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LAW OF THE AZERBAIJAN REPUBLIC

of October 22, 2010 No. 1101-IIIQ

About investment funds

(as amended on 29-10-2021)

This Law establishes the principles and rules of the organization of investment funds, their managements and liquidation in the Azerbaijan Republic, and also legal and economic basis of regulation and control in the field of activities of investment fund.

Chapter I. General provisions

Article 1. Basic concepts

1.1. The basic concepts used in this Law reflect the following values:

1.1.1. investment fund - the financial structure created in the form of joint-stock or mutual investment fund, which is engaged in attraction of financial resources and their attachment for the purpose of profit earning according to the procedure, provided in the investment declaration;

1.1.2. joint-stock investment fund - the open joint stock company having the license for activities of joint-stock investment fund which exclusive object of activity is profit earning from attachment of the shares of money received from placement in securities and other property according to the procedure, provided by the investment declaration;

1.1.3. mutual investment fund - the property complex belonging to owners of shares of investment fund on the basis of the right of common ownership and being in management of the managing director of investment fund. The mutual investment fund has no the status of the legal entity, and its assets consist of the money which arrived from sale of shares, other assets received as a result of investment of these means. The mutual investment fund can be created in the opened, closed and interval form;

1.1.4. open mutual investment fund - the mutual investment fund which is carrying out sale and the redemption of the shares at least once a week which assets consist only of money and securities;

1.1.5. interval mutual investment fund - the mutual investment fund which is carrying out sale and the redemption of shares at least once a year which assets consist only of money and securities;

1.1.6. closed-end investment fund - the mutual investment fund which is carrying out sale and the redemption of shares at the end of activities of fund according to the procedure, the stipulated in Clause 18.6 presents of the Law which assets consist only of money, securities and real estate;

1.1.7. share of investment fund (further - share) - the bank personalized security confirming the appropriate rights of property of the owner to share of investment fund, granting the right to the corresponding money from asset sale of fund after liquidation of mutual investment fund according to share and also other rights provided by this Law and corresponding normative legal and normative nature acts;

1.1.8. the investment declaration - the document reflecting the purposes, the directions, investment objects of investment fund and restriction on investing activities;

1.1.9. management of investment funds - licensed, consisting of making transactions for the benefit of the client or the third party specified to them with transferred to cash management, securities and other property established by the legislation which exclusive subject belongs to the client;

1.1.10. the managing director of investment fund (further - the managing director) - the legal entity who is engaged only in activities for management of investment funds and having the license on this type of activity;

1.1.11. depositary of investment fund (further - depositary) - person having license for activities of depositary of investment fund;

1.1.12. net assets value of investment fund - monetary value of difference between assets of fund and its obligations;

1.1.13. the agreement of management of mutual investment fund the agreement with the conditions established by the managing director in rules of management of mutual investment fund which the investor joins upon purchase of share signed with the managing director;

1.1.14. supervision body behind the financial markets behind the financial markets - the structure created by relevant organ of the executive authority for the purpose of implementation of regulation and control in the financial markets;

1.1.15. the requirement of civil faultlessness - for the owner of the prevailing share if he is legal entity, the head of its executive body - lack of criminal record for the committed intentional crime; for persons holding executive positions in joint-stock investment fund and managing, for the administrator of property - lack of criminal record, lack of the fact of criminal prosecution for heavy and especially serious crimes against property and in the field of economic activity, lack of prohibition by a court decision on occupation of the corresponding position or occupation professional activity lack of the fact of the announcement insolvent judicially;

1.1.16. the prevailing share - immediate or indirect possession of shares, constituting 10 or more percent from the authorized capital of joint-stock investment fund or the managing director or allowing to influence significantly decision making by the legal entity which participant he is based on the agreement;

1.1.17. executive position in joint-stock investment fund or in the managing director of investment fund - membership in governing bodies (the observation council, executive body), and also in auditing committee or audit committee of joint-stock investment fund or the managing director of investment fund;

1.1.18. the beneficial owner - the physical person or legal entity receiving finally economic or any other benefit as a result of activities of investment fund and the performed operations and also the valid owner of the legal entity for benefit of whom bargains, or the physical person exercising control over the client are concluded and (or) on behalf of which financial transactions and other transactions, or the physical person exercising control over the legal entity are performed;

1.1.19. representation - separate division of investment fund or the managing director, not being the legal entity, located out of the location of investment fund or the managing director whose activities are limited to representation and protection of their interests;

1.1.20. the certificate of competency - the official document issued to persons who received physical satisfactory or more good result in case of the certification performed by supervision body behind the financial markets.

Article 2. Legislation on investment funds

2.1. Activities of investment funds in the Azerbaijan Republic are regulated by the Constitution of the Azerbaijan Republic, the Civil code of the Azerbaijan Republic, this Law and other regulatory legal acts, acts of normative nature of supervision body behind the financial markets, the Azerbaijan Republic, and also international treaties of the Azerbaijan Republic.

2.2. If international treaties of the Azerbaijan Republic establish the rules other than this Law then regulations of international treaties are applied.

2.3. This Law does not extend on legal entities who were created by the state for implementation of the state investment policy, and the structures founded by them.

2.3-1. The relations in the field of investment funds in the Alyatsky free economic zone are governed according to requirements of the Law of the Azerbaijan Republic "About the Alyatsky free economic zone".

2.4. Investment funds do not bear responsibility according to obligations of the state, and the state does not bear responsibility according to obligations of investment funds.

Article 3. Name of investment fund and Managing director

3.1. At the name of joint-stock investment fund there shall be words "joint-stock investment fund".

3.2. At the name of mutual investment fund there shall be words "mutual investment fund", and also it is necessary to specify that the fund is open, interval or closed.

3.3. In the Azerbaijan Republic words "Investment fund" in the name can use only investment funds created according to the legislation of the Azerbaijan Republic, their managing directors concerning these funds and also the foreign legal entities having the corresponding license.

3.4. Use in the name of investment fund and the managing director of the words "state", "national", "central", "governmental", "guaranteed" or "insured" is forbidden. The name of investment fund shall not reflect other words which can create false idea of zastrakhovannost or security of the gained income, and also of risks to which investors can undergo.

Article 4. State register of investment funds and their managing directors

4.1. The state register of investment funds and their managing directors is kept by supervision body behind the financial markets. The register includes names of investment funds and their managing directors, their legal addresses, registration numbers and dates of the licenses issued to them and cancelled, data on investment funds of their managing directors which activities are stopped.

4.2. The joint-stock investment fund is entered in the state register of investment funds and their managing directors from the moment of provision by supervision body behind the financial markets on the corresponding license.

4.3. The mutual investment fund is entered in the state register of investment funds and their managing directors from the moment of state registration of its rules of management of supervision body behind the financial markets.

Chapter II. Joint-stock investment fund

Article 5. Organization of joint-stock investment fund and its activities

5.1. The joint-stock investment fund is created in the form of open joint stock company by at least than three legal and (or) physical persons.

5.2. The joint-stock investment fund acts on the basis of the license provided by supervision body behind the financial markets.

5.3. The joint-stock investment fund cannot be engaged in other types of business activity.

5.4. In the charter of joint-stock investment fund it shall be specified that the exclusive subject of its activities constitutes investment of the money which arrived as a result of placement of its shares, according to the procedure, established by this Law and the investment declaration.

5.5. The assets of joint-stock investment fund provided for the investment purposes are controlled by the managing director based on the agreement.

5.6. The joint-stock investment fund cannot create affiliated enterprises, issue securities, except ordinary nominal shares.

5.7. The minimum size of the authorized capital of joint-stock investment fund and the rule of its forming are established by supervision body behind the financial markets.

5.8. The joint-stock investment fund can take debt in the amount of, not exceeding 10 percent of its assets, for the term of no more than three months.

5.9. The register of owners of shares of joint-stock investment fund is kept by the central depositary.

Article 6. Management in joint-stock investment fund

6.1. In addition to powers, stipulated in Article 107.1 Civil codes of the Azerbaijan Republic, treat special powers of general meeting of shareholders of joint-stock investment fund:

6.1.1. decision making about change of the managing director or depositary;

6.1.2. decision making about increase in expenses of fund.

6.2. The list of persons having rights to participate at general shareholder meeting is established on the basis of the shareholder register of fund. This list shall be constituted no later than 60 days and not earlier than 45 days before date of general shareholder meeting.

6.3. At least in 45 days prior to convocation of general shareholder meeting it is necessary to provide information on it in mass media, and also on the basis of the constituted list to send to shareholders, the managing director, depositary and supervision body behind the financial markets the written notice.

6.4. In joint-stock investment fund the supervisory board with odd structure at least from three physical persons shall be created. At least one of members of the supervisory board shall be the impartial person which is not the affiliate of joint-stock investment fund.

6.5. The managing director, depositary, the auditor and the appraiser who signed the relevant agreements with joint-stock investment fund and also their affiliates and them and representatives cannot become the member of the supervisory board of joint-stock investment fund.

6.6. Employees of the managing director, the depositary, the auditor and the appraiser who signed the relevant agreements with joint-stock investment fund and also their affiliates cannot become the member of executive body of joint-stock investment fund.

6.7. Powers of governing bodies of joint-stock investment fund, the procedure of adoption of decisions by them, including questions on which decisions are made unanimously or caused by a majority vote are regulated by the relevant legislation on joint-stock companies.

6.8. Provision of information in cases when private interests of members of executive body of joint-stock investment fund can lead to contradiction with interests of investment fund, and also the conclusion of the transactions contradicting interests of joint-stock investment fund are performed according to requirements of Article 107-10.5 of the Civil code of the Azerbaijan Republic.

Article 7. Share issue of joint-stock investment fund

7.1. In addition to the documents specified in article 6.3 of the Law of the Azerbaijan Republic "About the security market for state registration of share issue of joint-stock investment fund the following documents are submitted:

7.1.1. copies of the agreements signed by joint-stock investment fund with the managing director and depositary;

7.1.2. the investment declaration of joint-stock investment fund and its simplified form.

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