Obligation Croatica 6.625% ( XS0525827845 ) en USD

Société émettrice Croatica
Prix sur le marché 100 %  ▼ 
Pays  Croatie
Code ISIN  XS0525827845 ( en USD )
Coupon 6.625% par an ( paiement semestriel )
Echéance 14/07/2020 - Obligation échue



Prospectus brochure de l'obligation Croatia XS0525827845 en USD 6.625%, échue


Montant Minimal 100 000 USD
Montant de l'émission 1 250 000 000 USD
Description détaillée La Croatie est un pays d'Europe du Sud-Est, membre de l'Union européenne, bordé par la mer Adriatique, connu pour ses paysages côtiers pittoresques, ses îles, son riche patrimoine historique et culturel, et sa gastronomie méditerranéenne.

L'Obligation émise par Croatica ( Croatie ) , en USD, avec le code ISIN XS0525827845, paye un coupon de 6.625% par an.
Le paiement des coupons est semestriel et la maturité de l'Obligation est le 14/07/2020







REPUBLIC OF CROATIA
U.S.$1,250,000,000 6.625 PER CENT. NOTES DUE 2020
Issue price: 99.102 per cent.
The U.S.$1,250,000,000 6.625 per cent. Notes due 2020 (the "Notes") are issued by the Republic of Croatia (the "Republic" or
"Croatia").
The Notes mature on 14 July 2020.
Application has been made to the Commission de Surveillance du Secteur Financier (the "CSSF") in its capacity as competent
authority under the Luxembourg Act dated 10 July 2005 (the "Luxembourg Act") on prospectuses for securities to approve this
document as a prospectus and to the Luxembourg Stock Exchange for the listing of the Notes on the Official List of the
Luxembourg Stock Exchange and admission to trading on the Luxembourg Stock Exchange's regulated market.
The Notes will be rated Baa3 (stable outlook) by Moody's Investors Service, Inc., BBB (negative outlook) by Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies Inc. and BBB- (negative outlook) by Fitch Ratings Ltd. A rating is
not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the
assigning rating organisation.
The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the
"Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States and
may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons except
pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and
applicable state securities laws. Accordingly, the Notes are being offered, sold or delivered: (a) in the United States only to
qualified institutional buyers ("QIBs") (as defined in Rule 144A ("Rule 144A") under the Securities Act) in reliance on,
and in compliance with, Rule 144A; and (b) to Persons (other than U.S. Persons) (each as defined in Regulation S) outside
the United States in reliance on Regulation S ("Regulation S") under the Securities Act. Each purchaser of the Notes will
be deemed to have made the representations described in "Subscription and Sale" and is hereby notified that the offer
and sale of Notes to it is being made in reliance on the exemption from the registration requirements of the Securities Act
provided by Rule 144A. In addition, until 40 days after the commencement of the offering, an offer or sale of any of the
Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration
requirements of the Securities Act if the offer or sale is made otherwise than in accordance with Rule 144A.
The Notes will initially be represented by two global certificates in registered form (the "Global Certificates"), one of which
will be issued in respect of the Notes offered and sold in reliance on Rule 144A (the "Restricted Global Certificate") and will be
registered in the name of Cede & Co., as nominee for The Depository Trust Company ("DTC") and the other of which will be
issued in respect of the Notes offered and sold in reliance on Regulation S (the "Unrestricted Global Certificate") and will be
registered in the name of a nominee of a common depositary for Euroclear Bank S.A./N.V. ("Euroclear") and Clearstream
Banking, société anonyme ("Clearstream, Luxembourg"). It is expected that delivery of the Global Certificates will be made
on 14 July 2010 or such later date as may be agreed (the "Closing Date") by the Republic and the Joint Lead Managers (as
defined under "Subscription and Sale").
Prospective investors should be aware that none of the statistical information in this Prospectus has been independently
verified.
An investment in the Notes involves certain risks.
Prospective investors should have regard to the factors described
under the heading "Risk Factors" on page 6.
Joint Lead Managers
BARCLAYS CAPITAL
CITI
J.P. MORGAN
The date of this Prospectus is 13 July 2010.


THE REPUBLIC OF CROATIA
i


This Prospectus comprises a prospectus for the purposes of Article 5.4 of Directive 2003/71/EC (the "Prospectus
Directive") and for the purposes of the Luxembourg Act.
The Republic accepts responsibility for the information contained in this Prospectus. To the best of the knowledge
of the Republic (having taken all reasonable care to ensure that such is the case) the information contained in this
Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information.
The Republic, having made all reasonable enquiries, confirms that this Prospectus contains all material information
with respect to the Republic and the Notes which is material in the context of the issue and offering of the Notes, that
the information contained in this Prospectus is true and accurate in every material respect and is not misleading, that
the opinions and intentions expressed in this Prospectus are honestly held and that there are no other facts the
omission of which makes misleading any statement herein, whether of fact or opinion.
The Joint Lead Managers (as described under "Subscription and Sale", below) have not independently verified the
information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made
and no responsibility or liability is accepted by the Joint Lead Managers as to the accuracy or completeness of the
information contained or incorporated in this Prospectus or any other information provided by the Republic in
connection with the offering of the Notes. No Joint Lead Manager accepts any liability in relation to the information
contained or incorporated by reference in this Prospectus or any other information provided by the Republic in
connection with the offering of the Notes or their distribution.
No person is or has been authorised by the Republic to give any information or to make any representation not
contained in or not consistent with this Prospectus or any other information supplied in connection with the offering
of the Notes and, if given or made, such information or representation must not be relied upon as having been
authorised by the Republic or any of the Joint Lead Managers.
Neither this Prospectus nor any other information supplied in connection with the offering of the Notes (a) is
intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by
the Republic or any of the Joint Lead Managers that any recipient of this Prospectus or any other information
supplied in connection with the offering of the Notes should purchase the Notes. Each investor contemplating
purchasing any Notes should make its own independent investigation of the financial condition and affairs, and its
own appraisal of the creditworthiness, of the Republic. Neither this Prospectus nor any other information supplied
in connection with the offering of the Notes constitutes an offer or invitation by or on behalf of the Republic or any
of the Joint Lead Managers to any person to subscribe for or to purchase any Notes.
Neither the delivery of this Prospectus nor the offering, sale or delivery of the Notes shall in any circumstances
imply that the information contained herein concerning the Republic is correct at any time subsequent to the date
hereof or that any other information supplied in connection with the offering of the Notes is correct as of any time
subsequent to the date indicated in the document containing the same. The Joint Lead Managers expressly do not
undertake to review the financial condition or affairs of the Republic during the life of the Notes or to advise any
investor in the Notes of any information coming to their attention.
This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy the Notes in any jurisdiction
to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this
Prospectus and the offer or sale of Notes may be restricted by law in certain jurisdictions. The Republic and the Joint
Lead Managers do not represent that this Prospectus may be lawfully distributed, or that the Notes may be lawfully
offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to
an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In
particular, no action has been taken by the Republic or the Joint Lead Managers which is intended to permit a public
offering of the Notes or the distribution of this Prospectus in any jurisdiction where action for that purpose is
required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Prospectus nor any
advertisement or other offering material may be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with any applicable laws and regulations. Persons into whose
possession this Prospectus or any Notes may come must inform themselves about, and observe, any such
restrictions on the distribution of this Prospectus and the offering and sale of Notes. In particular, there are
restrictions on the distribution of this Prospectus and the offer or sale of the Notes in the United States, the European
Economic Area (including the United Kingdom) and the Republic of Croatia, see "Subscription and Sale".
IN CONNECTION WITH THE ISSUE OF THE NOTES, CITIGROUP GLOBAL MARKETS LIMITED
AS STABILISING MANAGER (THE "STABILISING MANAGER") (OR PERSON(S) ACTING ON
BEHALF
OF
THE
STABILISING
MANAGER)
MAY OVER-ALLOT
NOTES
OR
EFFECT
TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A
LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO
ii


ASSURANCE THAT THE STABILISING MANAGER (OR PERSONS ACTING ON BEHALF OF THE
STABILISING MANAGER) WILL UNDERTAKE STABILISATION ACTION. ANY STABILISATION
ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF
THE TERMS OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY
TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE CLOSING
DATE OF THE NOTES AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE NOTES. ANY
STABILISATION ACTION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THE RELEVANT
STABILISING MANAGER(S) (OR PERSONS ACTING ON BEHALF OF ANY STABILISING
MANAGER(S)) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES.
The Notes have not been approved or disapproved by the United States Securities and Exchange Commission or any
other securities commission or other regulatory authority in the United States, nor have the foregoing authorities
reviewed or passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a
criminal offence.
This Prospectus is being submitted on a confidential basis in the United States to a limited number of QIBs for
informational use solely in connection with the consideration of the purchase of the Notes. It may not be copied or
reproduced in whole or in part nor may it be distributed or any of its contents disclosed to anyone other than the
prospective investors to whom it is originally submitted.
Each purchaser or holder of interests in the Notes will be deemed, by its acceptance or purchase of any such Notes,
to have made certain representations and agreements as set out in "Subscription and Sale".
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS
BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE
STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A
PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE
SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER CHAPTER 421-B
IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF,
OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS
UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER
OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES
The Republic is a foreign sovereign nation, and a substantial portion of the assets of the Republic are located outside
the United States and the United Kingdom. As a result, it may not be possible for investors to effect service of
process within the United States or the United Kingdom upon the Republic, or to enforce judgements obtained in
courts located in the United States or United Kingdom, including judgements predicated upon civil liability
provisions of the securities laws of the United States or any state or territory within the United States.
A substantial part of the Republic's assets are located in the Republic of Croatia and the courts of the Republic of
Croatia may refuse to recognise a judgement obtained in a foreign jurisdiction (including, but not limited to England
and the United States) in certain cases according to the provisions of the Croatian Law on Resolving Conflicts of
Law with Other Countries' Laws and Regulations in Certain Matters (Official Gazette No. 53/1991). Once
recognised, a foreign judgement is equal to the judgment of a Croatian court and is fit for enforcement in the
Republic of Croatia.
iii


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Prospectus, as well as written and oral statements that Republic and its
representatives make from time to time in reports, filings, news releases, conferences, teleconferences, web
postings or otherwise, are or may be deemed to be forward-looking statements. Statements that are not historical
facts, including, without limitation, statements about the Republic's beliefs and expectations, are forward-looking
statements. These statements are based on current plans, objectives, assumptions, estimates and projections. When
used in this Prospectus, the words "anticipates", "estimates", "expects", "believes", "intends", "plans", "aims",
"seeks", "may", "will", "should" and any similar expressions generally identify forward-looking statements.
Therefore, undue reliance should not be placed on them. The Republic has based these forward-looking statements
on its current view with respect to future events and financial results. Forward-looking statements speak only as of
the date on which they are made and the Republic undertakes no obligation to update publicly any of them in light of
new information or future events. Forward-looking statements involve inherent risks and uncertainties. The
Republic cautions that a number of important factors could cause actual results to differ materially from those
contained in any forward-looking statement. Forward-looking statements include, but are not limited to: (i) plans
with respect to the implementation of economic policy, including privatisations, and the pace of economic and legal
reforms; (ii) expectations about the behaviour of the economy if certain economic policies are implemented;
(iii) the outlook for gross domestic product, inflation, exchange rates, interest rates, foreign investment, trade and
fiscal accounts; and (iv) estimates of external debt repayment and debt service.
In addition to the factors described in this Prospectus, including those discussed under the "Risk Factors", the
following factors, among others, could cause future results to differ materially from those expressed in any forward-
looking statements made herein:
· adverse external factors, such as global or regional economic slowdowns that may affect the Republic, higher
international interest rates, reduced demand for the Republic's exports or increases in oil and gas prices, which
could each adversely affect the Republic's economy and in particular could negatively affect the current account,
balance of payments and international reserves and cause or contribute to recession or low growth in the Republic;
· adverse domestic factors, such as recession, declines in foreign direct investment ("FDI") and portfolio
investment, high domestic inflation, high domestic interest rates, exchange rate volatility, a reduction in gas
supplies, difficulties in borrowing in the domestic and foreign markets, trade and political disputes between the
Republic and its trading partners, political uncertainty or lack of political consensus, which could each lead to
lower growth in the Republic and lower international currency reserves;
· decisions of the Republic's official creditors regarding the provision of new debt or rescheduling of the existing
debt and decisions of international organisations regarding the terms of their financial assistance to the Republic,
and accordingly the net cash flow to or from the Republic over the life of the Notes;
· decisions of international financial institutions such as the International Monetary Fund (the "IMF"), the World
Bank, the European Bank for Reconstruction and Development (the "EBRD") and the European Investment
Bank (the "EIB") regarding the funding of new or existing projects over the life of the Notes; and
· political and economic factors in the Republic and abroad, which affect the timing and structure of economic
reforms in the Republic, the success and timing of the Republic's accession to the European Union ("EU"), the
climate for FDI and the pace, scale and timing of privatisations in the Republic.
iv


DEFINED TERMS AND CONVENTIONS
The following terms are used to refer to economic concepts that are discussed in this Prospectus:
· Gross domestic product ("GDP") means the total value of goods and services produced inside a country during
the relevant period. Unless otherwise stated references to GDP is to real, rather than nominal, GDP.
· Gross value added ("GVA") is the value of output less the value of intermediate consumption; it is a measure of
the contribution to GDP made by an individual producer, industry or sector and is used to estimate GDP. GVA
(measured by sector) plus taxes minus subsidies equals GDP.
· Imports comprise all goods and services imported from abroad intended either for consumption or for inward
processing. Exports comprise all goods and services exported from Croatia, which originate from domestic
production or internal trade.
· The registered unemployment rate is calculated as the ratio of the members of the active population who register
with local employment agencies as being unemployed to the total active population. "Active Population" means
people employed and people over the age of 15 registered as seeking employment.
· The inflation rate is measured by the year-on-year percentage change in the consumer price index ("CPI"), unless
otherwise specified. The CPI index, measures inflation based on the price of a basket of approximately 740 goods
and services weighted according to the Household Budget Survey and retail sales data. Croatia also measures
inflation in terms of producer price index ("PPI"), which is the measure of wholesale prices at the producer level
calculated based on a basket of approximately 400 industrial products. Unlike CPI, PPI does not take into account
services. Year-on-year rates are calculated by comparing the average of the twelve monthly indices for the later
period against the average of the twelve monthly indices for the prior period.
· The budget deficit is consolidated revenues minus consolidated expenditures of the general government. This is
the principal measure of fiscal balance for countries participating in the European Economic and Monetary
Union.
· The Standard International Trade Classification ("SITC") is a statistical classification of the commodities
entering external trade. It is designed to provide the commodity aggregates required for the purposes of economic
analysis and to facilitate the international comparison of trade-by-commodity data.
· Consolidated public debt ("Consolidated Public Debt") means total internal and external general government
debt plus direct guarantee obligations (i.e. other than the guarantee obligations of HBOR) of Croatia.
· General government debt ("general government debt") consists of the sum of: (i) central government debt;
(ii) extra budgetary debt (of government funds and agencies); and (iii) local government debt.
Capitalised terms which are used but not defined in any particular section of this Prospectus will have the meaning
attributed thereto in "Conditions of the Notes" or any other section of this Prospectus.
Certain figures and percentages included in this Prospectus have been subject to rounding adjustments; accordingly
figures shown in the same category presented in different tables may vary slightly and figures shown as totals in
certain tables may not be an arithmetic aggregation of the figures which precede them.
References to a "billion" are to a thousand million.
All references in this document to "U.S. dollars", "dollars", "U.S.$", "USD" and "$" refer to United States dollars,
and to "HRK" and "Kuna" refer to the lawful currency for the time being of the Republic. In addition, references to
"euro", "EUR" and "E" refer to the currency introduced at the start of the third stage of European economic and
monetary union pursuant to the Treaty establishing the European Community, as amended. References to "Old EU
Member States" refer to Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, The Netherlands, Portugal, Spain, Sweden and United Kingdom whereas references to "New EU
Member States" are to all other Member States of the European Union.
v


INFORMATION SOURCES
The statistical information in this Prospectus has been derived from a number of different identified sources. All
statistical information provided in this Prospectus may differ from that produced by other sources for a variety of
reasons, including the use of different definitions and cut-off times.
The source for most of the financial and demographic statistics for Croatia included in this Prospectus is data
prepared by the Republic's Central Bureau of Statistics ("CBS"), a Croatian independent entity established to
provide comprehensive statistical information, and the Croatian National Bank ("CNB"). The CBS harmonises, to
the extent possible, its programmes and methodologies with the statistics of the EU. Certain other financial and
statistical information contained herein has been derived from official Croatian government sources including the
Ministry of Finance.
EXCHANGE RATES
The following table sets forth, for the periods indicated, the period end, average, high and low official mid-point
rates published by the Croatian National Bank, expressed in Kuna per U.S. Dollar.
Year Ended 31 December
Period End
Average(1)
High
Low
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.233626
5.949959
6.315817
5.556868
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.578401
5.839170
6.233626
5.521655
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.985456
5.365993
5.711720
4.933413
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.155504
4.934417
5.801776
4.522752
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.089300
5.280370
5.941123
4.803825
Month Ended
31 January 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.236361
5.098490
5.236361
5.009663
28 February 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.342054
5.327413
5.402364
5.222468
31 March 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.392463
5.346701
5.433298
5.259480
30 April 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.473884
5.405008
5.502769
5.319151
31 May 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.852635
5.752744
5.951009
5.440539
30 June 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.897241
5.921915
6.088922
5.806633
July 2010 (through 6 July) . . . . . . . . . . . . . . . . . . . . . . . . .
5.742232
5.804104
5.865387
5.742232
Source: Croatian National Bank
(1) Average of daily rates.
vi


CONTENTS
Page
OVERVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
CONDITIONS OF THE NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
THE GLOBAL CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28
OVERVIEW OF THE REPUBLIC OF CROATIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29
THE ECONOMY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39
FOREIGN TRADE AND INTERNATIONAL BALANCE OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . .
62
MONETARY DEVELOPMENTS AND INTERNATIONAL RESERVES . . . . . . . . . . . . . . . . . . . . . . . .
74
PUBLIC FINANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
95
PUBLIC DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
108
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
119
CLEARING AND SETTLEMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
121
SUBSCRIPTION AND SALE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
125
TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
127
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
129
vii


OVERVIEW
This Overview does not purport to be complete and must be read as an introduction to this Prospectus and any
decision to invest in the Notes should be based on a consideration of this Prospectus as a whole.
Words and expressions defined in "Conditions of the Notes" shall have the same meanings in this Overview.
THE REPUBLIC OF CROATIA
Territory and Population
The Republic occupies a total area of 56,538 square kilometres. The capital city, Zagreb, is located in the north of
the country. The Dinaric Alps, which rise to 1,831 metres above sea level, run the length of the country. Croatia
borders Slovenia to the north and Montenegro to the east and shares a sea border with Italy to the west and south.
The Danube forms the eastern border with Serbia while the other two large rivers, the Sava and Drava, form the
southern and northern borders with Bosnia Herzegovina and Hungary, respectively. The area of land between the
rivers is dissected by many smaller tributaries. The Adriatic coastline is the most prominent feature of Croatia,
running the entire length of the western border, from the Istrian peninsula in the north to Dubrovnik in the South
with approximately 1,185 islands along the coast.
Constitution and Government Structure
A new constitution was adopted on 22 December 1990 and was substantially amended in December 1997,
November 2000, March 2001 and June 2010 (the "Constitution"). It established a multi-party democracy, with an
economy based on market principles and private ownership. Under the Constitution, the President of Croatia (the
"President") is elected for five-year terms and may not serve more than two terms. The President appoints, with the
consent of the President of the Parliament, a Prime Minister of the Government (the "Prime Minister") who, in
turn, appoints Government Ministers. Dr. Ivo Sanader was appointed Prime Minister following elections in 2003
and was reappointed following elections in November 2007. In July 2009, Dr. Ivo Sanader voluntarily resigned and
Ms. Jadranka Kosor, the Vice Prime Minister at the time, was appointed as the Prime Minister. The Constitution is
based on the separation of powers between the legislature, executive and judiciary.
Judicial Reform
In 2008, the Government commenced a reform of the judiciary (the "Judicial Reform") in order to combat
corruption and restore confidence in the judicial system. The Ministry of Justice is undertaking measures aimed at
establishing a more efficient judicial system founded upon principles of independence and professionalism. The
objectives of the Judicial Reform include strengthening the rule of law, improving the efficiency and effectiveness
of the judicial system, shortening the period of time between the commencement and conclusion of training, and
improving professionalism and ongoing training of the staff.
International Relations
After gaining independence, Croatia was admitted to the United Nations (the "UN") in May 1992. In the same year,
Croatia became a participant country in the Organisation for Security and Co-operation in Europe ("OSCE") and
became a member of the IMF. In 1996, Croatia became the 40th Member State of the Council of Europe. In October
2000, Croatia became a member of the World Trade Organisation ("WTO"), while in 2002 it acceded to the Central
European Free Trade Area. Furthermore, Croatia was elected as a non-permanent member of the UN Security
Council for the period 2008-2009, holding the Council's Presidency in December 2008. Croatia became a candidate
country for EU accession in June 2004 and in 2010 the negotiation process entered the final phase, as discussed
below. In April 2009, Croatia acceded to the North Atlantic Treaty Organization ("NATO").
European Union Accession
In October 2005, the EU Council of Ministers opened the accession negotiations of Croatia with the EU. In total, 35
chapters of the acquis communautaire (as defined below) will be negotiated. The screening exercise for Croatia was
successfully completed in October 2006. It is currently expected that Croatia will conclude the accession
negotiations by the end of 2010. In accordance with Article 141 of the Constitution, a national referendum on
the EU accession must be held in Croatia. The Constitution has been substantially amended in June 2010, inter alia,
in connection with the EU accession. The bill relating to the amendment to the Constitution has been promulgated
by the Parliament on 16 June 2010. The key amendments include, inter alia, (1) the elimination of the quorum
requirement in Article 86 and 141 of the Constitution, which currently provide that at a referendum the decision is
made by the majority of the voters who have participated in the referendum, and (2) the addition of provisions
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relating to the European Union (membership and transfer of certain constitutional authorisations, participation in
the EU institutions, EU law, etc.), the majority of which will come into force on the day of accession of Croatia to
the European Union.
Economy
The framework and goals of the economic policy of Croatia are defined in a series of strategic documents of the
Government, namely: the Strategic Development Framework for 2006-2013, the Government Programmes Strategy
2010-2012, the Economic and Fiscal Policy Guidelines and the Pre-accession Economic Programme (the "PEP").
Those documents provide the basis for the implementation of the economic policy in the medium term period, and
they are prepared through consultations between the Government administration bodies and employers' and unions'
representatives.
The main objective of the economic policy in the current macroeconomic environment is to preserve
macroeconomic stability and create conditions for recovery and stable economic growth.
GDP
The effects of the global financial and economic crisis were first felt in Croatia in the second half of 2008 and
intensified towards the end of the year. The negative impact of the crisis intensified further in 2009 with the largest
GDP decline in the first quarter of 2009. In particular, real GDP growth slowed down from 5.5 per cent. in 2007 to
2.4 per cent. in 2008, while GDP contracted by 5.8 per cent. in 2009. The negative trends continued in the first
quarter of 2010, during which GDP recorded an annual decrease of 2.5 per cent. in real terms, according to the CBS
estimates.
Gross Value Added
GVA in real terms declined by 4.0 per cent. in 2009, decelerating by 6.8 per cent. as compared to 2008 when it grew
by 2.8 per cent. This decline was largely attributable to the real GVAdecrease in the wholesale and retail trade sector
and the mining, quarrying, manufacturing, electricity, gas and water supply sectors. The GVA dynamics and trends
in 2009 are primarily due to the negative effects of the global financial and economic crisis. Negative GVA trends
continued in the first quarter of 2010, during which period real GVA declined by 2.4 per cent. compared to the first
quarter of 2009 (from HRK 68,902 as at 31 March 2009, as compared to HRK 67,272 as at 31 March 2010). This
decrease was mainly due to real GVA decreases in the construction (18.7 per cent.), hotels and restaurants (5.5 per
cent.) and transport, storage and communication (5.4 per cent.) sectors.
Inflation
Price stability has consistently been the primary goal of the Croatian National Bank's (the "CNB") monetary policy,
which the CNB pursues primarily through the maintenance of the relatively stable HRK/EUR exchange rate. The
average annual rate of inflation as measured by the consumer price index ("CPI") increased from 2.9 per cent. in
2007 to 6.1 per cent. in 2008. This was principally due to a relatively high carry-over effect from 2007, and to a
sharp increase in prices of food and refined petroleum products in the first half of 2008. The surge in CPI peaked in
July 2008 when their annual rate of change reached 8.4 per cent. The annual rate of change of CPI subsequently
decreased to 2.9 per cent. in December 2008. Declines in inflation, which commenced in the second half of 2008,
continued throughout 2009. The average annual inflation rate decreased from 6.1 per cent. in 2008 to 2.4 per cent. in
2009. Several factors contributed to downward pressures on prices, including weakened domestic demand for goods
and services, reduced inflation pressures stemming from prices of imports and slower growth of unit labour costs.
These downward pressures were to some extent offset by the growth in prices of subsidised products, such as gas,
tobacco products, and medical and hospital services. Similar CPI trends continued at the beginning of 2010,
bringing the average annual inflation rate further down to 0.8 per cent. in the first four months of 2010. This was
mostly due to a decrease in meat and processed food prices during that period and the base comparison effect
associated with the already relatively strong increase in food and regulated prices at the beginning of 2009. An
opposite effect resulting in upward pressures on inflation stemmed from an increase in energy prices (gas and
refined petroleum product prices). PPI, trending upwards since October 2009, continued to grow through
April 2010.
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