Regulation on Determining the Net Asset Value and Unit Price of Voluntary Pension Funds – Unofficial Consolidated Text (NN, Nos. 128/17, 114/18, 2/20, 139/23 and 51/24)

UNOFFICIAL CONSOLIDATED TEXT (Official Gazette Nos. 128/17, 114/18, 2/20, 146/22, 139/23, 51/24) PRAVILNIK ON DETERMINING THE NET ASSET VALUE AND UNIT PRICE OF VOLUNTARY PENSION FUNDS General Provisions Article 1. This Regulation governs: a) the determination of the net asset value of voluntary pension funds (hereinafter: fund) and the unit price of the fund, b) the method and deadlines by which the custodian reports to HFSA on the calculation of the fund's net asset value and unit price, c) the actions of the pension management company in cases where the calculation and control of the fund's net asset value are not completed within the prescribed deadline.

Determination of the Fund's Net Asset Value Article 2. (1) The fund's total assets on the valuation date consist of the sum of the values of all types of fund assets. (2) The net asset value of the fund is the total asset value reduced by the fund's liabilities. (3) Fund liabilities may arise from: a) investments of fund assets, b) issuance and redemption of units, c) management fees to the pension management company, d) custodian fees e) liabilities arising under Article 117 of the Voluntary Pension Funds Act (Official Gazette, Nos. 19/2014, 29/2018, 115/2018 and 156/2023, hereinafter: the Act), and e) other liabilities for unpaid costs under Article 111 of the Act.

Determination of the Fund's Unit Price Article 3. (1) When determining the net asset value and unit price of the fund, the pension management company is obliged to: a) calculate the total asset value and total fund liabilities for the valuation date in accordance with this Regulation, b) calculate the net asset value of the fund by reducing the total fund assets by the total fund liabilities for the valuation date, c) calculate the unit price by dividing the net asset value from point b) of this paragraph by the number of units as of the last day for which the fund's unit price was calculated, d) execute the issuance of units to members' personal accounts based on received payments (at the unit price from the day funds were received into the fund account) and thereby reduce the corresponding portion of liabilities arising from unit issuance, and calculate the amount of liabilities for exercising membership termination rights under Article 118 of the Act using the fund's unit price from the last day of membership, e) calculate the number of fund units for the valuation date by increasing the number of units from the last day for which the unit price was calculated, by the number of units issued to members' personal accounts based on received payments, and decreasing it by the number of units resulting from exercising membership termination rights under Article 118 of the Act for the valuation date, f) calculate the net asset value of the fund by increasing the net assets from point b) by the amount of liability reduction for issued units and decreasing it by the amount of liability increase from exercising membership termination rights under point d) of this paragraph. (2) The net asset value and unit price of the fund are calculated for each day of the following working day, except Saturdays and Sundays. (3) As an exception to paragraph 2 of this Article, the net asset value and unit price of the fund are always calculated for the last day of the month on the following working day. (4) Management fees and custodian fees are calculated daily, based on a base amount consisting of the total fund assets reduced by the amount of fund liabilities arising from investments in financial instruments and real estate, and are paid once a month on the second working day of the month for the preceding month. (5) As an exception to paragraph 4 of this Article, management fees and custodian fees for Saturdays and Sundays are calculated on the last calculated base amount from paragraph 4 of this Article. (6) Received payments into the fund account or exercised membership termination rights in the fund, which occur on non-working days, will be calculated by the pension management company at the fund's unit price from the first following working day.

Internal Act for Valuation Article 4. (1) The pension management company is obliged to prepare an internal act describing the obligations, roles, and responsibilities of all parties participating in the asset and liability valuation process. (2) The internal act from paragraph 1 of this Article must at least: − ensure a reliable, transparent, comprehensive, and adequately documented valuation process, − cover significant aspects of the valuation process as well as valuation procedures and controls, − describe protective measures for the functional independent implementation of valuation, including measures to prevent or limit any person from exerting undue influence on the valuation process. (3) The pension management company ensures that the internal act from paragraph 1 of this Article is applied consistently. (4) The pension management company is obliged to review the appropriateness of the internal act from paragraph 1 at least once a year.

Accounting Policies Article 5. (1) The principles and bases for the recognition, measurement, and derecognition of fund assets and liabilities must be specified by the fund's accounting policies. (2) The accounting policies from paragraph 1 of this Article must comply with the provisions of this Regulation and International Financial Reporting Standards (IFRS) established by the European Commission and published in the Official Journal of the European Union.

Documentation of the Asset and Liability Valuation Process Article 6. (1) The pension management company is obliged to retain the documentation from Article 9(5), Article 10(1), Articles 11(5, 6, and 8), Article 13(4 and 5), Articles 14(3 and 8), Article 15(4 and 5), Articles 16(5 and 6), Article 17(4), and Article 18(2) of this Regulation for at least three years from the date all rights and obligations arising from investments in a specific fund asset cease. (2) The pension management company is obliged to adopt, apply, and regularly update appropriate internal acts containing at least the requirements from Article 4(1), Article 11(4), Article 12(4), Articles 13(3 and 11), Articles 14(6 and 7), Articles 15(2 and 7), Article 16(12 and 13), and Article 17(3) of this Regulation. (3) The management company is obliged to maintain a register of updates to the internal acts from paragraph 2, specifying amendments and additions to the internal act as well as the reasons for implementing them. (4) The pension management company is obliged to provide the documentation from paragraph 1 to HFSA upon request.

Recognition and Measurement of Fund Assets and Liabilities Article 7. (1) The recognition of fund assets and liabilities is conducted depending on the type of asset or liability and the classification performed in accordance with the fund's accounting policies. (2) Financial assets and liabilities of the fund are initially recognized at fair value, increased or decreased, in the case of financial assets or liabilities not designated at fair value through profit or loss, by transaction costs directly attributable to the acquisition or issuance of financial assets or liabilities. An exception applies to financial assets and liabilities measured at fair value through profit or loss, which do not have transaction costs added upon initial recognition, as they are recognized in the profit or loss account upon inception. (3) Assets acquired in a foreign currency and subsequent measurement of fund assets and liabilities denominated in foreign currency are converted into euro equivalents using the European Central Bank reference exchange rates valid for the valuation date, or at an exchange rate arising from a contractual relationship related to that transaction. If the currency in which the asset is denominated is not listed on the ECB exchange rate list, Croatian National Bank mid-rates valid for the valuation date or mid-rates for currencies to which the denominated currency is linked, published on financial-information services, are applied for conversion. Values expressed in the currency to which the denominated currency is linked are converted into euro equivalents using ECB reference exchange rates for the valuation date. For currencies for which the ECB does not publish reference rates, the pension management company uses the Croatian National Bank mid-rate valid for the valuation date.

Article 8. (1) Financial assets and financial liabilities are recognized from the date when the contractual terms of the instrument in which the fund is a contracting party begin to apply. (2) Purchases and sales of financial instruments are recognized in the fund's assets on the trade date. A concluded purchase transaction is recognized in the fund's assets according to type and performed classification of the financial instrument, simultaneously forming a settlement liability. On the transaction date for sales, the financial instrument ceases to be recognized in the fund's assets, and a claim arising from the sale of the financial instrument begins to be recognized. (3) When participating in a public offer, transferable securities are initially expressed as claims for the amount of the proposal submitted to participate in the offer, if there is an unconditional obligation to pay funds according to public offer terms. After the offer is accepted and notice of acceptance of the transferable security's public offer is received from the issuer or arranger or custodian, whichever occurs earlier, and the transferable security is assigned all necessary characteristics, it is recognized in the fund's assets according to financial asset classifications from the fund's accounting policies. (4) Transferable securities in the fund's assets under mandatory and voluntary takeover offers are valued from the date of notice to the custodian of an accepted offer by the bidder at the redemption price from the public offer. (5) Changes in fund assets and liabilities in the fund's accounting books are recorded based on proper and credible accounting documents. (6) Claims or liabilities for interest and similar rights and obligations of the fund are expressed in the fund's assets or liabilities upon establishing the holder's right. (7) Claims for dividends or profit shares, as well as dividend shares, are recognized in the assets of the pension fund on the first day from which the share trades ex-dividend. (8) As an exception to paragraph 7 of this Article, the pension management company may recognize claims for dividends or profit shares, or dividend shares, in the fund's assets on the date establishing the holder's right, based on a decision to pay dividends or distribute profits by the competent body of the commercial company (e.g., general meeting) or upon receiving notice from the custodian. (9) The provision of paragraph 3 of this Article applies mutatis mutandis to money market instruments.

Financial Instruments Valued at Fair Value Article 9. (1) The fair value of transferable debt securities and money market instruments traded in the Republic of Croatia on an active market is calculated using the weighted average trading price by volume of securities traded on a regulated market within the meaning of capital markets legislation in the Republic of Croatia, and reported OTC transactions on the day for which fund assets and liabilities are valued, taking into account the criteria from Article 12(9)(a) and (b) of this Regulation. (2) The fair value of equity securities traded in the Republic of Croatia on an active market is calculated using the weighted average trading price by volume of securities traded on a regulated market within the meaning of capital markets legislation in the Republic of Croatia, on the day for which fund assets and liabilities are valued, taking into account the criteria from Article 12(9)(c) of this Regulation.

(3) As an exception to paragraph 1 of this Article, money market instruments issued by the Republic of Croatia may be valued using the amortized cost method applying the effective interest rate method based on yield to maturity relevant until a new transaction in the fund managed by the same pension management company, or primary issuance of money market instruments issued by the Republic of Croatia with the same maturity. (4) The fair value of transferable securities and money market instruments traded in another Member State or OECD country on an active market is valued using the last published trading price on markets from Article 155(1)(1) of the Act or official financial-information services on the day for which fund assets and liabilities are valued. (5) As an exception to paragraphs 4 and 5 of this Article, the pension management company may use another price for valuing transferable securities and money market instruments if it estimates that the price from paragraph 4 does not represent fair value. In this case, it is obliged to explain and document in writing the reasons for applying a different price during valuation. (6) As an exception to paragraphs 4 and 5 of this Article, the fair value of money market instruments issued by another Member State or OECD country may also be valued using the amortized cost method applying the effective interest rate method based on yield to maturity relevant until a new transaction in the fund managed by the same pension management company, or primary issuance of money market instruments issued by another Member State or OECD country with the same maturity. (7) UCITS fund units are valued at the unit price of the corresponding UCITS fund valid for the valuation date, published by the management company or on official financial-information services. If no publication occurred for the valuation date or the UCITS fund unit price was unavailable, the fair value of UCITS fund units is the unit price from the last valuation date for which a UCITS fund unit price was published. (8) The provisions of paragraph 7 of this Article apply mutatis mutandis to units in open-ended investment funds with a public offer that have received operating approval in an OECD Member State. (9) Units of open-ended alternative investment funds and closed-ended alternative investment funds without legal personality are valued in accordance with paragraph 7, if applicable, or according to notice received from the alternative investment fund management company. (10) Shares of closed-ended alternative investment funds, as well as units or shares of ETFs, are valued in accordance with the provisions of this Regulation relating to the valuation of investments in transferable equity securities. (11) Business shares of closed-ended alternative investment funds are valued in accordance with Article 13 of this Regulation. (12) As an exception to paragraph 4, under the conditions of paragraph 5, debt securities and money market instruments traded in another Member State or OECD country, for which it cannot be determined whether they are on an active market, may be valued using prices published on official financial-information services for the day assets and liabilities are valued, obtained by algorithms that calculate (generate) composite prices consistently using available market trading data, indicative or binding quotes.

Article 10. (1) Upon initial investment in a specific financial instrument, the pension management company is obliged to define by internal act how each financial instrument in the fund's assets or liabilities will be valued. The internal act must at minimum contain: a) the primary price source for valuation, i.e., the primary market on which the financial instrument in which the fund invests is traded and from which a quoted price for valuation purposes is applied, b) the secondary price source for valuation, if it exists and the conditions under which a price from the secondary source will be used in case no price from Article 9(1, 2, 4, 5, and 10) is available on the primary market from point a), c) valuation techniques to be used when determining fair value of transferable securities or money market instruments in case active market conditions are not met (inactive market). (2) If no active market exists for a transferable security or money market instrument, as defined by Article 12 of this Regulation, the provisions of Article 13 must be applied.

Derivatives Article 11. (1) Investments in derivative financial instruments are valued at the publicly available daily settlement price on markets from Article 155(1)(1) of the Act or official financial-information services. (2) As an exception, derivative financial instruments for which no price from paragraph 1 is available on the market are valued at fair value for the valuation date by applying the last bid price, available on the official financial-information service, to long positions thus acquired, while the officially available last ask price is applied to short positions thus acquired. (3) Foreign exchange forward transactions are valued daily at fair value using forward points for a specific currency (close-out method), available on official financial-information services. If forward points for a currency pair are not available, reference interest rates (close-out method) for the specific currency available on official financial-information services are used to calculate fair value. ECB reference exchange rates are taken as reference rates, or if a currency is not listed on the ECB exchange rate list, the Croatian National Bank mid-rate for such currency published on financial-information services is applied. (4