PROSPECTUS SUPPLEMENT
(To Prospectus Dated June 6, 1997)
U.S. $8,461,000,000
[LOGO] The CIT Group Holdings, Inc.
Medium-Term Notes
Due 9 Months or More From Date of Issue
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The CIT Group Holdings, Inc. (the "Corporation") may offer from time to
time its Medium-Term Notes (the "Senior Notes") and its Medium-Term Senior
Subordinated Notes (the "Senior Subordinated Notes") (the Senior Notes and the
Senior Subordinated Notes are referred to collectively herein as the "Notes"),
up to an aggregate initial offering price of U.S. $8,461,000,000 or the
equivalent thereof if any of the Notes are denominated in other currencies or
currency units (the "Specified Currency") as may be designated by the
Corporation at the time of offering (the "Foreign Currency Notes"). If specified
in the applicable Pricing Supplement, the maturity of certain of the Senior
Subordinated Notes may be subject to acceleration only in the event of certain
circumstances related to the insolvency of the Corporation. Each Note will
mature on a day nine months or more from the date of issue, as selected by the
initial purchaser and agreed to by the Corporation. Unless otherwise specified
in an accompanying pricing supplement to this Prospectus Supplement (the
"Pricing Supplement"), the Notes will be issued in fully registered form in
denominations of U.S. $1,000, and integral multiples thereof or, in the case of
Foreign Currency Notes, in the denominations specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement and
except for Foreign Currency Notes, the Notes will be represented by one or more
permanent global Notes registered in the name of The Depository Trust Company or
its nominee. Unless otherwise specified in the applicable Pricing Supplement,
the Notes will not be redeemable prior to maturity.
The interest rate or interest rate formula, if any, issue price, priority,
stated maturity, Specified Currency, and redemption and repayment provisions, if
any, and other terms, if any, of each Note will be established by the
Corporation at the date of issuance of such Note and will be set forth in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, each Note will bear interest at a fixed rate (the "Fixed
Rate Notes"), or at a rate or rates determined by reference to LIBOR, the
Treasury Rate, the Commercial Paper Rate, the CD Rate, the Federal Funds Rate,
the Prime Rate, the 11th District Cost of Funds Rate, the CMT Rate, or other
rate basis, as specified in the applicable Pricing Supplement, as adjusted by
the Spread and/or Spread Multiplier, if any, applicable to such Note or by
reference to such other rate formula as specified in the applicable Pricing
Supplement (the "Floating Rate Notes"). The Notes may be issued as "Extendible
Notes" whose interest rate or interest rate formula may be adjusted on specified
dates and which may be subject to repayment at certain times at the option of
the holder or to redemption at certain times at the option of the Corporation.
Fixed Rate Notes may be issued as Original Issue Discount Notes (as defined
herein) at a discount from the principal amount payable at maturity thereof, and
may include provisions under which holders of Original Issue Discount Notes do
not receive periodic payments of interest on such Notes ("Zero-Coupon Notes").
Interest rates and interest rate bases or formulae are subject to change by the
Corporation but no such change will affect any Note already issued or as to
which an offer to purchase has been accepted by the Corporation.
Interest on each Fixed Rate Note, other than Zero-Coupon Notes, and
interest on each Floating Rate Note is payable on the dates established by the
Corporation on the date of issue and set forth in such Note and in the
applicable Pricing Supplement. See "Description of the Notes". Unless otherwise
specified in the applicable Pricing Supplement, a Foreign Currency Note will not
be sold in, or to a resident of, the country of the Specified Currency in which
such Note is denominated. See "Foreign Currency Risks".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT, OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===================================================================================================================================
Price to Public(1)Agents' Commissions or Discounts (2) Proceeds to Corporation(2)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note................... 100% .125%--.750% 99.250%--99.875%
- -----------------------------------------------------------------------------------------------------------------------------------
Total(4)................... U.S.$8,461,000,000 U.S.$11,388,750--U.S.$68,332,500 U.S.$9,042,667,500--U.S.$9,099,611,250
===================================================================================================================================
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, the
price to public will be 100% of the principal amount.
(2) Unless otherwise specified in the applicable Pricing Supplement, the
Corporation will pay to Lehman Brothers, Lehman Brothers Inc., Credit Suisse
First Boston Corporation, Goldman, Sachs & Co., Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, Salomon Brothers Inc, and UBS Securities LLC (each an "Agent"
and, collectively, the "Agents"), a commission, in the form of a discount,
on the Notes (whether denominated in U.S. dollars or in a Specified
Currency) ranging from .125% to .750% of the principal amount of any Note
sold through any such Agent, depending upon the maturity of such Note,
except that the commission payable by the Corporation to the Agents with
respect to Notes with maturities of greater than thirty years will be
negotiated at the time the Corporation issues such Notes. The Corporation
also may sell Notes to any Agent, as principal, at a discount for resale to
one or more investors and other purchasers at varying prices related to
prevailing market prices at the time of resale, as determined by such Agent
or, if so agreed, on a fixed public offering price basis. Unless otherwise
specified in the applicable Pricing Supplement, any Note sold to an Agent as
principal will be purchased by such Agent at a price equal to 100% of the
principal amount thereof less a percentage equal to the commission
applicable to any agency sale of a Note of identical maturity. No commission
will be payable on Notes sold directly to purchasers by the Corporation.
(3) Before deduction of estimated expenses payable by the Corporation of U.S.
$5,234,000.
(4) Or the equivalent thereof for Notes denominated in a Specified Currency.
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The Notes are being offered hereby on a continuing basis for sale directly
by the Corporation in those jurisdictions where it is authorized to do so. In
addition, the Corporation may offer the Notes through the Agents who have
separately agreed to use their reasonable best efforts to solicit offers to
purchase the Notes. The Corporation may also sell Notes to any Agent, as
principal, at a discount for resale to one or more investors and other
purchasers at varying prices related to prevailing market prices at the time of
resale, as determined by such Agent or, if so agreed, on a fixed public offering
price basis. The Notes will not be listed on any securities exchange, and there
can be no assurance that there will be a secondary market for the Notes. There
is no assurance that the full amount of Notes offered hereby may be sold, and
the Corporation reserves the right to reduce the amount of Notes offered hereby
at any time. The Corporation reserves the right to withdraw, cancel, or modify
the offer made hereby without notice. The Corporation or any Agent may reject
any offer to purchase Notes in whole or in part. See "Plan of Distribution".
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LEHMAN BROTHERS
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON BROTHERS INC
UBS SECURITIES
June 12, 1997
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CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF NOTES FOLLOWING THE PRICING OF THE
OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE NOTES OR FOR THE PURPOSE OF
MAINTAINING THE PRICE OF THE NOTES. FOR A DESCRIPTION OF THESE ACTIVITIES SEE
"PLAN OF DISTRIBUTION."
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and, to the extent inconsistent therewith, replaces, the
description of the general terms of the Debt Securities set forth under the
heading "Description of Debt Securities" in the accompanying Prospectus, to
which description reference is hereby made. The Notes and the applicable Pricing
Supplement will specify certain additional terms of the Notes, which terms shall
supplement, and, to the extent inconsistent herewith and therewith, replace, the
descriptions set forth herein and in the accompanying Prospectus.
General
The Senior Notes will be issued as part of one or more separate, unlimited
series of Debt Securities constituting superior indebtedness under one or more
separate indentures (each, as supplemented, a "Senior Indenture", and
collectively, the "Senior Indentures"), in each case between the Corporation and
a banking institution organized under the laws of the United States or one of
the states thereof (each, a "Senior Trustee", and collectively, the "Senior
Trustees"). The Senior Subordinated Notes will be issued as either (i) one or
more separate, unlimited series of Debt Securities constituting senior
subordinated indebtedness under one or more separate indentures (each, as
supplemented, a "Senior Subordinated Indenture", and collectively, the "Senior
Subordinated Indentures"), in each case between the Corporation and a banking
institution organized under the laws of the United States or one of the states
thereof (each, a "Senior Subordinated Trustee", and collectively, the "Senior
Subordinated Trustees"), or (ii) one or more separate, unlimited series of Debt
Securities constituting senior subordinated indebtedness under the Senior
Subordinated Indentures which is intended to qualify as "Tier II Capital" under
the rules and regulations of the Ministry of Finance of Japan and the risk-based
capital guidelines of the Board of Governors of the Federal Reserve System of
the United States, if such series have the limited rights of acceleration
described under "Description of Debt Securities--Senior Subordinated Securities"
and "--Events of Default" in the accompanying Prospectus. The Senior Indentures
and the Senior Subordinated Indentures are collectively referred to herein as
the "Indentures". Unless otherwise specified in the applicable Pricing
Supplement, with respect to each separate series of Notes issued under the
Indentures, the applicable Trustee will serve as registrar, paying agent and
authenticating agent (in each such capacity, the "Registrar", "Paying Agent" and
"Authenticating Agent"), and may act as exchange rate agent if so specified in
the applicable Pricing Supplement (in such capacity, the "Exchange Rate Agent").
The Notes may be denominated in U.S. dollars or may be denominated in such
other Specified Currencies as may be designated by the Corporation at the time
of the offering. The Notes offered hereby will be initially limited to an
aggregate initial offering price of U.S. $8,461,000,000 or the equivalent
thereof, at the Market Exchange Rate (as defined under "Special Provisions
Relating to Foreign Currency Notes--Payment Currency") on the applicable trade
date, in other Specified Currencies. The amount of Senior Notes and Senior
Subordinated Notes that may be issued (by virtue of offerings pursuant to other
prospectuses) under the Senior Indentures and the Senior Subordinated
Indentures, respectively, is unlimited. For a description of restrictions on the
Corporation's ability to issue Senior Subordinated Notes, see "Description of
Debt Securities--Certain Restrictive Provisions" in the accompanying Prospectus.
Each Note will mature nine months or more from the date of issue as
selected by the initial purchaser and agreed to by the Corporation. The specific
Maturity Date (as defined below) of each Note will be set forth on the face
thereof, and the specific Maturity Date, or the range of maturities, if any, for
the Notes will be set forth in the
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applicable Pricing Supplement. The Notes will consist of one or more of (a)
"Fixed Rate Notes", which may bear an interest rate of zero in the case of
Zero-Coupon Notes, (b) "Floating Rate Notes", on which rates are determined, and
adjusted periodically, by reference to an interest rate basis or formula,
adjusted by a "Spread" and/or "Spread Multiplier", including but not limited to
(i) "LIBOR Notes", (ii) "Treasury Rate Notes", (iii) "Commercial Paper Rate
Notes", (iv) "CD Rate Notes", (v) "Federal Funds Rate Notes", (vi) "Prime Rate
Notes", (vii) "11th District Cost of Funds Rate Notes", (viii) "CMT Rate Notes",
and (ix) Notes on which rates are determined by reference to one or more other
interest rate bases or formulae, (c) Notes bearing interest as otherwise
specified in the applicable Pricing Supplement, or (d) "Extendible Notes", on
which interest rates or interest rate bases or formulae may be adjusted on
specified dates and may be subject to repayment at certain times at the option
of the holder or to redemption at certain times at the option of the
Corporation.
The Notes will be denominated in U.S. dollars and payments of principal of,
and premium and interest, if any, on the Notes will be made in U.S. dollars,
except for Foreign Currency Notes or as may otherwise be provided for in the
applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, the Notes will be issued at 100% of their principal amount.
Unless otherwise specified in the applicable Pricing Supplement, the Notes will
be issued in fully registered form only, without coupons. Notes denominated in
U.S. dollars will be issuable in denominations of $1,000 and integral multiples
thereof. Foreign Currency Notes will be issuable in the denominations specified
in the applicable Pricing Supplement. Unless otherwise specified in the
applicable Pricing Supplement and except for Foreign Currency Notes, the Notes
will be represented by one or more permanent global Notes registered in the name
of The Depository Trust Company, New York, New York (the "Depositary"), or its
nominee, as described below. Subject to the requirements imposed by the
Depositary, a single global Note will represent all Notes issued on the same day
and having the same terms, including, but not limited to, the same currency or
currency unit of denomination, Interest Payment Dates (as defined below),
interest rate or interest rate basis or formula, if any, priority, stated
maturity, and redemption and repayment provisions, if any. Payments of principal
of, and premium and interest, if any, on Notes represented by a global Note will
be made by the Paying Agent to the Depositary. See "Description of the
Notes--Book-Entry System".
Unless otherwise specified in the applicable Pricing Supplement, the
following terms have the meanings set forth below:
"Business Day" means any day, other than a Saturday or Sunday, that (a) is
neither a legal holiday nor a day on which banking institutions are generally
authorized or required by law or regulation to close (i) with respect to all
Notes, in The City of New York, and (ii) with respect to Foreign Currency Notes,
in the principal financial center of the country of the Specified Currency (or,
in the case of Foreign Currency Notes denominated in European Currency Units, in
Brussels, Belgium), and (b) with respect to LIBOR Notes, is also a London
Business Day (as defined below).
"Calculation Agent" means, unless otherwise specified in the applicable
Pricing Supplement, the Corporation acting in the capacity of calculation agent
with regard to the Floating Rate Notes and, where applicable, certain other
Notes.
"Calculation Date" means, with respect to any Floating Rate Note and, where
applicable, certain other Notes, unless otherwise specified in an applicable
Pricing Supplement, the earlier of (a) the Business Day immediately preceding
the applicable Interest Payment Date (as defined below), the date on which such
Note will mature (the "Maturity Date") or the date of redemption or repayment,
as the case may be, or (b) the fifth Business Day after an Interest
Determination Date (as defined below) relating to such Note.
"Index Maturity" means, with respect to any Floating Rate Note, the period
to maturity of the instrument or obligation on which the interest rate is based,
as specified in the applicable Pricing Supplement and in such Note.
"Interest Determination Date" means, for any Interest Reset Date (as
defined in "Description of the Notes--Interest Rates--Floating Rate Notes")
with respect to any Floating Rate Note, the date for determining the rate of
interest that will take effect on such Interest Reset Date, as specified therein
and in the applicable Pricing Supplement.
"Interest Payment Date" means a day on which interest is payable on the
applicable Note.
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"Interest Rate" means, at any given time, the rate per annum at such time
at which the applicable Note bears interest.
"London Business Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation of the rate of interest on Floating
Rate Notes (including the calculation of the Interest Factor and the Money
Market Yield, each as described below) will be rounded, if necessary, to the
nearest one hundred-thousandth of a percentage point, with five one-millionths
of a percentage point rounded upward (e.g., 9.876545% (or .09876545) will be
rounded upward to 9.87655% (or .0987655)), and all U.S. dollar amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded to the
nearest cent (with one-half cent being rounded upward), or in the case of
Floating Rate Notes denominated in a Specified Currency other than U.S. dollars,
to the smallest whole unit of the Specified Currency.
The Pricing Supplement relating to each Note will describe, among other
things, the following terms: (1) the Specified Currency in which such Note is
denominated; (2) whether such Note is a Fixed Rate Note or a Floating Rate Note;
(3) the price (which may be expressed as a percentage of the aggregate principal
amount thereof) at which such Note will be issued (the "Issue Price"); (4) the
Maturity Date; (5) if such Note is a Fixed Rate Note, the Interest Rate, if any,
for such Note; (6) if such Note is a Floating Rate Note, the Initial Interest
Rate, the Interest Determination Date, the Interest Reset Dates, the Interest
Payment Dates, the Index Maturity, the Maximum Interest Rate and the Minimum
Interest Rate (as defined in "Description of the Notes--Interest Rates"), if
any, and the Spread and/or Spread Multiplier (as defined in "Description of the
Notes--Interest Rates"), if any, and any other terms relating to the particular
method of calculating the Interest Rate, for such Note; (7) if such Note may be
redeemed or repaid prior to maturity, the provisions relating to such redemption
or repayment; (8) whether such Note is a Senior Note or a Senior Subordinated
Note and, if a Senior Subordinated Note, whether the maturity of such Note may
be subject to acceleration by the holders or Trustee of such Note only in the
event of certain circumstances related to the insolvency of the Corporation; (9)
if such Note is an Extendible Note, the provisions relating to such extension;
(10) the date on which such Note will be issued (the "Issue Date"); (11) whether
such Note is a global Note or a certificated Note; (12) the Trustee, Registrar,
Paying Agent, and Authenticating Agent under the Indenture pursuant to which the
Note is to be issued; and (13) any other terms of such Note not inconsistent
with the provisions of the Indenture.
Payment and Paying Agents
Unless otherwise specified in the applicable Pricing Supplement, the
payment of the principal of, and premium and interest, if any, on each Note that
is to be made in U.S. dollars (including payments that are to be made in U.S.
dollars with regard to Foreign Currency Notes) will be made in the manner
described below. For a description of special provisions relating to the payment
of the principal of, and premium and interest, if any, on a Foreign Currency
Note to be made in a Specified Currency, see "Special Provisions Relating to
Foreign Currency Notes--Payment of Principal and Interest".
Unless otherwise specified in the applicable Pricing Supplement, interest
on Fixed Rate Notes will be payable semi-annually on each Interest Payment Date
and on the Maturity Date or upon earlier redemption or repayment. Unless
otherwise specified in the applicable Pricing Supplement, interest on the
Floating Rate Notes will be payable on the Interest Payment Dates set forth
below and on the Maturity Date or upon earlier redemption or repayment. Interest
payable on each Interest Payment Date will be paid to the person in whose name
the Note is registered on the registry books of the Registrar at the close of
business on the applicable record date (a "Record Date") next preceding each
Interest Payment Date; provided, however, that interest payable on the Maturity
Date or upon earlier redemption or repayment will be payable to the person to
whom principal shall be payable. Unless otherwise specified in an applicable
Pricing Supplement, the first payment of interest on any Note originally issued
between a Record Date and an Interest Payment Date will be made on the next
succeeding Interest Payment Date to the holder of record with respect to such
Interest Payment Date.
Interest on each Note (other than global Notes and Foreign Currency Notes
and other than interest payable to the holder thereof, if any, on the Maturity
Date or upon earlier redemption or repayment) will be paid by check mailed to
the person in whose name the Note is registered at the close of business on the
applicable
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Record Date. Except as provided below, the principal of, and premium, if any, on
each Note, and interest payable to the holder thereof, if any, when the
principal of such Note is payable, will be paid on the Maturity Date or upon
earlier redemption or repayment in immediately available funds upon surrender of
the Note at the corporate trust office of the Paying Agent in the Borough of
Manhattan, The City of New York. If the Paying Agent receives a written request
from a holder of U.S. $1,000,000 or more (or its equivalent in the Specified
Currency, if other than U.S. dollars) in aggregate principal amount of the Notes
not later than the close of business on (a) a Record Date pertaining to an
Interest Payment Date or (b) the fifteenth day prior to the Maturity Date or the
date of redemption or repayment, if any, the Paying Agent will, subject to
applicable laws and regulations, until it receives notice to the contrary (but,
in the case of payments to be made on the Maturity Date or upon earlier
redemption or repayment, only after surrender of the Note or Notes in the
Borough of Manhattan, The City of New York, not later than one Business Day
prior to the Maturity Date or the date of redemption or repayment, as the case
may be), make all U.S. dollar payments to such holder by wire transfer to the
account designated in such written request. Payment of principal of, and premium
and interest, if any, on Notes represented by a permanent global Note registered
in the name of or held by the Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered owner and
holder of the permanent global Note representing such Notes. The Corporation may
at any time designate additional Paying Agents or rescind the designation of any
Paying Agent or approve a change in the office through which any Paying Agent
acts.
Interest Rates
Each Note, except Zero-Coupon Notes, will bear interest from its Issue Date
at the fixed rate per annum, or at the floating rate per annum determined
pursuant to the interest rate formula, stated on the face thereof and in the
applicable Pricing Supplement. Interest Rates are subject to change by the
Corporation from time to time, but no such change will affect any Notes
theretofore issued or as to which an offer has been accepted by the Corporation.
Interest rates offered by the Corporation with respect to the Notes may differ
among different series of Debt Securities offered within a short time frame
depending upon, among other things, changes in overall economic or market
conditions or differences in the aggregate principal amount of Notes purchased
by each investor in different series of Debt Securities.
Unless otherwise specified in the applicable Pricing Supplement, the
Interest Rate on each Note will be equal to (a) in the case of a Fixed Rate
Note, a fixed rate, or (b) in the case of a Floating Rate Note, either (i) an
interest rate determined by reference to the interest rate basis specified in
the applicable Pricing Supplement plus or minus the Spread, if any, and/or (ii)
an interest rate calculated by reference to the interest rate basis specified in
the applicable Pricing Supplement multiplied by the Spread Multiplier, if any.
The "Spread" is the number of basis points specified in the applicable Pricing
Supplement as being applicable to the Interest Rate for such Floating Rate Note,
and the "Spread Multiplier" is the percentage specified in the applicable
Pricing Supplement as being applicable to the Interest Rate for such Floating
Rate Note. Any Floating Rate Note may also have either or both of the following:
(i) a maximum numerical Interest Rate limitation, or ceiling, on the rate of
interest which may accrue during any interest period (the "Maximum Interest
Rate"); and (ii) a minimum numerical Interest Rate limitation, or floor, on the
rate of interest which may accrue during any interest period (the "Minimum
Interest Rate"). The applicable Pricing Supplement will specify the interest
rate basis and the Spread or Spread Multiplier, if any, or other interest rate
formula and the Maximum or Minimum Interest Rate, if any, applicable to each
Floating Rate Note. The Interest Rate on the Notes will in no event be higher
than the maximum rate permitted by New York law as the same may be modified by
United States law of general application. Under present New York law the maximum
rate of interest which may be charged to a corporation is 25% per annum on a
simple interest basis. This limit may not apply to Notes in which $2,500,000 or
more has been invested.
Fixed Rate Notes
Each Fixed Rate Note, except Zero-Coupon Notes, will bear interest from the
Issue Date at the annual interest rate stated therein and specified in the
applicable Pricing Supplement. Interest on the Fixed Rate Notes, except
Zero-Coupon Notes, will be payable on the Interest Payment Dates stated therein
and specified in the applicable Pricing Supplement. Unless otherwise specified
in the applicable Pricing Supplement, the Interest Payment Dates
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for the Fixed Rate Notes will be January 15 and July 15 of each year and on the
Maturity Date or upon earlier redemption or repayment. Unless otherwise
specified in the applicable Pricing Supplement, the Record Dates for the Fixed
Rate Notes will be the fifteenth calendar day next preceding each Interest
Payment Date. Unless otherwise specified in the applicable Pricing Supplement,
interest will be computed on the basis of a 360-day year of twelve 30-day
months. If an Interest Payment Date or the Maturity Date (or the date of
redemption or repayment) with respect to a Fixed Rate Note falls on a day that
is not a Business Day, the payment will be made on the next Business Day as if
it were made on the date such payment was due, and no interest will accrue on
the amount so payable for the period from and after such Interest Payment Date
or the Maturity Date (or the date of redemption or repayment), as the case may
be. Interest payments on each Fixed Rate Note will include the amount of
interest accrued from and including the last Interest Payment Date to which
interest has been paid (or from and including the Original Issue Date if no
interest has been paid with respect to such Note) to, but excluding, the
applicable Interest Payment Date, or Maturity Date, as the case may be.
Fixed Rate Notes may be issued as discounted securities (bearing no
interest in the case of Zero-Coupon Notes or bearing interest at a rate which at
the time of issuance is below market rates) at an issue price lower than the
principal amount thereof and which provide that upon redemption, repayment, or
acceleration of the maturity thereof an amount less than the principal amount
thereof shall become due and payable, or which for United States federal income
tax purposes would be considered original issue discount notes ("Original Issue
Discount Notes"). Certain information concerning United States federal income
tax aspects of Zero-Coupon Notes or Original Issue Discount Notes is set forth
elsewhere in this Prospectus Supplement and may be set forth in the applicable
Pricing Supplement.
Floating Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. Each Floating Rate Note will bear
interest from the Issue Date at the floating rate per annum determined pursuant
to the interest rate formula stated therein and specified in the applicable
Pricing Supplement. Interest on the Floating Rate Notes will be payable on the
Interest Payment Dates stated therein and specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement, the
Interest Payment Dates for Floating Rate Notes will be, in the case of Floating
Rate Notes which reset (a) daily, weekly, or monthly, either the third Wednesday
of each month or the third Wednesday of March, June, September, and December of
each year, as specified in the Note and in the applicable Pricing Supplement,
(b) quarterly, the third Wednesday of March, June, September, and December of
each year, (c) semi-annually, the third Wednesday of the two months of each year
specified in the Note and in the applicable Pricing Supplement, and (d)
annually, the third Wednesday of the month specified in the Note and in the
applicable Pricing Supplement and, in each case, on the Maturity Date or upon
earlier redemption or repayment. Interest payments on each Floating Rate Note
will include the amount of interest accrued from and including the last Interest
Payment Date to which interest has been paid (or from and including the Original
Issue Date if no interest has been paid with respect to such Note) to, but
excluding, the applicable Interest Payment Date, or Maturity Date, as the case
may be. The Record Dates for the Floating Rate Notes shall be the fifteenth
calendar day next preceding each Interest Payment Date and interest will be
computed in the manner set forth below.
If an Interest Payment Date, other than an Interest Payment Date occurring
on the Maturity Date (or the date of redemption or repayment), with respect to a
Floating Rate Note would otherwise fall on a day that is not a Business Day with
respect to such Note, such Interest Payment Date will be postponed to the next
succeeding day that is a Business Day with respect to such Note, except that in
the case of a LIBOR Note, if such day falls in the next calendar month, such
Interest Payment Date will be the preceding day that is a Business Day with
respect to such Note. If the Maturity Date (or the date of redemption or
repayment) with respect to a Floating Rate Note would otherwise fall on a day
that is not a Business Day with respect to such Note, the payment of principal
and premium and interest, if any, will be made on the next succeeding Business
Day, and no interest on such payment will accrue for the period from and after
the Maturity Date (or the date of redemption or repayment).
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Accrued interest will be computed by adding the Interest Factors (as
defined below) calculated for each day from the date of issue or from the last
date to which interest has been paid or duly provided for with respect to any
Floating Rate Note up to but not including the day for which accrued interest is
being calculated. The "Interest Factor" for each such day will be computed by
multiplying the face amount of such Floating Rate Note by the Interest Rate
applicable to such day and dividing the product thereof by 360, or, in the case
of any Treasury Rate Note or CMT Rate Note, by the actual number of days in the
year.
The Interest Rate on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually, or annually (each date on which such reset
occurs, an "Interest Reset Date"), as specified therein and in the applicable
Pricing Supplement.
Unless otherwise specified in the Note and in the applicable Pricing
Supplement, the "Interest Reset Date" will be, in the case of Floating Rate
Notes which reset (a) daily, each Business Day, (b) weekly, the Wednesday of
each week (other than weekly reset Treasury Rate Notes, which reset on the
Tuesday of each week, except as provided below), (c) monthly, the third
Wednesday of each month (with the exception of monthly reset 11th District Cost
of Funds Rate Notes, which will reset on the first calendar day of the month),
(d) quarterly, the third Wednesday of March, June, September, and December of
each year, (e) semi-annually, the third Wednesday of the two months specified in
the Note and in the applicable Pricing Supplement, and (f) annually, the third
Wednesday of the month specified in the Note and in the applicable Pricing
Supplement. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day for such Floating Rate Note, the
Interest Reset Date for such Floating Rate Note shall be postponed to the next
succeeding Business Day, except that in the case of a LIBOR Note, if such
Business Day is in the next succeeding calendar month, such Interest Reset Date
will be the immediately preceding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, (i) the
Interest Determination Date pertaining to an Interest Reset Date for a CD Rate
Note, CMT Rate Note, Commercial Paper Rate Note, Federal Funds Rate Note, or
Prime Rate Note will be the Business Day next preceding the Interest Reset Date,
(ii) the Interest Determination Date pertaining to an Interest Reset Date for a
LIBOR Note will be the second London Business Day next preceding the Interest
Reset Date, (iii) the Interest Determination Date pertaining to an Interest
Reset Date for the 11th District Cost of Funds Rate Note will be the last
working day of the month of the Federal Home Loan Bank of San Francisco (the
"FHLB of San Francisco") next preceding the Interest Reset Date on which the
FHLB of San Francisco publishes the monthly 11th District Cost of Funds Index
(as defined below), and (iv) the Interest Determination Date pertaining to an
Interest Reset Date for a Treasury Rate Note will be the day of the week in
which such Interest Reset Date falls on which Treasury bills would normally be
auctioned. Treasury bills are usually sold at auction on Monday of each week,
unless that day is a legal holiday, in which case the auction is usually held on
the following Tuesday, except that such auction may be held on the preceding
Friday. If, as a result of a legal holiday, an auction is so held on the
preceding Friday, such Friday will be the Interest Determination Date pertaining
to the Interest Reset Date occurring in the next succeeding week. If an auction
date shall fall on any Interest Reset Date for a Treasury Rate Note, then such
Interest Reset Date shall instead be the first Business Day immediately
following such auction date.
Unless otherwise specified in the applicable Pricing Supplement, the
Interest Rate determined with respect to any Interest Determination Date for any
Floating Rate Note will become effective on and as of the next succeeding
Interest Reset Date; provided, however, that the Interest Rate in effect with
respect to any Floating Rate Note for the period from the Issue Date to the
first Interest Reset Date will be the "Initial Interest Rate" as set forth or
described in the applicable Pricing Supplement. Such Interest Rate will be
applicable from and including the Interest Reset Date to which it relates to but
not including the next succeeding Interest Reset Date or until the Maturity
Date, as the case may be.
The Interest Rate determined with respect to any Interest Determination
Date for any Floating Rate Note will be determined by the Calculation Agent in
accordance with the provisions below. The Calculation Agent will, upon the
request of the holder of any Floating Rate Note and to the extent available,
provide the Interest Rate then in effect for such Note and, if different, the
Interest Rate to be in effect as a result of a determination made on the most
recent Interest Determination Date with respect to such Note.
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LIBOR Notes. The Interest Rate on any LIBOR Note will be equal to the then
applicable LIBOR, as adjusted by the Spread and/or the Spread Multiplier, if
any, specified in such LIBOR Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
applicable LIBOR will be determined according to the method specified in the
Note and in the applicable Pricing Supplement for each Interest Determination
Date relating to a LIBOR Note in accordance with the following provisions:
(i) On each Interest Determination Date relating to a LIBOR Note, LIBOR
will be (a) where the applicable Pricing Supplement specifies
LIBOR-Telerate (as defined below) as the method for determining LIBOR, the
rate for deposits in U.S. dollars having the Index Maturity specified in
the applicable Pricing Supplement which appears on the Telerate Page 3750
(as defined below) as of 11:00 a.m., London time, on such Interest
Determination Date ("LIBOR-Telerate") or (b) where the applicable Pricing
Supplement specifies LIBOR-Reuters (as defined below) as the method for
determining LIBOR, the arithmetic mean of the offered rates for deposits in
U.S. dollars having the Index Maturity specified in the applicable Pricing
Supplement which appear on the Reuters Screen LIBO Page (as defined below)
as of 11:00 a.m., London time, on such Interest Determination Date,
provided that at least two such offered rates appear on the Reuters Screen
LIBO Page ("LIBOR-Reuters"); provided, however, that if the method for
determining LIBOR with respect to any LIBOR Note is not specified therein
or in the applicable Pricing Supplement, "LIBOR" means LIBOR-Telerate.
(ii) If on any Interest Determination Date, (x) in any case where
LIBOR-Telerate applies, the rate for deposits in U.S. dollars having the
applicable Index Maturity does not appear on the Telerate Page 3750 as
specified in (i)(a) above, or, (y) in any case where LIBOR-Reuters applies,
fewer than two offered rates for deposits in U.S. dollars having the
applicable Index Maturity appear on the Reuters Screen LIBO Page as
specified in (i)(b) above, LIBOR will be determined on the basis of the
rates at which deposits in U.S. dollars are offered by four major banks in
the London interbank market selected by the Calculation Agent at
approximately 11:00 a.m., London time, on such Interest Determination Date
to prime banks in the London interbank market having the Index Maturity
specified in the applicable Pricing Supplement commencing on the second
London Business Day immediately following such Interest Determination Date
and in a principal amount equal to an amount that is representative for a
single transaction in such market at such time. The Calculation Agent will
request the principal London office of each of such banks to provide a
quotation of its rate. If at least two such quotations are provided, the
rate in respect of such Interest Determination Date will be the arithmetic
mean of the quotations. If fewer than two quotations are provided, LIBOR in
respect of such Interest Determination Date will be the arithmetic mean of
the rates quoted by three major banks in The City of New York, selected by
the Calculation Agent, at approximately 11:00 a.m., New York City time, on
such Interest Determination Date for loans in U.S. dollars to leading
European banks, having the Index Maturity specified in the applicable
Pricing Supplement commencing on the second London Business Day immediately
following such Interest Determination Date and in a principal amount equal
to an amount that is representative for a single transaction in such market
at such time; provided, however, that if the banks selected as aforesaid by
the Calculation Agent are not quoting as described in this sentence, the
Interest Rate will be the Interest Rate in effect on such Interest
Determination Date.
"Telerate Page 3750" means the display page designated as page 3750 on the
Dow Jones Telerate Service (or such other page as may replace page 3750 on that
service for the purpose of displaying London interbank offered rates).
"Reuters Screen LIBO Page" means the display page designated as page "LIBO"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO page on that service for the purpose of displaying London interbank
offered rates).
Treasury Rate Notes. The Interest Rate on any Treasury Rate Note will be
equal to the then applicable Treasury Rate (as defined below), as adjusted by
the Spread and/or Spread Multiplier, if any, specified in such Treasury Note and
in the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date, the rate for the
auction of direct obligations of the United States ("Treasury bills") held on
such Interest Determination Date having the Index Maturity specified in the
applicable Pricing Supplement as such rate is published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates", or any successor publication of the Board of Governors
of the Federal Reserve System ("H.15(519)"), under the heading "Treasury
bills--auction average (investment)". If Treasury bills have been auctioned on
such Interest Determination Date but such rate has not been so published by 9:00
a.m., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Treasury Rate means, with respect to such Interest
Determination Date, the auction average rate for the aforementioned auction for
such Interest Determination Date (expressed as a bond equivalent, on the basis
of a year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise reported by the United States Department of the Treasury. In the event
that the results of the auctions of Treasury bills are not published or reported
as provided above by 3:00 p.m., New York City time, on such Calculation Date or
no auction was held during the week in which the Interest Reset Date falls (or
on the Friday preceding such week as described above), then the Treasury Rate
will be calculated by the Calculation Agent and shall be the yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 p.m., New York City time,
on such Interest Determination Date of three leading primary United States
government securities dealers selected by the Calculation Agent for the issue of
Treasury bills with a remaining maturity closest to the applicable Index
Maturity; provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting as described in this sentence, the Interest
Rate will be the Interest Rate in effect on such Interest Determination Date.
Commercial Paper Rate Notes. The Interest Rate on any Commercial Paper Rate
Note will be equal to the then applicable Commercial Paper Rate (as defined
below), as adjusted by the Spread and/or Spread Multiplier, if any, specified in
such Commercial Paper Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date,
the Money Market Yield (as defined below) of the rate on that date for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement as such rate is published in H.15(519), under the heading "Commercial
Paper" or, if not available, under such other heading representing commercial
paper issued by non-financial entities whose bond rating is "AA", or the
equivalent, from a nationally recognized rating agency. In the event that such
rate is not published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, then the Commercial Paper Rate
will be the Money Market Yield of the rate on such Interest Determination Date
for commercial paper having the Index Maturity specified in the applicable
Pricing Supplement as published by the Federal Reserve Bank of New York in its
daily statistical release "Composite 3:30 p.m. Quotations for U.S. Government
Securities", or any successor publication of the Federal Reserve Bank of New
York ("Composite Quotations"), under the heading "Commercial Paper". If by 3:00
p.m., New York City time, on the Calculation Date pertaining to such Interest
Determination Date such rate is not yet published in either H. 15(519) or
Composite Quotations, the Commercial Paper Rate for that Interest Determination
Date will be the Money Market Yield of the arithmetic mean of the offered rates
of three leading dealers of commercial paper in The City of New York selected by
the Calculation Agent as of 11:00 a.m., New York City time, on that Interest
Determination Date, for commercial paper having the Index Maturity specified in
the applicable Pricing Supplement placed for industrial issuers whose bond
rating is "AA", or the equivalent, from a nationally recognized rating agency.
If the dealers selected as aforesaid by the Calculation Agent are not quoting as
described in the preceding sentence, the Interest Rate will be the Interest Rate
in effect on such Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
D x 360
Money Market Yield = ----------------- x 100
360 - (D x M)
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where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
CD Rate Notes. The Interest Rate on any CD Rate Note will be equal to the
then applicable CD Rate (as defined below), as adjusted by the Spread and/or
Spread Multiplier, if any, specified in such CD Rate Note and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on that date
for negotiable certificates of deposit having the Index Maturity specified in
the applicable Pricing Supplement as such rate is published in H.15(519) under
the heading "CDs (Secondary Market)". In the event such rate is not published by
3:00 p.m., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, then the CD Rate will be the rate on such Interest
Determination Date for negotiable certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Certificates of Deposit". If by 3:00
p.m., New York City time, on such Calculation Date such rate is not published in
either H.15(519) or Composite Quotations, the CD Rate will be calculated by the
Calculation Agent and will be the arithmetic mean of the secondary market
offered rates, as of 10:00 a.m., New York City time, on that Interest
Determination Date, of major United States money center banks in The City of New
York selected by the Calculation Agent for negotiable certificates of deposit
with a remaining maturity closest to the specified Index Maturity in a
denomination of U.S. $5,000,000; provided, however, that if fewer than three
dealers selected as aforesaid by the Calculation Agent are quoting as described
in this sentence, the Interest Rate will be the Interest Rate in effect on such
Interest Determination Date.
Federal Funds Rate Notes. The Interest Rate on any Federal Funds Rate Note
will be equal to the then applicable Federal Funds Rate (as defined below), as
adjusted by the Spread and/or Spread Multiplier, if any, as specified in such
Federal Funds Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date, the rate on
that date for Federal Funds as such rate is published in H.15(519) under the
heading "Federal Funds (Effective)". In the event that such rate is not
published prior to 9:00 a.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, then the Federal Funds Rate will
be the rate on such Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate". If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not published in
either H.15(519) or Composite Quotations, the Federal Funds Rate will be the
arithmetic mean of the rates, as of 9:00 a.m., New York City time, on such
Interest Determination Date for the last transaction in overnight Federal Funds
arranged by three leading brokers of Federal Funds transactions in The City of
New York selected by the Calculation Agent; provided, however, that if fewer
than three brokers selected as aforesaid by the Calculation Agent are quoting as
described in this sentence, the Interest Rate will be the Interest Rate in
effect on such Interest Determination Date.
Prime Rate Notes. The Interest Rate on any Prime Rate Note will be equal to
the then applicable Prime Rate (as defined below), as adjusted by the Spread
and/or Spread Multiplier, if any, specified in such Prime Rate Note and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the prime rate or
base lending rate on that date as such rate is published in H.15(519) under the
heading "Bank Prime Loan". In the event that such rate is not published prior to
9:00 a.m., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, then the Prime Rate will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates of interest
publicly announced by each bank that appears on the Reuters Screen USPRIME1 Page
(as defined below) as such bank's prime rate or base lending rate as in effect
for such Interest Determination Date as quoted on the Reuters Screen USPRIME1
Page. If fewer than four such rates appear on the Reuters Screen USPRIME1 Page
on such date, then the Prime Rate will be the arithmetic mean of the prime rates
or base lending rates (quoted on the basis of the actual number of days in the
year divided by a 360-day year) as of the close of
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business on such Interest Determination Date by three major banks in The City of
New York selected by the Calculation Agent; provided, however, that if fewer
than three banks selected as aforesaid by the Calculation Agent are quoting as
described in this sentence, the Interest Rate will be the Interest Rate in
effect on such Interest Determination Date.
"Reuters Screen USPRIME1 Page" means the display page designated as page
"USPRIME1" on the Reuters Monitor Money Rates Service (or such other page as may
replace the USPRIME1 page on that service for the purpose of displaying prime
rates or base lending rates of major United States banks).
11th District Cost of Funds Rate Notes. The Interest Rate on any 11th
District Cost of Funds Rate Note will be equal to the then applicable 11th
District Cost of Funds Rate (as defined below), as adjusted by the Spread and/or
Spread Multiplier, if any, as specified in the 11th District Cost of Funds Rate
Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "11th
District Cost of Funds Rate" means, with respect to any Interest Determination
Date, the rate equal to the monthly weighted average cost of funds for the
calendar month immediately preceding the month in which such Interest
Determination Date falls, as set forth under the caption "11th District" on
Telerate Page 7058 (as defined below) as of 11:00 a.m., San Francisco time, on
such Interest Determination Date. If such rate does not appear on Telerate Page
7058 on the applicable Interest Determination Date, the 11th District Cost of
Funds Rate for such Interest Determination Date shall be the monthly weighted
average cost of funds paid by member institutions of the Eleventh Federal Home
Loan Bank District that was most recently announced (the "Index") by the FHLB of
San Francisco as such cost of funds for the calendar month immediately preceding
the date of such announcement. If the FHLB of San Francisco fails to announce
such rate for the calendar month immediately preceding such Interest
Determination Date, then the 11th District Cost of Funds Rate for such Interest
Determination Date will be the 11th District Cost of Funds Rate in effect on
such Interest Determination Date.
"Telerate Page 7058" means the display page designated as page 7058 on the
Dow Jones Telerate Service (or such other page as may replace page 7058 on that
service for the purpose of displaying the monthly weighted average cost of funds
paid by member institutions of the Eleventh Federal Home Loan Bank District).
CMT Rate Notes. The Interest Rate on any CMT Rate Note will be equal to the
then applicable CMT Rate (as defined below), as adjusted by the Spread and/or
Spread Multiplier, if any, as specified in the CMT Rate Note and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date, the rate displayed on
the Designated CMT Telerate Page (as defined below) under the caption
"...Treasury Constant Maturities...Federal Reserve Board Release H.15...Mondays
Approximately 3:45 p.m.," under the column for the Designated CMT Maturity Index
(as defined below) for (i) if the Designated CMT Telerate Page is 7055, the rate
on such Interest Determination Date and (ii) if the Designated CMT Telerate Page
is 7052, the week, or the month, as applicable, ended immediately preceding the
week in which the applicable Interest Determination Date occurs. If such rate is
no longer displayed on the relevant page, or if not displayed by 3:00 p.m., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the CMT Rate for such Interest Determination Date will
be such treasury constant maturity rate for the Designated CMT Maturity Index as
published in the relevant H.15(519). If such rate is no longer published, or if
not published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, then the CMT Rate for such
Interest Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the Interest Determination Date with respect
to such Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 p.m., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, then the CMT Rate for the Interest Determination Date will be calculated
by the Calculation Agent and will be a yield to maturity, based on the
arithmetic mean of the secondary market
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closing offer side prices as of approximately 3:30 p.m., New York City time, on
the Interest Determination Date reported, according to their written records, by
three leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York selected by the Calculation Agent
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate obligations
of the United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury Note quotations, the CMT
Rate for such Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity based on the arithmetic mean of the
secondary market offer side prices as of approximately 3:30 p.m., New York City
time, on the Interest Determination Date of three Reference Dealers in The City
of New York (from five such Reference Dealers selected by the Calculation Agent
and eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100,000,000. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided however, that if fewer than
three Reference Dealers selected by the Calculation Agent are quoting as
described herein, the CMT Rate will be the CMT Rate in effect on such Interest
Determination Date. If two Treasury Notes with an original maturity as described
in the third preceding sentence, have remaining terms to maturity equally close
to the Designated CMT Maturity Index, the quotes for the CMT Rate Note with the
shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement (or any other
page as may replace such page on that service for the purpose of displaying
Treasury Constant Maturities as published in H.15(519)), for the purpose of
displaying Treasury Constant Maturities as published in H.15(519). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the Treasury Notes (either one, two, three, five, seven, ten, twenty or thirty
years) specified in the applicable Pricing Supplement with respect to which the
CMT Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
Extendible Notes
Interest on Extendible Notes during the "Initial Interest Period" specified
in the applicable Pricing Supplement is payable at the initial interest rate
(which may be a fixed rate or a floating rate adjusted by a Spread and/or Spread
Multiplier) (the "Initial Interest Rate") specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement, for
any Extension Period (as defined below) the Corporation shall establish,
pursuant to the procedures specified in the applicable Pricing Supplement, (i)
the Interest Rate or the interest rate basis and formula for determining the
Interest Rate for such Extension Period in the case of Floating Rate Notes, (ii)
the length of such Extension Period, (iii) the time of any Redemption Period (as
defined below) during such Extension Period, and (iv) the percentage or
percentages of the principal amount at which the Extendible Notes are to be
redeemable during such Redemption Period. An "Extension Period" will be a period
of one or more whole calendar periods (e.g., weeks, months, or years) commencing
on the day following the last day of the Initial Interest Period or any
subsequent Extension Period.
Unless otherwise specified in the applicable Pricing Supplement, the
Extendible Notes will be repayable in whole or in part on the day immediately
following the end of the Initial Interest Period and on the day immediately
following the end of each Extension Period, at the option of the holder, at 100%
of the principal amount to be repaid, in each case plus accrued interest, if
any, to the repayment date. The applicable Pricing Supplement will specify the
procedures that must be followed in order to effect such a repayment.
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Unless otherwise specified in the applicable Pricing Supplement, (i) the
Extendible Notes will not be redeemable before the day immediately following the
end of the Initial Interest Period and (ii) the Corporation, at its option, may
redeem any or all of the Extendible Notes either in whole or in part, upon not
less than 30 nor more than 60 days' notice by mail, on the day immediately
following the end of the Initial Interest Period at 100% of their principal
amount and, during any Extension Period thereafter, on any date during any
period within such Extension Period in which the Extendible Notes are redeemable
at the option of the Corporation (a "Redemption Period") at such percentage or
percentages of their principal amount as shall have been established by the
Corporation, in each case plus accrued interest, if any, to the date fixed for
redemption. The applicable Pricing Supplement will specify the procedures that
must be followed in order to effect such a redemption.
Foreign Currency, Currency Indexed, and Other Indexed Notes
The Corporation may from time to time offer Notes ("Foreign Currency
Notes") which are denominated in a Specified Currency other than U.S. dollars,
as specified in the applicable Pricing Supplement. See "Special Provisions
Relating to Foreign Currency Notes" and "Foreign Currency Risks".
The Corporation may from time to time offer Notes ("Currency Indexed
Notes") of which the principal amount payable on the Maturity Date (or upon
earlier redemption or repayment) and/or interest thereon will be determined with
reference to the exchange rate of a Specified Currency relative to another
currency or composite currency (the "Indexed Currency") or to a currency index
(the "Currency Index"), each as specified in the applicable Pricing Supplement.
Holders of Currency Indexed Notes may receive a principal amount on the Maturity
Date or upon earlier redemption or repayment that is greater than or less than
the face amount of such Notes depending upon the relative value at maturity of
the Specified Currency compared to the Indexed Currency or Currency Index.
Information as to the method for determining the amount of interest payable and
the principal amount payable on the Maturity Date or upon earlier redemption or
repayment, the relative value of the Specified Currency compared to the
applicable Indexed Currency or Currency Index, any exchange controls applicable
to the Specified Currency or Indexed Currency, and certain tax considerations
associated with an investment in the Currency Indexed Notes will be set forth in
the applicable Pricing Supplement. See "Special Provisions Relating to Foreign
Currency Notes" and "Foreign Currency Risks".
The Corporation from time to time may also offer indexed Notes ("Indexed
Notes"), other than Currency Indexed Notes, the principal amount of which
payable on the Maturity Date or upon earlier redemption or repayment and/or
interest thereon may be determined by reference to one or more equity or other
indices and/or formulae or the price of one or more specified commodities or by
such other methods or formulae as may be specified by the Corporation in the
applicable Pricing Supplement. The Pricing Supplement relating to such Indexed
Notes will describe, as applicable, the method by which the amount of interest
payable and the amount of principal payable on the Maturity Date or upon earlier
redemption or repayment in respect of such Indexed Notes will be determined,
certain tax consequences to holders of such Indexed Notes, certain risks
associated with an investment in such Indexed Notes and other information
relating to such Indexed Notes.
An investment in the Currency Indexed Notes or in other Indexed Notes, as
to principal or interest or both, to one or more values of commodities or
interest rate indices entails significant risks that are not associated with
similar investments in a conventional fixed-rate debt security. The interest
rate on Currency Indexed Notes and other Indexed Notes may be less than that
payable on a conventional fixed-rate debt security issued at the same time,
including the possibility that no interest will be paid or that negative
interest will accrue, and the principal amount of a Currency Indexed Note or
some other Indexed Note payable at maturity may be less than the original
purchase price of such Note if allowed pursuant to the terms of such Note,
including the possibility that no principal will be paid, or if such principal
amount is utilized to net against accrued negative interest, the principal
amount payable at maturity may be less than the possibility that no principal
will be paid. The secondary market for Currency Indexed Notes and other Indexed
Notes will be affected by a number of factors, independent of the
creditworthiness of the Corporation and the value of the applicable currency
commodity or interest rate index, the time remaining to the maturity of such
Notes, the amount outstanding of such Notes and market interest rates. The value
of the applicable currency commodity or interest rate index
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depends on a number of interrelated factors, including economic, financial and
political events, over which the Corporation has no control. Additionally, if
the formula used to determine the principal amount or interest payable with
respect to such Notes contains a multiple or leverage factor, the effect of any
change in the applicable currency commodity or interest rate index will be
increased. The historical experience of the relevant currency commodities or
interest rate indices should not be taken as an indication of future performance
of such currencies, commodities or interest rate indices during the term of any
Currency Indexed Note or any other Indexed Note. Accordingly, prospective
investors should consult their own financial and legal advisors as to the risk
entailed by an investment in Currency Indexed Notes and other Indexed Notes and
the suitability of such Notes in light of their particular circumstances.
Unless otherwise specified in the applicable Pricing Supplement, (a) for
the purpose of determining whether holders of the requisite principal amount of
Debt Securities outstanding under the applicable Indenture have made a demand or
given a notice or waiver or taken any other such action, the outstanding
principal amount of Currency Indexed Notes or of other Indexed Notes will be
deemed to be the face amount thereof, and (b) in the event of an acceleration of
the maturity of a Currency Indexed Note or any other Indexed Note, the principal
amount payable to the holder of such Note upon acceleration will be the
principal amount determined by reference to the formula by which the principal
amount of such Note would be determined on the Maturity Date thereof, as if the
date of acceleration were the Maturity Date.
Redemption
Unless otherwise specified in the applicable Pricing Supplement and except
for Extendible Notes, the Notes will not be redeemable prior to maturity. The
Notes will not be entitled to any sinking fund.
Repayment at Option of Holder
Except as otherwise specified in the applicable Pricing Supplement and
except for Extendible Notes, the Notes will not be repayable at the option of
the holder.
Book-Entry System
Unless otherwise specified in the applicable Pricing Supplement and except
for Foreign Currency Notes, upon issuance, the Notes will be represented by a
permanent global Note or Notes. Each permanent global Note will be deposited
with, or on behalf of, the Depositary and registered in the name of a nominee of
the Depositary. Except under the limited circumstances described below,
permanent global Notes will not be exchangeable for definitive certificated
Notes.
Ownership of beneficial interests in a permanent global Note will be
limited to institutions that have accounts with the Depositary or its nominee
("participants") or persons that may hold interests through participants. In
addition, ownership of beneficial interests by participants in such permanent
global Note will be evidenced only by, and the transfer of that ownership
interest will be effected only through, records maintained by the Depositary or
its nominee for such permanent global Note. Ownership of beneficial interests in
such permanent global Note by persons that hold through participants will be
evidenced only by, and the transfer of that ownership interest within such
participant will be effected only through, records maintained by such
participant. The Depositary has no knowledge of the actual beneficial owners of
the Notes. Beneficial owners will not receive written confirmation from the
Depositary of their purchase, but beneficial owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the participants through which the beneficial
owners entered the transaction. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such laws may impair the ability to transfer beneficial
interests in such permanent global Note.
The Corporation has been advised by the Depositary that upon the issuance
of a permanent global Note, and the deposit of such permanent global Note with
the Depositary, the Depositary will immediately credit on its book-entry
registration and transfer system the respective principal amounts represented by
such permanent global Note to the accounts of participants.
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Payment of principal of, and premium and interest, if any, on Notes
represented by a permanent global Note registered in the name of or held by the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner and holder of the permanent global Note
representing such Notes. The Corporation has been advised by the Depositary that
upon receipt of any payment of principal of, or premium or interest, if any, on
a permanent global Note, the Depositary will immediately credit, on its
book-entry registration and transfer system, accounts of participants with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such permanent global Note as shown in the records of
the Depositary. Payments by participants to owners of beneficial interests in a
permanent global Note held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the sole responsibility of such participants, subject
to any statutory or regulatory requirements as may be in effect from time to
time.
None of the Corporation, the Trustee, or any other agent of the Corporation
or the Trustee will have any responsibility or liability for any aspect of the
records of the Depositary, any nominee, or any participant relating to or
payments made on account of beneficial interests in a permanent global Note or
for maintaining, supervising, or reviewing any of the records of the Depositary,
any nominee, or any participant relating to such beneficial interests.
A permanent global Note is exchangeable for definitive Notes registered in
the name of, and a transfer of a permanent global Note may be registered to, any
person other than the Depositary or its nominee, only if:
(a) the Depositary notifies the Corporation that it is unwilling or
unable to continue as Depositary for such permanent global Note or if at
any time the Depositary ceases to be a clearing agency registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
(b) the Corporation in its sole discretion determines that such
permanent global Note shall be exchangeable for definitive Notes in
registered form; or
(c) there shall have occurred and be continuing an event of default
under the applicable Indenture, as described in the accompanying
Prospectus, and the Depositary is notified by the Corporation, the
applicable Trustee, or the applicable Registrar and Paying Agent that such
global Note shall be exchangeable for definitive Notes in registered form.
Any permanent global Note that is exchangeable pursuant to the preceding
sentence will be exchangeable in whole for definitive Notes in registered form,
of like tenor and of an equal aggregate principal amount as the permanent global
Note, in denominations of $1,000 and integral multiples thereof. Such definitive
Notes will be registered in the name or names of such person or persons as the
Depositary shall instruct the applicable Trustee. It is expected that such
instructions may be based upon directions received by the Depositary from its
participants with respect to ownership of beneficial interests in such permanent
global Note.
Except as provided above, owners of beneficial interests in such permanent
global Note will not be entitled to receive physical delivery of Notes in
definitive form and will not be considered the holders thereof for any purpose
under the applicable Indenture, and no permanent global Note shall be
exchangeable, except for another permanent global Note of like denomination and
tenor to be registered in the name of the Depositary or its nominee.
Accordingly, each person owning a beneficial interest in such permanent global
Note must rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a holder under the applicable Indenture.
The Corporation understands that, under existing industry practices, in the
event that the Corporation requests any action of holders, or an owner of a
beneficial interest in such permanent global Note desires to give or take any
action that a holder is entitled to give or take under the Indenture, the
Depositary would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning through
them.
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The Depositary has advised the Corporation that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered under
the Exchange Act. The Depositary was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. The Depositary is owned by a
number of its participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the Depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. The rules applicable to the Depositary and its participants are on
file with the Securities and Exchange Commission.
Information Concerning the Exchange Rate Agents, Registrars, Paying Agents,
and Authenticating Agents
The Corporation from time to time may borrow from the Trustees, and the
Corporation and certain of its subsidiaries may maintain deposit accounts and
conduct other banking transactions with the Trustees.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
General
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of and premium and
interest, if any, on the Notes will be made in U.S. dollars. Unless otherwise
specified in the applicable Pricing Supplement, the following provisions shall
apply to Foreign Currency Notes which are in addition to, and to the extent
inconsistent therewith replace, the description of general terms and provisions
of the Notes set forth in the accompanying Prospectus and elsewhere in this
Prospectus Supplement.
Foreign Currency Notes are issuable in registered form only, without
coupons. Unless otherwise specified in the applicable Pricing Supplement,
payment of the purchase price of Foreign Currency Notes will be made in
immediately available funds. Unless otherwise specified in the applicable
Pricing Supplement, Foreign Currency Notes will be issued only in certificated
form.
Currencies
Unless otherwise specified in the applicable Pricing Supplement,
purchasers are required to pay for Foreign Currency Notes in the Specified
Currency. At the present time there are limited facilities in the United States
for conversion of U.S. dollars into the Specified Currencies and vice versa, and
banks offer non-U.S. dollar checking or savings account facilities in the United
States only on a limited basis. However, if requested by a prospective purchaser
of Notes on or prior to the fifth Business Day preceding the date of delivery of
the Notes, or by such other day as determined by the Exchange Rate Agent who
presented such offer to purchase Notes to the Corporation, such Exchange Rate
Agent is prepared to arrange for the conversion of U.S. dollars into the
Specified Currency set forth in the applicable Pricing Supplement to enable the
purchasers to pay for the Foreign Currency Notes. Each such conversion will be
made by such Exchange Rate Agent on such terms and subject to such conditions,
limitations, and charges as such Exchange Rate Agent may from time to time
establish in accordance with its regular foreign exchange practices. All costs
of exchange will be borne by the purchasers of the Foreign Currency Notes.
Specific information about the currency or currency units in which a
particular Foreign Currency Note is denominated, including historical exchange
rates and a description of the currency and any exchange controls, will be set
forth in the applicable Pricing Supplement. The information therein concerning
exchange rates is furnished as a matter of information only and should not be
regarded as indicative of the range of or trends in fluctuations in currency
exchange rates that may occur in the future.
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Payment of Principal and Interest
The principal and premium and interest payments, if any, on Foreign
Currency Notes are payable by the Corporation in the Specified Currency.
However, except as provided below, the Exchange Rate Agent appointed by the
Corporation to convert principal and premium and interest payments, if any, in
respect of Foreign Currency Notes to U.S. dollars will convert all payments of
principal of, and premium and interest, if any, on Foreign Currency Notes to
U.S. dollars. However, unless otherwise specified in the applicable Pricing
Supplement, the holder of a Foreign Currency Note may elect to receive such
payments in the Specified Currency as described below.
Any U.S. dollar amount to be received by a holder of a Foreign Currency
Note will be based on the highest bid quotation in The City of New York received
by the Exchange Rate Agent at approximately 11:00 a.m., New York City time, on
the second Business Day preceding the applicable Interest Payment Date from
three recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) for the purchase by the quoting dealer of the Specified Currency for U.S.
dollars for settlement on such payment date, in an amount equal to the aggregate
amount of the Specified Currency payable to all holders of Notes not electing to
receive the Specified Currency on such payment date and at which the applicable
dealer commits to execute a contract. If such bid quotations are not available,
payments will be made in the Specified Currency. All currency exchange costs
will be borne by the holder of the Foreign Currency Note by deductions from such
payments.
Unless otherwise specified in the applicable Pricing Supplement, a holder
of a Foreign Currency Note may elect to receive payment of the principal of, and
premium and interest, if any, on the Foreign Currency Note in the Specified
Currency by transmitting a written request for such payment to the principal
offices of the Paying Agent prior to the Record Date immediately preceding any
Interest Payment Date and at least fifteen days prior to the Maturity Date or
the date of redemption or repayment, if any, in the case of payments to be made
on the Maturity Date or upon earlier redemption or repayment. Such request may
be in writing (mailed or hand delivered) or by cable, telex, or other form of
facsimile transmission. A holder of a Foreign Currency Note may elect to receive
payment in the Specified Currency for all payments of principal and premium and
interest, if any, and need not file a separate election for each payment. Such
election will remain in effect until revoked by written notice to the Paying
Agent, but written notice of any such revocation must be received by the Paying
Agent on or prior to the Record Date in the case of any payment of interest or
at least fifteen days prior to the Maturity Date or the date of redemption or
repayment, if any, in the case of the payment of principal and premium, if any.
Holders of Foreign Currency Notes whose Foreign Currency Notes are to be held in
the name of a broker or nominee should contact such broker or nominee to
determine whether and how an election to receive payments in the Specified
Currency may be made.
Unless otherwise specified in the applicable Pricing Supplement, the
payment of the principal of, and premium and interest, if any, on each Foreign
Currency Note to be made in U.S. dollars will be made in the manner specified
under "Description of the Notes--Payment and Paying Agents". Unless otherwise
specified in the applicable Pricing Supplement, the payment of principal of, and
premium and interest, if any, on each Foreign Currency Note to be made in the
Specified Currency will be made as set forth below. The payment of interest on a
Foreign Currency Note (other than interest payable to the holder thereof, if
any, on the Maturity Date or upon earlier redemption or repayment) to be made in
the Specified Currency will be paid by bank draft mailed to the person in whose
name the Note is registered at the close of business on the applicable Record
Date. The principal of and premium, if any, on such Foreign Currency Note and
any interest payable to the holder thereof when the principal of such Foreign
Currency Note is payable will be paid by bank draft upon surrender of such Note
at the corporate trust office of the Paying Agent in the Borough of Manhattan,
The City of New York. Specified Currency drafts will be drawn on a bank office
located outside the United States. If the Paying Agent receives a written
request from a holder of the equivalent of U.S. $1,000,000 or more in aggregate
principal amount of the Foreign Currency Notes not later than the close of
business on a Record Date for an interest payment or the fifteenth day prior to
the Maturity Date or the date of redemption or repayment, if any, the Paying
Agent will, subject to applicable laws and regulations, until it receives notice
to the contrary (but, in the case of payments to be made on the Maturity Date or
earlier redemption or repayment, only after the surrender of the Note or Notes
in the Borough of Manhattan, The City of New York, not later
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than one Business Day prior to the Maturity Date or the date of redemption or
repayment, as the case may be), make all Specified Currency payments to such
holder by wire transfer to an account (i) designated in such written request and
(ii) maintained in the country of the Specified Currency.
Outstanding Foreign Currency Notes
For purposes of calculating the principal amount of any Foreign Currency
Note payable in a Specified Currency for any purpose under the Indentures, the
principal amount of such Foreign Currency Note at any time outstanding shall be
deemed to be the U.S. dollar equivalent, determined as of the date of the
original issuance of such Foreign Currency Note, of the principal amount of such
Foreign Currency Note.
Payment Currency
If a Specified Currency is not available for the payment of principal of,
and premium and interest, if any, with respect to a Foreign Currency Note due to
the imposition of exchange controls or other circumstances beyond the control of
the Corporation, or is no longer used by the government of the country issuing
such currency or for the settlement of transactions by public authorities of or
within the international banking community, the Corporation will be entitled to
satisfy its obligations to holders of Foreign Currency Notes by making such
payment in U.S. dollars on the basis of the noon buying rate in The City of New
York for cable transfers of the Specified Currency as certified for customs
purposes by the Federal Reserve Bank of New York (the "Market Exchange Rate") on
the second day prior to such payment, or if such Market Exchange Rate is not
then available, on the basis of the most recently available Market Exchange Rate
or as otherwise specified in an applicable Pricing Supplement. Any payment made
under such circumstances in U.S. dollars where required payment is in a
Specified Currency will not constitute a default under the Indentures.
If payment on a Foreign Currency Note is required to be made in European
Currency Units ("ECU") and ECU are unavailable due to the imposition of exchange
controls or other circumstances beyond the Corporation's control, or are no
longer used in the European Monetary System, all payments due on that date with
respect to such Foreign Currency Note shall be made in U.S. dollars. The amount
so payable on any date in ECU shall be converted into U.S. dollars, at a rate
determined by the Exchange Rate Agent as of the second Business Day prior to the
date on which such payment is due on the following basis. The component
currencies of the ECU for this purpose (the "Components") shall be the currency
amounts that were components of the ECU as of the last date on which ECU were
used in the European Monetary System. The equivalent of ECU in U.S. dollars
shall be calculated by aggregating the U.S. dollar equivalents of the
Components. The U.S. dollar equivalent of each of the Components shall be
determined by the Paying Agent on the basis of the most recently available
Market Exchange Rate, or as otherwise specified in the applicable Pricing
Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be multiplied or divided in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall have a value on
the date of division equal to the amount of the former component currency
divided by the number of currencies into which that currency was divided.
All determinations referred to above by the Exchange Rate Agent or Paying
Agent shall be at its sole discretion (except to the extent expressly provided
herein that any determination is subject to approval by the Corporation) and, in
the absence of manifest error, shall be conclusive for all purposes and binding
on holders of the Notes and the Exchange Rate Agent or Paying Agent, as the case
may be, shall have no liability therefor. Any payment made in U.S. dollars under
the aforementioned circumstances where required payment is in a Specified
Currency will not constitute a default under the Indentures.
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FOREIGN CURRENCY RISKS
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN CURRENCY INDEXED
NOTES OR NOTES DENOMINATED IN OTHER THAN U.S. DOLLARS AS THEY EXIST AT THE DATES
THEREOF OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE INVESTORS
SHOULD CONSULT THEIR OWN FINANCIAL, TAX AND LEGAL ADVISORS AS TO THE RISKS
ENTAILED BY AN INVESTMENT IN SUCH NOTES. SUCH NOTES ARE NOT AN APPROPRIATE
INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN
CURRENCY, CURRENCY UNIT, OR INDEXED TRANSACTIONS.
Exchange Rates and Exchange Controls
An investment in the Foreign Currency Notes entails significant risks that
are not associated with a similar investment in a security denominated in U.S.
dollars. Similarly, an investment in Currency Indexed Notes entails significant
risks that are not associated with a similar investment in a non-currency
indexed Note. Such risks include, without limitation, the possibility of
significant changes in rates of exchange between the U.S. dollar and the
Specified Currency and the possibility of the imposition or modification of
foreign exchange controls by either the U.S. or foreign governments. Such risks
generally depend on economic and political events over which the Corporation has
no control. In recent years, rates of exchange between the U.S. dollar and
certain foreign currencies have been highly volatile and such volatility may be
expected in the future. The exchange rate between the U.S. dollar and a foreign
currency or currency unit is in most cases established principally by the supply
of and demand for such currencies, and changes in the rate result over time from
the interaction of many factors, among which are rates of inflation, interest
rate levels, balances of payments, and the extent of governmental surpluses or
deficits in the countries of such currencies. These factors are in turn
sensitive to, among other things, the monetary, fiscal, and trade policies
pursued by such governments and those of other countries important to
international trade and finance. Fluctuations in any particular exchange rate
that have occurred in the past are not necessarily indicative, however, of
fluctuations in the rate that may occur during the term of any Note.
Depreciation of the Specified Currency in a Foreign Currency Note against the
U.S. dollar would result in a decrease in the U.S. dollar-equivalent yield of
such Note below its coupon rate, and in certain circumstances could result in a
loss to the investor on a U.S. dollar basis. Similarly, depreciation of the
Specified Currency in a Currency Indexed Note against the applicable Indexed
Currency would result in the principal amount payable with respect to such
Currency Indexed Note at the Maturity Date (or upon earlier redemption or
repayment) thereof being less than the face amount of such Currency Indexed Note
which, in turn, would decrease the effective yield of such Currency Indexed Note
below its stated interest rate and could also result in a loss to the investor.
Foreign exchange rates can either be fixed by sovereign governments or
float. Exchange rates of most economically developed nations are permitted to
fluctuate in value relative to the U.S. dollar. National governments, however,
rarely voluntarily allow their currencies to float freely in response to
economic forces. Sovereign governments in fact use a variety of techniques, such
as intervention by a country's central bank or imposition of regulatory controls
or taxes, to affect the exchange rate of their currencies. Governments may also
issue a new currency to replace an existing currency or alter the exchange rate
or relative exchange characteristics by devaluation or revaluation of a
currency. Thus, a special risk in purchasing Foreign Currency Notes or Currency
Indexed Notes is that their U.S. dollar-equivalent yields could be affected by
governmental actions, which could change or interfere with theretofore freely
determined currency valuation, fluctuations in response to other market forces,
and the movement of currencies across borders. There will be no adjustment or
change in the terms of such Notes in the event that exchange rates should become
fixed, or in the event of any devaluation or revaluation or imposition of
exchange or other regulatory controls or taxes, or in the event of other
developments, affecting the U.S. dollar or any applicable currency or currency
unit.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at a Note's maturity.
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Even if there are no actual exchange controls, it is possible that the Specified
Currency for any particular Note that would otherwise be payable in such
Specified Currency would not be available at such Note's maturity. In that
event, the Corporation will make required payments in U.S. dollars on the basis
of the Market Exchange Rate on the second day prior to such payment, or if such
Market Exchange Rate is not then available, on the basis of the most recently
available Market Exchange Rate. See "Special Provisions Relating to Foreign
Currency Notes--Payment Currency".
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in foreign currencies will not be sold in, or to residents of, the
country of the Specified Currency in which particular Notes are denominated.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Corporation
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding, or receipt of payments of principal of, and
premium and interest, if any, on the Notes. Such persons should consult their
own counsel with regard to such matters.
Judgments
Courts in the United States generally would grant or enforce a judgment
relating to an action based on the Foreign Currency Notes and Currency Indexed
Notes only in U.S. dollars, and the date used to determine the rate of
conversion of foreign currencies into U.S. dollars will depend on various
factors, including which court rendered the judgment. Section 27 of the
Judiciary Law of the State of New York provides that a New York State court
would be required to enter a judgment in the Specified Currency of the
underlying obligation; such judgment would then be converted into U.S. dollars
at the rate of exchange prevailing on the date of entry of the judgment.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary, which was prepared by Schulte Roth & Zabel LLP,
counsel to the Corporation, describes certain United States federal income tax
consequences of the ownership of Notes as of the date hereof. Except where
noted, it deals only with Notes held by initial purchasers as capital assets and
does not deal with special situations, such as those of dealers in securities or
financial institutions, life insurance companies, United States Holders (as
defined below) whose "functional currency" is not the U.S. dollar, or persons
owning (actually or constructively) ten percent or more of the combined voting
power of all classes of voting stock of the Corporation. In addition, with
respect to a particular series of Notes, the discussion below must be read in
conjunction with the discussion of certain federal income tax consequences that
may appear in the applicable Pricing Supplement for such series. Furthermore,
the discussion below is based upon the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), and Treasury Regulations (including proposed
Treasury Regulations), rulings, and judicial decisions thereunder as of the date
hereof, and such authorities may be repealed, revoked, modified or, in the case
of proposed Treasury Regulations, withdrawn or finalized in a form different
from such proposed Treasury Regulations, so as to result in federal income tax
consequences different from those discussed below. Persons considering the
purchase, ownership, or disposition of Notes should consult their own tax
advisors concerning the federal income tax consequences in light of their
particular situations as well as any consequences arising under the laws of any
other taxing jurisdiction.
United States Holders
As used herein, a "United States Holder" of a Note means a holder that is
(i) a citizen or resident of the United States, (ii) a corporation, partnership
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United States
fiduciaries have the authority to control all the substantial decisions of such
trust. A "Non-United States Holder" is a holder that is not a United States
Holder.
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Payments of Interest. Except as set forth below, interest on a Note will
generally be taxable to a United States Holder as ordinary income from domestic
sources at the time it is paid or accrued in accordance with the United States
Holder's method of accounting for tax purposes.
Original Issue Discount. The following is a summary of the principal United
States federal income tax consequences of the ownership of Original Issue
Discount Notes by United States Holders. Additional rules applicable to Original
Issue Discount Notes which are denominated in or determined by reference to a
Specified Currency are described under "Foreign Currency Notes" below. This
summary is based upon final regulations issued by the Treasury Department, which
are effective for debt instruments issued on or after April 4, 1994.
A Note may be issued for an amount that is less than its stated redemption
price at maturity (i.e., the sum of all payments to be made on the Note other
than "qualified stated interest" payments). The difference between the stated
redemption price at maturity of the Note and its "issue price", if such
difference is at least 0.25 percent of the stated redemption price at maturity
multiplied by the number of complete years to maturity, will be "original issue
discount" ("OID"). The "issue price" of each Note will be the initial offering
price to the public at which a substantial amount of the particular offering is
sold. A "qualified stated interest" payment is stated interest that is
unconditionally payable at least annually at a single fixed rate, or, generally,
at a rate (a "Variable Rate") which varies among payment periods if such rate
can reasonably be expected to measure contemporaneous variations in the cost of
newly borrowed funds or which is based upon the changes in the yield or price of
certain actively traded property. Interest is payable at a single fixed rate
only if the rate appropriately takes into account the length of the interval
between payments. Notes that may be redeemed prior to their maturity date at the
option of the issuer shall be treated from the time of issuance as having a
maturity date for federal income tax purposes on such redemption date if such
redemption would result in a lower yield to maturity. Notes that may be redeemed
prior to their maturity date at the option of the holder shall be treated from
the time of issuance as having a maturity date for federal income tax purposes
on such redemption date if such redemption would result in a higher yield to
maturity. Notice will be given in the applicable Pricing Supplement if the
Corporation issues Notes that are redeemable prior to maturity and determines
that such Notes will be deemed to have a maturity date for federal income tax
purposes prior to their Maturity Date.
In certain cases (e.g., where interest payments are deemed not to be
qualified stated interest payments), Notes that bear interest from a non-tax
standpoint may be deemed instead to be Original Issue Discount Notes for federal
income tax purposes, with the result that the inclusion of interest in income
for federal income tax purposes may vary from the actual cash payments of
interest made on such Notes, generally accelerating income for cash method
taxpayers. For those purposes, the Treasury Regulations provide rules for
determining whether payments pursuant to a Note with a Variable Rate will be
treated as payments of qualified stated interest. The Pricing Supplement for any
series of Notes will specify whether they are Original Issue Discount Notes and,
in the case of Notes with a Variable Rate, will describe the applicable rules
for inclusion of OID in income of a United States Holder.
United States Holders of Original Issue Discount Notes with a maturity upon
issuance of more than one year must, in general, include OID in income in
advance of the receipt of some or all of the related cash payments. The amount
of OID includible in income by the initial United States Holder of an Original
Issue Discount Note is the sum of the "daily portions" of OID with respect to
the Note for each day during the taxable year or portion of the taxable year in
which such United States Holder held such Note ("accrued OID"). The daily
portion is determined by allocating to each day in any "accrual period" a pro
rata portion of the OID allocable to that accrual period. The accrual period for
an Original Issue Discount Note may be of any length and may vary in length over
the term of the Note provided that each accrual period is no longer than one
year and each scheduled payment of principal or interest occurs at the beginning
or the end of an accrual period. The amount of OID allocable to any accrual
period is an amount equal to the excess (if any) of (a) the product of the
Note's "adjusted issue price" at the beginning of such accrual period and its
yield to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period) over
(b) the sum of any qualified stated interest allocable to the accrual period. In
determining OID allocable to an accrual period, if an interval between payments
of qualified stated interest
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contains more than one accrual period the amount of qualified stated interest
payable at the end of the interval is allocated on a pro rata basis to each
accrual period in the interval and the adjusted issue price at the beginning of
each accrual period in the interval must be increased by the amount of any
qualified stated interest that has accrued prior to the beginning of the first
day of the accrual period but is not payable until the end of the interval. The
amount of OID allocable to the final accrual period is the difference between
the amount payable at maturity (other than a payment of qualified stated
interest) and the adjusted issue price of the Note at the beginning of the final
accrual period. If all accrual periods are of equal length, except for an
initial short accrual period, the amount of OID allocable to the initial short
accrual period may be computed under any reasonable method. The adjusted issue
price of the Note at the start of any accrual period is equal to its issue price
increased by the accrued OID for each prior accrual period and reduced by any
prior payments with respect to such Note that were not qualified stated interest
payments. Under these rules, a United States Holder generally will have to
include in income increasingly greater amounts of OID in successive accrual
periods. The Corporation is required to report to the Internal Revenue Service
(the "IRS") the amount of OID accrued on Notes held of record by persons other
than corporations and other exempt holders.
In the case of Original Issue Discount Notes having a term of one year or
less ("Short-Term Original Issue Discount Notes"), OID is included in income
currently either on a straight-line basis or, if the United States Holder so
elects, under the constant yield method used generally for OID as described
above. However, certain categories of United States Holders (such as individual
cash method taxpayers) are not required to include accrued OID on Short-Term
Original Issue Discount Notes in their income currently unless they elect to do
so. If such a United States Holder that does not elect to currently include the
OID in income subsequently recognizes a gain upon the disposition of the Note,
such gain will be treated as ordinary interest income to the extent of the
accrued OID. Furthermore, such non-electing United States Holder of a Short-Term
Original Issue Discount Note may be required to defer deductions for a portion
of such United States Holder's interest expense with respect to any indebtedness
incurred or maintained to purchase or carry such Note.
Amortization of Premium. A Note may be considered to have been issued at a
"premium" to the extent that the United States Holder's tax basis in the Note
exceeds the Note's outstanding stated redemption price at maturity. A United
States Holder generally may elect to amortize the premium over the remaining
term of the Note on a constant yield method. Any such election shall apply to
all debt securities (other than debt securities the interest on which is
excludible from gross income) held by the United States Holder at the beginning
of the first taxable year to which the election applies (or thereafter acquired
by the United States Holder) and is irrevocable without the consent of the IRS.
The amount amortized in any year will be treated as a reduction of the United
States Holder's interest income from the Note. Bond premium on a Note held by a
United States Holder that does not make such an election will decrease the gain
or increase the loss otherwise recognized on disposition of the Note.
Proposed Treasury regulations issued on June 27, 1996 would clarify the
treatment of bond premium. Among the provisions contained in the proposed
regulations is a provision that generally provides that premium may be amortized
to offset interest income only as a United States Holder takes the qualified
stated interest into account under the holder's regular accounting method.
Moreover, the proposed Treasury regulations generally provide that in the case
of instruments that provide for alternative payment schedules, bond premium is
calculated by assuming that both the issuer and the holder will exercise or not
exercise options in a manner that maximizes the holder's yield. If adopted, the
regulations would be effective for debt instruments acquired on or after the
date 60 days after the date final regulations are published in the Federal
Register. However, if a United States Holder elects to amortize bond premium for
the taxable year containing such effective date, the proposed Treasury
regulations would apply to all the United States Holder's debt instruments held
on or after the first day of that taxable year.
Election to Treat All Interest as OID. A cash or accrual basis United
States Holder may elect to treat all interest on any Note as OID and calculate
the amount includible in gross income under the constant yield method described
above. For the purposes of this election, interest includes stated interest,
acquisition discount, OID, de minimis OID, market discount, de minimis market
discount and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium. If a United States Holder makes this election for a Note
with amortizable bond premium, the election is treated as an election under the
amortizable
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bond premium provisions described above and the electing United States Holder
will be required to amortize bond premium for all of the holder's other debt
instruments with amortizable bond premium. The election is to be made for the
taxable year in which the United States Holder acquires the Note, and may not be
revoked without the consent of the IRS. United States Holders should consult
with their own tax advisors about this election.
Sale, Exchange, and Retirement of Notes. A United States Holder's tax basis
in a Note will, in general, be the United States Holder's cost therefor,
increased by all accrued OID and reduced by any amortized premium and any cash
payments on the Note other than qualified stated interest payments. Upon the
sale, exchange, or retirement of a Note, a United States Holder will recognize
gain or loss equal to the difference between the amount realized upon the sale,
exchange, or retirement and the adjusted tax basis of the Note. Except as
described above with respect to certain Short-Term Original Issue Discount
Notes, and except with respect to gain or loss attributable to changes in
exchange rates as described below with respect to certain Foreign Currency
Notes, such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if at the time of sale, exchange, or retirement the Note
has been held for more than one year. Under current law, net capital gains are,
under certain circumstances, taxed at lower rates than ordinary income. The
deductibility of capital losses is subject to limitations.
Extendible Notes. A Note may provide that the Corporation has the option to
reset the interest rate, in the case of a Fixed Rate Note, or the Spread or
Spread Multiplier, in the case of a Floating Rate Note, on an Interest Reset
Date or to extend the maturity of a Note on the Maturity Date. Pursuant to final
Treasury Regulations, the treatment of a United States Holder of Notes with
respect to which such an option has been exercised who does not elect to have
the Corporation repay such Notes on the applicable Optional Reset Date or
Original Stated Maturity will depend on the terms established for such Notes by
the Corporation pursuant to the exercise of such option (the "Revised Terms").
Such holder may be treated for federal income tax purposes as having exchanged
such Notes (the "Old Notes") for new Notes with Revised Terms (the "New Notes").
If the holder is treated as having exchanged Old Notes for New Notes, such
exchange may be treated as either a taxable exchange or a tax-free
recapitalization.
If the exercise of the option by the Corporation is not treated as an
exchange of Old Notes for New Notes, no gain or loss will be recognized by a
United States Holder as a result thereof. If the exercise of the option is
treated as a taxable exchange of Old Notes for New Notes, a United States Holder
would recognize gain or loss equal to the difference between the issue price of
the New Notes and the holder's adjusted tax basis in the Old Notes. If the
exercise of the option is treated as a tax-free recapitalization, no loss would
be recognized by a United States Holder as a result thereof and gain, if any,
would be recognized to the extent of the fair market value of the excess, if
any, of the principal amount of securities received over the principal amount of
securities surrendered. Although, in this regard, the meaning of the term
"principal amount" is not clear, such term could be interpreted to mean "issue
price" with respect to securities that are received and "adjusted issue price"
with respect to securities that are surrendered. The presence of such options
may also affect the calculation of OID, among other things. Persons considering
the purchase of Extendible Notes should carefully examine the applicable Pricing
Supplement and should consult their own tax advisors regarding the United States
federal income tax consequences of the holding and disposition of such Notes.
Foreign Currency Notes. The following is a summary of the principal United
States federal income tax consequences to a United States Holder of the
ownership of a Note denominated in a Specified Currency other than the U.S.
dollar ("Foreign Currency Notes") and deals only with Foreign Currency Notes
that are not treated, for federal income tax purposes, as an integrated economic
transaction in conjunction with one or more spot contracts, futures contracts or
similar financial instruments. Persons considering the purchase of Foreign
Currency Notes should consult their own tax advisors with regard to the
application of the United States federal income tax laws to their particular
situations, as well as any consequences arising under the laws of any other
taxing jurisdiction.
If interest payments are made in a Specified Currency to a United States
Holder who is not required to accrue such interest prior to its receipt, such
holder will be required to include in income the U.S. dollar value of the amount
received (determined by translating the Specified Currency received at the "spot
rate" for such
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<PAGE>
Specified Currency on the date such payment is received), regardless of whether
the payment is in fact converted into U.S. dollars. No exchange gain or loss is
recognized with respect to the receipt of such payment.
A United States Holder who is required to accrue interest on a Foreign
Currency Note prior to receipt of such interest will be required to include in
income for each taxable year the U.S. dollar value of the interest that has
accrued during such year, determined by translating such interest at the average
rate of exchange for the period or periods during which such interest accrued.
The average rate of exchange for an interest accrual period is the simple
average of the exchange rates for each business day of such period (or such
other average that is reasonably derived and consistently applied by the
holder). An accrual basis holder may elect to translate interest income at the
spot rate on the last day of the accrual period (or last day of the taxable year
in the case of an accrual period that straddles the holder's taxable year) or on
the date the interest payment is received if such date is within five days of
the end of the accrual period. Any such election shall apply to all debt
securities held by the United States Holder at the beginning of the first
taxable year to which the election applies (or thereafter acquired by the United
States Holder) and is irrevocable without the consent of the IRS. Upon receipt
of an interest payment on such Note, such holder will recognize ordinary income
or loss in an amount equal to the difference between the U.S. dollar value of
such payment (determined by translating any Specified Currency received at the
spot rate for such Specified Currency on the date received) and the U.S. dollar
value of the interest income that such holder has previously included in income
with respect to such payment. Any such gain or loss generally will not be
treated as interest income or expense, except to the extent provided in Treasury
Regulations or administrative pronouncements of the IRS.
OID on a Note that is also a Foreign Currency Note will be determined for
any accrual period in the applicable Specified Currency and then translated into
U.S. dollars in the same manner as interest income accrued by a holder on the
accrual basis, as described above. Likewise, a United States Holder will
recognize exchange gain or loss when the OID is paid to the extent of the
difference between the U.S. dollar value of the accrued OID (determined in the
same manner as for accrued interest) and the U.S. dollar value of such payment
(determined by translating any Specified Currency received at the spot rate for
such Specified Currency on the date of payment). For this purpose, all receipts
on a Note will be viewed first as the receipt of any periodic interest payments
called for under the terms of the Note, second as receipts of previously accrued
OID (to the extent thereof), with payments considered made for the earliest
accrual periods first, and thereafter as the receipt of principal.
A United States Holder's tax basis in a Foreign Currency Note will be the
U.S. dollar value of the Specified Currency amount paid for such Foreign
Currency Note determined at the time of such purchase. In the case of a Note
which is denominated in a foreign currency and is traded on an established
securities market, a cash basis taxpayer (or, if it elects, an accrual basis
taxpayer) will determine the U.S. dollar value of the cost of such Note by
translating the amount paid at the spot rate of exchange on the settlement date
of the purchase. A United States Holder who purchases a Note with any previously
owned Specified Currency will recognize exchange gain or loss at the time of
purchase attributable to the difference at the time of purchase, if any, between
his tax basis in such Specified Currency and the fair market value of the Note
in U.S. dollars on the date of purchase. Such gain or loss will be ordinary
income or loss.
For purposes of determining the amount of any gain or loss recognized by a
United States Holder on the sale, exchange, or retirement of a Foreign Currency
Note, the amount realized upon such sale, exchange, or retirement will be the
U.S. dollar value of the amount realized in Specified Currency (other than
amounts attributable to accrued but unpaid interest not previously included in
the holder's income), determined at the time of the sale, exchange, or
retirement and in accordance with his method of accounting. In the case of a
Note which is denominated in a foreign currency and is traded on an established
securities market, a cash basis taxpayer (or, if it elects, an accrual basis
taxpayer) will determine the U.S. dollar value of the amount realized by
translating such amount at the spot rate of exchange on the settlement date of
the sale.
A United States Holder will recognize exchange gain or loss attributable to
the movement in exchange rates between the time of purchase and the time of
disposition (including the sale, exchange or retirement) of a Foreign Currency
Note. Such gain or loss will be treated as ordinary income or loss. Such gain or
loss may
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<PAGE>
be required to be netted against any non-exchange gain or loss in calculating
overall gain or loss on a Note. Under proposed Treasury Regulations issued on
March 17, 1992, which could differ materially from the final Treasury
Regulations, if a Foreign Currency Note is denominated in one of certain
hyperinflationary currencies, generally (i) exchange gain or loss would be
realized with respect to movements in the exchange rate between the beginning
and end of each taxable year (or such shorter period) that such Note was held
and (ii) such exchange gain or loss would be treated as an addition or offset,
respectively, to the accrued interest income on (and an adjustment to the
holder's tax basis in) the Foreign Currency Note.
A United States Holder's tax basis in any Specified Currency received as
interest on (or OID with respect to), or received on the sale or retirement of,
a Foreign Currency Note will be the U.S. dollar value thereof at the spot rate
at the time the holder received such Specified Currency. Any gain or loss
recognized by a United States Holder on a sale, exchange, or other disposition
of Specified Currency will be ordinary income or loss and will not be treated as
interest income or expense, except to the extent provided in Treasury
Regulations or administrative pronouncements of the IRS.
Indexed Notes
The tax treatment of a United States Holder of an Indexed Note will depend
on factors including the specific index or indices used to determine indexed
payments on the Note and the amount and timing of any contingent payments of
principal and interest. Persons considering the purchase of Indexed Notes should
carefully examine the applicable Pricing Supplement and should consult their own
tax advisors regarding the United States federal income tax consequences of the
holding and disposition of such Notes.
Non-United States Holders
Non-United States Holders will not be subject to United States federal
withholding tax on the interest income (including any OID and income with
respect to Foreign Currency Notes) on any Note, provided that (i) the beneficial
owner does not actually or constructively own 10% or more of the voting stock of
the Corporation, (ii) the beneficial owner is not a controlled foreign
corporation related to the Corporation through stock ownership, and (iii) the
beneficial owner provides the correct certification of non-United States Holder
status (which may generally be satisfied by providing an IRS Form W-8 certifying
that the beneficial owner is not a United States Holder and providing the name
and address of the beneficial owner).
A Non-United States Holder will not be subject to United States federal
withholding tax on gain realized from the sale or exchange of a Note.
A Note held by an individual who is not a citizen or resident of the United
States at the time of such holder's death will not be subject to United States
federal estate tax, provided that any interest received on the Note, if received
by the holder at the time of the holder's death, would not be effectively
connected with the conduct of a trade or business in the United States and the
individual does not own, actually or constructively, at the date of death, 10%
or more of the voting stock of the Corporation.
Backup Withholding and Information Reporting
In general, if a United States holder fails to furnish a correct taxpayer
identification number, fails to report dividend and interest income in full, or
fails to certify that such holder has provided a correct taxpayer identification
number and that the holder is not subject to withholding, the Corporation may
withhold a 31 percent federal backup withholding tax on amounts paid to the
holder. An individual's taxpayer identification number is such person's social
security number.
Payments in respect of a Note made within the United States by the
Corporation or any of its paying agents are generally subject to backup
withholding at a rate of 31 percent. Information reporting and backup
withholding do not apply to payments made on a Note if the certification
described in clause (iii) under "Non-United States Holders" above is received,
provided the payor does not have actual knowledge that the holder is a United
States person. Special rules may apply with respect to the payment of the
proceeds from the sale of a Note to or through foreign offices of certain
brokers.
The backup withholding tax is not an additional tax and may be credited
against a holder's regular federal income tax liability or refunded by the IRS
where applicable.
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<PAGE>
DIVIDEND POLICY
The Corporation, The Dai-Ichi Kangyo Bank, Limited, the 80% stockholder of
the Corporation ("DKB"), and CBC Holding (Delaware) Inc., a subsidiary of The
Chase Manhattan Corporation and the 20% stockholder of the Corporation ("CBC
Holding"), operate under a policy requiring the payment of dividends by the
Corporation to DKB and CBC Holding equal to and not exceeding 30% of net
operating earnings of the Corporation on a quarterly basis. Such dividends are
paid to DKB and CBC Holding based upon their respective stock ownership in the
Corporation. The Indentures do not require this policy or otherwise directly
limit the Corporation's ability to pay dividends.
PLAN OF DISTRIBUTION
The Notes are being offered hereby on a continuing basis for sale directly
by the Corporation in those jurisdictions where it is authorized to do so. In
addition, subject to the terms and conditions set forth in the Selling Agency
Agreement, dated May 15, 1996, the Corporation may offer the Notes through any
of the Agents who have separately agreed to use their reasonable best efforts to
solicit offers to purchase the Notes. The Corporation may also sell Notes to any
Agent, as principal, at a discount for resale to one or more investors or other
purchasers at varying prices related to prevailing market prices at the time of
resale, as determined by such Agent or, if so agreed, on a fixed public offering
price basis. Unless otherwise specified in the applicable Pricing Supplement,
the Corporation will pay each Agent a commission, in the form of a discount,
which, depending on the maturity of the Notes placed by such Agent, will range
from .125% to .750% of the principal amount of such Notes, except that the
commission payable by the Corporation to the Agents with respect to Notes with
maturities of greater than thirty years will be negotiated at the time the
Corporation issues such Notes. No commission will be payable to the Agents on
the Notes sold directly to purchasers by the Corporation. Payment of the
purchase price of the Notes will be required to be made in immediately available
funds.
The Agents may offer the Notes they have purchased as principal to other
dealers. The Agents may sell Notes to any dealer at a discount and, unless
otherwise specified in the applicable Pricing Supplement, such discount allowed
to any dealer will not be in excess of the discount to be received by such Agent
from the Corporation. Unless otherwise specified in the applicable Pricing
Supplement, any Note sold to an Agent as principal will be purchased by such
Agent at a price equal to 100% of the principal amount thereof less a percentage
equal to the commission applicable to any agency sale of a Note of identical
maturity, and may be resold by the Agent to investors and other purchasers as
described above. After the initial public offering of Notes to be resold to
investors and other purchasers, the public offering price (in the case of a
fixed price public offering), concession and discount may be changed.
The Corporation will have the sole right to accept offers to purchase Notes
and may, in its absolute discretion, reject any proposed purchase of Notes in
whole or in part. Each Agent will have the right, in its discretion reasonably
exercised, to reject in whole or in part any proposed purchase of Notes through
it.
In connection with the offering, the rules of the Securities and Exchange
Commission permit the Agents to engage in certain transactions that stabilize
the price of the Notes. Such transactions may consist of bids or purchases for
the purpose of pegging, fixing or maintaining the price of the Notes.
If the Agents create a short position in the Notes in connection with the
offering (i.e., if they sell a larger principal amount of the Notes than is set
forth in the cover page of this Prospectus Supplement or the applicable Pricing
Supplement), the Agents may reduce that short position by purchasing Notes in
the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases.
None of the Agents makes any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may
have on the price of the Notes. In addition, none of the Agents makes any
representation that the Agents will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
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Each Agent may be deemed to be an "Underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Corporation has agreed to
indemnify each Agent against certain liabilities, including liabilities under
the Act, or to contribute to payments each Agent may be required to make in
respect thereof.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. The Corporation has been
advised by the Agents that each of the Agents may from time to time purchase and
sell Notes in the secondary market, but is not obligated to do so and may
discontinue making a market in the Notes at any time without notice. No
assurance can be given as to the existence or liquidity of any secondary market
for the Notes.
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<PAGE>
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No dealer, salesman, or any other person has been authorized by the Corporation
or any agent to give any information or to make any representation, other than
as contained in the Pricing Supplement, this Prospectus Supplement, the
Prospectus or the documents incorporated by reference, in connection with the
offer contained in the Pricing Supplement, this Prospectus Supplement, and the
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Corporation or any underwriter or
agent. The Pricing Supplement, this Prospectus Supplement, and the Prospectus do
not constitute an offer by any agent to sell securities in any State to any
person to whom it is unlawful for such agent to make such offer in such State.
Neither the delivery of the Pricing Supplement, this Prospectus Supplement and
the Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that there has been no change in the information
contained or incorporated by reference herein since the respective dates of such
information.
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TABLE OF CONTENTS
Page
----
Prospectus Supplement
Description of the Notes .................................................. S-2
Special Provisions Relating to
Foreign Currency Notes ................................................ S-16
Foreign Currency Risks .................................................... S-19
Certain United States Federal
Income Tax Consequences ............................................... S-20
Dividend Policy ........................................................... S-26
Plan of Distribution ...................................................... S-26
Prospectus
Available Information ..................................................... 2
Documents Incorporated by Reference ....................................... 2
The Corporation ........................................................... 3
Summary of Financial Information .......................................... 6
Use of Proceeds ........................................................... 7
Description of Debt Securities ............................................ 7
Plan of Distribution ...................................................... 12
Experts ................................................................... 13
Legal Opinions ............................................................ 13
================================================================================
================================================================================
U.S. $8,461,000,000
[LOGO]
The CIT Group
Holdings, Inc.
Medium-Term Notes
Due 9 Months or More
From Date of Issue
----------
PROSPECTUS SUPPLEMENT
June 12, 1997
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LEHMAN BROTHERS
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON BROTHERS INC
UBS SECURITIES
================================================================================
