UBS AG — Regulatory Filings 2012

Jun 19, 2012

Filed Pursuant to Rule 424(b)(2) Registration Statement No. 333-178960

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities Offered		Amount of
	Offering Price	Registration Fee (1)
Commodity Contingent Buffer Enhanced Notes linked to the performance of Basket of Corn and Brent Crude Oil Futures Contracts and the Palladium Spot Price due June 27, 2013	$6,056,000.00	$694.02
(1)	Calculated in accordance with Rule 457(r) of the Securities Act of 1933.

●
(To Prospectus dated January 11, 2012
and Product Supplement
dated January 13,
2012)

| UBS AG $6,056,000 Commodity Contingent
Buffer Enhanced Notes |
| --- |
| Linked to a
Basket of Corn and Brent Crude Oil Futures Contracts and the Palladium Spot Price
due June 27, 2013 |

| Investment Description |
| --- |
| UBS AG Commodity Contingent
Buffer Enhanced Notes (the “Notes”) are unsubordinated and unsecured debt
securities issued by UBS AG (“UBS” or the “Issuer”) with returns linked to
the performance of an equally weighted basket (the “underlying basket”) of
futures contracts on Corn, Brent Crude Oil and the spot price of Palladium (each, a
“basket commodity” and collectively, the “basket commodities”). The return on
the Notes at maturity is based on the performance of the underlying basket.
If the final basket level is equal to or greater than the barrier level, UBS
will repay your principal amount at maturity plus pay a return equal to the
greater of the 5.25% contingent minimum return and the basket return, up to a
maximum return of 15%. However, if the final basket level is less than the
barrier level, you will be fully exposed to the decline of the underlying
basket and UBS will repay less than the full principal amount at maturity, if
anything, resulting in a loss on your investment that is proportionate to the
negative basket return. You will not receive interest during the term of the
Notes. Investing in the Notes involves
significant risks. You may lose some or all of your principal amount.
These Notes are suitable for investors with a bullish view on the basket commodities.
The contingent
minimum return feature applies only if you hold the Notes to maturity. Any
payment on the Notes 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 Notes and you could lose your entire principal amount. |

Features Key Dates

| o | Contingent
Minimum Return With Participation in the Positive Performance of the
Underlying Basket Up to the Maximum Return: At
maturity, UBS will pay you the principal amount of the Notes plus a minimum
return of 5.25% as long as the final basket level of the underlying basket is
greater than or equal to the barrier level on the final valuation date (a decline of 20% as
measured from the trade date to the final valuation date). The Notes provide
for the participation in any positive performance of the underlying basket above
the 5.25% contingent minimum return up to a maximum return of 15%. If the
final basket level is less than the barrier level, you will be fully exposed
to the negative performance of the underlying basket. |
| --- | --- |
| o | Contingent
Repayment of Principal: The contingent minimum
return feature also provides for the contingent repayment of your principal
at maturity. If you hold the Notes to maturity and the final basket level is
greater than or equal to the barrier level, UBS will pay you at least your principal
amount plus the contingent minimum return. If the final basket level is below
the barrier level, your investment will be fully exposed to any negative
basket return and, in that case, UBS will pay less than your principal amount,
if anything, resulting in a loss proportionate to the negative basket return.
The contingent repayment of principal applies only if you hold the Notes to
maturity. Any payment on the Notes, including any repayment of principal, is
subject to the creditworthiness of UBS. |

Trade Date	June 15, 2012
Settlement Date	June 20, 2012
Final Valuation Date*	June 24, 2013
Maturity Date*	June 27, 2013

• Subject to postponement in the event of a market disruption event as described in “Market Disruption Events” on page 16 of this pricing supplement.

NOTICE TO INVESTORS: THE NOTES ARE SIGNIFICANTLY RISKIER THAN CONVENTIONAL DEBT INSTRUMENTS. THE ISSUER IS NOT NECESSARILY OBLIGATED TO REPAY THE FULL PRINCIPAL AMOUNT OF THE NOTES AT MATURITY, AND THE NOTES CAN HAVE DOWNSIDE MARKET RISK SIMILAR TO THE UNDERLYING BASKET. THIS MARKET RISK IS IN ADDITION TO THE CREDIT RISK INHERENT IN PURCHASING A DEBT OBLIGATION OF UBS. YOU SHOULD NOT PURCHASE THE NOTES IF YOU DO NOT UNDERSTAND OR ARE NOT COMFORTABLE WITH THE SIGNIFICANT RISKS INVOLVED IN INVESTING IN THE NOTES.

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED UNDER “KEY RISKS” BEGINNING ON PAGE 8 AND UNDER ‘‘RISK FACTORS’’ BEGINNING ON PAGE PS-15 OF THE PRODUCT SUPPLEMENT BEFORE PURCHASING ANY NOTES. EVENTS RELATING TO ANY OF THOSE RISKS, OR OTHER RISKS AND UNCERTAINTIES, COULD ADVERSELY EFFECT THE MARKET VALUE OF, AND THE RETURN ON, YOUR NOTES. YOU MAY LOSE SOME OR ALL OF YOUR INITIAL INVESTMENT IN THE NOTES.

Note Offering

We are offering Commodity Contingent Buffer Enhanced Notes linked to an equally weighted basket of futures contracts on Corn, Brent Crude Oil and the spot price of Palladium. The return on the Notes is subject to, and will not exceed, the predetermined maximum return.

Basket Commodities (Component Weighting)	Contingent Minimum Return	Maximum Return	Maximum Payment at Maturity per Note	Initial Basket Level	Barrier Level	CUSIP	ISIN
Corn
futures contract (1/3)
Brent Crude Oil
futures contract (1/3)	5.25%	15%	$1,150	100	80	902674JB7	US902674JB75
Palladium
spot price (1/3)

See ‘‘Additional Information about UBS and the Notes” on page 2. The Notes will have the terms specified in the accompanying product supplement, the accompanying currency and commodity supplement, the accompanying prospectus and this pricing supplement.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these Notes or passed upon the adequacy or accuracy of this pricing supplement, the product supplement, or the accompanying prospectus. Any representation to the contrary is a criminal offense. The Notes are not deposit liabilities of UBS AG and are not FDIC insured.

	Price to Public	Underwriting Discount (1)(2)	Proceeds to UBS AG
Per Note	$1,000.00	$10.00	$990.00
Total	$6,056,000.00	$60,560.00	$5,995,440.00

(1) Certain fiduciary accounts will pay a purchase price of $990 per $1,000 principal amount of the Notes, and the placement agents, with respect to sales made to such accounts, will forgo any fees.

(2) JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC and their affiliates, acting as placement agents for the Notes, will receive a fee from the Issuer of $10 per $1,000 principal amount of the Notes, but will forgo any fees for sales to certain fiduciary accounts. The total fees represent the amount that the placement agents received from sales to accounts other than such fiduciary accounts.

| J.P.
Morgan Securities LLC |
| --- |
| Pricing Supplement dated June 15, 2012 |

1

| Additional Information
about UBS and the Notes |
| --- |
| UBS has filed a
registration statement (including a prospectus, as supplemented by a product
supplement for the Notes and a currency and commodity supplement for the
various securities we may offer, including the Notes), with the Securities
and Exchange Commission, or SEC, for the offering to which this pricing supplement
relates. Before you invest, you should read these documents and
any other documents relating to this offering that UBS has filed with the SEC
for more complete information about UBS and this offering. You may obtain
these documents without cost by visiting EDGAR on the SEC website at
www.sec.gov. Our Central Index Key, or CIK, on the SEC website is 0001114446.
Alternatively, UBS will arrange to send you these documents if you so request
by calling toll-free 877-387-2275. |

You may access these documents on the SEC website at www.sec.gov as follows:

| s | Product supplement dated January
13, 2012: |
| --- | --- |
| | http://www.sec.gov/Archives/edgar/data/1114446/000119312512011545/d282615d424b2.htm |
| s | Currency and commodity supplement
dated January 11, 2012 |
| | http://www.sec.gov/Archives/edgar/data/1114446/000119312512009002/d279580d424b2.htm |
| s | Prospectus dated January 11,
2012: |
| | http://www.sec.gov/Archives/edgar/data/1114446/000119312512008669/d279364d424b3.htm |

References to ‘‘UBS,’’ ‘‘we,’’ ‘‘our’’ and ‘‘us’’ refer only to UBS AG and not to its consolidated subsidiaries. In this pricing supplement, ‘‘Notes’’ refer to the Commodity Contingent Buffer Enhanced Notes that are offered hereby, unless the context otherwise requires. Also, references to the ‘‘product supplement’’ mean the UBS product supplement titled “Medium Term Notes Linked to a Currency or Commodity or a Basket Comprised of Currencies or Commodities,” dated January 13, 2012, references to the “currency and commodity supplement’’ mean the UBS Currency and Commodity Supplement Debt Securities and Warrants, dated January 11, 2012, and references to ‘‘accompanying prospectus’’ mean the UBS prospectus titled ‘‘Debt Securities and Warrants,’’ dated January 11, 2012.

This pricing supplement, together with the documents listed above, contains the terms of the Notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including pricing terms, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth in “Key Risks” beginning on page 8 and in “Risk Factors” in the accompanying product supplement, as the Notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax and other advisers before deciding to invest in the Notes.

2

Investor Suitability

The Notes may be suitable for you if:

| s | You fully understand the risks
inherent in an investment in the Notes, including the risk of loss of your
entire initial investment. |
| --- | --- |
| s | You can tolerate a loss of all or
a substantial portion of your investment and are willing to make an
investment that may have the same downside market risk as the underlying
basket. |
| s | You believe the underlying basket
will appreciate over the term of the Notes and that the appreciation is
unlikely to exceed an amount equal to the maximum return of 15%. |
| s | You understand and accept that
your potential return is limited to the maximum return and you are willing to
invest in the Notes based on the maximum return of 15%. |
| s | You can tolerate fluctuations in
the price of the Notes prior to maturity that may be similar to or exceed the
downside fluctuations in the underlying basket. |
| s | You do not seek current income
from your investment. |
| s | You are willing to hold the Notes
to maturity, a term of approximately 53 weeks, and accept that there may be
little or no secondary market for the Notes. |
| s | You fully understand the risks
associated with commodities generally, and corn and oil futures contracts and the spot price of
palladium specifically. |
| s | You are willing to assume the
credit risk of UBS for all payments under the Notes, and understand that if
UBS defaults on its obligations you may not receive any amounts due to you
including any repayment of principal. |

The Notes may not be suitable for you if:

| s | You do not fully understand the
risks inherent in an investment in the Notes, including the risk of loss of
your entire initial investment. |
| --- | --- |
| s | You require an investment
designed to guarantee a full return of principal at maturity. |
| s | You cannot tolerate a loss of all
or a substantial portion of your investment and are unwilling to make an
investment that may have the same downside market risk as the underlying
basket. |
| s | You believe that the level of the
underlying basket will decline during the term of the Notes and is likely to
be below the barrier level on the final valuation date, or you believe the
underlying basket will appreciate over the term of the Notes by more than the
maximum return of 15%. |
| s | You seek an investment that has
unlimited return potential without a cap on appreciation. |
| s | You are unwilling to invest in
the Notes based on the maximum return of 15%. |
| s | You cannot tolerate fluctuations
in the price of the Notes prior to maturity that may be similar to or exceed
the downside fluctuations in the level of the underlying basket. |
| s | You seek current income from this
investment. |
| s | You are unable or unwilling to
hold the Notes to maturity, a term of approximately 53 weeks, or you seek an
investment for which there will be an active secondary market. |
| s | You do not fully understand the
risks associated with commodities generally, and corn and oil
futures contracts and the spot price of palladium specifically. |
| s | You are not willing to assume the
credit risk of UBS for all payments under the Notes. |

The suitability considerations identified above are not exhaustive. Whether or not the Notes are a suitable investment for you will depend on your individual circumstances, and you should reach an investment decision only after you and your investment, legal, tax, accounting and other advisors have carefully considered the suitability of an investment in the Notes in light of your particular circumstances. You should also review carefully the “Key Risks” beginning on page 8 of this pricing supplement for risks related to an investment in the Notes.

3

Final Terms

Issuer	UBS AG, London Branch
Principal Amount	$1,000 per Note
Term	Approximately 53 weeks.
Underlying Basket	The Notes are linked to an
equally weighted basket consisting of (i) futures contracts on Corn, (ii)
futures contracts on Brent Crude Oil and (iii) the spot price of Palladium (each, a “basket commodity” and
collectively, the “basket commodities”).
Component Weightings	With respect to: (i) Corn: 1/3, (ii) Brent Crude Oil: 1/3 and (iii) Palladium: 1/3.
Contingent Minimum	5.25%
Return
Maximum Return	15%
Payment at Maturity (per Note)	If the final
basket level is greater than or equal to the barrier level , UBS
will pay you an amount in cash equal to:
	$1,000 + ($1,000 × the greater
of: (a) the contingent minimum return and (b) the basket return, subject to
the maximum return)
	If the final
basket level is less than the barrier level , UBS
will pay you an amount that is less than your principal amount, if anything,
resulting in a loss on your investment that is proportionate to the negative
basket return:
	$1,000 + ($1,000 x basket return)
	If
the final basket level is less than the barrier level, the contingent minimum
return feature is lost, and you will be fully exposed to any decline in the
final basket level as compared to the initial basket level. As a result, you
may lose some or all of your initial investment at maturity.
Basket Return	Final Basket Level – Initial Basket Level
	Initial Basket Level
Initial Basket Level	Set equal to 100 on the trade
date.
Final Basket Level	The basket closing level on the
final valuation date.
Basket Closing Level	On the final valuation date, the
basket closing level will be calculated as follows:
	100 x [1 + (Corn return x 1/3) +
(Brent Crude Oil return x 1/3) + (Palladium return x 1/3)], where the return
for each basket commodity is equal to the commodity return of the respective
basket commodity.
Commodity Return	With respect to each basket
commodity, the percentage change from the respective initial commodity price
to the respective final commodity price, calculated as follows:
	Final Commodity Price – Initial Commodity Price
	Initial Commodity Price
Initial Commodity Price	With respect to each basket
commodity, the Closing Price for such basket commodity on the trade date, as
determined by the calculation agent. The initial commodity price for Corn is $579.50. The initial commodity price for Brent Crude Oil is $97.61. The initial commodity price for Palladium is $632.00.
Final Commodity Price	With respect to each basket
commodity, the Closing Price for such basket commodity on the final valuation
date, as determined by the calculation agent.

| Closing Price | With respect to Corn, on any
trading day, the Closing Price is the official settlement price per bushel on
the Chicago Board of Trade (the “CBOT”) of the first nearby month futures
contract for #2 Yellow Corn, stated in U.S. dollars, as made public by the
CBOT (Bloomberg Ticker: “C 1” ), provided that if such
date falls within the notice period for delivery of corn under such futures
contract or on the last trading day of such futures contract (all pursuant to
the rules of the CBOT), then the second nearby month futures contract
(Bloomberg Ticker: “C 2” ) will be used. |
| --- | --- |
| | With respect to Brent Crude Oil,
on any trading day, the Closing Price is the official settlement price per
barrel of Brent Blend Crude Oil on the IntercontinentalExchange’s ICE Futures
Europe (“ICE”) of the first nearby month futures contract, stated in U.S.
dollars, as made public by the ICE (Bloomberg Ticker CO1 ),
provided that if such date falls within the notice period for delivery of
Brent Crude Oil under such futures contract or on the last trading day of
such futures contract, then the second nearby month futures contract
(Bloomberg Ticker: “CO2” ) will be used. |
| | With
respect to Palladium, on any trading day, the Closing Price is the official
afternoon palladium fixing per troy ounce gross of unallocated palladium bullion for delivery in Zurich
through a member of the London Platinum and Palladium Market (the “LPPM”)
authorized to effect such delivery, stated in U.S. dollars, as set by the
four members the LPPM during the
afternoon Palladium price fixing which starts at 2:00 p.m. London, England
time, on such day and displayed on Bloomberg quote “PLDMLNPM” or any
successor page. |
| Barrier Level | 80 |
| Final Valuation Date | June 24, 2013, unless the
calculation agent determines that a market disruption event (as set forth
under “Market Disruption Events” on page 16 of this pricing supplement)
has occurred or is continuing with respect to any basket commodity on any
such day. In no event however, will the final valuation date for any basket
commodity be postponed by more than 10 business days. See “Market Disruption
Events” on page 16 of this pricing supplement. |

INVESTING IN THE NOTES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. ANY PAYMENT ON THE NOTES, 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 NOTES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.

4

Determining Payment at Maturity

| ● |
| --- |
| The initial basket level, maximum
return and barrier level are set. |
| The final commodity price for
each basket commodity is determined on the final valuation date and the
basket return is calculated. |
| If the final
basket level is greater than or equal to the barrier level , UBS
will pay you an amount in cash equal to: |
| $1,000 + ($1,000 × the greater of: (a) the
contingent minimum return and (b) the basket return, subject to the maximum
return) |
| If the final
basket level is less than the barrier level , UBS will pay you an amount that is less than your principal amount, if
anything, resulting in a loss on your investment that is proportionate to the
negative basket return: |
| $1,000 + ($1,000 x basket return) |
| If
the final basket level is less than the barrier level, the contingent minimum
return feature is lost, and you will be fully exposed to any decline in the
final basket level as compared to the initial basket level. As a result,
you may lose some or all of your initial investment at maturity. |

INVESTING IN THE NOTES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. ANY PAYMENT ON THE NOTES, 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 NOTES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.

5

Hypothetical Examples of How the Notes Might Perform at Maturity

The following examples illustrate the payment at maturity on a hypothetical offering of the Notes assuming the following*:

| Term: | Approximately
53 weeks |
| --- | --- |
| Principal Amount: | $1,000 per Note |
| Initial Basket Level: | 100 |
| Barrier Level: | 80 |
| Contingent Minimum Return: | 5.25% |
| Maximum Return: | 15% |

• The examples are provided for illustrative purposes only and are purely hypothetical. The numbers in the examples have been rounded for ease of analysis.

Example 1: The Final Basket Level is 110 (a Basket Return of 10%).

Because the basket return of 10% is greater than the contingent minimum return of 5.25% but less than the maximum return of 15%, the investor would receive at maturity the principal amount of each Note plus an additional payment equal to the product of (i) the principal amount multiplied by (ii) the basket return.

At maturity, the investor will receive a cash payment per Note equal to:

| principal amount + (principal
amount × basket return) = |
| --- |
| $1,000 + ($1,000 × 10%) |
| = $1,100 |

Investor would receive $1,100 at maturity for each Note for a total return on the Notes equal to the basket return of 10%.

Example 2: The Final Basket Level is 130 (a Basket Return of 30%).

Because the basket return of 30% is greater than the maximum return of 15%, the investor would receive at maturity the principal amount of each Note plus an additional payment equal to the product of (i) the principal amount multiplied by (ii) the maximum return.

At maturity, the investor will receive a cash payment per Note equal to:

| principal amount + (principal
amount × maximum return) = |
| --- |
| $1,000 + ($1,000 × 15%) |
| = $1,150 |

Investor would receive $1,150 at maturity for each Note for a total return on the Notes equal to the maximum return of 15%.

Example 3: The Final Basket Level is 85 (a Basket Return of -15%).

Because the basket return of -15% is less than the contingent minimum return of 5.25%, the investor would receive at maturity the principal amount of each Note plus an additional payment equal to the product of (i) the principal amount multiplied by (ii) the contingent minimum return.

At maturity, the investor will receive a cash payment per Note equal to:

| principal amount + (principal
amount × contingent minimum return) = |
| --- |
| $1,000 + ($1,000 × 5.25%) |
| = $1,052.50 |

Investor would receive $1,052.50 at maturity for each Note for a total return on the Notes equal to the contingent minimum return of 5.25%.

Example 4: The Final Basket Level is 50 (a Basket Return of -50%).

Because the basket return of -50% is less than the barrier level of 80, at maturity, the investor will receive the principal amount of each Note reduced by the product of (i) the principal amount multiplied by the (ii) basket return:

At maturity, the investor will receive a cash payment per Note equal to:

| principal amount + (principal
amount × basket return) = |
| --- |
| $1,000 + ($1,000 × -50%) |
| = $500 |

Investor would receive $500 at maturity for each Note, for a loss on the Notes equal to -50% (the basket return).

If the final basket level is less than the barrier level, UBS will not pay you the contingent minimum return and your principal will be fully exposed to any decline in the underlying basket resulting in a loss on your investment that is proportionate to the negative basket return. As a result, you may lose some or all of your principal at maturity.

6

Hypothetical Return Table of the Notes at Maturity

The hypothetical return table below is based on the following assumptions*:

| Term: | Approximately
53 weeks |
| --- | --- |
| Principal Amount: | $1,000 per Note |
| Initial Basket Level: | $100 |
| Barrier Level: | 80 |
| Contingent Minimum Return: | 5.25% |
| Maximum Return: | 15% |

• The examples are provided for illustrative purposes only and are purely hypothetical. The numbers in the examples have been rounded for ease of analysis.

Hypothetical Final Basket Level — 200.00	100.00 %	$1,150.00	15.00 %
150.00	50.00 %	$1,150.00	15.00 %
140.00	40.00 %	$1,150.00	15.00 %
130.00	30.00 %	$1,150.00	15.00 %
120.00	20.00 %	$1,150.00	15.00 %
115.00	15.00 %	$1,150.00	15.00 %
110.00	10.00 %	$1,100.00	10.00 %
105.25	5.25 %	$1,052.50	5.25 %
105.00	5.00 %	$1,052.50	5.25 %
100.00	0.00 %	$1,052.50	5.25 %
95.00	-5.00 %	$1,052.50	5.25 %
85.00	-15.00 %	$1,052.50	5.25 %
80.00	-20.00 %	$1,052.50	5.25 %
70.00	-30.00 %	$700.00	-30.00 %
60.00	-40.00 %	$600.00	-40.00 %
50.00	-50.00 %	$500.00	-50.00 %
40.00	-60.00 %	$400.00	-60.00 %
30.00	-70.00 %	$300.00	-70.00 %
20.00	-80.00 %	$200.00	-80.00 %
10.00	-90.00 %	$100.00	-90.00 %
0	-100.00 %	$0.00	-100.00 %

7

Key Risks

An investment in the Notes involves significant risks. Some of the risks that apply to the Notes are summarized here, but we urge you to read the more detailed explanation of risks relating to the Notes generally in the ‘‘Risk Factors’’ section of the product supplement. We also urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the Notes.

| s | Risk of loss at maturity — The Notes differ from ordinary debt
securities in that the issuer will not necessarily repay the full principal
amount of the Notes. If the basket return is negative, UBS will repay you the
principal amount of your Notes in cash only if the final basket level is
greater than or equal to the barrier level and will only make such payment at
maturity. If the final basket level is below the barrier level, you will lose
some or all of your initial investment in an amount proportionate to the
decline in the level of the underlying basket from the trade date to the
final valuation date. |
| --- | --- |
| s | The contingent
repayment of principal applies only at maturity — The contingent repayment of your principal is
only available if you hold your Notes to maturity. If you are able to sell
your Notes prior to maturity in the secondary market, you may have to sell
them at a loss relative to your initial investment even if the final basket
level is above the barrier level. You should be willing to hold your Notes to
maturity. |
| s | The contingent minimum return only applies if you
hold the Notes to maturity - You
should be willing to hold your Notes to maturity. If you are able to sell
your Notes prior to maturity in the secondary market, the return you realize
may not reflect the full economic value of the contingent minimum return or
the Notes themselves, and may be less than the return of the underlying
basket at the time of sale even if such return is positive and does not
exceed the maximum return. You can only receive the full benefit of the
contingent minimum return and earn the potential maximum return from UBS if
you hold the Notes to maturity. |
| s | Your growth
potential is limited — The Notes do not offer
full participation in any positive appreciation of the underlying basket. The
Notes allow for participation in any positive basket return that exceeds the
contingent minimum return only up to the predetermined maximum return of 15%.
In no event will the return on your Notes be greater than the maximum return.
Since the maximum payment amount on the Notes is capped, you will not benefit
from a positive basket return in excess of an amount equal to the
predetermined maximum return. As a result, the return on an investment in the
Notes may be less than the return on a hypothetical direct investment in the
underlying basket. |
| s | No interest payments — UBS
will not pay any interest with respect to the Notes. |
| s | Credit risk of UBS — The Notes are
unsubordinated, unsecured debt obligations of the issuer, UBS, and are not,
either directly or indirectly, an obligation of any third party. Any payment
to be made on the Notes, 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 Notes 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 Notes and you
could lose your entire initial investment. |
| s | Potential credit
rating downgrade — According to public news sources, at least one nationally
recognized statistical rating agency intends to reduce credit ratings of many
financial institutions, including UBS. These potential reductions, which
follow downgrades by other nationally recognized statistical rating agencies
may adversely affect our economic prospects and therefore our ability to
repay the Notes. In addition, any potential reductions in our credit ratings
may adversely affect the market value of the Notes. |
| s | The formula for calculating the payment at maturity
of the Notes will not take into account all developments in the basket
commodities — Changes in the market prices for the basket
commodities during the term of the Notes before the final valuation date may
not be reflected in the calculation of payment at maturity. Generally, the
calculation agent will calculate the payment at maturity by comparing only
the initial basket level on the trade date and the final basket level on the
final valuation date. No other levels will be taken into account. As a
result, you may lose some or all of your investment even if the level of the
underlying basket has appreciated at certain times during the term of the
Notes before declining to a basket closing level that is below the initial
basket level on the final valuation date. |
| s | Investments related to the price of the basket
commodities may be more volatile than traditional securities investments — The price
of the basket commodities are subject to variables that may be less
significant to the prices of traditional securities such as stocks and bonds,
and where the return on such securities is not related to commodities or
commodities futures contracts. Variables such as changes in supply and demand
relationships, governmental programs and policies, national and international
political and economic events, changes in interest and exchange rates,
trading activities in commodities and related contracts, weather, trade,
fiscal, monetary and exchange control policies may have a larger impact on
commodity prices than on traditional securities. These additional variables
may create additional investment risks that may cause the price of the basket
commodities to move in unpredictable and unanticipated directions and at
unpredictable or unanticipated rates and cause the value of the Notes to be more
volatile than the prices of traditional securities. |
| s | The amount you
receive at maturity may result in a return that is less than the yield on a
standard debt security of comparable maturity — The amount you receive at maturity may result
in a return that is less than the return you could earn on other investments.
For example, your return on the Notes may be lower than the yield you would
earn if you bought a standard U.S. dollar-denominated unsubordinated
non-callable debt security of UBS with the same stated maturity date. |
| s | The Notes do not offer direct exposure to physical
commodities — The Notes will reflect the return on commodity
futures contracts, not the return on the physical commodities underlying such
commodity futures contracts. The price of a futures |

8

| s | contract reflects the expected
value of the commodity upon delivery in the future, whereas the spot price of
a commodity reflects the immediate delivery value of the commodity. A variety
of factors can lead to a disparity between the expected future price of a
commodity and the spot price at a given point in time, such as the cost of
storing the commodity for the term of the futures contract, interest charges
incurred to finance the purchase of the commodity and expectations concerning
supply and demand for the commodity. The price movement of a futures contract
is typically correlated with the movements of the spot price of the
underlying commodity, but the correlation is generally imperfect and price
moves in the spot market may not be reflected in the futures market (and vice
versa). Accordingly, the Notes may underperform a similar investment that
reflects the return on physical commodities. — The Notes are not regulated by the Commodity Futures
Trading Commission — An investment in the Notes does not constitute
either an investment in futures contracts, options on futures contracts, or
commodity options and therefore you will not benefit from the regulatory
protections attendant to CFTC regulated products. This means that the Notes
are not traded on a regulated exchange and issued by a clearinghouse. See
“There may be little or no secondary market for the Notes” below. In
addition, the proceeds to be received by UBS from the sale of the Notes will
not be used to purchase or sell any commodity futures contracts, options on
futures contracts or options on commodities for your benefit. Therefore an
investment in the Notes thus does not constitute a collective investment
vehicle that trades in these instruments. An investment in a collective
investment vehicle that invests in these instruments often is subject to
regulation as a commodity pool and its operator may be required to be
registered with and regulated by the CFTC as a commodity pool operator. | |
| --- | --- | --- |
| s | The market value
of the Notes may be influenced by unpredictable factors — The market value of your Notes may fluctuate
between the date you purchase them and the final valuation date when the
calculation agent will determine your payment at maturity. Several factors,
many of which are beyond our control, will influence the market value of the
Notes. We expect that generally the settlement price of the basket
commodities on any day will affect the market value of the Notes more than
any other single factor. Other factors that may influence the market value of
the Notes include: | |
| | s | the
volatility, frequency and magnitude of changes in the price of the basket
commodities; |
| | s | supply
and demand trends for the basket commodities or the physical commodities
underlying the basket commodities; |
| | s | the
time to maturity of the Notes; |
| | s | interest
and yield rates in the market generally; |
| | s | supply
and demand for the Notes, including inventory positions held by UBS
Securities LLC. or any other market maker; |
| | s | a
variety of economic, financial, political, regulatory, geographical,
meteorological and judicial events; and |
| | s | the
creditworthiness of UBS. |
| s | Historical
performance of the basket commodities should not be taken as an indication of
its future performance of the basket commodities during the term of the Notes
— It is impossible to predict
whether the price of any of the basket commodities will rise or fall. The
basket commodities will be influenced by complex and interrelated political,
economic, regulatory, financial, geographical, meteorological and other
factors. Moreover, the underlying basket to which the Notes are linked does
not have a recognized market value and no historical performance data is
available. The Closing Prices of the basket commodities will determine the
level of the underlying basket. | |
| s | Legal and
regulatory risks — Legal and regulatory
changes could adversely affect the settlement prices of the basket
commodities. In addition, many governmental agencies and regulatory
organizations are authorized to take extraordinary actions in the event of
market emergencies. It is not possible to predict the effect of any future
legal or regulatory action relating to the settlement prices of the basket
commodities, but any such action could cause unexpected volatility and
instability in precious metals markets with a substantial and adverse effect
on the performance of the underlying basket and, consequently, on the value
of the Notes. | |
| s | Changes in law or regulation relating to commodity
futures contracts may adversely affect the market value of the Notes and the
amounts payable on your Notes — Commodity futures
contracts such as the basket commodities are subject to legal and regulatory
regimes that are in the process of changing in the United States and, in some
cases, in other countries. For example, the United States Congress has
enacted legislation that is, among other things, intended to limit
speculation and increase transparency in the commodity markets and regulate
the over-the-counter derivatives markets. The legislation requires the CFTC
to adopt rules on a variety of issues and many provisions of the legislation
will not become effective until such rules are adopted. | |
| | Among other things, the
legislation requires that most over-the-counter transactions be executed on
organized exchanges or facilities and be cleared through regulated clearing
houses, and requires registration of, and imposes regulations on, swap
dealers and major swap participants. The legislation also authorizes the CFTC
to adopt rules with respect to the establishment of limits on futures
positions that are not entered into or maintained for “bona fide” hedging
purposes, as defined in the legislation. The legislation also requires the CFTC
to apply its position limits on physical commodities across the futures
positions held by a market participant on any exchange or trading facility,
together with its positions in swaps that are “economically equivalent” to
the specified exchange-traded futures that are subject to the position
limits. The enactment of the legislation, and the CFTC’s adoption of rules on
position limits, which have been adopted but have not yet become effective,
could limit the extent to which entities can enter into transactions in
exchange-traded futures contracts as well as related swaps and could make
participation in the markets more burdensome and expensive. Any such
limitations could restrict or prevent our ability to hedge our obligations
under the Notes. If they are imposed, those restrictions on effecting
transactions in the futures markets could substantially reduce liquidity in
the commodity futures contracts, including the basket commodities, which
could adversely affect the prices of such contracts and, in turn, the market
value of the Notes and the amounts payable on the Notes | |

9

| | at maturity. In addition, other
parts of the legislation, by increasing regulation of, and imposing
additional costs on, swap transactions, could reduce trading in the swap market
and therefore in the futures markets, which would further restrict liquidity
and adversely affect prices. |
| --- | --- |
| s | Owning the Notes
is not the same as owning the commodities or certain other related contracts
directly — The return on your Notes
will not reflect the return you would realize if you actually purchased the
basket commodities or the physical commodities underlying the basket
commodities, or exchange-traded or over-the counter instruments based on the
commodities. You will not have any rights that holders of such assets or
instruments have. |
| s | No assurance that the investment view implicit in the
Notes will be successful — It is impossible to
predict whether and the extent to which the level of the underlying basket
will rise or fall. There can be no assurance that the final basket level will
rise above the initial basket level. The level of the underlying basket will
be influenced by complex and interrelated political, economic, financial and
other factors that affect the basket commodities that comprise the underlying
basket. You should be willing to accept the risks of owning commodities and
commodity futures contracts in general and the basket commodities in
particular, and the risk of losing some or all of your initial investment. |
| s | Changes in the prices of the basket commodities may offset each other — The
return on the Notes is linked to a weighted
basket comprised of the basket commodities. While the prices of some basket commodities may increase over the term of the
Notes, the prices of other basket commodities may not increase during the term of the Notes as much or may even decline.
Therefore, in determining whether the final basket level of the underlying basket is less than the barrier level and in calculating
the basket return and the payment at maturity on the Notes, increases in the prices of one or more of the basket commodities
may be moderated, or offset, by lesser increases or declines in the prices of one or more of the other basket commodities. |
| s | Suspension or
disruptions of market trading in commodities and related futures may
adversely affect the value of the Notes — The
commodity futures markets are subject to temporary distortions or other
disruptions due to various factors, including the lack of liquidity in the
markets, the participation of speculators and government regulation and
intervention. In addition, U.S. futures exchanges and some foreign exchanges
have regulations that limit the amount of fluctuation in some futures
contract prices that may occur during a single business 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 price beyond the limit, or
trading may be limited for a set period of time. Limit prices have the effect
of precluding trading in a particular contract or forcing the liquidation of
contracts at potentially disadvantageous times or prices. These circumstances
could adversely affect the level of the underlying basket, and therefore, the
value of the Notes. |
| s | Prices of
commodities and commodity futures contracts are highly volatile and may
change unpredictably — Commodity prices are
highly volatile and, in many sectors, have experienced unprecedented
historical volatility in the past few years. Commodity prices are affected by
numerous factors including: changes in supply and demand relationships
(whether actual, perceived, anticipated, unanticipated or unrealized);
weather; agriculture; trade; fiscal, monetary and exchange control programs;
domestic and foreign political and economic events and policies; disease;
pestilence; technological developments; changes in interest rates, whether
through governmental action or market movements; monetary and other
governmental policies, action and inaction; macroeconomic or geopolitical and
military events, including political instability in some oil-producing
countries; and natural or nuclear disasters. Those events tend to affect
prices worldwide, regardless of the location of the event. Market
expectations about these events and speculative activity also cause prices to
fluctuate. These factors may adversely affect the performance of the
underlying basket and, as a result, the market value of the Notes, and any
payments you may receive in respect of the Notes. |
| | Moreover, the prices of many
commodities, particularly energy and agricultural commodities reached
historically high levels in 2009. Since reaching such highs, prices have
fallen precipitously, to approximately 25% of their historic highs, in some
case, and prices have experienced unprecedented volatility since that time.
In the case of many commodities, recent prices have also risen substantially,
although they have not reached their historically high levels. There is no
assurance that prices will again reach their historically high levels or that
volatility will subside. It is possible that lower prices, or increased
volatility, will adversely affect the performance of underlying basket and,
as a result, the market value of the Notes. |
| s | The Notes may be subject to certain risks specific to Corn as a
commodity — Because the Notes are linked, in part, to the
performance of the price of the first nearby month futures contract for #2
Yellow Corn (or, if the day on which the price is determined falls within the
notice period for delivering of Corn under such futures contract or on the
last trading day of such futures contract, then the second nearby month
futures contract), we expect that generally the market value of the Notes
will depend in part on the market price of Corn. The price of Corn is
primarily affected by the global demand for, and supply of, Corn. The demand
for corn is in part linked to the development of industrial and energy uses
for Corn. This includes the use of Corn in the production of ethanol. The
demand for Corn is also affected by the production and profitability of the pork
and poultry sectors, which use corn for feed. Negative developments in those
industries may lessen the demand for Corn. For example, if avian flu were to
have a negative effect on world poultry markets, the demand for Corn might
decrease. The supply of Corn is dependent on many factors including weather
patterns, government regulation, the price of fuel and fertilizers and the
current and previous price of Corn. In addition, technological advances could
lead to increases in worldwide production of Corn and corresponding decreases
in the price of Corn. |
| s | The Notes may be subject to certain risks specific to
Brent Crude Oil as a commodity — The Notes are linked,
in part, to the performance of futures contracts on the underlying physical
commodity Brent Crude Oil. Brent Crude Oil is an energy-related commodity.
Consequently, in addition to factors affecting commodities generally that are
described above and in the prospectus supplement, the Notes may be subject to
a number of additional factors specific to energy-related commodities that
might cause price volatility. These may include, among others: |

| s | changes in the level of
industrial and commercial activity with high levels of energy demand; |
| --- | --- |
| s | disruptions in the supply chain
or in the production or supply of other energy sources; |
| s | price changes in alternative
sources of energy; |
| s | adjustments to inventory; |

10

| s | variations in production and
shipping costs; |
| --- | --- |
| s | costs associated with regulatory
compliance, including environmental regulations; and |
| s | changes in industrial, government
and consumer demand, both in individual consuming nations and
internationally. |

| | These factors interrelate in
complex ways and may offset or enhance the effect of another factor. |
| --- | --- |
| s | Futures
contracts on Brent Crude Oil are the benchmark crude oil contracts in
European markets — Because futures
contracts on Brent Crude Oil are the benchmark crude oil contracts in
European markets, the underlying basket will be affected by global economic
conditions. A decline in economic activity in Europe, or globally, could
result in decreased demand for crude oil and for futures contracts on crude
oil, which could adversely affect the value of the underlying basket and,
therefore, the Notes. |
| s | The Notes may be subject to certain risks specific to
Palladium as a commodity — The Notes are linked, in
part, to the performance of the spot price of Palladium. The price of palladium has fluctuated widely over
the past several years. Because the palladium supply is both limited and
concentrated, any disruptions in the palladium supply tend to have an
exaggerated effect on the price of palladium. Key factors that may influence
prices are the policies and production and cost levels in the most important
palladium-producing countries, in particular, Russia, South Africa and Canada
(which together account for over 80% of production), the size and
availability of the Russian palladium stockpiles, global supply and demand as
well as the economic situation of the main consuming countries. The
possibility of large-scale distress sales of palladium in times of crises may
also have a short-term negative impact on the price of palladium and may
adversely affect the value of the Notes. For example, the 2008 financial
crisis resulted in significantly depressed prices of palladium largely due to
forced sales and deleveraging from institutional investors such as hedge
funds and pension funds. Crises in the future may impair palladium’s price
performance which may, in turn, have an adverse effect on the value of the
Notes. Palladium is used in a variety of industries, in particular the
automotive industry. Demand for palladium from the automotive industry, which
uses palladium as a catalytic converter, accounts for more than 50% of the
industrial use of palladium, and a renewed decline in the global automotive
industry may impact the price of palladium and affect the value of the notes.
Palladium is also used in the electronics, dental and jewelry industries. |
| s | The settlement price of the Palladium may be
determined by the London Platinum and Palladium Market (“LPPM”), and
there are certain risks relating to the price being determined by the LPPM — Your Notes are linked, in part, to the
performance of palladium, which is a precious metal. On the final valuation date, your payment at maturity will be based, in part,
on the price of the palladium, which will be determined by reference to fixing levels reported by the LPPM. The LPPM is a
self-regulatory association of platinum and palladium market participants. If the LPPM should cease operations, or if palladium
trading should become subject to a value added tax or other tax or any other form of regulation currently not in place, the role of
LPPM price fixings as a global benchmark for the value of palladium may be adversely affected. The LPPM is a principals’
market that operates in a manner more closely analogous to over-the-counter physical commodity markets than regulated
futures markets, and certain features of U.S. futures contracts are not present in the context of LPPM trading. For example,
there are no daily price limits on the LPPM, which would otherwise restrict fluctuations in the prices of LPPM contracts. In a
declining market, it is possible that prices would continue to decline without limitation within a trading day or over a period of
trading days. The LPPM has no obligation to consider your interest in calculating or revising the official palladium fixing. |
| s | There may be
little or no secondary market for the Notes — The Notes
will not be listed or displayed on any securities exchange or any electronic
communications network. There can be no assurance that a secondary market for
the Notes will develop. UBS Securities LLC and other affiliates of UBS may
make a market in the Notes, 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 Notes prior to maturity could be at a substantial discount from
the issue price and to the intrinsic value of the product; and as a result,
you may suffer substantial losses. |
| s | Price of Notes
prior to maturity — The market price of the Notes will be influenced
by many unpredictable and interrelated factors, including the settlement
price of the basket commodities and the expected settlement price volatility
of the basket commodities; the time remaining to the maturity of the Notes;
interest rates in the markets in general; geopolitical conditions and
economic, financial, political and regulatory, judicial or other events; and
the creditworthiness of UBS. |
| s | Impact of fees
on the secondary market price of the Notes –Generally,
the price of the Notes in the secondary market is likely to be lower than the
issue price to public since the issue price to public included, and the
secondary market prices are likely to exclude, commissions, hedging costs or
other compensation paid with respect to the Notes. |
| s | There are
potential conflicts of interest between you and the calculation agent — Our affiliate, UBS Securities LLC, will serve
as the calculation agent. UBS Securities LLC, will, among other things,
decide the amount paid out to you on the Note offering at maturity as well as
determine whether the barrier level has been breached. For a fuller
description of the calculation agent’s role, see “General Terms of the Notes
— Role of Calculation Agent” on page PS-26 of the product supplement. The
calculation agent will exercise its judgment when performing its functions.
For example, the calculation agent may have to determine whether a market
disruption event affecting a basket commodity has occurred or is continuing
on a day when the calculation agent will determine the final basket level.
This determination 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 Note offering and your payment at maturity,
the calculation agent may have a conflict of interest if it needs to make any
such decision. |
| s | The business
activities of UBS or its affiliates may create conflicts of interest — UBS and its affiliates may engage in business
related to the basket commodities that are not for the account of holders of
the Notes or on their behalf. These trading activities might present a
conflict between the holders’ interest in the Notes and the interest of UBS
and its affiliates will have in |

11

| | their
proprietary accounts, in facilitating transactions, including options and
other derivatives transactions for their customers and in accounts under
their management. |
| --- | --- |
| s | Potentially
inconsistent research, opinions or recommendations by UBS — UBS
and its affiliates publish research from time to time on financial markets
and other matters that may influence the value of the Notes, or express
opinions or provide recommendations that are inconsistent with purchasing or
holding the Notes. 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 of the merits of investing in the Notes and the underlying
basket to which the Notes are linked. |
| s | You must rely on
your own evaluation of the merits of an investment linked to the basket
commodities — In the ordinary course
of business, UBS or one or more of its affiliates from time to time expresses
views on expected movements in the basket commodities. These views are
sometimes communicated to clients who participate in precious metals markets.
However, these views, depending upon worldwide economic, political and other
developments, may vary over differing time-horizons and are subject to change.
Moreover, other professionals who deal in precious metals market may at any
time have significantly different views from views of UBS or those of its
affiliates. For reasons such as these, UBS believes that most investors in
precious metals markets derive information concerning those markets from
multiple sources. In connection with your purchase of the Notes, you should
investigate the precious metals markets and not rely on views which may be
expressed by UBS or its affiliates in the ordinary course of business with
respect to future settlement prices of the basket commodities. |
| s | Uncertain tax treatment —
Significant aspects of the tax treatment of the Notes are uncertain. You
should consult your tax advisor about your own tax situation. See ‘‘What Are
the Tax Consequences of the Notes’’ beginning on page 13. |

You are urged to review “Risk Factors” in the product supplement for a general description of the risks related to an investment in the Notes.

12

What Are the Tax Consequences of the Notes?

The United States federal income tax consequences of your investment in the Notes are uncertain. Some of these tax consequences are summarized below, but we urge you to read the more detailed discussion in ‘‘Supplemental U.S. Tax Considerations—Non-Currency Linked Notes that it Would be Reasonable to Treat as Derivative Contracts”‘ beginning on page PS-49 of the product supplement and discuss the tax consequences of your particular situation with your tax advisor.

There are no statutory provisions, regulations, published rulings or judicial decisions addressing the characterization for U.S. federal income tax purposes of securities with terms that are substantially the same as the Notes. Accordingly, the tax treatment of the Notes is uncertain. Pursuant to the terms of the Notes, UBS and you agree, in the absence of a statutory or regulatory, change or an administrative or judicial ruling to the contrary, to characterize your Notes as a pre-paid derivative contract with respect to the underlying basket. If your Notes are so treated, you should generally not accrue any income with respect to the Notes prior to sale, exchange or maturity of the Notes and you should generally recognize capital gain or loss upon the sale, exchange or maturity of your Notes in an amount equal to the difference between the amount you receive at such time and the amount you paid for your Notes. Such gain or loss should be long-term if you have held your Notes for more than one year.

In the opinion of our counsel, Cadwalader, Wickersham & Taft LLP, it would be reasonable to treat your Notes in the manner described above. However, because there is no authority that specifically addresses the tax treatment of the Notes, it is possible that your Notes could alternatively be treated for tax purposes in the manner described under ‘‘Supplemental U.S. Tax Considerations — Alternative Treatments’’ on page PS-50 of the product supplement.

The Internal Revenue Service, for example, might assert that Section 1256 of the Internal Revenue Code of 1986, as amended (the “Code”) should apply to your Notes in which case, gain or loss recognized with respect to your Notes would be treated as 60% long-term capital gain or loss and 40% short-term gain or loss. Alternatively, some or all of the long-term gain on your Notes might be subject to tax under the special tax rate for “collectibles”, which currently is up to 28%.

In 2007, the Internal Revenue Service released a notice that may affect the taxation of holders of the Notes. According to the notice, the Internal Revenue Service and the Treasury Department are actively considering whether the holder of an instrument similar to the Notes should be required to accrue ordinary income on a current basis, and they are seeking taxpayer comments on the subject. It is not possible to determine what guidance they will ultimately issue, if any. It is possible, however, that under such guidance, holders of the Notes will ultimately be required to accrue income currently and this could be applied on a retroactive basis. The Internal Revenue Service and the Treasury Department are also considering other relevant issues, including whether additional gain or loss from such instruments should be treated as ordinary or capital, whether foreign holders of such instruments should be subject to withholding tax on any deemed income accruals, and whether the special ‘‘constructive ownership rules’’ of Section 1260 of the Code should be applied to such instruments. Holders are urged to consult their tax advisors concerning the significance, and the potential impact, of the above considerations. Except to the extent otherwise required by law, UBS intends to treat your Notes for United States federal income tax purposes in accordance with the treatment described above and under ‘‘Supplemental U.S. Tax Considerations-Non-Currency Linked Notes that it Would be Reasonable to Treat as Derivative Contracts’’ on page PS-49 of the product supplement, unless and until such time as the Treasury Department and Internal Revenue Service determine that some other treatment is more appropriate.

Moreover, in 2007, legislation was introduced in Congress that, if it had been enacted, would have required holders of Notes purchased after the bill was enacted to accrue interest income over the term of the Notes despite the fact that there will be no interest payments over the term of the Notes. It is not possible to predict whether a similar or identical bill will be enacted in the future, or whether any such bill would affect the tax treatment of your Notes.

Specified Foreign Financial Assets — Under recently enacted legislation, individuals (and to the extent provided in future regulations when finalized, entities) that own “specified foreign financial assets” in excess of certain thresholds may be required to file information with respect to such assets with their tax returns, especially if such individuals hold such assets outside the custody of a U.S. financial institution. You are urged to consult your tax advisor as to the application of this legislation to your ownership of the Notes.

PROSPECTIVE PURCHASERS OF THE NOTES SHOULD CONSULT THEIR TAX ADVISORS AS TO THE U.S. FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES.

13

Historical Information

The information in the three charts below and on the next page reflects the historical Closing Price of the first nearby futures contracts for Corn and Brent Crude Oil, and the spot price of Palladium, stated in U.S. dollars, as reported by Bloomberg Professional ® service (“Bloomberg”) for each day in the period from June 15, 2002 through June 15, 2012. As of June 15, 2012, the Closing Prices of first nearby futures contracts on Corn, Brent Crude Oil and Palladium were $579.50, $97.61 and $632.00, respectively. The historical performance of the price of each basket commodity should not be taken as an indication of future performance, and no assurance can be given as to the Closing Price of any basket commodity on any given day in the future.

Your payment at maturity will be based on the performance of an equally weighted basket consisting of futures contracts on Corn and Brent Crude Oil, and the spot price of Palladium. An increase in the price of a basket commodity will have a positive impact on the basket return. Conversely, a decrease in the price of a basket commodity will have a negative impact on the basket return. Price movements in the basket commodities may not correlate with each other, and increases in the price of one or more of the basket commodities may be moderated, or more than offset, by lesser increases or declines in the price of the other basket commodities.

Historical Performance of Corn

Historical Performance of Brent Crude Oil

14

Historical Performance of Palladium

15

Market Disruption Events

With respect to each basket commodity, the calculation agent will determine the initial commodity price on the trade date and the final commodity price on the final valuation date. The date of determination of the initial commodity price or final commodity price (in each case, the “determination date”) may be postponed for a basket commodity, and thus the determination of the initial basket level or the final basket level (as the case may be) may be delayed, if the calculation agent determines that the originally scheduled determination date is not a trading day or a market disruption event has occurred or is continuing on such day with respect to the basket commodity (any such basket commodity affected by a non-trading day or a market disruption event, a “disrupted basket commodity”). If such postponement occurs, the initial commodity price or final commodity price for the disrupted basket commodity may be determined by the calculation agent by reference to the Closing Price of the disrupted basket commodity on the first business day on which no market disruption event has occurred or is continuing for such basket commodity, as determined by the calculation agent. In no event, however, will a determination date with respect to a basket commodity be postponed by more than eight business days.

If a determination date is postponed to the last possible day, but a market disruption event occurs or is continuing on that day, that last day will nevertheless be the determination date. In such event, the calculation agent will make an estimate of the Closing Price for each disrupted basket commodity that would have prevailed in the absence of the market disruption event, and such estimate shall constitute the initial commodity price or the final commodity price, as applicable, for such disrupted basket commodity.

Upon the delay of a determination date as set forth above, the calculation agent may delay any of the trade date, the settlement date, the final valuation date and the maturity date as it deems appropriate.

A “market disruption event” for a particular basket commodity will not necessarily be a market disruption event for another basket commodity. If, on the originally scheduled determination date, no market disruption event with respect to a particular basket commodity occurs or is continuing, then the determination of the Closing Price for such basket commodity will be made on the originally scheduled determination date, irrespective of the occurrence of a market disruption event with respect to one or more of the other basket commodities.

Notwithstanding the occurrence of one or more market disruption events with respect to a basket commodity, the calculation agent may waive its right to postpone the determination date with respect to such basket commodity if it determines that the applicable market disruption event has not or is not likely to materially impair its ability to determine the Closing Price of the basket commodity.

Any of the following will be a market disruption event, as determined by the calculation agent:

| s | the failure of Bloomberg to
announce or publish the Closing Price for such basket commodity, or the
temporary or permanent discontinuance or unavailability of Bloomberg as a
price source for such purpose; |
| --- | --- |
| s | the official settlement price is
not published for such basket commodity; |
| s | a material suspension, absence or
limitation of trading in such basket commodity on its relevant exchange, or
in option contracts relating to such basket commodity in the primary market
for those contracts (as determined by the calculation agent, the “related
exchange”); |
| s | such basket commodity or option
contracts relating to such basket commodity do not trade on what was, on the
trade date, the relevant exchange for the basket commodity or the related
exchange for those options; |
| s | the relevant exchange for such
basket commodity or the related exchange or quotation system, if any, for
option contracts relating to such basket commodity fails to open for trading
during its regular trading session; |
| s | the permanent discontinuation or
disappearance of trading in a basket commodity or option contracts relating
to such basket commodity or the disappearance or permanent discontinuance or
unavailability of the official settlement price, notwithstanding the
availability of Bloomberg or the status of trading in such basket commodity
or the option contracts relating to such basket commodity; |
| s | the occurrence since the trade
date of a material change in the formula for or the method of calculating the
relevant settlement official price of such basket commodity; |
| s | the occurrence since the trade
date of a material change in the content, composition or constitution of a
basket commodity; or |
| s | any event that materially
disrupts or impairs, as determined by the calculation agent, the ability of
market participants to effect transactions in, or obtain market values for
such basket commodity on its relevant exchange or effect transactions in, or
obtain market values for option contracts related to such Commodity on its
related exchange (including, but not |

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| | limited to, limitations,
suspensions or disruptions of trading of one or more futures contracts on
such basket commodity by reason of movements exceeding “limit up” or “limit
down” levels permitted by the relevant exchange); or |
| --- | --- |
| s | any other event, if the
calculation agent determines that the event materially interferes with our
ability or the ability of any of our affiliates to establish, maintain or
unwind all or a material portion of a hedge with respect to that offering of
the Notes. |

The following events will not be market disruption events:

| s | a limitation on the hours or
numbers of days of trading in a commodity in its primary market, but only if
the limitation results from an announced change in the regular business hours
of the relevant market; or |
| --- | --- |
| s | a decision to permanently
discontinue trading in the option contracts relating to a basket commodity. |

For this purpose, an “absence of trading” in the related exchange for option contracts related to a basket commodity, if available, are traded will not include any time when that market is itself closed for trading under ordinary circumstances.

In contrast, a suspension or limitation of trading in a basket commodity or option contracts related to a basket commodity, if available, by reason of any of:

| s | a price change exceeding limits
set by the relevant exchange or related exchange, as applicable, |
| --- | --- |
| s | an imbalance of orders, or |
| s | a disparity in bid and ask
quotes, |

will constitute a suspension or material limitation of trading.

“Relevant exchange” means, with respect to (i) Corn, the CBOT or any successor thereto, (ii) with respect to Brent Crude Oil, the ICE or any successor thereto, and (iii) with respect to Palladium, LPPM or any successor thereto. With respect to any successor commodity (as defined under “Discontinuation of Trading of a Basket Commodity on Its Relevant Exchange; Alternative Method of Calculation” on page 18 of this pricing supplement), the primary exchange or market of trading related to such successor commodity, as determined by the calculation agent.

For the purposes of this offering, the trade date, and therefore the determination of the initial commodity price, has not been postponed for any of the basket commodities. The initial commodity price for each basket commodity is specified under “Final Terms” on page 4 of this pricing supplement.

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Discontinuation of Trading of Basket Commodity on Its Relevant Exchange; Alternative Method of Calculation

If the relevant exchange of a basket commodity discontinues trading in such basket commodity, the calculation agent may replace such basket commodity with another commodity futures contract, the price of which is quoted on such relevant exchange or any other exchange, that the calculation agent determines to be comparable to the discontinued basket commodity (such replacement commodity futures contract will be referred to herein as a “successor commodity”), then the final commodity price will be determined by reference to the official settlement price of such successor commodity at the close of trading on such relevant exchange for such successor commodity on the final valuation date as determined by the calculation agent.

Upon any selection by the calculation agent of a successor commodity, the calculation agent will cause written notice thereof to be promptly furnished to the trustee, to UBS and to the holders of the Notes.

If the relevant exchange discontinues trading in a basket commodity or the physical delivery of the physical commodity underlying a basket commodity (an “underlying commodity”) prior to, and such discontinuation is continuing on, the final valuation date and the calculation agent determines that no successor commodity is available at such time, or the calculation agent has previously selected a successor commodity and trading in such successor commodity or the physical delivery of the underlying commodity for such successor commodity is discontinued prior to, and such discontinuation is continuing on, the final valuation date, then the calculation agent will determine the final commodity price for such basket commodity or successor commodity, as applicable; provided that, if the calculation agent determines that no successor commodity exists for the discontinued basket commodity, the final commodity price for such basket commodity will be the settlement price that the calculation agent determines to be fair and commercially reasonable under the circumstances on the date following the final valuation date.

Notwithstanding these alternative arrangements, discontinuation of trading on the relevant exchange in a basket commodity may adversely affect the value of the Notes.

If at any time the method of calculating the final commodity price of a basket commodity or successor commodity, as applicable, is changed in a material respect by the relevant exchange, or if the reporting thereof is in any other way modified so that such final commodity price does not, in the opinion of the calculation agent, fairly represent the value of such basket commodity or successor commodity, as applicable, the calculation agent will, at the close of business in New York City on the final valuation date for such basket commodity or successor commodity, as applicable, make such calculations and adjustments as may be necessary in order to arrive at a value for such basket commodity or successor commodity, as applicable. The calculation agent shall cause written notice of such calculations and adjustments to be furnished to the holders of the Notes.

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Supplemental Plan of Distribution

We have agreed to sell to JP Morgan Chase Bank, N.A., J.P. Morgan Securities LLC and their affiliates (the “Agents”) and the Agents have agreed to purchase, all of the Notes at the issue price less the underwriting discount indicated on the cover of this pricing supplement, the document filed pursuant to Rule 424(b) containing the final pricing terms of the Notes. The Agents intend to resell the Notes to securities dealers at a discount from the price to public up to the underwriting discount set forth on the cover of this pricing supplement.

Each Agent may be deemed to be an “underwriter” within the Securities Act of 1933 (the “Securities Act”). We have agreed to indemnify the Agents against certain liabilities, including liabilities under the Securities Act.

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