Regulation on Criteria for Assessing Conditions for Membership in the Management and Supervisory Boards of UAIFs and Closed AIFs with External Managers (Official Gazette Nos. 136/20 and 79/22)

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 CRITERIA FOR ASSESSING CONDITIONS FOR MEMBERSHIP IN THE MANAGEMENT AND SUPERVISORY BOARDS OF UAIFs AND IN THE SUPERVISORY BOARD OF CLOSED AIFs WITH EXTERNAL MANAGERS (Official Gazette Nos. 136/20 and 79/22 – Unofficial Consolidated Text)

I. INTRODUCTORY PROVISIONS Article 1. (OG 79/22) This Regulation provides detailed provisions on:

1. criteria for assessing the conditions for performing the function of a management member of a UAIF, including specific conditions related to the type of AIF managed or intended to be managed by the UAIF, the concept of sufficient time dedicated by a management member of a medium or small UAIF to performing their function, and the documentation attached to the application for approval to perform the management member function,
2. content of the UAIF business program, conditions and criteria for evaluating programs and candidates presenting a program, as well as justified grounds on which Hanfa may issue approval for a term shorter than required,
3. conditions that supervisory board members of a UAIF must meet,
4. criteria for assessing the conditions that members of the supervisory board of a closed AIF with legal personality, managed by an external UAIF, must meet.

II. CRITERIA FOR ASSESSING CONDITIONS FOR MEMBERSHIP IN THE MANAGEMENT OF UAIFs Article 2. (OG 79/22) (1) A management member of a UAIF may be a person who permanently meets the conditions prescribed by Articles 42 and 43 of the Law and this Regulation. (2) Deleted. (2) A candidate for a management member of a UAIF must have appropriate professional knowledge, competence, good reputation, and experience for managing the operations of a UAIF. (3) When deciding on an application for approval to perform the function of a management member of a UAIF, Hanfa will take into account all elements that may affect the assessment of whether the candidate meets the set conditions, with a view to ensuring continuous operations of the UAIF.

Professional Knowledge of Management Members of UAIFs Article 3. (OG 79/22) (1) A person has the professional knowledge prescribed by Article 42, paragraph 1, point 1 of the Law required for performing the function of a management member of a UAIF if they have completed one of the following studies: a) undergraduate and master university study or integrated undergraduate and master university study or professional study and specialist master professional study, having acquired at least 300 ECTS points upon completion, or b) university undergraduate study, having acquired higher professional qualifications, or professional undergraduate study of at least four years' duration, having acquired higher professional qualifications. (2) The provisions of paragraph 1, point b) of this Article apply to persons who completed their studies under regulations in force prior to the entry into force of the Law on Scientific Activity and Higher Education ("Official Gazette" Nos. 123/03, 198/03, 105/04, 174/04, 2/07 Decision of the Constitutional Court, 46/07, 45/09, 63/11, 94/13, 139/13, 101/14, 60/15 and 131/17) and have the right to use the corresponding academic or professional title or academic degree established by the Law on Academic and Professional Titles and Academic Degree ("Official Gazette" Nos. 107/07 and 118/2012), in accordance with Article 120, paragraph 2 of the Law on Scientific Activity and Higher Education. (3) When assessing a candidate's professional knowledge, Hanfa may, in addition to the achieved level of education in accordance with paragraphs 1 and 2 of this Article, also verify continuous professional development of the candidate in the following areas: a) operations of investment funds or other funds managed or planned to be managed by a UAIF during the term for which the candidate's approval application is submitted, b) financial markets, c) accounting framework, d) legal-regulatory framework, e) strategic planning and knowledge of business strategy, business plan, and its implementation, f) risk management (identification, measurement, monitoring, control, and mastery of the main types of risks for UCITS and UAIF management companies), g) corporate governance, including the internal control system, and h) financial data analysis. (4) When assessing a candidate's competence for the function of management member under Article 42, paragraph 1, point 1 of the Law, Hanfa may evaluate strategic thinking and the ability to create short-term and long-term business plans, risk assessment and management, organizational capabilities, UAIF leadership, independence of opinion, as well as the candidate's ability and willingness for continuous learning and professional development. The assessment also considers the area of responsibility for which the candidate is responsible, as well as the duties and capabilities required by their management position.

Experience of a Management Member of UAIF Article 4. (OG 79/22) (1) Experience within the meaning of Article 42, paragraph 1, point 1 of the Law, in addition to the experience from Article 42, paragraph 2 of the Law for a management member of a large and medium UAIF, or Article 42, paragraph 8 of the Law for a management member of a small UAIF, is considered other appropriate experience, namely:

1. for a management member of a large and medium UAIF, at least three years of experience as deputy management member, advisory board member, authorized signatory in a UAIF, or holder of a key function in a UAIF, open-ended investment fund company with public offering, credit institution, or investment company headquartered in the Republic of Croatia or another Member State,
2. for a management member of a large and medium UAIF, at least five years of experience in management or working in key positions with a high degree of independence in activities comparable to those of the fund management company, as assessed by Hanfa, such that performing these activities the candidate could acquire knowledge necessary for performing the function of management member in a fund management company regarding financial markets, regulatory framework, requirements, strategic planning, and linking business strategy, business plan, and its implementation, risk management, assessment of supervisory and control effectiveness, financial data analysis, identification of main problems based on these data, and appropriate controls and measures, which includes work experience in management at the board level or directly below it, or in managerial or operational positions with a high degree of independence, and authorized signatory experience.
3. for a management member of a small UAIF, at least five years of work experience in activities comparable to those of the fund management company, as assessed by Hanfa, such that performing these activities the candidate could acquire knowledge necessary for performing the function of management member in a UAIF. (2) Comparable activities under paragraph 1, point 3 include experience in activities closely related to the subject matter of financial sector entities, scope and responsibilities of supervisory authorities, accounting-financial and legal activities with a higher degree of independence in performing these activities, audit services, and other activities not exclusively in the support category to basic business processes in other legal entities and state administration bodies, as well as other activities that Hanfa considers comparable to UAIF activities depending on the type of AIF managed by a small UAIF. (3) When assessing the duration of experience, Hanfa may take into account multiple short-term or temporary positions if it establishes that together with other previous activities performed, the candidate has acquired at least three or five years of experience in activities from paragraphs 1 of this Article within the last ten years before submitting the application.

Good Reputation of a Management Member of UAIF Article 5. (1) When assessing the good reputation prescribed by Article 42, paragraph 1, point 4 of the Law required for performing the management function, particular attention will be paid to: a) whether the candidate's approval or consent for performing certain activities was withdrawn, revoked, or annulled due to non-compliance with regulations under laws within Hanfa's jurisdiction or other competent supervisory-regulatory authorities, or whether an foreign supervisory-regulatory authority has withdrawn consent or imposed a measure prohibiting the performance of relevant activities in the fund industry, banking, or capital markets, b) whether proceedings have been initiated against the candidate, whether criminal or misdemeanor proceedings are ongoing, or whether they have been finally convicted for offenses prescribed by the Law on Financial Market Instruments ("Official Gazette" Nos. 84/02 and 138/06), Law on Criminal Offenses against the Capital Market ("Official Gazette" No. 152/08), Law on Capital Markets ("Official Gazette" Nos. 88/08, 146/08, 74/09, 54/13, 159/13, 18/15, 110/15, 123/16 and 131/17), Law on Capital Markets ("Official Gazette" Nos. 65/18, 17/20 and 83/21), Law on Mandatory Pension Funds ("Official Gazette" Nos. 19/14, 93/15, 64/18, 115/18 and 58/20), Law on Voluntary Pension Funds ("Official Gazette" Nos. 19/14, 29/18 and 115/18), Law on Open-Ended Investment Funds with Public Offering ("Official Gazette" Nos. 44/16, 126/19 and 110/21, or "Official Gazette" Nos. 16/13 and 143/14), Law on Alternative Investment Funds ("Official Gazette" Nos. 21/18, 126/19 and 110/21, or "Official Gazette" Nos. 16/13 and 143/14), Law on Insurance ("Official Gazette" Nos. 30/15, 112/18, 63/20 and 133/20), Law on Prevention of Money Laundering and Financing of Terrorism ("Official Gazette" Nos. 108/17 and 39/19, or "Official Gazette" Nos. 87/08 and 25/12), and Law on Companies ("Official Gazette" Nos. 111/93, 34/99, 121/99, 52/00, 118/03, 107/07, 146/08, 137/09, 152/11, 111/12, 68/13, 110/15 and 40/19), or for a foreign person, whether proceedings have been initiated against them, whether proceedings are ongoing, or whether they have been finally convicted for offenses that correspond in description and consequences to the aforementioned offenses, c) whether proceedings have been initiated against the candidate, whether criminal proceedings are ongoing, or whether they have been finally convicted for the following criminal offenses prescribed by Article 42, paragraph 7 of the Law, d) whether proceedings have been initiated against the candidate, whether criminal proceedings are ongoing, or whether they have been finally convicted for criminal offenses from the Criminal Code ("Official Gazette" Nos. 110/97, 27/98, 50/00, 129/00, 51/01, 111/03, 190/03 – Constitutional Court Decision, 105/04, 84/05, 71/06, 110/07, 152/08 and 57/11) that are in legal continuity with the aforementioned criminal offenses from point c) of this Article, or for a foreign person, whether proceedings have been initiated against them, whether proceedings are ongoing, or whether they have been finally convicted for offenses that correspond in description and consequences to the aforementioned criminal offenses, e) the candidate's previous professional work and personal integrity, f) whether business results and/or financial stability endanger the person's reputation, g) whether there are other reasons for doubt regarding the candidate's good reputation. (2) When assessing the conditions from paragraph 1, points a) to d), Hanfa will take into account available information regarding the type of judgment or decision, the stage of proceedings, declared legal remedies, imposed sanctions, existing circumstances, significance of the criminal or misdemeanor offense, and the period elapsed since the commission of the offense and the person's behavior during that time. Hanfa will also consider a larger number of minor offenses that individually do not impair, but together may impair the good reputation of the person. (3) Additionally, when assessing the conditions from paragraph 1, point e), Hanfa will analyze information indicating irresponsible or inappropriate behavior of the candidate in previous professional work, such as unprofessional and conscientious handling or omission of due diligence, transparent handling, non-cooperation with competent authorities, or failure to comply with imposed measures of Hanfa or other competent bodies involving withdrawal or revocation or confiscation of approvals or licenses for performing managerial functions or professional occupations, and, if available, will also analyze the reasons for termination of employment contracts, as well as the reasons for dismissal from key or similar functions and prohibition of conducting business or representing legal entities imposed by competent authorities, as well as all other data and evidence indicating that the candidate's actions comply with high standards of professional conduct. (4) When assessing the conditions from paragraph 1, point f), Hanfa will consider the financial and business results of the candidate, or the trading company in which the candidate has or had a significant share and/or managerial function, before pre-bankruptcy settlement was conducted over the company, open bankruptcy proceedings were initiated, a decision on compulsory liquidation was made, or approval for business was withdrawn or revoked, which could affect the candidate's good reputation and integrity. Hanfa will assess whether the candidate's actions influenced the occurrence of these events. (5) Establishing the existence of circumstances from paragraph 1 does not affect the application of the presumption of innocence principle under the law governing criminal proceedings.

Commitment to Performing Functions of Management Members Article 5a. (OG 79/22) (1) When assessing whether a candidate for management member of a small and medium UAIF can dedicate sufficient time to fulfilling their duties, the following are evaluated:

1. number of executive and non-executive functions or deputy functions held simultaneously
2. type, size, scope, and complexity of activities performed by the company in which the candidate holds an executive or non-executive function or deputy function
3. geographical location of the company where the candidate holds their function and travel time required to perform that function
4. number of management meetings held on average throughout the year
5. management meetings held as needed with competent authorities and interested parties
6. position, responsibilities, and areas of responsibility covered by the candidate
7. other professional, political, or other functions or relevant activities of the candidate
8. number of functions in organizations or entities not primarily established for profit, and
9. time required for introductory and continuous education. (2) When assessing under paragraph 1 of this Article, functions of management or supervisory board members in organizations or entities not primarily established for profit are not considered, such as associations, non-profit organizations, companies established exclusively for managing the personal property of a management member or related persons, provided that daily management by the management member is not required, and similar organizations or entities. (3) Circumstances from paragraph 1 of this Article are determined in relation to individual circumstances and the nature, scope, and complexity of UAIF activities.

Application for Issuance of Approval and Attached Documentation Article 6. (OG 79/22) (1) Before making a decision on the appointment of a management member, the applicant must obtain Hanfa's approval in accordance with the provisions of the Law. A decision on the appointment of a management member may also be made conditional upon the entry into force of Hanfa's approval. (2) The application for issuance of approval to perform the function of management member must contain an explanation covering essential reasons that influenced the submission of the application and objectives sought by appointing the candidate to the UAIF management. (3) The application from paragraph 2 of this Article must contain the proposed term duration, function and responsibilities for which the candidate is appointed, explanation of the decision on candidate selection containing criteria and procedures followed by the UAIF when assessing candidate suitability, and at least the following:

1. personal data of the appointed person including first name and surname, maiden name, OIB (Personal Identification Number), place and date of birth, country of birth, domicile or residence, nationality, gender, father's and mother's names,
2. information on education including a chronological list of all educational degrees with year of completion, duration, and acquired academic title,
3. information on professional development including a chronological list of all forms of professional development, specifying topics, organizers, and duration, years of passing professional exams, certificates, licenses, etc.,
4. for foreign nationals, information on the level of knowledge of the Croatian language,
5. information on work experience, including a chronological list of all previous employers and positions or functions held outside employment with indication of periods in which specific functions were performed,
6. for positions or functions held within the last ten years, the following are specified: – description of activities performed by the candidate at that position or function, – organizational structure of the employer or entity where activities were performed or functions held at the time the candidate worked in that position or function, – scope of responsibilities, decision-making powers, and accountability, – number of subordinate employees,
7. information on whether proceedings are ongoing against the candidate or whether the candidate has been finally convicted for one or more criminal offenses listed in Article 42, paragraph 7 of the Law or Article 5, paragraph 1 of this Regulation, or for any other criminal offense,
8. information on whether the candidate has been finally convicted, whether a measure has been imposed against them, and whether competent courts or authorities are conducting proceedings against the candidate due to irregularities or non-compliance with the Law and subordinate regulations, or any other regulations governing banking, financial, or insurance activities, payment instruments, or provision of financial services, or any other relevant regulations that may cast doubt on the candidate's good reputation,
9. information on whether misdemeanor proceedings are ongoing against the candidate or whether the candidate has been finally convicted for a misdemeanor constituting a gross and/or repeated violation of regulations under Hanfa's, the Croatian National Bank's, or other competent regulatory authorities' jurisdiction, or for any misdemeanor that could negatively affect the candidate's financial stability and reputation,
10. information on whether bankruptcy proceedings have been opened over the candidate's assets or over a company where the candidate was a supervisory board member, management member, or held another managerial position, whether bankruptcy proceedings are open, a decision on compulsory liquidation has been made, or approval for business has been annulled or revoked,
11. information on the candidate's financial status, including whether the candidate's assets affect their ability to meet future financial obligations, whether the candidate is on the list of delinquent debtors (e.g., HROK, tax debtor list of the Ministry of Finance, "black list", credit register, etc.), and whether enforcement or bankruptcy proceedings have been initiated over the candidate's assets,
12. information on financial and business results of trading companies in which the candidate is or was a significant shareholder, holds or held significant business shares, or performed the function of management member or another managerial position, including whether pre-bankruptcy settlement was initiated over the company, bankruptcy proceedings are open, a decision on compulsory liquidation was made, or approval for business was withdrawn,
13. information on whether another competent authority has already conducted a suitability assessment of the person (including data about that authority and evidence of assessment results),
14. information on the result of the suitability assessment conducted by the UAIF and explanation of the assessment,
15. information on whether a collaborator of the person has been convicted for a criminal offense prosecuted ex officio.

Article 7. (OG 79/22) (1) The following documentation is attached to the application for issuance of approval to perform the function of management member of a UAIF: a) decision on appointment of the selected candidate for management member conditional upon obtaining Hanfa's approval, or decision on election of the candidate for management member, b) certified copy of identity card or passport, or for a foreign national, certified copy of identity card or travel document issued under the provisions of the Law on Foreigners ("Official Gazette" No. 133/20, hereinafter: Law on Foreigners), c) certified copy of proof of completed appropriate level of education, d) document on recognition of foreign higher education qualification issued by the competent authority in the Republic of Croatia, e) curriculum vitae with detailed information on education, professional development, and work experience, f) appropriate document proving the candidate's length of service, g) employer certificates on previous work experience (company name, period of employment, description of activities and duties), related to Article 42, paragraphs 2 or 8 of the Law, or exceptionally, when an employer certificate cannot be obtained because the employer no longer exists, other document(s) confirming such relevant experience, whose authenticity Hanfa may assess, h) for foreign nationals, appropriate document required to establish an employment relationship in accordance with the provisions of the Law on Foreigners (e.g., residence and work permit, residence approval, EU Blue Card, etc.), i) in cases where all candidates for management members are foreign nationals, at least one of them must have a certificate from the competent authority on knowledge of the Croatian language, j) certificate on non-initiation of criminal and misdemeanor proceedings issued by the competent authority of the Republic of Croatia, or for a foreign national, certificate from the competent authority of their country of citizenship (not older than 3 months), k) UAIF business program for the term period, l) electronically completed Questionnaire for a Candidate Performing the Function of Management Member of a UAIF (Appendix 1 published on Hanfa's website) which is an integral part of this Regulation, with signature certified by a notary public, not older than one month from the date of submission of the application for issuance of approval to perform the function of management member, m) candidate's declaration on whether criminal or misdemeanor proceedings are ongoing against them and whether they have been finally convicted for a criminal offense or misdemeanor (Appendix 2), with signature of the candidate for management member of a UAIF certified by a notary public, not older than one month from the date of submission of the application for issuance of approval to perform the function of management member of a UAIF, n) list of collaborators of the candidate within the meaning of Article 4, point 63 of the Law, which list regarding Croatian collaborators includes data on OIB, maiden name, gender, nationality, father's and mother's names, date of birth, place and country of birth, domicile; for foreign collaborators, proof is submitted that they have not been finally convicted for criminal offenses prosecuted ex officio and for criminal offenses from Article 42, paragraph 7 of the Law (in case the relevant competent authority of the collaborator's country does not issue such proof, a candidate's declaration (Appendix 3) with signature of the candidate for management member of a UAIF certified by a notary public, not older than one month from the date of submission of the application for issuance of approval to perform the function of management member of a UAIF, is accepted as a substitute), o) results of the suitability assessment conducted by the UAIF with explanation, p) proof of payment of the fee attached to the application for issuance of approval to perform the function of management member of a UAIF prescribed by Hanfa's Act on Type and Amount of Fees, r) additional documentation upon Hanfa's request. (2) Documentation prescribed by this Regulation is submitted in original or certified copy. Foreign documents from this Article are translated into Croatian by a sworn court interpreter, and foreign documents from paragraph 1, points b), c), and f) of this Article are also authenticated in accordance with the law and