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CONSULTATION DOCUMENT

Undertakings for Collective Investment in Transferable Securities (UCITS) Product Rules, Liquidity Management, Depositary, Money Market Funds, Long-term

Investments

OCTOBER 2012

Submission presented by Amundi 90, Boulevard Pasteur F75015 PARIS

IRR ID 94607479886-02

Amundi is a major asset manager based in Europe and promoter of many hundreds of UCITS. It ranks second in Europe and ninth worldwide among the top Asset Management companies with €692.9 billions under management at the end of June 2012. Located at the heart of the main investment regions in some 30 countries, Amundi offers a comprehensive range of products covering all asset classes and major currencies. However Amundi’s principal activities are in Europe and the euro-zone. Amundi has developed savings solutions to meet the needs of more than 100 million retail customers worldwide and designs innovative, high-performing products designed for institutional clients and tailored specifically to their requirements and risk profile. Thus, Amundi is very keen to seize the opportunity offered by the European Commission to openly discuss the future of the European industry which is so much dependent on the UCITS directive. We thank the Commission for this consultation. When answering this consultation we refer as often as possible to our current practice in order to provide direct first hand information and express openly our views on each of the questions. We are aware of answer transmitted by l’Association Française de Gestion and refer to it in several places because we share its views as we do globally for answers of EFAMA and AMIC.

1. INTRODUCTION 2. ELIGIBLE ASSETS Box 1 (1) Do you consider there is a need to review the s cope of assets and exposures that are deemed eligible for a UCITS fund? The flexibility introduced by UCITS III has been supplemented over time by a series of additional rules issued by CESR and ESMA since 2010 and we consider that a good balance has been found between flexibility on the investment side and rigorousness in terms of measurement and

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management of the associated risks, and believe that this balance has been central to the success of the UCITS brand. If UCITS are to continue to be the product of choice for promoters and investors we believe it is essential that retail investors should be able to continue to benefit from product innovation and developments in investment management techniques. In fact, innovation has provided added value for retail investors and, in many cases, has permitted to combine performance with moderate risk which has been particularly beneficial for these investors during the successive financial crises we have experienced. So we do not see the need for any restriction of the scope of eligible assets and exposures for UCITS. We would rather propose to extend the scope to some commodities and, in particular, to gold. It is worth reminding that gold is a specific type of commodity and has long been considered as an instrument of monetary policy. Hedge funds indices and loans are also in our view candidates to be eligible assets for UCITS, to a limited extent such as 10% for the total of all non-core instruments. Lastly, it is important to underline the fact that an investment structure or technique is complex for retail investors to understand should not be the determining factor in considering its UCITS eligibility. In many cases, the complexity of the instruments or techniques (e.g. derivatives) will serve to reduce the risk and to ensure that the product is actually more suitable for retail investors. Indeed, it is important that such complex products are well understood by the competent authority in charge of supervising the UCITS and are explained in clear terms to investors if any risk may arise from their usage. (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? Although the UCITS framework is primarily designed for retail investors, there are actually different types of UCITS investors, ranging from retail individuals to large professional investors. As a result, the expectation of UCITS investors may vary quite a lot and it is therefore difficult to identify a detailed set of common investor expectations in respect of UCITS strategies. This being said, we consider that, for example, the recent attempts to replicate hedge fund like strategies in the UCITS framework (so-called “Newcits”) has created confusion and concern, in particular from part of external actors (e.g. Asian or from other emerging markets) and has been detrimental for the UCITS label. (3) Do you consider there is a need to further deve lop rules on the liquidity of eligible assets? What kind of rules could be envisaged? Plea se evaluate possible consequences for all stakeholders involved.

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We do not see the need to further develop rules on the liquidity of eligible assets. However, we agree that the discussion opened below, see Box 4, on how to cope with exceptional circumstances is the good approach to the general problem of liquidity.

(4) What is the current market practice regarding t he exposure to non-eligible assets? What is the estimated percentage of UCITS exposed t o non-eligible assets and what is the average proportion of these assets in such a UC ITS' portfolio? Please describe the strategies used to gain exposure to non-eligible as sets and the non-eligible assets involved. If you are an asset manager, please provi de also information specific to your business. UCITS managed by Amundi are not exposed to non eligible assets. (5) Do you consider there is a need to further refi ne rules on exposure to non-eligible assets? What would be the consequences of the follo wing measures for all stakeholders involved: - Preventing exposure to certain non-eligible asset s (e.g. by adopting a "look through" approach for transferable securities, investments i n financial indices, or closed ended funds). - Defining specific exposure limits and risk spread ing rules (e.g. diversification) at the level of the underlying assets. For the reason exposed in question (2) we would be in favour of preventing exposure to non-eligible assets by adopting the so-called look through approach. We consider that a maximum of 10% of the NAV of a fund could be invested in non core assets. (6) Do you see merit in distinguishing or limiting the scope of eligible derivatives based on the payoff of the derivative (e.g. plain vanilla vs. exotic derivatives)? If yes, what would be the consequences of introducing such a dis tinction? Do you see a need for other distinctions? We see no merits in distinguishing eligible derivatives on the basis of their payoff profile. The payoff is only one element to be taken into account when determining standardisation of OTC derivatives for EMIR purposes Furthermore, we do not believe that a derivative which does not pose any problem in terms of risk to a UCITS should be restricted simply because it is too complex for some investors to understand. The experience of the last decade demonstrates that UCITS managers have sufficient risk management capabilities to adequately deal with such instruments. We therefore believe that UCITS managers should remain free to select derivative instruments (be they plain vanilla or exotic derivatives) which in their opinion best suit the interests of their investors. It is important for retail investors to easily understand the global risk-return profile of the fund, not of its components. And the global risk-return profile of the fund may be easy to understand although it may be the result of a combination of exotic derivatives. We strongly believe that the new EMIR regulation, combined with current UCITS rules, will provide for a very secure framework for the use

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of derivatives in UCITS. Furthermore, restricting the scope of eligible derivatives in UCITS would play against the desired level-playing field with structured notes issued by banks. (7) Do you consider that market risk is a consisten t indicator of global exposure relating to derivative instruments? Which type of strategy e mploys VaR as a measure for global exposure? What is the proportion of funds using VaR to measure global exposure? What would be the consequence for different stakeho lders of using only leverage (commitment method) as a measure of global exposure ? If you are an asset manager, please provide also information specific to your bu siness. Amundi manages 240 portfolios for which it calculates the regulatory global risk using the VaR method. Amundi considers that the VaR and commitment methods are fully legitimate and complementary tools that should both be available to UCITS risk managers for measuring global fund exposure depending on the specificities of the fund. Nowadays, VaR remains the simplest way to take into account the exposure of a derivative instrument (delta adjusted). Using VaR allows taking into account the correlation of the assets as well as the current market conditions. In particular for portfolios using extensively derivatives, VaR provides investors and risk managers with a more accurate view of the global risk of a portfolio, especially when derivative exposures are offset by other derivatives. We would therefore be very concerned by any proposal to move to a regime where a leverage test (be it the commitment approach or the ‘sum of gross notionals” test) becomes the only available method to calculate global exposure. A narrow leverage test may indeed provide a misleading assessment of a UCITS’s risk profile or volatility. Of course, the commitment approach is much better than the gross method which does not help much to evaluate the real risk and leverage of a fund. But the commitment approach does not take into account the purpose for which derivatives are used (e.g. reduction of risk or otherwise). Positions that economically offset risk, such as interest rate or currency hedge, may be required to be included in the commitment approach calculation even though such transactions would ultimately reduce risk in a portfolio. As a result, the determination of global exposure solely by reference to leverage could have an adverse effect in terms of investor protection in that it would discourage/make more difficult the use of derivatives to reduce the risk in a portfolio through hedging and efficient portfolio management. Though the VaR method does not permit in itself to calculate the leverage of a fund, it will be often necessary to take it in consideration in order to complement the results of the Commitment method and to give a more accurate view of the global exposure of a specific portfolio. Thus we recommend maintaining the current practice to use VaR as the most significant tool to express risk of certain types of UCITS (on top of commitment to express leverage). (8) Do you consider that the use of derivatives sho uld be limited to instruments that are traded or would be required to be traded on

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multilateral platforms in accordance with the legis lative proposal on MiFIR? What would be the consequences for different stakeholders of i ntroducing such an obligation? As a preliminary remark, we wish to underline the fact that we are not aware of any particular issue in relation to investments by UCITS in OTC derivatives and that we therefore do not see the rationale for the proposed changes by the Commission. With this in mind, we fundamentally object to any such limitation in the use of derivatives by UCITS which, we believe, is unduly restrictive for the following reasons: - Limiting the scope of eligible derivative instruments to those traded on multilateral platforms will

effectively limit the ability for UCITS to mitigate the market risk of their investment. This is due to the fact that derivatives used for hedging purposes must often be specifically modeled in order to account for specificities of a UCITS portfolio;

- As of today, trading on multilateral platforms only covers a very limited range of derivatives.

Moreover, the scope of central clearing obligations under EMIR which shall determine the extent of multilateral trading of derivatives is, for the time being, far from clear. It must be expected that EMIR will start with some very standardized products and will only gradually expand to more sophisticated products. It is therefore to be feared that UCITS will not be able to find on multilateral platforms the range of derivative instruments they need to hedge their portfolios against a number of risks or to pursue their investment strategies.

We also wish to take this opportunity to reiterate once again the need to clarify the counterparty limits as defined in Article 52 of the UCITS directive in order to allow UCITS to make full use of the central clearing arrangements provided by EMIR. According to that provision, UCITS have a 5% limit on exposures to a single counterparty on OTC derivatives (raised to 10% where the counterparty is a credit institution). However there is an urgent need to clarify how these limits apply in the context of central clearing to CCPs and, in particular, as to who the counterparty is for the purposes of the 5% or 10% limit. We therefore recommend that clarity be provided on this issue and that the 5%-10% limit be removed for any exposure to a clearing house. In the absence of such clarification, the existing counterparty limits under Article 52 may actually act as a brake on UCITS moving to central clearing, therefore preventing UCITS and their investors from benefiting from the reduction of counterparty risk associated with central clearing. In the same vein, we are also very concerned about the fact that, as a result of the prohibition from reusing cash obtained through repo or reverse repo transactions for collateralization of other investments (as currently envisaged in the ESMA guidelines on ETFs and other UCITS issues), UCITS may experience serious difficulties in providing sufficient liquidity as collateral to CCP. Should this prohibition be maintained, it would also act as brake on UCITS moving to central clearing.

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3. EFFICIENT PORTFOLIO MANAGEMENT (EPM) Box 2 (1) Please describe the type of transaction and ins truments that are currently considered as EPM techniques. Please describe the t ype of transactions and instruments that, in your view, should be considere d as EPM techniques. According to ESMA’s approach in its consultation issued in January 2012 (ESMA 2012/44) on its guidelines on ETF and other UCITS issues, EPM encompasses securities lending and Repos. Securities lending brings extra revenues to the funds and their holders. Reverse repos and repos are largely used as means to adjust cash position of the funds in a safe, flexible and profitable way. In that respect they are closer to usual investment tools than to EPM techniques. Amundi does not see any other type of transaction that should be considered as EPM. (2) Do you consider there is a specific need to fu rther address issues or risks related to the use of EPM techniques? If yes, please describe the issues you consider merit attention and the appropriate way of addressing suc h issues. If we consider ESMA’s guidelines, they raise an important question on consistency and hierarchy of European regulations as ESMA expresses definitive views on a topic which is open for comments in the present consultation initiated by the European Commission. However, the risks relating to EPM are properly addressed in ESMA’s guidelines through transparency and disclosure requirements, risk control and liquidity management. But some rules should be revisited : §29 is unclear and not economically justified if it views fees splitting agreements as unsuitable and § 40-e on diversification, 40-i and j (see question 6 below) on use and investment of collateral and 42 on stress testing create real operational concerns particularly with reference to the introduction of EMIR and Dodd Frank Act. (3) What is the current market practice regarding t he use of EPM techniques: counterparties involved, volumes, liquidity constra ints, revenues and revenue sharing arrangements? Amundi, as most fund managers, carefully monitors the counterparty risk of the funds it manages and follows their credit worthiness on a continuous basis. If securities lending is limited, Amundi uses largely reverse repo as a safer way to invest cash without having to face the credit risk of one issuer or counterparty only as would be the case with a CD or a deposit. The percentage of reverse repo may in some instances go as high as to represent 100% of the NAV of a fund. Most transactions are contracted for with a possibility for, Amundi to call them back with a 48 hour delay. This takes place at market price, which is consistent with the valuation in the NAV of the funds. Revenue sharing agreements express the economical reality of a win-win transaction: the UCITS holders do get extra revenues through securities lending or Repo and the intermediary receives an

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appropriate reward for its activity on the market and in order to cover its costs to develop such an activity. Splitting agreements whereby margin is shared between fund and asset manager are totally acceptable as long as they are disclosed to the investors. (4) Please describe the type of policies generally in place for the use of EPM techniques. Are any limits applied to the amount of portfolio a ssets that may, at any given point in time, be the object of EPM techniques? Do you see a ny merit in prescribing limits to the amount of fund assets that may be subject to EPM? I f yes, what would be the appropriate limit and what consequences would such limits have on all the stakeholders affected by such limits? If you are an asset manage r, please provide also information specific to your business. EPM techniques do not create specific risks that would not be analysed and properly monitored by the risk control systems of an asset manager. Current organisation of risk control within management companies ensures that UCITS are compliant with regulation, prospectus and information provided in the KID. In Amundi’s view, funds should be authorized to use EPM techniques for up to 100% of all their assets and regulatory limitation of leverage to 2:1 in terms of exposure for UCITS is stringent enough to avoid excesses. (5) What is the current market practice regarding t he collateral received in EPM? More specifically: - are EPM transactions as a rule fully collateraliz ed? Are EPM and collateral positions marked-to-market on a daily basis? How often are ma rgin calls made and what are the usual minimum thresholds? As a general principle, Amundi requires a full collateralisation of its transactions and even demands overcollateralization in some instances. For example, when MMFs receive money market instruments as collateral they will require 102%. Valuation of collateral is calculated daily and margin calls follow when the Minimum Transfer Amount is reached. - does the collateral include assets that would be considered as non-eligible under the UCITS Directive? Does the collateral include assets that are not included in a UCITS fund's investment policy? If so, to what extent? Amundi accepts only assets eligible under UCITS rules as collateral for UCITS funds. But Amundi’s opinion is that there is not direct link between collateral and eligible assets according to the investment policy of each fund. Collateral is a tool to mitigate counterparty risk. It is not an investment decision. As a matter of fact, if the counterparty defaults the beneficiary of the collateral will sell it at once to get its money back and not accept the dangerous idea of transferring the collateral in the portfolio, which would immediately and automatically change the risk profile of the fund. The main criteria for collateral are quality and liquidity. Introducing any other rule would be counterproductive. - to what extent do UCITS engage in collateral swap (collateral upgrade/downgrade) trades on a fix-term basis? So far Amundi is not entered in collateral swaps. It considers that it is more appropriate for a fund to offer as collateral what it holds and over-collateralize through haircut instead of entering in a

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supplementary counterparty risk through a new swap. Amundi is very much concerned that regulators may inappropriately limit eligible collateral or require excessive cash margins. (6) Do you think that there is a need to define cri teria on the eligibility, liquidity, diversification and re-use of received collateral? If yes, what should such criteria be? As suggested in ESMA’s guidelines a broad definition of eligible collateral is necessary to avoid liquidity and market impact. It can be efficiently managed with an appropriate haircut policy. Liquidity as defined by ESMA in its guidelines (§40-a) is too restrictive since the reference to trading “on a regulated market or MTF” is not appropriate to include Funds and Money market instruments in the list of collateral. Diversification expressed by ESMA (§ 40-e) by a ratio of 20% of assets as a maximum by issuer should be revisited to allow for higher a ratio on Government bonds or covered bonds for example and to take into account the diversity of counterparties. More generally authorities should be reminded that “good guarantees do not make good loans” as bankers used to say. Collateral should not be over regulated, since the risk lies first with the volatility of the underlying transaction, secondly with the counterparty to the transaction and only to a third degree to the quality of the collateral. In that respect stress testing collateral or adding collateral when computing the ratio referred to in article 56-2 of the directive is not proportionate to the reality of the risk. Practically, Amundi’s procedures focus first (i) on the choice of counterparties, which is clearly the main issue, and then (ii) turn to the level of collateral according to a collateral/haircut matrix defining the appropriate level of haircut for a given type of collateral and finally (iii) check liquidity of the collateral and availability of reliable market prices. This progressive test is aimed at preventing aggressive risky taking when using EPM techniques such as securities lending for example. As far as re-use is concerned, Amundi considers, contrary to ESMA’s guidelines §40 i and j, that it should not be forbidden. In fact, the real risk essentially stems from the leverage gained from EPM techniques and the excessive exposure it may lead to. As UCITS are strictly limited in that respect, re-use of collateral by UCITS should be authorised. Furthermore, with the implementation of Dodd Frank Act and EMIR and the requirement for full collateralisation of derivative transactions, funds should be authorised to use collateral received to post their own collateral in order to fulfil their obligations and avoid shortage on eligible collateral. The contrary would lead to the situation where a fund “A” investing all its assets into reverse-repos would be de facto forbidden to use derivatives, as it could not re-use its assets, while fund “B” investing all its assets in bonds would be able to use derivatives. Such a situation would be absurd from the investor protection’s point of view, as investments of fund “A” may be much more secure than investments of fund “B”.

(7) What is the market practice regarding haircuts on received collateral? Do you see any merit in prescribing mandatory haircuts on rece ived collateral by a UCITS in EPM? If you are an asset manager, please provide also in formation specific to your business. Haircut is a very efficient way to protect investor and to adapt to the evolution of market conditions. Amundi thinks that haircut is not a matter for regulatory measures, as it is a fine tuning instrument that needs flexibility to be efficient. One may suggest that the fact to publish official minimum requirements for haircut may lead to the false feeling of a comfortable position. It could

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disincentivise operators to properly monitor the risk on the collateral received. Moreover, any rule might appear too restrictive in easy times and too loose in times of difficulties and any regulatory change leads to a cliff-edge effect that is counterproductive. A continuous adjustment of haircut is negotiable on a bilateral basis and offers higher protection. Amundi does require haircut on collateral it receives and takes it as a key instrument in its risk management. (8) Do you see a need to apply liquidity considerat ions when deciding the term or duration of EPM transactions? What would the conseq uences be for the fund if the EPM transactions were not "recallable" at any time? Wha t would be the consequences of making all EPM transactions "recallable" at any tim e? Funds have to adapt to meet redemptions presented by unit holders in all circumstances. This principle suggests that on one hand assets should be rapidly negotiable and that NAV must constantly reflect market prices. These rules should apply to EPM techniques as well. Transactions should be recallable on a reasonable notice period (48 hours is the common practice in consistence with settlement delays) at market price. Amundi has entered in transactions where the counterparties accepted to unfold the deal as necessary to face redemptions, thus taking on themselves this redemption risk. In its consultation ESMA referred to “callability on an accrued basis” which sounded as both unnecessary and economically unjustified as it would de facto limit the use of Repo to overnight transactions. Call at market price is the common and recommended practice. (9) Do think that EPM transactions should be treate d according to their economic substance for the purpose of assessment of risks ar ising from such transactions? As all assets, EPM transactions should be treated according to both their legal reality and their economic substance. Economic transparency when assessing risk is the proper approach. (10) What is the current market practice regarding collateral provided by UCITS through EPM transactions? More specifically, is the EPM counterparty allowed to re-use the assets provided by a UCITS as collateral? If so, to what extent? Amundi is particularly active on repos which are legally different from securities lending. Speaking of repos or reverse repos there is complete transfer of property of cash on one side and securities or monetary market instruments on the other. Each counterparty is authorised to use its property as long as it keeps its engagement to return it when due. There is a specific case when Amundi is particularly keen to allow its counterparty to use or re-use the collateral it posted. It’s the case of a back to back transaction by which the counterparty of the fund returns its position to reduce or suppress its market risk and is required to post collateral with its new counterparty. We feel that the economic substance fully justifies the use or re-use of the collateral we posted.

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Conversely, Amundi is convinced that funds should be authorised to use the collateral they receive in order to comply with EMIR requirements and post their own collateral. (11) Do you think that there is a need to define cr iteria regarding the collateral provided by a UCITS? If yes, what would be such criteria? A UCITS is an investor subject to specific rules to protect investors who trust it. We do not see any need to regulate the collateral posted by a UCITS. (12) What is the market practice in terms of inform ation provided to investors as regards EPM? Do you think that there should be greater tran sparency related to the risks inherent in EPM techniques, collateral received in the context of such techniques or earnings achieved thereby as well as their distribu tion? UCITS provide regular information to investors including on the use of EPM techniques. ESMA’s guidelines go a step further and Amundi agrees with these new requirements in terms of transparency. 4. OTC DERIVATIVES Box 3 (1) When assessing counterparty risk, do you see me rit in clarifying the treatment of OTC derivatives cleared through central counterpart ies? If so, what would be the appropriate approach? The introduction of CCPs does modify the assessment of counterparty risk for OTC derivatives. Hopefully for the better, since we expect that the risk being concentrated on a small number of central counterparties those will be closely supervised and sufficiently funded to diminish counterparty risk and bring it as close as possible to zero. It is the regulator’s responsibility to control the organisation, the solvency (capital, guarantee funds, margins…) and the robustness of CCPs and we are confident that all steps will be taken to ensure market stability and confidence…be it only to encourage the desired trend towards central clearing. An attentive examination of the legal structure offered by the CCPs is of prime importance as well as a good monitoring of the time sequence of successive bookings and associated risks (executing broker, clearing member, CCP). Amundi is concerned that mandatory or recommended clearing could lead to a difficulty in complying with counterparty risk limits of UCITS. CCPs should benefit from a specific enlarged counterparty ratio much higher than other financial counterparties which are limited to 10%. The question is to decide whether (i) a 30% counterparty ratio would be workable or (ii) a waiver of any counterparty risk should be introduced for CCPs. We favour this last option. (2) For OTC derivatives not cleared through central counterparties, do you think that collateral requirements should be consistent betwee n the requirements for OTC and EPM transactions?

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Amundi’s view is that within EPM transactions Repos and reverse repos are from a different nature and should not be considered as collateralised transactions. Speaking of collateral stricto sensu, yes consistency and reference to a single ruling is acceptable. (3) Do you agree that there are specific operationa l or other risks resulting from UCITS contracting with a single counterparty? What measur es could be envisaged to mitigate those risks? We do not see any specific risk in contracting with a single counterparty. On the contrary from an operational point of view :

- using one single counterparty limits counterparty risk to one entity when using several entities would multiply this risk and may extend it to second ranking counterparties for the sake of useless diversification;

- since UCITS cannot have a counterparty risk higher than 10% of the NAV diversification is not an issue and may just increase the total risk of the fund by multiplying the 10% exposure ratio;

- best execution rules make it difficult to decide to deal with counterparties that did not show the best offer in terms of risk/ price;

- follow-up and administrative process is smoother and then operational risk is far lower when using one single counterparty. For example, Amundi resets daily total return swaps that are transacted with one single counterparty by a fund and thus reduce the risk exposure of the fund to a minimum of the daily variation. This can be done because the swap is not split between several counterparties having different administrative processes.

In a nutshell, Amundi considers that the limitation of counterparty risk to 10% as provided for in UCITS regulation is very protective of the holders interests and should not be amended with any requirement to diversify counterparties and finally increase the risk of the fund.

(4) What is the current market practice in terms of frequency of calculation of counterparty risk and issuer concentration and valu ation of UCITS assets? If you are an asset manager, please also provide information spec ific to your business. Within Amundi, counterparty risk due to the use of OTC derivatives and issuer concentration risk are calculated on a daily basis using dedicated tools. More specifically Amundi’s ETF not only value their swaps on a daily basis but also reset them in order to bring counterparty risk to zero every day. Concentration risk takes into account securities together with derivatives having securities of the same issuer as underlying asset. Amundi values assets of UCITS on a daily basis. Illiquid assets, which cannot be valued daily, are limited to 10% of the NAV in order to manage liquidity risk. (5) What would be the benefits and costs for all st akeholders involved of requiring calculation of counterparty risk and issuer concent ration of the UCITS on an at least daily basis?

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Amundi calculates these ratios on a daily basis whatever the frequency of computation of the official NAV by the administrator. Some asset managers prefer to make the calculation on the same frequency as the computation of the official NAV and would probably have difficulties to dispose of the relevant information more frequently. An intraday calculation would need very costly developments and tools for Amundi: our current organisation relies on an overnight batch updating portfolios prior to calculating ratios. To monitor counterparty risk or concentration risk intraday would simply mean to change the design of most of the IT. (6) How could such a calculation be implemented for assets with less frequent valuations? Some products may not have a daily valuation and in that case Amundi refers to the last available price to calculate counterparty ratio. Different tests make sure that this price is not outdated or inappropriate. 5. EXTRAORDINARY LIQUIDITY MANAGEMENT TOOLS Box 4 (1) What type of internal policies does a UCITS use in order to face liquidity constraints? If you are an asset manager, please provide also in formation specific to your business. Amundi has defined internal liquidity policies based on the typology of the portfolios. Eligible assets for each category are selected on the basis of their liquidity. For the purpose of illustration, WAL is the criterion applied for Money Market Funds, for bond portfolios the criterion is the liquidation price and the time needed to liquidate the position, for equity portfolios the criterion is the time needed to liquidate the position. Implementation of these policies is regularly controlled. (2) Do you see a need to further develop a common f ramework, as part of the UCITS Directive, for dealing with liquidity bottlenecks i n exceptional cases? Yes, Amundi is in favour of a common framework for dealing with exceptional liquidity issues. But we feel that asset managers should keep a leeway in the implementation of these rules. (3) What would be the criteria needed to define the "exceptional case" referred to in Article 84(2)? Should the decision be based on quan titative and/or qualitative criteria? Should the occurrence of "exceptional cases" be lef t to the manager's self-assessment and/or should this be assessed by the competent aut horities? Please give an indicative list of criteria. Indicative criteria which could illustrate what an “exceptional case” is could include:

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- a weakening of the compensation between subscription and redemption with a regular outflow of redemptions, - important redemptions which might lead to difficulties in the management of the portfolio and produce a deterioration of liquidity management ratios, - market shock that the asset manager considers as a threat to the liquidity of the market or the segments of the market where the fund is engaged. (4) Regarding the temporary suspension of redemptio ns, should time limits be introduced that would require the fund to be liquid ated once they are breached? If yes, what would such limits be? Please evaluate benefits and costs for all stakeholders involved. Amundi is not in favour of time limits whose breach would require the fund to be liquidated. Only a case by case analysis is appropriate in coordination with national supervisor. In these exceptional cases when redemptions are suspended the asset manager has converging interests with unit holders: nobody wants such an uncomfortable position to last long. (5) Regarding deferred redemption, would quantitati ve thresholds and time limits better ensure fairness between different investors? How wo uld such a mechanism work and what would be the appropriate limits? Please evalua te benefits and costs for all the stakeholders involved. As a general position, Amundi thinks that the possibility for an asset manager to decide to suspend redemption is sufficient an instrument to deal with extraordinary cases of illiquid markets - knowing that UCITS as a rule invest in liquid assets. We do not favour quantitative thresholds and time limits, even if they can be useful to protect equality and fairness between investors. We consider that it should be considered as an option at the hand of management companies and that complete information should then be channelled to investors using the usual ways. In particular, a clear explanation on how investors are impacted and how their orders will be processed should be produced. In such cases, redemption orders should be taken into account on an equal basis for all the pending orders so as to avoid any incentive for the first to run out. In case of gates there are two ways to proceed with redemptions not fully served: either the orders are automatically transferred to the following redemption day or they have to be renewed by the unit holder. Both methods have advantages and drawbacks and it seems wise to leave it open for the asset manager to choose. All details have to be provided for in the prospectus of the fund. (6) What is the current market practice when using side pockets? What options might be considered for side pockets in the UCITS Directive? What measures should be developed to ensure that all investors' interests a re protected? Please evaluate benefits and costs for all the stakeholders involved. Side pockets proved to be an effective way to give some liquidity to investors and to freeze only what is illiquid and may be so for a long time. It should not be considered as an usual tool to regulate liquidity of UCITS and as such should not be provided for in the prospectus. It would be useful to include in the regulatory framework the possibility to create side pockets and to manage them with a view to liquidate their holdings. As well as exceptional suspension of redemptions it is

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a possibility that should be authorized by law and practical application should rely on an agreement with national supervisor and complete information of unit holders at the time of implementation. (7) Do you see a need for liquidity safeguards in E TF secondary markets? Should the ETF provider be directly involved in providing liqu idity to secondary market investors? What would be the consequences for all the stakehol ders involved? Do you see any other alternative?

ESMA’s guidelines on ETF and other UCITS issues addressed this issue with the sufficient level of flexibility in their § 23. They affirm the principle and leave it to the fund to organise. (8) Do you see a need for common rules (including t ime limits) for execution of redemption orders in normal circumstances, i.e. in other than exceptional cases? If so, what would such rules be? Rules for the execution of redemption orders are defined in the prospectus of each fund. Amundi is not in favour of common rules on that topic. 6. DEPOSITARY PASSPORT Box 5 (1) What advantages and drawbacks would a depositar y passport create, in your view, from the perspective of: the depositary (turnover, jobs, organisation, operational complexities, economies of scale …), the fund (cost s, cross border activity, enforcement of its rights …), the competent authori ties (supervisory effectiveness and complexity …), and the investor (level of investor protection)? Amundi agrees that in theory the introduction of a depositary passport would foster competition which should lead to higher service or lower cost and ultimately benefit to retail investors. However, Amundi thinks that it is not advisable to introduce a depositary passport now and considers that UCITS 5 is right not to mention that possibility as long as the route to fully harmonized role and responsibilities of depositaries throughout Europe is not accomplished. It would be detrimental to offer a possibility that would favour the wrong side of competition, namely dumping with lower services and decreased protection for investors. (2) If you are a fund manager or a depositary, do y ou encounter problems stemming from the regulatory requirement that the depositary and the fund need to be located in the same Member State? If you are a competent autho rity, would you encounter problems linked to the dispersion of supervisory fu nctions and responsibilities? If yes, please give details and describe the costs (financi al and non-financial) associated with these burdens as well as possible issues that a sep aration of fund and depositary might create in terms of regulatory oversight and supervi sory cooperation.

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Amundi has not experienced any real concern resulting from the obligation to select a depositary located in the same State as the UCITS. We feel it is not wise to change this well accepted rule as long as we have not implemented a full harmonization of the regulation of depositaries. (3) In case a depositary passport were to be introd uced, what areas do you think might require further harmonisation (e.g. calculation of NAV, definition of a depositary's tasks and permitted activities, conduct of business rules , supervision, harmonisation or approximation of capital requirements for depositar ies…)? Yes, further harmonization is required and must be considered as a prerequisite before offering a European passport to depositaries. Such issues as entities eligible to be depositary, role with reference to control of NAV and information provided in the KIID, rules concerning accounting for securities or derivatives in the depository books, definition of responsibility especially in case of delegation…are among the topics where we expect progresses to be realized before envisioning any depositary passport. (4) Should the depositary be subject to a fully-fle dged authorisation regime specific to depositaries or is reliance on other EU regulatory frameworks (e.g., credit institutions or investment firms) sufficient in case a passport for depositary functions were to be introduced? To answer to this question we first have to experience how depositaries reach a common minimum level in their practice after the implementation still to come of AIFM and UCITS 5 directives. (5) Are there specific issues to address for the su pervision of a UCITS where the depositary is not located in the same jurisdiction? Yes, one may spontaneously think of several points where difficulties may stem from the different nationalities of the fund and the depositary: conflict of law and jurisdiction, exchange of information, communication to investors… 7. MONEY MARKET FUNDS Box 6 (1) What role do MMFs play in the management of liq uidity for investors and in the financial markets generally? What are close alterna tives for MMFs? Please give indicative figures and/or estimates of cross-elasti city of demand between MMFs and alternatives. MMFs are largely used by all types of clients and especially corporate treasurers and institutional investors. They provide them with a very effective tool to invest cash with a high degree of liquidity both when investing or divesting, for large or small amounts, on D date if before cut off, with a risk diversification and a return higher than available otherwise for cash. There is no comparable alternative for treasurers since deposits or CDs will increase counterparty or credit risk and management of a diversified portfolio would require time and expertise that the MMF manager offers at a low cost. In times of crisis, we have seen some investors require accrued transparency

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on the portfolio of MMFs, some have switched to MMFs invested solely in government securities but globally assets under management of MMFs have not declined over the last years, even when short term interest rate drastically declined. (2) What type of investors are MMFs mostly targetin g? Please give indicative figures. All types of clients are active with MMFs and it is very important in order to mutualise in- and out-flows that a real diversity of profiles exists among unit holders. (3) What types of assets are MMFs mostly invested i n? From what type of issuers? Please give indicative figures. MMFs invest to the best interest of their holders. The managers select the instruments that offer the best profile in terms of risk / return. Thus the assets in which MMFs invest may vary according to market moves. Currently (September 2012) Amundi MMFs are mainly invested in Money Market Instruments namely about 65% when short term bonds represent 20% and Reverse repo and deposit account for 15%. By type of issuers, financial institutions represent 70% of the portfolio, corporate 10% as well as government and supra national agencies (10% each). (4) To what extent do MMFs engage in transactions s uch as repo and securities lending? What proportion of these transactions is o pen-ended and can be recalled at any time, and what proportion is fixed-term? What a ssets do MMFs accept as collateral in these transactions? Is the collateral marked-to- market daily and how often are margin calls made? Do MMFs engage in collateral swap (coll ateral upgrade/downgrade) trades on a fixed-term basis? MMFs at Amundi do not lend securities but use Reverse repo as an efficient means to invest cash on a callable basis. It is safer than a deposit in a bank as there is a total collateralisation of the amount sent to the counterparty. All of these transactions are callable with a 24 or 48 hours notice and none is contracted on a fixed non callable term. Collateral policy at Amundi defines the rules for collateral and besides Govies, agencies and covered bonds only issuers eligible in the assets are accepted as collateral, but longer maturity issues are accepted. For bonds there is a daily margin call and for money market instruments, which are often less commonly traded, there is an overcollateralization of 2%. Collateral swap is viewed at Amundi as the introduction of an unnecessary new counterparty risk and no MMF enters in such transactions. (5) Do you agree that MMFs, individually or collect ively, may represent a source of systemic risk ('runs' by investors, contagion, etc… ) due to their central role in the short term funding market? Please explain. If MMFs considerably participate to the financing of the economy on the short term side, their role should not be overestimated as in Europe banks keep a far more important role in that respect. The risk of run leading by contagion to a systemic crisis is a scenario which is unthinkable with VNAV MMFs. The risk of run results from the fear that the official NAV of a fund might be inflated, thus offering to the first to redeem the advantage of not suffering from the necessary adjustment in price that the other unit holders will necessarily suffer afterwards. As the VNAV fund publishes an official

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NAV marked to market there is no room for a discrepancy between official NAV and shadow NAV. If liquidity disappears and fire sale prompts prices to go down, the NAV of the VNAV fund will drop immediately, thus suppressing any premium to the first to redeem at an already discounted price). CNAV funds have not properly addressed that issue yet. Due to the total amount represented by CNAV funds in Europe we do not think that there is a systemic risk resulting from the MMFs in that region. (6) Do you see a need for more detailed and harmoni sed regulation on MMFs at the EU level? If yes, should it be part of the UCITS Direc tive, of the AIFM Directive, of both Directives or a separate and self-standing instrume nt? Do you believe that EU rules on MMF should apply to all funds that are marketed as MMF or fall within the European Central Bank's definition 15? Amundi feels that ESMA, and previously CESR, accomplished a very good job in defining rules for MMFs and short-term-MMFs. This set of rules could be revisited and for example we suggest that MMFs could hold a minimum of 10% to 15% in cash or instruments maturing within a week, but we do not support the idea of introducing regulation concerning MMFs in the UCITS directive. Even if most MMFs are UCITS in Europe some are not and must nevertheless comply with ESMA’s views to be labelled as MMF. The present architecture of the regulation seems appropriate. Moreover, the recent publication (October 9, 2012) by IOSCO of its recommendations on MMFs comforts us in this position, as the approach is totally consistent with CESR’s regulation. It is confusing to use the label MMF for funds that are not compliant with ESMA’s rules and it is the case for MMF established under the regulation of third countries. Any move to improve the situation would be welcomed by Amundi. (7) Should a new framework distinguish between diff erent types of MMFs, e.g.: maturity (short term MMF vs. MMF as in CESR guidelines) or a sset type? Should other definitions and distinctions be included? We do think that CESR’s guidelines are adequate and offer a good alternative between short term and regular MMFs, provided that they both are considered as cash equivalent for accounting and prudential purposes. Any other distinction has not to be recognised by the regulation as it will be more of a marketing specificity in terms of investment strategy or eligible assets. Box 7 (1) What factors do investors consider when they ma ke a choice between CNAV and VNAV? Do some specific investment criteria or restr ictions exist regarding both versions? Please develop. From a commercial point of view there is a major difference between CNAV and VNAV funds in the way they are perceived. CNAV are viewed as deposit like instruments with a stability of the value that refers to the accounting of a deposit. This is probably the way MMFs are marketed in the USA. VNAV MMFs are on the contrary understood to be investment schemes and to have as such the general risk of all investment. For sure, they present the smallest risk of all offered funds! But risk is

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inherent to a fund even a MMF. This is the way MMFs are marketed in France for example, where CNAV have not been authorised. (2) Should CNAV MMFs be subject to additional regul ation, their activities reduced or even phased out? What would the consequences of suc h a measure be for all stakeholders involved and how could a phase-out be implemented while avoiding disruptions in the supply of MMF? In our opinion the issue is not to suppress CNAV but for CNAV MMF to address the possibility of a discrepancy between official (C) NAV and marked to market shadow NAV. It might be through a mechanism of diminution of the number of units held by the investor, or through an exit fee and a better transparency of the NAV… Moreover some investors prefer CNAV funds for accounting reasons (and the interpretation of “cash equivalent” is important in that respect) or because they are more often rated (usually triple A)…These are probably very bad reasons but should be considered before turning CNAV MMFs to VNAV. (3) Would you consider imposing capital buffers on CNAV funds as appropriate? What are the relevant types of buffers: shareholder fund ed, sponsor funded or other types? What would be the ap propriate size of such buffers in order to absorb first losses? For each type of the buffer, what would be the benefits and costs of such a measure for all stakeholders involv ed? The key issue is not to absorb the potential losses of a CNAV MMF but to avoid any loss to appear. Reduction of the number of units, redemption fees…are probably better suggestions than any buffer or guarantee. (4) Should valuation methodologies other than mark- to-market be allowed in stressed market conditions? What are the relevant criteria t o define "stressed market conditions"? What are your current policies to deal with such situations? The subprime crisis and its consequences have lead to tense market conditions and MMFs proved their robustness from August 2007 to date. No significant incident was reported with VNAV MMFs (if we agree not to consider as MMFs funds that had too high a WAL or a WAM to comply with the now existing CESR guidelines). In France NAV is computed on a marked to market basis for all holdings; for short term Money market instruments which are not actively traded on the secondary market it is accepted that three months before maturity date valuation could be done on an accrued basis, whereby price moves daily in order to converge towards the final payment to be received at maturity (capital and interest); however this method cannot be followed if there is a risk that full payment at maturity date might not be obtained. Stressed market conditions are typically characterised by a large spread between bid and ask prices. That is an index showing that liquidity is not effective and creates a risk for funds and especially MMFs if they have to sell important stakes of assets. In such occurrences there is a discussion on whether we should favour a valuation at bid instead of at mid prices to be able to face redemptions of all quantities but thus favouring new subscribers to the fund.

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Amundi thinks that UCITS should be authorised under the responsibility of the manager to utilise a technique such as a swing price to adapt the price paid or received by subscribers or redeemers for the market impact of their orders. This tool might prove quite efficient in stressed periods too. Box 8 (1) Do you think that the current regulatory framew ork for UCITS investing in money market instruments is sufficient to prevent liquidi ty bottlenecks such as those that have arisen during the recent financial crisis? If not, what solutions would you propose? First, one should keep in mind that liquidity is a key element of MMFs. Investors like the possibility to invest or divest instantly in MMFs for large or small amounts. This flexibility is the major driver of the success of MMFs. Of course, return in line with short term interest rate and proper credit selection to avoid capital losses are also expected from MMFs managers. Second, it is fair to consider that there has not been any major shock on the liquidity of MMFs, especially VNAV MMFs, even in the recent tense periods. Thus Amundi considers that the current regulation is adequate to avoid liquidity problems on VNAV. The opinion in CNAV is that focus should be not on regulating liquidity, but on dealing with the possibility of a discrepancy between official and shadow NAV. (2) Do you think that imposing a liquidity fee on t hose investors that redeem first would be an effective solution? How should such a mechani sm work? What, if any, would be the consequences, including in terms of investors' confidence? The premium offered to the first to redeem disappears if means are taken to avoid any significant discrepancy between official and shadow NAV. Liquidity fee is not appropriate as it would impair liquidity of MMFs which is THE key element of their success. (3) Different redemption restrictions may be envisa ged: limits on share repurchases, redemption in kind, retention scenarios etc. Do you think that they represent viable solutions? How should they work concretely (length and proportion of assets concerned) and what would be the consequences, incl uding in terms of investors' confidence? Redemption restrictions of any kind are very dangerous for the future of MMFs: their availability for subscribing or redeeming at any time for any type of amount is what is cherished by investors. The only possibility to regulate liquidity without risking immediate jeopardy of the industry would relate to valuation rules. Namely, switch to bid price or even better organise for a swing price taking into account the market impact of the daily flow of orders are suggestions made in the exclusive interest of the holders and can be explained and understood. All the other suggestions are too easily perceived by holders as a way for managers to transfer to the holders the risk of liquidity that they should manage. (4) Do you consider that adding liquidity constrain ts (overnight and weekly maturing securities) would be useful? How should such a mech anism work and what would be

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the proposed proportion of the assets that would ha ve to comply with these constraints? What would be the consequences, includ ing in terms of investors' confidence? Liquidity constraints are actually often included in the process of management of MMFs. They should be considered as dynamic and include the knowledge that the manager has from the prospective flows of subscriptions or redemptions over the coming days. A minimum of 10% to 15% of the total assets maturing in less than a week is the proportion which is currently the reference for Amundi MMFs. This ratio has been volatile over the last years with periods when it reached much higher levels. The introduction of such a ratio is supported by Amundi provided that it is a minimum that is not too high and that can be followed on a moving average. It would be an element (on top of the rules on maximum WAL and WAM) to comfort investors and it should apply to all MMFs, be they regular or short term MMFs. (5) Do you think that the 3 options (liquidity fees , redemption restrictions and liquidity constraints) are mutually exclusive or could be ado pted together? We strongly disapprove of liquidity fees and redemption restrictions other than the existing possibility to suspend redemptions in case of crisis. On the contrary we welcome the introduction of a minimum ration of 10 to 15 % of assets maturing in less than a week. (6) If you are a MMF manager, what is the weighted average maturity (WAM) and weighted average life (WAL) of the MMF you manage? What should be the appropriate limits on WAM and WAL? Amundi considers that CESR’s guidelines concerning WAL and WAM are adequate for each of the two categories of MMFs that were identified. These limits allow for an active management of the assets within a framework of lilted risk exposure. Currently WAM on Amundi’s MMFs is limited to 1 day, since interest rate risk is systematically hedged through a reference to EONIA, and WAM averages 100 days. Box 9 (1) Do you think that the definition of money marke t instruments (Article 2(1)(o) of the UCITS Directive and its clarification in Commission Directive 2007/16/EC 16) should be reviewed? What changes would you consider? The current definition of money market instruments (MMI) in the UCITS directive is adequate: it refers to the existence of a market place where these products are dealt, their liquidity and accurate valuation. Market practices have not changed significantly over the last years to review this definition. In particular MMIs are most often exchanged on the primary market where the liquidity exists and not necessarily dealt on regulated markets or MTFs or OTFs. (2) Should it be still possible for MMFs to be rate d? What would be the consequences of a ban for all stakeholders involved?

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Rating is a commercial activity and nothing should prevent CRAs from offering their services if they are approved of by investors or/and issuers. However, rating of MMFs should not be expressed on the same scale as issuance ratings in order to avoid misinterpretations. Some clients, mainly international firms, have included ratings as a criterion to select investments and apply it to MMFs. They should be taught that rating does not prevent them from doing their homework and develop their own appreciation of risk. (3) What would be the consequences of prohibiting i nvestment criteria related to credit ratings? Amundi expects regulators to be consistent and not to refer to rating in their regulations at the same time as they criticise and want to reduce over-reliance on ratings conducted by CRAs that proved to be insufficiently attentive. In that respect the reference to ratings in CESR’s guidelines on MMFs is probably the only subject on which we would suggest a modification. On the other hand we consider that rating is an opinion that can be referred to as an element to assess credit risk. Thus our position is: neither obligation nor prohibition to refer to ratings. Suppressing, as we suggest, all reference to ratings in regulations would make it necessary for investors, and fund managers among them, to develop internal credit analysis. A principle of proportionality should apply in that respect and some investors may issue a procedure by which they decide to rely on external analysis which may be produced by CRAs for example. (4) MMFs are deemed to invest in high quality asset s. What would be the criteria needed for a proper internal assessment? Please give detai ls as regards investment type, maturity, liquidity, type of issuers, yield etc. Through this question we penetrate the internal process of MMFs management. Yes, it belongs to the fund manager to choose appropriate investments in terms of credit quality, maturity, liquidity, yield and instruments. In all these areas the manager will be assisted by credit analysts and risk controllers who check the compliance with the investment process and criteria. Amundi feels that CESR’s guidelines have appropriately defined the framework for an efficient fund management though reactive and adjustable to market conditions. 8. LONG-TERM INVESTMENTS Box 10 General remarks Amundi welcomes the proposal to create an appropriate framework for Long-Term Investments and is very much in favor of such an initiative which may contribute to the growth of the economy in Europe. We therefore welcome the Commission’s intent to investigate the role that investment funds could play in channeling retail investors’ money towards such financing through the development of a framework for long-term investments. Of course, it is important to remind the essential role that the asset management industry is already playing today in this respect. Indeed, by providing equity capital in both primary (IPOs and private

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placements) and secondary markets, as well as debt capital –via corporate bonds or money market instruments– asset managers are fueling the real economy, helping corporations, banks and government agencies to meet their short-term funding needs but also their long-term capital requirements. By contributing to very high levels of activity and turnover in the secondary markets, they also contribute to liquidity. Put differently, if asset managers were not contributing to the supply of funds in financial markets as much as they do today, firms would borrow in less favorable conditions. This would lead to higher cost of capital, lower levels of investment and poorer long-term growth performance. AFG produced research on the subject in France (see press release of October 15, 2012 annexed). Whatever may be the regulatory solution which will be retained, Amundi considers that the following provisions should be adopted in order to ease the management of LT funds:

- Loosened liquidity and diversification rules - Possible restrictions on redemption with, in particular, lock up periods or engagement to

invest till maturity date and possibility to exchange units among investors on a secondary market

- Eligibility of non listed securities and loans and of assets which may not be traded on a secondary market

- Adapted frequency for publication of NAV - No systematic reference to mark to market for the calculation of NAV - Introduction of a general threshold for initial NAV.

(1) What options do retail investors currently have when wishing to invest in long-term assets? Do retail investors have an appetite for lo ng-term investments? Do fund managers have an appetite for developing funds that enable retail investors to make long-term investments?

We do believe that there is an appetite to invest in long-term assets as a way for retail investors to diversify their portfolio and, in particular in the current turbulent market conditions, to gain exposure to new asset classes such as, for example, real-estate and commodities that are less correlated to financial markets. This appetite is illustrated, for instance, by the popularity among retail investors for open-ended real estate funds. In addition, it is worth mentioning that the average length of investment in retail funds is often superior to 7 or 8 years. Amundi benefits with a long and successful experience in long term structured products for retail clients and we can testify of the appetite of this category of investors for closed end products. So we believe that most long term investments funds should include a maturity date at which investors would be offered liquidation of their holding. Of course, the appetite of retail investors for long term products is even greater when a fiscal incentive is associated. In this respect, it is most important to provide fiscal stability and we think that any regulation on long term saving should create the obligation for member states to provide this stability for each product.

As the Commission rightly notes in the Consultation Paper, investing in illiquid assets also implies a number of constraints in the sense that such products usually require a certain level of minimum initial and ongoing subscriptions, long lock in periods due to the investment types, low liquidity and challenges with valuation, all specificities which do not fit with the UCITS framework.

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From Amundi’s’ perspective, there is certainly an appetite to develop funds that enable retail investors to seek long-term outcomes in pursuit of their individual goals as well as to invest in long-term assets in the interest of retail investors, as part of a well-diversified and risk-reward adjusted investment portfolio.

(2) Do you see a need to create a common framework dedicated to long-term investments for retail investors? Would targeted mo difications of UCITS rules or a stand-alone initiative be more appropriate?

In our view, it is perhaps too early to express any recommendation yet on the umbrella under which it would be appropriate to develop LT investment products. Generally speaking, we advocate against an inflation of new directives or regulation covering investment funds and would have a strong preference for having as many products as possible covered by the already existing directives (i.e. UCITS and AIFMD).

Considering the retail orientation of the UCITS directive it seems consistent that the Long Term Investments framework should not be caught in the AIFMD directive which is primarily designed for institutional investors and is not conceived as a product regulation.. Long term investment funds should be regulated as a new type of UCITS. Such original framework, specifically designed for LT UCITS, should incorporate the investor protection principles of the UCITS directive while taking into account the specificities of investments in real or other illiquid assets, and should facilitate EU-wide marketing (via an EU passport) and management of this new fund type (please refer also to our answer to question 9 below).

Private Equity and real estate funds have been classified as AIFs but could probably join a LT UCITS framework with the advantage of getting a passport for retail markets. Last but not least, these LT funds could attract non EU investors and due to the reputation of the UCITS brand it will be beneficial for LT funds to be “affiliated” to the UCITS. (3) Do you agree with the above list of possible el igible assets? What other type of asset should be included? Please provide definitions and characteristics for each type of asset.

It is probably worth reminding the objective of the regulation project which is to provide a framework that will make it possible for investors who do not require liquidity and allow for time to meet demand of counterparties that have long term financial needs. This achievement can be obtained through any financial technique: physical real estate or infrastructure, securitization, loan, bond or mezzanine, capital… Thus the list of assets should not be limitative but illustrative and more specifically bonds and shares should be included in the list, even if listed on an exchange.

We also believe that it will be important to ensure sufficient flexibility in the determination of the eligible assets in order to react swiftly to potential new financing needs of the real economy. We would therefore recommend following the UCITS approach, whereby only broad categories of eligible assets are defined in the level 1 Directive, subsequent details being provided through technical standards to be developed by ESMA.

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Furthermore, investments in liquid assets such as financial instruments or bank deposits should be possible in order to allow for proper liquidity management. The key element for long term investment is for the investor to agree not to get his money back before final maturity of the fund. (4) Should a secondary market for the assets be en sured? Should minimum liquidity constraints be introduced? Please give details.

If the question relates to secondary market of underlying assets bought by funds and refers to valuation problems, we suggest that long term investment specialized funds publish a valuation on a quarterly or annual basis to be consistent with the investment horizon. Furthermore we think that illiquid holdings should be valued on the assessment of an expertise subject to periodic adjustment. There is no need to try and develop liquidity on illiquid assets.

But we also understand the reference to a “secondary market for the assets” to be related to the need to provide investors in long-term investment funds with redemption opportunities.

Given the fact that a retail investor personal situation and/or financial position may change over time due to unforeseen circumstances, it may be appropriate to build in some form of extraordinary early redemption facility for such investors. Indeed, the principle of a secondary market should not be compulsory for all eligible assets; otherwise it would reduce the scope and limit the potentialities provided by the new framework.

In order to increase the attractiveness of such products to retail investors, we would also recommend permitting at least semi-open funds structures enabling investors to redeem their units at regular intervals. So the regulation at level 1 should offer a maximum of flexibility on the question of redemptions and allow for the parallel development of a secondary market of funds units or shares among investors at a price that might be, depending on supply and demand, different from that of the last valuation.

(5) What proportion of a fund's portfolio do you t hink should be dedicated to such assets? What would be the possible impacts?

We believe it is impossible to give a single answer to that question. In practice, the proportion of a portfolio allocated to long-term investments would depend upon the fund’s investment objectives and the liquidity that it offers to its retail investors. The closer the objective and the more liquid the terms offered to shareholders, the lower the allocation to long-term investments. It is conceivable that some funds would allocate the greatest part of their portfolio to such assets but they would then probably be funds specializing in long-term assets rather than funds specializing in long-term investment (in which case they would present specific risks and might be less suitable to the needs of retails investors).

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In other words, we believe the proportion of long-term assets in the portfolio should be aligned with the product structure in line with the principle enshrined by Article 16(2) AIFMD. Accordingly, entirely closed-ended funds investment in illiquid assets could account for up to 100% of the portfolio. Semi-open ended funds, on the other hand, will require a certain proportion of more liquid assets in order to maintain their capability to redeem fund units at certain intervals or to deal with extraordinary early redemptions as referred to in our answer to question 4 above. It is also important to afford flexibility in this field as to permit fund managers to adapt their strategy to the financial market conditions. (6) What kind of diversification rules might be ne eded to avoid excessive concentration risks and ensure adequate liquidity? Please give in dicative figures with possible impacts .

As a general rule, diversification is an essential feature of fund investments and is of particular relevance in the case of open-ended funds. In relation to closed-ended funds, it could be envisaged to allow products focusing on single investments such as a specific infrastructure or energy project with high financing needs. In that case, however, additional safeguards should apply at the distribution level in order to ensure appropriate investor protection. Such safeguards could comprise a general requirement for investment advice with strict suitability standards or particular conditions for qualification of investors (including minimum investment amounts).

(7) Should the use of leverage or financial derivat ive instruments be banned? If not, what specific constraints on their use might be con sidered?

The use of financial derivative instruments in long-term investment funds should not be banned considering that these instruments may be very useful to mitigate certain investment risks, such as currency risks for instance, in the best interest of investors. In addition, the new framework could also fit for long term structured funds which are based on the use of derivatives. We believe that the 100% maximum exposure rule of UCITS funds could apply to LT UCITS. (8) Should a minimum lock-up period or other restri ctions on exits be allowed? How might such measures be practically implemented?

In order to ensure the most efficient functioning of such long-term investments for the best interest of all shareholders, it may be sensible to allow a prescribed minimum investment period prior to allowing redemptions and also limit generally redemptions on an ongoing basis. As already mentioned in our answer to question 4 above, certain parameters should define circumstances which may allow early redemption by an investor, without unduly negatively impacting other investors and also allowing the fund manager to efficiently carry out the investment

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mandate to the best of its ability. However, closed ended funds might just decide not to allow any redemption before maturity and sellers would have to seek another investor to buy their stake.

(9) To ensure high standards of investor protectio n, should parts of the UCITS framework be used, e.g. management company rules or depositary requirements? What other parts of the UCITS framework are deemed neces sary?

Yes, as already mentioned in our answer to question 2, we believe that an EU framework for long-term investment funds should be framed alongside the investor protection principles of the UCITS directive while taking into account the specificities of investments in real or other illiquid assets, and should, in the future, facilitate EU-wide marketing (via an EU passport) and management of this new fund type. The UCITS framework contains, among other, provisions relating to risk management, organizational rules and internal audit that are fit for purpose. Also inherent is the fact that UCITS regulation includes ongoing review of risk management provisions, reporting to competent authorities and disclosure of information to investors through the KIID, prospectus and periodic reports. But other UCITS provisions should be left aside as, for example, the mark to market rules of valuation which could be substituted by amortization methods in the context of buy and hold strategies for closed or semi closed ended funds.

(10) Regarding social investments only, would you s upport the possibility for UCITS funds to invest in units of EuSEF? If so, under wha t conditions and limits?

In order to facilitate fund-of-funds structures providing enhanced diversification to retail investors, we would see benefits in allowing funds established under the new framework to hold units of target funds investing in unlisted companies or other long-term assets. However, concerning EuSEF, we are highly concerned that UCITS may invest in funds that do not appoint a depositary and would suggest to limit the possibility for them to invest only in those EuSEF that choose to have a depositary. 9. UCITS IV IMPROVEMENT Box 11

(1) Do you think that the identified areas (points 1 to 4) require further consideration and that options should be developed for amending t he respective provisions? Please provide an answer on each separate topic wit h the possible costs / benefits of changes for each, considering the impac t for all stakeholders involved.

Yes the identified 4 subjects are to be considered for clarification:

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- self managed funds or investment companies should be subject to the same level of requirements as management companies, except for the application of the principle of proportionality;

- we consider that feeder funds are totally invested in a master fund and refer explicitly to

some aspects of the prospectus of the master in their own prospectus, especially to describe investment strategy and risks; hence, there is appropriate information when they turn regular UCITS, amend their prospectus and inform holders with the format (general announcement or personal mail) appropriate to the importance of the resulting changes in terms of risk profile of the fund; thus, we do not see any need to amend the current directive on this point;

- Finding arrangements in order to limit to 20 working days the delay for agreeing a cross

border merger of funds is important, as the aim of UCITS 4 is typically to offer a pan-European market for UCITS; we would like to underline that in practice some authorities take an undefined time to confirm that all required items are correctly provided and then start instruction of the file (within 20 days), so that procedures may just last far longer than the regulatory time limits; we suggest that an overall time limit of 30 days be included in the regulation, i.e 10 days for confirming the compliance of the file and 20 for its instruction;

- From a practical point of view, notification procedures differ quite a lot from one country

to another and any attempt to unify them is welcomed; in an ideal world an asset manager would post its modified documents in a central UCITS registrar through which all local authorities would be informed of the changes and amendments posted; the version posted in the central registrar would be totally and fully opposable to public and authorities and would liberate the asset manager from any other notification duties; in a real world it is important to limit notifications to classes and shares actually traded or marketed in the considered countries and to examine the possibility of a standard format of notification notices that could be automated. Amundi which a major actor in Europe and executes many notifications in many European countries totally supports the proposal of the Commission.

(2) Regarding point 5, do you consider that further alignment is needed in order to improve consistency of rules in the European asset management sector? If yes, which areas in the UCITS framework should be further harm onised so as to improve consistency between the AIFM Directive and the UCIT S Directive? Please give details and the possible attached benefits and costs. Since UCITS are principally aimed at retail clients and AIFs are more dedicated to institutional or qualified investors it is not abnormal to have some differences between the two regulations. AFG (Association Française de gestion) lists in its answer to the present consultation areas where differences are welcomed and we support its answer. Consistency in the general framework is currently largely achieved and we do not see areas where wide discrepancies produce heavy troubles for the industry. We are more concerned by the fact

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that new categories of funds (as EuSEF) may develop in a framework far more flexible and uncertain. We do not favour either the idea to introduce stand-alone regulations for new types of funds but would prefer to have a segmentation within the UCITS and/or AIF frameworks. Finally, we refer to AFG’s answer which mentions specific areas where UCITS directive could be improved or clarified.

Contacts à AMUNDI : Frédéric BOMPAIRE Affaires publiques 90 , boulevard Pasteur 75015 PARIS 33 (0) 1 7637 9144 frederic.bompaire@amundi.com Bernard AGULHON Regulatory 90, Boulevard Pasteur 75015 PARIS 33 (0)1 7633 2523bernard.agulhon@amundi.com

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