Strictly private & confidential

2 ASSOCIATION OF INVESTMENT FUND MANAGEMENT COMPANIES  2015 election year – number of populist measures that can have long term effect CHF loan regulation – 8 bn HRK estimated negative effect on banking sector bottom-line, pressure on already modest FX reserves; however, capital adequacy will remain strong despite huge loss (ca 19,8% vs current 22,3%) vouchers for electricity, Christmas payout for pensioners, termination of 40% income tax rate... Lack of much needed structural reforms of public sector in the election year  High unemployment (16%) and low labour market participation (ca 51%) Unfavourable demographic change High youth unemployment and significant youth migration outflow  The pension system is fragmented into a high number of special pension schemes, which gives rise to unequal treatment and further contributes to early exits Political environment

3 ASSOCIATION OF INVESTMENT FUND MANAGEMENT COMPANIES  In 1Q15 „statistically” out of recession, recovery confirmed in 2Q15 (+1,2% yoy GDP growth) – mostly due to higher private consumption and government spending  Robust retail sales (4,5% yoy in July - highest growth in the past 8 years, growing 12 months in a row), VAT receipts, and better consumer confidence suggest that private consumption has bottomed out  Employment has stabilized and corporate profits are recovering (solid corporate earnings in 2Q15)  Excellent tourism season will bode well for GDP growth and private consumption on annual basis – estimated tourism revenue ca 8 bn EUR (above record 2008 level – 7.5 bn EUR)  Industrial production grew in July (3,9% yoy), positive trend 6 months in a row supported by low base and foreign demand recovery  High budget deficit and growing public debt Macroeconomic environment

4 ASSOCIATION OF INVESTMENT FUND MANAGEMENT COMPANIES Stock exchange index development

5 ASSOCIATION OF INVESTMENT FUND MANAGEMENT COMPANIES  Act on Open-Ended Investment Funds with Public Offering (UCITS IV) Transposes Directives 2009/65/EC, 2010/44/EU, 2010/43/EU, 2010/78/EU Transposes EU Regulations 583/2010, 584/2010  Alternative Investment Funds Act (AIFM) Transposes Directive 2011/61/EU  Capital Markets Act (MiFID) Transposes Directives 89/117/EC, 97/9/EU, 2001/34/EU, 2003/6/EU, 2003/71/EU, 2003/124/EU, 2003/125/EU, 2004/39/EU, 2004/72/EC, 2004/109/EU, 2006/48/EU, 2006/49/EU, 2006/73/EU, 2007/14/EU, 2007/44/EU, 2009/111/EU, 2010/73/EU, 2010/78/EU, 2011/89/EU  Takeover Act  AMLCTF Act FATCA – IGA Model 1 A (information exchange postponed till )  Bankruptcy Act (revised from ) Allowing Close-Out Netting -> soon ISDA legal opinion Legal Framework

6 ASSOCIATION OF INVESTMENT FUND MANAGEMENT COMPANIES  Corporate Tax Open ended funds are not subject to corporate tax Close ended fund are subject to 20% corporate tax Corporate investors are subject to 20% corporate tax  Capital Gain Tax Natural persons are not subject to capital gain tax capital gain tax is 12% Payable within eight days No Tax after three years  Savings Tax Natural persons are not subject to 12% savings tax  Withholding Tax Natural persons are subject to 12% withholding tax  Value Added Tax Funds management is not subject to VAT Portfolios management is subject to 25% VAT  Financial Transaction Tax Currently no FTT Tax Framework

7 ASSOCIATION OF INVESTMENT FUND MANAGEMENT COMPANIES Houshold assets

8 ASSOCIATION OF INVESTMENT FUND MANAGEMENT COMPANIES Investment Funds Assets

9 ASSOCIATION OF INVESTMENT FUND MANAGEMENT COMPANIES Asset Managers

10 ASSOCIATION OF INVESTMENT FUND MANAGEMENT COMPANIES  MiFID II Draft in Oct 2015; final in Jun 2016 Investment advice and distribution issue Portfolio management inducement issue (ESMA guideline)  Capital Gain Tax 8 day obligation -> Asset managers will calculate tax  ISDA opinion Collateral issue  UCITS V Implementation in 2015 (partially implemented in current Investment Funds Act)  EU MMF Croatia is not investable grade There are not 20 credit institutions Suggestion that directive applies only to EUR MMF  FTT Some rumors but nothing further Current issues and projects