Regulation on the Regulatory Capital of Pension Companies Managing Mandatory Pension Funds – Unofficial Consolidated Text (NN, No. 60/14, 39/17, 146/22 and 52/24)

Croatian Financial Services Agency, 10000 Zagreb, Franje Račkoga 6, P.O. Box 164, Croatia t: 01 6173 200, f: 01 4811 507, e: info@hanfa.hr, OIB: 49376181407, MB: 02016419, w: www.hanfa.hr REGULATION ON THE REGULATORY CAPITAL OF PENSION COMPANIES MANAGING MANDATORY PENSION FUNDS (Official Gazette No. 60/14, 39/17, 146/22 and 52/24 – Unofficial Consolidated Text)

Article 1.
(1) This Regulation prescribes:
− the method for calculating the regulatory capital of a pension company, the characteristics of items constituting it, and respective deduction items; − additional capital requirements for pension companies that, in addition to establishing and managing mandatory pension funds, also carry out the establishment and management of voluntary pension funds; − the content of the regulatory capital calculation report, as well as the method and deadlines for submission. (2) The basis for calculating the regulatory capital of a pension company is accounting data from the business books of the pension company, kept in accordance with legal and sub-legal acts governing the financial reporting of pension companies. (3) An integral part of this Regulation consists of:
a) instructions for calculating the regulatory capital of a pension company (Appendix 1), b) the regulatory capital calculation report (Appendix 2).

OBLIGATED ENTITY
Article 2. (NN 52/24)
The obligated entity for maintaining regulatory capital is a pension company that carries out one or both activities specified in Article 7, paragraph 1 of the Act on Mandatory Pension Funds (»Official Gazette«, No. 19/2014, 93/2015, 64/18, 115/18, 58/20 and 156/23, hereinafter: the Act).

MINIMUM AMOUNT OF REGULATORY CAPITAL
Article 3. (NN 52/24)
The minimum amount of regulatory capital for a pension company is prescribed by Article 9, paragraph 1 of the Act; accordingly, the regulatory capital of a pension company must at all times be greater than or equal to the amount of share capital:
− from Article 8, paragraph 1 of the Act if it carries out only the activity specified in Article 7, paragraph 1, point a of the Act; or − from Article 8, paragraph 2 of the Act if it carries out both activities specified in Article 7, paragraph 1 of the Act.

CALCULATION OF REGULATORY CAPITAL
Article 4.
(1) The regulatory capital of a pension company consists of the items specified in Article 5 of this Regulation, reduced by the deduction items for regulatory capital specified in Article 6 of this Regulation.
(2) The provisions of this Regulation relating to a pension company established as a joint-stock company shall apply mutatis mutandis to a pension company established as a limited liability company.

REGULATORY CAPITAL
Article 5. (NN 52/24)
(1) The items included in the regulatory capital of a pension company are:
a) subscribed and paid-in share capital (paid amounts for business shares, respectively nominal value of ordinary shares realized upon issuance of those shares), b) all types of reserves formed from profit after taxation, c) retained earnings of previous years determined on the basis of audited annual financial statements (unencumbered by any future obligations) and approved by the members or shareholders of the pension company, and allocated in accordance with the decision of the general meeting of the pension company on the use of profit, d) current year profit determined on the basis of audited annual financial statements (unencumbered by any future obligations) and approved by the members or shareholders of the pension company, respectively allocated in accordance with the decision of the general meeting of the pension company on the use of profit, or profit determined on the basis of financial statements for periods during the year and confirmed by auditors, which, in accordance with the decision of the members or shareholders, respectively the general meeting of the pension company on the use of profit, unencumbered by any future obligations, is allocated to reserves and/or retained earnings during the year; and e) capital reserves (amounts above nominal/book value realized upon issuance of shares from point a) of this paragraph, as well as additional payments by shareholders of the pension company into the capital of the pension company). (2) Regulatory capital must have the following characteristics:
a) it is fully paid and subscribed, b) it is unconditionally and irreversibly available, c) it is fully and without restriction available to cover losses from current operations as soon as they occur, d) it is unencumbered by taxes; otherwise, before being used to cover risks and losses, all tax obligations must be taken into account, e) in the event of bankruptcy or liquidation of the pension company, it is available to cover losses after obligations to all creditors have been met.

DEDUCTION ITEMS OF REGULATORY CAPITAL
Article 6. (NN 52/24)
The deduction items of the regulatory capital of a pension company are as follows:
a) illiquid assets, assets that cannot be immediately liquidated to timely meet the due obligations of the pension company, such as investments in long-term intangible assets (goodwill, licenses, patents, trademarks and concessions), b) shares of the pension company in other pension companies, c) losses in subsidiaries, d) due receivables, e) financial assets acquired by the pension company that are not in compliance with Article 26, paragraphs 1 and 2 of the Act, f) retained losses of previous years determined on the basis of audited annual financial statements, g) current year loss determined on the basis of an audited annual financial statement and approved by the members or shareholders of the pension company, respectively the general meeting of the pension company, or loss determined on the basis of financial statements for periods during the year; and h) unrealized loss from fair value adjustment of financial assets through other comprehensive income, negative net revaluation reserves arising from investments in associated companies, and other negative net revaluation reserves. Positive revaluation reserves are not included in the calculation of regulatory capital.

REPORTING
Article 7.
The pension company is obliged to submit to HANFA the regulatory capital calculation report from Appendix 2 of this Regulation in accordance with the provisions of this Regulation.

DEADLINES FOR SUBMISSION
Article 8.
(1) The pension company is obliged to prepare the regulatory capital calculation report as of 31 December, 31 March, 30 June and 30 September of the current year.
(2) The deadline for submitting the regulatory capital calculation report for periods during the financial year is:
− quarterly period as of 31 March of the current year by 30 April of the current year, − semi-annual period as of 30 June of the current year by 31 July of the current year, − nine-month period as of 30 September of the current year by 31 October of the current year. (3) The deadline for submitting the audited regulatory capital calculation report as of 31 December is 30 April of the following year. (4) In addition to the dates specified in paragraph 1 of this article, HANFA may request a pension company to calculate regulatory capital on any other day.

AUDIT OF THE REPORT
Article 9. (NN 52/24)
(1) The pension company is obliged to submit to HANFA the regulatory capital calculation report from Article 7 of this Regulation, audited by an independent external authorized auditor, as of 31 December.
(2) The independent external authorized auditor, while performing the audit of the regulatory capital calculation report from Article 7 of this Regulation, is required to verify its correctness, accuracy and completeness, assess whether it has been prepared in accordance with the Act and this Regulation, and whether it is consistent with the annual financial statements of the pension company as of the reporting date. (3) For the purposes of auditing the regulatory capital calculation report specified in paragraph 1 of this article, the pension company is obliged to conclude an engagement with an independent external authorized auditor expressing reasonable assurance. (4) The pension company is obliged to publish the audited regulatory capital calculation report on its website within the deadline specified in Article 8, paragraph 3 of this Regulation.

METHOD OF SUBMITTING THE REPORT
Article 10. (NN 52/24)
(1) The pension company submits to HANFA the regulatory capital calculation report from Article 7 of this Regulation in electronic form, in accordance with HANFA's technical instruction.
(2) The pension company is obliged to submit the audited regulatory capital calculation report from Article 7 of this Regulation, together with the opinion of an independent external authorized auditor on the regulatory capital calculation report as of 31 December, in the manner and in accordance with the Technical Instruction for using the electronic data submission system of the Croatian Financial Services Agency (reports.hanfa.hr) and the Instruction for filling out WEB forms for management companies: DZU UCITS, UAIF, OMD and DMD. (3) It is considered that the pension company has submitted the reports from paragraphs 1 and 2 of this article at the moment when the report is accepted by HANFA's server for receiving reports. (4) In justified cases of technical inability to submit or improperly executed submission (e.g., system failure, inability to read received documentation, etc.) in the manner prescribed by paragraphs 1 and 2 of this article, the pension company is obliged to submit the report in written form, directly or by post for timely reporting. The pension company is obliged to submit the report in the manner prescribed by paragraphs 1 and 2 of this article as soon as the reasons for submission inability cease, and no later than within 8 days from the cessation of circumstances causing such technical inability. (5) HANFA may, if necessary, request the pension company to submit certain documentation prescribed by this Regulation in original or certified copy, regardless of the electronic submission already made.

TRANSITIONAL AND FINAL PROVISIONS
Article 11.
This Regulation enters into force on the eighth day from the date of publication in the »Official Gazette«, except for the provisions of Articles 7, 8, 9 and 10 of this Regulation which enter into force on 1 January 2015.

FINAL PROVISIONS
Regulation on Amendments and Supplements to the Regulation on Capital of Pension Companies Managing Mandatory Pension Funds (NN 39/17) entered into force on 1 May 2017.
Article 7.
This Regulation shall be published in the »Official Gazette« and enters into force on 1 May 2017.

TRANSITIONAL AND FINAL PROVISIONS
Regulation on Amendments and Supplements to the Regulation on Capital of Pension Companies Managing Mandatory Pension Funds (NN 146/22) entered into force on 1 January 2023.
Article 9.
(1) This Regulation shall be published in the »Official Gazette« and enters into force on 1 January 2023.
(2) The pension company is obliged to submit the first reports in accordance with Article 8 of this Regulation for reporting periods starting from 1 January 2023.
(3) Reports for periods up to 1 January 2023 are submitted in accordance with Appendix 2 of the Regulation on Capital of Pension Companies Managing Mandatory Pension Funds (»Official Gazette« No. 60/14 and 39/17) in the manner prescribed by Article 6 of this Regulation, which amends Article 10, paragraph 1 of that Regulation.

FINAL PROVISIONS
Regulation on Amendments and Supplements to the Regulation on Capital of Pension Companies Managing Mandatory Pension Funds (NN 52/2024) entered into force on 11 May 2024.
Article 10.
This Regulation enters into force on the eighth day from the date of publication in the »Official Gazette«.

APPENDIX 1. (NN 52/24)
INSTRUCTIONS FOR CALCULATING THE REGULATORY CAPITAL OF A PENSION COMPANY These Instructions further prescribe the content and format of the regulatory capital calculation report, as well as the method for preparing and completing the report that the pension company is obliged to submit to HANFA.
I. GENERAL PROVISIONS
»Company Name« - the name of the pension company obligated to report is entered on an individual basis.
»Company OIB« - the OIB (Tax Identification Number) of the pension company, determined by the Tax Administration, is entered.
»Date« - the last day of the reporting period is entered in dd.mm.yyyy format.
Items that increase positions in the report are entered as positive amounts, while items that decrease positions (deduction items) are entered as negative amounts or with a minus sign (-).
II. INSTRUCTIONS FOR PREPARING AND COMPLETING THE REGULATORY CAPITAL CALCULATION REPORT
REPORT: Regulatory Capital
The pension company calculates regulatory capital in accordance with the provisions of this Regulation, and enters the calculation result into the report positions. Certain positions are completed as follows:

1. Regulatory Capital Items
   Positions from 1.1 to 1.6 relate to regulatory capital items that, with positive or negative signs, constitute regulatory capital before reduction by deduction items from Article 6 of this Regulation. Calculation positions are completed as follows:
   1.1. Paid ordinary shares: enter the nominal value of paid (and subscribed) ordinary shares constituting the basic regulatory capital of the pension company.
   1.2. Paid business shares: for a pension company established as a limited liability company, enter the nominal value of paid (and subscribed) business shares constituting the basic capital of the pension company.
   1.3. Reserves formed from profit after taxation: enter the mathematical sum of reserves relating to:
   1.3.1. Statutory reserves - the amount of net profit allocated to this type of reserve taking into account Articles 220 and 222 of the Companies Act,
   1.3.2. Statutory reserves - the amount of net profit allocated to reserves in accordance with the Articles of Association of the pension company, taking into account Articles 220 and 222 a. (406 a) of the Companies Act,
   1.3.3. Other reserves - the amount of net profit allocated to reserves formed in accordance with Articles 220 and 222 a. (406 a) of the Companies Act.
   1.4. Capital reserves: enter the paid amount exceeding the nominal value of shares (ordinary) constituting the basic capital of the pension company. Capital reserves also include additional payments by shareholders or members of the pension company into its capital (Article 222 (406.a) of the Companies Act).
   1.5. Retained earnings: enter the amount of retained earnings from previous years, shown in the financial statement, determined on the basis of audited annual financial statements (unencumbered by any future obligations) and approved by the members or shareholders of the pension company, respectively allocated in accordance with the decision of the general meeting on the use of profit. In financial statements for the first quarter of the current year, the pension company may also include a portion of profit from the previous year (previous year profit item), if the pension company has decided to retain this portion of profit with approval from members or shareholders or the supervisory board.
   1.6. Current year profit (based on annual financial statements) - enter the amount of current year profit determined on the basis of audited annual financial statements (unencumbered by any future obligations - reduced by paid dividends, taxes and other obligations from profit during the reporting period) and approved by members or shareholders of the pension company, respectively allocated in accordance with the decision of the general meeting on the use of profit.
   1.7. Sum of items (1.1 - 1.6): enter the mathematical sum of positions from 1.1 to 1.6.
2. Deduction Items of Regulatory Capital
   Positions from 2.1 to 2.9 relate to items deducted from regulatory capital, taking into account Article 6 of this Regulation. Deduction positions are completed as follows:
   2.1. Illiquid assets: (Article 6, point a) enter with a negative sign the total amount of illiquid assets that cannot be immediately liquidated to timely meet due obligations, such as investments in long-term intangible assets (goodwill, licenses, patents, trademarks and concessions). Software or development support during regulatory capital calculation is not considered a deduction item.
   2.2. Shares in other pension companies: (Article 6, point b) enter with a negative sign the total amount of shares in other pension companies.
   2.3. Losses in subsidiaries: (Article 6, point c) enter with a negative sign the amount of loss realized in subsidiaries of the pension company, determined on the basis of annual financial statements of each individual subsidiary.
   2.4. Due receivables: (Article 6, paragraph point d) enter with a negative sign the sum of all due receivables.
   2.5. Assets not in compliance with Article 26, paragraph 1 and 2 of the Act: (Article 6, point e) enter with a negative sign the total amount of assets acquired by the pension company that are not in compliance with Article 26, paragraph 1 and 2 of the Act.
   2.6. Retained losses: (Article 6, point f) enter with a negative sign the amount of losses from previous financial years, shown in the statement of financial position, determined on the basis of audited annual financial statements and approved by members or shareholders, respectively the general meeting.
   2.7. Current year loss: (Article 6, point g) enter with a negative sign the amount of current year loss determined on the basis of audited annual financial statements approved by members or shareholders, respectively the general meeting, or loss determined on the basis of financial statements for periods during the year.
   2.8. Unrealized loss on financial assets at fair value through other comprehensive income: (Article 6, point h) enter with a negative sign unrealized losses from fair value adjustment of financial assets through other comprehensive income.
   2.9. Negative net revaluation reserves: (Article 6, point h) enter with a negative sign negative net revaluation reserves arising from investments in associated companies and other negative net revaluation reserves.
   2.10. Sum of items (2.1 - 2.9): enter the mathematical sum of positions from 2.1 to 2.9.
   I. REGULATORY CAPITAL: enter the mathematical sum of positions I and 2.10.
   A. CAPITAL REQUIREMENT ACCORDING TO ARTICLE 3, PARAGRAPH 1, ALINIA 1 OF THE REGULATION - enter the capital requirement amount in accordance with Article 3, alinia 1.
   B. CAPITAL REQUIREMENT ACCORDING TO ARTICLE 3, PARAGRAPH 1, ALINIA 2 OF THE REGULATION - enter the capital requirement amount in accordance with Article 3, alinia 2, only if the pension company carries out both activities specified in Article 7, paragraph 1 of the Act.
   II. Surplus (+)/Deficit (-) of Regulatory Capital - enter the difference between position I and position A, respectively position B, depending on which capital requirement applies.
3. Financial Assets of the Pension Company
   3.1. Transferable debt securities and money market instruments from Article 125, paragraph 1, point 1 of the Act - enter the amount of assets invested in transferable debt securities and money market instruments from Article 125, paragraph 1, point 1 of the Act. Guarantee fund assets from Article 112 of the Act are not included in the regulatory capital calculation.
   3.2. Transferable debt securities and money market instruments from Article 125, paragraph 1, point 2 of the Act - enter the amount of assets invested in transferable debt securities and money market instruments from Article 125, paragraph 1, point 2 of the Act.
   3.3. Deposits at credit institutions from Article 125, paragraph 1, points 13 and 14 of the Act and cash on accounts at credit institutions from Article 125, paragraph 1, points 16 and 17 of the Act - enter the amount of assets invested in deposits at credit institutions and cash on accounts at credit institutions from Article 26, paragraph 1, point 2 of the Act. Guarantee fund assets from Article 112 of the Act are not included in the regulatory capital calculation.
   3.4. Sum of items from 3.1 to 3.3: enter the mathematical sum of positions from 3.1 to 3.3.
   III. Amount of Surplus/Deficit on Financial Assets for the Purpose of Maintaining Regulatory Capital in accordance with Article 26, paragraph 3 of the Act - enter the difference between financial assets invested in accordance with Article 26, paragraph 3 of the Act and capital requirements specified under item A., respectively item B., depending on which capital requirement applies.
4. Additional Information
   4.1. General Meeting Decisions (declared dividend for the current financial year): enter the amount relating to declared dividends/net net profit in the current financial year according to the decision of the General Meeting held during the current year, respectively the decision of founders, which are recorded in the gross balance sheet of the current financial year as an obligation for payment.
   4.2. General Meeting Decisions (paid dividends for the current financial year): enter the amount of paid dividend/net profit in the current financial year, but only that part relating to declared dividend/net profit for the current financial year according to the decision of the General Meeting, respectively founders.
   4.3. Regulatory capital reserves realized through share issuance: enter the amount realized above nominal/book value upon issuance of ordinary shares.
   4.4. Unincluded current year profit: enter the amount of current year profit that does not meet the conditions for inclusion in regulatory capital calculation and is therefore excluded.
   4.5. Unrealized gain from fair value adjustment of financial assets through other comprehensive income: enter the amount of unrealized gains from valuation of financial assets at fair value through other comprehensive income arising from the application of IFRS 9.

APPENDIX 2. (NN 52/24)
REPORT ON THE CALCULATION OF REGULATORY CAPITAL Company Name:
Company OIB:
Date:
Position Code DESCRIPTION AMOUNT (in EUR)

1. REGULATORY CAPITAL ITEMS
   1.1. Paid ordinary shares
   1.2. Paid business shares
   1.3. Reserves formed from profit after taxation = 1.3.1 + 1.3.2 + 1.3.3
   1.3.1. statutory reserves
   1.3.2. statutory reserves
   1.3.3. other reserves
   1.4. Regulatory capital reserves
   1.5. Retained earnings
   1.6. Current year profit (based on annual financial statements)
   1.7. Sum of items (1.1 to 1.6) = 1.1 + 1.2 + 1.3 + 1.4 + 1.5 + 1.6
2. Deduction Items of REGULATORY Capital
   2.1. Illiquid assets
   2.2. Shares in other pension companies
   2.3. Losses in subsidiaries
   2.4. Due receivables
   2.5. Assets acquired by the pension company not in compliance with Article 26, paragraphs 1 and 2 of the Act
   2.6. Retained losses from previous years determined on the basis of audited annual financial statements
   2.7. Current year loss (based on annual financial statement or based on financial statements for periods during the year)
   2.8. Unrealized loss on financial assets at fair value through other comprehensive income
   2.9. Negative net revaluation reserves
   2.10. Sum of items (from 2.1 to 2.9) = 2.1 + 2.2 + 2.3 + 2.4 + 2.5 + 2.6 + 2.7 + 2.8 + 2.9
   I. REGULATORY CAPITAL = 1.7 + 2.10.
   A. CAPITAL REQUIREMENT ACCORDING TO ARTICLE 3, ALINIA 1 OF THE REGULATION B. CAPITAL REQUIREMENT ACCORDING TO ARTICLE 3, ALINIA 2 OF THE REGULATION
   II. Surplus (+)/Deficit (-) of Regulatory Capital = I. – Max (A., B.)
3. Financial Assets of the Pension Company
   3.1. Transferable debt securities and money market instruments from Article 125, paragraph 1, point 1 of the Act
   3.2. Transferable debt securities and money market instruments from Article 125, paragraph 1, point 2 of the Act
   3.3. Deposits at credit institutions from Article 125, paragraph 1, points 13 and 14 of the Act and cash on accounts at credit institutions from Article 125, paragraph 1, points 16 and 17 of the Act