currency would continue to decline without limitation within a single trading day or over a period of trading days.

Legal and regulatory changes could affect foreign exchange rates. Many government agencies and regulatory organizations are authorized to take extraordinary actions in respect of their respective currency in the event of market emergencies.

PS-14

TABLE OF CONTENTS

Risk Factors

It is not possible to predict the effect of any future legal or regulatory action relating to foreign exchange rates, or related futures contracts and over-the-counter instruments, but any such action could cause unexpected volatility and instability in currency markets with a substantial and adverse effect on the performance of any Eligible Currency and, consequently, on the value of the Securities.

There are uncertainties regarding the potential performance of the UBS V10 Currency Index because of its limited performance history.

The UBS V10 Currency Index was launched on May 6, 2009. While the UBS V10 Currency Index is intended to identify and exploit trends in the foreign exchange forward rates, the methodology used to perform these functions has a limited history of application. It cannot be determined at this point whether, or the extent to which, the UBS V10 Currency Index will serve as an adequate tool for predicting future trends in foreign exchange forward rates.

Even though the euro, the Swiss franc, the British pound, the Canadian dollar, the Norwegian krone, the Australian dollar, the New Zealand dollar, the U.S. dollar, the Swedish krona and the Japanese yen are traded around-the-clock, if a secondary market develops, the Securities may trade only during regular trading hours in the United States.

The interbank market for the euro, the Swiss franc, the British pound, the Canadian dollar, the Norwegian krone, the Australian dollar, the New Zealand dollar, the U.S. dollar, the Swedish krona and the Japanese yen is a global, around-the-clock market. Therefore, the hours of trading for the Securities may not conform to the hours during which these ten currencies are traded. To the extent that U.S. markets are closed while markets for theses ten currencies remain open, significant price and rate movements may take place in the underlying foreign exchange markets that will not be reflected immediately in the price of the Securities.

There is no systematic reporting of last-sale information for foreign exchange. Reasonable current bid and offer information is available in certain brokers’ offices, in bank foreign currency trading offices and to others who wish to subscribe for this information, but this information will not necessarily reflect the exchange rates that are relevant for determining the value of the Securities. The absence of last-sale information and the limited availability of quotations to individual investors make it difficult for many investors to obtain timely, accurate data about the state of the foreign exchange markets.

There may not be an active trading market in the Securities — sales in the secondary market may result in significant losses.

You should be willing to hold your Securities until maturity. There may be little or no secondary market for the Securities. Unless otherwise specified in the applicable terms supplement, the Securities will not be listed or displayed on any securities exchange or any electronic communications network. UBS Securities LLC and other affiliates of UBS may make a market for the Securities, although they are not required to do so. UBS Securities LLC or any other affiliate of UBS may cease any such market-making activities at any time.

If you sell your Securities before maturity, you may have to do so at a substantial discount from the issue price, and, as a result, you may suffer substantial losses even if the change in the level of the Index is zero or positive at the time of such sale. In addition, if your Securities offer full, partial or contingent repayment of principal, and you sell your Securities prior to maturity, you may have to sell them at a loss relative to your initial investment even if the conditions for repayment of the principal amount of your Securities at maturity have been satisfied.

PS-15

TABLE OF CONTENTS

Risk Factors

Trading by UBS or its affiliates in the foreign exchange and currency derivative markets may impair the value of the Securities.

UBS and its affiliates are active participants in the interbank foreign exchange and currency derivative markets as dealers, proprietary traders and agents for our customers. Therefore, at any given time UBS and its affiliates may be participants in foreign exchange and currency derivative transactions. In addition, as described below under “Use of Proceeds and Hedging” on page PS- 32 , we or one or more of our affiliates may hedge our foreign exchange exposure from the Securities by entering into foreign exchange and currency derivative transactions, such as options in the over-the-counter market. Our trading and hedging activities may affect the Index and make it less likely that you will receive a return on your investment in the Securities. It is possible that UBS or its affiliates could receive substantial returns from these hedging activities while the market value of the Securities declines.

UBS or its affiliates may also engage in trading in instruments linked to the spot and forward rates on the Eligible Currencies on a regular basis as part of our general broker-dealer and other businesses for proprietary accounts or to facilitate transactions for customers, including block transactions. UBS or its affiliates may also issue or underwrite other securities or financial or derivative instruments with returns linked or related to changes in the Index. By introducing competing products onto the marketplace in this manner, UBS or its affiliates could adversely affect the market value of the Securities.

These transactions and activities are not entered into for the account of holders of Securities or on their behalf and may present a conflict between your interest in the Securities and the interests of UBS and its affiliates, in their proprietary accounts, in facilitating transactions, including options and other derivatives transactions for their customers and in accounts under their management.

Although difficult to predict, the implementation of certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act may have an adverse effect on the performance of the Index and, consequently, the value of the Securities.

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on July 21, 2010 (the “Dodd-Frank Act”), and the rules and regulations to be promulgated under it, will subject certain swap transactions and swap market participants to comprehensive regulation, including (subject to certain exceptions) mandatory central clearing and exchange-trading requirements. “Swap dealers” and “major swap participants” (as defined under the Dodd-Frank Act) will be subject to new requirements for capital and margin, as well as a variety of other administrative duties.

Section §721(a)(47)(A)(iii) of the Dodd-Frank Act provides that “foreign exchange swaps” and “foreign exchange forwards” are “swaps” subject to the Dodd-Frank Act’s regulatory regime. However, Section §721(a)(47)(E) authorizes the Secretary of the Treasury to make a determination that foreign exchange swaps and foreign exchange forwards shall not be “swaps.” Such a determination has not yet been made, and it is impossible to predict whether or when the Secretary of the Treasury will make such a determination.

The potential impact of the Dodd-Frank Act’s regulatory regime on the pricing, liquidity, volatility and other trading characteristics of the foreign exchange markets is difficult to predict. The performance of the Securities is linked to the performance of the Index which, in turn, is linked to the performance of certain foreign exchange forwards. Therefore, no assurances can be given that the implementation of the Dodd-Frank Act will not have a materially adverse effect on the performance of the Index or the value of, or payment (if any) you receive with respect to, the Securities.

PS-16

TABLE OF CONTENTS

Risk Factors

We and our affiliates may have published research, expressed opinions or provided recommendations that are inconsistent with investing in or holding the Securities, and may do so in the future. Any such research, opinions or recommendations could affect the exchange rates of the Eligible Currencies to which the Securities are linked or the market value of the Securities.

UBS and its affiliates publish research from time to time on financial markets and other matters that may influence the value of the Securities, or express opinions or provide recommendations that are inconsistent with purchasing or holding the Securities. UBS and its affiliates may have published research or other opinions that call into question the investment view implicit in the Securities. Any research, opinions or recommendations expressed by UBS or its affiliates may not be consistent with each other and may be modified from time to time without notice. Investors should make their own independent investigation regarding the merits of investing in the Securities and the UBS V10 Currency Index to which the Securities are linked.

There are potential conflicts of interest between you and the Calculation Agent.

One of our affiliates will serve as the Calculation Agent. The Calculation Agent will, among other things, determine the level of the Index and the payment at maturity on your Securities. For a fuller description of the Calculation Agent’s role, see “General Terms of the Securities — Role of Calculation Agent” on page PS- 31 . The Calculation Agent will exercise its judgment when performing its functions. For example, the Calculation Agent may have to determine whether a Disruption Event has occurred or is continuing on the Final Valuation Date or any other applicable valuation date and whether a hedging disruption event has occurred. These determinations may, in turn, depend on the Calculation Agent’s judgment whether the event has materially interfered with our ability to unwind our hedge positions. Since these determinations by the Calculation Agent may affect the market value of the Securities, the Calculation Agent may have a conflict of interest if it needs to make any such decision.

There are potential conflicts of interest between you and UBS Securities LLC.

UBS Securities LLC is an affiliate of UBS and, as such, will have a “conflict of interest” in any offering of Securities within the meaning of FINRA Rule 5121. In addition, UBS will receive the net proceeds (excluding the underwriting discount) from the initial public offering of the Securities, thus creating an additional conflict of interest within the meaning of FINRA Rule 5121. Consequently, any offering of Securities will be conducted in compliance with the provisions of FINRA Rule 5121. Neither UBS Securities LLC nor any other affiliated agent of UBS will be permitted to sell Securities in any offering to an account over which it exercises discretionary authority without the prior specific written approval of the account holder. See “UBS will determine the market price of the foreign exchange forward contracts underlying the Index” on PS- 11 for more information.

The Calculation Agent can postpone a valuation date, the Final Valuation Date, a Coupon Payment Date, Call Date or the Maturity Date if a Disruption Event occurs on the Final Valuation Date or other applicable valuation date.

If the Calculation Agent determines that a Disruption Event has occurred or is continuing on the Final Valuation Date or other applicable valuation date, such Final Valuation Date or other valuation date will be postponed until the first Index business day on which no Disruption Event occurs or is continuing. If such a postponement occurs, then the Calculation Agent will instead use the relevant level of the UBS V10 Currency Index on the first Index business day after that day on which no Disruption Event occurs or is continuing. In no event, however, will the Final Valuation Date or any other valuation date be postponed by more than ten Index business days. As a result, a Coupon Payment Date, Call Date or the Maturity Date for the Securities could also be postponed, although not by more than ten Index business days.

PS-17

TABLE OF CONTENTS

Risk Factors

If the Final Valuation Date or any other valuation date is postponed to the last possible day, but a Disruption Event occurs or is continuing on that day, that day will nevertheless be the Final Valuation Date or such other valuation date, as the case may be. If the closing exchange rate of any of Selected Currencies is not available on the last possible Final Valuation Date or such other valuation date, as the case may be, the Calculation Agent will make a commercially reasonable estimate of the closing exchange rate or rates that would have prevailed in the absence of a disruption event. See “General Terms of the Securities — Discontinuance of the Index; Alteration of Method of Calculation of the Index” on page PS- 29 .

The inclusion of commissions, compensation and projected profits from hedging in the original issue price is likely to affect adversely secondary market prices.

Assuming no change in market conditions or any other relevant factors, the price, if any, at which UBS Securities LLC or its affiliates are willing to purchase the Securities in secondary market transactions will likely be lower than the initial price to public, since the initial price to public is likely to include, and secondary market prices are likely to exclude, commissions or other compensation paid with respect to the Securities, as well as the projected profit included in the cost of hedging our obligations under the Securities. In addition, any such prices may differ from values determined by pricing models used by UBS Securities LLC or its affiliates, as a result of dealer discounts, mark-ups or other transactions.

The Securities are not insured by the FDIC.

The Securities are not deposit liabilities of UBS, and neither the Securities nor your investment in the Securities are insured by the United States Federal Deposit Insurance Corporation (“FDIC”) or any other governmental agency of the United States, Switzerland or any other jurisdiction.

The U.S. federal income tax consequences of an investment in Securities that do not guarantee the return of principal are unclear.

There is no direct legal authority regarding the proper U.S. federal income tax treatment of Securities that do not provide for a repayment of principal feature, and we do not plan to request a ruling from the Internal Revenue Service (the “IRS”). Consequently, significant aspects of the tax treatment of these Securities are uncertain, and the IRS or a court might not agree with the treatment described in the section of this prospectus supplement entitled “Supplemental U.S. Tax Considerations — Tax Consequences to U.S. Holders — Securities Treated as Prepaid Forward Contracts.” If the IRS were successful in asserting an alternative treatment for these Securities, the timing and/or character of income on the Securities might differ materially and adversely from the description herein.

In addition, as described in “Supplemental U.S. Tax Considerations — Tax Consequences to U.S. Holders — Securities Treated as Prepaid Forward Contracts,” in 2007 Treasury and the IRS released a notice requesting comments on various issues regarding the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments, such as Securities that do not guarantee the return of principal. It is possible that any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in these Securities, possibly with retroactive effect.

You should consult your tax advisor regarding the U.S. federal income tax consequences of an investment in Securities that do not guarantee the return of principal (including possible alternative treatments and the issues presented by the 2007 notice) and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.

ADDITIONAL RISK FACTORS RELATING TO A PARTICULAR ISSUANCE OF SECURITIES MAY BE SET FORTH IN THE APPLICABLE TERMS SUPPLEMENT.

PS-18

TABLE OF CONTENTS

The UBS V10 Currency Index with Volatility Cap

Overview of the UBS V10 Currency Index with Volatility Cap

The UBS V10 Currency Index with Volatility Cap (which we sometimes refer to as the “UBS V10 Currency Index” or the “Index”) employs a proprietary short-term currency trading strategy designed by UBS and was first published on May 6, 2009. The Index notionally invests in a dynamically adjusted basket (the “Basket”) consisting of positions in foreign exchange forward contracts on the U.S. dollar with tenors of up to approximately six months (which we sometimes refer to as “foreign exchange forward contracts”) relative to the ten Eligible Currencies: the Australian dollar (AUD), the Canadian dollar (CAD), the Swiss franc (CHF), the euro (EUR), the British pound (GBP), the Japanese yen (JPY), the Norwegian krone (NOK), the New Zealand dollar (NZD), the Swedish krona (SEK) and the U.S. dollar (USD). Generally, the Index is based on the view that foreign exchange forward rates are biased estimators of future foreign exchange spot rates, and that currencies that trade at a forward discount ( i.e. , currencies whose forward exchange rate is lower than the current spot exchange rate) tend to outperform, on average and over time, currencies that trade at a forward premium ( i.e. , currencies whose forward exchange rate is higher than the current spot exchange rate). This is commonly referred to as “forward rate bias.” The Index is also based on a view that this tendency may be reversed during periods of high volatility in foreign exchange markets. While historically there has been some empirical evidence to support these views, the basis for these views is not entirely clear.

On each Index business day, the Eligible Currencies are ranked in descending order based on their respective one-month interest rates as of approximately 11:00 a.m., London time, as determined by the Index Sponsor. The top three currencies (the “High Yielding Currencies”) and the bottom three currencies (the “Low Yielding Currencies”) are designated as the “Selected Currencies.” At any given time, the Basket will consist of either one hypothetical long position in each of the High Yielding Currencies and one hypothetical short position in each of the Low Yielding Currencies (a “Normal Carry Trade”) or one hypothetical short position in each of the High Yielding Currencies and one hypothetical long position in each of the Low Yielding Currencies (a “Reverse Carry Trade”), based on the level of the Volatility Filter at the time of the designation of the Selected Currencies and in each case on a net basis. On each Portfolio Rebalance Date (as defined below), each of the hypothetical long positions will have a notional value of 1/3 of the total notional value of the Basket, and each of the hypothetical short positions will have a notional value of 1/3 of the total notional value of the Basket. When the U.S. dollar is not a Selected Currency, the Index reflects notional exposure to six foreign exchange forward contracts, each in a Selected Currency against the U.S. dollar. When the U.S. dollar is a Selected Currency, the Index reflects notional exposure to five foreign exchange forward contracts, each with a notional value equal to 1/3 of the total notional value of the Basket on the previous Portfolio Rebalance Date or if such date is a Portfolio Rebalance Date then the notional value of the Basket on such date, and the portion of the total notional value of the Basket represented by the U.S. dollar/U.S. dollar contract will not reflect notional exposure to any foreign exchange forward contract. As a result, during periods of Normal Carry Trade when the U.S. dollar is one of the Low-Yielding Currencies or during periods of Reverse Carry Trade when the U.S. dollar is one of the High-Yielding Currencies, the Index will generally reflect a net short position in the U.S. dollar. During periods of Normal Carry Trade when the U.S. dollar is one of the High-Yielding Currencies or during periods of Reverse Carry Trade when the U.S. dollar is one of the Low-Yielding Currencies, the index will generally reflect a net long position in the U.S. dollar.

The rankings of the interest rates of the Eligible Currencies are reviewed together with the state of the Volatility Filter on every Index business day during the term of the Securities at approximately 11:00 a.m., London time. Whenever the interest rate rankings have changed such that the composition of the Selected Currencies has changed, then the Basket will be adjusted as follows: the open forward positions in the specific currencies to be replaced or changed will be offset at prevailing market rates through offsets to the notional amounts of the Selected Currencies (other than, if applicable, the U.S.

PS-19

TABLE OF CONTENTS

The UBS V10 Currency Index with Volatility Cap

dollar), and new forward positions in the new or changed Selected Currencies will be opened to settle on the next Portfolio Settlement Date (as defined below). If the rankings change during the period of two Index business days between any Portfolio Rebalance Date and the immediately following Portfolio Settlement Date, the new positions entered into on any such day will settle on the next Portfolio Settlement Date after the immediately following Portfolio Settlement Date.

As discussed in more detail below, the Volatility Filter will apply an algorithm, based on the implied one-month volatility of each of the Eligible Currencies versus the U.S. dollar, to signal either a Normal Carry Trade or a Reverse Carry Trade. Should the Filter Level have changed so as to require a change in the carry ( i.e. , moving from a Normal Carry Trade to a Reverse Carry Trade, or vice versa ), then all existing open positions will be offset and the appropriate new positions opened. These new positions would then settle on the next Portfolio Settlement Date. If the Filter Level changes during the period of two Index business days between any portfolio Rebalance Date and the immediately following Portfolio Settlement Date, the new positions entered into on any such day will settle on the next Portfolio Settlement Date after the immediately following Portfolio Settlement Date. The method for calculating the Filter Level and the algorithm used by the Volatility Filter is described in greater detail below under “— The Volatility Filter.”

The last day of May and November of each year that is a day on which banking institutions in the principal financial center for each Eligible Currency are open for business and can settle foreign exchange transactions will each be a “Portfolio Settlement Date.” Two Index business days before each Portfolio Settlement Date (each such a day, a “Portfolio Rebalance Date”), all net existing foreign currency forward positions shall be offset using foreign currency forward transactions, at the then prevailing market rates, and new foreign currency forward positions in all Selected Currencies (except the U.S. dollar if the U.S. dollar is a Selected Currency), with settlement dates of Portfolio Settlement Date following the next Portfolio Settlement Date, shall be opened. Each of these foreign currency forward positions shall have a notional equal to 1/3 of the value of the Basket on such Portfolio Rebalance Date.

The foreign exchange forward contracts underlying the Index are foreign exchange forward contracts traded in the over-the-counter market with tenors of up to approximately six months. The prices of such contracts used to calculate gains and losses from notional settlement of hypothetical positions will be based on the prevailing prices available to UBS at 3:00 p.m. London time (or shortly thereafter taking into consideration available prices for the notional foreign exchange forward contracts that would need to be hypothetically settled as a result of such determination), on the applicable valuation date.

The level of the Index is generally published by the Index Sponsor on each Index business day, with published information reflecting the state of the Index at 3:00 p.m., London time (or shortly thereafter taking into consideration available prices for the notional foreign exchange forward contracts that would need to be hypothetically settled as a result of such determination). Index information is available under the symbol “UBFSV10V ” from Bloomberg. Bloomberg and the Index Sponsor have no obligation to continue to publish the Index. Either may discontinue publication of the Index at any time in its sole discretion.

PS-20

TABLE OF CONTENTS

The UBS V10 Currency Index with Volatility Cap

Application of the Volatility Cap

On each Index business day, the Index Sponsor will calculate the volatility of the Index as the standard deviation of the daily returns of the Index over the prior 65 Index business days (without application of the volatility cap), multiplied by the square root of 260 (approximately 16.12). If the volatility of the Index, calculated in such manner, exceeds 30%, a leverage factor of less than one is applied with the intent of reducing the future volatility of the Index. The specific leverage factor is determined per the following table:

●	●
Leverage Factor	Volatility of the Index
100%	Volatility < 30%
90%	30% Volatility < 32.5%
80%	32.5% Volatility < 35%
70%	35% Volatility < 37.5%
60%	37.5% Volatility < 40%
50%	40% Volatility < 42.5%
40%	42.5% Volatility < 45%
30%	45% Volatility < 47.5%
20%	47.5% Volatility < 50%
10%	50% Volatility < 52.5%
0%	52.5% Volatility

For example, if the historical volatility of the Index on an Index business day (without giving effect to any application of the leverage factor), calculated in the manner described in the preceding paragraph, is determined to be 34%, the leverage factor will be 80% and the impact of any positive or negative performance will be reduced by 20% in calculating the daily value for the Index for such day.

The Volatility Filter

The Volatility Filter is a quantitative methodology used to dynamically adjust the simulated positions in each of the Selected Currencies comprising the Basket. Based on these foreign exchange rate volatilities, the Volatility Filter will generate a signal (a “Carry Signal”) indicating whether the Basket should maintain a Normal Carry Trade or a Reverse Carry Trade. Below is a description of how the Volatility Filter generates Carry Signals.

Calculating the Currency Z-Scores, the Volatility Factor, the Derivative Factor and the Filter Level

In applying the Volatility Filter, on each Index business day, the Index Sponsor will calculate the z-score of the one-month implied volatility for each Eligible Currency with respect to the U.S. dollar (each a “Currency Z-Score”) on each weekday as follows:

where:

Ø Z i is the Currency Z-Score for currency i ;

Ø IV i is the current one-month implied volatility for currency i relative to the U.S. dollar;

Ø μ i is the average one-month implied volatility for currency i relative to the U.S. dollar over the past 252 weekdays; and

PS-21

TABLE OF CONTENTS

The UBS V10 Currency Index with Volatility Cap

Ø σ i is the standard deviation of the one-month implied volatility for currency i relative to the U.S. dollar in the past 252 weekdays.

The Volatility Factor ( V ) is the average of the Currency Z-Scores for 9 of the Eligible Currencies, excluding the U.S. dollar, calculated as follows:

The Derivative Factor ( D ) reflects the change in Volatility Factor over the past five weekdays, and is calculated as follows:

The Filter Level ( F ) is calculated by adding the Derivative Factor to the Volatility Factor as follows:

The addition of the Derivative Factor is intended to make the Filter Level rise more quickly and fall more sharply, so that the Filter Level is more sensitive to change.

UBS will determine the one-month implied volatilities used to calculate the Filter Level by reference to the UBS mid-market prices for the Eligible Currencies at approximately 11:00 a.m. London time on the date of determination and the prices at approximately the close of business in New York, or such other time as may be used, for all dates prior to the date of determination.

Generating a Carry Signal

The Volatility Filter generates a Carry Signal on each Index Business Day. The Carry Signal may change when the Filter Level crosses an Upper Threshold or a Lower Threshold. The Upper Threshold is 1.6 and the Lower Threshold is 0.6. If the Filter Level is equal to or below the Lower Threshold, the Volatility Filter generates a Carry Signal indicating a Normal Carry Trade.

If the Filter Level is equal to or above the Upper Threshold, the Volatility Filter generates a Carry Signal indicating a Reverse Carry Trade.

If the Filter Level is between the Lower Threshold and the Upper Threshold, then the Carry Signal generated by the Volatility Filter remains the same as the Carry Signal generated the last time the Filter Level crossed either the Upper Threshold or the Lower Threshold on an Index business day.

In sum, the Volatility Filter generates Carry Signals as follows:

●	●	●
Filter Level	Last Cross	Carry Signal
F 0.6	N/A	Normal Carry Trade
0.6 < F < 1.6	Lower Threshold	Normal Carry Trade
0.6 < F < 1.6	Upper Threshold	Reverse Carry Trade
F 1.6	N/A	Reverse Carry Trade

Index Administration

UBS AG, acting through the London branch, the Zurich branch, the New York branch or such other branch as may be specified in the applicable terms supplement, as sponsor of the Index (the “Index Sponsor”) administers the Index. As the Index is based on algorithmic principles, the Index Sponsor has limited discretion in the administration of the Index. However, the Index Sponsor may modify the methodology used to calculate the level of the Index as it deems appropriate if the Index Sponsor is of the

PS-22

TABLE OF CONTENTS

The UBS V10 Currency Index with Volatility Cap

view that (i) events or circumstances make the calculation of the Index according to the current Index methodology impossible or impracticable (including but not limited to any changes to or any suspension or termination of trading in any Eligible Currency or certain other events affecting the Eligible Currencies) or (ii) such modification is required to address any ambiguities, errors or omissions in the Index methodology. In its sole discretion, the Index Sponsor may also replace a price used for notional settlement of a hypothetical position when there is an obvious and manifest error in the officially settled price or when a market abuse is likely to have taken place or suspend or discontinue the calculation of the Index. The Index Sponsor may also discontinue publication of the Index, including after events or circumstances that the Index Sponsor determines would make calculation of the Index impossible or impracticable.

If foreign exchange forward contracts in one or more of the Selected Currencies become unavailable, the Index Sponsor shall calculate the level of the Index using the last available price for such contracts for a period of ten Index business days. If foreign exchange forward contracts in one or more of the Selected Currencies remain unavailable for a period of time that is more than ten Index business days, the Index Sponsor shall cease publication of the Index.

If the Calculation Agent determines that the method of calculating the Index has been changed for any reason other than an event or circumstance that made the calculation of the Index according to the prior Index methodology impossible or impracticable such that the Index does not, in the opinion of the Calculation Agent, fairly represent the value of the Index had such changes or modifications not been made, the Calculation Agent will make such calculations and adjustments as may be necessary to determine the applicable value of the Index on the Final Valuation Date in accordance with the formula for and method of calculating the Index level last in effect prior to such modification, as practicable. If the Index Sponsor suspends or discontinues publication of the Index, and such suspension or discontinuance has occurred or is occurring on the Final Valuation Date and continues for ten Index business days thereafter, the Calculation Agent will make such calculations and adjustments as may be necessary to determine a value for the Index in accordance with the formula for and method of calculating the Index level last in effect prior to such suspension or discontinuation, as practicable. There can be no assurance that such modification, suspension or discontinuation will not adversely impact the value of your Securities. See “Actions by the Index Sponsor could result in changes to the level of the Index” on PS-11.

Interest Rates

The interest rates used by UBS, as Index Sponsor, to determine the Selected Currencies on each Index business day shall be the one-month interest rate for each Eligible Currency as of approximately 11:00 a.m., London time. UBS will determine the one-month interest rate for each Eligible Currency, using both (i) its internal transfer mid-deposit rates and (ii) its internal implied forward rates, in each case derived from its own internal interest rate curves.

If both methodologies produce the same set of High Yielding Currencies, the High Yielding Currencies underlying the Basket will be replaced in accordance with such ranking. If the methodologies produce different sets of High Yielding Currencies, then the High Yielding Currencies underlying the Basket will remain unchanged. If both methodologies produce the same set of Low Yielding Currencies, the Low Yielding Currencies underlying the Basket will be replaced in accordance with such ranking. If the methodologies produce different sets of Low Yielding Currencies, then the Low Yielding Currencies underlying the Basket will remain unchanged.

Notwithstanding the foregoing, if on any Index business day a High Yielding Currency, after the application of the rules described in the preceding two paragraphs, would become both a High Yielding Currency and a Low Yielding Currency, then such currency will be removed from the set of High Yielding Currencies and replaced by an Eligible Currency with the highest one-month interest rate, as

PS-23

TABLE OF CONTENTS

The UBS V10 Currency Index with Volatility Cap

determined by reference to UBS’s internal transfer mid-deposit rates, that is not already a Selected Currency. If on any Index business day a Low Yielding Currency, after the application of the rules described above, would be both a High Yielding Currency and a Low Yielding Currency, then such currency will be removed from the set of Low Yielding Currencies and replaced by an Eligible Currency with the lowest one-month interest rate, as determined by reference to UBS’s internal transfer mid-deposit rates, that is not already a Selected Currency.

Foreign Exchange Forward Contract Prices

The prices of the foreign exchange forward contracts used to calculate gains and losses from the notional settlement of hypothetical positions underlying the UBS V10 Currency Index shall be based on the prevailing prices available to UBS at 3:00 p.m., London time (or shortly thereafter taking into consideration available prices for the notional foreign exchange forward contracts that would need to be hypothetically settled as a result of such determination), on the relevant valuation date.

PS-24

TABLE OF CONTENTS

General Terms of the Securities

The following is a summary of the general terms of the Securities. The information in this section is qualified in its entirety by the more detailed explanation set forth in the applicable terms supplement and in the accompanying prospectus. In this section, references to “holders” mean those who own the Securities registered in their own names, on the books that we or the trustee maintain for this purpose, and not those who own beneficial interests in the Securities registered in street name or in the Securities issued in book-entry form through the Depository Trust Company (“DTC”) or another depositary. Owners of beneficial interests in the Securities should read the section entitled “Legal Ownership and Book-Entry Issuance” in the accompanying prospectus.

In addition to the terms described elsewhere in this prospectus supplement, the following general terms will apply to the Securities:

Denominations

Unless otherwise specified in the applicable terms supplement, Securities will be issued in denominations of $10.00. The applicable terms supplement will specify your minimum investment for each offering of the Securities in which you invest.

Coupon

The applicable terms supplement will specify whether you will receive coupon payments during the term of your Securities. These payments will be determined according to a formula specified in the applicable terms supplement (the “Coupon Payment Formula”). The Coupon Payment Formula may be based on the performance of the UBS V10 Currency Index over the relevant period, as may be specified in the applicable terms supplement.

Payment at Maturity or Upon Automatic Call

The amount payable to you at maturity will be calculated in accordance with the applicable Payment at Maturity Formula, as set forth in the applicable terms supplement. The Payment at Maturity Formula may be based on the performance of the UBS V10 Currency Index.

For Securities with an autocall feature, unless otherwise specified in the applicable terms supplement, the amount payable to you on the Call Settlement Date (as defined and specified in the applicable terms supplement), will be based on the level of the Index at approximately 3:00 p.m., London time, on the Observation Date (as defined and specified in the applicable terms supplement), and calculated in accordance with the applicable Payment at Call Formula, as set forth in the applicable terms supplement.

The applicable terms supplement will specify the Trade Date, the Call Settlement Dates, if any, the Observation Dates, if any, and the Final Valuation Date, as well as the respective terms of each offering of the Securities, including, in each case as and if applicable, the Payment Formulas (including the circumstances under which we are obligated to repay any portion of the principal amount), the index fee, the trigger or barrier level, the maximum gain amount and the Participation Rate.

We may issue separate offerings of Securities with each offering subject to the particular terms set forth in the applicable terms supplement. Each Security is a separate and distinct security, and you may invest in one or more Securities. The performance of each Security will depend upon the performance of the UBS V10 Currency Index and will not depend on the performance of any other Securities previously or subsequently offered.

Index Fee

Unless otherwise specified in the applicable terms supplement, there will be no index fee for the Securities. If so specified, the Payment Formulas for your Securities will provide for a fee payable to our affiliate, the Index Sponsor, which may be deducted from amount(s), if any, payable on your Securities.

PS-25

TABLE OF CONTENTS

General Terms of the Securities

Any such index fee will equal to a percentage per annum of the principal amount of your Securities specified in the applicable terms supplement or will be determined pursuant to such other formula specified in the applicable terms supplement, in each case calculated by the Calculation Agent.

Participation Rate

We may offer the Securities with the opportunity for enhanced upside exposure to the UBS V10 Currency Index. In such cases, a measure of the performance of the Index may be multiplied by the Participation Rate or Multiplier when calculating the payments due on your Securities. We will specify the Participation Rate or Multiplier, if any, applicable to your Securities in the applicable terms supplement

Repayment of Principal

The Securities differ from ordinary debt securities in that we may not necessarily be obligated to repay the principal amount of the Securities at maturity. We will specify in the applicable terms supplement the relevant Payment Formulas which determine, among other things, whether, the extent to which and under what circumstances UBS will be obligated to repay the principal amount of any such securities. Depending on the Payment Formulas for a Security and the performance of the Index, you may lose all or a substantial portion of your investment in the Securities

To the extent we are obligated to repay any of the principal amount of the Securities, such payment will only be due at maturity (unless otherwise specified in the pricing supplement). The market value of the Securities may fluctuate between the date you purchase them and the Final Valuation Date. If you sell your Securities in the secondary market prior to maturity, you may incur a loss on your investment even if you would otherwise have received a full return of principal at maturity based on the terms specified in the applicable terms supplement. Any repayment of principal feature is subject to the creditworthiness of the Issuer.

Early Redemption Following a Hedging Disruption Event

The Securities will be automatically redeemed upon the occurrence of a hedging disruption event that is continuing for ten consecutive Index business days following such occurrence. If a hedging disruption event is deemed to have occurred, but ceases to be occurring on or before the tenth consecutive Index business day following the date of such hedging disruption event, the Securities will not be redeemed. Any of the following will be a hedging disruption event, in each case as determined by the Calculation Agent:

Ø due to (i) the adoption of, or any change in, any applicable law, regulation or rule or (ii) the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law, rule, regulation or order, in each case occurring after the Trade Date for the Securities, the Calculation Agent determines that it is contrary to such law, rule, regulation or order to purchase, sell, enter into, maintain, hold, acquire or dispose of any of our or any affiliate’s (A) positions or contracts in securities, options, futures, derivatives or foreign exchange or (B) other instruments or arrangements, in each case, in order to hedge individually or in the aggregate on a portfolio basis our obligations under the Securities (“hedge positions”);

Ø any other event that the Calculation Agent determines materially interferes with our ability or the ability of any of our affiliates to create, unwind or maintain all or a material portion of any hedge positions with respect to your Securities; or

Ø any other event specified in the applicable terms supplement as a hedging disruption event.

In the case of such an automatic redemption, the tenth consecutive Index business day following the date determined by the Calculation Agent to be a date on which a hedging disruption event has begun (or the

PS-26

TABLE OF CONTENTS

General Terms of the Securities

following Index business day if the hedging disruption event occurs on a day that is not an Index business day) will be deemed to be the Final Valuation Date. You will then receive a cash payment per Security, determined pursuant to the Payment at Maturity Formula, on the fifth note business day immediately following the Final Valuation Date (such fifth note business day, the “early redemption settlement date”), unless otherwise specified in the applicable terms supplement. After the Securities are redeemed pursuant to an automatic redemption, no further amounts will be owed to you under the Securities and you will not benefit from any subsequent change in the level of the Index. In addition, if the Securities are redeemed prior to their scheduled maturity, there is no guarantee that you would be able to reinvest the proceeds from an investment in the Securities, if any, in a comparable investment with similar characteristics as the Securities.

Maturity Date

The Maturity Date for your Securities will be the date specified in the applicable terms supplement, unless that day is not a note business day, in which case the Maturity Date will be the next following note business day. If the Calculation Agent postpones the Final Valuation Date, the Maturity Date will be postponed to maintain the same number of note business days between the Final Valuation Date and the Maturity Date as existed prior to the postponement of the Final Valuation Date. As discussed below under “— Final Valuation Date,” the Calculation Agent may postpone the Final Valuation Date if a Disruption Event occurs or is continuing on a day that would otherwise be the Final Valuation Date. We describe Disruption Events under “— Disruption Event” below. In no event, however, will the Final Valuation Date or the Maturity Date for the Securities be postponed by more than ten note business days.

The postponement of the Maturity Date for one offering of the Securities will not affect the Maturity Date for any other offering of the Securities.

Valuation Dates

Unless otherwise specified in the applicable terms supplement, the Calculation Agent will calculate the value of the Index on each Index business day following the Trade Date, up to, and including, the Final Valuation Date.

Final Valuation Date

The Final Valuation Date for your Securities will be (i) the date specified in the applicable terms supplement, unless the Calculation Agent determines that a Disruption Event occurs or is occurring on such Final Valuation Date or (ii) the tenth consecutive Index business day following the date on which, as determined by the Calculation Agent, a hedging disruption event has begun (or the following Index business day if the hedging disruption event occurs on a day that is not an Index business day), unless the Calculation Agent determines that the hedging disruption event has not been occurring for ten consecutive Index business days. If a Disruption Event occurs on the date specified as the Final Valuation Date in the applicable terms supplement, the Final Valuation Date will be the first following Index business day on which the Calculation Agent determines that a Disruption Event does not occur and is not continuing. In no event, however, will the Final Valuation Date for the Securities be postponed by more than ten Index business days. If the Final Valuation Date has been postponed for ten consecutive Index business days and a Disruption Event is still continuing on such tenth consecutive Index business day, or if the Calculation Agent determines that a hedging disruption event has occurred and is continuing for ten consecutive Index business days following such occurrence, the Calculation Agent will make such calculations and adjustments as may be necessary to determine a value for the Index in accordance with the formula for and method of calculating the Index last in effect prior to the Disruption Event.

The postponement of the Final Valuation Date for one offering of the Securities will not affect the Final Valuation Date for any other offering of the Securities.

PS-27

TABLE OF CONTENTS

General Terms of the Securities

Call Settlement Date

If the Securities have an autocall feature and the Securities are called on any Observation Date, the call settlement date will be a set number of days (as specified in the applicable terms supplement) following such Observation Date, unless that day is not a note business day, in which case the call settlement date will be the next following note business day.

Observation Dates

The Observation Dates, if any, will be specified in the applicable terms supplement.

Disruption Events

Any of the following will be a Disruption Event:

Ø the UBS V10 Currency Index is not published on an Index business day;

Ø any event that the Calculation Agent determines materially interferes with our ability, or the ability of any of our affiliates, to unwind all or a material portion of a hedge with respect to the Securities that we or our affiliates have effected or may effect as described below under “Use of Proceeds and Hedging” on page PS- 32 ; or

Ø any other event or circumstance beyond the direct control of the Calculation Agent which would make the calculation of the performance of the Index impossible or impracticable, technically or otherwise.

Examples of the foregoing events or circumstances include, without limitation:

Ø systems failures;

Ø a currency exchange rate for one of the Eligible Currencies splits into dual or multiple exchange rates;

Ø an event occurs that generally makes it impossible to convert an Eligible Currency into U.S. Dollars in the home country for such currency (the “Eligible Currency Jurisdiction”) through customary legal channels;

Ø an event occurs that generally makes it impossible to deliver U.S. dollars from accounts inside an Eligible Currency Jurisdiction to accounts outside that Eligible Currency Jurisdiction, or to deliver an Eligible Currency between accounts inside the Eligible Currency Jurisdiction or to a party that is a non-resident of the relevant Eligible Currency Jurisdiction;

Ø the occurrence of a default, event of default or other similar condition or event with respect to any security or indebtedness of, or guaranteed by, any governmental authority in relation to an Eligible Currency;

Ø any change in, or amendment to, the laws or regulations prevailing in the Eligible Currency Jurisdiction in respect of any Eligible Currency, or any change in any application or official interpretation of such laws or regulations, or any other governmental action that the Index Sponsor determines is reasonably likely to cause another Disruption Event to occur or that leads or may lead to the introduction of a foreign exchange peg regime;

Ø the occurrence of an event that makes it impossible or not reasonably practicable to obtain a firm quote for a foreign exchange rate for one of the Eligible Currencies;

Ø any nationalization, confiscation, expropriation, requisition or other action by a governmental authority in an Eligible Currency Jurisdiction that deprives UBS or any of its affiliates of all or substantially all of its assets in such Eligible Currency Jurisdiction;

PS-28

TABLE OF CONTENTS

General Terms of the Securities

Ø it becomes impossible for UBS to obtain a foreign exchange rate for an Eligible Currency;

Ø a material suspension in trading of the Eligible Currencies;

Ø unscheduled holidays;

Ø natural or man-made disasters;

Ø acts of God;

Ø armed conflicts;

Ø acts of terrorism;

Ø riots or labor disruptions; or

Ø any similar intervening event or circumstance.

Discontinuance of the Index; Alteration of Method of Calculation of the Index

In its discretion, the Index Sponsor may modify the methodology used to calculate the level of the Index, as it deems appropriate, if the Index Sponsor is of the view that (i) events or circumstances make the calculation of the Index according to the current Index methodology impossible or impracticable (including but not limited to any changes to or any suspension or termination of trading in any Eligible Currency or certain other events affecting the Eligible Currencies) or (ii) such modification is required to address any ambiguities, errors or omissions in the Index methodology. If the Calculation Agent determines that the method of calculating the Index has been changed for any reason other than an event or circumstance that made the calculation of the Index according to the prior Index methodology impossible or impracticable such that the value of the Index does not, in the opinion of the Calculation Agent, fairly represent the value of the Index had such changes or modifications not been made, the Calculation Agent will make such calculations and adjustments as may be necessary to determine values for the Index in accordance with the formula for and method of calculating the Index level last in effect prior to such modification, as practicable.

The Index Sponsor may also discontinue publication of the Index, including after events or circumstances that the Index Sponsor determines would make calculation of the Index impossible or impracticable. If the Index Sponsor suspends or discontinues publication of the Index, and such suspension or discontinuation occurs or is continuing on the Final Valuation Date and continues for more than ten Index business days thereafter, the Calculation Agent will determine the applicable value of the Index on such tenth Index business day in accordance with the formula for and method of calculating the Index level last in effect prior to such suspension or discontinuation, as practicable, using the interest rates and foreign exchange rates in effect (or, if trading in a currency included in the Index has been materially suspended or materially limited, the Calculation Agent’s commercially reasonable estimate of the exchange rate for such currency and the corresponding interest rate that would have prevailed but for the suspension or limitation), without rebalancing or substitution following such suspension or discontinuation. The Calculation Agent will use the applicable level of the Index determined as described above to calculate the payment at maturity as if such tenth Index business day were the Final Valuation Date and UBS will redeem the Securities within three note business days. All determinations and adjustments to be made by the Calculation Agent with respect to the Index shall be made in its sole discretion.

Redemption Price upon Optional Tax Redemption

We have the right to redeem your Securities in the circumstances described under “Description of Debt Securities We May Offer — Optional Tax Redemption” in the accompanying prospectus. If we exercise this right, the redemption price of the Securities will be determined by the Calculation Agent in a manner reasonably calculated to reflect the fair market value of the Securities.

PS-29

TABLE OF CONTENTS

General Terms of the Securities

Default Amount on Acceleration

If an event of default (as defined in the accompanying prospectus) occurs and the maturity of your Securities is accelerated, we will pay the default amount in respect of the principal of your Securities at maturity. We describe the default amount below under “— Default Amount.”

For the purpose of determining whether the holders of our Medium Term Securities Series A, of which the Securities are a part, are entitled to take any action under the indenture, we will treat the outstanding principal amount of the Securities as the outstanding principal amount of the series of notes constituted by the Securities. Although the terms of the Securities may differ from those of the other Medium Term Securities Series A, holders of specified percentages in principal amount of all Medium Term Securities Series A, together in some cases with other series of our debt securities, will be able to take action affecting all the Medium Term Securities Series A, including the Securities. This action may involve changing some of the terms that apply to the Medium Term Securities Series A, accelerating the maturity of the Medium Term Securities Series A after a default or waiving some of our obligations under the indenture. We discuss these matters in the accompanying prospectus under “Description of Debt Securities We May Offer — Default, Remedies and Waiver of Default” and “Description of Debt Securities We May Offer — Modification and Waiver of Covenants.”

Default Amount

The default amount for your Securities on any day will be an amount, in U.S. dollars, payable in respect of the principal amount of your Securities, equal to the cost of having a qualified financial institution, of the kind and selected as described below, expressly assume all our payment and other obligations with respect to your Securities as of that day and as if no default or acceleration had occurred, or to undertake other obligations providing substantially equivalent economic value to you in respect of your Securities. That cost will equal the lowest amount, as determined by the Calculation Agent in the manner described in the following paragraph, that a qualified financial institution would charge to effect this assumption or undertaking.

During the default quotation period for your Securities, which we describe below, we will request at least three qualified financial institutions to provide quotations of the amount each would charge to effect this assumption or undertaking, and we will notify the Calculation Agent in writing of the quotations we obtain. The default amount referred to in the paragraph above will equal the lowest — or, if there is only one, the only — quotation obtained, and as to which notice is so given, during the default quotation period.

Default Quotation Period

The default quotation period is the period beginning on the day the default amount first becomes due and ending on the third note business day after that day, unless no quotation of the kind referred to above is obtained. In such a case, the default quotation period will continue until the third note business day after the first note business day on which at least one quotation is obtained. In any event, if the default quotation period has not ended before the Maturity Date, then the default amount will equal the principal amount of the Securities.

Qualified Financial Institutions

For the purpose of determining the default amount at any time, a qualified financial institution must be a financial institution organized under the laws of any jurisdiction in the United States of America, Europe or Japan, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date of issue and rated either:

Ø A-1 or higher by Standard & Poor’s Ratings Group or any successor, or any other comparable rating then used by that rating agency; or

PS-30

TABLE OF CONTENTS

General Terms of the Securities

Ø P-1 or higher by Moody’s Investors Service, Inc. or any successor, or any other comparable rating then used by that rating agency.

Manner of Payment and Delivery

Any payment on or delivery of your Securities at maturity will be made to accounts designated by you and approved by us, or at the office of the trustee in New York City, but only when your Securities are surrendered to the trustee at that office. We also may make any payment or delivery in accordance with the applicable procedures of the depositary.

Business Day

When we refer to a note business day with respect to your Securities, we mean a Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on which banking institutions in London, New York City or Zurich generally are authorized or obligated by law, regulation or executive order to close.

As described in the accompanying prospectus, any payment on your Securities that would otherwise be due on a day that is not a note business day may instead be paid on the next day that is a note business day, with the same effect as if paid on the original due date, except as described under “— Maturity Date” and “— Final Valuation Date” above.

When we refer to an Index business day with respect to the Index, we mean a Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on which banking institutions in London or Zurich generally are authorized or obligated by law, regulation or executive order to close.

Role of Calculation Agent

One of our affiliates will serve as the initial Calculation Agent, unless otherwise specified in the applicable terms supplement. We may change the Calculation Agent after the original issue date of the Securities without notice. The Calculation Agent will make all determinations regarding the value of the Securities, payments due on the Securities, business days, valuation dates, Coupon Payment Dates, Call Settlement Dates, Observation Dates, Disruption Events, hedging disruption events, the default amount and the amount payable in respect of your Securities in its sole discretion. Absent manifest error, all determinations of the Calculation Agent will be final and binding on you and us, without any liability on the part of the Calculation Agent. You will not be entitled to any compensation from us for any loss suffered as a result of any of the above determinations by the Calculation Agent.

Booking Branch

The booking branch of UBS AG will be set forth in the applicable terms supplement.

PS-31

TABLE OF CONTENTS

Use of Proceeds and Hedging

We will use the net proceeds we receive from the sale of the Securities for the purposes we describe in the accompanying prospectus under “Use of Proceeds.” We or our affiliates may also use those proceeds in transactions intended to hedge our obligations under the Securities as described below.

In anticipation of the sale of the Securities, we or our affiliates may enter into hedging transactions involving execution of foreign exchange forward contracts, currency future, swap and option transactions, both before and after the Trade Date. From time to time, we or our affiliates may enter into additional hedging transactions or unwind those we have entered into. In this regard, we or our affiliates may:

Ø execute or terminate currency future, swap and option transactions;

Ø acquire or dispose of foreign exchange forward contracts; or

Ø do a combination of the above.

We or our affiliates may acquire a long or short position in securities similar to the Securities from time to time and may, in our or their sole discretion, hold or resell those securities.

No holder of the Securities will have any rights or interest in our hedging activity or in any positions we may take in connection with our hedging activity.

The hedging activity discussed above may result in the occurrence of a hedging disruption event that could cause the early redemption of your Securities. See “Description of the Securities — Early Redemption Following a Hedging Disruption Event” on page PS- 26 of this prospectus supplement.

The hedging activity discussed above may also adversely affect the market value of the Securities from time to time and payment at maturity of your Securities. See “Risk Factors” on page PS-9 of this prospectus supplement for a discussion of these adverse effects.

PS-32

TABLE OF CONTENTS

Supplemental U.S. Tax Considerations

The discussion below supersedes the section of the accompanying prospectus entitled “U.S. Tax Considerations.”

The appropriate tax treatment of the Securities will be specified in the applicable terms supplement and will depend upon, among other things, the facts at the time of the issuance of the Securities.

The following is a general summary of the material U.S. federal income tax consequences of the ownership and disposition of the Securities. It applies to you only if you are an initial holder of a Security that purchases the Security at its “issue price,” which is the first price at which a substantial amount of the Securities is sold (not including sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers), and hold the Security as a capital asset within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended to the date hereof (the “Code”). This summary is based on the Code, existing and proposed Treasury regulations, revenue rulings, administrative interpretations and judicial decisions, in each case as currently in effect, all of which are subject to change, possibly with retroactive effect. It does not address all aspects of U.S. federal income taxation that may be relevant to you in light of your particular circumstances or if you are a holder of a Security that is subject to special treatment under the U.S. federal income tax laws, such as:

Ø a financial institution;

Ø a tax-exempt entity;

Ø a dealer or trader in securities subject to a mark-to-market method of tax accounting;

Ø a regulated investment company;

Ø a real estate investment trust;

Ø a person who holds the Securities as part of a hedging transaction, “straddle,” conversion transaction or integrated transaction, or who has entered into a “constructive sale” with respect to the Securities;

Ø a U.S. Holder (as defined below) whose functional currency is not the U.S. dollar; or

Ø a partnership or other entity classified as a partnership for U.S. federal income tax purposes.

As the law applicable to the U.S. federal income taxation of instruments such as the Securities is technical and complex, the discussion below necessarily represents only a general summary. Moreover, the effects of any applicable state, local or non-U.S. tax laws are not discussed. You should consult your tax advisor regarding the U.S. federal income tax consequences of an investment in the Securities and any tax consequences under the laws of any state, local or non-U.S. taxing jurisdiction.

Tax Consequences to U.S. Holders

You are a “U.S. Holder” if, for U.S. federal income tax purposes, you are a beneficial owner of a Security that is:

Ø a citizen or resident of the United States,

Ø a corporation created or organized under the laws of the United States, a state thereof or the District of Columbia, or

Ø an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

PS-33

TABLE OF CONTENTS

Supplemental U.S. Tax Considerations

Securities Treated as Contingent Payment Debt Instruments

Subject to additional discussion and/or modification in the applicable terms supplement, the following describes the material U.S. federal income tax consequences of the ownership and disposition of Securities that we treat as “contingent payment debt instruments” for U.S. federal income tax purposes. Except as otherwise stated, the following assumes that the Securities discussed in this section will be treated as contingent payment debt instruments.

Under this treatment, regardless of your accounting method, you will be required to accrue as interest income original issue discount (“OID”) on the Securities at the “comparable yield,” as determined by us. The comparable yield is the yield at which, in similar market conditions, we could issue a fixed-rate debt instrument with terms similar to those of the Securities, including the level of subordination, term and timing of payments, but excluding any adjustments for the riskiness of the contingencies or the liquidity of the Securities. Solely for purposes of determining the amount of interest income that you will be required to accrue, we are also required to construct a “projected payment schedule” in respect of the Securities representing a schedule of payments the amount and timing of which would produce a yield to maturity on the Securities equal to the comparable yield. We will provide the comparable yield and projected payment schedule in the applicable terms supplement. Neither the comparable yield nor the projected payment schedule constitutes a representation by us regarding the actual amounts that we will pay on the Securities. For U.S. federal income tax purposes, you will be required to use the projected payment schedule in determining annual interest accruals in respect of a Security, unless you timely disclose and justify the use of other estimates to the IRS.

Accordingly, subject to a sale, exchange or retirement of the Securities, you will be required to accrue an amount of OID for U.S. federal income tax purposes, for each accrual period prior to and including the maturity of the Securities, that equals:

Ø the product of (i) the adjusted issue price (as defined below) of your Security as of the beginning of the accrual period and (ii) the comparable yield of the Securities, adjusted for the length of the accrual period;

Ø multiplied by the number of days during the accrual period that you held your Security; and

Ø divided by the number of days in the accrual period.

For U.S. federal income tax purposes, the “adjusted issue price” of a Security is its issue price increased by any interest income previously accrued (without regard to any adjustments described below) and decreased by the projected amount of any prior scheduled payments (without regard to the actual amount of any prior payments).

You will have a “positive adjustment” if the amount of any contingent payment is more than the projected amount of that payment, or a “negative adjustment” if the amount of the contingent payment is less than its projected amount. The amount included in income as interest, as described above, will be adjusted upward by the amount by which the total positive adjustments in a taxable year exceed the total negative adjustments in the taxable year (a “net positive adjustment”) or adjusted downward by the amount by which the total negative adjustments exceed the total positive adjustments in the taxable year (a “net negative adjustment”). To the extent a net negative adjustment exceeds the amount of interest you otherwise would be required to include for the taxable year, it will give rise to an ordinary loss to the extent of (i) the amount of all previous interest inclusions under your Security minus (ii) the total amount of your net negative adjustments treated as ordinary losses in prior taxable years. Any net negative adjustments in excess of that amount will be carried forward to offset future interest income in respect of your Security or to reduce the amount realized on a sale, exchange or retirement of your Security. A net negative adjustment is not subject to the limitation imposed on miscellaneous itemized deductions under Section 67 of the Code.

PS-34

TABLE OF CONTENTS

Supplemental U.S. Tax Considerations

Upon a sale, exchange or retirement of a Security prior to its scheduled maturity, you generally will recognize taxable gain or loss equal to the difference between the amount you receive and your basis in the Security. (At the scheduled maturity, you will be treated as receiving the projected amount set forth in the projected payment schedule, and any difference between the amount received and the projected amount will be treated as a positive or negative adjustment, as described above.) Your basis in a Security will equal the cost thereof, increased by the amount of interest income previously accrued by you in respect of the Security (without regard to any adjustments described above) and decreased by the projected amount of all prior scheduled payments with respect to the Security (without regard to the actual amount of those payments). You will treat any gain as interest income and any loss first as ordinary loss, to the extent of previous interest inclusions (less the amount of any prior net negative adjustments treated as ordinary losses), and then as capital loss.

Losses recognized as described above are not subject to the limitation imposed on miscellaneous itemized deductions under Section 67 of the Code. The deductibility of capital losses, however, is subject to limitations. Additionally, if you recognize a loss above certain thresholds, you may be required to file a disclosure statement with the IRS. You should consult your tax advisor regarding these limitations and reporting obligations.

Special rules may apply if the amount of all of the remaining payments on the Securities becomes fixed. For this purpose, a payment will be treated as fixed if the remaining contingencies with respect to it are remote or incidental. Under these rules, you would be required to account for the difference between the originally projected amounts of the contingent payments and the fixed amounts thereof in a reasonable manner over the period(s) to which the difference relates. In addition, you would be required to make adjustments to, among other things, your accrual periods and your adjusted basis in the Securities. The character of any gain or loss on a sale or exchange of your Securities also would be affected. You should consult your tax advisor regarding the application of these rules.

Securities Treated as Prepaid Forward Contracts

Subject to additional discussion and/or modification in the applicable terms supplement, the following describes the material U.S. federal income tax consequences of the ownership and disposition of Securities that we treat as prepaid forward contracts for U.S. federal income tax purposes. However, due to the absence of authorities that directly address instruments that are similar to the Securities, significant aspects of the U.S. federal income tax consequences of an investment in these Securities are uncertain. We do not plan to request a ruling from the IRS, and the IRS or a court might not agree with the treatment described herein. Accordingly, you should consult your tax advisor regarding the U.S. federal income tax consequences of an investment in these Securities (including possible alternative treatments, some of which are discussed below) and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction. Except as otherwise stated, the following assumes that the Securities discussed in this section will be treated as prepaid forward contracts.

Tax Treatment prior to Maturity. You should not be required to recognize taxable income or loss over the term of the Securities prior to maturity, other than pursuant to a sale, exchange or retirement as described below.

Sale, Exchange or Retirement of the Securities. Upon a sale, exchange or retirement of the Securities, you will recognize taxable gain or loss equal to the difference between the amount realized on such sale, exchange or retirement and your tax basis in the Securities. Your tax basis in the Securities should equal the amount you paid to acquire the Securities.

Under Section 988 of the Code, your gain or loss will be treated as ordinary income or loss unless, on or before the date on which you acquire your Securities, you make a valid election pursuant to the Treasury regulations governing foreign currency transactions to treat such gain or loss as capital gain or loss.

PS-35

TABLE OF CONTENTS

Supplemental U.S. Tax Considerations

Although the matter is uncertain, we believe it is reasonable to treat the election under Section 988 as available. Assuming that you make a valid election, your gain or loss should be capital gain or loss and should be long-term capital gain or loss if at the time of sale, exchange or retirement you have held the Securities for more than one year. The deductibility of capital losses is subject to certain limitations.

To make the election, you must, in accordance with detailed procedures set forth in the regulations under Section 988, either (a) clearly identify the transaction on your books and records on the date you acquire your Securities as being subject to the election and file the relevant statement verifying the election with your federal income tax return, or (b) otherwise obtain independent verification of the election.

If you recognize an ordinary loss under Section 988 above an applicable threshold, you will be required to file a disclosure statement with the IRS. You should consult your tax advisor regarding the application of Section 988 to your investment in the Securities, the potential availability of the election under Section 988 and the procedures for making it if it is available, and the loss disclosure rules.

Possible Alternative Tax Treatments of an Investment in the Securities. If the IRS were successful in asserting an alternative treatment for these Securities, the timing and/or character of income on the Securities might differ materially and adversely from the description herein. For example, it is possible that the Securities could be treated as debt instruments issued by us. Under this treatment, Securities with a term of more than one year, taking into account the last possible date on which the Securities could be outstanding, would be governed by Treasury regulations relating to the taxation of contingent payment debt instruments, as described above under “— Tax Consequences to U.S. Holders — Securities Treated as Contingent Payment Debt Instruments.” In the case of Securities with a term of one year or less, taking into account the last possible date on which the Securities could be outstanding, any income recognized upon maturity would, and any income recognized upon a sale or exchange of the Securities may, be treated as ordinary interest income.

It is also possible that the Securities could be treated as “foreign currency contracts” within the meaning of Section 1256 of the Code, in which case you would be required to recognize income or loss on the Securities as if they had been sold for their fair market value at the end of each year. Under this treatment, such gain or loss would be ordinary in character absent a valid election to treat gain or loss on the Securities as capital, in which case such gain or loss would be treated as 60% long-term capital gain or loss and 40% short-term capital gain or loss, without regard to the period during which you held your Securities.

Other U.S. federal income tax treatments of the Securities might also require you to include amounts in income during the term of the Securities and/or might treat all or a portion of your gain or loss on the sale or settlement of the Securities as short-term capital gain or loss, without regard to how long you held the Securities. For example, it is possible that one of certain applications of the Index methodology, a modification of the Index methodology or a substitution of a successor index could be treated as a taxable exchange that could cause you to recognize gain or loss (subject, in the case of loss, to possible application of the “wash sale” rules) as if you had sold or exchanged the Securities.

In addition, in 2007 Treasury and the IRS released a notice requesting comments on various issues regarding the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments, such as the Securities that do not guarantee the repayment of principal. The notice focuses in particular on whether to require holders of these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property to which the instruments are linked; and whether these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income that is subject to an interest charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance

PS-36

TABLE OF CONTENTS

Supplemental U.S. Tax Considerations

promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the Securities, possibly with retroactive effect.

You should consult your tax advisor regarding the U.S. federal income tax consequences of an investment in the Securities (including possible alternative treatments and the issues presented by the 2007 notice) and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.

Medicare Tax

For taxable years beginning after December 31, 2012, a U.S. person that is an individual, an estate or a trust that does not fall into a special class of trusts that are exempt from this tax, generally will be subject to a 3.8% tax (the “Medicare tax”) on the lesser of (1) the U.S. person’s “net investment income” for the relevant taxable year and (2) the excess of the U.S. person’s modified adjusted gross income for the taxable year over a certain threshold. A U.S. person’s net investment income will generally include its gain on the sale, redemption, or maturity of the Securities. If you are a U.S. individual, estate or trust, you should consult your tax advisors regarding the applicability of the Medicare tax to your investment in the Securities.

Tax Consequences to Non-U.S. Holders

You are a “Non-U.S. Holder” if, for U.S. federal income tax purposes, you are a beneficial owner of a Security that is:

Ø a nonresident alien individual;

Ø a foreign corporation; or

Ø a foreign estate or trust.

You are not a Non-U.S. Holder for the purposes of this discussion if you are an individual present in the United States for 183 days or more in the taxable year of disposition of a Security, in which case you should consult your tax advisor regarding the U.S. federal income tax consequences of the disposition of the Security.

Subject to the discussion below in “— Possible Alternative Treatments of Securities Treated as Prepaid Forward Contracts,” there will be no U.S. federal income or withholding tax on payment to you on the Securities or any gain realized on a sale, exchange or retirement of the Securities, provided generally that (i) you certify on IRS Form W-8BEN, under penalties of perjury, that you are not a United States person and provide your name and address or otherwise satisfy applicable requirements and (ii) those amounts are not effectively connected with your conduct of a U.S. trade or business.

If you are engaged in a U.S. trade or business, and if income or gain from the Securities is effectively connected with your conduct of that trade or business, you generally will be subject to regular U.S. federal income tax with respect to that income or gain in the same manner as if you were a U.S. Holder. In lieu of IRS Form W-8BEN, you may be required to provide a properly executed IRS Form W-8ECI in order to claim an exemption from withholding. If this paragraph applies to you, you should consult your tax advisor regarding other U.S. tax consequences of the ownership and disposition of the Securities, including, if you are a corporation, the possible imposition of a 30% branch profits tax.

Possible Alternative Treatments of Securities Treated as Prepaid Forward Contracts. As described above under “— Tax Consequences to U.S. Holders — Securities Treated as Prepaid Forward Contracts — Possible Alternative Tax Treatments of an Investment in the Securities,” in 2007 Treasury and the IRS released a notice requesting comments on various issues regarding the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments, such as the Securities that we treat as prepaid forward contracts. The notice focuses, among other things, on the degree, if any, to which income realized with respect to such instruments by non-U.S. holders should be subject to withholding

PS-37

TABLE OF CONTENTS

Supplemental U.S. Tax Considerations

tax. It is possible that any Treasury regulations or other guidance promulgated after consideration of these issues might require non-U.S. holders to accrue income, subject to withholding tax, over the term of the Securities, possibly on a retroactive basis. You should consult your tax advisor regarding the U.S. federal income tax consequences of an investment in the Securities (including possible alternative treatments and the issues presented by the 2007 notice) and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.

Backup Withholding and Information Reporting

Accruals of OID and proceeds received from a sale, exchange or retirement of the Securities generally will be subject to information reporting unless you are an “exempt recipient”(such as a corporation) and may also be subject to backup withholding at the rate specified in the Code if you fail to provide certain identifying information (such as an accurate taxpayer identification number, if you are a U.S. Holder) or meet certain other conditions. If you are a Non-U.S. Holder and you comply with the certification procedures described in the preceding section, you generally will establish an exemption from backup withholding.

Amounts withheld under the backup withholding rules are not additional taxes and may be refunded or credited against your U.S. federal income tax liability, provided the required information is furnished to the IRS.

Legislation enacted in 2010 requires certain individuals who hold “debt or equity interests” in any “foreign financial institution” that are not “regularly traded on an established securities market” to report information about such holdings on their U.S. federal income tax returns, generally for tax years beginning in 2011, unless a regulatory exemption is provided. Individual prospective investors should consult their tax advisors regarding this legislation.

PS-38

TABLE OF CONTENTS

Benefit Plan Investor Considerations

We, UBS Securities LLC and other of our affiliates may each be considered a “party in interest” within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or a “disqualified person” (within the meaning of Section 4975 of the Code) with respect to an employee benefit plan that is subject to ERISA and/or an individual retirement account, Keogh plan or other plan or account that is subject to Section 4975 of the Code (“Plan”). The purchase of the Securities by a Plan with respect to which UBS Securities LLC or any of our affiliates acts as a fiduciary as defined in Section 3(21) of ERISA and/or Section 4975 of the Code (“Fiduciary”) would constitute a prohibited transaction under ERISA or the Code unless acquired pursuant to and in accordance with an applicable exemption. The purchase of the Securities by a Plan with respect to which UBS Securities LLC or any of our affiliates does not act as a Fiduciary but for which any of the above entities does provide services could also be prohibited, but one or more exemptions may be applicable. The U.S. Department of Labor has issued five prohibited transaction class exemptions (“PTCEs”) that may provide exemptive relief for prohibited transactions that may arise from the purchase or holding of the Securities. These exemptions are PTCE 84-14 (for transactions determined by independent qualified professional asset managers), 90-1 (for insurance company separate accounts), 91-38 (for bank collective investment funds), 95-60 (for insurance company general accounts) and 96-23 (for transactions managed by in-house asset managers). Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code also provide an exemption for the purchase and sale of securities where neither UBS nor any of its affiliates have or exercise any discretionary authority or control or render any investment advice with respect to the assets of the Plan involved in the transaction and the Plan pays no more and receives no less than “adequate consideration” in connection with the transaction (the “service provider exemption”). There can be no assurance that any of these statutory or class exemptions will be available with respect to transactions involving the Securities. Any person proposing to acquire any Securities on behalf of a Plan should consult with counsel regarding the applicability of the prohibited transaction rules and the applicable exemptions thereto. Governmental and non-U.S. plans are not subject to Section 406 of ERISA or Section 4975 of the Code but may be subject to substantially similar federal, state, local or non-U.S. laws (“Similar Laws”). Upon purchasing the Securities, a Plan or a plan subject Similar Laws will be deemed to have represented that the acquisition, holding and, to the extent relevant, disposition of the Securities will not result in a non-exempt prohibited transaction under Section 406 of ERISA, Section 4975 of the Code or any Similar Laws. The sale of any Securities to a Plan or a plan subject to Similar Laws is in no respect a representation by us or any of our affiliates or representatives that such an investment meets all relevant legal requirements with respect to investments by any such plans generally or any particular plan, or that such investment is appropriate for such plans generally or any particular plan. The discussion above supplements the discussion under “Benefit Plan Investor Considerations” in the accompanying prospectus.

PS-39

TABLE OF CONTENTS

Supplemental Plan of Distribution (Conflicts of Interest)

Unless otherwise specified in the applicable terms supplement, with respect to each Security to be issued, UBS will agree to sell to UBS Securities LLC, and UBS Securities LLC will agree to purchase from UBS, the aggregate principal amount of the Securities specified on the front cover of the applicable terms supplement. Each Security will be issued pursuant to a distribution agreement substantially in the form attached as an exhibit to the registration statement of which the accompanying prospectus forms a part. UBS Securities LLC intends to resell the Securities they purchase at the original issue price specified in the applicable terms supplement. UBS Securities LLC may resell Securities to securities dealers at a discount from the original issue price applicable to the offered Securities up to the underwriting discount set forth in the applicable terms supplement. In the future, we or our affiliates may repurchase and resell the offered Securities in market-making transactions. For more information about the plan of distribution and possible market-making activities, see “Plan of Distribution” in the accompanying prospectus.

UBS may use this prospectus supplement and accompanying prospectus in the initial sale of any Securities. In addition, UBS, UBS Securities LLC or any other affiliate of UBS may use this prospectus supplement and the accompanying prospectus in a market-making transaction for any Securities after its initial sale. In connection with any Securities offering, UBS, UBS Securities LLC and any other affiliate of UBS or any other securities dealers may distribute this prospectus supplement and the accompanying prospectus electronically. Unless stated otherwise in the confirmation of sale delivered by UBS or its agent, this prospectus supplement and the accompanying prospectus are being used in a market-making transaction.

We may deliver certain Securities against payment for the Securities on or about the fourth or fifth note business day following the date of the pricing of the Securities. Under Rule 15c6-1 under the Exchange Act, trades in the secondary market generally are required to settle in three note business days, unless the parties to a trade expressly agree otherwise. Accordingly, purchasers who wish to trade Securities on the date of pricing or the next succeeding note business day will be required, for any offerings in which we expect Securities initially to settle in four or five note business days (T+4 or T+5), to specify alternative settlement arrangements to prevent a failed settlement. We will specify any such T+4 or T+5 plan of distribution in the applicable terms supplement.

UBS Securities LLC is an affiliate of UBS and, as such, will have a “conflict of interest” in any offering of Securities within the meaning of FINRA Rule 5121. In addition, UBS will receive the net proceeds (excluding the underwriting discount) from the initial public offering of the Securities, thus creating an additional conflict of interest within the meaning of FINRA Rule 5121. Consequently, any offering of Securities will be conducted in compliance with the provisions of FINRA Rule 5121. Neither UBS Securities LLC nor any other affiliated agent of UBS will be permitted to sell Securities in any offering to an account over which it exercises discretionary authority without the prior specific written approval of the account holder.

PS-40