Free Writing Prospectus

Price to Public

Underwriting Discount

Proceeds to UBS AG

UBS AG $· Callable Contingent Accrual Notes with Interest Linked to the Spread Between the USD 30-Year and 2-Year Swap Rates and the Performance of the S&P 500^® Index due on or about October 14, 2025

Callable Contingent Accrual Notes (the “Notes”) are senior unsecured debt obligations of UBS AG (“UBS”) with interest linked to both (i) the spread between the USD 30-year Constant Maturity Swap Rate (the “30y CMS”) and the USD 2-year Constant Maturity Swap Rate (the “2y CMS”) (the difference, or excess, of the 30y CMS over the 2y CMS being referred to herein as the “CMS Spread”) and (ii) the closing level of the S&P 500^® Index (the “Index”). The Notes pay interest quarterly in arrears, which accrues at a rate per annum that will be set on the Trade Date at a level between 7.15% and 7.65% (the “Base Rate”) for each day during the relevant interest period in which both (i) the CMS Spread is zero or positive and (ii) the Index closes at or above 850 (the “Index Barrier”). For a detailed description of how the 30y CMS, the 2y CMS, the CMS Spread and the closing level of the Index will be determined, see “General Terms of the Notes — Coupon” beginning on page 16. The Issuer may, in its sole discretion, elect to redeem the Notes in whole, but not in part, at a redemption price equal to the outstanding principal amount plus any accrued but unpaid interest thereon to but excluding the date of redemption, on any interest payment date scheduled to occur on or after October 14, 2011, by giving at least 5 Business Days’ prior written notice. Any payment on the Notes, including interest and repayment of principal, is subject to the creditworthiness of UBS.

You will not earn interest for any day on which the CMS Spread is negative or the closing level of the Index is below the Index Barrier. Accordingly, the actual interest payable on your Notes for any given Interest Period may be zero, and your return for any Interest Period or over the life of the Notes could be significantly less than the Base Rate or the return on a comparable debt instrument or may even be zero.

Features

Variable Income: UBS will make quarterly interest payments that will range from 0.00% to a maximum of ¹/4 of the Base Rate per quarter. Interest will accrue at the Base Rate for each day that both (i) the CMS Spread is zero or positive and (ii) the Index closes at or above the Index Barrier. No interest will accrue for any day on which the CMS Spread is negative or the closing level of the Index is below the Index Barrier.

Issuer Call Right: We may, at our election, redeem the Notes in whole, but not in part, on the 14th day of each January, April, July or October, commencing on October 14, 2011, at a redemption price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest to but excluding the redemption date.

Principal Protection Feature: If you hold the Notes to maturity (or earlier redemption by the Issuer), you will receive at least 100% of your principal, subject to the creditworthiness of UBS.

Key Dates¹


Trade Date⁽¹⁾		October 8, 2010
Settlement Date⁽¹⁾		October 14, 2010
Interest Payment Dates		Quarterly, on the 14^th day of each January, April, July and October commencing on January 14, 2011, during the term of the Notes (subject to adjustments, as described herein).
Maturity Date		October 14, 2025
CUSIP:		90261JGA5
ISIN:		US90261JGA51

The Notes are expected to price on or about October 8, 2010 and to settle on or about October 14, 2010. In the event that we make any changes to the expected trade date and settlement date, the interest payment dates and maturity date will be changed to ensure that the stated term of the Notes remains the same.

See “Additional Information about UBS and the Notes” on page 2. The Notes we are offering will have the terms set forth in the accompanying prospectus and this free writing prospectus. See “Risk Factors” beginning on page 13 of this free writing prospectus for risks related to an investment in the Notes.

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 free writing prospectus 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.

UBS has filed a registration statement (including a prospectus) with the Securities and Exchange Commission, or SEC, for the offering to which this free writing prospectus 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 for free from the SEC website at www.sec.gov. Our Central Index Key, or CIK, on the SEC web site is 0001114446. Alternatively, UBS will arrange to send you these documents if you so request by calling toll-free 800-722-7370.

References to “UBS,” “we,” “our” and “us” refer only to UBS AG and not to its consolidated subsidiaries. In this document, the “Notes” refers to the Callable Contingent Accrual Notes that are offered hereby. Also, references to the “accompanying prospectus” mean the UBS prospectus, dated January 13, 2009. References to the “pricing supplement” mean the pricing supplement relating to your Notes prepared by UBS AG on the Trade Date.

You should rely only on the information incorporated by reference or provided in this free writing prospectus or the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this free writing prospectus or the accompanying prospectus is accurate as of any date other than the date on the front of the document.

The Notes may be suitable for you if:

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You seek an investment of up to 15 years with 100% principal protection if held to maturity (or early redemption by the Issuer), subject to the creditworthiness of UBS, and variable interest payments linked to the CMS Spread and the Index.

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You understand the complex factors that influence long- and short-term interest rates and the factors that influence stock prices in general.

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You believe that the 30y CMS will generally exceed or equal the 2y CMS Rate and that the Index will generally exceed or equal the Index Barrier during the period you will hold the Notes.

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You are willing and able to hold the Notes to maturity, a term of 15 years, and are aware that there may be little or no secondary market for the Notes.

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You are comfortable holding Notes with unpredictable interest payments, which could result in your receiving little or no interest on your Notes for some or all of the fifteen-year term of the Notes.

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You can tolerate the Issuer calling the Notes prior to maturity and losing any potential for income from the Notes thereafter.

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You are comfortable with the creditworthiness of UBS, as issuer of the Notes.

The Notes may not be suitable for you if:

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You require fixed income from this investment.

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You are not familiar with the complex factors that influence long– and short–term interest rates or the factors that influence stock prices.

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You believe that the 30y CMS will generally be less than the 2y CMS or that the Index will generally be less than the Index Barrier during the period you will hold the Notes.

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You cannot tolerate receiving little or no interest for some or all of the 15-year term of the Notes.

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You are unable or unwilling to hold the Notes to maturity, a term of 15 years.

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You seek an investment for which there will be an active secondary market.

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You cannot tolerate the Issuer calling the Notes prior to maturity and losing any potential for income from the Notes thereafter or the potential to re-invest the proceeds at a favorable rate comparable to that of the Notes.

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You are unable or unwilling to assume the credit risk associated with UBS, as issuer of 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 “Risk Factors” beginning on page 13 of this free writing prospectus for risks related to an investment in the Notes.

The tax treatment of your Notes depends upon whether or not it is reasonably expected that the return on the Notes during the first half of the Notes’ term will be significantly greater or less than the return on the Notes during the second half of the Notes’ term (“Front- or Back-Loaded”). We believe that the Notes are Front- or Back-Loaded. This determination is made solely for tax purposes based on currently available objective economic information and is not a prediction or guarantee of the timing or amount of the payments on your Notes. In the opinion of Sullivan & Cromwell LLP, assuming the Notes are Front-Loaded or Back-Loaded, the Notes should be treated as debt

instruments subject to special rules governing contingent payment obligations for United States federal income tax purposes. Under the special rules governing contingent payment obligations, the amount of interest you are required to take into account for each accrual period will be determined by constructing a projected payment schedule for the Notes, and applying the rules similar to those for accruing original issue discount on a hypothetical noncontingent debt instrument with that projected payment schedule. This method is applied by first determining the yield at which we would issue a noncontingent fixed rate debt instrument with terms and conditions similar to the Notes (the “comparable yield”) and then determining a payment schedule as of the issue date that would produce the comparable yield. Under these rules, you will only accrue interest based on the comparable yield. You will not have to separately include the amount of interest that you receive on the Notes, except to the extent of any positive or negative adjustments discussed in more detail under “Certain United States Federal Income Tax Consequences.” The comparable yield and projected payment schedule for your Notes is set forth below under “Certain United States Federal Income Tax Consequences.” The comparable yield and projected payment schedule are neither a prediction nor a guarantee of what the actual payments you receive will be.

Generally, amounts paid to a Non-United States Holder will not be subject to withholding, provided certain certification requirements are satisfied.

For a more complete discussion of the United States federal income tax consequences of your investment in the Notes, please see the discussion under “Certain United States Federal Income Tax Consequences” and consult your tax advisor.

Please see the accompanying prospectus for a discussion of certain Swiss tax considerations relating to the Notes.

(i) 7.15% - 7.65% per annum, which will be set on the Trade Date (the “Base Rate”) and (ii) n/N, where

n = the total number of calendar days in such Interest Period on which both (i) the CMS Spread equals or exceeds 0.00% and (ii) the Index Closing Level equals or exceeds the Index Barrier; and

The amount of interest to be paid on the Notes for an Interest Period will be equal to the product of:

(a) the principal amount of the Notes, (b) the Applicable Interest Rate for that Interest Period and (c) the number of days in that interest period divided by 360 (with the number of days to be calculated on the basis of a 360-day year consisting of twelve 30-day months);

acknowledged dealer of good credit in the swap market, where the floating leg, calculated on an actual/360 day count basis, is equivalent to USD-LIBOR with a designated maturity of three months. If at least three quotations are provided, the rate will be the arithmetic mean of the quotations, eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest). If fewer than three quotations are provided, the rate for such Business Day will be determined by the Calculation Agent, in a commercially reasonable manner and in its sole and absolute discretion.

For additional terms related to this offering, please see “General Terms of the Notes” beginning on page 16.

This free writing prospectus describes terms that will apply generally to the Notes. On the trade date, UBS AG will prepare a pricing supplement that will also include the specific pricing terms for this issuance. This free writing prospectus and the pricing supplement prepared on the Trade Date should be read in connection with the accompanying prospectus.

The Callable Contingent Accrual Notes (the “Notes”) are medium-term notes issued by UBS AG. Interest is payable quarterly in arrears and accrues at a rate per annum that will be set on the Trade Date at a level between 7.15% and 7.65% (the “Base Rate”) for each day on which both (i) the USD 30-year Constant Maturity Swap Rate (“30y CMS”) equals or exceeds the USD 2-year Constant Maturity Swap Rate (“2y CMS”) (the difference, or excess, of the 30y CMS over the 2y CMS being referred to herein as the “CMS Spread) and (ii) the closing level of the S&P 500_{^® Index (the
“Index”) is at or above 850 (the “Index Barrier”), subject to the rate cut-off provision. The Notes are 100% principal protected if held to maturity, subject to the creditworthiness of UBS. The Notes are senior unsecured
obligations of UBS AG that rank equally with its other unsecured unsubordinated obligations.}

The CMS Spread and Index Closing Level for any day in the applicable Interest Period will be subject to the rate cut-off date provision, which means that the CMS Spread and the Index Closing Level on the runoff period end date will apply to each calendar day from and including the runoff period end date to and including the last day of the applicable Interest Period. The runoff period end date for each applicable Interest Period will be the date that is five Business Days prior to the last day of such Interest Period. Therefore, if the CMS Spread on the runoff period end date is less than 0.00% or the Index Closing Level is less than the Index Barrier, no interest will accrue for that day and the next four days, even if the CMS Spread on those days equals or exceeds 0.00% and the Index Closing Level exceeds the Index Barrier.

Interest on the Notes, if any, will be determined by the Calculation Agent as described below, payable quarterly in arrears on the 14^th day of each January, April, July and October, commencing on January 14, 2011 (each such date, an “Interest Payment Date”); provided that if such day is not a Business Day, interest will be paid on the next succeeding Business Day, and no additional interest will accrue on account of the delay. Interest, if any, will be computed on the basis of a 360-day year consisting of twelve 30-day months.

The initial Interest Period will begin on, and include, the Settlement Date and end on, but exclude, January 14, 2011. Each subsequent Interest Period will begin on, and include, the Interest Period End Date for the preceding Interest Period and end on, but exclude, the next succeeding Interest Period End Date. The final Interest Period will end on, but exclude, the Maturity Date or any earlier redemption date.

You will not earn interest for any day on which either the CMS Spread is less than 0.00% or the Index Closing Level is less than the Index Barrier. Accordingly, the actual interest payable on your Notes may be zero, and your aggregate return over the life of the Notes could be significantly less than the Base Rate or the return on a comparable fixed-income debt instrument.

Whether interest is payable on any Interest Payment Date will depend on whether the CMS Spread equals or exceeds 0.00% and whether the Index Closing Level equals or exceeds the Index Barrier on each day during the related Interest Period, subject to the rate cut-off provision.

The CMS Spread on any day during an Interest Period is the amount (expressed as basis points) equal to (a) the 30y CMS minus (b) the 2y CMS (each as defined above) on such day; provided that (i) the CMS Spread with respect to any Saturday, Sunday or any other day which is not a Business Day will be the CMS Spread for the immediately preceding Business Day and (ii) the CMS Spread in effect on the fifth Business Day prior to the last day of such Interest Period will apply with respect to each subsequent day until and including the last day of the applicable Interest Period.

The Index Closing Level on any day during an Interest Period is the closing level of the Index on such day; provided that (i) the Index Closing Level with respect to any Saturday, Sunday or any other day which is not an Index Business Day will be the Index Closing Level for the immediately preceding Index Business Day, (ii) the Index Closing Level in effect on the fifth Business Day prior to the last day of such Interest Period will apply with respect to each subsequent day until and including the last day of the applicable Interest Period and (iii) if a market disruption event with respect to the Index occurs on any day or if any such day is not an Index Business Day, the Index Closing Level for such day will be the Index Closing Level on the immediately preceding Index Business Day on which no market disruption event has occurred.

The applicable interest rate (the “Applicable Interest Rate”) for such Interest Period will be equal to the product of (a) the Base Rate per annum that will be set on the Trade Date at a level between 7.15% and 7.65% and (b) a fraction, the numerator of which is equal to the number of days during such Interest Period on which both the (i) the CMS Spread equals or exceeds 0.00% and (ii) the Index Closing Level equals or exceeds the Index Barrier, and the denominator of which is the number of actual days in such Interest Period.

The amount of interest to be paid on the Notes for an Interest Period is equal to the product of (a) the principal amount of the Notes, (b) the Applicable Interest Rate for that interest period and (c) the number of days in that interest period divided by 360 (with the number of days to be calculated on the basis of a 360-day year consisting of twelve 30-day months).

Although we are not obligated to do so, our current practice is to quote you a price to purchase your Notes upon your request. However, any purchase price we quote you prior to redemption at maturity or upon an earlier call will take into consideration then-current market conditions and expectations of future payments on the Notes, among other things, and, as a result, the purchase price at which we would repurchase your Notes prior to maturity may be significantly less than the principal amount of the Notes. You should therefore be prepared to hold the Notes to maturity.

The Notes are part of a series of debt securities entitled “Medium-Term Notes, Series A” which we may issue from time to time under our indenture, which is described in the accompanying prospectus. This free writing prospectus summarizes general financial and other terms that apply to the Notes. Terms that apply generally to all Medium-Term Notes, Series A are described in “Description of Debt Securities We May Offer” in the accompanying prospectus. The terms described here (i.e., in this free writing prospectus) 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 following table illustrates how the Applicable Interest Rate is calculated based on the number of days the CMS Spread is equal to or greater than 0.00% and the Index Closing Level is equal to or greater than the Index Barrier.

The examples below are provided for purposes of illustration only. The actual Applicable Interest Rate for any Interest Period will depend on the actual CMS Spread and Index Closing Level for each day during such Interest Period.

$1,000 x Applicable Interest Rate, converted to a decimal equivalent, x (number of days in the Interest Period/360)

Fluctuations in the CMS Spread and Index Closing Level make the Applicable Interest Rate on the Notes for any Interest Period difficult to predict and, as a result, your effective return on the Notes may be lower than anticipated or even be zero for one or more of those Interest Periods. In addition, if, on the day that is five Business Days prior to the last day of the relevant Interest Period, the CMS Spread is less than 0.00% or the Index Closing Level is less than the Index Barrier, no interest will accrue for that day and the next four days, even if the CMS Spread on those days equals or exceeds 0.00% and the Index Closing Level exceeds the Index Barrier.

We have included the following graph of the historical behavior of CMS Spread for the period September 1, 2000 to September 27, 2010, for your reference. Past movements of CMS Spread are not indicative of future levels or the future behavior of CMS Spread.

We have included the following graph of the historical behavior of the Index Closing Level for the period September 1, 2000 to September 27, 2010, for your reference. Past movements of the Index Closing Level are not indicative of future levels or the future behavior of Index.

Your investment in the Notes will involve risks. The Notes are unsecured debt. Unlike ordinary debt securities, the return on the Notes is linked to the CMS Spread and the Index Closing Level. This section describes some of the most significant risks relating to an investment in the Notes. We urge you to read the following information about these risks, together with the other information in this free writing prospectus and the accompanying prospectus, before investing in the Notes.

The Notes are intended to be held to maturity. Your principal protection is subject to UBS’s creditworthiness and applies only if you hold your Notes to maturity. Changes in the CMS Spread and/or the Index Closing Level could result in a substantial loss to you if you sell your Notes in any secondary market that may develop prior to maturity.

You will receive at least the minimum payment of 100% of the principal amount of your Notes only if you hold your Notes to maturity (or the redemption date, if the Notes are called earlier). If you choose to sell your Notes in the secondary market prior to maturity, the trading value of the Notes will be affected by factors that interrelate in complex ways, including the level and direction of the 30y CMS, the 2y CMS and the Index, the anticipated level and potential volatility of the CMS Spread and the Index, the time remaining to the maturity of the Notes, the creditworthiness of UBS and the availability of comparable instruments. In particular, to the extent that the CMS Spread is negative or the Index Closing Level is less than the Index Barrier on any day, or the market perceives that the risk of this occurring increases, the trading price of the Notes may be adversely affected. You should be willing to hold your Notes to maturity. If you sell your Notes in the secondary market prior to maturity, you will not receive principal protection on the portion of your Notes sold, and you may receive a dollar price less than 100% of the applicable principal amount of Notes sold.

Your interest payments on the Notes for any Interest Period are uncertain and could be zero or relatively low amounts in periods where the CMS Spread is negative or the Index Closing Level is less than the Index Barrier.

The interest payable on the Notes is uncertain and the maximum interest rate for any Interest Period is the Base Rate, which is at a level between 7.15% and 7.65% per annum, to be set on the Trade Date. However, for every day during an Interest Period on which the CMS Spread (i.e., the difference between the 30y CMS and the 2y CMS) is less than 0.00% or the Index Closing Level is less than the Index Barrier, no interest will accrue for that day and, therefore, the Applicable Interest Rate for that Interest Period will be reduced, and if, for every day in an Interest Period, the CMS Spread is less than 0.00% or the Index Closing Level is less than the Index Barrier, the Applicable Interest Rate for that Interest Period will be zero. You will not earn interest for any day on which the CMS Spread is less than 0.00% or the Index Closing Level is less than the Index Barrier. If the CMS Spread is less than 0.00% or the Index Closing Level is less than the Index Barrier on each day during an Interest Period, no interest will accrue on the Notes for that Interest Period and, as a result, your return on the Notes for that Interest Period will be zero and the return over the life of the Notes could be significantly less than the Base Rate or could even be zero. Fluctuations in the 30y CMS, the 2y CMS and the Index may make the value of the Notes difficult to predict and more volatile than conventional fixed or floating interest rate debt securities and can result in effective returns to investors that are lower than anticipated.

When the rate cut-off date provision applies for any day included in any applicable Interest Period, it is possible that no interest will accrue for the remainder of that Interest Period

For each of the five Business Days prior to last day of any Interest Period, the rate cut-off date provision will apply so that the CMS Spread and the Index Closing Level for any such day will be determined on the runoff period end date, i.e., the fifth Business Day prior to the last day of such Interest period. Therefore, if the CMS Spread on the rate cut-off date is less than 0.00% or the Index Closing Level is less than the Index Barrier, no interest will accrue for that day and for the remainder of the Interest Period, even if the CMS Spread equals or exceeds 0.00% and the Index Closing Level exceeds the Index Barrier on any day during that time.

Included above in “Historical Levels of the CMS Spread” and “Historical Closing Levels of the Index” are information about the historical levels of the CMS Spread and the Index, respectively. These historical levels have been furnished as a matter of information only, and you should not regard the information as indicative of the range of, or trends in, fluctuations in the 30y CMS or the 2y CMS or the CMS Spread or the Index Closing Level, as applicable, that may occur in the future. There are multiple factors that have and will continue to impact the 30y CMS and the 2y CMS, and thereby the CMS Spread, and the Index. Fluctuations in the 30y CMS, the 2y CMS and the Index may make the value of the Notes difficult to predict and more volatile than conventional fixed or floating interest rate debt securities and can result in effective returns to investors that are lower than anticipated. Such factors include:

The existence, magnitude and longevity of the risks associated with the Notes depend on factors over which we do not have any control and that cannot readily be foreseen, including, but not limited to:

We have the right to redeem the Notes, in whole but not in part, on the 14th day of any January, April, July or October, commencing on October 14, 2011, at a redemption price equal to 100% of the outstanding principal amount plus accrued and unpaid interest to but excluding the redemption date. If we redeem the Notes prior to maturity, you will receive no further interest payments and may not be able to re-invest the proceeds at a favorable rate comparable to that of the Notes.

There may not be an active trading market in the Notes, and sales prior to maturity may result in losses.

You should be willing and able to hold your Notes to maturity. There may be little or no secondary market for the Notes. We do not intend to list the Notes on any stock exchange or automated quotation system, and it is not possible to predict whether a secondary market will develop for the Notes. Even if a secondary market for the Notes develops, it may not provide significant liquidity or result in trading of Notes at prices advantageous to you. Sales in the secondary market may result in significant losses. UBS Securities LLC, UBS Financial Services Inc. and other affiliates of UBS currently intend to act as market makers for the Notes, but they are not required to do so. Even if UBS Securities LLC, UBS Financial Services Inc., any of our other affiliates or any other market maker makes a market in the Notes, they may stop doing so at any time. We expect there will be little or no liquidity in the Notes. The prices we or our affiliates may offer for the Notes will be discounted to reflect costs and, among other things, changes of and volatility in interest rates in the market.

As a result, if you sell your Notes prior to maturity, you may have to do so at a discount from the issue price and you may suffer losses.

The inclusion of commissions and compensation in the initial price to public of the Notes is likely to adversely affect secondary market prices.

Assuming no change in market conditions or any other relevant factors, the price, if any, at which UBS Securities LLC, UBS Financial Services Inc. or their affiliates are willing to purchase the Notes 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 Notes. In addition, any such prices may differ from values determined by pricing models used by UBS or its affiliates, as a result of dealer discounts, mark-ups or other transactions.

You will not receive any dividend payments or other distributions on the securities included in the Index (the “Index Constituent Stocks”).

The return on your Notes is based, in part, on the performance of the Index, which reflects the changes in the market prices of the Index Constituent Stocks . This is known as a “price return” index or strategy. The return on your Notes does not reflect a “total return” index or strategy, which would also reflect dividends paid on the Index Constituent Stocks in addition to reflecting the price returns.

Owning the Notes is not the same as owning the Index or the Index Constituent Stocks

The return on your Notes may not reflect the return you would realize if you actually owned the Index or the Index Constituent Stocks. For instance, you will not receive or be entitled to receive any dividend payments over the life of the Notes.

UBS’s or its affiliates’ investments in instruments relating to interest rate swaps may impair the value of the Notes.

We and our affiliates are active participants in interest rate swaps and other contracts as sellers, buyers, dealers, proprietary traders and agents for our customers. As described under “Use of Proceeds and Hedging” on page 18, we or one or more of our affiliates may hedge our or their interest rate exposure from the Notes by entering into various transactions. We or our affiliates may adjust these hedges at any time. These activities may impair the value of the Notes. It is possible that we or our affiliates could receive significant returns from these hedging activities while the value of or amounts payable under the Notes may decline.

Trading activities related to short-term and long-term interest rate swaps and other instruments that may affect the 30y CMS, the 2y CMS or the Index Closing Level may be entered into on behalf of UBS, its affiliates or customers other than for the account of the holders of the Notes or on their behalf. In addition, UBS and its affiliates expect to engage in trading activities related to the 30y CMS, the 2y CMS or the Index that are not for the account of holders of the Notes or on their behalf. These trading activities may present a conflict between the holders’ interests in the Notes and the interests UBS and its affiliates will have in their proprietary accounts in facilitating transactions, including block trades and options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the levels of the 30y CMS and/or the 2y CMS and/or the Index, could be adverse to the interests of the holders of the Notes.

UBS and its affiliates have no affiliation with S&P, the Index sponsor, and are not responsible for their public disclosure of information.

We and our affiliates are not affiliated with the Index sponsor (except for licensing arrangements discussed in Annex A) and have no ability to control or predict its actions, including any errors in or discontinuation of public disclosure regarding methods or policies relating to the calculation of the Index. If the Index sponsor discontinues or suspends the calculation of the Index, it may become difficult to determine the market value of the Notes and the interest payments. The Calculation Agent may designate a successor index in its sole discretion. If the Calculation Agent determines in its sole discretion that no successor index comparable to the Index exists, the payment you receive on any interest payment date may be determined by the Calculation Agent in its sole discretion. See “Annex A — Discontinuance of or Adjustments to the Index; Alteration of Method of Calculation”. The Index sponsor is not involved in the offer of the Notes in any way and has no obligation to consider your interest as an owner of the Notes in taking any actions that might affect the value of your Notes.

We have derived the information about the Index sponsor and the Index from publicly available information, without independent verification. Neither we nor any of our affiliates assumes any responsibility for the adequacy or accuracy of the information about the Index sponsor or the Index. You, as an investor in the Notes, should make your own independent investigation into the Index sponsor and the index for your Notes.

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

UBS AG, London Branch, will serve as the initial Calculation Agent. UBS AG, London Branch, will, among other things, determine the Applicable Interest Rate throughout the term of the Notes. For a description of the Calculation Agent’s role, see “General Terms of the Notes — Role of Calculation Agent” on page 17. The Calculation Agent will exercise its judgment when performing its functions.

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

UBS and its affiliates publish research from time to time with respect to movements in interest rates and equity markets generally or the 30y CMS, the 2y CMS, the CMS Spread or the Index specifically and other matters that may influence the value of the Notes, express opinions or provide recommendations that are inconsistent with purchasing or holding the Notes. UBS and its affiliates may have published research or other opinions that call into question the investment view implicit in 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. You should make your own independent investigation regarding the merits of investing in the Notes and the CMS Spread and the Index to which the Notes are linked.

Neither UBS nor any of its subsidiaries or affiliates currently publishes research on, or assigns a research recommendation to, the Notes.

The Notes are senior unsecured debt obligations of the issuer, UBS AG, and are not, either directly or indirectly, an obligation of any third party. Any payment to be made on the Notes, including interest and any principal protection provided at maturity, 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 the principal protection or any other amounts owed to you under the terms of the Notes.

The Notes are not deposit liabilities of UBS, and neither the Notes nor your investment in the Notes 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 following is a summary of the general terms of the Notes. The information in this section is qualified in its entirety by the information set forth in the accompanying prospectus. In this section, references to “holders” mean you, as owner of the Notes registered in your name, on the books that we or the trustee maintain for this purpose, and not those holders who own beneficial interests in the Notes registered in street name or in the Notes issued in book-entry form through The Depository Trust Company or another depositary. As an owner of beneficial interests in the Notes, you should read the section entitled “Legal Ownership and Book-Entry Issuance” in the accompanying prospectus.

In addition to the terms described elsewhere in this free writing prospectus, the following general terms will apply to the Notes:

Your minimum investment is one Note at the principal amount. The principal amount of each Note will be $1,000.

Interest Payment Dates shall be the 14^th day of each January, April, July and October, commencing on January 14, 2011, and ending with the Maturity Date, provided that if any such day is not a Business Day, the interest payment shall be paid on the next succeeding Business Day, with no additional interest being paid on account of the delay.

The regular record date relating to an interest payment on the Notes shall be the Business Day prior to the Interest Payment Date. For the purpose of determining the holder at the close of business on a regular record date, the close of business will mean 5:00 P.M., New York City time, on that day.

Interest on the Notes, if any, will be based on the Applicable Interest Rate, as determined by the Calculation Agent, and will be payable quarterly in arrears on the Interest Payment Date for the applicable Interest Period. Interest, if any, will be computed on the basis of a 360-day year consisting of twelve 30-day months. The initial Interest Period will begin on, and include, the Settlement Date and end on, but exclude, January 14, 2011. Each subsequent Interest Period will begin on, and include, the Interest Period End Date for the preceding Interest Period and end on, but exclude, the immediately succeeding Interest Period End Date. The final Interest Period will end on, but exclude, the Maturity Date or any earlier redemption date (without adjustment for Business Days). An “Interest Period End Date” means the 14^th day of each January, April, July and October, commencing on January 14, 2011.

The Applicable Interest Rate for an Interest Period will be equal to the product of (a) the Base Rate, which will be set on the Trade Date at a level between 7.15% and 7.65% per annum and (b) a fraction, the numerator of which is equal to the number of days during such Interest Period on which both the (i) the 30y CMS equals or exceeds the 2y CMS (the difference, or excess, of the 30y CMS over the 2y CMS being referred to herein as the “CMS Spread) and (ii) the Index Closing Level equals or exceeds the Index Barrier, and the denominator of which is the number of actual days in such Interest Period.

We may, at our election, redeem the Notes in whole, but not in part, on the 14th day of any January, April, July or October, commencing on October 14, 2011, by giving at least 5 Business Days’ prior written notice in the manner described under “Description of Debt Securities We May Offer — Notices” in the accompanying prospectus. If the redemption notice is given and funds deposited as required, then interest will cease to accrue on and after the redemption date for the Notes.

If we elect to redeem your Notes as described above, we will pay you an amount equal to 100% of the principal amount of your Notes plus accrued and unpaid interest to but excluding the redemption date (the “redemption price”) on such redemption date to the holder of record of the Notes as of the close of business on the immediately preceding Business Day. See “Description of Debt Securities We May Offer — Redemption and Repayment” in the accompanying prospectus. If any redemption date is not a Business Day, we will pay the redemption price on the next Business Day without any interest or other payment due to the delay.

We have the right to redeem the Notes in the circumstances and at the price described under “Description of Debt Securities We May Offer — Optional Tax Redemption” in the accompanying prospectus.

Any payment on or delivery of the Notes upon redemption or 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 the Notes 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.

When we refer to a Business Day with respect to the Notes, we mean a day that is a Business Day of the kind described in “Description of Debt Securities We May Offer — Payment Mechanics for Debt Securities” in the accompanying prospectus.

As described in “Description of Debt Securities We May Offer — Payment Mechanics for Debt Securities” in the accompanying prospectus, any payment on the Notes that would otherwise be due on a day that is not a Business Day may instead be paid on the next day that is a Business Day, with the same effect as if paid on the original due date.

UBS AG, London Branch, will serve as the initial Calculation Agent. We may change the Calculation Agent after the original issue date of the Notes without notice. The Calculation Agent will make all determinations regarding the 30y CMS, the 2y CMS, the CMS Spread, the Index Closing level, market disruption events, discontinuance of or adjustments to the Index, alterations of methods of calculation, the amount of any Interest Payment to which you may be entitled, payments on the Notes due at maturity or any earlier redemption date, Business Days, Index Business Days, the default amount, the Applicable Interest Rate and any other amounts payable in respect of your Notes. 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.

We will use the net proceeds we receive from the sale of the Notes 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 Notes as described below.

In connection with the sale of the Notes, we or our affiliates may enter into hedging transactions involving the execution of long-term or short-term interest rate swap, futures and option transactions, purchases and sales of securities linked to the 30y CMS or the 2y CMS or the CMS Spread or the Index or the execution of other derivative transactions with returns linked to or related to changes in the 30y CMS, the 2y CMS or the CMS Spread or the Index both before and after the Settlement Date of the Notes. From time to time, we or our affiliates may enter into additional hedging transactions or unwind those we have entered into.

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

The hedging activity discussed above may adversely affect the market value of the Notes from time to time and payment on the Notes at maturity. See “Risk Factors” beginning on page 13 for a discussion of these adverse effects.

The following is a general description of certain United States tax considerations relating to the Notes. It does not purport to be a complete analysis of all tax considerations relating to the Notes. Prospective purchasers of the Notes should consult their tax advisers as to the consequences under the tax laws of the country of which they are resident for tax purposes and the tax laws of the United States of acquiring, holding and disposing of the Notes and receiving payments of interest, principal and/or other amounts under the Notes. This summary is based upon the law as in effect on the date of this free writing prospectus and is subject to any change in law that may take effect after such date.

The discussion below supplements the discussion under “U.S. Tax Considerations” in the attached prospectus. This discussion assumes that the description of the terms of the Notes in this free writing prospectus is materially correct. This discussion applies to you only if you hold your Notes as capital assets for tax purposes. This section does not apply to you if you are a member of a class of holders subject to special rules, such as:

This discussion is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations under the Internal Revenue Code, published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis.

If a partnership holds the Notes, the United States federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the Notes should consult its tax advisor with regard to the United States federal income tax treatment of an investment in the Notes.

Except as otherwise noted under “Non-United States Holders” below, this discussion is only applicable to you if you are a United States Holder. You are a United States holder if you are a beneficial owner of a Note and you are: (i) a citizen or resident of the United States, (ii) a domestic corporation, (iii) an estate whose income is subject to United States federal income tax regardless of its source, or (iv) a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.

Under the contingent payment obligations rules, the amount of interest you are required to take into account for each accrual period will be determined by constructing a projected payment schedule for the Notes, and applying the rules similar to those for accruing original issue discount on a hypothetical noncontingent debt instrument with that projected payment schedule. This method is applied by first determining the yield at which we would issue a noncontingent fixed rate debt instrument with terms and conditions similar to the Notes (the “comparable yield”) and then determining a payment schedule as of the issue date that would produce the comparable yield. Under these rules, you will only accrue interest based on the comparable yield. You will not have to separately include the amount of interest that you receive on the Notes, except to the extent of any positive or negative adjustments discussed below.

It is not entirely clear how, under the rules governing contingent payment obligations, the maturity date for debt instruments (such as the Notes) that provide for a call right should be determined for purposes of computing the comparable yield and projected payment schedule. It would be reasonable, however, to compute the comparable yield and projected payment schedule for the Notes (and we intend to make the computation in such a manner) based on the assumption that the Notes will remain outstanding until the stated maturity date.

We have determined the comparable yield for the Notes is equal to ·% per annum, compounded quarterly.

Based upon this comparable yield, if you are an initial holder that holds a Note until the scheduled maturity and you pay your taxes on a calendar year basis, you would generally be required to pay taxes on the following amounts of ordinary income from the Note each year (subject to the positive and negative adjustments described below): $· in 2010, $· in 2011, $· in 2012, $· in 2013, $· in 2014, $· in 2015, $· in 2016, $· in 2017, $· in 2018, $· in 2019, $· in 2020, $· in 2021, $· in 2022, $· in 2023, $· in 2024, and $· in 2025.

In addition, we have determined the projected payments for a Note are as follows:

You are required to use the comparable yield and projected payment schedule set forth above in determining your interest accruals in respect of the Notes, unless you timely disclose and justify on your federal income tax return the use of a different comparable yield and projected payment schedule.

The comparable yield and projected payment schedule will not be provided to you for any purpose other than the determination of your interest accruals in respect of the Notes, and we make no representations regarding the amount of contingent payments with respect to the Notes.

If, during any taxable year, the actual payments with respect to the Notes exceed the projected payments for that taxable year, you will incur a “net positive adjustment” under the contingent debt regulations equal to the amount of such excess. You will treat a net positive adjustment as additional interest income in that taxable year.

If, during any taxable year, the actual payments with respect to the Notes are less than the amount of projected payments for that taxable year, you will incur a “net negative adjustment” under the contingent debt regulations equal to the amount of such deficit. This net negative adjustment will (a) reduce your interest income on the Notes for that taxable year, and (b) to the extent of any excess after the application of (a), give rise to an ordinary loss to the extent of your interest income on the Notes during prior taxable years, reduced to the extent such interest was offset by prior net negative adjustments. Any net negative adjustment in excess of the amounts described in (a) and (b) will be carried forward as a negative adjustment to offset future interest income with respect to the Notes or to reduce the amount realized on a sale, exchange, redemption or repurchase of the Notes. A net negative adjustment is not subject to the two percent floor limitation on miscellaneous itemized deductions.

If you purchase the Notes for an amount that differs from the Notes’ adjusted issue price at the time of the purchase, you must determine the extent to which the difference between the price you paid for the Notes and its adjusted issue price is attributable to a change in expectations as to the projected payment schedule, a change in interest rates, or both, and allocate the difference accordingly. The adjusted issue price of the Notes will equal the Notes’ original issue price plus any interest deemed to be accrued on the Notes (under the rules governing contingent payment obligations) as of the time you purchase the Notes, decreased by the amount of the projected payments that were previously projected to be made with respect to the Notes.

If you purchase the Notes for an amount that is less than the adjusted issue price of the Notes, you must (a) make positive adjustments increasing the amount of interest that you would otherwise accrue and include in income each year to the extent of amounts allocated to a change in interest rates under the preceding paragraph and (b) make positive adjustments increasing the amount of ordinary income (or decreasing the amount of ordinary loss) that you would otherwise recognize upon the maturity of the Notes to the extent of amounts allocated to a change in expectations as to the projected payment schedule under the preceding paragraph. If you purchase the Notes for an amount that is greater than the adjusted issue price of the Notes, you must (a) make negative adjustments decreasing the amount of interest that you would otherwise accrue and include in income each year to the extent of amounts allocated to a change in interest rates under the preceding paragraph and (b) make negative adjustments decreasing the amount of ordinary income (or increasing the amount of ordinary loss) that you would otherwise recognize upon the maturity of the Notes to the extent of amounts allocated to a change in expectations as to the projected payment schedule under the preceding paragraph. Adjustments allocated to the interest amount are not made until the date the daily portion of interest accrues.

Because any Form 1099-OID that you receive will not reflect the effects of positive or negative adjustments resulting from your purchase of the Notes at a price other than the adjusted issue price determined for tax purposes, you are urged to consult with your tax advisor as to whether and how adjustments should be made to the amounts reported on any Form 1099-OID.

You will recognize gain or loss upon the sale, exchange, redemption or maturity of the Notes in an amount equal to the difference, if any, between the amount of cash you receive at such time and your adjusted basis in the Notes. In general, your adjusted basis in the Notes will equal the amount you paid for the Notes, increased by the amount of interest you previously accrued with respect to the Notes (in accordance with the comparable yield for the Notes), decreased by the amount of the projected payments that you were projected to receive with respect to the Notes and increased or decreased by the amount of any positive or negative adjustment, respectively, that you are required to make if you purchase the Notes at a price other than the adjusted issue price determined for tax purposes.

Any gain you recognize upon the sale, exchange, redemption or maturity of the Notes will generally be ordinary interest income. Any loss you recognize at such time will generally be ordinary loss to the extent of interest you included as income in the current or previous taxable years in respect of the Notes, and thereafter, capital loss. You will generally only be able to use such ordinary loss to offset your income in the taxable year in which you recognize the ordinary loss and will generally not be able to carry such ordinary loss forward or back to offset income in other taxable years. The deductibility of capital losses is subject to limitations.

Alternative Treatment. If the Internal Revenue Service disagrees with our conclusion with respect to whether interest is expected to be Front- or Back-Loaded, the Internal Revenue Service could treat your Notes as variable rate debt instruments. Under this characterization, you will be subject to tax on interest payments, if any, as ordinary income at the time you receive or accrue such payments, depending on your method of accounting for tax purposes and any gain or loss you recognize upon the sale or maturity of your notes will be capital gain or loss. Please see the discussion under “U.S. Tax Considerations — Taxation of Debt Securities — Original Issue Discount — Variable Rate Debt Securities” in the accompanying prospectus for a detailed description of the tax consequences of owning a variable rate debt instrument.

Information with Respect to Foreign Financial Assets. Under recently enacted legislation, individuals that own “specified foreign financial assets” with an aggregate value in excess of $50,000 in taxable years beginning after March 18, 2010 will generally be required to file an information report with respect to such assets with their tax returns. “Specified foreign financial assets” include any financial accounts maintained by foreign financial institutions (which includes the Notes), as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in foreign entities. U.S. holders that are individuals are urged to consult their tax advisors regarding the application of this legislation to their ownership of the Notes.

Medicare Tax. For taxable years beginning after December 31, 2012, a U.S. person that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, 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 gross income for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000, depending on the individual’s circumstances). A United States holder’s net investment income will generally include its gross interest income and its net gains from the sale, redemption or maturity of the Notes, unless such interest payments or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). If you are a U.S. person that is an individual, estate or trust, you are urged to consult your tax advisors regarding the applicability of the Medicare tax to your gains in respect of your investment in the Notes.

Treasury Regulations Requiring Disclosure of Reportable Transactions. Treasury regulations require United States taxpayers to report certain transactions (“Reportable Transactions”) on Internal Revenue Service Form 8886. An investment in the Notes or a sale of the Notes should generally not be treated as a Reportable Transaction under current law, but it is possible that future legislation, regulations or administrative rulings could cause your investment in the Notes or a sale of the Notes to be treated as a Reportable Transaction. You should consult with your tax advisor regarding any tax filing and reporting obligations that may apply in connection with acquiring, owning and disposing of Notes.

Backup Withholding and Information Reporting. If you are a noncorporate United States holder, information reporting requirements, on Internal Revenue Service Form 1099, generally will apply to:

Additionally, backup withholding will apply to such payments if you are a noncorporate United States holder that:

Pursuant to recently enacted legislation, certain payments in respect of Notes made to corporate United States holders after December 31, 2011 may be subject to information reporting and backup withholding.

Payment of the proceeds from the sale of a Note effected at a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale of a Note that is effected at a foreign office of a broker will generally be subject to information reporting and backup withholding if:

In addition, a sale of a Note effected at a foreign office of a broker will generally be subject to information reporting if the broker is:

Backup withholding will apply if the sale is subject to information reporting and the broker has actual knowledge that you are a United States person.

Non-United States Holders. If you are not a United States holder, you will not be subject to United States withholding tax with respect to payments on your Notes but you will be subject to generally applicable information reporting and backup withholding requirements with respect to payments on your Notes unless you comply with certain certification and identification requirements as to your foreign status.

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 Notes specified on the front cover of the pricing supplement related to the Notes. UBS Financial Services Inc., in turn, will agree to purchase from UBS Securities LLC, and UBS Securities LLC will agree to sell to UBS Financial Services Inc., all or a portion of such aggregate principal amount of the Notes. UBS Securities LLC and UBS Financial Services Inc. may resell Notes to other securities dealers at discounts from the original issue price at varying levels up to the underwriting discount set forth on the front cover of this free writing prospectus. In the future, we or our affiliates may repurchase and resell the offered Notes in market-making transactions. As described in more detail under “Use of Proceeds and Hedging,” we or one of our affiliates may enter into swap agreements or related hedge transactions with one of our other affiliates or unaffiliated counterparties in connection with the sale of the Notes. UBS Securities LLC and/or its affiliate may earn additional income as a result of payments pursuant to these swap or related hedge transactions.

UBS may use this free writing prospectus and the accompanying prospectus in the initial sale of any Notes. In addition, UBS, UBS Securities LLC or any other affiliate of UBS may use this free writing prospectus and the accompanying prospectus in a market-making transaction for any Notes after their initial sale. In connection with this offering, UBS, UBS Securities LLC, UBS Financial Services Inc., any other affiliate of UBS or any other securities dealers may distribute this free writing prospectus and the accompanying prospectus electronically. Unless UBS or its agent informs the purchaser otherwise in the confirmation of sale, this free writing prospectus and the accompanying prospectus are being used in a market-making transaction.

You should rely only on the information incorporated by reference or provided in this free writing prospectus or the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this free writing prospectus is accurate as of any date other than the date on the front of the document.

Conflicts of Interest — Each of UBS Securities LLC and UBS Financial Services Inc. is an affiliate of UBS and, as such, has a “conflict of interest” in this offering within the meaning of NASD Rule 2720. In addition, UBS will receive the net proceeds (excluding the underwriting discount) from the initial public offering of the Notes, thus creating an additional conflict of interest within the meaning of Rule 2720. Consequently, the offering is being conducted in compliance with the provisions of NASD Rule 2720. Neither UBS Securities LLC nor UBS Financial Services Inc. is permitted to sell Notes in this offering to an account over which it exercises discretionary authority without the prior specific written approval of the account holder.

The returns on UBS structured products are linked to the performance of the relevant underlying asset or index. Investing in a structured product is not equivalent to investing directly in the underlying asset or index. Before investing, you should carefully read the detailed explanation of risks, together with other information in the relevant offering materials discussed below, including but not limited to information concerning the tax treatment of the investment. UBS AG has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents UBS AG has filed with the SEC for more complete information about UBS AG and this offering. You may get these documents for free by visiting EDGAR on the SEC web site at www.sec.gov or by calling toll-free 1-800-657-9836.

The S&P 500^® Index (the “S&P Index”) is maintained by the S&P Index Committee (the “S&P Index Committee”), a team of S&P’s economists and index analysts who meet on a regular basis. The calculation of the value of the S&P Index, discussed below in further detail, is based on the relative value of the aggregate market value of specified classes of common stock of 500 companies (the “S&P Index Constituent Stocks”) as of a particular time compared to the aggregate average market value of the common stocks of 500 similar companies during the base period of the years 1941 through 1943 (the “Base Period”). The S&P Index Constituent Stocks do not represent the common stocks of the 500 largest companies listed on the New York Stock Exchange and not all 500 companies whose common stock are included in the S&P Index are listed on the New York Stock Exchange. Stocks are chosen for inclusion in the S&P Index by the S&P Index Committee with the goal of ensuring that the S&P Index is a leading indicator of United States equities (as determined below), reflecting the risk and return characteristics of the broader large cap universe on an ongoing basis. Ten main groups of companies comprise the Index, with the number of companies included in each group as of September 27, 2010 indicated below: Consumer Discretionary (81); Consumer Staples (41); Energy (39); Financials (80); Health Care (51); Industrials (56); Information Technology (76); Materials (32); Telecommunications Services (9); and Utilities (35).

Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. (“S&P”), calculates the S&P Index by reference to the prices of the S&P Index Constituent Stocks without taking account of the value of dividends paid on such stocks. As a result, the return on the Notes will not reflect the return you would realize if you actually owned the stocks that compose the S&P Index and received the dividends paid on such stocks.

Only common stock of operating companies, real estate investment trusts (excluding mortgage REITs) and business development companies are eligible for inclusion in the S&P Index. The common stock of closed-end funds, holding companies, partnerships, investment vehicles and royalty trusts are not eligible for inclusion in the S&P Index. Further, for the common stock of a company to be eligible for inclusion in the S&P Index it must meet all of the following additional criteria, as determined by the S&P Index Committee in its sole discretion:

Generally, only one class of common stock of any company is included in the S&P Index. The stock price and total shares outstanding of common stock of a company included in the S&P Index with more than one class of common stock outstanding is based on the most liquid class of common stock of that company as determined by S&P Index Committee in its sole discretion.

The common stock of a company may be removed from the S&P Index when the S&P Index Committee determines, in its sole discretion, that one of the following criteria is met:

The calculation of the value of the S&P Index (discussed below in further detail) is based on the relative value of the aggregate Market Value (as defined below) of the common stocks of approximately 500 companies as of a particular time as compared to the aggregate Market Value of the common stocks of approximately 500 similar companies during the Base Period. The “Market Value” of any S&P Index Constituent Stock is the product of the market price per share times the number of the then outstanding shares of such S&P Index Constituent Stock times an investable weight factor (“IWF”). An IWF is calculated for each S&P Index Constituent Stock so that the number of shares outstanding is reduced to exclude certain closely held shares from the determination of the level of the S&P Index.

The level of the S&P Index is calculated using a base-weighted aggregate methodology: the level of the S&P Index reflects the total Market Value of all the S&P Index Constituent Stocks relative to the Base Period. An indexed number is used to represent the results of this calculation in order to make the value easier to work with and track over time. The actual total Market Value of the S&P Index Constituent Stocks in the S&P Index during the Base Period has been set equal to an indexed value of 10. This is often indicated by the notation 1941-43=10. In practice, the daily calculation of the S&P Index is computed by dividing the total Market Value of the level of S&P Index Constituent Stocks by a number called the “S&P Divisor”. By itself, the S&P Divisor is an arbitrary number. However, in the context of the calculation of the level of the S&P Index, it is the only link to the original Base Period value of the S&P Index. Continuity in the S&P Index value is maintained by adjusting the S&P Divisor for certain events as described below.

Changes to the S&P Index are made on an as-needed basis. There is no annual or semi-annual reconstitution. Rather changes in response to corporate actions and market developments can be made at any time.

An adjustment to the S&P Divisor is required when any change to any S&P Index Constituent Stocks alters the total market value of the S&P Index while holding stock prices constant. S&P Divisor adjustments are made “after the close” meaning that after the close of trading the closing prices are used to calculate the new S&P Divisor based on whatever changes are being made. The table below summarizes the types of maintenance adjustments which require a divisor adjustment:

Each of the corporate actions in the table above has the effect of altering the market value of an S&P Index Constituent Stock and consequently the aggregate market value of the S&P Index Constituent Stocks. In order that the level of the S&P Index prior to such corporate action, not be affected by the change in market value of the S&P Index Constituent Stocks, a new S&P Divisor is derived as follows:

In cases where there is no achievable market price for a stock being deleted, such stock may be removed from the S&P Index at zero or minimal price at the discretion of the S&P Index Committee, in recognition of the constraints faced by investors in trading bankrupt or suspended stocks. Constituent changes are typically announced one to five days before they are scheduled to be implemented.

A large part of the maintenance of the S&P Index involves adjustments in response to changes in a company’s shares outstanding. The S&P Index Committee follows a 5% rule. Generally, changes in a company’s shares outstanding of 5% or more due to mergers, acquisitions, public offerings, private placements, tender offers, Dutch auctions or exchange offers are made as soon as reasonably possible. Other changes of 5% or more are made weekly and are announced on Wednesdays for implementation after the close of trading the following Wednesday (one week later). Changes of less than 5% of a company’s shares outstanding are accumulated and made quarterly on the third Friday of March, June, September and December, with the exception of an acquisition of another company in the S&P Index which are made as reasonably as possible. In the case of certain rights issuances, in which the number of rights issued and/or terms of their exercise are deemed substantial by the S&P Index Committee, a price adjustment and/or share increase may be implemented immediately.

Neither UBS nor any of its affiliates accepts any responsibility for the calculation, maintenance or publication of, or for any error, omission or disruption in, the S&P Index or any successor index. While S&P currently employs the above methodology to calculate the S&P Index, no assurance can be given that S&P will not modify or change this methodology in a manner that may affect the amount payable at maturity to beneficial owners of the Securities. S&P does not guarantee the accuracy or the completeness of the S&P Index or any data included in the S&P Index. S&P assumes no liability for any errors, omissions or disruption in the calculation and dissemination of the S&P Index. S&P

disclaims all responsibility for any errors or omissions in the calculation and dissemination of the S&P Index or the manner in which the S&P Index is applied in determining the amount payable at maturity.

We have derived all information regarding the the S&P Index contained in this free writing prospectus, including, without limitation, its make-up, method of calculation and changes in its components, from publicly available information. Such information reflects the policies of, and is subject to change by, S&P.

We do not assume any responsibility for the accuracy or completeness of such information. S&P has no obligation to continue to publish the S&P Index, and may discontinue publication of the S&P Index.

S&P and UBS have entered into a non-exclusive license agreement providing for the license to UBS, and certain of its affiliates, in exchange for a fee, of the right to use the S&P Index, in connection with securities, including the Notes. The S&P Index is owned and published by S&P.

The license agreement between S&P and UBS provides that the following language must be set forth in this free writing prospectus:

The Notes are not sponsored, endorsed, sold or promoted by S&P. S&P makes no representation or warranty, express or implied, to the owners of the Notes or any member of the public regarding the advisability of investing in securities generally or in the Notes particularly, or the ability of the S&P Index to track general stock market performance. S&P’s only relationship to UBS is the licensing of certain trademarks and trade names of S&P and of the S&P Index which is determined, composed and calculated by S&P without regard to UBS or the Notes. S&P has no obligation to take the needs of UBS or the owners of the Notes into consideration in determining, composing or calculating the S&P Index. S&P is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Notes to be issued or in the determination or calculation of the equation by which the Notes are to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the Notes.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY UBS, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P INDEX OR ANY DATA INCLUDED THEREIN.

WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

“Standard & Poor’s,” “S&P,” “S&P 500,” “Standard & Poor’s 500” and “500” are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by UBS. The Securities are not sponsored, endorsed, sold or promoted by S&P and S&P makes no representation regarding the advisability of investing in the Securities.

The Index Closing Level on any trading day will be determined based on the closing level of the Index or any successor index or alternative calculation of such index published following the regular official weekday close of the principal trading session of the relevant exchange for such index.

Any of the following may be a market disruption event, in each case as determined by the calculation agent in its sole discretion:

For this purpose, an “absence of trading” in the primary securities market on which option or futures contracts related to the Index or any index constituents are traded will not include any time when that market is itself closed for trading under ordinary circumstances.

Discontinuance of or Adjustments to the Index; Alteration of Method of Calculation

If the sponsor (S&P) discontinues publication of the Index and the index sponsor or any other person or entity publishes a substitute index that the calculation agent determines is comparable to that index and approves the substitute index as a successor index, then the calculation agent will determine the closing levels of the Index by reference to such successor index.

If the calculation agent determines that the publication of the Index is discontinued and that there is no successor index on any date when the value of the Index is required to be determined, the calculation agent will instead make the necessary determination by reference to a group of stocks or another index or indices, as applicable, and will apply a computation methodology that the calculation agent determines will as closely as reasonably possible replicate the Index. If the calculation agent determines that any index constituents or the method of calculating the Index have been changed at any time in any respect — including any addition, deletion or substitution and any reweighting or rebalancing of the index constituents, as applicable, and whether the change is made by the index sponsor under its existing policies or following a modification of those policies, is due to the publication of a successor index, is due to events affecting one or more of the index constituent stocks or their issuers, as applicable, or is due to any other reason — that causes the Index not to fairly represent the value of that index had such changes not been made or that otherwise affects the calculation of the closing levels of the Index, then the calculation agent may make adjustments in this method of calculating that index that it believes are appropriate to ensure that the Index Closing Level used to determine the amount payable on any Interest Payment Date, Redemption Date or on the Maturity Date is equitable. All determinations and adjustments to be made by the calculation agent with respect to the closing levels of the affected index and the amount payable on any Interest Payment Date, Redemption Date or at maturity or otherwise relating to the level of the index may be made by the calculation agent in its sole discretion.


Number of Days on which the CMS Spread is equal to or greater than 0.00% *and* the Index Closing Level is equal or greater than the Index Barrier	Applicable Interest Rate (per annum)	Interest amount payable on any quarterly Interest Payment Date*
90	7.40%	$18.50
60	4.93%	$12.33
30	2.46%	$6.16
0	0.00%	$0.00


Type of Corporate Action		Adjustment Factor
Company added / deleted		Net change in market value determines the S&P Divisor adjustment.
Spin-Off (Only if spun-off company added to S&P Index and another company deleted from S&P Index)		S&P Divisor adjustment reflects deletion of company from S&P Index.
Special Dividend		When a company pays a special dividend the share price is assumed to drop by the amount of the dividend.
Rights Offering		Increase in market capitalization measured as the shares issued multiplied by the price paid.


Taxable Year:	Payment on	Payment on	Payment on	Payment on
2010	$	$	$	$
2011	$	$	$	$
2012	$	$	$	$
2013	$	$	$	$
2014	$	$	$	$
2015	$	$	$	$
2016	$	$	$	$
2017	$	$	$	$
2018	$	$	$	$
2019	$	$	$	$
2020	$	$	$	$
2021	$	$	$	$
2022	$	$	$	$
2023	$	$	$	$
2024	$	$	$	$
2025	$	$	$	$