Regulation on Determining the Net Asset Value and Share Price of AIFs (NN, Nos. 114/18, 124/19, 2/20, 155/22 and 147/23 – Unofficial Consolidated Text) – Application Pursuant to Article 12(3) of the Current Regulation

Croatian Financial Services Supervisory 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 DETERMINING THE NET ASSET VALUE AND SHARE PRICE OF AIFs (Official Gazette Nos. 114/18, 124/19, 2/20, 155/22 and 147/23 – Unofficial Consolidated Text) General Provisions
Article 1.
(1) This Regulation governs:
a) determination of the net asset value (NAV) and share price of AIFs, b) criteria related to appropriate valuation procedures for AIF assets and liabilities and the calculation of AIF share prices, c) frequency of NAV and AIF share price calculations, d) method and deadlines for reporting on the calculation of AIF NAV and share prices. (2) Regulated market in the context of this Regulation means:
a) regulated market under the capital markets law of the Republic of Croatia and/or an EU Member State, b) another regulated market in the Republic of Croatia and/or an EU Member State that regularly operates, is recognized, and open to the public, c) official stock exchange quotation in a third country or another regulated market in a third country that regularly operates, is recognized, and open to the public. Calculation of Net Asset Value of AIFs
Article 2.
(1) The total assets of an AIF on the valuation date consist of the sum of the values of all asset types.
(2) The net asset value (NAV) of an AIF is the total assets value reduced by liabilities.
(3) AIF liabilities may arise from:
a) investments in AIF assets, b) use of techniques and instruments for efficient management of AIF assets, and c) other liabilities for unpaid fees or costs under Articles 214 and 215 of the Alternative Investment Funds Act ("Official Gazette", Nos. 21/18, 126/19 and 110/21, hereinafter: the Act), as well as d) issuance and redemption of AIF shares. (4) The NAV and share prices of open AIFs with a public offering are calculated for each subsequent working day. (5) The NAV and share prices of open AIFs with a private offering are calculated for each day in which the issuance or redemption of shares occurs, and at least on the dates of preparation of annual and semi-annual financial statements. (6) Exceptionally, pursuant to paragraph 5 of this Article, the NAV and share prices of risk capital AIFs and venture capital AIFs are calculated as determined by the rules of the AIF, and at least on the dates of preparation of annual and semi-annual financial statements. (7) The NAV and share price of closed AIFs, whose shares are not listed on a regulated market, are calculated upon capital increase or decrease, and at least on the dates of preparation of annual and semi-annual financial statements. (8) The NAV and share price of closed AIFs, whose shares are listed on a regulated market, are calculated at least once monthly for the last day of the month and upon capital increase or decrease. Calculation of Share Price for Open AIFs
Article 3. (NN 147/23)
(1) When calculating the NAV and share price of open AIFs, the AIF management company (UAIF) must:
a) calculate the total assets and total liabilities of the open AIF for the valuation date in accordance with this Regulation, b) calculate the NAV of the open AIF by reducing total assets by total liabilities for the valuation date, c) calculate the share price of the open AIF by dividing the NAV from subpoint b) of this paragraph by the number of shares as of the last date for which the share price was calculated, d) execute share issuance upon received valid requests and valid payments from those requests, thereby reducing the corresponding portion of liabilities for issued shares, and calculate liability amounts upon received valid redemption requests using the share price from subpoint c), e) calculate the number of shares for the valuation date by increasing the share count from the last calculation date by the number of shares obtained through issuance requests for the valuation date (for which investors made valid payments), and reducing it by the number of shares obtained through redemption requests for the valuation date, f) calculate the post-issuance and redemption NAV of the open AIF by increasing the NAV from subpoint b) with the value of issued shares and reducing it by the increase in liabilities for redeemed shares. (2) Requests for issuance or redemption of open AIF shares received on non-working days will be calculated at the share price of the following working day. (3) In cases where the rules of the open AIF and the prospectus (where applicable) provide for denomination of the share price in a foreign currency, the determined EUR share price is converted into the foreign currency using European Central Bank (ECB) reference rates. Documentation of the Asset and Liability Valuation Process
Article 4. (NN 147/23)
(1) The UAIF must prescribe the principles and basis for recognition, measurement, and derecognition of AIF assets and liabilities through accounting policies.
(2) The accounting policies from paragraph 1 must align with this Regulation and the International Financial Reporting Standards (IFRS) established by the European Commission and published in the Official Journal of the European Union. (3) The UAIF must retain documentation from Article 6 paragraph 2, Article 7 paragraph 1, Article 8 paragraphs 5, 6 and 8, Article 8a paragraph 2, Article 10 paragraphs 4 and 5, Article 11 paragraphs 3 and 8, Article 11a paragraph 2, Article 12 paragraphs 3 and 5, and Article 13 paragraphs 3 and 6 for at least three years from the termination of all rights and obligations arising from investments in specific AIF assets. (4) The UAIF must adopt, apply, and regularly update appropriate internal acts containing at least the requirements from Article 9 paragraphs 3, 8 and 9, Article 10 paragraphs 3 and 11, Article 11 paragraphs 6 and 7, Article 12 paragraphs 2 and 7, and Article 13 paragraphs 11 and 12. (5) The UAIF must maintain a register of updates to the internal act from paragraph 4, noting amendments and reasons for implementation. Recognition of AIF Assets and Liabilities
Article 5. (NN 147/23)
(1) AIF assets and liabilities are recognized from the date when contractual terms begin to apply, with the AIF as one of the contracting parties.
(2) Purchase and sale of financial instruments are recognized in AIF assets on the trade date. A concluded purchase transaction is recognized in AIF assets by type and classification of the financial instrument, with simultaneous formation of a settlement liability. On the trade date of a sale transaction, the financial instrument is derecognized from AIF assets, and a receivable arising from the sale of the financial instrument is recognized. (3) Recognition of AIF financial assets and liabilities depends on the type of financial instrument and applied classification, in accordance with accounting policies and the UAIF investment policy prescribed by AIF rules and prospectus (where applicable). (4) Financial assets and liabilities 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 (FVTPL), 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 FVTPL, which do not add transaction costs upon initial recognition as they are recognized in profit or loss upon occurrence. (5) In participation in public offerings of transferable securities (initial and secondary offerings, offerings to a limited number of investors, etc.), transferable securities are initially recognized as receivables at the offered amount. After the offer is accepted and notice of acceptance of the public offering of transferable securities is received from the issuer, arranger, or depositary (whichever occurs first), and the transferable securities are assigned all necessary characteristics, they are recognized in AIF assets according to financial asset classifications from accounting policies. (6) Paragraph 5 applies mutatis mutandis to money market instruments. (7) Transferable securities in AIF assets subject to conditional public offers for redemption are valued from the date of notice by the depositary or issuer/arranger upon acceptance, at the redemption price from the public offering. (8) Investments in commodities are recognized according to this Article regarding recognition of investments in financial assets at FVTPL. (9) Investments in business shares/shares of trading companies where the AIF holds between 20% and 50% ownership, or has significant influence on operations (unless proven otherwise), are in accordance with IAS 28 Investments in Associates and Joint Ventures, initially recognized at acquisition cost. (10) Investments in business shares/shares of trading companies where the AIF holds over 50% ownership, or control in accordance with IAS 27 Separate Financial Statements, are initially recognized at acquisition cost. (11) Exceptionally, pursuant to paragraphs 9 and 10, if the UAIF decides to value investments in associates and subsidiaries according to point 10(b) of IAS 27, such investments are initially recognized in accordance
with this Article regarding financial asset recognition. (12) Real estate is initially measured at purchase cost, including transaction costs, or by the purchase price increased by all statutory direct acquisition costs of real estate. (13) When investing in real estate, the UAIF must ensure that the purchase price does not deviate from prices achieved on active markets between unrelated parties, and substantially aligns with estimates by authorized appraisers. (14) Receivables or liabilities for interest and similar rights are recognized in AIF assets or liabilities upon determination of the holder's right. (15) Receivables for dividends or profit shares are recognized in AIF assets on the first day from which shares trade ex-dividend. (16) Exceptionally, pursuant to paragraph 15, the UAIF may recognize receivables for dividends or profit shares on the date of determining the holder's right, based on a decision by the competent body (e.g., general meeting) or received notice from the depositary. (17) Changes in AIF assets and liabilities in accounting books are recorded based on proper and verifiable accounting documents. (18) Assets and liabilities acquired in foreign currency and subsequent measurement of AIF assets/liabilities denominated in foreign currency are converted to EUR using ECB reference rates valid for the valuation date, or by a rate arising from the contractual relationship related to that transaction. If the currency in which assets are denominated is not listed on the ECB exchange rate list, cross-rates of the currency to which the denominated asset is linked are used for conversion, published on financial information services. Values expressed in the linked currency are converted to EUR using ECB reference rates for the valuation date. For currencies without published ECB reference rates, the management company uses mid-rates of the Croatian National Bank (HNB) valid for the valuation date. Financial Instruments and Commodities Valued at Fair Value on Active Markets
Article 6.
(1) Fair value of transferable securities and money market instruments traded on active markets is calculated using the last trading price published on regulated or official financial information services on the valuation date.
(2) Exceptionally, pursuant to paragraph 1, the UAIF may use another price for valuing transferable securities and money market instruments if it determines that the price from paragraph 1 does not represent fair value. In such cases, the UAIF must document in writing the reasons for applying a different price. (3) Exceptionally, pursuant to paragraph 1, fair value of debt securities traded in the Republic of Croatia on active markets is calculated using the volume-weighted average trading price of securities traded on regulated markets under Article 1(2)(a) and (b), and reported OTC transactions on the valuation date. (3a) Exceptionally, pursuant to paragraph 1 and under conditions of paragraph 2, debt securities and money market instruments traded in other Member States or third countries, where an active market cannot be determined, may be valued using prices published on official financial information services for the valuation date, generated by algorithms consistently calculating composite prices using available market trading data, indicative or binding quotes. (4) For AIFs with an investment objective of replicating a specific equity or debt index, the valuation methodology identical to that used for valuing the replicated index is applied. (5) Shares of investment funds are valued at the share price of the corresponding investment fund valid for the valuation date, published by the management company. If no publication or price was available on the valuation date, fair value is the share price from the last valuation date published by the management company. (6) Exceptionally, pursuant to paragraph 5:
a) shares of investment funds traded (ETFs) on active markets under Article 1(2) are valued according to equity investment valuation rules, b) shares of closed AIFs are valued according to equity investment valuation rules, c) business shares of closed AIFs are valued according to Article 10. (7) Investments in commodities are valued at fair value less costs to sell (IFRS 13, points 24, 25 and 26). Changes in fair value less costs to sell are recognized in profit or loss of the period in which they occur (IAS 2, point 3(b)).
Article 7.
(1) Upon initial investment, the UAIF must define by internal act how specific financial instruments and other investments in assets or liabilities are valued. The internal act must minimally contain:
a) primary price source for valuation, i.e., the primary market where financial instruments and other investments trade, from which quoted prices are applied for valuation, b) secondary price source, if available and conditions for using the secondary source price apply when no price from Article 6(1), (2), (3), (5) and Article 8(1) is available on the primary market from subpoint a), c) valuation techniques to be used when determining fair value of financial instruments and other investments in case active market conditions are not met (inactive markets). (2) If no active market exists for financial instruments and other investments, as defined by Article 9, the provisions of Article 10 must be applied. Financial Derivatives
Article 8. (NN 147/23)
(1) Investments in financial derivatives traded on regulated markets are valued at publicly available daily settlement prices on regulated markets or official financial information services.
(2) Exceptionally, financial derivatives 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 from official financial information services to long positions, and the last ask price to short positions. (3) Fair value of FX forward transactions is calculated using reference interest rates (close-out method) for the specific currency, available on official financial information services. The reference rate is taken as the ECB reference rate, or if unavailable, by applying daily forward points (difference between contracted forward rate and mid-rate on transaction date, divided by days to maturity) cumulatively allocated/allocated to the mid-rate on transaction date. The resulting value is compared with HNB mid-rate on valuation date using the close-out method. The difference represents fair value for the valuation date. (4) The UAIF must prescribe OTC derivative valuation in AIF internal acts if investment in OTC derivatives is provided by rules and prospectus. (5) When preparing fair value estimates for OTC derivatives, the UAIF must ensure and document that valuations use fair values not solely based on market prices quoted by the counterparty in informal markets, meeting:
a) basis for fair value is relevant market value from appropriate source or calculated by appropriate valuation method, b) confirmation of valuation performed by:
– an independent third party from the counterparty, regularly and in a manner verifiable by the AIF, or – an appropriate internal organizational unit of the UAIF independent from asset management activities.
(6) The UAIF must, in accordance with paragraph 5 and considering the type and complexity of OTC derivatives, establish, implement, regularly update, and appropriately document measures ensuring appropriate, transparent, and fair valuation of AIF investments in OTC derivatives. (7) Exceptionally, pursuant to paragraphs 1, 2 and 3, the UAIF may value financial derivatives from AIF portfolios defined as hedging instruments by applying IFRS 9 Financial Instruments regarding hedge accounting. (8) If the UAIF applies hedge accounting from paragraph 7, it must prepare a written internal act defining hedging instruments and hedged positions, as well as evidence of compliance with IFRS 9. Investments in Deposits
Article 8.a. (NN 147/23)
(1) Investments in AIF deposits not meeting conditions under IFRS 9 4.1.2 are valued by the UAIF at fair value (points 61 to 66 of IFRS 13) and in accordance with Article 10 when applicable.
(2) If the UAIF values investments in deposits according to paragraph 1, it must prepare a written internal act on valuation techniques aligned with IFRS 13 Annex B points B10 to B30.
(3) In accordance with paragraphs 1 and 2, provisions of Article 10 apply to internal acts regarding valuation method descriptions and input data, content, preparation, form, inputs, review, documentation of fair value estimates, notification to depositaries, and suspension of issuance/redemption in AIFs, as well as the obligation for depositary verification of UAIF compliance. Active and Inactive Markets
Article 9.
(1) For equity securities, an active market is considered a market where equity securities traded at least 20 trading days in a quarterly period.
(2) For debt securities and money market instruments, an active market is considered a market where such instruments traded at least 15 trading days in a quarterly period.
(3) The UAIF must prescribe criteria for distinguishing active and inactive markets in AIF internal acts for investments in financial derivatives under Article 8(1), if provided by rules and prospectus.
(4) The UAIF must assess at least once per quarter, at the end of the quarterly period defined by accounting policies, whether financial instruments meet conditions from paragraphs 1, 2 and 3.
(5) The price from Article 10 must be applied by the UAIF no later than the seventh working day after the date in paragraph 4 if equity securities, debt securities, money market instruments, and financial derivatives do not meet conditions from paragraphs 1, 2 and 3 (inactive market). (6) Exceptionally, pursuant to paragraph 4, the UAIF must assess in case of trading suspension of financial instruments on regulated markets, considering expected duration and reasons for suspension, whether the last valuation price of equity securities, debt securities, money market instruments, and financial derivatives represents fair value under Articles 6 and 8. (7) If the assessment from paragraph 6 determines that the last valuation price does not represent fair value, the UAIF must apply the price from Article 10 no later than the third working day after trading suspension. (8) The UAIF must prescribe criteria in AIF internal acts for determining transactions whose price does not represent fair value, or transactions considered irrelevant when calculating the number of trading days from paragraphs 1 and 2, considering for example volume