Regulation on Determining the Net Asset Value of UCITS Funds and the Price of UCITS Fund Shares

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 DETERMINING THE NET ASSET VALUE OF UCITS FUNDS AND THE PRICE OF UCITS FUND SHARES (Official Gazette, No. 89/24, 133/25 and 66/26)

• unofficial consolidated text

GENERAL PROVISIONS

Article 1.
This Regulation governs:
a) the determination of the net asset value of UCITS funds and the price of shares in UCITS funds, b) methods for calculating the value of assets and liabilities of UCITS funds, c) the frequency of determining the net asset value of UCITS funds, d) the method for calculating management fees and depositary fees, and e) the method and deadlines for reporting the net asset value of UCITS funds and the price of UCITS fund shares.

CALCULATION OF NET ASSET VALUE OF UCITS FUNDS

Article 2. (Official Gazette 66/26)
(1) The total assets of a UCITS fund for the valuation day consist of the sum of the values of all types of assets.
(2) The net asset value of a UCITS fund is the value of total assets reduced by liabilities.
(3) Liabilities of a UCITS fund may arise from:
a) investments in financial instruments, b) the use of techniques and instruments used for the efficient management of the UCITS fund portfolio, c) other liabilities for unpaid costs under Article 247, paragraphs 2 and 3, and Article 248, paragraphs 1 and 2 of the Act on Open-Ended Investment Funds with Public Offering ("Official Gazette", No. 44/16, 126/19, 110/21, 76/22, 152/24 and 13/26, hereinafter: the Act) and in accordance with the UCITS fund prospectus, and d) the issuance and redemption of UCITS fund shares.

CALCULATION OF THE PRICE OF UCITS FUND SHARES

Article 3. (Official Gazette 66/26)
(1) When calculating the net asset value and the price of shares in a UCITS fund, the management company is obliged to:
a) calculate the value of total assets and total liabilities of the UCITS fund for the valuation day in accordance with the provisions of this Regulation, b) calculate the net asset value of the UCITS fund by reducing the total assets of the UCITS fund by the total liabilities of the UCITS fund for the valuation day, c) calculate the price of shares in the UCITS fund by dividing the net asset value from sub-item b) of this paragraph by the number of shares from the last day for which the price of shares in the UCITS fund was calculated, d) execute the issuance of shares upon receiving valid requests for the issuance of shares and valid payments of the amounts from the requests, thereby reducing the corresponding portion of liabilities for issued shares, and calculate the amount of liabilities upon receiving valid requests for the redemption of shares, using the price of shares in the UCITS fund from sub-item c) of this paragraph, e) calculate the number of shares in the UCITS fund for the valuation day by increasing the number of shares from the last day for which the price of shares in the UCITS fund was calculated by the number of shares obtained by executing requests for the issuance of shares for the valuation day, for which the investor has made a valid payment of the amount from the request, and decreasing by the number of shares obtained by executing requests for the redemption of shares for the valuation day, f) calculate the net asset value of the UCITS fund after the issuance and redemption of shares from sub-item d) by increasing the net asset value of the UCITS fund from sub-item b) of this paragraph by the value of issued shares and decreasing by the amount of the increase in liabilities for redeemed shares. (2) The net asset value and the price of shares in a UCITS fund are calculated for each day on which the issuance or redemption of shares was carried out, and at least twice a month at regular time intervals, on the following working day. (3) Exceptionally from paragraph 2 of this Article, the net asset value and the price of shares in a UCITS fund are always calculated for the last day of the month, on the following working day. (4) Requests for the issuance or redemption of shares in a UCITS fund received on non-working days will be calculated by the management company at the price of shares in the UCITS fund from the first following working day. (5) In cases where the prospectus of a UCITS fund provides for the denomination of the price of shares in a UCITS fund in a foreign currency, the determined price of shares in the UCITS fund, calculated in euros, is converted into the foreign currency in which the denomination of the price of shares in the UCITS fund is provided, by applying the reference exchange rates of the European Central Bank.

DOCUMENTATION OF THE ASSET AND LIABILITY VALUATION PROCESS OF UCITS FUNDS

Article 4.
(1) The management company is obliged to specify the principles and basis for the recognition, measurement, and derecognition of assets and liabilities of UCITS funds in the accounting policies of the UCITS fund.
(2) The accounting policies from paragraph 1 of this Article must be in accordance with the provisions of this Regulation and the International Financial Reporting Standards established by the European Commission and published in the Official Journal of the European Union (hereinafter: IFRS).
(3) The management company is obliged to keep the documentation from Article 7, paragraph 2, Article 8, paragraph 1, Article 9, paragraphs 5, 6, and 8, Article 10, paragraph 2, Article 12, paragraphs 3 and 7, Article 13, paragraphs 3 and 8, Article 14, paragraph 2, Article 15, paragraphs 4 and 5, and Article 16, paragraphs 5 and 6, for at least three years from the date the cessation of all rights and obligations arising from investments in individual assets of the UCITS fund. (4) The management company is obliged to adopt, apply, and regularly update appropriate internal acts that contain at least the requirements from Article 9, paragraph 4, Article 10, paragraph 3, Article 11, paragraphs 3, 8, and 9, Article 12, paragraphs 2, 5, and 11, Article 13, paragraphs 6 and 7, Article 14, paragraph 2, Article 15, paragraphs 2, 7, and Article 16, paragraphs 12 and 13 of this Regulation. (5) The management company is obliged to maintain a register of updates of the internal act from paragraph 4 of this Article, which lists the amendments and supplements to the internal act and the reasons for implementing them. (6) The depositary is obliged, when adopting and updating the internal acts from paragraph 4 of this Article, and at least once a year, to verify whether they are in accordance with legal provisions, the provisions of this Regulation, and the prospectus and/or rules of the Fund.

RECOGNITION OF ASSETS AND LIABILITIES OF UCITS FUNDS

Article 5.
(1) The recognition of assets and liabilities of UCITS funds is carried out depending on the type of asset and the classification performed in accordance with the accounting policies of the UCITS fund and the investment policy of the management company as provided in the UCITS fund prospectus.
(2) Financial assets and liabilities of UCITS funds are initially recognized at fair value increased or decreased, in the case of financial assets or financial liabilities not designated at fair value through profit or loss, by transaction costs directly attributable to the acquisition or issue of financial assets or financial liabilities. An exception to the above are financial assets and financial liabilities measured at fair value through profit or loss, to which transaction costs are not added upon initial recognition, as they are recognized in the profit and loss account upon occurrence. (3) Assets acquired in a foreign currency and subsequent measurement of assets and liabilities of UCITS funds denominated in a foreign currency are converted into euro equivalent by applying the reference exchange rates of the European Central Bank valid for the valuation day, or by the exchange rate resulting from the contractual relationship related to that transaction. If the currency in which the asset or liability is denominated is not listed on the exchange rates of the European Central Bank, the average exchange rates of the Croatian National Bank valid for the valuation day are applied for conversion, or in the absence thereof, the average exchange rates published by the central bank of the country of the relevant currency or the average exchange rates for the currency to which the currency in which the asset is denominated is linked, published on a financial-information service. Values expressed in the currency to which the currency in which the asset is denominated is linked are converted into euro equivalent by the reference exchange rates of the European Central Bank for the valuation day. For currencies for which the European Central Bank does not publish reference exchange rates, the management company uses the average exchange rate of the Croatian National Bank valid for the valuation day.

Article 6.
(1) Financial assets and financial liabilities are recognized from the date when the contractual terms of the instrument in which the UCITS fund is one of the contracting parties begin to apply.
(2) The purchase and sale of financial instruments are recognized in the assets of the UCITS fund on the trade date. A concluded purchase transaction is recognized in the assets of the UCITS fund according to the type and classification of the financial instrument, with the simultaneous formation of a liability for settlement. On the date of concluding a sale transaction, the financial instrument ceases to be recognized in the assets of the UCITS fund, and a claim based on the sale of the financial instrument begins to be recognized. (3) When participating in public offers of transferable securities (initial and secondary offers, offers to a limited number of investors, etc.), transferable securities are initially recognized as a claim in the amount of the submitted offer for participation in the offer. After the offer is accepted and notification of acceptance of the public offer of transferable securities is received from the issuer, arranger, or depositary, whichever is earlier, and the transferable securities have been assigned all necessary characteristics, it is recognized in the assets of the UCITS fund in accordance with the classifications of financial assets from the accounting policy of the UCITS fund. (4) The provision of paragraph 3 of this Article applies mutatis mutandis to money market instruments. (5) Transferable securities in the assets of UCITS funds in conditional public offers for the redemption of securities are recognized from the date of notification by the depositary or issuer/arranger of the accepted offer by the issuer at the redemption price from the public offer. (6) Changes in the assets and liabilities of UCITS funds in the accounting books of UCITS funds are recorded based on regular and authentic accounting documents. (7) Claims or liabilities for interest and similar rights and obligations of UCITS funds are recognized in the assets or liabilities of UCITS funds upon determination of the holder's right. (8) Claims for dividends are recognized in the assets of UCITS funds on the first day from which the share trades ex-dividend. (9) Exceptionally from paragraph 8 of this Article, the management company may recognize claims for dividends in the assets of UCITS funds on the date of determination of the holder's right, based on the decision on dividend payment by the competent authority of the issuer (e.g., general meeting) or upon receiving notification from the depositary.

FINANCIAL INSTRUMENTS VALUED AT FAIR VALUE ON AN ACTIVE MARKET

Article 7.
(1) The fair value of transferable securities and money market instruments from Article 252, paragraph 1, item 1 of the Act, traded on an active market, is calculated by applying the last trading price published on the markets from the relevant article or official financial-information services on the day for which the assets and liabilities of the UCITS fund are valued. (2) Exceptionally from paragraph 1 of this Article, the management company may use another trading price published on the markets from Article 252, paragraph 1, item 1 of the Act or official financial-information services for valuing transferable securities and money market instruments, which it considers more adequately represents the fair value of those transferable securities and money market instruments. In that case, it is obliged to explain and document in writing the reasons for applying a price different from the price in paragraph 1 of this Article during valuation. (3) Exceptionally from paragraph 1 of this Article, the fair value of debt securities and money market instruments traded in the Republic of Croatia on an active market is calculated by applying the weighted average trading price by the quantity of securities traded on the markets in the Republic of Croatia from Article 252, paragraph 1, item 1, sub-items a) and b) of the Act, and reported OTC transactions on the day for which the assets and liabilities of the UCITS fund are valued. (4) Exceptionally from paragraph 1 of this Article, and under the conditions of paragraph 2 of this Article, debt securities and money market instruments traded in another Member State or third country from Article 252, paragraph 1, item 1, and for which it cannot be determined whether they are traded on an active market, may be valued by applying the price published on an official financial-information service, for the day for which the assets and liabilities are valued, obtained by algorithms that calculate (generate) a composite price consistently using available market data on trading, indicative, or binding quotes. (5) For valuing the assets of a UCITS fund whose investment objective is to replicate a specific equity index or debt securities index, the valuation methodology identical to the valuation methodology used when valuing the index sought to be replicated is applied. (6) Shares in UCITS funds and shares of other investment funds from Article 252, paragraph 1, item 3 of the Act (hereinafter: shares of investment funds) are valued at the price of shares of the respective investment fund valid for the valuation day, as published by the management company. In case no publication was made for the valuation day or the price of shares of the investment fund was not available, the fair value of the shares of the investment fund is the price of shares of that investment fund from the last valuation day for which the price was published by the management company, or the price of shares from the statement of account and price of
shares issued by the management company. (7) Exceptionally from paragraph 6 of this Article, shares of investment funds traded (ETF) on an active market from Article 252, paragraph 1, item 1 of the Act are valued in accordance with the provisions of this Regulation governing the valuation of investments in transferable securities.

Article 8.
(1) When initially investing in individual transferable securities, money market instruments, or financial derivatives, the management company is obliged to define by internal act how they will be valued in the assets or liabilities of the UCITS fund. The internal act must minimally contain:
a) the primary price source for valuation, i.e., the primary market on which the transferable security, money market instrument, or financial derivative in which the UCITS fund invests is traded, and from which the quoted price is applied for valuation purposes, b) the secondary price source, if it exists, and the conditions under which the price from the secondary source will be used, in case there is no price from Article 7, paragraphs 1, 2, 3, and 6, and Article 9, paragraph 1 of this Regulation on the primary market from item a) of this paragraph, c) valuation techniques to be used when determining the fair value of securities, money market instruments, or financial derivatives in case the conditions for an active market are not met (inactive market). (2) If there is no active market for a transferable security, money market instrument, or financial derivative, as defined by the provisions of Article 11 of this Regulation, the provisions of Article 12 of this Regulation must be applied.

FINANCIAL DERIVATIVES

Article 9.
(1) Financial derivatives traded on regulated markets from Article 252, paragraph 1, item 5 of the Act are valued at the publicly available daily settlement price on the markets from Article 252, paragraph 1, item 1 of the Act or official financial-information services.
(2) Exceptionally, financial derivatives for which the price from paragraph 1 of this Article is not available on the market are valued at fair value for the valuation day by applying the last bid price available on the official financial-information service for long positions thus held, while the officially available last ask price is applied for short positions thus held. (3) Currency forward transactions are valued daily at fair value by applying forward points for a specific currency (close-out method), which are available on the official financial-information service. If forward points for a currency pair are not available on the official financial-information service, reference interest rates (close-out method) for a specific currency, available on the official financial-information service, are used to calculate the fair value of currency forward transactions. As the reference exchange rate, the reference exchange rate of the European Central Bank is taken, or if one of the currencies is not listed on the exchange rates of the European Central Bank, the average exchange rates published by the central bank of the country of the relevant currency or the average exchange rate for such currency published on the financial-information service are applied for calculating the fair value of currency forward transactions. (4) The management company is obliged to specify the valuation of OTC derivatives in the internal acts of the UCITS fund, if the UCITS fund prospectus provides for investment in OTC derivatives. (5) When compiling the assessment of the fair value of OTC derivatives, the management company is obliged to ensure and confirm with appropriate documentation that when valuing OTC derivatives of the UCITS fund, fair values are used that are not based solely on market prices quoted by the other contracting party in transactions on the informal market and that meet the following conditions:
a) the basis for fair value is the relevant market value taken from the appropriate source, or if such value is not available, the value calculated by an appropriate fair value assessment method, b) the valuation confirmation was performed by:
– a third party independent of the other contracting party of the OTC derivative, regularly and in such a manner that the UCITS fund can verify it, or – an appropriate organizational unit within the management company independent of the asset management activities of the UCITS fund.
(6) The management company is obliged, in the sense of paragraph 5 of this Article and taking into account the type and complexity of OTC derivatives, to establish, implement, regularly update, and appropriately document measures and procedures that ensure appropriate, transparent, and fair valuation of UCITS fund investments in OTC derivatives. (7) Exceptionally from paragraphs 1, 2, and 3 of this Article, the management company may value financial derivatives from the UCITS fund portfolio, which are defined as hedging instruments, by applying the provisions of International Financial Reporting Standard 9 – Financial Instruments (hereinafter: IFRS 9) in the part relating to hedge accounting. (8) If the management company applies hedge accounting from paragraph 7 of this Article, it is obliged to prepare an internal act in writing defining hedging instruments and hedged risk items, as well as evidence of meeting the conditions from IFRS 9.

INVESTMENTS IN DEPOSITS

Article 10.
(1) Investments in UCITS fund deposits, which do not meet the conditions specified in 4.1.2 IFRS 9, are valued by the management company at fair value (items 61 to 66 IFRS 13) and in accordance with the provisions of Article 12 of this Regulation, when applicable.
(2) If the management company values investments in deposits in accordance with the provisions of paragraph 1 of this Article, it is obliged to prepare an internal act in writing on valuation techniques.
(3) In the sense of paragraphs 1 and 2 of this Article, the provisions of Article 12 of this Regulation are applicable to internal acts regarding the description of the valuation method and input data, then regarding the content, preparation, form, input data, review, and documentation of fair value assessments, informing the depositary, and suspending the issuance and redemption of shares in the UCITS fund, and on the obligation to verify the management company's actions by the depositary.

ACTIVE AND INACTIVE MARKETS

Article 11.
(1) For equity securities, an active market is considered a market on which equity securities were traded for a minimum of 20 trading days in a quarterly period.
(2) For debt securities and money market instruments, an active market is considered a market on which the aforementioned instruments were traded for a minimum of 15 trading days in a quarterly period.
(3) The management company is obliged to specify criteria for distinguishing between active and inactive markets in the internal act of the UCITS fund for investments in financial derivatives from Article 9, paragraph 1 of this Regulation, if they are provided for in the UCITS fund prospectus.
(4) The management company is obliged to assess at least once per quarter, at the end of the quarterly period defined by the internal rules of the UCITS fund, whether the transferable securities, money market instruments, and financial derivatives meet the conditions from paragraphs 1, 2, and 3 of this Article. (5) The price from Article 12 of this Regulation is obliged to be applied by the management company no later than on the seventh working day from the date in paragraph 4 of this Article in case equity securities, debt securities, money market instruments, and financial derivatives do not meet the conditions from paragraphs 1, 2, and 3 of this Article (inactive market). (6) Exceptionally from the provision in paragraph 4 of this Article, the management company is obliged in the case of the suspension of trading of financial instruments on a regulated market to assess, taking into account the anticipated duration and reasons for the suspension, whether the last valuation price of equity securities, debt securities, money market instruments, and financial derivatives represents the fair value from Articles 7 and 9 of this Regulation. (7) In case the assessment from paragraph 6 of this Article determines that the last valuation price of equity securities, debt securities, money market instruments, and financial derivatives...

money and derivative financial instruments does not represent fair value under Articles 7 and 9 of this Regulation, the management company is obliged to begin applying, no later than the third working day from the date of suspension of trading, the price under Article 12 of this Regulation.

(8) The management company is obliged to specify in the internal acts of the UCITS fund clear criteria for determining transactions whose price does not represent fair value, i.e., transactions that will not be considered relevant when calculating the number of trading days under paragraphs 1 and 2 of this article, taking into account, for example, trading volume, number of transactions, price change, etc.

(9) The management company may, through the internal acts of the UCITS fund, including the criteria from paragraphs 1 and 2 of this article, specify additional criteria for distinguishing between active and inactive markets, taking into account, for example:
a) trading volume in relation to the average volume over a three-month period, b) the difference between the last bid price and the last ask price, and c) trading volume in relation to market capitalization over a three-month period.

(10) The management company is obliged to apply the provisions of this article proportionally to the listing period for transferable securities, money market instruments, and financial derivatives that were listed on the markets referred to in Article 252, paragraph 1, point 1 of the Act for a period shorter than three months at the time of the assessment under paragraph 4 of this article.

(11) In the event of the lifting of the temporary suspension of trading of a financial instrument on a regulated market under paragraph 6 of this article, and the management company's actions in accordance with paragraph 7 of this article, the management company is obliged to apply the provisions of paragraph 4 of this article in such a way that the period of temporary suspension of trading of the financial instrument is not taken into account in the calculation of the active/inactive market.

TECHNIQUES FOR VALUING FINANCIAL INSTRUMENTS VALUED AT FAIR VALUE

Article 12 (NN 66/26)

(1) The fair value of transferable securities, money market instruments, and financial derivatives traded on an inactive market is determined by valuation techniques, which aim to estimate the price at which the asset would be sold or the liability transferred in an orderly transaction between market participants at the valuation date.

(2) The management company is obliged to describe in the internal acts of the UCITS fund the valuation techniques under paragraph 1 of this article, which include at least:
a) criteria for selecting a specific fair value valuation method, b) assumptions to be taken into account when applying a specific fair value valuation method and the justification for their use, such as:
– in the case of the comparable companies (peer group) method; criteria for selecting comparable companies, the reference number of comparable companies required to use the method, – in the case of the discounted cash flow (DCF) method; the method for calculating the discount rate, sources of inputs used in calculating the discount rate, the method for projecting future cash flows of the issuer, etc. c) a description of the input data and their sources to be taken into account when applying a specific fair value valuation method.

(3) Upon the cessation of the conditions for an active market under Article 11 of this Regulation, the management company is obliged to prepare a written fair value assessment of transferable securities, money market instruments, or financial derivatives, which contains the input data used in the calculation as well as their sources.

(4) The management company is obliged to explain and document in the fair value assessment under paragraph 3 of this article the reasons and method for selecting a specific fair value valuation method, and if multiple methods are used, the method for assigning weights to each fair value valuation method, as well as the reasons for excluding a specific method from the fair value calculation.

(5) The use of a valuation model based on the use of amortized cost by applying the effective interest rate method is considered an appropriate valuation technique for determining fair value under paragraph 1 of this article, exclusively on the condition that the management company determines by internal act a valuation model that includes continuous monitoring of the issuer's credit risk, market interest rates, and liquidity in the secondary market for the instrument in question, and which, in the event of a change in any of the aforementioned parameters, immediately revises the fair value assessment.

(6) The management company is obliged, when preparing the fair value assessment, to use market data that are publicly available to the greatest possible extent, and to rely as little as possible on data that are not publicly available and are specific to a particular issuer, or the management company is obliged to include all factors that market participants would consider in determining fair value.

(7) The management company is obliged to revise the fair value assessment of transferable securities, money market instruments, or financial derivatives under paragraph 3 of this article at least on the reporting dates of the annual and semi-annual reports of the UCITS fund and upon learning of material information related to valuation.

(8) The management company, upon learning of material information based on circumstances (share of transferable securities, money market instruments, or financial derivatives in the net asset value of the UCITS fund or potential impact on the fair value of transferable securities, money market instruments, or financial derivatives), shall assess, acting with the care of a good expert, the impact of the information on the change in the price of UCITS fund units and notify the depositary in writing without delay.

(9) In the event of an estimated change in the price of money market UCITS fund units by more than 0.2%, and all other UCITS fund units by more than 1%, the management company is obliged to immediately prepare a fair value assessment of transferable securities, money market instruments, or financial derivatives under paragraph 3 of this article. In the event of inability to prepare the assessment within the specified period, the management company is obliged to suspend the issuance and redemption of UCITS fund units until the aforementioned fair value assessment is prepared.

(10) When the estimated change in the price of UCITS fund units is less than that specified in paragraph 9 of this article, the management company is obliged to prepare the fair value assessment under paragraph 3 of this article no later than within 7 working days from the date of learning of the material information.

(11) The management company is obliged to describe in the internal acts of the UCITS fund the procedure for revising assessments under paragraph 7 of this article, including, for example:
a) comparison of realized prices, in the event that there was trading, with the last estimated fair value, b) consideration of the reputation, consistency, and quality of data sources used for valuation, c) examination and documentation of exceptions, d) highlighting and investigation of all differences that appear unusual or deviate from the reference value established by the fair value assessment, e) testing with outdated prices and implicit parameters, f) comparison with the prices of any related assets or their risk hedges, and g) review of input data used in determining prices based on models, especially those according to which the model price shows significant sensitivity.

(12) The UCITS fund depositary is obliged to verify whether the management company, when determining fair value by valuation techniques for transferable securities, money market instruments, and financial derivatives, acted in accordance with paragraphs 2 and 11 of this article, Article 8, paragraph 1, point c), and Article 9, paragraphs 4 and 5 of this Regulation, and is obliged to keep records thereof.

(13) Exceptionally from paragraph 1 of this article, transferable securities and money market instruments traded on an inactive market, which were issued or guaranteed by the Republic of Croatia, another Member State, local or regional self-government units in the Republic of Croatia, another Member State or an OECD Member State, or the Croatian National Bank or the central bank of another Member State or an OECD Member State, the European Central Bank, the European Union, or the European Investment Bank, a third country or, in the case of a federal state, one of the member states constituting the federation, or an international public body to which one or more Member States belong, may be valued by applying the price published on official financial information services for the day for which the assets and liabilities are valued, obtained by algorithms that calculate (generate) a composite price consistently using available market trading data and indicative or binding quotes.

(14) The management company is obliged to provide the depositary, upon request, all documentation containing the input data on which its fair value assessment of transferable securities, money market instruments, or financial derivatives under paragraphs 3 and 4 of this article is based, which includes publicly available data and assumptions used in fair value valuation models.

(15) Upon the reactivation of trading and the fulfillment of the conditions for an active market under Article 11 of this Regulation, transferable securities, money market instruments, and financial derivatives shall begin to be valued according to the principles valid under the conditions of their quotation on an active market.

FINANCIAL INSTRUMENTS VALUED AT AMORTIZED COST

Article 13 (NN 133/25)

(1) Financial liabilities are valued at amortized cost by applying the effective interest rate method (point 5.4 IFRS 9), except for financial liabilities referred to in point 4.2.1 IFRS 9.

(2) Deposits in credit institutions and instruments used for effective portfolio management, which meet the conditions specified in point 4.1.2 IFRS 9, are valued at amortized cost by applying the effective interest rate method (point 5.4 IFRS 9).

(3) Exceptionally from paragraph 2 of this article, money market instruments, bonds, and other debt securities of the UCITS fund, which were initially recognized and subsequently valued in accordance with the provisions of Articles 12, 13, and 14 of the Regulation on Determining the Net Asset Value of UCITS Funds and the Price of UCITS Fund Units ("Official Gazette", Nos. 128/17, 114/18, 124/19, and 2/20) up to and including December 31, 2022, may continue to be valued by the management company in accordance with those provisions until their maturity.

(4) The management company is obliged to prescribe, apply, and update quarterly an internal act in which it determines the purpose, method, and scope of the business model formation under paragraph 2 of this article.

(5) The internal act under paragraph 3 of this article must be aligned with the investment strategy and risk profile of the UCITS fund.

(6) The management company may sell assets under paragraphs 2 and 3 of this article in the event of:
– deterioration of the credit risk of the asset, – exceeding investment limits, – increase in concentration risk, and – fulfillment of liquidity insurance obligations for the redemption of units – execution of sales immediately before maturity, and if the proceeds from the sale are approximately equal to the amount collected within the remaining contractual cash flows

(7) The management company is obliged to prescribe criteria in the internal acts for making decisions on selling assets in future periods in the cases under paragraph 6, lines 1 and 3 of this article (points B.4.1.3.A and B.4.1.3.BI IFRS 9).

(8) The management company is obliged to prescribe by internal act the characteristics of asset sales in future periods in the cases specified in paragraph 5, lines 2, 3, and 4 of this article (point B. 4.1.3.BI IFRS 9), which include at least:
– the frequency of asset sales, taking into account, for example, the number of transactions in the business year, the percentage of the total number of transactions in the last year, etc., and

– the value of sales in relation to the total value of investments in the financial instrument that is the subject of the sale of the aforementioned business model, etc.

(9) The decision on the sale of assets under paragraph 5 of this article is prepared in written or digital form and must contain at least a description of the circumstances due to which the management company makes the decision to sell assets and the input data used for the same.

(10) The management company is obliged to keep records of the frequency, value, and time of sales, as well as the reasons for selling assets before the maturity date classified in the business model under paragraph 2 of this article.

VALUATION OF MONEY MARKET FUNDS

Article 14

(1) The assets of a money market UCITS fund under Article 3, paragraph 1, point a) and Article 3, paragraph 1, point c), which do not meet the conditions under Article 29, paragraph 7 of Regulation (EU) 2017/1131 of the European Parliament and of the Council of June 14, 2017, on money market funds (text relevant to the EEA, Official Journal of the European Union L 169/8, June 30, 2017; hereinafter: Money Market Fund Regulation), are not allowed to be valued in accordance with the provisions of Article 13 of this Regulation.

(2) The management company managing a money market fund established in accordance with the Money Market Fund Regulation is obliged to prepare in writing an internal act on valuation techniques aligned with the provisions of Article 29 of the Money Market Fund Regulation and the provisions of Article 10, paragraph 2 of this Regulation, and to prepare fair value assessments in accordance with Article 10, paragraph 3 of this Regulation.

IMPAIRMENT FOR EXPECTED CREDIT LOSSES

Article 15 (NN 66/26)

(1) For financial assets of the UCITS fund measured in accordance with points 4.1.2 and 4.1.2.A IFRS 9, the management company is obliged to recognize allowances for impairment for expected credit losses in accordance with the provisions of point 5.5 IFRS 9.

(2) The management company is obliged to prescribe by internal act:
a) the method for calculating expected credit losses for financial assets under paragraph 1 of this article, b) qualitative and quantitative criteria for determining significant increase (decrease) in credit risk, taking into account the factors specified in point B.5.5.17 IFRS 9. c) the method and frequency of updating methods and assumptions used to estimate expected credit losses.

(3) The management company is obliged to continuously monitor available and accessible information important for assessing the issuer's credit risk, and in the event of circumstances indicating a significant change in credit risk, at least quarterly, assess the amounts of allowances for impairment for expected credit losses.

(4) The assessment under paragraph 3 of this article is to be prepared by the management company in written form, regardless of the assessment result regarding the need to change the amount of allowances for impairment, and must be accompanied by all necessary documentation and accessible data on which it was based.

(5) If, during the monitoring of the issuer's credit risk under paragraph 3 of this article, evidence or circumstances indicating impairment for expected credit losses (or reversal) are found, the management company is obliged to prepare in writing an impairment assessment for expected credit losses (or reversal) from which all input data used in the calculation and their sources are visible.

(6) The management company is obliged to include the amount of the allowance for impairment for expected credit losses under paragraph 5 of this article in the calculation of the net asset value of the UCITS fund no later than on the seventh working day from the last day of the reporting period.

(7) The management company may, in the internal acts, in addition to information about events indicating impairment for expected credit losses (or reversal) from Appendix A IFRS 9, specify additional information to be taken into account as objective evidence of changes in the impairment allowances for expected credit losses of the UCITS fund.

(8) Deleted.

(9) Deleted.

IMPAIRMENT OF UCITS FUND ASSETS

Article 16 (NN 66/26)

(1) Exceptionally from Article 15 of this Regulation, the management company may decide not to apply the provisions of point 5.5 IFRS 9 when valuing the assets and liabilities of the UCITS fund, i.e., the management company may decide not to recognize allowances for impairment of financial assets of the UCITS fund, which are measured in accordance with points 4.1.2 and 4.1.2.A IFRS 9, for expected credit losses.

(2) In the event that the management company decides to apply the exception under paragraph 1 of this article when valuing the assets and liabilities of the UCITS fund, it is obliged to apply the provisions from paragraphs 3 to 14 of this article, i.e., to recognize asset impairment based on objective evidence.

(3) All UCITS fund assets, except assets valued at fair value (point 4.1.2.A and point 4.1.4 IFRS 9), are subject to the preparation of an assessment regarding the existence of evidence or circumstances related to impairment.

(4) The assessment under paragraph 3 of this article must be prepared immediately whenever there is objective evidence or circumstances indicating the need to assess asset value for impairment, and at least on the date of preparation of the annual and semi-annual reports of the UCITS fund.

(5) The assessment under paragraph 3 of this article is to be prepared by the management company in written form, regardless of whether the assessment indicates the need for asset impairment, and must be accompanied by all necessary documentation and accessible data on which it was based.

(6) If the assessment under paragraph 3 of this article establishes the existence of evidence or circumstances indicating asset impairment, the management company is obliged to prepare in writing an asset impairment assessment from which all input data used in the calculation and their sources are visible.

(7) The assessment regarding the existence of evidence or circumstances related to impairment under paragraph 5 of this article and the asset impairment assessment under paragraph 6 of this article are to be prepared by the management company in accordance with the provisions of this Regulation.

(8) The management company is obliged to prepare the asset impairment assessment under paragraph 6 of this article immediately in cases where impairment could result in a change in the price of money market UCITS fund units by more than 0.2%, and all other UCITS fund units by more than 1%.

(9) When impairment results in a smaller change in the price of units than specified in paragraph 8 of this article, the management company is obliged to prepare the asset impairment assessment under paragraph 6 of this article within 7 working days.

(10) The amount of the loss from asset impairment is calculated as the difference between the book value of the asset and the present value of estimated future cash flows discounted at the original effective interest rate of the financial instrument (i.e., the effective interest rate calculated at initial recognition). The amount of the loss is recognized in the profit and loss statement.

(11) Objective evidence or circumstances indicating the need to assess asset value for impairment include the following visible information:
a) significant financial difficulties of the issuer or debtor, including account blockage, b) significant deterioration of financial indicators from separate and/or consolidated financial statements, c) breach of contract, such as non-payment of obligations or delay in payment of interest or principal on loans and/or issued securities, resulting in the postponement or refinancing of securities to settle obligations on unpaid issues, d) initiation of pre-bankruptcy settlement, opening of bankruptcy or liquidation proceedings, or other financial reorganizations and restructuring, e) significant changes with a negative effect that have occurred in the technological, economic, or legal environment in which the issuer operates, f) disappearance of an active market for securities due to the financial difficulties of the issuer, or g) prolonged and continuous decline in the market price of the security or a decline in market price of more than 10% relative to the valuation price h) exceptionally from line g) of this paragraph, the management company is obliged to take into account, as objective evidence for the impairment of a security that constitutes a significant share in the total assets of the UCITS fund, the prolonged and continuous decline in market price, even for a decline in market price of less than 10% relative to the valuation price i) the management company is obliged to specify in the internal act of the UCITS fund criteria for determining the significant share of the security in the total assets of the UCITS fund under line h) of this paragraph, as well as the time period that constitutes the concept of prolonged and continuous decline under lines g) and h) of this paragraph j) decline in the credit rating of the issuer published by external rating agencies.

(12) The management company is obliged to specify in the internal acts of the UCITS fund situations that constitute significant financial difficulties of the issuer or debtor under paragraph 11, point a) of this article, as well as criteria for financial indicators indicating significant financial deterioration under paragraph 11, point b) of this article, which will be taken into account when checking the impairment of UCITS fund assets under paragraph 3 of this article.

(13) The management company may, in the internal acts of the UCITS fund, in addition to the information under paragraph 11 of this article, specify additional information to be taken into account as objective evidence of UCITS fund asset impairment.

(14) In the event that the amount of the loss from impairment decreases, and this decrease can be objectively linked to an event that occurred after the recognition of impairment (e.g., significant improvement in the issuer's business operations and credit rating), the previously recognized impairment loss is corrected and recognized in the profit and loss statement. With this correction, the book value of the financial instrument cannot exceed the amount of amortized cost that would arise if impairment had not been recognized.

(15) Deleted.

(16) Deleted.

OTHER ASSETS AND LIABILITIES

Article 17

(1) The fair value of a currency spot transaction for the valuation date is determined by calculating the difference between the contracted exchange rate and the reference exchange rates of the European Central Bank or the exchange rates under Article 5, paragraph 3 of this Regulation for the day of valuation of the UCITS fund's assets.

(2) Other assets and liabilities of the UCITS fund are valued at amortized cost by applying the effective interest rate method.

CALCULATION OF FEES

Article 18 (NN 133/25, 66/26)

(1) Fees for the management company and depositary are calculated for each day for which the net asset value is calculated in accordance with Article 3, paragraphs 2 and 3 of this Regulation, on a base consisting of the total assets of the UCITS fund reduced by the amount of the fund's liabilities based on investments in financial instruments.

(2) The management fee and the custodian fee for days on which the net asset value is not calculated shall be calculated on the last calculated base amount from paragraph 1 of this Article.

(3) The fees from paragraphs 1 and 2 of this Article shall be calculated on the established base amount by applying the prescribed fee rates from the UCITS fund prospectus.

(4) The performance fee related to the UCITS fund shall be calculated by the management company in accordance with Article 247, paragraph 5 of the Act.

MANNER AND DEADLINES FOR REPORTING

Article 19 (NN 66/26)

(1) The management company is obliged to calculate the net asset value and the unit price of the UCITS fund for every valuation day from Article 3, paragraphs 2 and 3 of this Regulation.

(2) The custodian is obliged to carry out the verification procedure for the calculation of the UCITS fund unit price for every valuation day from Article 3, paragraphs 2 and 3 of this Regulation, and to report to the management company for whose UCITS funds it performs custodian activities on the carried out verification procedure.

(3) The custodian is obliged to submit to Hanfa a report on the calculation of the net asset value of the UCITS fund and the unit price of the UCITS fund for the valuation day from Article 3, paragraph 3 of this Regulation, no later than the end of the next working day.

(4) The report on the calculation of the net asset value from paragraph 3 of this Article must contain data on all transactions and all income and expenses of the UCITS fund executed in the period from the previous valuation day for which the report was submitted to Hanfa.

(5) The management company may contract with the custodian that the management company submits to Hanfa the Report on the calculation of the net asset value of the UCITS fund and the unit price of the UCITS fund for the valuation day, which has been pre-verified by the custodian in accordance with paragraph 2 of this Article.

(6) The report from paragraph 3 of this Article is submitted in electronic form in the manner prescribed by Hanfa's technical instruction.

(7) In all cases of establishing non-compliance and inconsistency in the application of this Regulation, the management company or the custodian are obliged, at Hanfa's request, to correct the valuation of the UCITS fund's assets and submit an explanation of the reasons and consequences of the deviation from the principles of asset valuation and the obligations of the UCITS fund, as well as a report on the new calculation of the net asset value of the UCITS fund and the unit price of the UCITS fund.

(8) At Hanfa's request, the management company and/or the custodian are obliged to calculate or carry out the verification of the calculation of the net asset value and the unit price of the UCITS fund for days not covered by Article 3, paragraphs 2 and 3 of this Regulation, and to submit them to Hanfa.

TRANSITIONAL AND FINAL PROVISIONS

Article 20.

(1) This Regulation enters into force on November 1, 2024.

(2) With the entry into force of this Regulation, the Regulation on Determining the Net Asset Value of a UCITS Fund and the Price of Units in a UCITS Fund ("Narodne novine", No. 128/17, 114/18, 124/19 and 2/20, 155/22 and 147/23) ceases to be valid.

FINAL PROVISION

The Regulation on Amendments to the Regulation on Determining the Net Asset Value of a UCITS Fund and the Price of Units in a UCITS Fund (NN 133/25), entered into force on November 6, 2025.

Article 3.

This Regulation enters into force on the eighth day from the date of publication in "Narodne novine".

FINAL PROVISION

The Regulation on Amendments and Supplements to the Regulation on Determining the Net Asset Value of a UCITS Fund and the Price of Units in a UCITS Fund (NN 66/26), entered into force on July 2, 2026.

Article 8.

This Regulation enters into force on the eighth day from the date of publication in "Narodne novine".