UNOFFICIAL CONSOLIDATED TEXT

NN 3/17 of 11.01.2017. NN 41/17 of 27.04.2017. (effective from 01.05.2017.)

CROATIAN FINANCIAL SERVICES SUPERVISORY AGENCY

Based on Article 3(1), Article 100(6), Article 120, Article 104(5), Article 178(4), Article 181, Article 246(3) and Article 261(6) of the Act on Open-Ended Investment Funds with Public Offer (»Narodne novine« No. 44/16, hereinafter: the Act), the Croatian Financial Services Supervisory Agency (hereinafter: the Agency) adopted at its Management Board meeting held on 5 January 2017

REGULATION ON UCITS FUND SHARES

Article 1

This Regulation prescribes: a) duration and conditions of the initial offer of UCITS fund shares, b) procedure, deadlines and execution of share issuance and redemption, c) suspension and resumption of share issuance and redemption, d) payment into UCITS fund in financial instruments and in specie redemption, e) exchange of shares in one UCITS fund for shares in another UCITS fund managed by the same management company, f) conditions and method of receiving requests for issuance or redemption during suspension, g) conditions for determining share price, payment deadlines and business resumption conditions after suspension ends, h) additional conditions for refusing investment agreements, i) share classes and their introduction method, j) special rules for umbrella UCITS funds and sub-funds, k) determination of UCITS ETF fund, use of the "UCITS ETF" label and conditions for redeeming shares or stocks of UCITS ETF, and l) establishment, maintenance and publication of data from the register of UCITS fund shares.

Payment into UCITS Fund in Financial Instruments

Article 2

(1) Payment into UCITS fund in financial instruments, pursuant to Article 246(3) of the Act, may be made exclusively in financial instruments from Article 252(1)(1) of the Act into which the UCITS fund is permitted to invest according to the prospectus and/or rules, and whose prices are immediately and regularly available on markets where they are listed or traded, in accordance with the fund's investment objectives, strategy and limits. (2) Payments into UCITS fund under paragraph 1 of this Article are permitted if the following conditions are met: a) the possibility of payment into UCITS fund in financial instruments and issuance of shares based on such payments, as well as all essential details regarding such payments, are stated in the prospectus and/or rules of the UCITS fund, b) conversion of paid financial instruments into UCITS fund shares is executed at prices at which the financial instruments are valued in the assets of the UCITS fund, after all financial instruments subject to payment have been deposited into custody accounts or other appropriate accounts of the UCITS fund pursuant to Article 221(1)(1) of the Act, c) costs of payment into UCITS fund in financial instruments are borne by the investor. (3) The management company is obliged to document compliance with the conditions for payment into UCITS fund in financial instruments under paragraphs 1 and 2 of this Article and to keep documentation as prescribed by the Act and regulations adopted pursuant to the Act.

In Specie Redemption

Article 3

(1) In specie redemption, i.e., redemption by transfer of a proportional amount of each type of asset in total value equal to the value of shares being redeemed, is possible only if the following conditions are met: a) the possibility of such redemption and all essential details regarding it are provided for in the prospectus and/or rules of the UCITS fund, b) the holder of shares in the UCITS fund has agreed to such redemption, c) the request for redemption of shares represents at least 5 percent of the net asset value (NAV) of the UCITS fund, d) the difference between the total value of the proportional amount of each type of asset of the UCITS fund being transferred and the total value of shares being redeemed is paid in cash, e) transfer of the proportional amount of each type of asset of the UCITS fund to the requestor is controlled by the custodian of the UCITS fund. (2) When in specie redemption is carried out during the liquidation procedure of the UCITS fund, the limitation under paragraph 1(b) of this Article does not apply.

Exchange of Shares in UCITS Funds

Article 4

(1) A management company managing multiple UCITS funds may, upon the investor's request, allow the exchange of all or part of the shares of a UCITS fund for shares in other UCITS funds managed by it. (2) The management company shall not execute the share exchange under paragraph 1 of this Article if the calculation of net asset value is impossible for any of the UCITS funds whose shares are intended to be exchanged. (3) If provided for in the prospectus and/or rules of the UCITS funds it manages, the management company may charge an exit fee for the UCITS fund from which shares are redeemed and/or an entry fee for the UCITS fund issuing shares at the time of share exchange. (4) The exchange of shares in UCITS funds shall not last longer or financially burden the investor more than their possible decision to sell shares in one fund and buy shares in another UCITS fund managed by the same management company. (5) Share exchange is executed upon submission of a share exchange request, which constitutes a simultaneous request for redemption of shares in the UCITS fund and issuance of shares in another UCITS fund managed by the same management company, made by the same investor for monetary funds to be paid to the investor as redemption proceeds, with such funds credited directly to the second UCITS fund for which share issuance is requested. The same rules prescribed by the Act, regulations adopted pursuant to the Act, prospectus and/or UCITS fund rules apply to share exchange as those applied to individual redemption and issuance transactions.

Reasons for Suspension of Share Issuance and Redemption

Article 5

(1) The management company, when fulfilling obligations under Articles 177(3) and (5) of the Act, must notify the Agency in writing of the reasons that led to the suspension of share issuance and redemption, and must promptly inform the public on its website. (2) During the suspension of share issuance and redemption, the management company must publish on its website data that enable an average investor to understand the circumstances causing the suspension, as well as the type and significance of risks arising therefrom.

Calculation of Net Asset Value and Share Price During Suspension

Article 6

(1) The management company is obliged to calculate the net asset value and share price of the UCITS fund throughout the entire suspension period in accordance with Article 168 of the Act, where applicable. (2) If circumstances arise that would prevent calculation of net asset value and share price during suspension, the management company must promptly notify the Agency and the public, stating the reasons why accurate net asset value and share price cannot be calculated. (3) The notification to the Agency under paragraph 2 of this Article may be submitted by the management company in accordance with the Technical Instruction for Using Web Form Submission and Documentation Delivery Services in Electronic Form and the Instructions for Filling Out Web Forms for Management Companies. (4) The management company is considered to have delivered the notification to the Agency under paragraph 2 of this Article at the moment the notification is logged on the server for sending such documentation.

Method of Receiving Requests for Issuance or Redemption

Article 7

(1) The management company must refuse to conclude investment agreements for requests for issuance of UCITS fund shares received during the suspension of share issuance and redemption, and must promptly return any received payments to UCITS fund investors. (2) The management company must record requests for redemption of shares during suspension in the order they are received, ensuring that no holder of UCITS fund shares is placed in a preferential position. (3) The rights of holders of UCITS fund shares prescribed by Article 116(1) of the Act, as well as rights and encumbrances on UCITS fund shares in favor of third parties prescribed by Article 118(1) of the Act, are suspended during the suspension of share issuance and redemption until the date the suspension ends. (4) During the suspension of share issuance and redemption, it is prohibited to offer shares of UCITS fund pursuant to Article 164 of the Act.

Conditions for Determining Share Price, Payment Deadlines and Business Resumption

Article 8

(1) The management company shall execute requests for redemption of shares received during suspension at the UCITS fund share price determined on the day the suspension ends. (2) The deadline under Article 119(4) of the Act may exceptionally be extended by an additional 7 days for payment of redemption requests received during suspension, if this is in the interest of other UCITS fund shareholders and provided for in the prospectus and/or rules. (3) Upon occurrence of suspension, the management company must promptly publish on its website that investors who submit redemption requests during suspension have the option to withdraw or execute them at the price specified in paragraph 1 of this Article.

Refusal to Conclude Investment Agreement

Article 9

In addition to the provisions of Articles 100(1) and (4) of the Act, which regulate cases of refusing to conclude investment agreements, the management company may refuse to conclude an investment agreement if the investor has not provided all documentation prescribed by the management company as necessary for concluding the agreement.

Classes of UCITS Fund Shares

Article 10

Details regarding the rights granted by each class of UCITS fund shares must be clearly explained to all investors and potential investors in the prospectus and/or rules of the UCITS fund.

Calculation of Price per Share Class

Article 11

(1) Rights from a specific share class must be in accordance with the prospectus and/or rules of the UCITS fund and must not cause harm to holders of other share classes in the same UCITS fund. (2) When rights from a specific share class may result in different share prices, the price is calculated separately for each share class of the UCITS fund, taking into account specific rights arising from that share class in accordance with the Act and regulations adopted pursuant to the Act governing the calculation of UCITS fund share prices.

Establishment of Umbrella UCITS Fund

Article 12

(1) A management company in the Republic of Croatia may establish an umbrella UCITS fund (hereinafter: umbrella fund), which consists of two or more UCITS sub-funds (hereinafter: sub-funds). (2) The management company is obliged to obtain Agency approval for the establishment and operation of the umbrella fund, as well as for the establishment and operation of all sub-funds of the umbrella fund. (3) After establishing the umbrella fund, the management company may, with Agency approval, subsequently establish new sub-funds to be included in the aforementioned umbrella fund, while adhering to the provision of Article 14(6) of this Regulation. (4) A management company managing at least two UCITS funds may establish an umbrella fund from existing UCITS funds by restructuring the aforementioned funds into sub-funds and including them in the umbrella fund. (5) The application for establishment and issuance of approval for operation of the umbrella fund and sub-funds applies mutatis mutandis the provisions of Article 243 of the Act.

Name of Umbrella Fund and Sub-Funds

Article 13

(1) The name of the umbrella fund must contain an indication that it is an umbrella fund. (2) The name of a sub-fund must contain the name of the umbrella fund (without the "umbrella fund" indication) and a distinguishing name that clearly differentiates the sub-fund from other sub-funds of that umbrella fund.

Documents of Umbrella Fund

Article 14

(1) The management company is obliged to prepare a prospectus for the umbrella fund. Separate prospectuses are not prepared for sub-funds of the umbrella fund; rather, the specifics of each individual sub-fund are determined in the prospectus of the umbrella fund. (2) The prospectus must clearly indicate which provisions apply to all sub-funds of the umbrella fund and which apply only to a specific sub-fund. (3) The management company is obliged to prepare rules for the umbrella fund. In addition to data prescribed by Article 198 of the Act, the rules must clearly indicate that they concern an umbrella fund. Separate rules are not prepared for individual sub-funds; rather, the specifics of each sub-fund are determined in the rules of the umbrella fund. (4) The rules must clearly indicate which provisions apply to all sub-funds of the umbrella fund and which apply only to a specific sub-fund. (5) Key investor documents are prepared as separate documents for each individual sub-fund in accordance with the provisions of Part Eight, Chapter 4 of the Act. (6) When a management company establishes additional sub-funds after creating an umbrella fund, it must appropriately amend and supplement the prospectus and rules of the umbrella fund, and prepare key investor documents for the new sub-funds.

Assets of Sub-Fund

Article 15

(1) The assets of one sub-fund are fully separate from the assets of another sub-fund. (2) Liabilities and claims arising from transactions on behalf of one sub-fund must be settled exclusively from, or in favor of, the assets of that same sub-fund.

Investments of Sub-Funds

Article 16

(1) The provisions of Part Ten, Chapter 3 of the Act apply mutatis mutandis to each sub-fund of the umbrella fund. (2) The management company may consolidate established risk management processes for individual sub-funds into a common risk management process for the umbrella fund, noting specific risk management features that apply to each sub-fund.

Custodian Duties and Segregation of Sub-Fund Assets

Article 17

(1) The management company is obliged to conclude a custody agreement with the custodian for the umbrella fund covering all its sub-funds. (2) The custodian must perform the aforementioned duties on behalf of each individual sub-fund pursuant to the custody agreement for the umbrella fund. (3) The management company and custodian must ensure segregation of assets for each individual sub-fund as prescribed by Articles 221 and 223 of the Act. (4) The assets of an individual sub-fund are held and recorded separately from the assets of other sub-funds of the umbrella fund, from the assets of the management company and from the assets of the custodian.

Termination and Liquidation

Article 18

(1) The umbrella fund ceases to exist without liquidation if: a) fewer than two sub-funds remain included in the umbrella fund, in which case the remaining sub-fund continues to operate as a UCITS fund and/or b) all sub-funds of the umbrella fund are included in another umbrella fund. (2) The provisions of Part Thirteen of the Act apply mutatis mutandis to the liquidation procedure of a sub-fund and the legal consequences of sub-fund liquidation. (3) Liquidation of a sub-fund, in addition to the reasons specified in Article 336 of the Act, is also carried out when: a) the management company makes a liquidation decision, b) an event occurs that is specified in the prospectus as a reason for sub-fund liquidation.

UCITS ETFs

Article 19

In accordance with ESMA Guidelines on exchange-traded funds (ETFs) and other matters concerning UCITS funds (ESMA/2014/937):

1. A UCITS ETF is a UCITS fund whose at least one class of shares or stocks trades daily on at least one regulated market or multilateral trading facility, and which has at least one market maker ensuring that the market value of shares or stocks does not significantly differ from net asset value and indicative net asset value, if calculated.
2. A UCITS fund meeting the conditions of the preceding paragraph must use the label "UCITS ETF" in its name, rules, prospectus, key investor documents and marketing material.
3. If the market value of shares or stocks of a UCITS ETF deviates significantly from its net asset value, the management company must allow redemption of shares or stocks of the UCITS ETF to investors who acquired its shares or stocks (or, where applicable, any right to acquire a specific share or stock guaranteed upon distribution of that share or stock) on the secondary market. The management company must publish information about redemption of shares or stocks of UCITS ETF on the regulated market and indicate that it is ready to directly redeem shares or stocks from such investors.
4. A UCITS fund not meeting the conditions of this Article must not use the labels "UCITS ETF" or "ETF", nor the name "exchange-traded fund".
5. The management company must take all necessary actions to align with the Guidelines on exchange-traded funds (ETFs) and other matters concerning UCITS funds.

Register of Shares

Article 20

(1) A share may be registered to an investment company or credit institution providing safekeeping and administration services for financial instruments on behalf of clients, including custody and related services and portfolio management activities, or to a management company performing portfolio management activities, with the register of shares noting that the investment company, credit institution or management company holds the share on behalf of a third party. (2) Data entered into the register of UCITS fund shares must enable unambiguous identification of the person to whom the shares are registered (the holder or other persons under paragraph 1 of this Article), and must at least include the following: a) For legal entities: – company name, – address (registered office), place, postal code, country, – data on the legal representative (identical to data for natural persons under point b) of this paragraph), – data on the person authorized to submit requests for issuance or redemption. b) For natural persons: – name and surname, – address (domicile), place, postal code, country.

Article 21

(1) The management company, or registry keeper of the UCITS fund register, is obliged to record at minimum for each holder of UCITS fund shares in the register: – date and time of receiving the request for issuance or redemption, – execution date of the request, – type of request (issuance or redemption), – number of shares issued or redeemed, – share price at which the issuance or redemption request was executed, – date of the share price, – total amount of the request (including entry fee for issuance requests or exit fee deducted for redemption requests), – total amount of fees charged upon issuance or redemption, – conversion amount, if shares are denominated in a currency different from the payment currency, – share balance after each issuance or redemption. (2) The management company or registry keeper must maintain the register of UCITS fund shares electronically in a manner that allows determination of the data under paragraph 1 of this Article for each holder. (3) In addition to minimum data entered into the register, the management company or registry keeper must ensure possession of other necessary data for smooth execution of share issuance and redemption, and for ensuring payments to UCITS fund shareholders.

Article 22

The management company will handle data from the register of UCITS fund shares collected pursuant to this Regulation in accordance with the law governing personal data protection.

Article 23

The management company may publish only those data from the register of UCITS fund shares that relate to total assets of UCITS funds, total number of shareholders and general data on the structure of shareholders in a specific UCITS fund.

Final Provisions

Article 24

This Regulation enters into force on the eighth day following publication in »Narodne novine« (Official Gazette).

Class: 011-02/17-02/02 File No.: 326-01-440-17-1 Zagreb, 5 January 2017. Deputy Chairman of the Management Board Mario Radaković, v.r.