Obligation Centralna Vlada 1.125% ( XS2309428113 ) en EUR

Centralna Vlada

100 % ▲

Croatie

XS2309428113 ( en EUR )

1.125% par an ( paiement annuel )

04/03/2033 - Obligation échue

Prospectus brochure de l'obligation Central Government: Republic of Croatia XS2309428113 en EUR 1.125%, échue

Le gouvernement central de la République de Croatie est composé du Parlement (Sabor), du Président et du Gouvernement (Cabinet).

L'Obligation émise par Centralna Vlada ( Croatie ) , en EUR, avec le code ISIN XS2309428113, paye un coupon de 1.125% par an.
Le paiement des coupons est annuel et la maturité de l'Obligation est le 04/03/2033

REPUBLIC OF CROATIA

1,000,000,000 1.125 per cent. Notes due 2033
1,000,000,000 1.750 per cent. Notes due 2041

Issue price for the 2033 Notes: 98.538 per cent.
Issue price for the 2041 Notes: 99.366 per cent.
The issue price of the 1,000,000,000 1.125 per cent. Fixed Rate Notes due 2033 (the "2033 Notes") issued by the Republic of Croatia (the
"Issuer", the "Republic" or "Croatia"), will be 98.538 per cent. of their principal amount. The 2033 Notes will mature on 4 March 2033 at their
principal amount. The issue price of the 1,000,000,000 1.750 per cent. Fixed Rate Notes due 2041 (the "2041 Notes" and, together with the 2033
Notes, the "Notes" and each a "Series") issued by the Issuer, will be 99.366 per cent. of their principal amount. The 2041 Notes will mature on 4
March 2041 at their principal amount.
The 2033 Notes will be in registered form in denominations of 100,000 and integral multiples of 1,000 in excess thereof. Interest on the
2033 Notes will accrue at the rate of 1.125 per cent. per annum from and including 4 March 2021 and will be payable in Euro annually in arrear on
4 March in each year, commencing on 4 March 2022. Payments on the 2033 Notes will be made without withholding or deduction for or on account
of taxes imposed by the Issuer except to the extent described under "Terms and Conditions of the 2033 Notes -- Taxation".
The 2041 Notes will be in registered form in denominations of 100,000 and integral multiples of 1,000 in excess thereof. Interest on the
2041 Notes will accrue at the rate of 1.750 per cent. per annum from and including 4 March 2021 and will be payable in Euro annually in arrear on 4
March in each year, commencing on 4 March 2022. Payments on the 2041 Notes will be made without withholding or deduction for or on account of
taxes imposed by the Issuer except to the extent described under "Terms and Conditions of the 2041 Notes -- Taxation".
This Offering Circular does not constitute a prospectus pursuant to Regulation (EU) 2017/1129 (the "Prospectus Regulation") or Regulation
(EU) 2017/1129 as it forms part of United Kingdom ("UK") domestic law by virtue of the European Union (Withdrawal) Act 2018 (the "UK
Prospectus Regulation"). This Offering Circular also does not constitute a light prospectus pursuant to Part III of the Luxembourg Act dated 16 July
2019 on prospectuses for securities (the "Luxembourg Act"). Accordingly, this Offering Circular does not purport to meet the format and the
disclosure requirements of the Prospectus Regulation and Commission Delegated Regulation (EU) No. 2019/980 or the UK Prospectus Regulation
and Commission Delegated Regulation (EU) No. 2019/980 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act
2018 (the "EUWA"). This Offering Circular has not been, and will not be, submitted for approval to any competent authority within the meaning of
the Prospectus Regulation or the UK Prospectus Regulation and in particular the Commission de Surveillance du Secteur Financier, in its capacity as
competent authority under the Prospectus Regulation or the UK Financial Conduct Authority, in its capacity as competent authority under the UK
Prospectus Regulation. Application has been made to the Luxembourg Stock Exchange for the Notes of each Series to be admitted to trading on the
Luxembourg Stock Exchange's regulated market and to be listed on the Official List of the Luxembourg Stock Exchange. The Luxembourg Stock
Exchange's regulated market is a regulated market for the purposes of the Markets in Financial Instruments Directive (Directive 2014/65/EU) (as
amended, "MiFID II").
The Issuer is rated Ba1 (stable outlook) by Moody's Investors Service, Inc. ("Moody's"), BBB- (stable outlook) by S&P Global Ratings Europe
Ltd. ("S&P"), and the Issuer has a long term foreign currency issuer default rating of BBB- (stable outlook) by Fitch Ratings Ltd. ("Fitch"). The
Notes will be rated Ba1 by Moody's, BBB- by S&P, and BBB- by Fitch. 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. As at the date of this Offering Circular, S&P is
established in the European Economic Area ( the "EEA") and registered under Regulation (EC) No 1060/2009 (as amended) (the "CRA Regulation"),
Fitch is established in the UK and registered under Regulation (EC) No 1060/2009 as it forms part of UK domestic law by virtue of the EUWA (the
"UK CRA Regulation") and Moody's is neither established in the EEA nor in the UK and not registered under the CRA Regulation or the UK CRA
Regulation. The ratings of S&P have been endorsed by S&P Global Ratings UK Limited ("S&P UK") in accordance with the UK CRA Regulation
for use in the UK. The ratings of Fitch have been endorsed by Fitch Ratings Ireland Limited ("Fitch Europe") in accordance with the CRA Regulation
for use in the EEA. The ratings of Moody's have been endorsed by Moody's Investors Service Ltd ("Moody's UK") in accordance with the UK CRA
Regulation for use in the UK and by Moody's Deutschland GmbH ("Moody's Europe") in accordance with the CRA Regulation for use in the EEA.
As such, each of S&P, Fitch Europe and Moody's Europe is included in the list of credit rating agencies published by the European Securities and
Markets Authority ("ESMA") on its website at https://www.esma.europa.eu/supervision/credit-rating-agencies/risk in accordance with the CRA
Regulation and each of Fitch, S&P UK and Moody's UK is included in the list of credit rating agencies published by the UK Financial Conduct
Authority (the "FCA") on its website at https://www.fca.org.uk/markets/credit-rating-agencies/registered-certified-cras. The list of registered and
certified rating agencies published by ESMA or the FCA on their respective websites is not conclusive evidence of the status of the relevant rating
agency included in such list, as there may be delays between certain supervisory measures being taken against a relevant rating agency and the
publication of the updated ESMA or FCA list. Certain information with respect to the credit rating agencies and ratings is set out in the sections
entitled "There can be no assurance that Croatia's credit ratings will not change" and "Credit Ratings may not reflect all risks" of this Offering
Circular.
The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or any
state securities law, and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act.
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MIFID II product governance / Professional investors and eligible counterparties only target market Solely for the purposes of each
manufacturer's product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for
the Notes is eligible counterparties and professional clients only, each as defined in MiFID II; and (ii) all channels for distribution of the Notes to
eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a
"distributor") should take into consideration the manufacturers' target market assessment; however, a distributor subject to MiFID II is responsible
for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturer`s target market assessment)
and determining appropriate distribution channels.
The Notes in respect of each Series will initially be represented by a global certificate (each a "Global Certificate" and together the "Global
Certificates"), in registered form, without interest coupons attached and will be registered in the name of a nominee of a common safekeeper for
Clearstream Banking S.A. ("Clearstream, Luxembourg") and Euroclear Bank SA/NV ("Euroclear"), on or about 4 March 2021 (the "Closing
Date"). The Notes in respect of each Series will be issued in the New Safekeeping Structure ("NSS"). This means that the Notes are intended to be
registered in the name of a nominee of a common safekeeper for Euroclear and Clearstream, Luxembourg and does not necessarily mean that the
Notes will be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or
at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria established by the European
Central Bank from time to time.
An investment in the Notes involves certain risks. See "Risk Factors" for a discussion of certain factors that should be considered in
connection with an investment in the Notes.
Joint Bookrunners and Joint Lead Managers
J.P. MORGAN
MORGAN STANLEY

SOCIÉTÉ GÉNÉRALE
ZAGREBACKA BANKA
CORPORATE & INVESTMENT BANKING
Joint Lead Manager
OTP BANK NYRT.

2 March 2021

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THE REPUBLIC OF CROATIA

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The Issuer accepts responsibility for the information contained in this Offering Circular. To the best of the
knowledge of the Issuer (having taken all reasonable care to ensure that such is the case) the information
contained in this Offering Circular is in accordance with the facts and does not omit anything likely to
affect the import of such information. The Issuer, having made all reasonable enquiries, confirms that this
Offering Circular contains all information with respect to the Issuer and the Notes which is material in the
context of the issue and offering of the Notes, that the information contained in this Offering Circular is
true and accurate in every material respect and is not misleading, that the opinions and intentions
expressed in this Offering Circular are honestly held and that there are no other facts the omission of which
makes misleading any statement herein, whether of fact or opinion.
No person has been authorised in connection with the offering of the Notes to give any information or make
any representation regarding the Issuer or the Notes other than as contained in this Offering Circular. Any
such representation or information should not be relied upon as having been authorised by the Issuer or
any agency thereof or the Joint Lead Managers (as defined under "Subscription and Sale"). Neither the
delivery of this Offering Circular nor any sales made in connection with the issue of the Notes shall, under
any circumstances, constitute a representation that there has been no change in the affairs of the Issuer
since the date hereof.
The Joint Lead Managers make no representation or warranty, express or implied, as to the accuracy or
completeness of the information in this Offering Circular. Each person receiving this Offering Circular
acknowledges that such person has not relied on any Joint Lead Manager or any person affiliated with any
Joint Lead Manager in connection with its investigation of the accuracy of such information or its
investment decision. Each person contemplating making an investment in the Notes must make its own
investigation and analysis of the creditworthiness of the Issuer and its own determination of the suitability
of any such investment, with particular reference to its own investment objectives and experience, and any
other factors which may be relevant to it in connection with such investment.
This Offering Circular does not constitute an offer of, or an invitation by or on behalf of the Issuer or any
agency thereof or any Joint Lead Manager to subscribe or purchase, any of the Notes. The distribution of
this Offering Circular and the offering of the Notes in certain jurisdictions may be restricted by law.
Persons into whose possession this Offering Circular comes are required by the Joint Lead Managers to
inform themselves about and to observe any such restrictions. For a description of certain further
restrictions on offers and sales of Notes and distribution of this Offering Circular, see "Subscription and
Sale".
Each potential investor in the Notes must determine the suitability of that investment in light of its own
circumstances. In particular, each potential investor should:
(i)
have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits
and risks of investing in the Notes and the information contained in this Offering Circular or any
applicable supplement;
(ii)
have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its
particular financial situation, an investment in the Notes and the impact the Notes will have on its
overall investment portfolio;
(iii)
have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes,
including where the currency for principal or interest payments is different from the potential
investor's currency;
(iv)
understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant
financial markets; and
(v)
be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for
economic, interest rate and other factors that may affect its investment and its ability to bear the
applicable risks.
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In this Offering Circular, all references to "HRK" and "kuna" are to the lawful currency for the time being
of the Issuer, all references to "", "EUR", "euro" and "Euro" are to the currency introduced at the start
of the third stage of European economic and monetary union pursuant to the Treaty on the Functioning of
the European Union, all references to "U.S. dollars", "US$" and "U.S.$" are to the lawful currency for the
time being of the United States of America and all references to "CHF" or "Swiss franc" are to Swiss
Francs. Certain amounts which appear in this Offering Circular have been subject to rounding
adjustments; accordingly, figures shown as totals may not be an arithmetic aggregation of the figures which
precede them. In this Offering Circular, unless the contrary intention appears, a reference to a law or a
provision of a law is a reference to that law or provision as extended, amended or re-enacted.
IN CONNECTION WITH THE ISSUE OF EACH SERIES, J.P. MORGAN AG AS STABILISATION
MANAGER (THE "STABILISATION MANAGER") (OR PERSONS ACTING ON BEHALF OF THE
STABILISATION MANAGER) MAY OVER-ALLOT NOTES OF A SERIES OR EFFECT
TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES OF A
SERIES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER,
STABILISATION MAY NOT NECESSARILY OCCUR. ANY STABILISATION ACTION MAY
BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE
TERMS OF THE OFFER OF THE NOTES OF THE RELEVANT SERIES IS MADE AND, IF BEGUN,
MAY CEASE AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS
AFTER THE ISSUE DATE OF THE NOTES AND 60 DAYS AFTER THE DATE OF THE
ALLOTMENT OF THE NOTES OF A SERIES. ANY STABILISATION ACTION OR OVER-
ALLOTMENT MUST BE CONDUCTED BY THE STABILISATION MANAGER (OR PERSONS
ACTING ON BEHALF OF THE STABILISATION MANAGER) IN ACCORDANCE WITH ALL
APPLICABLE LAWS AND RULES.
NOTIFICATION UNDER SECTION 309B(1)(c) OF THE SECURITIES AND FUTURES ACT
(CHAPTER 289) OF SINGAPORE, AS MODIFIED OR AMENDED FROM TIME TO TIME (the
"SFA") - In connection with Section 309B of the SFA and the Securities and Futures (Capital Markets
Products) Regulations 2018 of Singapore (the "CMP Regulations 2018"), the Issuer has determined the
classification of the Notes as prescribed capital markets products (as defined in the CMP Regulations 2018)
and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of
Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

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CONTENTS

Page
THE REPUBLIC OF CROATIA .................................................................................................................. i
RISK FACTORS .......................................................................................................................................... 1
TERMS AND CONDITIONS OF THE 2033 NOTES .............................................................................. 11
TERMS AND CONDITIONS OF THE 2041 NOTES .............................................................................. 30
SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM ............... 31
USE OF PROCEEDS ................................................................................................................................. 34
OVERVIEW OF THE REPUBLIC OF CROATIA ................................................................................... 35
THE ECONOMY ....................................................................................................................................... 40
FOREIGN TRADE AND INTERNATIONAL BALANCE OF PAYMENTS ......................................... 71
MONETARY DEVELOPMENTS, INTERNATIONAL RESERVES AND FINANCIAL SYSTEM ..... 85
PUBLIC FINANCE ................................................................................................................................. 112
PUBLIC DEBT ........................................................................................................................................ 137
TAXATION ............................................................................................................................................. 146
SUBSCRIPTION AND SALE ................................................................................................................. 147
GENERAL INFORMATION .................................................................................................................. 150

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RISK FACTORS
Investment in the Notes involves a high degree of risk. Prospective investors should carefully consider the
following risk factors, together with the other information set out in this Offering Circular, before making a
decision to invest in the Notes and should understand that the risks set forth below could, individually or in
the aggregate, have a material adverse effect on Croatia's capacity to repay principal and make payments
of interest on the Notes or otherwise fulfil its obligations under the Notes. Most of these factors are
contingencies which may or may not occur and Croatia is not in a position to express a view on the likelihood
of any such contingency occurring. Additional risks and uncertainties not currently known to Croatia or that
Croatia currently deems to be immaterial may also materially affect Croatia's economy and its ability to
fulfil its obligations under the Notes. In any such case, investors may lose all or part of their investment in
the Notes. Words and expressions defined in "Terms and Conditions of the 2033 Notes" or in "Terms and
Conditions of the 2041 Notes" or elsewhere in this Offering Circular have the same meanings in this section.
Risk Factors Relating to Croatia
Having acceded to the European Union ("EU") on the back of a raft of legal, economic, financial and
other reforms and policies, Croatia is undergoing a period of transition which may adversely affect the
Croatian economy and Croatia's ability to repay principal and make payments of interest on the Notes
On 1 July 2013, Croatia joined the EU and became its 28th member state. To facilitate this, the Government
of Croatia (the "Government") introduced structural measures in 2012 and 2013 with the aim of
strengthening the quality of public finances and bringing political, economic and judicial structures in line
with EU requirements.
Croatia has also undergone and continues to undergo changes in legislation due to its EU accession. As a
result, there is a lack of an established practice under many securities, tax and other regulatory regimes in
Croatia and new regulations may be subject to contradictory, ambiguous or changing interpretations by the
Croatian regulatory authorities. Consequently, companies operating in the region may face tax, securities and
other regulatory compliance related risks that may be less predictable than in countries with more stable
regulatory systems.
As a result of EU membership, Croatia may be eligible to receive financial assistance from EU structural
funds pursuant to the EU Cohesion Policy. However, there is no guarantee that Croatia will meet the criteria
to receive disbursements under these funds or that such funds would be available or the timing of any such
disbursements (see "The Economy -- Economic Policy -- EU Structural Funds").
Following accession to the EU, Croatia's economy is exposed to increased competition with other EU
Member States (a "Member State"). As part of its EU accession, Croatia also exited from the Central
European Free Trade Agreement ("CEFTA") - a trade agreement between the non-EU countries in Southeast
Europe, which previously accounted for a significant portion of Croatia's exports, particularly in the
agriculture and food industries. Croatia's trade with its non-EU trade partners now relies on each country's
respective Stabilisation and Association Agreement ("SSA"), which is each such country's bilateral trade
agreement with the EU. Following accession to the EU, Croatia's trade with CEFTA countries declined,
specifically in agro-food exports. In addition, as a result of EU accession Croatia is also required to
significantly reduce the level of domestic subsidies to the agriculture sector (see "The Economy --
Government Subsidies").
Croatia will be eligible to adopt the euro once it fulfils the necessary conditions. Croatia entered the Exchange
Rate Mechanism ("ERM II") on 10 July 2020. Under ERM II, the exchange rate of a non-euro area Member
State is fixed against the euro and is only allowed to fluctuate within set limits. Entry into ERM II is based
on an agreement between the ministers and central bank governors of the non-euro area Member State and
the euro area Member States, and the European Central Bank (the "ECB"). Entry into ERM II was a first step
towards the full adoption of the euro in Croatia, in line with Croatia's commitment pursuant to the treaty for
Croatia's accession into the EU. On 27 May 2019, the Republic of Croatia submitted a request to the ECB
for the establishment of a close cooperation between the ECB and the Croatian National Bank in the exercise
of supervisory tasks over credit institutions within the Single Supervisory Mechanism ("SSM"). On 4 July
2019, the Republic of Croatia sent a letter of intent to the euro area member states, Denmark and EU
institutions expressing its intent to enter the ERM II. This marked the first formal step towards the Republic
of Croatia's joining the ERM II, which precedes the introduction of the euro as a country's official currency.
The letter of intent was accompanied by an Action Plan detailing the reforms that the Republic of Croatia
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would implement before entering the ERM II (the "Action Plan"). The Republic of Croatia successfully
passed and implemented the agreed measures from the Action Plan and formally informed the institutions
and the ERM II parties by submitting its final report on implementation in June 2020. On 10 July 2020, the
Republic of Croatia formally entered the ERM II. Croatia's entry into the eurozone, will primarily depend on
Croatia's macroeconomic indicators, i.e. its ability to fulfil a set of membership criteria which are more
stringent than those applied to previous candidates. The policy measures required to meet such criteria,
adoption of the euro could each result in adverse macroeconomic effects on Croatia's economy and lead to
lower rates of, or negative, economic growth.
Croatia's economy remains vulnerable to both internal and external economic shocks as a result of the
global Coronavirus pandemic
Since the beginning of 2020, the outbreak and ongoing spread of the Coronavirus (the "Coronavirus
pandemic"), also known as COVID-19, has escalated into a global pandemic resulting in the implementation
of stringent travel and transport restrictions, quarantines and extended shutdowns of certain businesses
globally, including in Croatia, in an attempt to contain the continued spread of the virus. On 11 March 2020,
the Government declared an extraordinary epidemic "state of emergency" due to the Coronavirus outbreak
(the "State of Emergency"). On 19 March 2020, the Government made a decision to implement strict
measures in an attempt to stay ahead of the spread of the Coronavirus including: instituting restrictions on
social gatherings and work in trade and service activities, including food and beverage service activities,
temporarily halting border crossing for the Republic of Croatia; cancelling all sporting, cultural and other
large public events; and the closing all educational institutions, sport facilities recreational areas and
children's activity centres. The Coronavirus pandemic reached its initial peak in the second quarter of 2020,
allowing many countries to ease or suspend their restrictive measures in the summer months of 2020.
However, COVID-19 continued to spread internationally. In December 2020, new variants of the
Coronavirus were detected in numerous countries. As of January 2021, the Coronavirus pandemic was
detected in more than 200 countries and territories. The continued spread of the Coronavirus pandemic
through the second half of 2020 and into 2021, has forced many governments, including that of the Republic,
to reinstitute their series of restrictive measures in an attempt to slow and limit the spread of COVID-19. The
duration of these health measures is dependent upon the effectiveness and efficiency of coping with the
current situation both domestically and internationally.
The country's real gross domestic product ("GDP") is estimated to decline by 8.9 per cent. in 2020. In the
first nine months of 2020, domestic demand declined by 5.2 per cent., reflecting Croatian households'
precautionary savings as social distancing and increased unemployment led to a drop in private consumption
and increased uncertainty resulted in business delayed investment decisions. The external sector contribution
to GDP was negative as lower external demand, global supply chain disruptions and restricted international
travel led to a decline in the exports of goods and services by approximately 29.8 per cent. in the first nine
months of 2020. The accommodation and food service activities, the arts, entertainment and recreation and
the transport sectors were the primary economic sectors directly impacted by the state of emergency measures
as a result of a decrease in demand.
As noted above, the restrictive travel and quarantine measures currently in place globally may continue to
have an adverse effect on Croatia's tourism sector beyond the expiration of said measures. While the
Government has implemented numerous measures to address the impact of the Coronavirus pandemic on the
country's tourism industry, there is no guarantee that the Government's measures will be effective or that
tourists will return in similar numbers compared to before the Coronavirus pandemic. For more information,
see "The Economy Coronavirus Measures to assist the economy due to the Coronavirus pandemic". The
reduction in tourism has had a materially negative effect on the financial condition of Croatia, and a sustained
gap in tourism may increase this effect or delay Croatia's recovery. Moreover, no assurance can be made as
to the negative impacts of the Coronavirus pandemic continue, whether in Croatia or globally and the ongoing
impact remains highly uncertain.
In addition, the Coronavirus pandemic is expected to impact the labour market in 2021. The number of
employed workers decreased in 2020, and the unemployment rate reached 7.0 per cent. as compared to 6.6
per cent. in 2019. Employers are expected to adjust to the lower economic activity through reduction of
workers or a reduction in hours for workers. These outcomes could result in lower revenues from social
security contributions and higher expenditure on social security benefits. Even with the Government's
preventative measures to mitigate the potential economic impact of the Coronavirus pandemic, the
Coronavirus pandemic could have an adverse effect on the funds available to social security and healthcare
services in Croatia in the future.
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On 17 March 2020 and 2 April 2020, the Government adopted two comprehensive and targeted packages of
economic measures to mitigate the Coronavirus pandemic's negative impact on economic activity. The goal
of these measures was to help the private sector, as the bearer of economic activity, to overcome the crisis
through job preservation and payment of salaries and to solve the liquidity problems of those business
activities, which have been reduced by the Coronavirus pandemic. For more information on these measures
and policies see "The Economy Coronavirus Measures to assist the economy due to the Coronavirus
pandemic". The combined impact of the slowdown in economic activity and the cost of such measures has
had a material negative impact on the Government's budget. As a result of the Coronavirus pandemic,
Government expenditures increased significantly while budget revenues decreased, resulting in the
Government's need to amend the initial 2020 State Budget in May 2020. For more information see, "The
Economy Functioning of the public finance system and the sustainability of public services financing". As
a result, Croatia's deficit increased in 2020, requiring both reductions in other spending and external
financing. Moreover, the debt/GDP ratio is expected to rise to 87.3 per cent. and 85.3 per cent. in 2020 and
2021, respectively. In addition, the Croatian National Bank ("CNB") implemented, within its mandate,
numerous measures aimed at both preserving the stability of the banking system and strengthening its
flexibility to reduce the adverse effects on households and companies from the restrictions caused by
Coronavirus pandemic. No assurance may be given that the Government's deficit and public debt will not
increase more than expected, on the availability of external financing and the terms of such financing or that
the Government's measures will be sufficient to limit the negative economic effects of the Coronavirus
pandemic and, after its end, to put Croatia's economy on a path to recovery, which in turn may have a negative
effect on the financial condition of the Issuer.
Accordingly, Croatia's economy and its capacity to repay principal and/or interest on the Notes may be
adversely affected as a result of issues arising from the ongoing Coronavirus pandemic, including the impact
on Croatia's public finances or linked to an economic slowdown in the Eurozone or owing to a prolonged
recession or depression in the global economy.
Croatia's economy remains vulnerable to external shocks and internal economic challenges which could
have an adverse effect on Croatia's economic growth and its ability to service its public debt
Croatia's economy remains vulnerable to external shocks, including the impact of the Coronavirus pandemic,
see "-- Croatia's economy remains vulnerable to both internal and external economic shocks as a result of
the global Coronavirus pandemic", as well as the earthquakes in Zagreb and Petrinja in 2020, see "The
Economy Earthquakes", which negatively affected the Croatian economy, and the ongoing political turmoil
in certain emerging markets as well as the continuing uncertainty regarding certain Member States.
Croatia continues to face a number of economic challenges including low worker participation, deleveraging
of the private sector and large infrastructural damage and additional pressure public services. Even if the
global economy recovers in the future following the Coronavirus pandemic, the recovery may not be
sustained and may reverse. Unfavourable demographic trends (i.e. ageing population, emigration of skilled
workers and/or declining workforce) could have negative implications for economic growth and fiscal policy.
This could have a material adverse effect on Croatia's ability to repay principal and make payments of interest
on the Notes and on Croatia's credit rating.
Depreciation in the kuna may adversely affect the Croatian economic and financial condition
A significant portion (approximately 72 per cent.) of Croatia's public external debt and domestic debt is
denominated in or linked to foreign currencies. In addition, government guarantees are denominated in or linked
to foreign currency. In the event of foreign currency fluctuations, and a depreciation of the kuna relative to the
U.S. dollar, the euro or the Swiss franc, the negative impact on the service obligations in respect of the debt
denominated in foreign currencies will likely not be offset by any positive impact on the service obligations in
respect of debt denominated in kuna. Any significant depreciation of the kuna may have an adverse effect on
the Republic's ability to repay its debt denominated in foreign currencies, including the amounts due under the
Notes. The CNB has intervened in the foreign currency as part of its policy of pursuing a stable euro/kuna
exchange rate, as a result of depreciation during volatile market conditions resulting from the Coronavirus
pandemic. The depreciation of the kuna against foreign currencies may negatively affect the capacity of
corporate and household borrowers to repay their debt and as a result adversely affect the financial and economic
condition of Croatia. (See "Monetary Developments, International Reserves and Financial System -- Monetary
Policy and Instruments").
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The further proliferation of the euro in the Croatian economy may adversely affect the CNB's ability to
implement its monetary policies
In recent years, the role of the euro in the Croatian economy and circulation of the euro in Croatia
substantially increased as a result of sizeable euro capital inflows from abroad, including from persons
working abroad who send money to their families in Croatia; the tourism industry, in particular the
population's willingness to accept euro from tourists; and the fact that a majority of corporate and household
loans are euro-denominated or euro-indexed. As the Government's domestic monetary policy mostly impacts
the kuna and has limited impact on other currencies including the euro, the further proliferation of the euro
in the Croatian economy and widespread use of euro by the population may undermine the ability of the CNB
to implement its monetary policies. Similarly, the policies of the ECB affecting the euro are likely to
indirectly impact the Croatian economy. Any limitations on the ability of the CNB to implement its monetary
policies may have an adverse effect on the Croatian economy and thus on the ability of Croatia to repay
principal and make payments of interest on the Notes.
The current account balance may deteriorate
Croatia's current account deficit has declined gradually since 2008 and recorded surpluses in each year since
2014, although this trend reversed in 2020 due to the Coronavirus pandemic. Nevertheless, as a small, open
economy, Croatia's current account balance is significantly affected by its trade balance and any future negative
changes in the trade balance and the current account balance could have an adverse effect on the Croatian
economy and thus on the ability of Croatia to repay principal and make payments of interest on the Notes.
If Government revenue decreases, some or all of the Government's expenditure reduction plans prove
insufficient or additional spending is required, and state-owned enterprises' dependence on public
finances is not reduced, Croatia may not be able to service its public debt and, as a result, to repay principal
and make payments of interest on the Notes
Without on-going and sufficient structural reforms aimed at reducing the dependence of state-owned
enterprises on public finances and at fostering greater economic efficiency through broader private sector
participation, revenue raising measures could prove inadequate. The Government's ability to make payments
may become further affected by economic cyclical trends. Lower than expected growth would have a negative
impact on budget revenue and would increase the Government deficit. With the resulting negative implications
due to the Coronavirus pandemic, as well as the earthquake in Zagreb, Government expenditures increased
significantly and revenues decreased requiring a revised 2020 Budget. This negative impact continued through
2020, with the ongoing spread of the Coronavirus pandemic and Croatia's second earthquake in Petrinja in
2020, resulting in an estimated general government deficit of 8.0 per cent. of GDP following the Government's
adoption of a comprehensive package of measure to help the economy, see "The Economy Functioning of
the public finance system and the sustainability of public services financing". Moreover, as noted above
demographic trends, including an ageing population, are likely to limit the ability of the Croatian government
to reduce expenditures.
Taken as a whole, reduced revenue, coupled with high expenses related to public wages, social benefits,
interest payments, healthcare system, pensions and subsidies, may adversely affect Croatia's ability to repay
principal and make payments of interest on the Notes.
There can be no assurance that Croatia's credit ratings will not change
The long term foreign and domestic currency debt of the Republic is currently rated BBB- (stable outlook)
by S&P and Ba1 (stable outlook) by Moody's and BBB- (stable outlook) by Fitch. There can be no guarantee
that the Republic will not experience credit downgrades or negative revisions to the outlook. Deterioration
in key economic indicators or the materialisation of any of the risks discussed herein may contribute to credit
rating downgrades. Any adverse changes in an applicable credit rating or credit rating outlook could
adversely affect the trading price for the Notes. In addition, negative ratings action could adversely affect
Croatia's ability to refinance existing indebtedness or finance its deficit and could affect payment of principal
and interest under the Notes.
Croatia may not be able to refinance its debt on favourable terms or at all
Croatia has substantial amounts of internal and external public debt. As at 31 December 2019, the general
Government debt stood at HRK 292.4 billion (72.7 per cent. of GDP) and Government guarantees stood at
HRK 4.4 billion (1.1 per cent. of GDP), for a total amount of HRK 296.8 billion or 73.8 per cent. of GDP.
87441-8-18318-v3.5
- 4 -
UK-0060-A

Document Outline

#3">THE REPUBLIC OF CROATIA
#4">Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
- #4">(i) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained in this Offering Circular or any applicable supplement;
- #4">(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;
- #4">(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal or interest payments is different from the potential investor's currency;
- #4">(iv) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant financial markets; and
- #4">(v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
#7">RISK FACTORS
- #7">Risk Factors Relating to Croatia
#7">Having acceded to the European Union ("EU") on the back of a raft of legal, economic, financial and other reforms and policies, Croatia is undergoing a period of transition which may adversely affect the Croatian economy and Croatia's ability to repa...
#9">Depreciation in the kuna may adversely affect the Croatian economic and financial condition
#10">The further proliferation of the euro in the Croatian economy may adversely affect the CNB's ability to implement its monetary policies
#10">The current account balance may deteriorate
#10">If Government revenue decreases, some or all of the Government's expenditure reduction plans prove insufficient or additional spending is required, and state-owned enterprises' dependence on public finances is not reduced, Croatia may not be able to ...
#10">There can be no assurance that Croatia's credit ratings will not change
#10">Croatia may not be able to refinance its debt on favourable terms or at all
#11">Private Croatian borrowers may not be able to repay or reschedule their debt which may have a material adverse effect on the Croatian banking system and the Croatian economy
#11">Corruption and money laundering issues may hinder the growth of the Croatian economy and otherwise have a material adverse effect on Croatia
#12">Croatia's legal system is not fully developed and presents greater risks and uncertainties than a more developed legal system
- #13">Risk Factors Relating to an Investment in the Notes
#13">The terms of each Series may be modified or waived without the consent of all the Holders of the Notes
#14">The Issuer may choose to grant preferential treatment to other unsecured creditors
#14">Event of Default
#15">There may be no active trading market for the Notes
#17">TERMS AND CONDITIONS OF THE 2033 NOTES
- #17">1. Form, Denomination and Title
  - #17">1.1 Form and Denomination
  - #17">1.2 Title
- #18">2. Transfers of Notes and Issue of Certificates
  - #18">2.1 Transfers
  - #18">2.2 Delivery of new Certificates
  - #18">2.3 Formalities free of charge
  - #18">2.4 Closed Periods
  - #18">2.5 Regulations
- #18">3. Status
- #19">4. Negative Pledge and Other Covenants
  - #19">4.1 Negative Pledge
    - #19">In these Conditions:
      - #19">(a) any Security Interest upon property (or any revenues therefrom) to secure Public External Indebtedness incurred for the purpose of financing the acquisition or construction of such property (or property which forms part of a class of assets of a s...
      - #19">(b) any Security Interest existing on property (or any revenues therefrom) at the time of its acquisition;
      - #19">(c) any Security Interest arising by operation of law which has not been foreclosed or otherwise enforced against the assets to which it applies;
      - #19">(d) any Security Interest securing or providing for the payment of Public External Indebtedness incurred in connection with any Project Financing provided that such Security Interest only applies to (i) properties which are the subject of such Project...
      - #19">(e) the renewal or extension of any Security Interest described in sub paragraphs (a) and (b) above, provided that the principal amount of the original financing secured thereby is not increased.
- #20">5. Interest
  - #20">5.1 Interest Rate and Interest Payment Dates
  - #20">5.2 Interest Accrual
    - #20">Each Note will cease to bear interest from and including its due date for redemption unless, upon due presentation, payment of the principal in respect of the Note is improperly withheld or refused or unless default is otherwise made in respect of pa...
      - #20">(a) the date on which all amounts due in respect of such Note have been paid; and
      - #20">(b) the day on which notice has been given to the Noteholders that the Fiscal Agent or the Registrar has received all sums due in respect of the Notes up to such day (except, in the case of payment to the Fiscal Agent or the Registrar to the extent th...
  - #20">5.3 Calculation of Broken Interest
- #20">6. Payments
  - #20">6.1 Payments in respect of Notes
  - #20">6.2 Payments subject to Applicable Laws
  - #21">6.3 No commissions
  - #21">6.4 Payment on Business Days
  - #21">6.5 Partial Payments
  - #21">6.6 Agents
    - #21">The names of the initial Agents and their initial specified offices are set out at the end of these Conditions. The Republic reserves the right at any time to vary or terminate the appointment of any Agent and to appoint additional or other Agents p...
      - #21">(a) there will at all times be a Fiscal Agent;
      - #21">(b) there will at all times be an Agent (which may be the Fiscal Agent) having a specified office in a major European city; and
      - #21">(c) there will at all times be a Registrar.
- #21">7. Redemption and Purchase
  - #21">7.1 Redemption at Maturity
  - #21">7.2 Purchases
  - #22">7.3 Cancellations
- #22">8. Taxation
  - #22">8.1 Payment without Withholding
    - #22">All payments in respect of the Notes by or on behalf of the Republic shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied col...
      - #22">(a) to a holder, or to a third party on behalf of a holder, if such holder is liable to such Taxes in respect of such Note by reason of his having some connection with the Republic other than the mere holding of the Note; or
      - #22">(b) if such Note is surrendered for payment more than 30 days after the Relevant Date (as defined below), except to the extent that the holder would have been entitled to such additional amounts on surrender of such Note for payment on the last day of...
  - #22">8.2 Interpretation
  - #22">8.3 Additional Amounts
- #22">9. Prescription
- #22">10. Events of Default
  - #22">10.1 Events of Default
    - #22">(a) if default is made in the payment of any interest due in respect of the Notes or any of them and the default continues for a period of 15 days from the due date for payment thereof; or
    - #22">(b) if the Republic fails duly to perform or observe any of its other obligations under these Conditions and such failure continues unremedied for 45 days after written notice thereof has been delivered by any Noteholder to the Fiscal Agent; or
    - #23">(c) the Republic ceases to be a member of the International Monetary Fund ("IMF") or to be eligible to use the general resources of the IMF, and such situation continues unremedied for 45 days after written notice thereof has been delivered by any Not...
    - #23">(d) (a) the acceleration of the maturity (other than by optional or mandatory redemption or other prepayment) of any Public External Indebtedness of the Republic, (b) the Republic defaults in the payment of any principal of or interest on, or any amou...
    - #23">(e) if the Republic shall declare a general moratorium on the payment of principal of, or interest on the Public External Indebtedness of the Republic,
  - #23">10.2 Withdrawal
- #23">11. Replacement of Certificates
- #23">12. Notices
  - #23">12.1 Notices to the Noteholders
  - #24">12.2 Notices to the Republic
- #24">13. Meetings of Noteholders; Written Resolutions
  - #24">13.1 Convening Meetings of Noteholders; Conduct of Meetings of Noteholders; Written Resolutions
    - #24">(a) The Republic may convene a meeting (including by way of telephone or video conference) of the Noteholders at any time in respect of the Notes in accordance with the Agency Agreement. The Republic will determine the time and place (which need not b...
    - #24">(b) The Republic will convene a meeting of Noteholders if the holders of at least 10 per cent. in principal amount of the outstanding Notes (as defined in the Agency Agreement and described in Condition 13.9 (Notes controlled by the Republic) below) h...
    - #24">(c) The Republic (with the agreement of the Fiscal Agent) will set the procedures governing the conduct of any meeting in accordance with the Agency Agreement. If the Agency Agreement does not include such procedures, or additional procedures are requ...
    - #24">(d) The notice convening any meeting will specify, inter alia;
      - #24">(i) the date, time and location of the meeting;
      - #24">(ii) the agenda and the text of any Extraordinary Resolution to be proposed for adoption at the meeting;
      - #24">(iii) the record date for the meeting, which shall be no more than five business days before the date of the meeting;
      - #24">(iv) the documentation required to be produced by a Noteholder in order to be entitled to participate at the meeting or to appoint a proxy to act on the Noteholder's behalf at the meeting;
      - #24">(v) any time deadline and procedures required by any relevant international and/or domestic clearing systems or similar through which the Notes are traded and/or held by Noteholders;
      - #24">(vi) whether Condition 13.2 (Modification of this Series of Notes only), or Condition 13.3 (Multiple Series Aggregation … Single limb voting), or Condition 13.4 (Multiple Series Aggregation … Two limb voting) shall apply and, if relevant, in relation ...
      - #24">(vii) if the proposed modification or action relates to two or more series of debt securities issued by the Republic and contemplates such series of debt securities being aggregated in more than one group of debt securities, a description of the propo...
      - #25">(viii) such information that is required to be provided by the Republic in accordance with Condition 13.6 (Information);
      - #25">(ix) the identity of the Aggregation Agent and the Calculation Agent, if any, for any proposed modification or action to be voted on at the meeting, and the details of any applicable methodology referred to in Condition 13.7 (Claims Valuation); and
      - #25">(x) any additional procedures which may be necessary and, if applicable, the conditions under which a multiple series aggregation will be deemed to have been satisfied if it is approved as to some but not all of the affected series of debt securities.
    - #25">(e) In addition, the Agency Agreement contains provisions relating to Written Resolutions. All information to be provided pursuant to Condition 13.1(d) (Convening Meetings of Noteholders; Conduct of Meetings of Noteholders; Written Resolutions) shall ...
    - #25">(f) A "record date" in relation to any proposed modification or action means the date fixed by the Republic for determining the Noteholders and, in the case of a multiple series aggregation, the holders of debt securities of each other affected series...
    - #25">(g) An "Extraordinary Resolution" means any of a Single Series Extraordinary Resolution, a Multiple Series Single Limb Extraordinary Resolution and/or a Multiple Series Two Limb Extraordinary Resolution, as the case may be.
    - #25">(h) A "Written Resolution" means any of a Single Series Written Resolution, a Multiple Series Single Limb Written Resolution and/or a Multiple Series Two Limb Written Resolution, as the case may be.
    - #25">(i) Any reference to "debt securities" means any notes (including the Notes), bonds, debentures or other debt securities issued by the Republic in one or more series with an original stated maturity of more than one year.
    - #25">(j) "Debt Securities Capable of Aggregation" means those debt securities which include or incorporate by reference this Condition 13 (Meetings of Noteholders; Written Resolutions) and Condition 14 (Aggregation Agent; Aggregation Procedures) or provisi...
  - #25">13.2 Modification of this Series of Notes only
    - #25">(a) Any modification of any provision of, or any action in respect of, the Notes, the Agency Agreement and/or the Deed of Covenant may be made or taken if approved by a Single Series Extraordinary Resolution or a Single Series Written Resolution as se...
    - #25">(b) A "Single Series Extraordinary Resolution" means a resolution passed at a meeting of Noteholders duly convened and held in accordance with the procedures prescribed by the Republic and the Fiscal Agent pursuant to Condition 13.1 (Convening Meeting...
      - #25">(i) in the case of a Reserved Matter, at least 75 per cent. of the aggregate principal amount of the outstanding Notes; or
      - #25">(ii) in the case of a matter other than a Reserved Matter, more than 50 per cent. of the aggregate principal amount of the outstanding Notes.
    - #26">(c) A "Single Series Written Resolution" means a resolution in writing signed or confirmed in writing by or on behalf of the holders of:
      - #26">(i) in the case of a Reserved Matter, at least 75 per cent. of the aggregate principal amount of the outstanding Notes; or
      - #26">(ii) in the case of a matter other than a Reserved Matter more than 50 per cent. of the aggregate principal amount of the outstanding Notes.
    - #26">(d) Any Single Series Extraordinary Resolution duly passed or Single Series Written Resolution approved shall be binding on all Noteholders, whether or not they attended any meeting, whether or not they voted in favour thereof and whether or not they ...
  - #26">13.3 Multiple Series Aggregation … Single limb voting
    - #26">(a) In relation to a proposal that includes a Reserved Matter, any modification to the terms and conditions of, or any action with respect to, two or more series of Debt Securities Capable of Aggregation may be made or taken if approved by a Multiple ...
    - #26">(b) A "Multiple Series Single Limb Extraordinary Resolution" means a resolution considered at separate meetings of the holders of each affected series of Debt Securities Capable of Aggregation, duly convened and held in accordance with the procedures ...
    - #26">(c) A "Multiple Series Single Limb Written Resolution" means each resolution in writing (with a separate resolution in writing or multiple separate resolutions in writing distributed to the holders of each affected series of Debt Securities Capable of...
    - #26">(d) Any Multiple Series Single Limb Extraordinary Resolution duly passed or Multiple Series Single Limb Written Resolution approved shall be binding on all Noteholders and holders of each other affected series of Debt Securities Capable of Aggregation...
    - #26">(e) The "Uniformly Applicable" condition will be satisfied if:
      - #26">(i) the holders of all affected series of Debt Securities Capable of Aggregation are invited to exchange, convert, or substitute their debt securities, on the same terms, for (i) the same new instrument or other consideration or (ii) a new instrument,...
      - #27">(ii) the amendments proposed to the terms and conditions of each affected series of Debt Securities Capable of Aggregation would, following implementation of such amendments, result in the amended instruments having identical provisions (other than pr...
    - #27">(f) It is understood that a proposal under Condition 13.3(a) above will not be considered to satisfy the Uniformly Applicable condition if each exchanging, converting, substituting or amending holder of each affected series of Debt Securities Capable ...
    - #27">(g) Any modification or action proposed under Condition 13.3(a) may be made in respect of some series only of the Debt Securities Capable of Aggregation and, for the avoidance of doubt, the provisions described in this Condition 13.3 may be used for d...
  - #27">13.4 Multiple Series Aggregation … Two limb voting
    - #27">(a) In relation to a proposal that includes a Reserved Matter, any modification to the terms and conditions of, or any action with respect to, two or more series of Debt Securities Capable of Aggregation may be made or taken if approved by a Multiple ...
    - #27">(b) A "Multiple Series Two Limb Extraordinary Resolution" means a resolution considered at separate meetings of the holders of each affected series of Debt Securities Capable of Aggregation, duly convened and held in accordance with the procedures pre...
      - #27">(i) at least two thirds of the aggregate principal amount of the outstanding debt securities of all affected series of Debt Securities Capable of Aggregation (taken in aggregate); and
      - #27">(ii) more than 50 per cent. of the aggregate principal amount of the outstanding debt securities in each affected series of Debt Securities Capable of Aggregation (taken individually).
    - #27">(c) A "Multiple Series Two Limb Written Resolution" means each resolution in writing (with a separate resolution in writing or multiple separate resolutions in writing distributed to the holders of each affected series of Debt Securities Capable of Ag...
      - #27">(i) at least two thirds of the aggregate principal amount of the outstanding debt securities of all the affected series of Debt Securities Capable of Aggregation (taken in aggregate); and
      - #28">(ii) more than 50 per cent. of the aggregate principal amount of the outstanding debt securities in each affected series of Debt Securities Capable of Aggregation (taken individually).
    - #28">(d) Any Multiple Series Two Limb Extraordinary Resolution duly passed or Multiple Series Two Limb Written Resolution approved shall be binding on all Noteholders and holders of each other affected series of Debt Securities Capable of Aggregation, whet...
    - #28">(e) Any modification or action proposed under Condition 13.4(a) may be made in respect of some series only of the Debt Securities Capable of Aggregation and, for the avoidance of doubt, the provisions described in this Condition 13.4 may be used for d...
  - #28">13.5 Reserved Matters
    - #28">(a) to change the date, or the method of determining the date, for payment of principal, interest or any other amount in respect of the Notes, to reduce or cancel the amount of principal, interest or any other amount payable on any date in respect of ...
    - #28">(b) to change the currency in which any amount due in respect of the Notes is payable or the place in which any payment is to be made;
    - #28">(c) to change the majority required to pass an Extraordinary Resolution, a Written Resolution or any other resolution of Noteholders or the number or percentage of votes required to be cast, or the number or percentage of Notes required to be held, in...
    - #28">(d) to change this definition, or the definition of "Extraordinary Resolution", "Single Series Extraordinary Resolution", "Multiple Series Single Limb Extraordinary Resolution", "Multiple Series Two Limb Extraordinary Resolution", "Written Resolution"...
    - #28">(e) to change the definition of "debt securities" or "Debt Securities Capable of Aggregation";
    - #28">(f) to change the definition of "Uniformly Applicable";
    - #28">(g) to change the definition of "outstanding" or to modify the provisions of Condition 13.9 (Notes controlled by the Republic);
    - #28">(h) to change the legal ranking of the Notes;
    - #28">(i) to change any provision of the Notes describing circumstances in which Notes may be declared due and payable prior to their scheduled maturity date, set out in Condition 10 (Events of Default);
    - #28">(j) to change the law governing the Notes, the courts to the jurisdiction of which the Republic has submitted in the Notes, any of the arrangements specified in the Notes to enable proceedings to be taken or the Republic's waiver of immunity, in respe...
    - #29">(k) to impose any condition on or otherwise change the Republic's obligation to make payments of principal, interest or any other amount in respect of the Notes, including by way of the addition of a call option;
    - #29">(l) except as permitted by any related guarantee or security agreement, to release any agreement guaranteeing or securing payments under the Notes or to change the terms of any such guarantee or security; or
    - #29">(m) to exchange or substitute all the Notes for, or convert all the Notes into, other obligations or securities of the Republic or any other person, or to modify any provision of these Conditions in connection with any exchange or substitution of the ...
      - #29">(i) the provisions of the other obligations or debt securities of the Republic or any other person resulting from the relevant exchange or substitution or conversion; or
      - #29">(ii) if more than one series of other obligations or debt securities results from the relevant exchange or substitution or conversion, the provisions of the resulting series of debt securities having the largest aggregate principal amount.
  - #29">13.6 Information
    - #29">(a) a description of the Republic's economic and financial circumstances which are, in the Republic's opinion, relevant to the request for any potential modification or action, a description of the Republic's existing debts and a description of its br...
    - #29">(b) if the Republic shall at the time have entered into an arrangement for financial assistance with multilateral and/or other major creditors or creditor groups and/or an agreement with any such creditors regarding debt relief, a description of any s...
    - #29">(c) a description of the Republic's proposed treatment of external debt securities that fall outside the scope of any multiple series aggregation and its intentions with respect to any other debt securities and its other major creditor groups; and
    - #29">(d) if any proposed modification or action contemplates debt securities being aggregated in more than one group of debt securities, a description of the proposed treatment of each such group, as required for a notice convening a meeting of the Notehol...
  - #29">13.7 Claims Valuation
  - #30">13.8 Manifest error, etc.
  - #30">13.9 Notes controlled by the Republic
  - #30">13.10 Publication
  - #31">13.11 Exchange and Conversion
- #31">14. Aggregation Agent; Aggregation Procedures
  - #31">14.1 Appointment
  - #31">14.2 Extraordinary Resolutions
  - #31">14.3 Written Resolutions
  - #31">14.4 Certificate
    - #31">The certificate shall:
      - #31">(a) list the total principal amount of Notes and, in the case of a multiple series aggregation, the total principal amount of each other affected series of debt securities outstanding on the record date; and
      - #32">(b) clearly indicate the Notes and, in the case of a multiple series aggregation, debt securities of each other affected series of debt securities which shall be disregarded and deemed not to remain outstanding as a consequence of Condition 13.9 (Meet...
  - #32">14.5 Notification
  - #32">14.6 Binding nature of determinations; no liability
  - #32">14.7 Manner of publication
    - #32">The Republic will publish all notices and other matters required to be published pursuant to the Agency Agreement including any matters required to be published pursuant to Condition 10 (Events of Default), Condition 13 (Meetings of Noteholders; Writ...
      - #32">(a) on the website of the Croatian Ministry of Finance (Ministarstvo Financija);
      - #32">(b) through the systems of Clearstream Banking S.A. and Euroclear Bank SA/NV and/or any other international or domestic clearing system(s) through which the Notes are for the time being cleared;
      - #32">(c) in such other places and in such other manner as may be required by applicable law or regulation; and
      - #32">(d) in such other places and in such other manner as may be customary.
- #32">15. Noteholders' Committee
  - #32">15.1 Appointment
    - #32">(a) Holders of at least 25 per cent. of the aggregate principal amount of the outstanding debt securities of all series of affected debt securities (taken in aggregate) may, by notice in writing to the Republic (with a copy to the Fiscal Agent), appoi...
      - #32">(i) an Event of Default under Condition 10 (Events of Default);
      - #32">(ii) any event or circumstance which could, with the giving of notice, lapse of time, the issuing of a certificate and/or fulfilment of any other requirement provided for in Condition 10 (Events of Default) become an Event of Default;
      - #33">(iii) any public announcement by the Republic, to the effect that the Republic is seeking or intends to seek a rescheduling or restructuring of the Notes or any other affected series of debt securities (whether by amendment, exchange offer or otherwis...
      - #33">(iv) with the agreement of the Republic, at a time when the Republic has reasonably reached the conclusion that its debt may no longer be sustainable whilst the Notes or any other affected series of debt securities are outstanding.
    - #33">(b) Upon receipt of a written notice that a committee has been appointed in accordance with Condition 15.1(a) (… Appointment), and a certificate delivered pursuant to Condition 15.4 (… Certification), the Republic shall give notice of the appointment ...
      - #33">(i) all Noteholders in accordance with Condition 12 (Notices); and
      - #33">(ii) the holders of each affected series of debt securities in accordance with the terms and conditions of such affected series of debt securities,
  - #33">15.2 Powers
    - #33">Such committee in its discretion may, among other things:
      - #33">(a) engage legal advisers and financial advisers to assist it in representing the interests of the Noteholders;
      - #33">(b) adopt such rules as it considers appropriate regarding its proceedings;
      - #33">(c) enter into discussions with the Republic and/or other creditors of the Republic; and
      - #33">(d) designate one or more members of the committee to act as the main point(s) of contact with the Republic and provide all relevant contact details to the Republic.
  - #33">15.3 Engagement with the committee and provision of information
    - #33">(a) The Republic shall:
      - #33">(i) subject to Condition 15.3(b), engage with the committee in good faith;
      - #33">(ii) provide the committee with information equivalent to that required under Condition 13.6 (Meetings of Noteholders; Written Resolutions … Information) and related proposals, if any, in each case as the same become available, subject to any applicab...
      - #33">(iii) pay any reasonable fees and expenses of any such committee as may be agreed with it (including without limitation, the reasonable and documented fees and expenses of the committee's legal and financial advisers, if any) following receipt of reas...
    - #33">(b) If more than one committee has been appointed by holders of affected series of debt securities in accordance with the provisions of this Condition 15 (Noteholders' Committee) and/or equivalent provisions set out in the terms and conditions of any ...
  - #34">15.4 Certification
    - #34">The certificate shall certify:
      - #34">(a) that the committee has been appointed;
      - #34">(b) the identity of the initial Members; and
      - #34">(c) that such appointment complies with the terms and conditions of the relevant bond documentation.
- #34">16. Further Issues
- #34">17. Governing Law and Submission to Jurisdiction
  - #34">17.1 Governing Law
  - #34">17.2 Jurisdiction
- #35">18. Rights of Third Parties
#36">TERMS AND CONDITIONS OF THE 2041 NOTES
#36">The terms and conditions of the 2041 Notes will be identical to those described under "Terms and Conditions of the 2033 Notes" above, except as follows:
- #36">(a) the reference in the introductory paragraph to the " 1,000,000,000 1.125 per cent. Notes due 2033" shall be replaced by a reference to the " 1,000,000,000 1.750 per cent. Notes due 2041" and references to "Notes" shall be construed as references t...
- #36">(b) the reference in Condition 5.1 to "1.125 per cent." shall be replaced by a reference to "1.750 per cent.";
- #36">(c) the final sentence in the first paragraph of Condition 5.1 shall be replaced by the sentence: "The first payment for the period from and including 4 March 2021 to but excluding 4 March 2022 and amounting to 17.50 per 1,000 principal amount of No...
- #36">(d) the reference in Condition 7.1 to "4 March 2033" shall be replaced by a reference to "4 March 2041".
#37">SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM
#37">1. Form of the Notes
#37">2. Accountholders
#37">3. Cancellation
#37">4. Payments
#38">5. Notices
#38">6. Registration of Title
#38">7. Exchange for Certificates Exchange
- #38">(a) circumstances described in Condition 10 (Events of Default) have occurred; or
- #38">(b) Euroclear and/or Clearstream, Luxembourg is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces that it is permanently to cease business or does in fact do so and no success...
#40">USE OF PROCEEDS
#41">OVERVIEW OF THE REPUBLIC OF CROATIA
- #43">The Judicial System
#44">Judicial Reform
#44">Anti-Corruption and Organised Crime
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#45">Presidential Elections
#45">Local Elections
#45">Cooperation with the ICTY and Domestic War Crime Trials
#45">General Information
#46">THE ECONOMY
#46">The National Reform Programme (NRP) was adopted on 30 April 2020, within the framework of the European Semester, and defines the economic policy priorities and measures, which the Republic of Croatia plans to implement in the following 12 to 18 month...
#46">Objective 1: Sustainable economic growth and development
- #46">1. Improving the business environment
- #47">2. Investment policies directed towards the future
- #47">3. Improving management and utilisation of state assets
- #47">4. Improving public administration
- #47">5. Improvement of the efficiency of the judicial system
- #47">6. Education and training in accordance with labour market needs
- #48">7. Strengthening the framework for managing public finances and implementation of fiscal consolidation
- #48">8. Stimulation of demographic renewal
- #48">9. Improving the social welfare system
- #48">10. Ensuring financial stability, sustainability and quality of the healthcare system
#50">Measures to assist the economy due to the Coronavirus pandemic
#50">Horizontal Measures
#50">Postponement and write-off of direct taxes and contributions for all entrepreneurs facing difficulties in their business operations
#50">Subsidies for job preservation
#51">Measures directed towards micro, small and medium-sized entrepreneurs
#51">Loans of the Croatian Bank for Reconstruction and Development ("CBRD") and commercial banks
#51">Functioning of the public finance system and the sustainability of public services financing
#52">Sector Measures
- #53">Earthquakes
- #53">EU Structural Funds
- #54">Plans for Adoption of the Euro
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- #56">Economic Incentives Reform
#57">Reform of Croatia's Roads and Motorways Overview
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- #57">(i) The operation and maintenance activities have been assigned to HAC-ONC (as defined below).
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#58">Debt optimisation exercise in respect of the Road Companies
- #58">Gross Domestic Product
- #60">Gross Value Added ("GVA")
#64">Wholesale and retail trade, transportation, storage, accommodation and food service activities
#64">Information and communication
#64">Financial and insurance activities
#65">Real estate activities
#65">Other Sectors
- #65">Inflation and Trends in Prices
#65">Overview of Inflation
#67">Inflation Outlook for 2021
#67">Government Subsidies
- #68">Croatian Bank for Reconstruction and Development
- #68">Employment
- #70">Wages and labour costs
- #71">Social Security System Unemployment
- #71">Healthcare
#72">Pension System
#74">National Benefit for the Elderly
#74">The Social Welfare System
#74">Pending International Arbitrations
#74">The Republic of Croatia appears as a respondent in nine arbitrations at the ICSID. In chronological order, the material proceedings are:
- #74">1. MOL Hungarian Oil and Gas Company Plc v. Republic of Croatia (ARB/13/32)
- #75">2. A series of proceedings relating to Swiss Franc Loans:
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#77">FOREIGN TRADE AND INTERNATIONAL BALANCE OF PAYMENTS
- #77">Current Account Balance
- #77">Goods Account and Recent Trade in Goods Developments
#77">Trade in Goods Deficit
#78">Exports
#79">Imports
#80">Geographical Distribution of Croatia's Trade in Goods
- #83">Details of the International Balance of Payments
#84">Balance of payments for the periods indicated (EUR millions)
- #85">Capital Account
- #85">Financial Account
- #86">Foreign Direct Investment
- #87">Exchange Rates
#91">MONETARY DEVELOPMENTS, INTERNATIONAL RESERVES AND FINANCIAL SYSTEM
- #91">Monetary Policy and Instruments
- #91">Monetary Policy Developments January 2016 … December 2020
#93">Reserve Requirements and Credit Schemes
- #93">Foreign Currency Liquidity and Reverse Operations
- #94">Legal Framework
- #96">Monetary Developments
- #98">International Reserves Management
- #100">Banking System
- #100">Banking Regulation and Supervision
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#104">Classification of Placements
#105">Structure of the Banking Industry
#106">Capitalisation
- #107">Risk-Based Capital Requirements, Solvency and Profitability Ratios
- #108">Loan Exposure
- #112">Continuing impact of the economic and financial crisis on the financial markets
- #112">Foreign Currency Liquidity
- #113">Deposit Insurance
#113">Regulation of the Non-Banking Sector
- #113">Money Market
#115">Capital Markets
#116">2017 to 2020 trading summary
#118">PUBLIC FINANCE
- #118">Fiscal Framework - Excessive Deficit Procedure
- #118">Fiscal developments in 2016
- #119">Fiscal developments in 2017
- #120">Fiscal developments in 2018
- #122">Fiscal developments in 2019
- #123">Overview of the 2020 budget
- #125">Resulting fiscal trends in the Budgetary Central Government for the year ended 31 December 2020
- #125">2021 Budget Plan
- #126">Fiscal Responsibility Act
#127">Fiscal rules
#127">Fiscal Policy Committee
- #128">Regulation on Preparation and Submission of the Fiscal Responsibility Statement and Reports on the Application of Fiscal Rules
- #128">Budget Process
#128">In December 2012, the Act on the Amendments to the Budget Act was adopted. A primary reason for these changes was to facilitate EU programmes in light of Croatia's impending accession to the EU. For example, changes introduced by this Act included:
- #128">1. Increased flexibility being given concerning execution of the financial contributions of the Republic to the EU Budget based on the system of EU-own resources. These contributions can be executed above the planned level in the same manner as the pr...
- #129">2. Budget users being allowed to make an advance payment without the consent of the Minister of Finance or the president of a local and regional executive body for liabilities assumed under contracts for projects co-financed by the EU funds.
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#129">The Act on the Amendments to the Budget Act introduced the following changes:
- #129">1. The budget process was being harmonised with EU requirements by including two key documents of the European Semester, the National Reform Programme and the Convergence Programme of the Republic of Croatia in the budget planning process.
- #129">2. Coverage of the general government sector defined by the Budget Act and the register of budget users and extrabudgetary users was harmonised in the part defining the extrabudgetary users with statistical coverage established by the European statist...
- #129">3. The strengthening of medium-term budget framework through:
- #129">strengthening the role of projections adopted together with the budget by the Parliament or the representative body of local or regional self-government unit.
- #129">changes to setting ceilings for budget users as the basis for preparation of the financial plans (ceilings are necessary for the implementation of existing programmes or activities and will be given separately from the ceilings which are necessary f...
- #129">4. The strengthening of the budget transparency principle by prescribing mandatory publication of yearly financial statements for budgets, budget users and extrabudgetary users on their websites.
- #129">5. The improvement of projections and control of future spending through monitoring and approving the creation of multi-annual liabilities regardless of the source of financing (both state and local or regional self-government units) or budget users' ...
- #129">6. Improved control of the use of budget funds as a result of the provision requiring budget users, extrabudgetary users and local or regional self-government units to conduct inspections of purposeful and lawful use of the funds paid from the budget ...
- #129">7. Greater flexibility in the execution of EU projects introduced by facilitating the reallocation of up to 15 per cent. for national participation in project financing (an increase from 5 per cent.).
- #129">8. Improved implementation of the objectives of public debt management as a result of the obligation to prepare public debt management strategy and to monitor its implementation.
#129">Budget preparation consists of four steps:
- #129">1. The Strategic Plans for a three-year period are prepared by budgetary users in coordination with the ministry in charge of structural reforms and coordination of EU funds (by the end of March) and they are used as a basis for The National Reform Pr...
- #130">2. Economic and Fiscal Policy Guidelines for a three-year period are adopted by the Government covering strategic goals of economic and fiscal policy, key macroeconomic indicators, key indicators of fiscal policy, revenue and expenditure estimates of ...
- #130">3. Instructions for the Preparation of the State Budget Proposal are prepared and delivered to the budgetary and extrabudgetary users by the Ministry of Finance based on the Economic and Fiscal Policy Guidelines. Responsible ministries submit coordina...
- #130">4. The Ministry of Finance prepares the draft State Budget and projections for the next two-year period and delivers it to the Government (by 15 October).
#131">Ex-Post Evaluation of the Effects of Selected Programmes, Activities and Projects
#131">Revision of the strategic planning process
- #132">The new Budget Act (in progress)
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#138">This includes, generally, non-profit legal entities engaged in economic activity and any other entrepreneur not subject to income tax and whose profit is not subject to taxation elsewhere.
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#143">PUBLIC DEBT
#143">Overview
- #143">General Government Debt and Debt Instruments
- #143">General Government Domestic Debt Stock of Croatia
- #144">Central Government Debt and Debt Instruments
#144">Central Government Domestic Debt Stock of Croatia
#147">Overview of external Central Government debt stock and redemptions
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#148">External Debt
#148">Total External Debt (Public and Private)
#152">TAXATION
#153">SUBSCRIPTION AND SALE
#153">United Kingdom
#153">Each Joint Lead Manager has represented and agreed that:
- #153">(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 20...
- #153">(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.
#154">The offering of the Notes has not been registered pursuant to Italian securities legislation and, accordingly, no Notes may be offered, sold or delivered, nor may copies of this Offering Circular or of any other document relating to the Notes be dist...
- #154">(i) to qualified investors (investitori qualificati), as defined pursuant to Article 2 of the Prospectus Regulation and any applicable provision of Legislative Decree No. 58 of 24 February 1998, as amended (the "Financial Services Act") and Italian CO...
- #154">(ii) in other circumstances which are exempted from the rules on public offerings pursuant to Article 1 of the Prospectus Regulation, Article 34 ter of CONSOB Regulation No. 11971 of 14 May 1999, as amended from time to time, and the applicable Italia...
#154">Any offer, sale or delivery of the Notes or distribution of copies of this Offering Circular or any other document relating to the Notes in the Republic of Italy under (i) or (ii) above must be:
- #154">(a) made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act, CONSOB Regulation No. 20307 of 15 February 2018 (as amended from time to time) ...
- #154">(b) in compliance with any other applicable laws and regulations or requirement imposed by CONSOB, the Bank of Italy (including the reporting requirements, where applicable, pursuant to Article 129 of the Banking Act and the implementing guidelines of...
#154">Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
- #154">(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited in...
- #154">(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
#156">GENERAL INFORMATION
#156">Copies (and certified English translations where the documents in question are not in English) of the following documents may be inspected during usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) at the offices of ...
- #156">(a) the Agency Agreement in respect of each Series, which includes the form of the Certificates of such Series;
- #156">(b) the Deed of Covenant in respect of each Series;
- #156">(c) the resolutions of the Minister of Finance dated 1 March 2021 authorising the issue of the Notes; and
- #156">(d) the budget of the Issuer for the current fiscal year.
#156">In respect of the 2033 Notes:
#157">In respect of the 2041 Notes: