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2 péáíéo Reply on the UCITS-VI-Consultation CONSULTATION DOCUMENT Undertakings for Collective Investment in Transferable Securities (UCITS) Product Rules, Liquidity Management, Depositary, Money Market Funds, Long-term Investments Reply by: LBBW Asset Management Investmentgesellschaft mbh, Germany Reply in relation to questions: BOX 1, Question (1) Reply: Gold as eligible asset Objective: Gold as eligible asset under the UCITS regime Under current legislation Gold is not an eligible asset for a UCITS Fund. This paper aims to address this issue and proposes Gold and/or other precious metals should be added to the list of eligible Asset under the UCITS regime. Current workarounds to gain exposure to non-eligible assets: Certificates as eligible assets: Although the Directive quotes that Gold and Certificates representing Gold are prohibited as an investment in a UCITS Funds, some Certificates (i.e. ETF Securities) are considered eligible 1:1 products (certificates who 100% replicate the gold price movement) for a UCITS Fund in some jurisdictions. Commodity Investment through FDI (Indices): Another way to invest in Gold is as part of an index. For example, a fund replicating the Dow Jones UBS Commodity Index would app. invest about 10% in Gold and 4% in Silver.

3 péáíép Reply BOX 1: (1) Do you consider there is a need to review the scope of assets and exposures that are deemed eligible for a UCITS fund. Answer: Yes. We believe that today most investors see gold as a currency or reserve type asset. As gold is not subject to the risk of issuer default (no third party risk) many clients are looking at investments in gold as a risk diversification tool. At the moment, most investors are forced to either invest through eligible certificates, indices with exposure to gold or invest in non-ucits funds, primarily based in Switzerland. Third party default risk: The issue with these ways to invest is, that the fund and ultimately the client will either hold a certificate or a swap on a commodity index with the related third party default risk. Most clients would prefer a gold future (with the diversified counter party risk of a future exchange) or to directly hold gold in physical form. Gold itself has no third party default risk, as gold is not a promise by any issuing body. However, as UCITS sets a high standard for regulation, most investors would prefer a physical direct allocated gold investment in a UCITS framework rather than in a non-ucits or certificate legislation framework. Most clients and investors see gold investments as the ultimate safe haven investment. Therefore they expect a highly esteemed regulatory framework like UCITS, which especially on the custody side provides for a high level of security for the assets. Success of Swiss based Funds Most customers would prefer if a CIS (Collective Investment Scheme), especially an UCIT, would hold the Gold itself in physical form and not through other third party products which have a default risk of the issuing party.

4 péáíéq This is emphasized by the success of the Swiss based 100% Gold only funds (Gold ETFs) or i.e. the American SPDR Gold Fund. In the European Union only one Non-UCITS Gold Fund exists which can invest in physical gold up to 100%. New attitude from Future Exchanges and Central Banks: In the last couple of years the attitude towards Gold has changed significantly. In recent years many Central Banks have increased their Gold holdings. The signatories of the Central Bank Gold Agreement have seized to sell the maximum possible amount of Gold. Most Central Banks list Gold as a foreign currency reserve. Future Exchanges, like the CME also treat Gold as a currency or reserve type asset and accept Gold as collateral for margin requirements. Concerns: Risk Diversification: Some would argue that a 100%-Gold-Fund would not be risk diversified. However, in our view Gold has to be treated like a currency or reserve type asset. A USD-Money-Market fund has not to diversify in CHF or EUR. It only has to diversify in issuers of the USD-papers to avoid default risks of the issuers. Gold on the other hand side has no issuer, thus cannot default by a third party action. However, it would make sense i.e. to require two different storage locations and gold bars from i.e. 4 different smelters under the LBMA rules (London Bullion Market Association Good Delivery rules).

5 péáíér Concerns (2): Liquidity: Another argument pro Gold is the liquidity. The Gold market itself is highly liquid, both, the future and the physical market. The open interest in the December Front Future (as of 24 th Sep 2012) is about 344,000 contracts. This totals to an open interest of app. $ 60 billion. The daily turnover averages above 100,000 contracts, or app. $ 17b. The physical market in London (LBMA statistics) shows for 2012 (Jan-Aug) a daily average of about $ 31.6b transaction volume. The total worldwide Gold ETF volume is about $100b. This represents the transaction volume of 3 days. Summary: Many investors are looking towards Gold to diversify their total investments / wealth. Therefore they are looking for pure / 100% Gold Funds / ETFs to invest in a convenient, effective and secure way in physical Gold. However, as the UCITS framework prohibits investments in Gold these products have to be either launched in Switzerland, Jersey, the US or operate as a non-ucits fund which makes cross country sales nearly impossible. Therefore we suggest to add Gold to the list of eligible assets. Furthermore, we recommend to consider Gold as a currency, and thus consider a 100% Gold Fund as risk diversified, provided the Fund meats certain requirements (i.e. only bars under the LBMA Good Delivery rule should be allowed, adequate insurance in place, etc.)

6 péáíés Summary (2): Questions / Box 1 (1) Do you consider there is a need to review the scope of assets and exposures that are deemed eligible for a UCITS fund? Yes, Gold should be added to the list of eligible assets. (2) Do you consider that all investment strategies current observed in the marketplace are in line with what investors expect of a product regulated by UCITS? No. Clients would expect that the need for a secure investment in physical Gold should be regulated under UCITS rather then under Swiss or Jersey Law and repacked as Certificates or Indices. (3) Do you consider there is a need to further develop rules on the liquidity of eligible assets? What kind of rules could be envisaged? Please evaluate possible consequences for all stakeholders involved. No. Gold is a highly liquid asset, therefore no further liquidity rules seem necessary. However, if liquidity rules should be imposed, the following might be considered: o Liquidity rules could be in relation to fund volume. o Liquidity rules could i.e. impose fund size limits Example: Fund size maximum the average traded volume of gold on the London Bullion Market (London fixing) or a percentage of future open interest on the first three front months. o Total open interest in the future market is about $70b. The London bullion market transacts around $30b per day.

7 péáíét Our contact details are: Michael Krauß Head of Fixed Income & Alternative Investments LBBW Asset Management Investmentgesellschaft mbh Germany Phone: püçìäçóçìü~îé~åóèìéëíáçåëéäé~ëéççåçíüéëáí~íéíçåçåí~åíìëk vçìêëëáååéêéäó i t^ëëéíj~å~öéãéåífåîéëíãéåíöéëéääëåü~ñíãäe jáåü~éähê~ì _á~åå~_ìåéâ