Rulebook on the Capital of a Factoring Company - Unofficial Consolidated Text (NN 12/15 and 142/22)

UNOFFICIAL CONSOLIDATED TEXT RULEBOOK ON THE CAPITAL OF A FACTORING COMPANY (Narodne novine No. 12/15 and 142/22) The Rulebook on Amendments to the Rulebook on the Capital of a Factoring Company (NN No. 142/22) entered into force and is applied from January 1, 2023.

Rulebook on the Capital of a Factoring Company – Unofficial Consolidated Text (NN No. 12/15 and 142/22) 1 Introductory Provisions Article 1. (1) This Rulebook prescribes: – the method and rules for calculating capital, – the method and deadlines for reporting to the Agency, – additional requirements for measures and procedures regarding the conduct of a factoring company in normal and extraordinary circumstances. (2) This Rulebook also provides a detailed description and content of certain items taken into account in the calculation of a factoring company's capital.

Definitions of Terms Article 2. For the purposes of this Rulebook, the following terms are used:

1. Law – Factoring Act ("Narodne novine" No. 94/14),
2. Agency – Croatian Financial Services Supervisory Agency (HANFA),
3. Factoring Company – a legal entity that has received a license from the Agency to conduct factoring business,
4. Share Capital – share capital as prescribed by Article 22 of the Law,
5. Capital – capital of a factoring company as prescribed by Article 23 of the Law.

Capital of a Factoring Company Article 3. (1) A factoring company is obliged to ensure that at all times it meets two capital conditions: – the share capital must not be less than 132,722.81 euros, – the capital must not be less than 132,722.81 euros. (2) If the Agency estimates that the amount of capital is not adequate to the risks to which the factoring company is or may be exposed in conducting the factoring business referred to in Article 21 of the Law, the Agency may, by decision, order the factoring company to increase its capital.

Items Included in the Calculation of a Factoring Company's Capital Article 4. (1) The basis for calculating the capital of a factoring company is the accounting data from the business books of the factoring company, kept in accordance with laws and sub-laws regulating financial reporting of factoring companies. (2) The capital of a factoring company referred to in Article 3, paragraph 1, item 2 of this Rulebook includes the following items: – subscribed and paid-in share capital (paid amounts for business shares, i.e., nominal amount of ordinary and non-cumulative preferred shares, plus the premium realized from issuing those shares), – all types of reserves formed from profit after taxation,

Rulebook on the Capital of a Factoring Company – Unofficial Consolidated Text (NN No. 12/15 and 142/22) 2 – retained earnings of previous years determined on the basis of audited annual financial statements (unencumbered by any future obligations) and approved by members or shareholders, and allocated in accordance with the decision of the general meeting on the use of profit, – profit of the current year determined on the basis of audited annual financial statements (unencumbered by any future obligations) and approved by members or shareholders, or allocated in accordance with the decision of the general meeting on the use of profit, or profit determined on the basis of financial reports for periods during the year and confirmed by auditors, which, in accordance with the decision of members or shareholders, or the general meeting on the use of profit, unencumbered by any future obligations, is allocated to reserves and/or retained earnings during the year, and – capital reserves (amounts above the nominal value/book value realized from issuing shares referred to in item 1 of this paragraph, and from acquiring and/or disposing of own shares, as well as additional payments by members or shareholders into capital). (3) The sum of the items in paragraph 2 of this Article is reduced by the following items: – acquired own business shares or own shares, excluding cumulative preferred shares, at book value, – intangible assets, in the form of goodwill, licenses, patents, trademarks, concessions, and positive reserves arising from the revaluation of intangible assets, – carried forward losses of previous years, determined on the basis of audited annual financial statements, – loss of the current year, determined on the basis of an audited annual financial report and approved by members or shareholders, or by the general meeting, or loss determined on the basis of financial reports for periods during the year, – capital reserves (the difference between the amount achieved from the sale and the nominal value of the share if it is lower than the nominal amount), and – unrealized losses from the revaluation of financial assets available for sale, negative net revaluation reserves arising from accounting for investments in associates or joint ventures using the equity method, and other negative net revaluation reserves. (4) Positive revaluation reserves are not included in the calculation of capital.

Method and Deadlines for Reporting to the Agency Article 5. (1) A factoring company reports to the Agency on the capital of the factoring company via the Report on the Calculation of Capital of a Factoring Company (IIKFD) (Annex No. 1) and the Instructions for the Calculation of Capital of a Factoring Company (Annex No. 2), which are an integral part of this Rulebook. (2) The report referred to in paragraph 1 of this Article must be submitted by the factoring company to the Agency quarterly and annually, with the status as of the last day of the calendar year or the last day of the calendar quarter. (3) The report referred to in paragraph 1 of this Article must be submitted by the factoring company to the Agency quarterly, with the status as of the last day of the calendar quarter, specifically: – with the status as of March 31 of the current year, no later than April 30 of the current year, – with the status as of June 30 of the current year, no later than July 31 of the current year, – with the status as of September 30 of the current year, no later than October 31 of the current year, – with the status as of December 31 of the current year, no later than January 31 of the following year.

Rulebook on the Capital of a Factoring Company – Unofficial Consolidated Text (NN No. 12/15 and 142/22) 3 (4) The report referred to in paragraph 1 of this Article, with the status as of the last day of the calendar year, must be submitted by the factoring company to the Agency no later than April 30 of the following year. (5) The report referred to in paragraph 1 of this Article must be submitted by the factoring company in the manner prescribed by the relevant technical instruction issued by the Agency. (6) Exceptionally from the provisions of paragraphs 3 and 4 of this Article, the factoring company is obliged to submit the Report referred to in paragraph 1 of this Article within the deadline determined by the Agency.

Preventive Measures of the Agency in Case of Assessment that the Capital of a Factoring Company May Fall Below the Minimum Capital Level Article 6. (1) If the Agency assesses that the capital of a factoring company may fall below the minimum capital level referred to in Article 3, paragraph 1, item 2 of this Rulebook, the Agency may request the factoring company to adopt measures to reach the necessary level of capital or to prepare a proposal for measures for which other bodies of the factoring company are competent. (2) Along with the notification of measures referred to in paragraph 1 of this Article, the management of the factoring company is obliged to attach business projections for the next three years: – for the first year, by quarter, and – for the remaining two years, annually. (3) The business projections referred to in paragraph 2 of this Article must include at least the following: Report on Financial Position, Report on Comprehensive Income, Report on the Calculation of Capital of a Factoring Company, and a set of assumptions on which the projections are based. (4) The instruction on the method of submitting measures and forms referred to in paragraphs 1 and 2 of this Article is available to the factoring company at www.hanfa.hr.

Internal Acts Article 7. (1) A factoring company is obliged to continuously monitor and determine compliance with the conditions regarding the minimum amount of capital. (2) A factoring company is obliged to adopt internal acts that determine at least the following: – strategies and policies defining the method of managing the capital of a factoring company in normal and extraordinary circumstances, – plan and measures for preventing, or for the conduct of a factoring company in the event that the capital of the factoring company may fall below the minimum capital level. (3) A factoring company is obliged to regularly update the internal acts referred to in paragraph 1 of this Article.

Transitional and Final Provisions Article 8. (1) This Rulebook enters into force on the eighth day from the date of publication in "Narodne novine". (2) A factoring company is obliged to submit the report referred to in Article 5 of this Rulebook to the Agency for the first time with the status as of September 30, 2015.

Rulebook on the Capital of a Factoring Company – Unofficial Consolidated Text (NN No. 12/15 and 142/22) 4 Annex No. 1. REPORT ON THE CALCULATION OF CAPITAL OF A FACTORING COMPANY – IIKFD Serial No. Description Amount

1. Share Capital 1.1. Paid-in business shares 1.2. Paid-in ordinary shares 1.3. Paid-in cumulative shares
2. Reserves formed from profit after taxation 2.1. statutory reserves 2.2. statutory reserves (bylaws) 2.3. reserves for buyback of own shares 2.4. other reserves
3. Capital reserves
4. Retained earnings
5. Profit of the current year
6. Acquired own business shares
7. Acquired own shares 7.1. ordinary shares 7.2. non-cumulative preferred shares
8. Intangible assets
9. Carried forward losses
10. Loss of the current year
11. Capital reserves
12. Unrealized loss of financial assets available for sale
13. Negative net-revaluation reserves Capital of a factoring company (sum of items 1.-13.)

Annex No. 2. INSTRUCTIONS FOR THE CALCULATION OF CAPITAL OF A FACTORING COMPANY These Instructions further prescribe the content and format of the capital calculation report and the method of compiling and filling out the capital calculation report that a factoring company is obliged to submit to the Agency. Items 1 to 12 refer to capital items that, with a positive or negative sign, constitute the capital of a factoring company.

1. Share Capital: 1.1. Paid-in business shares: for a factoring company established as a limited liability company, enter the nominal value of the paid-in and subscribed business share that constitutes the share capital of the factoring company. 1.2. Paid-in ordinary shares: for a factoring company established as a joint-stock company, enter the nominal value of the paid-in and subscribed ordinary shares that constitute the share capital of the factoring company, 1.3. Paid-in non-cumulative preferred shares: for a factoring company established as a joint-stock company, enter the nominal value of the paid-in (and subscribed) non-cumulative preferred shares that constitute the capital of the factoring company.
2. Reserves formed from profit after taxation: enter the mathematical sum of reserves relating to:

Rulebook on the Capital of a Factoring Company – Unofficial Consolidated Text (NN No. 12/15 and 142/22) 5 2.1. statutory reserves – the amount of net profit allocated to this type of reserve, taking into account the provisions of Articles 220 and 222 of the Companies Act (if the factoring company is structured as a joint-stock company), 2.2. statutory reserves or reserves provided for in the articles of association – the amount of net profit allocated to reserves in accordance with the statutes of the factoring company, taking into account the provisions of Articles 220 and 222.a of the Companies Act or the articles of association, taking into account the provision of Article 406.a of the Companies Act, 2.3. reserves for buyback of own shares or reserves for own business shares – the amount of net profit allocated to reserves, taking into account the provisions of Articles 220 and 222a of the Companies Act or the provision of Article 406.a of the Companies Act, 2.4. other reserves – the amount of net profit allocated to reserves formed in accordance with the provisions of Articles 220 and 222a of the Companies Act or the provision of Article 406.a of the Companies Act. 3. Capital reserves: enter the part of the paid-in amount for which shares are issued that exceeds the nominal value of the shares (ordinary and non-cumulative preferred), and if the shares in question are issued without nominal value, enter the amount that exceeds the book value of the share capital relating to the aforementioned types of shares (if the factoring company is structured as a joint-stock company). Enter the part of the paid-in amounts for which business shares are issued that exceeds the nominal amounts of the shares (if the factoring company is structured as a limited liability company). Capital reserves also include additional payments by members or shareholders of the factoring company into capital (Article 222. (406. a) of the Companies Act). 4. Retained earnings: enter the amount of retained earnings of previous years, shown in the financial report, which is determined on the basis of audited annual financial statements (unencumbered by any future obligations) and approved by members or shareholders of the factoring company, or allocated in accordance with the decision of the general meeting of the factoring company. In the financial reports for the first quarter of the current year, the factoring company may also include a part of the profit from the previous year (item profit of the previous year) if the factoring company has decided to retain this part of the profit with the approval of the decision by members or shareholders or the supervisory board of the factoring company. 5. Profit of the current year: enter the amount of profit of the current year determined on the basis of audited annual financial statements (unencumbered by any future obligations – reduced by paid dividends, paid taxes, and other obligations from profit in the reporting period) and approved by members or shareholders of the factoring company, or allocated in accordance with the decision of the general meeting of the factoring company on the use of profit. 6. Acquired own business shares: enter the value of business shares acquired by the factoring company itself through buyback, structured as a limited liability company, with assets exceeding the amount of the company's share capital, and according to reserves prescribed by law for the acquisition of own shares, which do not reduce the company's share capital, or reserves that it must create based on the articles of association, which it may not use for payments to members of the company. 7. Acquired own shares: enter the mathematical sum of positions 7.1 and 7.2, which relate to shares that the factoring company, structured as a joint-stock company, acquired through direct or indirect buyback (book value/cost of investment) as well as those that the factoring company directly or indirectly holds in pledge (book value/nominal value), specifically: 7.1. ordinary shares are entered with a negative sign, 7.2. non-cumulative preferred shares are entered with a negative sign. 8. Intangible assets: enter, with a negative sign, the amount (including increase/premium from revaluation) of intangible assets characterized by uncertainty of future benefit, relating to: goodwill, licenses, patents, trademarks, and concessions. Software solutions or software support in development are not considered deductible items in the calculation of basic capital.

Rulebook on the Capital of a Factoring Company – Unofficial Consolidated Text (NN No. 12/15 and 142/22) 6 9. Carried forward losses: enter, with a negative sign, the amount of losses from previous business years, shown in the financial position report of the factoring company, which are determined on the basis of audited annual financial statements and approved by members or shareholders, or by the general meeting of the factoring company. 10. Loss of the current year: enter, with a negative sign, the amount of the loss of the current year determined on the basis of audited annual financial statements which are approved by members or shareholders or by the general meeting of the factoring company, or loss determined on the basis of financial reports for periods during the year. 11. Capital reserves: enter, with a negative sign, the amount that is lower than the nominal value of the shares (ordinary and non-cumulative preferred), and if shares are issued without nominal value, the amount that is lower than the book value expression of the share capital, relating to the aforementioned types of shares (Article 222 of the Companies Act). 12. Unrealized loss of financial assets available for sale: enter with a negative sign unrealized losses from the revaluation of financial assets available for sale. 13. Negative net revaluation reserves: enter with a negative sign negative net revaluation reserves arising from accounting for investments in associates or joint ventures using the equity method, as well as other negative net revaluation reserves. CAPITAL: enter the result of the mathematical sum of items 1. – 13.