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The World of Natural ResourcesVontobel Tracker Certificates on the

JPMorgan Commodity Curve Indices

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25 The essentials in brief

26 Investment in commodities Emerging markets are driving demand Liquidity flow as a price driver Ideal tool for diversification The commodities market

29 JPMCCI – the benchmark among the commodity indices

10 Overview of the advantages of the JPMCCI

11 Overview «JPMorgan Commodity Curve Indices» (JPMCCI)

12 JPMCCI Aggregate

14 JPMCCI Energy

16 JPMCCI Industrial Metals

18 JPMCCI Precious Metals

20 JPMCCI Agriculture

22 General product details

24 The index method Inclusion in the JPMCC Aggregate index The importance of open interest The roll mechanism «Contango» and «Backwardation»

27 The index calculation

28 Commodities as an asset class Advantages of diversification with «JPMorgan Commodity Curve Indices» (JPMCCI) Investment in «JPMorgan Commodity Curve Indices» as a hedge against inflation Correlation to other asset classes

31 Appendix 1: The JPMCCI Aggregate in comparison with the competition

33 Appendix 2: Significant risks for investors

34 Licence notice/Legal notice

Table of Contents

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The essentials in brief

1 Future, also referred to as future contract, is a standardised forward contract traded on a stock exchange with which the buyer is required to purchase or sell a pre-determined quantity of a qualitatively defined good (goods future) or a pre-determined amount of a financial instrument (financial future) on a specific maturity date and at a specific price. Futures offer a wide choice of underlying assets such as indices, oil, gold, currencies etc.

The commodities market has now reached a market volume of USD 360 billion (status: December 2010) and is increasingly establishing itself as an emancipated and indispensable segment of the capital market. Nowadays, a portfolio which has been broadly drawn up according to strategic aspects cannot help but cover the commodities market.

An investment in commodities has multiple benefits for the investor:

•Hedge against inflation possible

•Widerdiversification of the portfolio possible

•Low or negative correlation with other asset classes allows portfolio protection

•Economic cycles and demographic change can be mapped well by commodities

Wheninvestingincommodities,however,theparticulari-ties of the market must be taken into account. Investments are always made in futures1, which poses several problems. Their terms are limited and must be regularly extended for a long-term investment. Losses can occur with this process, so-called «rolling». However, an even bigger problem may arise for the investor: if he or she fails to sell the future before the end of its term, the commodity will actually be delivered. Nobody wants to have a tanker parked in front of their door. The solution is investment products.

Withacommoditiesindex,investorscaninvestwithouta maturity limit and do not have to deal with terms; the index provider does that. There are a great many commo-dities indices, some of which have been on the market for a long time. Experience has shown, however, that many of them cannot optimally solve the problems of the com-modities market or only solve them in part. As a relatively young representative, the JPMorgan Commodity Curve Indices (JPMCCI) are lining up to become the new benchmark in the commodities index segment, since they have the right answer to all important questions.

The benefits of the innovative commodities index:

•Innovative weighting concept for an optimum allocation from the investor’s perspective

•Considerationoftheentireforward-pricecurveofallcommodities futures included

•Curve neutrality can reduce the volatility of roll yields and generates a higher risk-adjusted return

•36individualcommodities

This new generation of commodities investments had previously been reserved for institutional investors. Withthenewopen-endcertificatesforamultitudeof«JPMorgan Commodity Curve Indices», this possibility is now also open to private investors. The certificates provide investors with a professional instrument for optimising their investment success.

Certificates represent an interesting option for investors wishing to invest in commodities. They offer the easiest access to the market and a wide variety in selecting an in-dividual commodity. Investors can also choose to purchase certificates with currency hedging (or quanto structure). This protects them against negative currency effects which erode investment success. The following pages provide all the information you need on these products.

Bank Vontobel AG has been a market leader in structured products for years. In cooperation with J.P.Morgan, it combines the best of two worlds: Vontobel with its many years of expertise as an issuer of certificates as well as high-quality service in Switzerland and Europe, and J.P.Morgan with its comprehensive know-how in the commodities field as a global index provider.

Wouldyouliketostayinformedaboutcurrenttrendson the commodity markets? Subscribe to our free commodities newsletter at www.derinet.ch/newsletter

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Investment in commodities

The origins of trading commodities on financial markets go back a long way. The world’s first financial speculation bubble in the 1730’s, known as the «tulip mania» today, was the beginning of a long history of commodities trading on financial markets. Even then the market participants worked with futures contracts, which have stood the test of time. In 1636 the first futures exchange was founded for the trade with tulip bulbs. Therefore, listed commodi-ties trading can look back on a history that is nearly as long as listed equity trading (1602).

A further important step on the path to today’s world market was the foundation of the famous commodities exchange Chicago Board of Trade (CBOT) in 1848. The CBOT introduced the first standardised futures contracts traded on the exchange in 1864, an important step which again enormously increased the tradability of commodities. In 1872 the New York Mercantile Exchange (NYMEX) was established. In 1898 the Chicago Mercantile Exchange (CME) followed, which was initially called the Chicago Butter & Egg Board. CBOT, CME and NMEX have since grown into a single company under the umbrella of the CME Group and process transactions worth billions of dollars every day. In addition to the USA, commodities trading also has a long tradition in Europe. The London Metal Exchange was established in 1877 and is now the most important futures exchange for industrial metals in the world.

Today, the market for commodities is gigantic. The copper market is a good example: In 2010, the demand for the most important industrial metal is estimated to be 19 million tonnes. At a copper price of USD 9 000 per tonne, this corresponds to a market volume of USD 171 billion. According to figures from the Bank for International Settlements (BIS), the volume of outstanding unlisted commodity derivatives alone was USD 2.85 trillion. High liquidity is an important prerequisite for efficient markets and makes the market accessible to private investors as well. Nowadays, certificates for individual commodities or commodities indices allow every investor to integrate the entire variety of this segment in his or her portfolio.

There are many reasons for considering commodities in strategic portfolio planning:

Emerging markets are driving demandPrimarily, of course, commodities are the basis for the production of goods. For this reason, commodity invest-mentsareeconomicallysensitive.Whentheworldecono-my grows, demand for oil, copper etc. also increases. The fact that the apparently imperturbable economic dynamics of the emerging markets has long since decoupled from the economy in the industrialised countries additionally increases the attractiveness of the asset class of com-

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modities. After all, this development has decreased the fluctuation margin (volatility) of commodity prices, and the prices no longer depend on the fragile economic development in Europe, Japan and the USA. As a result, the asset class gains diversification potential. However, the enormous growth in China, India and other emerging markets not only means that investors can better diversify their custody account. Since many raw material deposits are limited, the long-term strongly increasing demand naturally also leads to a tendential scarcity. As a result, commodity prices will probably increase over the long term and thus present investors with capital growth.

Liquidity flow as a price driverCommodity prices will receive further impetus from the aftershocks of the financial crisis. Many central banks, above all the USA’s Federal Reserve System (Fed), have tried to tackle the crisis by opening the money gates in all channels. The Fed has supplied the market with nearly two trillion dollars of fresh money. This capital naturally wants to be invested. Since there is not enough real economic investment potential for such gigantic sums, large parts of the new capital are migrating to capital markets. In addition, many central banks have bought government and corporate bonds in large amounts. As a result, yields on fixed interest securities have sunk to a record low in many places, so that large sums are flowing into the equity and commodities markets.

The commodities market is therefore being gripped on two sides: increasing real economic demand and increasing capital market demand driven by liquidity.

Ideal tool for diversificationA balanced list makes a portfolio more resistant to great losses in value. The portfolio should take different asset classes into account, such as shares, bonds, commodities, real estate or currencies and should be diversified within these classes. The probability thereby increases that it can absorb or at least mitigate price losses in the other segments. The previously mentioned continuity of the demand from the boom in emerging markets increases the benefit of the portfolio as a diversification investment. In the event of an economic downturn in Europe, the share prices would follow the negative trend under normal conditions, but if the global economy continues to grow, thanks to booming countries such as China and Brazil, demand for commodities will not noticeably change. The trend of increasing commodity prices would therefore continue in this theoretical scenario. Investors who invest in the European stock market and suffer losses as a result could compensate for these entirely or partially with an investment in commodities, depending on the individual portfolio structure and performance of the commodities.

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Investment in commodities

The commodities marketThe commodities market should therefore be emphasised more strongly. However, it has many particularities which investors should be aware of. The most basic difference from other markets is that investors can only invest in forward rate agreements, so-called futures contracts, but an investment in a future contract has per definition a limited duration. If investors want to invest over the long term, contracts must be transferred to new longer-term contracts before they expire. This process is referred to as «rolling» in technical terminology. In this case, losses or additional pro-fits can occur depending on the course of the forward-price curve. The rolling problem is explained in more detail in the Index method section of this brochure. The limited duration can also lead to a very different kind of problem for an investor who invests directly in a future: if one still has the futures contract when maturity is reached, the commodity will be delivered. Therefore, if one fails to get out in time, it could happen that one suddenly has a tanker with 159 000 litres of Brent oil or a truck with 25 tonnes of copper per contract in front of one’s door. Both of these would present normal investors with a storage problem. The simpler solution is therefore an investment in commodities indices such as the JPMCCI. In this case, the index provider is responsible for the rolling and the storage risk.

A further particularity of future trading is the fact that always only a fraction of the capital that is to be moved has to be invested. Only a security, the so-called margin, has to be deposited. This differs according to the stock exchange and underlying asset. One example: at the

Chicago Mercantile Exchange the margin for silver is USD 6 500. On 9 December 2010 the silver price was USD28.57perfineounce.Withacontractsizeof5000fine ounces, the margin was therefore 4.55% of the actual investment volume. This is a great advantage to the inves-tor: the amount of money that is not needed to buy the future, in our example 95.45% of the actual investment sum, can be invested with interest and thereby increases the yield. One also speaks of «collateralised return» here. Collateralised return plus performance of the commodity plus roll yield result in the so-called «total return». Total return commodity investments therefore let the capital work for you almost doubly. However, there are also index variants in which the interest result is not added. In this case, one speaks of «excess return» (ER).

Commodities are purchased by investors above all as pro-tection against unexpected inflation resulting from sudden wars (e.g. the Iraq war), severe weather (drought, flooding and cold spells) and currency risks (Asia 1997, Russia 1998). The current environment of low inflation offers investors favourable entry possibilities.

The commodities market is divided into different cate gories (see overview page 11). The performance of different com-modity groups as well as individual commodities is in turn dominated by different factors. Naturally, the classic inter-action of supply and demand has the greatest influence on the price performance of all groups. The following explana-tions are to show which variables can influence supply and demand and therefore commodity prices.

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JPMCCI – the benchmark among the commodity indices

There are numerous commodity indices in the marketplace. Most of them attempt to replicate the market as accura-tely and remuneratively as possible. Each index possesses its own characteristics and employs its own methodology. There are a lot of different ways to construct commodity indices. There are broadly diversified indices or ones that concentrate on just a few commodities, and there are indices that are reweighted on a monthly or even daily basis. Some of them have even existed for 20 years. But the world is evolving, and the commodities market has

changed as well amid advancing globalization. Paradigms are shifting, as are the requirements for functioning index concepts. Bank Vontobel AG chose the JPMCCI because it is convinced of the innovative and intelligent metho-dology employed by this index. The JPMCCI is a very innovative index on the commodity indices market. Bank Vontobel is thus cooperating with the commodity market leader J.P.Morgan to offer its clients the blended best of two worlds. The JPMorgan Commodity Curve index family provides investors access to a wide range of commodity products, giving them the possibility to easily replicate the commodity markets individually or in their entirety with a single product. In doing so, investors can draw on the innovative, intelligent methodology employed by the JPMCC indices. The JPMCCI aggregate index, sub-indices and single commodity indices present investors with a vast array of options for replicating the commodities mar-ket with one or more products tailored to their needs.

You can access full information about the JPMorganCommodity Curve index family and our tracker certificates at www.derinet.ch/jpmcci

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Overview of the advantages of the JPMCCI

A commodities investment in one of the JPMCC indices offers the investor the following advantages:

•Broader portfolio disposition through diversification across asset classes. Broad distribution within the commodities asset class is also possible thanks to the JPMCC indices.

•Inflationhedging.Creeping asset devaluation in the form of sharp price increases (inflation) always goes hand in hand with rising commodities prices, as these are part of the «price basket». Investing in commodities can therefore contribute to the hedging of a portfolio against devaluation in the form of inflation.

•Pricelosshedging.Under certain circumstances, com-modities investments can compensate for price losses in stocks, particularly in times of a negative correlation between stocks and commodities.

•Profitingfromaneconomictrend.In the long term, population growth and scarcity of commodities lead to an upward trend in prices of limited commodities. Investors can use this scenario to build up assets.

Four reasons to invest in JPMCCIIt has become clear that commodities have long since progressed from being niche products to standard in-vestments. Investing in commodities presents a couple of pitfalls (i.e. rollover problems) which can be avoided by falling back on the intelligent index construction of the JPMCCI concept. The index concept could be the new benchmark in the commodities segment.

The JPMCCI is the only commodities index to fully take account of four primary aspects:

•Broad diversification. The JPMCCI offers 36 individual commodities, five sub-indices and an overall index. This makes it possible now to reflect the commodities market in its entire breadth and variety.

•Investment along the entire future curve with individual terms weighted according to open interest. Distribution throughout all terms in which there are open positions helps to optimise the influence of the rollover process on overall yield.

•Weighting according to open interest. This applies not only to distribution over terms but also to the weighting of individual commodities in the JPMCCI Aggregate. The «open interest» parameter reflects the role of the com-modity from the perspective of the capital market, which is definitive for investors.

•Successive rollover processes.Whencontractsmustbebought or sold, this does not take place with a transac-tion. The volume is divided into ten equal parts, which are sold successively on the first ten trading days of the month, evening out any outliers.

Another advantage of the JPMCCI is that individual commodities as well as the sub-indices and overall index can easily be reflected with certificates.

Performance of the main index JPMCCI Aggregate and 4 Sub-Indices, from August 2010 until August 2011

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Perf

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JPMCCI Energy JPMCCI Industrial Metals JPMCCI Precious MetalsJPMCCI AgricultureJPMCCI Aggregate

Aug 10 Sep 10 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11

Past performance and simulations are not reliable indicators of future performance. Taxes and any fees reduce the total return. Source: Bloomberg, data as of August 31, 2011

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JPMCCI Cotton TRI JPMCCI Brent Crude TRI JPMCCI Gold TRI

Overview «JPMorgan Commodity Curve Indices» (JPMCCI)

Main index

Sub-Indices

Individual commodity indices

JPMCCI Agriculture TRI JPMCCI Energy TRI JPMCCI Industrial Metals TRI JPMCCI Precious Metals TRI

JPMCCI Corn TRI JPMCCI Crude Oil TRI JPMCCI Silver TRI

JPMCCI Cocoa TRI JPMCCI Natural Gas TRI

JPMCCI Coffee TRI

JPMCCI Sugar TRI

JPMCCI Wheat TRI

Agricultural commodities Energy commodities Industrial metals Precious metals

JPMCCI Aggregate TRI

JPMCCI Copper TRI

The JPMCC index family uses a comprehensive cross- section of 36 individual commodities tracked by an aggre-gate index, sub-indices and single commodity indices to reflect the entire commodities market in its full breadth and variety, and above all transparently. Vontobel, in coope-ration with J.P.Morgan, combines the best of two worlds; as the leading provider of tracker certificates, Vontobel

has been issuing structured products based on the JPMCC index family since the beginning of 2011. Investors can choose from a wide array of tracker certificates (SSPA product type number: 1300) on the JPMCCI Aggregate Total Return Index as well as on four sub-indices and twelve single commodity indices.

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JPMCCI Aggregate (Main index)

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JPMCCI Aggregate

The JPMCCI Aggregate Index employs 36 single commo-dity indices to track the entire commodities market in a breadth and depth unmatched by conventional commodity indices. Energy commodities make up the lion’s share of the aggregate index. Agricultural commodities, industrial metals and precious metals account for the rest of the index, with the livestock sector playing a subordinate role.

Index-Codes JPMCCI Aggregate: ISIN GB00B4VL6563, Bloomberg JMCXTR, Reuters CHVONT074=JPML

Data as of August 31, 2011

Source: Bloomberg

45.41% Energy 20.77% Agriculture 17.64% Industrial Metals 13.64% Precious Metals 12.55% Livestock

Current prices and the term sheet (final terms) stating the legally binding conditions, as well as further informationabout the rewards and risks, can be accessed at www.derinet.ch/jpmcci

Underlyings VONCERT (Tracker Certificates)

Category Name Index calculation

Reference currency

Swiss security number Symbol Maturity Currency

Main index JPMCCI Aggregate TRI Total Return USD 1208 7907 ETCCIU Open End USD

1208 7912 ETCCIC Open End CHF Quanto1

1208 7922 ETCCIE Open End EUR Quanto1

1208 7917 ETXCIU 04.02.2021 USD (COSI®)2

1the current Quanto- and Management fee can be downloaded at any time from www.derinet.ch under product details. 2COSI® Collateral Secured Instruments – InvestorPro-tection engineered by SIX Group; Further information: The issuer/guarantor of these products is Vontobel Financial Products Ltd., DIFC Dubai/Vontobel Holding AG, Zurich (S&P A; Moody’s A2), and the listing is registered on SIX Swiss Exchange.

JPMCCI Single Commodities in Aggregate Index (JPMCCI Aggregate)

Commodity Sector Stock exchange Weighting1

Aluminum Industrial metals LME 5.34%

Beef Cattle Livestock CME 0.24%

Brent Crude Energy ICE 9.09%

Cocoa Agriculture NYBOT 0.51%

Coffee Agriculture NYBOT 1.80%

Copper Industrial metals LME 7.18%

Copper Industrial metals COMEX 1.43%

Corn Agriculture CBOT 5.10%

Cotton Agriculture NYBOT 1.19%

Crude Oil Energy NYMEX 19.44%

Ethanol Energy CBOT 0.05%

Gas Oil Energy ICE 5.32%

Gold Precious metals COMEX 10.07%

Heating Oil Energy NYMEX 4.18%

Lead Livestock CME 0.61%

Lean Pork Livestock CME 0.78%

Live Cattle Livestock CME 1.53%

Natural Gas Energy NYMEX 4.08%

Nickel Industrial metals LME 1.32%

Commodity Sector Stock exchange Weighting1

Nickel Industrial metals LME 1.32%

Orange Juice Agriculture NYBOT 0.09%

Palladium Precious metals NYMEX 0.18%

Petrol (Gasoline) Energy NYMEX 3.25%

Platinum Precious metals NYMEX 0.27%

RobustCoffee Agriculture LIFFE 0.23%

Rough Rice Agriculture CBOT 0.06%

Silver Precious metals COMEX 3.12%

Soya Bean Meal Agriculture CBOT 0.84%

Soya Bean Oil Agriculture CBOT 1.11%

Soya Beans Agriculture CBOT 3.91%

Spring Wheat Agriculture MGE 0.25%

Sugar Agriculture NYBOT 2.91%

Tin Industrial metals LME 0.30%

Wheat Agriculture CBOT 1.82%

White Sugar Agriculture LIFFE 0.31%

Winter Wheat Agriculture KCBOT 0.67%

Zinc Industrial metals LME 1.47%1Data as of August 31, 2011; Source: J.P.Morgan

JPMCCI Energy(sub-index)

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Energy resources arguably constitute the most essential commodity category. In the modern world, it is impossible to do without energy. There are hardly any motor vehicles that can be driven without petroleum, at least for now. Withoutnaturalgas,manyheatingsystemsandpowerplants would not function. And it takes energy to produce goods. Sometimes energy commodities are even used as direct ingredients in products. Plastics, for example, are made out of petroleum. This means that the development of the world economy naturally has a huge impact on the prices of energy commodities. Political decisions on energy supply issues likewise have a significant, but rather long-term influence on the prices of energy commodities. For instance, if countries move to abandon atomic energy, they initially have an elevated need for fossil fuels. Conver-sely, a massive buildout of renewable energy to replace exchange-traded fossil fuels could push prices down. Investors in energy commodities should keep an eye on inventory data from the world’s major economies, though this mostly exerts a near-term impact on prices.

The JPMCCI Energy sub-index enables investors to replicate the energy sector with a single product. Oil and natural gas of course play the leading role in this sector index. In terms of trading volume and economic importance, the energy sector is the biggest commoditymarketofall.WTIandBrentcrudeoil futures are accordingly also the most traded commo-dity contracts with the highest visibility worldwide. WTIlightsweetcrudeandBrentcrudecarrythehigh-est weightings in the index and trade on two different futures exchanges.

Index-Codes JPMCCI Energy: ISIN GB00B4X1VG03,Bloomberg JMCXENTR, Reuters CHVONT072=JPML

JPMCCI Energy

Source: Bloomberg


42.81% Crude Oil 20.02% Brent Crude 11.71% Gas Oil 19.20% Heating Oil 8.99% Natural Gas 7.17% Gasoline 10.11% CBOT Ethanol



Reference currency


sub-index

JPMCCI Energy TRI Total Return USD 1208 7908 ETCENU Open End USD

1208 7913 ETCENC Open End CHF Quanto1

1208 7923 ETCENE Open End EUR Quanto1

1208 7918 ETXENU 04.02.2021 USD (COSI®)2

Individual commodity

JPMCCI Brent Crude TRI Total Return USD 1208 8053 ETCBCU Open End USD

JPMCCI Brent Crude TRI Total Return USD 1257 2089 ETCBCC Open End CHF Quanto1

JPMCCI Brent Crude TRI Total Return USD 1257 2092 ETCBCE Open End EUR Quanto1

JPMCCI Crude Oil TRI Total Return USD 1132 8866 ETCCOU Open End USD

JPMCCI Crude Oil TRI Total Return USD 1132 8867 ETCCOC Open End CHF Quanto1

JPMCCI Crude Oil TRI Total Return USD 1132 8868 ETCCOE Open End EUR Quanto1

JPMCCI Natural Gas TRI Total Return USD 1208 8052 ETCNGU Open End USD

JPMCCI Natural Gas TRI Total Return USD 1257 2091 ETCNGE Open End EUR Quanto1

JPMCCI Natural Gas TRI Total Return USD 1257 2088 ETCNGC Open End CHF Quanto1



JPMCCI Industrial Metals (sub-index)

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JPMCCI Industrial Metals

Like energy commodities, the prices of industrial metals are also very sensitive to cyclical economic fluctuations. Copper, aluminum, lead, nickel, zinc and tin rank among the biggest components of the JPMCCI Industrial Metals sub-index. Industrial metals are called this because they are mainly used for industrial production. This naturally also implies their most important influencing factor: economic growth in the industrialized countries and in industriali-zing emerging markets, especially China. The greater the production output there, the more metals are needed. Another influencing factor is production disruptions that reduce the supply of industrial metals. For example, in Chile, by far the world’s largest producer of copper, there are recurrent labor disputes that cause weeks-long production interruptions.

Source: Bloomberg


40.70% Copper 30.24% Aluminium 18.34% Zinc 18.10% COMEX Cooper 17.45% Nickel 13.46% Lead 11.71% Tin

The London Metal Exchange (LME) and the Chicago Mercantile Exchange (CME) are the main trading cen-ters for industrial metals. Since copper and aluminum are especially widely used in the real economy, those two metals are assigned a higher-than-average weighting in the JPMCCI Industrial Metals sub-index. To reflect the special role played by copper, two different exchanges are taken into account: the London Metal Exchange (LME) and the COMEX division of the New York Mercantile Exchange.

Index-Codes JPMCCI Industrial Metals: ISIN GB00B4V1B392, Bloomberg JMCXIMTR, Reuters CHVONT073=JPML



Reference currency


sub-index

JPMCCI Industrial Metals TRI Total Return USD 1208 7910 ETCIMU Open End USD

1208 7915 ETCIMC Open End CHF Quanto1

1208 7925 ETCIME Open End EUR Quanto1

1208 7920 ETXIMU 04.02.2021 USD (COSI®)2


JPMCCI Copper TRI Total Return USD 1208 8056 ETCCLU Open End USD

JPMCCI Copper TRI Total Return USD 1257 2090 ETCCLC Open End CHF Quanto1

JPMCCI Copper TRI Total Return USD 1257 2093 ETCCLE Open End EUR Quanto1



JPMCCI Precious Metals(sub-index)

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Reference currency


sub-index

JPMCCI Precious Metals TRI Total Return USD 1208 7911 ETCPMU Open End USD

1208 7916 ETCPMC Open End CHF Quanto1

1208 7926 ETCPME Open End EUR Quanto1

1208 7921 ETXPMU 04.02.2021 USD (COSI®)2

Individual commodityJPMCCI Gold TRI Total Return USD 1208 8054 ETCGOU Open End USD

JPMCCI Silver TRI Total Return USD 1208 8055 ETCSIU Open End USD

JPMCCI Precious Metals

For centuries precious metals have been considered an important medium of exchange, and investors have always viewed them as a source of inflation protection and as a safe haven in times of crisis. The demand factors for the individualmetalsareverydifferent.Whiledemandforgoldis driven mainly by the jewelry industry and by investors seeking a hedge against inflation, traditional manufactu-ring plays an additional key role as a driver of demand for silver. The platinum group metals, which include palladium alongside platinum, are an essential component of catalytic converters for motor vehicles. The prices of platinum group metals therefore have relatively high sensitivity to world-wide automobile production activity. The jewelry industry and investment demand play only a subordinate role here. Precious metals are traded around the clock on numerous exchanges. Besides prices for futures contracts, there are also spot prices for immediate physical delivery. Precious metals are also traded in the form of bars and coins.

Gold dominates the JPMCCI Precious Metals sub-index with a weighting that accounts for more than two-thirds of the total. The performance of this index varies little from that of other benchmark indices because gold and silver exhibit a very flat futures curve.

Index-Codes JPMCCI Precious Metals: ISIN GB00B4PCHS51, Bloomberg JMCXPMTR, Reuters CHVONT075=JPML

Source: Bloomberg


73.85% Gold 22.89% Silver 11.96% Platinum 11.31% Palladium



JPMCCI Agriculture(sub-index)

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JPMCCI Agriculture

The agricultural commodities market is the most varied one in terms of the number of different commodities and commodity subtypes. Various factors play an important role in long-term demand development. The more the world population grows, the more food that is needed to feed everyone. Utilization of crops to produce bioethanol fuel additionally increases demand for some commodities such as corn and sugar. In Brazil, for example, more than 50% of cars on the road are already being powered with bioethanol. Admixing bioethanol is now mandatory in the USA as well. On the supply side, the commodity price itself also has its own effects. Staple foods are often substitutes in the food industry. As a result, a long period of rising corn prices can prompt many farmers to switch their production capacity from wheat to corn, for example. This increases supply again and slows the rise in prices in the long term. Harvest yields can have a strong short- to medium-term impact on supply and mainly depend on the weather. Storms or exces-sive rain or drought can ruin harvests. On the other hand, ideal weather conditions can result in much-better-than-expected harvests. The Chicago Mercantile Exchange (CME) and the Euronext LIFFE exchange in London are the most important trading centers for agricultural commodities.

Reflecting the diversity of the agricultural commodities market, the JPMCCI Agriculture sub-index encompassing a total of 15 individual commodities covers most types of agricultural resources.

Index-CodesJPMCCIAgriculture:ISINGB00B4P5SW59,Bloomberg JMCXAGTR, Reuters CHVONT071=JPML

Source: Bloomberg




Reference currency


sub-index

JPMCCI Agriculture TRI Total Return USD 1208 7909 ETCAGU Open End USD

1208 7914 ETCAGC Open End CHF Quanto1

1208 7924 ETCAGE Open End EUR Quanto1

1208 7919 ETXAGU 04.02.2021 USD (COSI®)2


JPMCCI Corn TRI Total Return USD 1208 8057 ETCCRU Open End USD

JPMCCI Cocoa TRI Total Return USD 1208 8059 ETCCAU Open End USD

JPMCCI Coffee TRI Total Return USD 1208 8060 ETCCFU Open End USD

JPMCCI Cotton TRI Total Return USD 1208 8061 ETCCTU Open End USD

JPMCCI Sugar TRI Total Return USD 1208 8062 ETCSUU Open End USD

JPMCCI Wheat TRI Total Return USD 1208 8058 ETCWHU Open End USD



24.54% Corn 18.80% Soy Bean 13.99% Sugar 18.76% Wheat 18.65% Coffee 15.72% Cotton 15.33% Soy Bean Oil 14.05% Soy Bean Meal 13.20% WinterWheat 12.43% Cocoa 11.50% WitheSugar 11.19% SpringWheat 1.13% RobustCoffee 10.41% Orange Juice 10.29% Rough Rice

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General product details

Bank Vontobel now offers investors the appropriate certi-ficates to convert an investment in the constellation of JPMCC indices into practice. These certificates are known as Delta 1 products, or in simpler terms, tracker certificates (hereinafter referred to as Vontobel JPMCCI tracker certi-ficates or, as VONCERT on «JPMorgan Commodity Curve Indices»).

How tracker certificates workTracker certificates embody an index or stock basket in a single security. Tracker certificates enable a direct entry into an entire market and thereby a broad risk distribution with little capital and administration expense.

Withtrackercertificates,investorsparticipatelinearlyinthe performance of the underlying asset. All products are listed on the SIX Swiss Exchange and can be traded on the Scoach derivatives exchange.

The following applies to all Vontobel JPMCCI tracker certificates listed above:

Issuer: Vontobel Financial Products Ltd., DIFC DubaiGuarantor: Vontobel Holding AG, Zürich (Standard & Poor’s A; Moody’s A2)Lead manager: Bank Vontobel AG, ZürichPaying and calculation agent: Bank Vontobel AG, ZürichSSPA product type: Tracker certificate (1300), see also www.svsp-verband.ch

Fee structureThe fees represent the sum of the management fee and Quanto fees (which apply only to Quanto certificates). The management fee corresponds to the initial manage-ment fee of 1% per annum at the time of initial fixing. The issuer is entitled to adjust the management fee on the investor’s quarterly redemption date (first redemption date December 2012) down or up to the amount of the maxi-mum management fee (2% p.a.). Any adjustment to the management fee will be published by the issuer one month in advance at www.derinet.ch.

The Quanto fee corresponds to the initial Quanto fee at the time of initial fixing. The exact fee can be found in the product details and product history of this product at www.derinet.ch. Collateralisation costs may change, how-ever. In the event that an adjustment must be made, the issuer is entitled to adjust the Quanto fee on any trading

day. The amount of the initial Quanto fee and all adjust-ments affecting the Quanto fee will be published by the issuer at the specified location at www.derinet.ch.

TermAll Vontobel tracker certificates on «JPMorgan Commod-ity Curve Indices» are designed as open-ended products. As such, there are no term limitations (except for collateral secured products). The issuer does, however, have a right of termination. The issuer is entitled to terminate JPMCCI tracker certificates at any time for the purpose of early re-demption («termination date») without giving reasons, but no sooner than three months after provisional admission to trading on SIX Swiss Exchange. Corresponding notifica-tion must be published at least one month in advance. In this event, the term of the JPMCCI tracker certificate shall end early. In the event of a termination, the redemption amount shall be established on the relevant termination date. The redemption shall be made within five bank-ing days of the termination date. Should adjustments to the index be scheduled or already have been made, the issuer also has the right to terminate the JPMCCI tracker certificate at any time and without notice period as of a termination date determined by the issuer. The issuer also has this right should other events arise in reference to the index which, in the opinion of the issuer, appear to make the continuation of the JPMCCI tracker certificate ill-advised. The relevant notification must be published as soon as possible, stating the termination date authoritative for calculating the redemption amount.

The investor shall have the opportunity to sell the Vontobel JPMCCI tracker certificates within the respective trading times on or off the market. In addition, he or she has the right, subject to advance notice of the issuer, to terminate the issuer’s tracker certificates quarterly on the last banking day of the quarter (first termination date March 2011). Notice must be submitted to the paying and calculation agent no later than five banking days prior to the termina-tion date.

All products and term sheets (final terms) stating thelegally binding conditions, as well as further informationabout the rewards and risks, can be viewed at www.derinet.ch/jpmcci

23

Profit and loss prospectsVontobel JPMCCI tracker certificates are tracker certifi-cates, which allow participation in an underlying instru-ment’s performance in a transparent way and with a single transaction. Any potential profit consists of the positive difference between the sales price achieved, or the redemption price, and the purchase price. Vontobel JPMCCI tracker certificates do not achieve current income. The value of the tracker certificates during their term is significantly influenced by the price development and the volatility of the underlying instrument and the respective remaining term. A loss is made if the tracker certificates are sold or redeemed at a lower rate than the purchase price paid. Such a loss scenario may occur if the underlying instrument performs negatively. This may cause the price of the tracker certificates to fall significantly below the issue price/purchase price during the term, which results in a corresponding loss. Vontobel JPMCCI tracker certificates have no capital protection. A loss of up to the amount of capital invested can therefore not be ruled out.

Currency hedging – QuantoSome Vontobel JPMCCI tracker certificates are equipped with an additional function called Quanto, which hedges the investor against fluctuations in exchange rates. If an underlying is listed in US dollars but the certificate is listed in euros, a decrease in the value of the US dollar could reduce the trading result. In the worst case, losses might even arise from currency effects even though the price of the underlying increases. The Quanto mechanism protects against this currency effect. Vontobel JPMCCI tracker cer-tificates with a currency hedge always convert the price of the underlying with a ratio of 1. If the underlying is quoted at 200 dollars, for instance, the certificate – with a sub-scription ratio of one – will cost approximately 200 euros. Withthishedge,whichisgenerallyachievedviainterest-rate swaps, costs become due, i.e. Quanto fees. Quanto fees are deducted pro rata from the certificate trading price each trading day. Quanto fees may vary during the term of a certificate. Bank Vontobel publishes the current Quanto fee on its website under the product details and product history of each respective certificate so that investors can view them at any time.

Collateral securitisation with collateral secured instruments (COSI)Bank Vontobel also offers tracker certificates on JPMCCI indices with collateral securitisation by means of collateral secured instruments, or COSIs. The products differ from other commodity indices because they have a fixed term. Collateral secured instruments are listed on the SIX Swiss Exchange and tradable on the Scoach derivatives exchange.

From a legal standpoint, structured products are bearer bonds. For this reason, claims from these instruments in the event of the issuer’s bankruptcy are, as a rule, not privileged. Investors are considered normal class 3 credi-tors, i.e. they are equivalent to bond holders. This issuer risk can be reduced, for instance, through diversification, specifically through investment in certificates of various issuers. One new and effective way to eliminate issuer risk to a great extent is collateral secured instruments or COSIs.

Because the SIX Swiss Exchange, and not the issuer, ad mi nisters the collateral security, the independence of the collateral, and thereby an additional protection mechanism for the investor, is assured.

Read more about this in our brochure on collateral-secured certificates, which can be accessed at www.derinet.ch/cosi

24

The index method

The basis of the JPMCCI method is the weighting of commodities using open interest, in other words the total number of outstanding future positions. The durations with the highest open interest also have the largest weight. As a result, the importance of the individual durations on the capital market is taken into account. From the per-spective of investors, this is the preferred variant, since the capital market perspective is the most important one for capital market participants. A second important method is investing along the entire duration and not in an individual duration as with conventional commodity products. As such, negative roll influences are smoothed from the very beginning. In addition, the most liquid market segments are taken into account according to their importance.

Inclusion in the JPMCC Aggregate indexThe objective of the JPMCCI Aggregate is to compile a comprehensive commodities portfolio that provides a transparent, diversified and investable representation of the commodities market. In order to be included in the JPMCCI Aggregate, a commodity first has to meet five basic prerequisites: It must...

•betradedatapubliclyaccessibleexchange,•bequotedeitherinGreatBritainortheUSA,•bequotedindollars,•havebeentradedforatleastayearbeforebeingadded

to the index,•haveanestimatedmarketvolumeofatleastUSD250

million. The estimated market volume is calculated from the 3-year average of the open positions according to the Futures Industry Association, multiplied by the price of the short-term future.

After a commodity has been added to the index, it remains there until the estimated market volume has fallen below USD 150 million. This limit is so far below the admission limit that commodities that vary around the USD 250 million mark do not continuously fluctuate.

The composition of the individual commodities in the Aggregate index is also oriented towards the market volume estimated in dollars.

The importance of open interestThe success of the JPMCC index construction is based on the consideration of all durations of the futures curve in proportion to the respective open interest. The respective contracts are represented according to the percentage of open positions in the individual durations in the total open interest. The open interest represents the entire number of outstanding futures contracts held by market partici-pants. It measures the size of the respective commodity market from the perspective of the financial market. From an investor’s perspective, this is a more practical method than for example a weighting according to production sizes or trading volumes.

Withaweightingaccordingtoopeninterest,however,there are two conditions that a contract must meet:

•Theminimumshareofthecontractinthetotalopeninterest must be at least 3%.

•Thecontractmustnotbecomeduebeforethenextroll date.

Open Interest:Theopenintereststandsforthesumofallopenpositionsinafuturescontract.Witheachstockexchangetransactionthat creates a new position for the buyer as well as the seller, the open interest increases by 1 (A buys a contract for the first time, B sells a contract short for the first time).On the other hand, the sum remains unchanged with a transaction that opens a position and closes another one (A sells his contract to C). If the transaction closes a position for the buyer as well as the seller, the open interest decreases correspondingly (C sells to B).

25

0

200

400

600

800

1000

1200

1400

1600

1800

0

5

10

15

20

25

30

35

40

Oct 11

27.77

13.26

23.28

5.317.23

14.97

8.18

Nov 11 Dec 11 Jan 12 Jun 12 Dec 12 Dec 13

Open Interest (absolute values)

Share of the total open interest in per cent

Share of Open Interest (in %)

This is what the distribution of open interest in a given commodity could look like along the futures curve. In this particular example, 27.77% of the outstanding posi-tions are invested in the nearest futures contract (due in October 2011). In the case of a weighting based on open interest, this contract would then also receive a weighting of 27.77% of the total investment sum to replicate the commodity. In this example, a cumulative 65% or so of the total investment sum is invested in the three nearest contracts. These three maturities would thus accordingly account for 65% of the weight of the JPMCCI.

Alternative weighting methods would be, for example, a weighting according to production volumes. This gives an excellent overview of the overall economic significan-ce of a commodity, but is suboptimum from an investor’s point of view since it takes into account commodities which are difficult to invest in or access. An investor always receives a distorted picture here from the capital market perspective. In addition, this data is often outdated. The weightings would therefore not reflect the current produc-tion conditions.

The roll mechanismAs mentioned above, futures must be transferred (rolled) to longer running contracts before the end of their term, unless one wants to have the commodity delivered. In this case, investors can basically be confronted with two situations: the new contracts are either more expensive or less expensive than the «old» futures. Normally, contracts that are further in the future are more expensive. The total costs of storing a commodity, from storage fees to insurance costs to interests and wastage are an important reason why commodities with a delivery date in the future are more expensive. For this reason, futures generally cost more, the further the delivery date is in the future. Two technical terms describe the two possible situations:

Source: Bank Vontobel AG

Fictional example: Allocation of open interest along the futures curve

26

The index method

ContangoOne speaks of a contango situation when contracts with longer durations are considerably more expensive than ones with shorter durations. The reason for this is that longer durations mean higher storage costs, longer insur-ance terms and thus higher insurance premiums or even higher capital costs. The profits from expiring futures contracts are therefore consumed by the roll losses gener-ated by rolling into the next longer futures contract. A contango situation is usually present when the market expects rising current prices. A contango future curve could look like the one shown in the chart above.

BackwardationOne speaks of an opposite backwardation situation when contracts with longer durations are less expensive than ones with shorter durations. As a result, roll gains can occur during the regrouping process. A backwardation situation is usually given when the market expects falling prices. A backwardation futures curve could look like the one shown in the chart above.

Many commodities products provide a more or less sophis-ticated mechanism to minimise possible roll losses or to optimise rolling in general. One then speaks of roll-opti-mised products. The JPMCC index family does not have any specific roll optimisation mechanism. The construction of the indices is already designed in such a way that the influence of roll losses on the price development is kept to a minimum. Since positions are maintained in all duration areas from the very beginning, unlike most other commod-ities indices, the risk of roll losses is considerably reduced.

Naturally, some of the contracts still have to be rolled every month so that the representation of the futures curve pre-cisely oriented to the open interest remains permanently ensured. To prevent temporary price shocks from having too much of an influence, the required purchase and sales volume is divided by ten for the JPMCC indices. The ten individual transactions are then successively carried out on the first ten trading days of the month. As such, the target composition for a month is always achieved on the tenth trading day of the month. The purpose of this procedure is to smoothen short-term price fluctuations.

ContangoBackwardation

Maturity

Futu

re p

rice

Maturity

Futu

re p

rice

ContangoBackwardation

MaturityFu

ture

pric

eMaturity

Futu

re p

rice

Source: Bank Vontobel AG Source: Bank Vontobel AG

Contango situation in the commodity market Backwardation situation in the commodity market

27

The index calculation

For commodities investments, basically three index types are conceivable:

•Spot-Return-Index: Simply maps the performance of the commodity. However, as it does not take account of whether the price of the nearest future is more favour-able (backwardation) or more expensive (contango), it is not capable of replication and consequently not capable of investment.

•Excess-Return-Index: Whencalculatingtheexcessreturnindex, the roll yield, which can be positive or negative, is included in the index. Advantage over the spot return index: it is reproducible and thus investable. Disadvan-tage over the total return index: it does not earn the maximum possible yield.

•Total-Return-Index: Since only a fraction of the invest-ment sum has to be invested for futures, the rest can be invested with interest. The interest result is included in this index. The total return index (TRI) will thus earn a higher yield than the other two index types. The higher the interest rate, the greater the performance difference.

The indices are calculated according to the total return method. The TR method is the most attractive one for investors, since it earns the highest yield. As with all commodities products, the total return yield consists of different components:

•Price gains: Price increases of the commodity during the observed period, also called spot yield.

•Roll yield: The result of the monthly adjustment process.

•Interest return: Interest income from the cash amount that is not needed. Since an investment is made in futures, only a fraction of the investment sum is needed to represent the desired amount of the commodity. The rest of the sum is invested with interest. Interest income is included in the total return variant.

Price gains

Spot Return Index

Price gains

Roll yield

+

Excess Return Index

Price gains

Roll yield

+

Interest

+

Total Return Index

28

Commodities as an asset class

As mentioned above, commodities have in the mean-time established themselves as a separate and complete asset class. At the same time, investment products for commo dities can be useful for structuring and allocating a portfolio that has been compiled according to state-of-the-art, risk-optimised aspects. In the following, the most important characteristics are explained, which make an investment in commodities especially wise in the context of a portfolio.

Commodities investments via index prove to be superior to a spot or direct investment in many respects. If one buys physical gold, for example, the investor has many disadvantages.Whenphysicallybuyinggoldbarsorcoins,investors must always pay an extra charge for the dealer. The resulting spreads between the purchase and selling price can quickly consume a large part of the potential yield. In addition, investors have a storage risk with physi-calpurchase.Withaspotinvestment,theinvestorhastheproblem of rolling. If a commodity is quoted in contango (see also the section Index method), roll losses may arise. Intelligent index constructions are an interesting solution to these problems.

Advantages of diversification with «JPMorgan Commodity Curve Indices» (JPMCCI)The J.P.Morgan Commodity Curve Indices are ideal for diversifying a portfolio according to an investor’s individual requirements. In JPMCCI, J.P.Morgan offers a very wide range of products with a total of 36 JPMCC individual commodity indices, five subindices and one overall index, the JPMCCI Aggregate. Neither S&P GSCI (24 individual commodities) nor UBS CMCI (26 individual commodities) boast an equally large range. In this way, every investor can put together the commodities share of his or her portfolio tailored to the respective overall portfolio context.

As a wide-ranging commodities index, JPMCCI Aggregate offers easy access to a cross-section of the entire commo-dities market. Investors can thereby increase the risk-adjus-ted yield of their portfolio. A reverse projection carried out by J.P.Morgan (period from January 1996 to September 2007) came to the following result: if one added 30%

JPMCCI Aggregate to an account that consisted of 50% shares and bonds, the annual yield increased by 0.90%. At the same time, the fluctuation range, in other words the risk, decreased by 0.80%.JPMCCI Aggregate is not only suitable for the long-term diversification of a portfolio, however. Due to the low correlation (see the section Correlation to other asset clas-ses), investors can use this commodities product to hedge against price declines on the stock market over a particular period of time. Commodities can function as a hedge for stock investments in two scenarios:

•Thepricedeclineonthestockmarketsiscausedbyageopolitical event or a global supply shock. Examples of this occurred in the years 1973 (first oil crisis) and 1990 (GulfWar).

•Commoditypricehikescontributetoinflationarytenden-cies and prompt central banks to slow down growth by tightening monetary policy. An example of this occurred in 2000. The recovery after the Asia crisis had previously driven up prices. The consequence of the tightened monetary policy was the bursting of the internet bubble and the subsequent stock market crash.

5%

6%

7%

8%

9%

10%

11%

12%

13%

2% 4% 6% 8% 10% 12% 14% 16%

Volatility

Ret

urn

100% bond

50% Equity

100% Equity

100% JPMCCI

30% JPMCCI

50% Bond

70% Bond / Equity

Source: JPMorgan and index sponsors. Data from Jan 1996 to Sept 2007 Bond Investment – Lehman US Aggregate.Stock Investment – S&P 500.

JPMCCI Diversification for a Bond 50%/Stock 50% portfolio

29

Investment in «JPMorgan Commodity Curve Indices» as a hedge against inflationIf you do not protect your assets against inflation, you risk gradual depreciation. One possibility of hedging against inflationary tendencies is to purchase so-called inflation-linked bonds or swaps. These offer variable interest that is based on the performance of the price indices such as the Harmonized Consumer Price Index (HCPI). A further possibility is to purchase real stocks. These include com-modities as well as shares (especially commodity shares), real estate and even so-called commodity currencies. These consist of the currencies of countries that achieve a key

share of their gross domestic products with the export of commodities. Important resource countries are, for example, Australia (ores, metals, agricultural commodities), Russia (agricultural commodities, oil, gas) and Brazil (oil, agricultural commodities).

The adjacent diagram shows that hedging with com-modities is the most profit yielding variant here. For this analysis, the yields of various asset classes between 1990 and 2006 were measured, in which a surprise inflation occurred. This was done by comparing the actual inflation rate at the end of each year with the consensus estimates at the beginning of the respective year. As can be seen in the diagram, most assets achieved positive yields in such years. Most apparently, the commodities market as a who-le and above all energy commodities and industrial metals in particular grew. The direct relationship is logical: energy commodities as well as industrial metals are components of most inflation indices. In the US market, the «JPMorgan Commodity Curve Index» achieved an average yield of 26% during these years. In contrast, so-called Treasury Inflation-Protected Securities (TIPS), in other words inflation-based government bonds, only achieved eight percent.Withanaverageyieldoffourpercent,sharesare even worse off. Real estate with twelve per cent and commodity currencies with nine per cent closed somewhat better than TIPS and shares, but did not nearly achieve the yields of commodities.

In summary, it can be said that there are many ways of hedging against inflation. An investment in commodi-ties, however, is the most profitable and therefore wisest method in view of yields. As such, investors can not only compensate for depreciation through inflation but often generate extra added value with commodities.

–1.0

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

Correlation U.S. Consumer price IndexCorrelation U.S. Producer price Index

–0.5

0.0

0.5

1.0

Source: JPMorgan and index sponsors.

JPMCCI U.S. consumer price index vs. U.S. producer price indexmonthly data %, change oya., rolling two-year periods


Commodities behaviour of various asset classes between 1990 and 2006

–10%

0%

10%

20%

30%

40%

50%

60%

70%

All commodities Energy Precious metals Base metals Agriculture Inflation-linked bonds

Equities Mining stocks Energy stocks Real estate Commodity currencies

30

Commodities as an asset class

Correlation to other asset classesIn the section «Commodities as an asset class», it is shown that the risk-adjusted yield of a portfolio increases when it is more diversified. This corresponds to the modern portfolio theory according to Markowitz. Here it is very important that the different asset classes have a minimum correlation to each other.

The correlation can have a value between –1 and +1, whereby:

For a portfolio diversification, a correlation of –1 is ideal in theory, but in reality this almost never occurs. For a broad diversification, it is already sufficient if the asset classes are not correlated with each other. Then it is at least possible that one asset class increases when the other decreases. Therefore, in loss phases of individual asset classes, the losses of the portfolio can be partially or completely com-pensated for by price increases in the other asset groups. However, investors should take into account that in times of extreme market shocks, as was the case in the financial crisis, the previously determined correlations can lose their validity. For example, after the financial crisis started, the uncorrelatedness of the asset classes was blown away, since all asset classes lost considerable value at the height of the financial crisis.

The following table gives an overview of the historical correlation of the «JPMorgan Commodity Curve» (with selected asset classes:

An investment in Vontobel certificates on the JPMCCI thus offers ideal prerequisites for achieving a diversification that meets contemporary portfolio theory. The correlation to shares is very low, and with bonds an investment in the JPMCCI is even completely uncorrelated.

JPMCCI S&P 500 Emerging Market Equities

Emerging Market Bonds U.S. Treasuries Barcap

US-Aggregat*

JPMCCI 1.00 0.16 0.31 0.19 – 0.07 0.00

On a monthly performance basis in the period 1991 to 2009. *The Barcap US Aggregate is an index which maps various fixed-interest forms of securities on the American market. This index also includes US government bonds and corporate bonds.

+ 1 Complete correlation. Both asset classes behave identically.

+ 0 No correlation. The asset classes behave independently of each other.

– 1 Opposite correlation. One asset class always behaves precisely opposite to the other asset class.

–1.0

92 94

US-Treasuries Lehman Aggregate S&P 500

96 98 00 02 04 06

–0.5

0.0

0.5

1.0


JPMCCI vs. S&P 500, US-Treas. And Lehman US Agg. monthly data %, change oya., rolling two-year periods

31

Appendix 1: The JPMCCI Aggregate in comparison with the competition

In addition to the JPMCCI Aggregate, there are several other commodity indices which attempt to reflect the market as accurately and efficiently as possible. This is done using various approaches and therefore with vary-

ing success. This section is intended to help investors determine which index is best suited to them. The table below gives an overview of the most important differences among the aggregate indices of individual providers:

JPMCCI1 S&P GSCI2 RICI Enhanced3 UBS CMCI5

Composition 36 indiv. commodities,5 sectors:45.41% energy20.77% agriculture17.64% industrial metals13.64% precious metals 02.55% livestock

24 indiv. commodities,5 sectors:67.17% energy16.86 % agriculture08.22 % industrial metals04.32% livestock03.43% precious metals

35 indiv. commodities,4 sectors:41.00% energy38.00% agriculture4

13.00% industrial metals08.00% precious metals

26 indiv. commodities,5 sectors:34.60% energy29.60% agriculture26.90% industrial metals05.00% precious metals03.90% livestock

Metho dology Investment along the entire futures curve

Investment exclusively in nearby futures

Investment in various terms (3/3 diversi fication)

Investment along the entire futures curve

Weighting Open interest Annual global production volume

Expected economic impor-tance and liquidity

Combination of production, consumption and liquidity

1 As of 31.08.2011; 2 as of 09.12.2010; 3 as of February 2011; 4 in this case, agriculture also includes the livestock sector; 5 as of December 2010

Characteristics of individual indices in comparison with the JPMCCI

S&P GSCI vs. JPMCCIWhenconsideringtheindividualindices,itbecomesap parent that some methodologies and weightings are vastly different. The S&P GSCI is based on the antiquated methodology of investing exclusively in nearby futures, which will in the long term lead to less-than-optimal roll yields. This results in a clear advantage for the JPMCCI and its innovative concept of distributing investments across the entire future curve. The fact that the S&P GSCI concentrates purely on commodity production volumes for its weightings leads to the problem of distortion men-tioned in the Index methodology section. From the point of view of the capital market, the intelligent method is to allow for open interest, as the JPMCCI applies it. The S&P GSCI also has problems with balance: it includes only 24 indivi dual commodities, and with a good two-thirds share, the volatile energy sector is overwhelming, which could make for increased susceptibility to fluctuations.

RICI Enhanced vs. JPMCCIPart of the RICI concept (Rogers International Commodity Index) is weighting based on the expected importance of the commodities in the world economy. This expectation is based on the evaluation of legendary investor Jim Rogers. This can be an advantage, but at the same time also impliesarisk:managerrisk.Whowilltakeoverthejobofrating when Jim Rogers is no longer available? Or what happens if Rogers loses his feel for the market? As regards the concept of futures terms, the RICI Enhanced – which

always invests in three terms (nearby futures, medium-term futures and longer-term futures) – is going in the right direction. In contrast to the RICI Enhanced, however, the JPMCCI follows this path all the way to its end.

UBS CMCI vs. JPMCCICompared with the JPMCCI, the UBS CMCI (Constant Maturity Commodity Index) with 26 individual commo-dities is positioned with considerably less breadth. The UBS CMCI always invests in a particular future with a particular term so that it has indices with varying terms. This has the disadvantage that holdings must regularly be shifted in order to achieve a long-term investment. The UBS CMCI does not, however, use the innovative weighting concept based on open positions, but rather is much more oriented to the consumption and production of commodities as well as to market liquidity.

Summary of comparisonsMany commodities indices claim to have an innovative approach, but the JPMCCI is the only one that stays ahead of the market in all areas: along with the RICI Enhanced, it is the most broadly positioned index. It is the only one to employ the innovative concept of weighting based on open interest. And it invests across the entire range of terms, thereby optimising roll yields already in the base construction. There are some good ideas for the concep-tion of commodities indices that reflect the entire market. The JPMCCI Aggregate is the first index to combine all these ideas in a single product. The JPMCCI Aggregate could present in future as the new benchmark.

33

Appendix 2: Significant risks for investors

Currency risksIf the underlyingis denominated in a currency other than the reference currency of the product, investors should take into consideration that risks from fluctuating ex-change rates may be associated with the product. In this case, the risk of loss is dependent not only on the perfor-mance of the underlying, but also on unfavourable price performance of the other currency or currencies. This does not apply to currency-hedged products (Quanto structure).

Market risksThe general market performance of securities depends, in particular, on the performance of capital markets, which are, in turn, influenced by the general global economic situation and by the economic and political framework conditions in the respective countries (so-called market risk). Changes to market prices, such as interest rates, the price of commodities or related volatility can have a nega-tive effect on the value of the underlyings or the product. There is also a risk of market disruption (such as trading or stock market interruptions or discontinuation of trading) or other unforeseeable occurrences concerning the re-spective underlyings and/or on their stock exchanges or markets during the term or upon maturity of the structured products. Such occurrences can have an effect on the time of redemption and/or on the value of the structured products.

Secondary market risksGiven normal market conditions, the issuer or the lead manager intends to provide purchase and selling prices on a regular basis. However, neither the issuer nor the lead manager is under any obligation with respect to investors to provide purchase and selling prices for specific order or securities volumes, nor is there any guarantee of specific liquidity or of a specific spread (i.e. the difference between purchase and selling prices). Investors therefore cannot rely on being able to purchase or sell the structured products on a specific date or at a specific price.

Risk associated with the issuerThe value of structured products may depend not only on the performance of the underlying, but also on the creditworthiness of the issuer/guarantor. Creditworthiness can change during the term of the structured product. The investor is exposed to the risk of default of the issuer/guarantor. For information on the rating of Vontobel Holding AG or Bank Vontobel AG, please see the issue programme.

Publication of notificationsAll notifications to investors concerning the products or amendments to the product terms (e.g. due to corporate actions) are published at www.derinet.ch. In the event of products listed on SIX Swiss Exchange, notifications are also published at www.six-swiss-exchange.com in accord-ance with applicable provisions.

ClassificationIn Switzerland these financial instruments are considered to be structured products. They are not collective capital investments within the meaning of the Federal Act on Collective Investment Schemes (KAG), and are therefore not subject to the approval and supervision of the Swiss Financial Market Authority FINMA.

Restrictions on salesUSA, US persons, UK, Europe, Dubai (UAE).

Additional notes on riskKindly note the additional risk factors and restrictions on sales set out in detail in the issue programme.

Investors will find all other product-specific informa-tion, such as CH securities number, ISIN, initial fixing status, etc., in the complete listing brochures (consisting of the term sheet [final terms] and issue programme) for the respective products at www.derinet.ch.

Information for investors on the subject of raw materials is available hereCommodity exchange websites: Find everything about contract specifications such as contract sizes, units etc. You will also find current prices for individual futures:

•CME(includingNYMEX,COMEXundCBOT) www.cmegroup.com•LIFFEwww.nyseeuronext.com•LMEwww.lme.co.uk•ICE(includingNYBOT)www.theice.com•MGEwww.mgex.com•KCBOTwww.kcbt.com

Informationen on stocks:•USEnergyInformationAdministration www.eia.doe.gov•LondonMetalExchangewww.lme.co.uk•InternationalEnergyAgency(IEA)www.iea.org•U.S.CommoditiesFuturesTradingCommission www.cftc.gov

Informationen about the JPMCC Indexfamilie:www.derinet.ch/jpmcci

Information about the index regulations, Q&A’s and risk considerations:www.jpmorgan.com/jpmcci

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Licence notice

The Securities are not sponsored, endorsed, sold or pro-moted by J.P.Morgan Securities Ltd. («JPMSL»). JPMSL makes no representation or warranty, express or implied, to the owners of the Securities or any member of the public regarding the advisability of investing in securities ge ne-rally or in the Securities particularly or the ability of the JPMorgan Commodity Curve Index to achieve any stated objective. JPMSL’s only relationship to Bank Vontobel AG, Zurich (hereinafter referred to as the «Licencee») is the licensing of the JPMorgan Commodity Curve Index which is determined, calculated and maintained by JPMSL with-out regard to the Licencee or the Securities. J.P.Morgan is not responsible for and has no obligation or liability in connection with the issuance, administration, marketing or trading of the Securities. The JPMorgan Commodity Curve Index is derived from sources that are considered reliable. However, JPMSL does not guarantee the veracity, currency, completeness or ac-curacy of the JPMorgan Commodity Curve Index or other information furnished in connection with the JPMorgan Commodity Curve Index. No representation, warranty or condition, of any type, as to condition, satisfactory quality, performance or fitness for purpose are given or duty or liability assumed by JPMSL in respect of the JPMorgan Commodity Curve Index or any data included in or omis-sions from the JPMorgan Commodity Curve Index , or the use of the JPMorgan Commodity Curve Index in connec-tion with the Securities and all those representations, war-ranties and conditions are excluded save to the extent that such exclusion is prohibited by law.

Legal notice This document has been prepared with the greatest of care and in good faith by Bank Vontobel AG (hereinafter «Von-tobel»). Vontobel, however, makes no warranty with res-pect to the content and completeness of the document and accepts no responsibility for losses arising from the use of this information. The opinions expressed in this document are those of Vontobel at the time of compilation and are subject to change at any time without notice. Unless other-wise indicated, all figures and information are unaudited. This document is for information purposes only. It re-presents neither an offer nor a recommendation for the purchase or sale of financial instruments or banking servi-ces. It is not intended to replace the expert advice, inclu-ding that relating to all associated risks, required prior to a purchase decision. Past results must not be regarded as an indication or guarantee of future performance. The relevant prospectuses contain the complete terms and conditions; they provide the only reliable source of a concrete finan-cial instrument and are available free of charge from Bank Vontobel AG, Financial Products, CH 8022 Zurich (tel.: +41 (0)58 283 78 88). Furthermore, we refer you to our «Special Risks in Securities Trading» brochure, which you can order

To the fullest extent permitted by law, J.P.Morgan shall have no liability or responsibility to any person or entity for any loss, damages, costs, charges, expenses or other liabili-ties, including, without limitation, liability for any special, punitive, indirect or consequential damages (including loss of business or loss of profit), even if notified of the possi-bility of such damages, arising in connection with the use of the JPMorgan Commodity Curve Index or in connection with the Securities. Any «backtesting» information provided herein is illustra-tive only and derived from proprietary models based on certain data (which may or may not correspond with the data that someone else would use to back-test the Index) and assumptions and estimates (not all of which may be specified herein and which are subject to change without notice). The results obtained from different models, as-sumptions, estimates and/or data may be materially differ-ent from the results presented herein and such «backtest-ing» information should not be considered indicative of the actual results that might be obtained from an investment or participation in a financial instrument or transaction referencing the Index. J.P.Morgan expressly disclaims any responsibility for (i) the accuracy or completeness of the models, assumptions, estimates and data used in deriving the «backtesting» information, (ii) any errors or omissions in computing or disseminating the «backtesting» infor-mation, and (iii) any uses to which the «backtesting» infor-mation may be put by any recipient of such information. J.P.Morgan is the marketing name for JPMorgan Chase & Co. and its subsidiaries and affiliates worldwide.

from us. Structured products are not regarded as collective capital investments within the meaning of the Federal Act on Collective Investment Schemes (KAG), and are therefore not subject to the approval or supervision of the Swiss Fi-nancial Market Authority (FINMA). The value of structured products may depend not only on the development of the underlying asset, but also on the credit rating of the issuer. The investor is exposed to the risk of default of the issuer/guarantor.This publication and the financial products outlined therein are not intended for persons subject to a jurisdiction which limits or prohibits the sale of financial products or the dis-semination of this publication and/or the information con-tained therein. All data is provided without warranty. This document may not be copied in part or in whole without the express written consent of Vontobel. It is expressly not targeted at persons whose nationality or residence prohibits access to such information based on applicable legislation. Copyright © 2010 Bank Vontobel AG and/or companies associated with it. All rights reserved. Last revised: October 2011

© Bank Vontobel AG. All rights reserved.

Bank Vontobel AGFinancial ProductsDreikönigstrasse 378022 Zurich Phone +41 (0)58 283 78 50 www.vontobel.com

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