Obbligazione Croatica 5% ( XS0190291582 ) in EUR

Croatica

100 EUR ▲

Croazia

XS0190291582 ( in EUR )

5% per anno ( pagato 1 volta l'anno)

15/04/2014 - Obbligazione è scaduto

Prospetto opuscolo dell'obbligazione Croatia XS0190291582 in EUR 5%, scaduta

1 000 EUR

500 000 000 EUR

La Croazia offre una costa frastagliata con isole, spiagge e città storiche, un entroterra montuoso con parchi nazionali e un ricco patrimonio culturale.

The Obbligazione issued by Croatica ( Croatia ) , in EUR, with the ISIN code XS0190291582, pays a coupon of 5% per year.
The coupons are paid 1 time per year and the Obbligazione maturity is 15/04/2014

Offering Circular
Republic of Croatia
5500,000,000
5% Notes due 2014
Issue price: 99.155%
The issue price of the 1500,000,000 5% Notes due 2014 (the "Notes") issued by the Republic of Croatia
(the "Issuer", the "Republic" or "Croatia"), will be 99.155% of their principal amount. The Notes will
mature on 15th April 2014 at their principal amount.
The Notes will be in bearer form in denominations of 11,000, 110,000 and 1100,000. Interest on the
Notes will accrue at the rate of 5% per annum from and including 15th April 2004 and will be payable
in Euro annually in arrear on 15th April in each year, commencing 15th April 2005. Payments on the
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 Notes -- Taxation".
Application has been made to list the Notes on the Luxembourg Stock Exchange.
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 or to, or for the account or benefit of, any U.S. person except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the Securities Act.
The Notes will initially be represented by a temporary global Note (the "Temporary Global Note"),
without interest coupons, which will be deposited with a common depositary for Clearstream Banking,
société anonyme ("Clearstream, Luxembourg") and Euroclear Bank S.A./N.V., as operator of the
Euroclear System ("Euroclear"), on or about 15th April 2004 (the "Closing Date"). The Temporary Global
Note will be exchangeable for interests in a permanent global Note (the "Permanent Global Note") on or
after a date which is expected to be 25th May 2004 (the "Exchange Date") upon certification as to non-
U.S. beneficial ownership. The Permanent Global Note will be exchangeable for definitive Notes only in
certain limited circumstances as described herein. See "Summary of Provisions relating to the Notes while
in Global Form".
See "Investment Considerations" for a discussion of certain factors that should be considered in
connection with an investment in the Notes.
Joint Lead Managers
JPMorgan
UBS Investment Bank
Co-Managers
Alpha Bank
Citigroup
Deutsche Bank
Dresdner Kleinwort Wasserstein
DZ BANK AG
Landesbank Baden Württemberg
RZB Austria
UBM UniCredit Banca Mobiliare
Raiffeisen Zentralbank Österreich AG
14th April 2004

The Republic of Croatia
2

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. The
Issuer accepts responsibility for the information contained in this Offering Circular accordingly.
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 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 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 Manager or any person affiliated
with any 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 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 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".
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 "2" and "Euro" are 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, all references to "DEM" and "Deutsche Mark" are to
the non-decimal denomination of the Euro as defined by the conversion rate irrevocably fixed in
accordance with Article 1091(4) sentence 1 of the EC Treaty, and all references to "U.S.
dollars", "US$" and "USD" are to the lawful currency for the time being of the United States
of America. On 14th April 2004 the Croatian National Bank middle exchange rate between the
Euro and the Kuna was 21.00 = HRK7.499435 and the exchange rate between U.S. dollars and
the Kuna was US$1.00 = HRK6.197368.
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 connection with the issue, J.P. Morgan Securities Ltd. or any agent acting on its
behalf may over-allot or effect transactions with a view to supporting the market price
of the Notes at a level higher than that which might otherwise prevail for a limited
period after the issue date. However, there may be no obligation on J.P. Morgan
Securities Ltd. or any agent to do this. Such stabilising, if commenced, may be
discontinued at any time and must be brought to an end after a limited period.
3

Table of Contents
Investment Considerations ........................................................................................
5
Terms and Conditions of the Notes ..........................................................................
8
Use of Proceeds ........................................................................................................
15
Summary of Provisions relating to the Notes while in Global Form............................
16
Overview of the Republic of Croatia ........................................................................
18
The Economy ............................................................................................................
25
Recent Economic Trends ..........................................................................................
29
Foreign Trade and International Balance of Payments ..............................................
45
Monetary and Financial Systems ..............................................................................
54
Public Finance ..........................................................................................................
64
Public Debt ..............................................................................................................
72
Taxation....................................................................................................................
86
Subscription and Sale................................................................................................
87
General Information ................................................................................................
89
4

Investment Considerations
In addition to the other information contained in this Offering Circular, prospective investors
should consider carefully the information set forth below before making an investment in the
Notes.
General
Since gaining its independence in 1992, Croatia's political, legal, judicial and regulatory
structures have undergone extensive changes with a view to Croatia joining the European
Union by 2007. To the extent that such structures have been changed, they have not been fully
tested. As a consequence, investment in Croatia carries risks which are not typically associated
with investing in more mature markets.
Political Considerations
Since 1993, Croatia has been pursuing a programme of economic structural reform which has
resulted in the establishment of a free market economy through privatisation of state
enterprises and deregulation of the economy. The recently elected Government has reaffirmed
its intention to continue the strategy in favour of a pro-European, mainstream conservative
orientation that is committed to democracy, the rule of law, human rights and minority rights.
It is expected that the political initiatives necessary to achieve Croatia's transformation and such
economic reforms described elsewhere in this Offering Circular will continue with a view to
achieving their intended aims.
Economic Infrastructure
Since independence, Croatia has invested in repairing and modernising its infrastructure. Roads,
railways, seaports and airports have been a particular focus for the Government and future
investments are expected to continue. The rebuilding of Croatia's infrastructure to Western
European levels still requires further investment and may take some years to complete.
Official Economic Data
The Croatian Central Bureau of Statistics (the "CBS"), the Ministry of Finance and the Croatian
National Bank (the "CNB") regularly publish statistics on Croatia and its economy. There can be
no assurance that the statistics are as accurate as those compiled by statistics bureaus in
developed countries, but in recent years major adjustments have been made to the balance of
payments ("BOP"), System of National Accounts ("SNA") and Government Finance Statistics
("GFS") in line with international methodologies. Croatia has also signed an agreement with
the International Monetary Fund (the "IMF") to publish certain key economic data on the IMF
web site. Data now adheres to Special Data Dissemination Standards ("SDDS").
Economic Development
Since 2000, economic growth has increased, with recorded GDP growth of 2.9% in 2000,
3.8% in 2001 and 5.2% in 2002. In 2003, GDP growth was 4.3%. In 2002, GDP growth was
influenced by an increase in personal consumption which rose by 6.6% in 2002 and gross
capital formation which was due to a wage bill increase caused by average wage growth,
increased employment and new household borrowing from deposit taking banks. The growth
continued in early 2003 with real growth of GDP estimated at 4.9%, 5.0%, 3.9% and 3.3%
for the first, second, third and fourth quarters, respectively, higher than the corresponding
periods in 2002. This growth was influenced by investment activity and an increase in the
foreign goods and services trade. However, there can be no assurance that the favourable
factors which influenced the growth rates and positive growth trend will continue.
The 2000 current account deficit was the lowest since 1994 at US$459 million (2.5% of GDP).
Improved tourist revenues and increased transfers and a fairly stable merchandise trade deficit
account for the improvement. In 2001, the current account deficit increased to US$725 million
5

(3.7% of GDP) mainly due to an increase in imports. As a result of deterioration of the
merchandise trade balance and due to pronounced cross-currency changes of the U.S. dollar
against the Euro and Kuna, the current account deficit in 2002 increased to 8.5% of GDP.
Deficit growth was caused by foreign trade liberalisation together with consumption increase
triggered by credit expansion. In 2003, tourism revenues contributed to moderating the
external account deficit to 7.2% of estimated GDP for 2003.
Settlement of Outstanding Debt
After independence, Croatia, along with some of the other successor republics of the Socialist
Federal Republic of Yugoslavia ("SFRY"), entered into negotiations with the SFRY's creditors in
respect of outstanding SFRY debt. Agreements were concluded during 1995 and 1996 with
international institutions such as the Paris Club (in respect of public creditors) and the London
Club (in respect of commercial banks), as well as with foreign suppliers. These agreements were
concluded on the general basis of Croatia assuming responsibility for 28.49% of unallocated
outstanding SFRY debt, with the Paris and London Club agreements resulting in a rescheduling
of principal over extended periods of up to 14 years.
The London Club agreement releases Croatia from joint and several liability in respect of the
external debt of the SFRY to foreign commercial banks. Croatia has honoured all its assumed
obligations under its rescheduling agreements.
Privatisation Programme
Restructuring of the Croatian economy is not complete. Croatia commenced its privatisation
programme in 1991, with the aim of privatising some 3,000 "socially owned" companies.
The vast majority of companies in the former SFRY were "socially owned", i.e. owned and
managed by the employees. Under the main privatisation law, the Law on Transformation of
Socially Owned Companies (the "Law on Transformation"), published in the Official Gazette,
No. 19/91, 83/92, 84/92, 94/93, 2/94 and 9/95 and the Law on Privatisation (the "Law on
Privatisation"), published in the Official Gazette, No. 21/96, shares in each company were
offered to employees and former employees before being offered to individuals outside the
company. The take up rate was high, given that these shares were offered at discounts to their
market value (20% plus 1% for each year of employment in Croatia), and consequently little
change in the ownership structures resulted. This effectively ruled out large scale restructuring
or redundancies in many companies. In addition, actual cash raised from privatisations has been
minimal, due to the fact that most shares were offered to employees at a discount, or were
free within the voucher scheme described below. Until 1999, Croatia did not rely upon
privatisation receipts to fund budget expenditures. In 1999, the privatisation proceeds of the
strategic sale of 35% and in 2001 of another 16% of Croatian Telecom shares to Deutsche
Telekom contributed significantly to the budget revenues in such years.
The continued reform of the Croatian economy depends in part upon the successful
privatisation of the utilities and the largely completed privatisation of the banking sector. Any
significant disruption in the privatisation process may adversely affect the reforms currently
being undertaken. The first phase of the privatisation of the Croatian oil and gas company,
Industrija Nafte d.d. ("INA"), was completed in July 2003 with the sale of an interest
representing 25% plus 1 share to the Hungarian oil and gas company, Magyar Olaj-és Gázipari
("MOL") which invested US$505 million.
The approach to privatisation by the former centre-left Government saw all Government
holdings (other than in banks, insurance companies and utilities) consolidated into the Croatian
Privatisation Fund ("CPF") portfolio. At the beginning of 2000, the CPF's share portfolio
consisted of stakes in 1850 companies. In the first six months of 2000, holdings in almost 450
companies were divested by CPF. CPF has undertaken an analysis of each company to develop
a restructuring programme for it which forms the basis of negotiations with creditors and
potential buyers. The principle of using market value rather than book value as the basis for
price negotiations has now been adopted. As of 1st October 2003, CPF's portfolio comprised
6

1,133 companies, 854 of which are eligible for privatisation. See "Economy -- The Privatisation
Programme - Approach to Privatisation", below.
Croatia's Legal System
Croatia has taken, and continues to take, steps to move towards a mature legal system which
is comparable to the legal systems of the EU countries. New laws have been introduced and
revisions have been made with respect to company, property, bankruptcy, competition,
securities, labour, taxation, mutual funds and telecommunications laws to harmonise them with
EU laws. Such new laws and revisions remain untested in the courts and do not have a long
history of interpretation. In some circumstances, therefore, it may not be possible to obtain
swift enforcement of judgments in Croatia.
Croatian Investors
The Notes and Coupons (each as defined herein) are governed by English law and the Issuer
has submitted to the non-exclusive jurisdiction of the courts of England to settle any disputes
that may arise out of or in connection with any Note or Coupon (see "Terms and Conditions of
the Notes -- 15. Governing Law and Jurisdiction" below). In respect of any proceedings
between the Issuer and a Croatian natural or legal person to which a non-Croatian natural or
legal person is not also a party, a Croatian court may refuse to recognise and give effect to the
choice of English law as the law governing the Notes and Coupons and may also refuse to
recognise and enforce an English court judgment awarded in connection therewith in the
Republic of Croatia.
7

Terms and Conditions of the Notes
The following is the text of terms and conditions of the Notes which, subject to completion and
amendment, will be attached and (subject to the provisions thereof) will apply to each Note in
definitive form:
The 1500,000,000 5% Notes due 2014 (the "Notes", which expression includes, unless the
context otherwise requires, any further Notes issued pursuant to Condition 12 and forming a
single series with the Notes) of the Republic as represented by the Minister of Finance were
authorised pursuant to the Budget Execution Law of 2004 of the Republic. A fiscal agency
agreement dated 15th April 2004 (the "Fiscal Agency Agreement") has been entered into in
relation to the Notes between the Republic, JPMorgan Chase Bank as fiscal and principal paying
agent (the "Fiscal Agent") and the other paying agent named therein (together with the Fiscal
Agent, the "Paying Agents"). In these Conditions, "Fiscal Agent" and "Paying Agent" shall
include any successors appointed from time to time in accordance with the provisions of the
Fiscal Agency Agreement, and any reference to an "Agent" or "Agents" shall mean any or all
(as applicable) of such persons. The statements in these Conditions include summaries of, and
are subject to, the detailed provisions of the Fiscal Agency Agreement. The Fiscal Agency
Agreement includes the form of the Notes and the coupons relating to them (the "Coupons").
Copies of the Fiscal Agency Agreement are available for inspection during usual business hours
at the principal office of the Fiscal Agent at Trinity Tower, 9 Thomas More Street, London
EC1W 1YT and at the specified offices of each of the other Agents. The holders of the Notes
(the "Noteholders") and the holders of the Coupons (whether or not attached to them) (the
"Couponholders") are bound by, and are deemed to have notice of, the provisions of the Fiscal
Agency Agreement.
1.
Form, Denomination and Title
(a)
Form and Denomination
The Notes are serially numbered and in bearer form, in denominations of 11,000, 110,000 or
1100,000 each with Coupons attached on issue. Notes of one denomination may not be
exchanged for Notes of any other denomination.
(b) Title
Title to the Notes will pass by delivery. The holder of any Note or Coupon will (except as
otherwise required by law) be treated as its absolute owner for all purposes (whether or not it
is overdue and regardless of any notice of ownership, trust or any interest therein, any writing
thereon or any notice of any previous theft or loss thereof) and no person will be liable for so
treating the holder.
2.
Status
The Notes and Coupons constitute direct, unconditional, (subject to the provisions of Condition
3) unsecured and unsubordinated and general obligations of the Republic. The Notes and
Coupons rank pari passu, without any preference among themselves, and at least pari passu in
right of payment with all other present and future unsecured obligations of the Republic, save
only for such obligations as may be preferred by mandatory provisions of applicable law.
3.
Negative Pledge and Other Covenants
(a)
Negative Pledge
So long as any of the Notes or Coupons remains outstanding, the Republic will not grant or
permit to be outstanding any mortgage, charge, lien, pledge or other security interest (each a
"Security Interest"), other than a Permitted Security Interest, over any of its present or future
assets or revenues or any part thereof, to secure any Public External Indebtedness of the
Republic or any other person or any guarantee of the Republic in respect of Public External
Indebtedness unless the Republic shall, in the case of the granting of the security, before or at
8

the same time, and in any other case, promptly, procure that the Republic's obligations under
the Notes and Coupons are secured equally and rateably therewith.
(b) Other Covenants
So long as any Note remains outstanding, the Republic shall do or cause to be done all things
necessary to ensure the continuance of all governmental consents, licences, approvals and
authorisations, and make or cause to be made all registrations, recordings and filings, which
may at any time be required to be obtained or made in the Republic for the execution, delivery
or performance of the Notes and Coupons or for the validity or enforceability thereof.
(c)
Certain Definitions
In these Conditions:
"Permitted Security Interest" means:
(i) any Security Interest upon property 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 similar nature where the Security Interest is by reference to the
constituents of such class from time to time);
(ii) any Security Interest existing on property at the time of its acquisition;
(iii) any Security Interest arising by operation of law which has not been foreclosed or otherwise
enforced against the assets to which it applies;
(iv) 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 (a) properties which are the subject of such Project Financing or (b) revenues or
claims which arise from the operation, failure to meet specifications, exploitation, sale or loss
of, or failure to complete, or damage to, such properties; or
(v) the renewal or extension of any Security Interest described in sub paragraphs (i) and (ii)
above, provided that the principal amount of the original financing secured thereby is not
increased.
"Project Financing" means any arrangement for the provision of funds which are to be used
principally to finance a project for the acquisition, construction, development or exploitation of
any property pursuant to which the persons providing such funds agree that the principal
source of repayment of such funds will be the project and the revenues (including insurance
proceeds) generated by such project.
"Public External Indebtedness" means any obligation for borrowed money which is (a) in the
form of or represented by notes, bonds or other similar securities and which is listed or capable
of being listed on any stock exchange and (b) denominated or payable, or at the option of the
holder thereof payable, in a currency other than the lawful currency of the Republic provided
that, if at any time the lawful currency of the Republic is the Euro, then any indebtedness as
described in (a) denominated or payable, or at the option of the holder thereof payable, in
Euro, shall be included in "Public External Indebtedness".
4.
Interest
Each Note bears interest from and including 15th April 2004 at the rate of 5% per annum,
payable annually in arrear on 15th April in each year until maturity (each an "Interest Payment
Date"). The first such payment will be made on 15th April 2005. Interest will be paid subject
to, and in accordance with, the provisions of Condition 6.
The period beginning on and including 15th April 2004 and ending on but excluding the first
Interest Payment Date and each successive period beginning on and including an Interest
Payment Date and ending on but excluding the next successive Interest Payment Date is called
an "Interest Period".
9

Each Note will cease to bear interest from and including the due date for redemption unless,
after surrender of such Note, payment of principal is improperly withheld or refused or unless
default is otherwise made in respect of payment, in which case it will continue to bear interest
at the rate specified above (as well after as before judgment) until whichever is the earlier of (a)
the day on which all sums due in respect of such Note up to that day are received by or on
behalf of the relevant Noteholder and (b) the day on which notice has been given to the
Noteholders that the Fiscal Agent has received all sums due in respect of the Notes up to such
day (except, in the case of payment to the Fiscal Agent, to the extent that there is any
subsequent default in payment in accordance with these Conditions).
Where interest is to be calculated in respect of a period which is equal to or shorter than an
Interest Period, it will be calculated on the basis of the number of days in the relevant period,
from and including the date from which interest begins to accrue to but excluding the date on
which it falls due, divided by the number of days in the Interest Period in which the relevant
period falls (including the first such day but excluding the last).
5.
Redemption, Purchase and Cancellation
(a)
Final Redemption
Unless previously redeemed, or purchased and cancelled, the Notes will, subject to Condition 6
below, be redeemed at their principal amount on 15th April 2014.
(b) Purchase and Cancellation
The Republic may at any time purchase Notes at any price in the open market or otherwise
provided that if purchases are made by tender, tenders are available to all Noteholders alike.
The Notes so purchased, while held by or on behalf of the Republic, shall not entitle the holder
to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the
purposes of calculating the quorum of meetings of Noteholders or for the purpose of Condition
11. Any Notes so purchased may, but need not, be cancelled at the election of the Republic.
Any Notes so cancelled will not be reissued or resold.
6.
Payments
(a)
Method of Payment
Payments of principal and interest will be made against presentation and surrender (or, in the
case of a partial payment, endorsement) of Notes or the appropriate Coupons (as the case may
be) at the specified office of any Paying Agent in Euro by credit or transfer to a Euro account
(or any other account to which Euro may be credited or transferred) specified by the payee in a
city in which banks have access to the Trans-European Automated Real-time Gross Settlement
Express Transfer System (the "TARGET System") or by cheque. Payment of interest due in
respect of any Note other than on presentation and surrender of matured Coupons shall be
made only against presentation and either surrender or endorsement (as appropriate) of the
relevant Note.
(b) Payments Subject to Fiscal Laws
All payments are subject in all cases to any applicable fiscal or other laws and regulations, but
without prejudice to the provisions of Condition 7.
(c)
Commissions
No commissions or expenses shall be charged to the Noteholders or Couponholders by any
Agent in respect of any payments.
(d) Surrender of Unmatured Coupons
Each Note should be presented for redemption together with all unmatured Coupons relating
to it, failing which the amount of any such missing unmatured Coupon (or, in the case of
payment not being made in full, that proportion of the amount of such missing unmatured
10