Regulation on the Types of Alternative Investment Funds (Official Gazette, Nos. 28/19, 15/2020, 155/22 and 27/26 – Unofficial Consolidated Text)

Croatian Financial Services Agency, 10000 Zagreb, Franje Račkoga 6, P.O. Box 164, Croatia t: 01 6173 200, f: 01 4811 507, e: info@hanfa.hr, OIB: 49376181407, MB: 02016419, w: www.hanfa.hr REGULATION ON THE TYPES OF ALTERNATIVE INVESTMENT FUNDS (Official Gazette Nos. 28/19, 15/20, 155/22 and 27/26 – Unofficial Consolidated Text) I. GENERAL PROVISIONS Article 1. This Regulation prescribes:

1. the types and characteristics of alternative investment funds (AIFs) that may be established in the Republic of Croatia, their operating conditions, asset classes for investment, and investment restrictions;
2. the conditions under which certain types of AIFs may be offered to retail investors;
3. the criteria for assessing compliance with conditions for qualified investors; and
4. special rules relating to umbrella funds and their sub-funds. Article 1.a (OG 27/26) This Regulation transposes Directive (EU) 2024/927 of the European Parliament and of the Council of 13 March 2024 amending Directives 2011/61/EU and 2009/65/EC as regards delegation procedures, liquidity risk management, supervisory reporting, depositary and custodian services, and lending by alternative investment funds (Text with EEA relevance) (OJ L, 2024/927, 26.3.2024). Meaning of Certain Terms Article 2. The expressions used in this Regulation have the identical meaning as the terms used in the Act. Article 3. (1) In the Republic of Croatia, AIFs may be established as:
5. open AIFs,
6. closed AIFs. (2) Shares of the AIFs referred to in paragraph 1 of this Article may be distributed in the Republic of Croatia exclusively by private placement, that is, to professional and/or qualified investors. (3) By way of exception to paragraph 2 of this Article, shares of AIFs under Article 151 of the Act, which are more detailed in Part Two of this Regulation, may be distributed in the Republic of Croatia also by public offer, that is, to professional, qualified and/or retail investors. (4) An open AIF and a closed AIF without legal personality may be managed only by an external manager, while a closed AIF with legal personality may be managed by an external or internal manager. Article 4. Repealed. Article 5. Repealed. Assessment of Suitability for Qualified Investors Article 6. (1) For the purpose of the assessment under point 11(a) of Article 4 of the Act, the AIF manager (UAIF) is obliged to conduct a suitability assessment covering the following criteria: – alignment of the AIF’s investment objectives and strategy with the investor’s investment goals, – ability to bear risks arising from investing in AIF shares, – investor’s knowledge and experience necessary to understand the risks associated with investing in AIF shares. (2) For the purpose of the assessment under paragraph 1 of this Article, the UAIF is obliged to collect data on the investor’s investment goals, financial situation, and knowledge and experience in the field of investments. (3) The collected data on the investor’s investment goals must include information on the planned investment duration, willingness to assume risk, investor’s risk profile, and purpose of investment. (4) The collected data on the investor’s financial situation must include information on the source and amount of regular income, assets (including liquid funds, investments, real estate, and regular financial obligations). (5) The collected data on the investor’s knowledge and experience necessary to understand risks associated with investing in AIF shares must cover: – types of assets, services, and transactions the investor is familiar with, – nature, volume, and frequency of the investor’s transactions with financial instruments and other asset types in which the AIF is permitted to invest, and the period during which they were executed, – occupation and profession of the investor. (6) The UAIF is obliged to provide the investor with clear, unambiguous, and comprehensible information on the key characteristics of the AIF and the types and significance of all risks associated with investing in a specific AIF, and must obtain a special signed confirmation from the investor regarding their understanding and acceptance. (7) Using data collected under paragraphs 2–5 of this Article, the UAIF is obliged to assess whether investing in shares of a specific AIF is suitable for the investor and prepare a suitability report, which must be submitted to the investor. (8) If the UAIF fails to collect data under paragraphs 2–5 of this Article necessary for the suitability assessment under paragraph 1, or if based on the performed assessment it determines that investing in shares of a specific AIF is not suitable for the investor, it must not conclude an investment contract, notifying the investor accordingly. (9) The notification under paragraph 8 of this Article may be provided by the UAIF in a standardized form. (10) The UAIF must not discourage the investor from providing data necessary for the suitability assessment. (11) The UAIF may consider data obtained from the investor to be reliable, unless it is known or should reasonably be known that the data are obviously outdated, inaccurate, or incomplete. (12) The UAIF is obliged to establish and apply appropriate procedures and processes ensuring the accuracy, completeness, timeliness, and documentation of collected investor data. Article 7. Repealed. II. AIF WITH PUBLIC OFFER Open AIF with Public Offer Article 8. (1) When shares of an open AIF are offered by public offer, the provisions of the law governing the establishment and operation of open investment funds with public offer and regulations adopted under that law apply accordingly, regarding the preparation and publication of the prospectus and rules, delivery to investors, offering shares and advertising, and preparation, publication, and delivery of all information, reports, and data to be made available to investors. (2) The UAIF managing an open AIF with public offer must ensure that the net asset value per share is calculated and published for each valuation day on which share issuance or redemption occurs, at least once a month. (3) The UAIF managing an open AIF with public offer must enable share issuance and redemption at least once a month. (4) The UAIF managing an open AIF with public offer must pay the redemption amount to the investor no later than 7 working days from the date of receipt of a valid redemption request. (5) When shares of an open AIF are offered by public offer, the UAIF must prepare key investor information in accordance with Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs). Closed AIF with Public Offer Article 9. (1) Shares may be offered by public offer: – of a closed AIF without legal personality, and – of a closed AIF with legal personality established as a joint-stock company. (2) Repealed. (3) Repealed. (4) Repealed. Permitted Investments of Open and Closed AIF with Public Offer Article 10. (OG 27/26) (1) The UAIF managing an AIF with public offer must, taking into account the investment strategy and objectives stated in the prospectus or rules, ensure an appropriate level of risk diversification. (2) The assets of an AIF with public offer may consist exclusively of:
7. transferable securities or money market instruments: a) listed or traded on a regulated market within the meaning of the capital markets law in the Republic of Croatia and/or an EU Member State, b) traded on another regulated market in the Republic of Croatia and/or an EU Member State, which operates regularly, is recognized, and open to the public, c) listed on a stock exchange official list in a third country or traded on another regulated market in a third country that operates regularly, is recognized, and open to the public, provided such investment is foreseen in the prospectus of the AIF with public offer,
8. other financial instruments designated as transferable securities by the law governing open investment funds with public offer and subordinate regulations concerning permitted investments,
9. recently issued transferable securities, under the following conditions: a) issuance conditions include an obligation for the issuer to apply for listing on a stock exchange official list or another regulated market operating regularly, recognized and open to the public, b) such investment is foreseen in the prospectus, and c) listing will be completed within one year from issuance. Otherwise, the transferable securities will be considered unlisted,
10. shares in the following collective investment undertakings: a) UCITS funds approved in the Republic of Croatia or another EU Member State, and shares of other open investment funds meeting the conditions under Article 4(1)(2)(a) and (b) of the Act on Open Investment Funds with Public Offer (“Official Gazette”, No. 44/16) approved in the Republic of Croatia, another EU Member State, or a third country, under the following conditions: – such other investment funds have been approved by Hanfa or the competent authority of an EU Member State or third country with which cooperation is ensured, and are subject to supervision Hanfa considers equivalent to that prescribed by the Act; – the level of protection for shareholders of other investment funds is equivalent to that prescribed for UCITS fund shareholders, and regulations on asset segregation, borrowing, lending, and sale of transferable securities and money market instruments are equivalent; – reports on the operation of other investment funds are provided in semi-annual and audited annual reports to enable assessment of assets, liabilities, profit, and operations during the reporting period; – the prospectus of a UCITS fund or other investment fund whose shares or stocks are intended to be acquired foresees that up to 10% of its net asset value may be invested in shares or stocks of another UCITS fund or other investment funds, b) AIFs with public offer that have received operational approval or retail investor offering approval from Hanfa, c) AIFs with public offer that have received operational approval or retail investor offering approval from the competent authority of an EU Member State or third country with which cooperation is ensured, and are subject to supervision Hanfa considers equivalent to that prescribed by the Act, with powers regarding investments and borrowing equal to or more restrictive than permitted under Articles 10–16 of this Regulation, under the following conditions: – the level of protection for shareholders is at least equivalent to that prescribed for AIF shareholders under sub-point b); – regulations on asset segregation, borrowing, and lending are equivalent; – reports on operations are provided in semi-annual and audited annual reports to enable assessment of assets, liabilities, profit, and operations during the reporting period; – the rules or other relevant document of an AIF whose shares are intended to be acquired foresees that up to 15% of its net asset value may be invested in shares or stocks of other collective investment undertakings, d) other collective investment undertakings not listed in sub-points a)–c),
11. deposits at credit institutions repayable on demand and maturing within 12 months, provided the credit institution has its registered office in the Republic of Croatia or another EU Member State, or if in a third country, subject to supervision Hanfa considers equivalent to EU law;
12. financial derivatives traded on regulated markets under point 1, or OTC derivatives under point 1, under the following conditions: a) underlying assets consist of financial instruments covered by points 1–8, financial indices, interest rates, exchange rates or currencies, and commodities traded on commodity exchanges, in which the AIF may invest according to its investment objectives stated in the prospectus; b) other contracting parties in OTC derivative transactions are institutions subject to prudential supervision and belonging to categories that Hanfa may prescribe; c) OTC derivatives are subject to daily reliable and verifiable valuation, can be sold, liquidated, or closed out via netting at fair value upon the AIF’s request; d) investment in these instruments is exclusively for hedging AIF assets or achieving investment objectives; e) the AIF prospectus foresees investment in such instruments and shows their impact on the AIF’s risk profile;
13. money market instruments not traded on regulated markets under point 1, whose issuance or issuer is regulated to protect investors and savings, such that: a) they are issued or guaranteed by the Republic of Croatia, local/regional self-government units, or the Central Bank of the Republic of Croatia, another EU Member State’s local/regional authorities or central bank, the European Central Bank, the European Union, or the European Investment Bank, a third country (or member of a federation), or an international public body comprising one or more EU Member States; b) they are issued by a company whose securities are traded on regulated markets under point 1; c) they are issued or guaranteed by a subject subject to prudential supervision of an EU Member State’s competent authority under EU law criteria, or a subject complying with supervisory rules Hanfa considers at least as strict as EU law; d) they are issued by another person classified in categories prescribed by Hanfa, provided investments are protected equally to sub-points a), b), or c), and the issuer is a company with capital and reserves of at least 10 million euros, prepares annual financial reports according to business accounting regulations and financial reporting standards, is a financing entity within a group of listed companies, or finances special securitization entities using bank credit lines;
14. commodities traded on commodity exchanges;
15. other transferable securities and money market instruments not listed in points 1, 2, 3, and 7;
16. real estate under Article 23(1)(a) of this Regulation: a) located in geographical areas specified in the prospectus and/or AIF rules; b) for which the UAIF has received a report from an external valuer under Article 153 of the Act containing a property valuation within 15 days of preparation, including any mortgage encumbrances and a statement that the property can be sold at the estimated value within an appropriately short period upon request; c) acquired or contracted for acquisition within 6 months of receiving the report under sub-point b), at a price not exceeding 105% of the estimated value; d) property must not be acquired if circumstances known to the manager indicate the report under sub-point b) is no longer reliable, without obtaining a new valuation report; e) acquired directly or indirectly through one or more special purpose vehicles wholly owned by the AIF (unless EU/third country law provides otherwise for a percentage shareholder), with the sole purpose of acquiring property rights on behalf of the AIF. Such investment is considered direct real estate investment under this Regulation. The SPV acquires, disposes of, and manages the property for the AIF in accordance with its investment strategy and objectives. (3) If AIF assets are invested in real estate under paragraph 2, point 10 of this Article, the provision of Article 13(4) applies accordingly. (4) The provisions of the law governing open investment funds with public offer and regulations adopted under that law, regarding permitted investments and asset valuation/fund share pricing, apply accordingly to assets under paragraph 2, points 1, 2, 3, 6, and 7. (5) Investment in shares of other investment funds managed by the same UAIF must be foreseen in the prospectus of the AIF with public offer. (6) AIF assets may be held in cash on an account. Article 11. (1) The UAIF must ensure that the AIF’s total exposure to financial derivatives never exceeds 110% of its net asset value. Exposure is calculated considering the current value of underlying assets, counterparty risk, future market movements, and available time for position liquidation. (2) AIF assets with public offer may be invested in financial derivatives in accordance with the AIF’s investment policy and limits under Article 12(1)(4) and (7), and Article 17(1)(4) and (7), provided total exposure to underlying assets does not exceed limits under Article 12(1) and Article 17(1). When investing in derivatives with index underlying assets, index components are excluded from limit calculations. (3) When a transferable security or money market instrument contains an embedded derivative, that derivative is considered in total exposure calculations. Investment Limits of Open AIF with Public Offer Article 12. (1) Investment of open AIF assets with public offer is subject to the following limits:
17. up to 10% of net asset value may be invested in transferable securities or money market instruments of one issuer;
18. up to 20% of net asset value may be invested in deposits at the same credit institution under Article 10(2)(5), considering cash on accounts under Article 10(6);
19. counterparty risk exposure from OTC derivative transactions must not exceed: a) 10% of net asset value, if the counterparty is a credit institution under Article 10(2)(5); b) 20% of net asset value at acquisition, if all conditions are met: – counterparty is a credit institution under Article 10(2)(5); – it is the only OTC derivative in the AIF; – the AIF cannot lose more than the amount paid upon initial acquisition; – investment achieves a specific structure or strategy (e.g., capital-protected fund); – the prospectus/rules explicitly allow up to 20% investment in OTC derivatives and describe associated risks and specific structure/strategy; c) 5% of net asset value, if the counterparty is another legal entity;
20. regardless of individual limits in points 1–3, they are not combined; up to 20% of fund net asset value may be invested in: a) transferable securities or money market instruments of the same person; b) deposits with that person; or c) exposures arising from OTC derivative transactions with that person;
21. by way of exception to point 1, up to 35% of net asset value may be invested in transferable securities or money market instruments issued or guaranteed by the Republic of Croatia, local/regional self-government units, another EU Member State, its local/regional authorities, a third country, or an international public body comprising one or more EU Member States;
22. by way of exception to point 1, up to 25% of net asset value may be invested in covered bonds issued by credit institutions registered in the Republic of Croatia or another EU Member State, subject to special public supervision for investor protection under a specific law. Proceeds must be invested according to the specific law in assets enabling obligation fulfillment by maturity, primarily used for principal and interest payments if obligations are not met. If >5% of net asset value is invested in such bonds from one issuer, the total value exceeding 5% must not exceed 80% of net asset value;
23. limits in points 1–6 are not combined; total investments in: a) transferable securities or money market instruments of the same person; b) deposits with that person; and c) financial derivatives issued by that person and OTC derivatives with that person, executed under points 1–6, must not exceed 35% of net asset value;
24. up to 20% of net asset value may be invested in transferable securities and/or money market instruments whose issuers are affiliated companies under the law governing commercial companies, accounting regulations, and financial reporting standards, as well as closely related persons. These are considered one person for limits under points 4 and 7;
25. up to 20% of net asset value may be invested in transferable securities and money market instruments under Article 10(2)(9) and shares in collective investment undertakings under Article 10(2)(4)(d);
26. up to 10% of net asset value may be invested in commodities from Article