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What Are the Tax Consequences of the Securities?

You should review carefully the section entitled "Material U.S.

Federal Income Tax Consequences" in the accompanying product

supplement no. UBS-5-I. In determining our reporting responsibilities

we intend to treat (i) the Securities for U.S. federal income tax

purposes as prepaid forward contracts with associated contingent

coupons and (ii) any Contingent Coupons as ordinary income, as

described in the section entitled "Material U.S. Federal Income Tax

Consequences Tax Consequences to U.S. Holders Tax Treatment as

Prepaid Forward Contracts with Associated Contingent Coupons" in the

accompanying product supplement no. UBS-5-I. Based on the advice of

Davis Polk & Wardwell LLP, our special tax counsel, we believe that

this is a reasonable treatment, but that there are other reasonable

treatments that the Internal Revenue Service (the "IRS") or a court

may adopt.

Sale, Exchange or Redemption of a Security.Assuming the treatment described above is respected, upon a sale or

exchange of the Securities (including redemption upon an automatic

call or at maturity), you should recognize short-term capital gain or

loss equal to the difference between the amount realized on the sale

or exchange and your tax basis in the Securities, which should equal

the amount you paid to acquire the Securities (assuming Contingent

Coupons are properly treated as ordinary income, consistent with the

position referred to above). The deductibility of capital losses is

subject to limitations. If you sell your Securities between the time

your right to a Contingent Coupon is fixed and the time it is paid,

it is likely that you will be treated as receiving ordinary income

equal to the Contingent Coupon. Although uncertain, it is possible

that proceeds received upon the sale or exchange of your Securities

prior to an Observation Date but that can be attributed to an

expected Contingent Coupon payment could be treated as ordinary

income. You should consult your tax adviser regarding this issue.

As described above, there are other reasonable treatments that the

IRS or a court may adopt, in which case the timing and character of

any income or loss on the Securities could be materially affected. In

addition, in 2007 Treasury and the IRS released a notice requesting

comments on the U.S. federal income tax treatment of "prepaid forward

contracts" and similar instruments, which might include the

Securities. The notice focuses in particular on whether to require

holders of these instruments to accrue income over the term of their

investment. It also asks for comments on a number of related topics,

including the character of income or loss with respect to these

instruments and the relevance of factors such as the nature of the

underlying property to which the instruments are linked. While the

notice requests comments on appropriate transition rules and

effective dates, any Treasury regulations or other guidance

promulgated after consideration of these issues could materially

affect the tax consequences of an investment in the Securities,

possibly with retroactive effect. You should consult your tax adviser

regarding the U.S. federal income tax consequences of an investment

in the Securities, including possible alternative treatments and the

issues presented by this notice.

The U.S. federal income tax treatment of Contingent Coupons is

uncertain, and although we believe it is reasonable to conclude that

Contingent Coupons are not subject to U.S. withholding tax (at least

if a Form W-8 is provided), a withholding agent may nonetheless

withhold on these payments (generally at a rate of 30%, subject to

the possible reduction or elimination of that rate under an

applicable income tax treaty), unless income from your Securities is

effectively connected with your conduct of a trade or business in the

United States. If you are not a United States person, you are urged

to consult your tax adviser regarding the U.S. federal income tax

consequences of an investment in the Securities in light of your

particular circumstances.