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ETRACS CMCI Silver Total Return

ETRACS CMCI Silver Total Return is designed to track the performance of the UBS Bloomberg CMCI Silver Total Return (the "Index"), less investor fees. The Index measures the collateralized returns from a basket of silver futures contracts. The commodity futures contracts are diversified across five constant maturities from three months up to three years.

The Index was created in January 2007 and has no performance history prior to that date.

 

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*Since inception

Historical results for the period from January 31, 2007 through December 31, 2010.

Source: UBS Investment Bank, publicly available data.

Historical information presented is as of December 31, 2010 and is furnished as a matter of information only. Historical performance of the Index is not an indication of future performance. Future performance of the Index may different significantly from historical performance, either positively or negatively.

The ETRACS ETNs are subject to investor fees. As a result, the return on the ETNs will always be lower than the total return on a direct investment in the Index or the Index constituents.

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Source: UBS Investment Bank

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Index comparisons

Source: UBS Investment Bank, CMCI Advisory Committee.

The graph above illustrates the historical returns of the Index from January 31, 2007 through December 31, 2010 in comparison with the spot price of silver in $/oz.

Historical performance of the Index is not an indication of future performance. Future performance of the Index may differ significantly from historical performance, either positively or negatively.

The ETRACS ETNs are subject to investor fees. As a result, the return on the ETNs will always be lower than the total return on a direct investment in the Index or the Index constituents.

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Maturity weights

Constant maturity weights of Future Contracts

Source: UBS Investment Bank, CMCI Advisory Committee. As of December, 2010

Weights across maturities are determined based on the relative liquidity of the underlying futures contracts.

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Risk considerations

An investment in the ETRACS ETNs involves risks. Selected risks are summarized here, but we urge you to read the more detailed explanation of risks described under "Risk Factors" beginning on page S-11 in the prospectus supplement for the ETRACS ETNs (the "ETRACS Prospectus"). Capitalized terms used below but not defined herein shall have the meanings attributed to them in the ETRACS Prospectus.

• You may lose some or all of your principal — The ETRACS ETNs are fully exposed to any decline in the level of the Index. You will lose some or all of your principal if the Index Ending Level is below the Index Starting Level or if the Index Ending Level is not sufficiently above the Index Starting Level to offset the cumulative effect of the Fee Amount applicable to your ETRACS ETNs. The Index is volatile and subject to a variety of market forces, some of which are described below. The Index Ending Level is therefore unpredictable. Commodity prices may change unpredictably, affecting the prices of the commodities underlying the exchange-traded futures contracts comprising the Index and, consequently, the value of the ETRACS ETNs.
• Limited performance history — The payment at maturity, call or early redemption on the ETRACS ETNs is linked to the performance of the Index, which was introduced in January 2007. As a result, the Index has a limited performance history, and it is uncertain how the Index will perform. In addition, while the Index is intended to represent a benchmark for commodities investments in silver, the methodology used to achieve this benchmarking has a limited history in its application. It therefore cannot be determined at this point whether, or the extent to which, the Index will serve as an adequate benchmark for the performance of the commodities market in silver.
• Market risk — The return on the ETRACS ETNs, which may be positive or negative, is directly linked to the performance of the Index, which is based on a variety of market and economic factors, interest rates in the markets and economic, financial, political, regulatory, judicial or other events that affect the markets generally.
• Credit of UBS — The ETRACS ETNs are senior 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 ETRACS ETNs 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 ETRACS ETNs 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 ETRACS ETNs.
• Potential over-concentration in a particular commodity — There is only one commodity – silver – underlying the futures contracts included in the Index. Investment in the ETRACS ETNs will increase your portfolio's exposure to fluctuations in the silver markets.
• A trading market for the ETRACS ETNs may not develop — Although the ETRACS ETNs are listed on NYSE Arca, a trading market for the ETRACS ETNs may not develop. Certain affiliates of UBS may engage in limited purchase and resale transactions in the ETRACS ETNs, although they are not required to and may stop at any time. We are not required to maintain any listing of the ETRACS ETNs on NYSE Arca or any other exchange.
• No interest payments from the ETRACS ETNs — You will not receive any interest payments on the ETRACS ETNs.
• No direct exposure to fluctuations in foreign exchange rates — The value of your ETRACS ETNs will not be adjusted to compensate for exchange rate fluctuations between the U.S. dollar and each of the other currencies in which the silver futures contracts are quoted. Therefore, if the applicable currencies appreciate or depreciate relative to the U.S. dollar over the term of the ETRACS ETNs, you will not receive any additional payment or incur any reduction in the payment at maturity, call or early redemption.
• Minimum Redemption Amount — You must elect to redeem at least 50,000 ETRACS ETNs for UBS to repurchase your ETRACS ETNs, unless we determine otherwise or your broker or other financial intermediary bundles your ETRACS ETNs for redemption with those of other investors to reach this minimum requirement.
• UBS' Contingent Call Right — UBS may elect to redeem all outstanding ETRACS ETNs if the aggregate principal amount of ETRACS ETNs outstanding is less than $10,000,000 as described under ''Specific Terms of the Securities — UBS' Contingent Call Right'' beginning on page S-36 of the ETRACS Prospectus.

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Important legal information specific to ETRACS ETNs Important legal and regulatory information: Disclaimer  Privacy policy  Business continuity (pdf)

UBS has filed a registration statement (including a prospectus, as supplemented by a prospectus supplement for each offering of the ETRACS ETNs) with the Securities and Exchange Commission (the "SEC") for the offerings to which this communication relates. Before you invest, you should read these documents and any other documents that UBS has filed with the SEC for more complete information about UBS and the offerings to which this communication relates. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, you can request the prospectus and any applicable prospectus supplement by calling toll-free (+1-877-387 2275).

Products and services in this web site may not be available for residents of certain jurisdictions. Please consult the restrictions relating to the product or service in question for further information. Activities with respect to US securities are conducted through UBS Securities LLC, a US broker dealer. Member of SIPC.

For information as to which entity provides the services in each jurisdiction, click here.

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