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Pursuant to Article 112 of Investment Fund Act (Narodne novine [Republic of Croatia Official Journal, no. 150/05) the General Meeting of the investment fund establishment and management company Jadran Invest d.o.o., Zagreb, Savska 141, on ______ __ , 2005 hereby adopts this
CHARTER
JADRAN KAPITAL d.d.
PUBLICLY-OFFERED CLOSED END REAL ESTATE INVESTMENT FUND
INTRODUCTORY PROVISIONS
Article 1
Jadran Kapital d.d. is a publicly-offered closed-end real estate investment fund, established as a public limited company, whose sole activity is to raise capital funds by publicly offering its own freely transferable shares and investment of said funds, adhering to the principles of security, profitability, liquidity and diversification of risk (hereinafter: Fund), with the approval and due oversight of the Croatian Financial Services Oversight Agency (hereinafter: Supervisory Authority).
The Fund is hereby established and managed by Jadran Invest d.o.o. an investment fund establishment and management company (hereinafter: Company).
The provisions of the Investment Fund Act ( hereinafter: Act) shall be applied accordingly to the Fund. The Companies Act and the Securities Market Act shall apply accordingly to any and all matters not regulated by the Investment Fund Act.
Article 2
This Charter shall regulate the terms and conditions and rules governing the Fund's operations and the legal relationship between the Fund and its shareholders.
NAME AND REGISTERED HEAD OFFICE
Article 3
Full name of the Fund is Jadran Kapital d.d. zatvoreni investicijski fond s javnom ponudom za ulaganje u nekretnine. In the English language, the Fund's name shall be translated as: JADRAN CAPITAL PLC PUBLICLY-OFFERED CLOSED-END REAL ESTATE INVESTMENT FUND.
Abbreviated name of the Fund is Jadran Kapital d.d.
In international dealings the Fund shall use the English name Jadran Capital.
The registered head office of the Fund is 10000 Zagreb, Savska 141.
The headquarters of the Fund is 10 000 Zagreb, Savska cesta 141.
DATE OF THE ESTABLISHMENT AND DURATION
Article 4
The Fund has been established pursuant to the Decision of the Company's General Meeting on adoption of the Fund's Prospectus and Charter, dated March 31st, 2006.
The Fund has been established as a going concern.
AVAILABILITY OF QUARTERLY, SEMI-ANNUAL AND ANNUAL REPORTS; COPIES OF CHARTER AND PROSPECTUS OR ADDITIONAL INFORMATION ON THE FUND
Article 5
The above specified documents and information are available at the Company headquarters office, at this address: Zagreb, Savska cesta 141.
MINIMUM FINANCIAL RESOURCES TO BE RAISED BY ISSUE, SUBSCRIPTION AND PAYMENT OF THE FUND'S SHARES, AND ALTERNATIVE IN CASE THE MINIMUM STIPULATED AMOUNT IS NOT RAISED
Article 6
The minimum target amount of financial resources raised through the public offer, subscription and payment of the Fund's shares is HRK 80.000.000,00 (eighty million Croatian kuna).
If the amount of financial resources raised by the public offer, subscription and payment of the Fund's shares is lower or does not reach the minimum target amount specified above, the Fund's share capital shall be set at the amount of finances raised. The Fund's share capital so raised shall be distributed to each of the Fund's shareholders, as the respective equity deposit of each single shareholder, in proportion to the subscribed and paid financial resources and established par value of a single share.
The ultimate number of the Fund's subscribed, paid and issued shares shall comply with the preceding paragraph.
Pursuant to law, the minimum monetary sum that must be raised through the issue, subscription and payment of the Fund's shares is HRK 5,000,000.00 (five million Croatian kuna). If, upon the expiry of the period allotted for subscription and payment of the Fund's shares, the minimum stipulated amount is not collected, the Company cannot issue the Fund's shares, and in this case the Company shall be obliged to reimburse the amounts paid to the shareholders within a period not to exceed seven days after expiry of the deadline specified for subscription and payment of the Fund's shares.
SHAREHOLDER RIGHTS
Article 7
The Fund's shareholders shall have the following rights:
a) Right to decision making and voting at the Fund's General Meeting,
b) Right to information (semi-annual and annual reports),
c) Right to dividends,
d) Right to payment of a proportional amount of liquidation assets or the bankruptcy estate.
INFORMATION ON EXCHANGES WHERE THE FUND'S SHARES ARE TO BE LISTED
Article 8
The Fund's shares shall be listed on the special public limited companies quotation of the Zagreb Stock Exchange.
Following the initial listing, undertaken in compliance with the previous paragraph, the Fund's Management Board shall decide on possible subsequent listings of the Fund's shares on other official stock exchange quotations or on other regulated public securities markets in Croatia and/or abroad.
DESCRIPTION OF INVESTMENT OBJECTIVES AND NATURE OF THE PORTFOLIO, IMPLEMENTATION MODELS AND RISKS PERTAINING TO INVESTMENTS AND STRUCTURE OF THE FUND
Article 9
In compliance with Croatia's legislation governing investment funds, the Management Board shall invest not less than 60% of the Fund's assets in real estate and property development projects. At the time of acquisition, each individual real estate property may not exceed 20% of the Fund's net asset value.
A lack of quality real estate in Croatia generally precludes investment in finished projects, i.e. existing facilities, so the Management Board therefore plans to invest up to 20% of the Fund's assets in finished projects.
To meet the needs of developmental investment projects, the Fund shall invest in other companies whose sole or major activity is sales and acquisition, rental and leasing of real estate and real estate management.
By investing in other companies, the Fund shall make strategic investments in companies that will use their own funds to acquire high-quality construction sites and/or agricultural land with plans for their further development. The Management Board expects considerable yields from this type of investment, given that the companies in which the Funds invests will be able to use financial leverage. When necessary, they will take out investment loans to engage in developmental projects and thereby raise the profitability of such projects.
With a view to long-term investments, when investing in other companies, the Management Board shall consider investing in companies owned or partially owned by local governments, particularly in cases of infrastructure projects, thereby securing stable investment yields over the course of several years.
When investing in other companies, the Fund's Management Board and/or Supervisory Board shall apply the same risk management policy and investment procedure in the course of decision-making as in the case of the Fund's own direct investments in projects.
The Management Board expects that up to 60% will be invested tourism-related and/or residential real estate, with the objective of generating medium-term earnings, while up to 20% will be invested in construction sites or future construction sites, with the objective of generating long-term earnings. According to projections, up to 20% of the Fund's assets will be invested in business and/or commercial real estate, up to 10% in agricultural land, and up to 10% in securities.
Other real estate investments, in compliance with the provisions of Article 80(3)5 of the Act, encompass:
- Investment in agricultural land, enabling further investment in new crops and farm production;
- Investment in agricultural infrastructure (irrigation, etc.);
- Investment in office space;
- Investment in tourist accommodation capacity;
- Investment in industrial zones and/or parks, free trade zones, office parks and technology parks;
- Investment in shopping malls;
- Investment in business centres;
- Investment in residential buildings;
- Infrastructure investments (utilities in housing districts, utilities in industrial zones, etc.);
- Investment in parking garages and lots;
- Investment in special-purpose health-care facilities (retirement homes, specialised clinics, polyclinics, hospitals, etc.);
- Investment in property required to manage real estate (equipment and furniture, accommodation capacity, machinery, etc.);
- Investment in cultural monuments;
- Investment in stakes or shares of companies solely or largely involved in acquisition and sales, rental and leasing of real estate and real estate management, stakes or shares in other real estate funds, or other securities, derivatives or certificates stipulated by the relevant authority, which prices based on real estate;
- Shares in companies solely or largely involved in construction, provided that real estate accounts for not less than 75% of total company assets;
- Shares in companies in which real estate accounts for over 50% of total assets;
The Fund, in line with sound business practices, will invest available assets that cannot immediately be channelled into investment projects into securities and cash deposits, adhering to the principle of risk diversification, in compliance with the Investment Fund Act and the Charter and Prospectus. The Management Board will thereby place not more than 30% of the fund's asset value in securities quoted on public markets within the EU and OECD member countries, and the balance of assets will be held in cash deposits as per the Croatian Investment Law.
In the case that the Fund managers appraise that instability in the property market could affect the portfolio up to 40% of the funds assets may be allocated to financial securities and cash deposits in order to safeguard investors within the scope of the Croatian Investment Law.
The Management Board also expects to invest up to 10% of the Fund's total assets in neighbouring countries such as Bosnia-Herzegovina, Serbia-Montenegro, and so forth. These investments will be carefully assessed, taking into account the risk factors in these countries. Such investments will generally be joint ventures, aimed at taking advantage of potentially high returns available there.
The Fund's expected return will be set at 12% per annum.
The risks associated with investments and the structure of the Fund's assets are :
- Possible instability of the property market (prices of properties may over time fall as well as rise). This may occur due to several reasons, such as, for example, general economic decline, political instability, etc.;
- Decisions made by the authorities to modify or alter the tax and legal framework for doing business may impact the fund's profitability;
- Changing interest rates that may influence the profitability of property investments (changes in interest rates can cause flows of capital from the markets to bank deposits and other financial instruments),
- Fluctuations in the domestic currency exchange rate in relation to the euro and other convertible currencies (instability in exchanges rates due to factors such as inflation or deflation may impact the property market as well as capital markets).
- Differences in accounting and auditing standards;
- Generally higher commissions on foreign transactions;
- Tax system differences;
- Altered regulation of real estate title acquisition;
- Possible restrictions in foreign capital inflow.
The Company cannot influence these risk factors in any manner whatsoever. The Company can reduce the Fund's exposure to these risks, respecting the limitations on investing the Fund's assets, through policies of dispersion and diversification of investments in compliance with law, this Prospectus and Fund's Charter.
MINIMUM INVESTMENT IN THE FUND AND SHARE SUBSCRIPTION METHOD
Article 10
Each single share of the Fund has a par value of HRK 100.00 (one hundred Croatian kuna).
The shares of subsequent issues may have different par values, if so decided by the Fund's General Meeting.
The Fund's shares are intangible securities.
The Fund's shares are recorded in the form of electronic entries in the securities account of the computer system maintained by the Central Depository Agency.
The Fund shall deem a shareholder any person registered as the holder of a securities account opened with Central Depository Agency.
The subscription and payment of shares shall be transacted with the deposit bank.
The Fund's shares shall be paid for in money, and they shall be paid in full prior to registration of the Fund's establishment in the court register or prior to entry of increases in share capital in the court register.
SHARE CAPITAL - SHARES
Article 11
The Fund's share capital is HRK 79.163.600,00 (seventynine million one hundred sixtythree thousand and six hundred Croatian kuna).
Share capital may be increased and decreased in the manner specified in the Companies Act and the Investment Fund Act.
The Fund's share capital is divided into ordinary registered shares.
The Fund's shares can be transferred without limitation.
The Fund may not issue preferred shares, nor shares bearing different rights.
METHOD AND TIME OF ASSESSMENT OF THE FUND'S ASSET VALUE
Article 12
The Fund's net asset value is the total value of the Fund's assets, less the Fund's liabilities. The Fund's asset value is calculated once a month by the Company based on assessment of the value of real estate portfolio, and other assets, less the Fund's liabilities.
The methods for assessment and establishment of Fund's asset value must conform with the International Accounting Standards and legislation in force in the Republic of Croatia.
AMOUNT, TYPE AND MAXIMUM LEVEL OF ESTABLISHMENT EXPENDITURES WHICH CAN BE CHARGED TO THE FUND
Article 13
The maximum costs and fees due upon establishment of the Fund that can be charged to the Fund's assets is 3.5% of subscribed and paid share capital. This amount pertains to all fees and costs that the Company should incur in the course of establishment procedures. After establishment of the Fund and its entry in the court register, the Fund's deposit bank shall, at the order of the Company, transfer the specified amount from the Fund's account to the Company's account.
ANNUAL MANAGEMENT AND OPERATIONAL FEES AND COSTS THAT MAY BE CHARGED TO THE FUND, AND THEIR IMPACT ON FUTURE SHAREHOLDER YIELDS
Article 14
The following fees and costs shall be charged against the Fund's assets:
- Investment fund management fee, paid to the Company , corresponding to 3% of the Fund's annual net asset value, increased by taxes, if subject to tax liability;
- Deposit bank fee, corresponding from 0.15% to 0,20% of the Fund's annual net asset value, dependent on the size of the Fund, increased by taxes, if subject to tax liability;
- Fees and expenses of the members of the Fund's Supervisory Board;
- Expenses, commissions or dues directly related to acquisition or sale of the Fund's assets;
- Fees and costs of maintaining the shares ledger and costs of dividend payments;
- Auditor and legal fees, and other expenses related to expertise necessary for the Fund's activities, which are not encompassed by Company managerial activities;
- Costs of drafting, printing and postage pertaining to publication and delivery of reports, which, in compliance with law and this Prospectus, must be delivered to the Fund's shareholders;
- Costs of the General Meeting, except for Extraordinary Shareholder Meetings convened by the Company - in such a case the Company shall bear these costs;
- All stipulated fees and dues payable to the Supervisory Board pertaining to release of approvals to the Fund;
- Costs of listing of Fund's shares on the stock exchange or regulated public markets and costs of quotation maintenance;
- Taxes that the Fund, according to the valid Croatian legislation, is obliged to pay for the assets and/or profits generated by business operations;
- Costs of compulsory advertisements;
- Other costs stipulated by special laws (costs of Supervisory Authority).
Article 15
The fee payable to the Company as specified under Article 14 in paragraph 1 shall be computed by the Company, and the deposit bank shall oversee and disburse said fee to the Company on a monthly basis.
The fee to the Company shall be computed monthly, at the close of the settlement month, such that the simple interest method is employed to compute the corresponding interest factor, which is then multiplied by the total value of the Fund's assets for the settlement period.
The total value of the Fund's assets shall be ascertained as the value of the Fund's assets on the last day of the settlement month.
The fee to the Company shall be disbursed by the deposit bank within a period not to exceed 7 days after commencement of the subsequent settlement period.
The fee payable to the Bank as specified under Article 14 in paragraph 2 shall be computed on a monthly basis, at the close of the settlement month, such that the simple interest method is employed to compute the corresponding interest factor, which is then multiplied by the total value of the Fund's assets for the settlement period.
The computed fee shall be collected by the deposit bank from the Fund's account within a period not to exceed 7 days after commencement of the subsequent settlement period.
All costs specified under Article 14 in paragraph 3 through 11 will be computed and collected from the Fund in the actual undisputed invoiced amount.
The indicator of the Fund's total fees and expenses, not including the costs specified in Article 14 paragraph 11 and 13, may not exceed 3.5% of the Fund's average annual net asset value upon termination of the annual statement period. The Company shall bear all incurred costs which exceed the highest permitted indicator of the total costs in the certain business year (at the close of the annual statement period) amounting to 3.5% of the Fund's average annual net asset value.
The impact of total fees and costs on the Fund's future returns shall be managed in compliance with sound business practices, aiming at improving and upgrading operations and profitability.
COMPUTATION OF DIVIDENDS AND FREQUENCY OF DISBURSEMENT TO SHAREHOLDERS
Article 16
The Company may propose to the Fund's General Meeting the disbursement of the Fund's net profits to the Fund's shareholders (dividends).
If the Company proposes disbursement of dividends to the Fund's shareholders to the Fund's General Meeting, the Company shall place an order with the deposit bank to disburse dividends to the Fund's shareholders after the Fund's financial statements are completed and approved at the Fund's General Shareholders Meeting together with the Decision on distribution of dividends to the Fund's shareholders.
The Fund's net profits shall be ascertained in financial statements as the difference between the Fund's income and expenditures.
Net profits shall be disbursed for the previous business year; however, the advance on profits can be disbursed after the semi-annual financial statements, in compliance with decision of the Fund's General Shareholders Meeting.
The final settlement and disbursement of the Fund's net profits shall be done upon adoption of the annual financial statements.
BODIES OF THE FUND
Article 17
The bodies of the Fund are:
- Management Board,
- Supervisory Board,
- General Meeting.
The Company's Management Board has been granted full authority to act as the Fund's management body, and it administers the Fund in compliance with the contract concluded between the Company and the Fund, as represented by its Supervisory Board, in compliance with the provisions of the Investment Fund Act and applicable legislation of the Republic of Croatia.
The Supervisory Board represents the Fund before the Company, acting in compliance with the provisions of the Investment Fund Act and applicable legislation of the Republic of Croatia.
The General Meeting of the Fund consists of Fund's shareholders; it acts in compliance with the provisions of the Investment Fund Act and applicable legislation of the Republic of Croatia.
MANAGEMENT BOARD OF THE FUND
Article 18
The Management Board of the Fund shall consists of the chair and members.
The Management Board shall have a minimum of two members and maximum of five members (directors).
The chair of the Management Board represents the Fund individually and independently, while the members of the Board represent the Fund jointly with the chair.
The members of the Board shall be appointed for a term of 3 (three) years, with the possibility of reappointment or dismissal.
The members of the Board shall be persons who fulfil the terms specified by the Act.
The members of the Board shall be full-time employees of the Company.
The operations of the Management Board may be, if necessary, governed by special rules, enacted by the Management Board with the prior consent of the Supervisory Board.
Not less than one member of the Management Board shall participate in the General Meeting of the Fund.
SUPERVISORY BOARD
Article 19
The members of the Supervisory Board of the Fund, over and above the authority granted thereto by the Companies Act, jointly represents the Fund to the Company.
Supervisory Board shall have a minimum of five members.
The members of Supervisory Board shall be independent experts and fulfil the requirements specified in the Act.
The members of the Supervisory Board shall be appointed for a term of 4 years.
Each member of the Supervisory Board, upon the expiry of the term of office, may be reappointed to the Supervisory Board.
The members of the first Supervisory Board shall be appointed by the Company.
At the session of the General Meeting of Shareholders, three members of the Supervisory Board shall be appointed by the General Meeting, and two members by the Company.
Article 20
The members of the Supervisory Board shall select a chair from among their ranks, and also select a deputy char who, when the chair is absent, shall exercise all of his/her authority.
Inasmuch as membership in the Supervisory Board of a member is terminated, the Supervisory Board shall prepare a proposal for appointment of a new member.
Article 21
The Supervisory Board shall conduct its work in sessions.
The Supervisory Board shall renders decisions on all matters and perform all activities specified in the Act, this Charter and other regulatory instruments of the Company.
The Supervisory Board shall convene a regular session once every quarter, and sessions may be convened more frequently if necessary.
Article 22
The Supervisory Board may render valid decisions if the session is attended by a majority of the total number of members.
Each member of the Supervisory Board shall be entitled to one vote.
Decisions of the Supervisory Board shall be made by a majority vote of attending members at the session (relative majority).
Voting at sessions of Supervisory Board shall conducted by open ballot method, and the Supervisory Board may unanimously decide to vote on one or all items on the agenda in written form, delivering written votes by fax or cable, and by e-mail; in such a case written voting shall be deemed the same as voting at a session, if none of the members of the Supervisory Board oppose such method.
The Supervisory Board shall be authorised to regulate its work in more detail in the Standing Orders.
REPORTS OF THE COMPANY TO THE SUPERVISORY BOARD
Article 23
The Company shall report to the Supervisory Board of the Fund not less than once monthly on the purchase and sale of the Fund's assets, on behalf and for the account of the Fund, and on returns generated from the Fund's assets.
At the request of the Supervisory Board, the Company shall submit more frequent reports on the status of the real estate market, securities market and other circumstances crucial to the formulation of an investment policy position.
GENERAL MEETING OF THE FUND
Article 24
The General Meeting of the Fund shall consist of the Fund's shareholders, whose rights and obligations are specified by the Act.
The shareholders of the Fund shall participate in the sessions of the General Meeting personally or by proxy.
Shareholders may participate in the General Meeting and exercise their voting rights, if they register their participation in the General Meeting to the Company not less than ten days prior to scheduled session.
Article 25
Decisions at the General Meeting shall be made public, either by raising hands or by open ballots submitted in written form. The method of voting shall be subject to special decision at each session of the General Meeting prior to adoption of the agenda, by a public vote made by raising hands.
The status of the record entered in the depository of the Central Depository Agency on the last day of the period specified for submission of applications shall apply for participation of shareholders in the General Meeting.
The General Meeting may render valid decisions, if the votes represented at the session represent not less than three tenths of the share capital of the Fund.
Article 26
Decisions of the General Meeting shall be deemed made, if passed by shareholders who jointly constitute a majority of given votes out of the votes represented at the session.
The following decisions of the General Meeting shall require over 75% (seventy-five per cent) of the votes represented at the General Meeting:
- decisions on amendment of the Fund's Charter or Prospectus,
- decisions on issuing new series of the Fund's shares,
- decisions on dismissal of members of the Supervisory Board who are chosen by the Fund's General Meeting,
- decisions on termination of the Company's management and transfer of the right to manage the Fund to some other investment fund management company,
- decisions on termination of the Fund,
- decisions on acquisition of the Fund's own share for the purpose of their withdrawal,
- decisions on merger with another fund, or dvision of the Fund.
DATA ON TAX REGULATIONS APPLICABLE TO THE FUND
Article 27
All tax liabilities relative to the performance of publicly-offered closed-end real estate investment funds, in conformity with the valid tax legislation of the Republic of Croatia, shall be charged against the Fund's assets.
TRADE SECRETS
Article 28
Trade secrets shall imply documents and data pertaining to the operations of the Company and Fund, whose disclosure to unauthorised persons may violate the interests of the Company and shareholders of the Fund, or those which are pursuant to law or other regulations are deemed trade secrets.
Article 29
The members of the Company and the Fund, members of Company and Fund bodies and any persons who are employed or who perform full-time or occasional tasks pursuant to separate contracts, shall be obliged to maintain trade secrets, and should they fail to do so they shall be held accountable for damages incurred due to disclosure of said secrets.
The obligation to maintain trade secrets shall not cease when the persons specified in paragraph 1 hereof lose the status of persons who are obliged to maintain trade secrets.
Violation of the obligation to maintain trade secrets shall be deemed a severe breach, which may be sanctioned by termination of employment, i.e. suspension from the post of member in a body of the Company or Fund.
Article 30
Exceptions to the obligation of maintaining trade secrets may be permitted only in the valid legislation of the Republic of Croatia, when this pertains to provision of data and statements to the relevant judicial and administrative authorities of the Republic of Croatia, such as the Commission, Central Depository Agency, or Money-laundering Prevention Office.
TRANSITIONAL AND FINAL PROVISIONS
Article 31
In case of amendments to legislation or decreased liquidity on financial markets, the Company shall, for the purpose of safeguarding the interests of the Fund's investors, adjust the investment programme to suit the new circumstances, and consequently propose amendments to this Charter.
Amendments to this Charter may be done solely in the manner specified in the Act and the provisions of this Charter.
Each amendment to this Charter shall be approved by the Supervisory Authority in advance.
The Company shall, in compliance with said amendments, draft the full revised version of the Charter, and together with other enclosures to the application for entry of said amendment in the court register, submit it to the relevant Commercial Court.
Article 32
The Management Board of the Company shall propose amendments to the Charter, which must be adopted by the General Meeting of the Fund.
Article 33
The text of the Charter in the version adopted by the General Meeting of the Fund and approved by the Commission shall be deemed the authentic text of the Charter.
The authentic text of the Charter and its amendments shall be maintained, specifically bound, at the registered head office of the Company.
The Management Board of the Company shall be responsible for the safekeeping of the Charter. The Management Board shall allow review of the Charter at the request of any shareholder of the Fund or holder of an ownership stake in the Company, and provide a photocopy of the Charter at their expense.
Article 34
This Charter shall enter into force upon approval by the Supervisory Authority in compliance with the Act.
The Company shall be obliged to publish this Charter and all subsequent amendments thereto in compliance with the Act.
This Charter has been adopted by the Securities Commission of Croatia under classification no:UP/I-450-08/06-03/02, prot. no.326-102/06-03, dated 27th of April 2006.
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