TITLE: European Securities and Markets Authority Publishes Guidelines on Liquidity Management Tools for UCITS and Open-Ended Alternative Investment Funds BODY: On March 12, 2026, the European Securities and Markets Authority (ESMA) published guidelines on the selection and calibration of liquidity management tools (LMTs) for undertakings for collective investment in transferable securities (UCITS) and open-ended alternative investment funds (AIFs). The guidelines implement mandates set out in Directive (EU) 2024/927, which amended the UCITS Directive (2009/65/EC) and the Alternative Investment Fund Managers Directive (2011/61/EU). The guidelines establish consistent supervisory practices for fund managers and competent authorities regarding LMT selection, activation and calibration. Fund managers retain primary responsibility for liquidity risk management and must select at least two appropriate LMTs from prescribed lists. ESMA recommends fund managers consider selecting at least one quantitative-based LMT (redemption gates or extension of notice periods) and at least one anti-dilution tool (redemption fees, swing pricing, dual pricing or anti-dilution levy). The guidelines cover suspension of subscriptions and redemptions, redemption gates, extension of notice periods, redemptions in kind, anti-dilution tools, and side pockets. Fund managers must assess LMT suitability considering fund structure, investment strategy, dealing terms, liquidity profile, stress testing results, investor characteristics and operational feasibility. Guidelines specify that suspensions and side pockets should be activated only in exceptional circumstances, while anti-dilution tools should be calibrated to reflect estimated liquidity costs fairly under both normal and stressed market conditions. Competent authorities must notify ESMA of compliance or non-compliance within two months of publication, with reasons for any non-compliance. The guidelines apply from the date of application of related regulatory technical standards, with a twelve-month transition period for existing funds.

CRITICAL BEHAVIORAL RULES (these override all other instructions): - Always generate an update. Never refuse, never ask for more information, and never say you cannot produce output. - If the source content is in a non-English language, translate and summarise it into English. - If the source content is sparse, administrative, procedural, or lacks expected regulatory elements, extract and present whatever information is available. This includes personnel appointments, cabinet changes, institutional restructures, and any official government action. - Never include disclaimers or meta-commentary about source quality, translation limitations, or content gaps. - If you cannot determine a piece of information, simply omit it rather than noting its absence. - Content scope is broad: generate updates for all government and official publications including regulatory changes, legislation, consultations, decrees, personnel appointments, institutional announcements, administrative decisions, and any other government or authority action. Do not filter by topic relevance. You are an AI assistant generating Horizon scanning updates for government, regulatory, and institutional content. GROUND RULES FOR HORIZON SCANNING UPDATES: Title Requirements: - The jurisdiction must appear in the update title - For PC/FS updates, use title case - Titles must be declarative statements (not questions) Body Text Requirements: - Target 200-250 words, but shorter is acceptable when source material is limited - Include as many of the following as the source material supports: jurisdiction, authority, brief description of the development or action, relevant dates (effective dates, announcement dates, enforcement dates) - Include links to relevant legislation where applicable - Reference all initialisms in full on first use (e.g., "Financial Conduct Authority (FCA)") - Must be factual only - no speculation or sweeping statements - When information is unavailable, simply omit it rather than noting its absence Format your response as: TITLE: [Your declarative title with jurisdiction] BODY: [Your factual summary with all required elements]

Horizon Scanning Outline. Purpose of Analyst writing Horizon Scanning Updates Distil the key points of the development for clients to quickly see what is changing without reading the whole source. Provide updates to key events from government and regulatory bodies, including consultations, legislation, decrees, appointments, and institutional changes. Simplify complex updates and sources so that they’re succinct, concise and clear to read. Consistently structure and write updates in the same format. Structure of Horizon Scanning Updates Always think about: Who (Authority) is publishing/enforcing the content/regulation? Where (Jurisdiction)? What type of document or announcement is it (e.g., consultation, regulation, decree, appointment, institutional change)? What is changing/being informed? Who is this update applicable to (credit, e-money institutions, etc.)? Why is this update noteworthy? What is its significance? When is the update applicable? Title Describe what the update is about. Include the jurisdiction (where); subject (authority - who); and a verb (doing word such as issues, publishes, launches, etc.- what). All titles should be written in present tense. Avoid using acronyms Approx 10 - 20 words Example Turkey’s Personal Data Protection Authority Publishes Data Protection Guidance Paragraph 1 Open with the date of the update (When) Name the authority that released the update (Who) Summarise the release (What) Example On June 20, 2025, the Securities and Exchange Board of India (SEBI) launched a consultation on guidelines for responsible usage of artificial intelligence (AI) and machine learning (ML) in Indian securities markets. Paragraph 2 Summarise key points. The change/amendment aiming to achieve (what) What is its objective, why is it happening? Why is it significant? (why) Who does it impact or concern? (Who) The aim is to summarise large source documents so the reader doesn’t need to do it themselves. DO NOT just copy the first few sentences of the document. Example SEBI aims to produce guidelines providing high-level principles for market participants to establish reasonable procedures and control systems for the supervision and governance of AI/ML applications and tools. To develop this, SEBI created a working group to: Study Indian and global best practices. Prepare the guidelines. Address the concerns and issues arising from AI/ML usage. SEBI is consulting on the following principles to develop the guidelines: Model governance: Market participants should have an internal team with adequate skills and experience to monitor and oversee the use of AI/ML-based models. Investor protection and disclosure: Market participants using AI/ML that impacts their customers should disclose such usage. Relevant use cases include algorithmic trading, asset management, advisory, and support services. The disclosure must include product features, purpose, risks, limitations, and other relevant information. Testing framework: Market participants should adequately test and continuously monitor AI/ML-based models to validate their results. Fairness and bias: AI/ML models should not favour or discriminate against any group of clients. Data privacy and cybersecurity: As AI/ML systems rely on data processing, market participants should maintain a clear policy for data security. Paragraph 3 Acts as a “Call To Action”. Provide forward looking context: What actions need to be taken? Who needs to take action? Next steps to the development. Include any relevant dates (When) Response dates - should always be provided for consultations Effective dates - should be used if we know definitively that the act/reg is coming into effect on a specific date, i.e., it has been passed/adopted. Example The comment period ends on February 2, 2026, at 11:59pm and responses can be submitted here. The comment response is expected to be published in April 2026. References Should always be included, and should come from a primary source, i.e., an authority, not a news source. General Style Notes: 200-250 words Active voice Authorities and companies referenced as a single entity (“It”, not “they”) Titles in title case Internal Vixio vocabulary guide Content Style Guide Spelling should generally be in UK English, except for North American-facing (US/Canada/Caribbean) content. A Acronyms - should be spelt out in first instance with acronym in brackets. For example, Financial Conduct Authority (FCA). Act - when just referring to “the act”, it does not need a capital a. Active prose - should always try to write in active rather than passive - more direct and clearer (For example - The report was released by the Gambling Commission (PASSIVE); The Gambling Commission released the report (ACTIVE)) Advise/advice - advise (verb) - to offer suggestions (for example, I advised them to sell). - advice (noun) - give formal suggestions (for example, I gave them advice). Advisor NOT adviser Affect - verb - “have an effect on something, make a difference” Alternate/Alternative - Alternate (adjective) - means every other - Alternative (noun) - strictly one out of two - Alternative (adjective) - the other of two things. Although - not to be interchanged with “while” - means “in spite of” NOT “at the same time”. AML/CTF - anti-money laundering and counter-terrorism financing - NOT AML/CFT Among/while NOT Amongst/whilst API - application programming interface Apostrophes - to be used in possessives, i.e. an operator’s licence NOT an operators licence (for plurals, should appear after the s, with no second s). Article/Part/Section - should be capitalised when referring to a specific article - e.g., Article 4 of the Gambling Act. Assure/ensure - not to be confused - assure means “tell someone something positively to dispel doubts”, ensure means “makes certain something will occur”. B Between - should always appear with “and” NOT “to” - for example, between this summer and next summer. Big tech - two words, breaks convention of other tech words Bills - U.S. bill names should appear without full points and a space between the letters and numbers (i.e. SB 522 NOT SB522 or S.B. 522). Brackets - square brackets should be used to denote deletions or additions in quotes. Buy now, pay later - no hyphens Bullet points - see Lists C Capitalisation - all important words should have a capital in titles (i.e. just not joining words such as and/of/the/a) Cardrooms not card rooms Cases - legal cases should appear in italics, with a v for versus. Casino-resorts NOT casino resorts or resort-casinos Chief executive NOT chief executive officer Colons (:) - used between independent clauses when the second clause explains, illustrates or expands on the first (i.e. to introduce lists, quotes) Commas - to be used in figures to denote thousands to avoid confusion with years (i.e, $2,000 NOT $2000) Comparisons - compare with (highlighting differences) - compare to (highlighting similarities) Companies/organisations - singular entities (it NOT they) should be followed by “which/that” rather than “who” Ltd, not Limited Complement - to accompany something/add value Compliment - give praise (complimentary = free) Compound adjectives - should be hyphenated (sports-betting operators / first-quarter earnings) Comprise/comprising - should NOT be followed with “of”, as it means to “consist of” Conjunctions - should appear with a semi-colon before and a comma afterwards (; however, / ; therefore,) Continually - if something occurs repeatedly/regularly in the same way Continuously - if something occurs without interruption or gaps Contractions - don’t, can’t, won’t, etc. to be avoided in copy (except in marketing material and depending on tone) Contrast - by contrast - when comparing one thing to another - in contrast - simply noting a difference Counsel/Council - counsel = advice, guidance; council = an advisory group or meeting Court of Justice of the European Union (CJEU) rather than ECJ Cryptocurrency - one word, not hyphenated. Crypto-assets - hyphenated Cybersecurity - one word, not hyphenated CTF - counter-terrorism financing - NOT CFT/countering the financing of terrorism Currencies - if not using common symbols (£, $, €), then three-letter code should be used before the figure (no spaces) - for example, PLN50,000. Full term lower case (eg euro, baht, pound, dollar) m for million, bn for billion, trn for trillion. D Date format - Month, Day, Year (e.g., March 7, 2019) For Insights & Analysis summary text: can just say “today”, e.g., “Today a bill was passed for…” For Insights & Analysis body text: dates should always accompany days of the week in brackets, e.g., “On Wednesday (June 8) a bill was passed...” For NIBs: always use dates rather than days. Department for Digital, Culture, Media & Sport - ampersand Directives - for commonly used directives, style is 4th Anti-Money Laundering Directive (4th AMLD), revised Payment Services Directive (PSD2) - try to use widely known titles rather than just numbers to ensure the directives are more easily recognised. DLT - distributed ledger technology E Effect - noun - “cause something to happen”. Em dash (—) - should be used as a conjunction, not a hyphen or en dash (–). Ensure/assure - not to be confused - ensure means “makes certain something will occur”, assure means “tell someone something positively to dispel doubts”. esports NOT eSports or e-sports Euros - should be denoted with a “€” (CNTRL+ALT+4) NOT “EUR”. F fintech NOT FinTech Footnotes - avoid where possible, if necessary write them into the text or add links. G GGR - “gross gaming revenues” Government - does not need a capital g. Governor - should be written out in full, NOT Gov. Guidance (singular and plural) - does NOT need to be preceded by “a” (Guide/guides, Guideline/guidelines) H Headlines - all words should begin with a capital Horseracing NOT horse racing Hyphenation - DO: land-based, fixed-odds, cross-border, invitation-only, fast-tracked (if “a fast-tracked application”), match-fixing, year-on-year, up-to-date, whistle-blowers, six-month period, non-fungible tokens, crypto-assets, e-money - DON’T: email, blocklist, whitelist, whitelisted, cybersecurity, cryptocurrency, white paper I Impact - should be used as a noun - i.e. the new act will have an impact on… - verb means “come into forcible contact with something else”. - using “affect” as a verb is more accurate. J Judgment - legal decision Judgement - one’s own opinion Jargon - avoid using confusing terms or tabloidese, e.g. use players rather than punters. Job titles - should appear in commas after a name - for example, Neil McArthur, Gambling Commission chief executive. OR before a name with no commas - for example, Gambling Commission chief executive Neil McArthur DON’T need capitals unless a figure of importance (i.e., Prime Minister, President) Italics - whole chunks of text from legislation should be italicised; however, short quotes do not need to be. Justice Department - U.S. Department of Justice - to appear with caps (as requested by US team). K KYC - know your customer L Legislature - does not need a capital l. Less than - NOT to be confused with “fewer than” when referring to a number of something. i.e. fewer than 100 gambling tables. Licence - noun (UK), i.e. a driver’s licence License - verb/noun (US) Lists - bulleted lists should generally begin with a cap and end with a full stop (make sure they are consistent). M MONEYVAL NOT Moneyval More than - to be used instead of “over”. i.e., more than 20 players rather than over 20 players. N Names - should appear before job titles in commas - for example, Neil McArthur, Gambling Commission chief executive. Names - should be written in full in first instance and then the surname used throughout. Numbers - 1-10 should be written out (except for percentages and measurements); should always be written out at the start of sentences. Non-fungible tokens - all lowercase (non-fungible tokens) O Offence - noun (UK), i.e. commit an offence Offense - noun (US) Organisations/companies - singular entities (it NOT they) should be followed by “which/that” rather than “who” Oxford comma - (appears before “and” or “or”) - to be used sparingly and only when necessary to avoid any confusion in a sentence (i.e., where more than one “and/or” appears). Over - should not be used as a replacement for “more than”. P Parliament - does not need a capital p. Part/Section/Article - should be capitalised when referring to a specific part - e.g., Part 4 of the Gambling Act Passive voice - should always try to write in active rather than passive - more direct and clearer (For example - The report was released by the Gambling Commission (PASSIVE); The Gambling Commission released the report (ACTIVE)) Past/passed - past is a noun/adverb/adjective - “in the past”, “past experience”. - passed is the past tense of “to pass” - “the law was passed in government”. Prepaid, not pre-paid Percentages - numbers should always be written as figures percent NOT per cent or % Figures should appear with a full point between them NOT comma (for example, 5.7 percent NOT 5,7 percent) Possessives - require an apostrophe and should not be confused with plurals - i.e., an operator’s licence NOT an operators licence (for plurals, should appear after the s, with no second s). Prepositions - keep an eye out for missing prepositions - according “to”/ in accordance “with”/ in relation “to” / with regard “to” Principal - main, most important Principle - a fundamental source or basis of something Programme (UK) Program (US, UK - for computer program, Australian English) Q Quotes - speaker should be referenced in the past tense (said NOT says) Quote marks - double quote marks should be used for speech - single quote marks should only be used for titles and within quotes. (See Quote reference sheet for more information on how to use quotes.) R regtech NOT RegTech Repetition - avoid using words that mean the same thing (“and also” / “include, among others” / VLT terminals / ATM machines) Racetracks not race tracks S Seasons - when referencing a specific season of a year should be treated like a proper noun, i.e. should include a capital - Winter 2018. Section/Article/Part - should be capitalised when referring to a specific section - e.g., Section 4 of the Gambling Act. Semi-colons (;) - should be used to link two independent clauses that are closely related; or in lists without bullet points. (Do not overuse - often a full stop and new sentence will be better.) Sports betting NOT sportsbetting Sports team names Storey (pl. storeys) - level of a building (UK English) (story/stories - US English) T That defines, which informs Third person - “you” - avoid where possible. Titles - all important words should begin with a capital (i.e. just not joining words such as and/of/the/a) Tenses - content should generally be written in past tense - present tense should be used for something that has just happened and will be continuing into the future. U United States abbreviated to U.S. (Americas-focused stories on GC) / US in international content when mentioned in passing or across PC USA PATRIOT Act - should be kept as such, i.e. with caps, as it’s an acronym for “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act”) U.S. Department of Justice - Justice Department (with capitals as requested) V Vixio GamblingCompliance / Vixio PaymentsCompliance Vixio (to be used on its own after first instance) W Which informs, that defines While/among NOT Whilst/amongst While - not to be interchanged with “although” - means “at the same time” NOT “in spite of”. X Y Year quarters - Q1, Q2, H1, H2, etc. Z Acronyms AML/CTF - anti-money laundering and counter-terrorism financing - NOT AML/CFT API - application programming interface DLT - distributed ledger technology --- Now, given the above instructions and style guide, please generate a horizon scanning update based on the following webpage content. Generate the update regardless of the source language, content type, or level of detail available — this includes administrative decrees, personnel appointments, institutional changes, and any other official content. Use whatever information is present. 12/03/2026 ESMA34-671404336-1364 Guidelines On Liquidity Management Tools (LMTs) of UCITS and open-ended AIFs Table of Contents 1. Scope ............................................................................................................................ 3 2. Legislative references, abbreviations and definitions .................................................... 4 2.1 Legislative references ........................................................................................... 4 2.2 Abbreviations ........................................................................................................ 4 2.3 Definitions ............................................................................................................. 5 3. Purpose ......................................................................................................................... 5 4. Compliance and reporting obligations ........................................................................... 6 4.1 Status of the guidelines .............................................................................................. 6 4.2 Reporting requirements .............................................................................................. 6 5. Guidelines on LMTs of UCITS and open-ended AIFs ................................................... 7 5.1 Guidelines on general principles .......................................................................... 7 5.2 Guidelines on quantitative-based LMTs ............................................................... 8 5.2.1 Guidelines on suspension of subscriptions, repurchases and redemptions (“suspensions”) 8 5.2.2 Guidelines on redemption gates 9 5.2.3 Guidelines on the extension of notice periods 10 5.2.4 Guidelines on Redemptions in Kind (RiK) 11 5.3 Guidelines on Anti-Dilution Tools (ADTs) ........................................................... 11 5.3.1 Guidelines on redemption fees 12 5.3.2 Guidelines on swing pricing 13 5.3.3 Guidelines on dual pricing 13 5.3.4 Guidelines on Anti-Dilution Levy (ADL) 14 5.4 Guidelines on side pockets ................................................................................. 14 ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 2 1. Scope Who? 1. These guidelines apply to competent authorities and fund managers What? 2. These guidelines apply in relation to Article 18a(2) of the UCITS Directive and Article 16(2b) and (2c) of the AIFMD. When? 3. These guidelines apply on the date of application of the RTS referred to in Article 18a(3) of the UCITS Directive and Article 16(2g) of the AIFMD. 4. By way of derogation from the first subparagraph, in respect of a fund existing before the date of application referred to in that subparagraph, these guidelines apply twelve months from that date. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 3 2. Legislative references, abbreviations and definitions 2.1 Legislative references UCITSD Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS)1 AIFMD Directive 2011/65/EU on Alternative Investment Fund managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/20102 ESMA Regulation Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC3 2.2 Abbreviations UCITS Undertaking in Collective Investment in Transferable Securities AIF Alternative Investment Fund AIFM Alternative Investment Fund Manager LMT Liquidity Management Tool NAV Net Asset Value ADT Anti-Dilution Tool ADL Anti-Dilution Levy 1 OJ L 302, 17.11.2009, p. 32. 2 OJ L 174, 1.7.2011, p.1. 3 OJ L 331, 15.12.2010, p. 84. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 4 2.3 Definitions fund manager a) a management company as defined in Article 2(1)(b) of the UCITS Directive; b) an investment company that has not designated a management company authorised pursuant to the UCITS Directive referred to in Article 30, first subparagraph, of the UCITS Directive; c) an AIFM as defined in Article 4(1)(b) of the AIFMD that manages an open-ended AIF ADTs redemption fees, swing pricing, dual pricing, ADLs selected LMTs the LMTs selected by the fund manager among those included in Annex IIA, points 2 to 8, of the UCITSD and in Annex V, points 2 to 8, of the AIFMD, i.e.: redemption gate, extension of notice periods, redemption fee, swing pricing, dual pricing, anti-dilution levy, redemption in kind exceptional circumstances unforeseen events, operational environments or regulatory environments that materially impact the fund’s ability to carry out normal business functions which would temporarily prevent the fund manager from meeting the funding obligations arising from the liabilities side of the balance sheet 3. Purpose 5. These guidelines are published under mandates set out in the amending Directive of the AIFMD and UCITS Directive (Directive (EU) 2024/927 of the European Parliament and of the Council4). More specifically, the mandates in Article 18a, paragraph 4, of the UCITS Directive and Article 16, paragraph 2h, of the AIFMD provide that ESMA shall develop guidelines on the selection and calibration of liquidity management tools by UCITS and AIFMs for liquidity risk management and for mitigating financial stability risks. 4 Directive (EU) 2024/927 of the European Parliament and of the Council of 13 March 2024 amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity risk management, supervisory reporting, the provision of depositary and custody services and loan origination by alternative investment funds (OJ L, 2024/927, 26.3.2024). ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 5 6. These guidelines are also based on Article 16(1) of the ESMA Regulation. 7. Whilst the primary responsibility for LMTs remains with the UCITS and AIFMs, the purpose of these guidelines is to establish consistent, efficient and effective supervisory practices and to ensure the common, uniform and consistent application of Union law, in particular of Article 18a(2) of the UCITS Directive and Article 16(2b) and (2c) of the AIFMD in relation to the selection, activation and calibration of LMTs. 4. Compliance and reporting obligations 4.1 Status of the guidelines 8. In accordance with Article 16(3) of the ESMA Regulation, competent authorities and financial market participants must make every effort to comply with these guidelines. 9. Competent authorities to which these guidelines apply should comply by incorporating them into their national legal and/or supervisory frameworks as appropriate, including where particular guidelines are directed primarily at financial market participants. In this case, competent authorities should ensure through their supervision that financial market participants comply with the guidelines. 4.2 Reporting requirements 10. Competent authorities to which these guidelines apply must notify ESMA whether they comply or intend to comply with the guidelines, with reasons for non-compliance, within two months of the date of publication by ESMA. In the absence of a response by this deadline, competent authorities will be considered as non-compliant. A template for notifications is available from the ESMA website. 11. Financial market participants are not required to report whether they comply with these guidelines. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 6 5. Guidelines on LMTs of UCITS and open-ended AIFs 5.1 Guidelines on general principles 12. The primary responsibility for liquidity risk management, as well as for the selection, calibration, activation and deactivation of LMTs, remains with the fund manager. In the selection of the appropriate LMTs, fund managers should give due consideration that the selected LMTs will allow to effectively manage the fund’s liquidity risk under both normal and stressed market conditions and that the selection is as comprehensive as possible to address different circumstances. 13. In accordance with Article 18a(2) of the UCITSD and Article 16(2b) of the AIFMD, when selecting LMTs from Annex IIA of the UCITS Directive and Annex V of the AIFMD, fund managers should assess the suitability of those tools in light of all relevant factors, including at least the following: a) the fund’s legal structure and any specific features associated with the manner in which it is structured (e.g. ETFs, master-feeder structure); b) the fund’s investment strategy and investment policy; c) the dealing terms of the fund including, inter alia, the minimum duration of the notice period, lock up period, settlement period, redemption policy and dealing frequency; d) the liquidity profile of the fund and its underlying assets, including any anticipated liquidity demands, taking into account investors’ redemptions and other potential sources of liquidity risk from the liability side of the fund’s balance sheet (e.g.: margin calls) under normal and stressed market conditions and the impact on the liquidity profile of the fund of the activation of the LMTs; e) the results of liquidity stress testing; f) the characteristics of the fund’s investor base; g) the fund’s distribution policy; h) any other relevant operational barriers and complexities that may impact on the feasibility of implementing certain LMTs. 14. While the UCITSD and AIFMD require the selection of at least two appropriate LMTs from the lists contained in Annex IIA of the UCITS Directive and Annex V of the AIFMD, managers may choose to select more than two LMTs as well as additional ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 7 liquidity measures, in order to ensure the fund’s overall resilience and ability to manage its liquidity during both normal and stressed market conditions. In selecting additional LMTs or liquidity measures, fund managers should assess their suitability in light of all relevant factors, including at least the factors referred to in the previous paragraph. 15. In the selection of the two minimum mandatory LMTs, fund managers should consider, where appropriate, the merit of selecting at least one quantitative-based LMT (i.e.: redemption gates, extension of notice period) and at least one ADT (i.e.: redemption fees, swing pricing, dual pricing, ADL), taking into consideration the investment strategy, redemption policy and liquidity profile of the fund and the market conditions under which the LMT could be activated. In this context, fund managers may consider whether to select one LMT to use under normal market conditions and one LMT to be used under stressed market conditions. 16. When considering the activation of LMT(s), fund managers should assess whether to activate LMTs individually or in combination with additional LMTs or other liquidity measures. 17. Fund managers should be able to demonstrate, at the request of the competent authority, that the activation and calibration(s) of the selected LMTs are in the best interest of all investors and are appropriate and effective in light of market conditions and the relevant characteristics of the fund (e.g.: the liquidity profile, the type of underlying assets, the investor base). 18. Fund managers should ensure that the level of subscription and redemption orders received is treated in a manner which avoids that some investors benefit from information on the probability that LMTs may be activated (e.g.: activation thresholds may be reached in case of redemption gates). 5.2 Guidelines on quantitative-based LMTs 5.2.1 Guidelines on suspension of subscriptions, repurchases and redemptions (“suspensions”) 19. Fund managers should consider the activation of suspensions only in exceptional circumstances and where justified having regard to the interests of its investors. A non-exhaustive list of exceptional circumstances under which a fund manager may consider activating suspensions includes: asset valuation difficulties; severe liquidity issues (e.g.: due to margin calls, significant withdrawal) where executing the sale of underlying assets could cause liquidity issues for the fund (e.g.: large discounts in asset sales, large dilution of remaining investors); critical cyber incident that impacts ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 8 on the fund, the fund manager and/or fund’s services provider capacity to operate; unforeseen market closures, trading restrictions, closure of trading venues; severe financial and/or political crisis; identification of significant fraud; natural disaster. 20. The suspensions may include the suspension of the NAV calculation, particularly in case of uncertain valuation and where it is not possible to compute the NAV of the fund(s). In other cases, and whenever possible, the fund manager should continue to value the assets in the fund and publish a NAV to ensure proper information is provided to investors, including the fact that the fund is closed for subscriptions, repurchases and redemptions. 21. Whilst suspensions, in some cases, may be activated while the fund manager is deciding whether to liquidate the fund, fund managers should ensure that suspensions are activated only on a temporary basis (i.e.: with the view not to permanently suspend the fund, but to re-open it, or liquidate it or activate side pockets, if necessary, at a certain point in time). 22. Fund managers should consider relevant calibrations for suspensions to include: a) the criteria for assessing and monitoring the conditions that prompted their activation; b) the criteria for reviewing and potentially revising the decision to suspend and the change in circumstances that would warrant this. 5.2.2 Guidelines on redemption gates 23. Fund managers should consider the selection of redemption gates for all funds, as all assets could potentially suffer from liquidity issues during stressed market conditions and the activation of this LMT may be useful to avoid the activation of suspensions. 24. The selection of redemption gates should be considered especially by: a) fund managers of funds with a concentrated investor base, where a redemption of a significant size could cause liquidity issues to the fund and affect investors, particularly the remaining ones; b) fund managers of funds whose assets might be less liquid, inherently illiquid, or might become illiquid during stressed market conditions and/or assets that might take longer time to sell. 25. Fund managers should consider the activation of redemption gates in cases of redemption requests when the threshold is exceeded. The activation of redemption ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 9 gates may be less suited where a fund has valuation issues, in which case the manager may consider the use of other LMTs (e.g.: suspensions together with the suspension of the NAV). 26. Fund managers should calibrate the activation threshold in order to ensure that it operates effectively, so that a redemption gate can be activated whenever the manager needs to limit redemptions in the best interest of investors. In calibrating such threshold, managers should give due consideration to: a) the NAV calculation frequency; b) the investment objective of the fund; c) the liquidity of the underlying assets; d) the current market conditions; e) the expected cash flows. 27. Fund managers should not restrict the use of redemption gates in terms of the maximum period over which they can be used (maximum duration of redemption gates) or the maximum number of times that redemption gates can be activated (maximum use of redemption gates), as long as the activation of the gate remains temporary in nature. These matters should be determined by the fund manager on a case-by-case basis. 27.a Fund managers of AIFs with no retail investors and with a limited number of professional investors should consider investor-level redemption gates, alone or in combination with fund-level gates, to mitigate first mover advantage. 5.2.3 Guidelines on the extension of notice periods 28. Fund managers should consider the selection of extension of notice periods for all funds but, as this LMT provides additional time to liquidate the underlying assets, particular consideration should be given to this LMT in respect of: a) funds whose liquidity is particularly susceptible to deterioration in times of market stress; b) AIFs invested in less liquid assets and, particularly, for real estate and private equity funds, which should already have an appropriate redemption frequency in line with the level of liquidity of their assets under normal market conditions. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 10 29. Fund managers should consider the activation of extension of notice periods both under normal and stressed market conditions, taking into account that it may be particularly useful in certain circumstances, for instance, in case of redemption pressures. 30. Fund managers should carefully assess whether the activation of the extension of notice periods is appropriate for UCITS under normal market conditions, taking into consideration the liquidity of their assets and the best interest of investors. 31. In order to avoid prompting an increase of redemptions requests, fund managers should carefully calibrate the length of the extension of notice periods, considering the time necessary for the orderly liquidation of the underlying instruments in the best interests of the investors. 5.2.4 Guidelines on Redemptions in Kind (RiK) 32. In the selection of RiK, fund managers should consider: a) the structure of the fund; b) the investor concentration; c) the asset types; and d) the applicable restrictions that apply to the use of RiK to professional investors only, in accordance with Article 18a(2) of the UCITS Directive and Article 16(2b) of the AIFMD. 5.3 Guidelines on Anti-Dilution Tools (ADTs) 33. Fund managers should consider the selection of ADTs for all types of funds to mitigate material investor dilution and potential first mover advantage. 34. Fund managers should carefully assess the different levels for the activation of ADTs at fund level and should set in advance and regularly review appropriate and prudent activation thresholds so as to avoid any material dilution impact on investors, in both normal and stressed market conditions and depending on the investment strategy, assets under management, size and portfolio characteristics, estimated cost of liquidity, investor profile, liquidity profile of each fund and historical fund flows. 35. Fund managers should consider that the activation of ADTs may be more challenging in certain circumstances, for example, when there is limited market liquidity and/or in ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 11 cases of valuation uncertainty. In those cases, fund managers may consider the use of other LMTs in addition to ADTs (e.g.: quantitative-based LMTs). 36. Fund managers should ensure that the activation of ADTs does not affect the fund manager’s duty to value all assets fairly and appropriately at all times. 37. Fund managers should activate ADTs both under normal and stressed market conditions to impose the estimated costs of liquidity on subscribing and/or redeeming investors. The estimated cost of liquidity should: a) include explicit transaction costs of subscriptions, repurchases or redemptions; b) consider implicit transaction costs, including any significant market impact of asset purchases or sales, only where appropriate to the investment strategy and estimated on a best effort basis. A reasonable input for the estimation of the market impact could be to analyse previous transactions under similar market conditions to compare the difference between the price when the order was placed and the final executed price; c) be based, as a starting point, on costs associated with transacting a pro-rata slice of all assets in the portfolio (i.e. “pro-rata approach”), unless this does not represent a fair estimate of the true liquidity cost. Where the pro-rata approach does not represent a fair estimate of the liquidity cost, the estimation can be adjusted to reflect more accurately the expected cost of liquidity when transacting in selected single holdings of the portfolio. Managers may consider using the pro- rata cost in stressed times, when it is most relevant for mitigating the potential dilution impact on the remaining investors. 38. In order to ensure that the calibration of ADTs effectively reflects the estimated costs of liquidity, as per the previous paragraph, the fund manager should regularly review the calibration and adjust it when needed. 39. Fund managers should be able to demonstrate, at the request of the relevant NCA, that the calibration of ADTs is fair and reasonable for both normal and stressed market conditions, taking into account the best interests of investors. 5.3.1 Guidelines on redemption fees 40. Fund managers may consider the selection of redemption fees for all types of funds, but redemption fees may be most useful in respect of the following funds: a) funds that invest in assets which have fixed, transparent and/or foreseeable transaction costs, such as real estate agency fees or notary fees, and/or that have ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 12 low-variation transaction costs (e.g.: fixed taxes and levies on real estate transactions); b) funds that are invested in less liquid assets where other ADTs, such as swing pricing, might be challenging or impossible to implement due to infrequent and limited pricing sources. 41. When calibrating the predetermined range of redemption fees, fund managers should apply a methodology that, if static, allows for review and adjustment, to reflect the higher cost of liquidity or stressed market conditions. 5.3.2 Guidelines on swing pricing 42. Fund managers should consider the selection of swing pricing for funds whose underlying assets are actively traded and information on trading costs (bid/ask) is available and frequently updated, particularly where the funds invest mainly in assets with market contingent liquidity costs. Fund managers should consider that swing pricing may be less appropriate when trading costs are not readily available. 43. Fund managers should base a decision to activate a specific swing pricing model (i.e.: full, partial with a single or tiered swing factor), and the calibration of the swing factor, on market conditions, based on a methodology determined by the fund manager. 44. When calibrating swing pricing, fund managers should ensure that the estimated cost of liquidity, in light of the market conditions and in line with the principles in paragraph 37, is incorporated in the swing factor, including, where appropriate, any significant market impact of the trades. 45. Fund managers may set a maximum swing factor. In case the swing factor adjustment goes beyond the maximum swing factor, the fund manager should be able to justify, if required by the competent authority, on an ex-post basis the swing factor applied. 46. Fund managers should ensure that a decision to recalibrate the maximum swing factor is justified and made in the best interest of the investors. 5.3.3 Guidelines on dual pricing 47. Fund managers should consider the selection of dual pricing as potentially appropriate for funds that invest mainly in assets whose liquidity costs are reflected primarily by a bid-ask spread. 48. While dual pricing may be more suitable for funds that invest in assets whose liquidity costs are mainly comprised of the bid-ask spread, fund managers should account ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 13 separately by additional adjustment to the NAV any significant market impact or explicit transaction costs. 5.3.4 Guidelines on Anti-Dilution Levy (ADL) 49. Fund managers should consider ADL to be especially appropriate for funds: a) with a high investor concentration (i.e.: a small number of investors), to address the risk that one or more investors could fully redeem their shares at a short notice; b) with significant levels of subscription and/or redemption activity that could negatively impact the fund’s existing investors (e.g.: smaller funds in terms of NAV could be more impacted by the cost of liquidity caused by large redemptions); c) that invest in less liquid assets (e.g.: high yield bonds, small cap equities); d) where information on trading costs (bid/ask) is generally available (e.g.: funds that invest in assets with market contingent liquidity costs). 50. Fund managers should note that ADL can be activated on an ongoing basis or dynamically based on pre-defined triggers and thresholds. 51. While the ADL may be implemented consistently during normal market conditions, fund managers should review its calibration in relation to changing market conditions to ensure its effectiveness in preserving the fund's liquidity. 52. Fund managers should calibrate ADL based on the same factors used to calibrate swing factors, i.e.: the calibration of ADL should include all estimated explicit and estimated implicit transaction costs, where appropriate and in line with the principles in paragraph 37, and it should be reviewed and, where needed, adjusted to ensure that the levy can evolve on a regular basis in light of the market conditions. 5.4 Guidelines on side pockets 53. Fund managers should consider the activation of side pockets only in exceptional circumstances and where justified having regard to the interests of its investors. A non-exhaustive list of exceptional circumstances under which a fund manager may consider activating side pockets includes: a) significant valuation uncertainty and/or illiquidity of a specific portion of the portfolio of the fund for which there is no active market and/or for which trading is prohibited ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 14 (e.g. due to sanctions) and/or for which fair valuation is temporarily unavailable with the view of segregating it from the rest of the fund (to enable this part to remain open for investors); b) fraud, financial crisis or war affecting a particular sector or region. 54. In the calibration of side pockets, managers should consider: a) determining the circumstances for activating a side-pocket and defining when such conditions no longer exist; b) setting criteria for assessing and monitoring the conditions that prompted the use of the side-pocket; c) consider the merit of placing some cash to manage the potential liabilities of the side pockets; d) the criteria for reviewing and potentially revising the side-pocket decision and the changing circumstances that would warrant this. ESMA - 201-203 rue de Bercy - CS 80910 - 75589 Paris Cedex 12 - France - www.esma.europa.eu 15 16

ESMA34-671404336-1364 Guidelines on liquidity management tools of UCITS and open-ended AIFs

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