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INTERNATIONAL BANK FOR 1818 H STREET, N.W. (202) 477-1234
RECONSTRUCTION AND WASHINGTON, D.C. 20433 CABLE ADDRESS:INTBAFRAD
DEVELOPMENT U.S.A.
FILE NO. 1-3431
REGULATION BW
RULE 3
May 12, 1997
VIA EDGAR
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
Pursuant to Rule 3 of Regulation BW, please find attached a Supplemental
Report dated May 12, 1997 of the Bank with respect to the Bank's Short-Term
Notes.
SINCERELY YOURS,
Scott B. White
Chief Counsel, Finance
ATTACHMENTS
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FILE NO. 1-3431
REGULATION BW
RULE 3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
SUPPLEMENTAL REPORT OF
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
WITH RESPECT TO ITS
SHORT-TERM NOTES
Filed pursuant to Rule 3 of Regulation BW
Dated: May 12, 1997
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The following information regarding the Short-Term Notes (the "Notes") of
International Bank for Reconstruction and Development (the "Bank") is being
filed pursuant to Rule 3 of Regulation BW. As authorized by Rule 4 of
Regulation BW, certain information is to be provided in the form of a
Supplemental Information Statement, attached as Exhibit A (the "Supplemental
Information Statement").
Item 1. Description of Obligations
- See Supplemental Information Statement.
- Short-Term Notes, to be offered on a continuous basis at a
discount and with maturities of 360 days or less.
- Federal Reserve Bank of New York, 33 Liberty Street, New York,
is the Fiscal Agent.
Item 2. Distribution of Obligations
- See Supplemental Information Statement, cover page.
- The Notes will be offered on a continuous basis with pricing,
distribution and commission arrangements as set out in the
Selling Group Agreements dated September 27, 1981, as amended,
between the Bank and each of the dealers listed on the cover
page of the Supplemental Information Statement (the "Selling
Group Agreements").
Item 3. Distribution Spread
- See Supplemental Information Statement, cover page.
- See Selling Group Agreements, page 5.
Item 4. Discounts and Commissions to Sub-Underwriters and Dealers
- See Item 2.
Item 5. Other Expenses of Distribution
- As the Notes will be offered on a continuous basis, precise
expense amounts are not known. Approximate annual printing
costs are $5,000. The fiscal agency fees charged to the Bank for
services rendered by the Fiscal Agent with respect to all of the
Bank's domestic borrowings is currently about
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$600,000 on an annualized basis. While the precise amount of
such fiscal agency fees attributable to the Short-Term Notes is
not determinable, the Bank estimates that between 5 and 10
percent of such fees should be so allocated.
Item 6. Application of Proceeds
- See Supplemental Information Statement, page 3.
Item 7. Exhibit
- Exhibit A: Supplemental Information Statement dated
March 31, 1997.
- See also the Bank's Information Statement dated March 31, 1997,
filed as Exhibit A to the Bank's Report dated April 23, 1997
with respect to one or more proposed issues of debt securities
of the Bank.
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SUPPLEMENTAL INFORMATION STATEMENT
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
[LOGO]
DISCOUNT NOTES
The World Bank, officially known as the International Bank for
Reconstruction and Development (the Bank), intends to offer on a continuous
basis notes (Discount Notes) represented by certificates, in bearer form only,
or in uncertificated form (Bookentry Discount Notes) with maturities of 360 days
or less at a discount and, in the case of Discount Notes in certificated form
only, on an interest-bearing basis. The Discount Notes are offered through a
group of dealers consisting of Credit Suisse First Boston; Goldman, Sachs & Co.;
Lehman Brothers Inc.; and Merrill Lynch Government Securities Inc. (the
Dealers). The Discount Notes may be offered in the United States and Eurodollar
markets. The Dealers will not accept any customer's order for Discount Notes to
be issued by the Bank for less than $50,000 aggregate face amount per maturity
date. Bookentry Discount Notes are available in denominations of $5,000 and
integral multiples thereof. Discount Notes in certificated form are available in
denominations of $5,000, $25,000, $100,000 and $1,000,000. The maturities of
Discount Notes offered by the Bank and the discount rate for various maturities
will be established from time to time by the Bank. Information as to the
maturities available and such discount rates (as well as the corresponding
interest rates for Discount Notes to be sold on an interest-bearing basis) may
be obtained from the Dealers.
Each of the Dealers has undertaken to the Bank to use its best efforts to
maintain a secondary market for the Discount Notes.
The Federal Reserve Bank of New York acts as Fiscal Agent of the Bank with
respect to Discount Notes pursuant to a Fiscal Agency Agreement. On original
issuance, all Discount Notes will be issued through the office of the Fiscal
Agent in New York. Bookentry Discount Notes will be held by Holding Institutions
designated by the Dealers including Morgan Guaranty Trust Company of New York
and The Chase Manhattan Bank as depositaries for Morgan Guaranty Trust Company
of New York, Brussels branch, as operator of the Euroclear System, and Cedel
Bank S.A., respectively. After original issuance, all Bookentry Discount Notes
will continue to be held by such Holding Institutions unless a purchaser
arranges for the transfer of its Bookentry Bonds to another Holding Institution.
There will be no conversions from Bookentry Discount Notes to Discount Notes in
certificated form or vice versa. Payment of the purchase price for Discount
Notes and payment of Discount Notes at maturity are to be made in immediately
available funds to accounts of Holding Institutions.
The Discount Notes will not be obligations of any government.
The validity and the terms and conditions of the Discount Notes will be
governed by the law of the State of New York.
March 31, 1997
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BOOKENTRY SYSTEM
The Federal Reserve Bank of New York will take delivery of and hold
Bookentry Discount Notes as record owner and custodian, but only for other
Federal Reserve Banks and Holding Institutions located in the Second Federal
Reserve District. Holding Institutions located in other Federal Reserve
Districts can hold Bookentry Discount Notes through their respective Federal
Reserve Bank or Branch. A Holding Institution is a depository institution that
has an appropriate bookentry account with a Federal Reserve Bank or Branch.
Transfers of Bookentry Discount Notes between Holding Institutions can be made
through the Federal Reserve Communications System.
The aggregate holdings of Bookentry Discount Notes of each Holding
Institution will be reflected in the bookentry account of such Holding
Institution with its Federal Reserve Bank or Branch. Each Holding Institution,
and each other intermediate holder in the chain to the ultimate beneficial
owner, will have the responsibility of establishing and maintaining accounts for
its customers having interests in Bookentry Discount Notes. Federal Reserve
Banks will be responsible only for maintaining the bookentry accounts of Holding
Institutions, effecting transfers on their books and ensuring that payments from
the Bank, through the Federal Reserve Bank of New York, are credited to
appropriate Holding Institutions. With respect to Bookentry Discount Notes,
Federal Reserve Banks will act only on the instructions of Holding Institutions
for which they maintain such Bookentry Discount Notes. The Federal Reserve Banks
will not record pledges of Bookentry Discount Notes.
The Bank will not impose fees in respect of Bookentry Discount Notes.
However, owners of Bookentry Discount Notes may incur fees payable in respect of
the maintenance and operation of the bookentry accounts in which such Bookentry
Discount Notes are held.
UNITED STATES MEMBERSHIP IN THE BANK
The United States became a shareholder of the Bank pursuant to an Act of
Congress (Bretton Woods Agreements Act, 22 U.S.C. SectionSection 286 et seq.).
The United States is the Bank's largest shareholder, having 17.54% of its shares
and 17.04% of the total voting power at December 31, 1996. The United States is
represented on the Bank's Board of Governors by the Secretary of the Treasury.
The United States also selects one of the Bank's 24 Executive Directors, who is
appointed by the President of the United States with the advice and consent of
the Senate. The Bank is an instrumentality of its member governments including
the United States Government.
ELIGIBILITY FOR INVESTMENT
The Discount Notes may be accepted as security at their face amount for all
fiduciary, trust, and public funds, the investment or deposit of which are under
the authority and control of the United States or any officers thereof (31
C.F.R. Section 202.6(b)(2)). The Discount Notes are also acceptable as
collateral for Treasury tax and loan accounts at their face amount (31 C.F.R.
Section 203.14(d)(2)).
The Discount Notes are eligible as security for advances for periods not
exceeding 90 days by Federal Reserve Banks to member banks (12 U.S.C. Section
347). National banks and state member banks of the Federal Reserve System may,
under Federal law, deal in the Discount Notes without limitation and may hold
Discount Notes for their own account subject to a limit of 10% of their
unimpaired capital and surplus (12 U.S.C. Section 24 (Seventh)). Surplus and
reserve funds of Federal Home Loan Banks may be invested in the Discount Notes
if obligations of the Bank are eligible investments for fiduciary and trust
funds under the laws of the state where the Federal Home Loan Bank is located
(12 U.S.C. SectionSection 1431(h) and 1436(a)). The Discount Notes are eligible
for purchase by federally chartered savings associations in an amount not
exceeding 30% of association assets (12 U.S.C. Section 1464(c)(2)(D)). Under the
laws of many states, the Discount Notes and other obligations of the Bank are
legal investments for fiduciary and trust funds, savings banks and insurance
companies.
APPROVAL OF THE UNITED STATES GOVERNMENT
As required by its Articles of Agreement, the Bank has obtained the approval
of the United States Government to the raising of funds in or outside the United
States through the issuance of the Discount Notes.
STATUS UNDER SECURITIES ACTS
Under the provisions of Section 15(a) of the Bretton Woods Agreements Act,
as amended, the Discount Notes are exempted securities within the meaning of
Section 3(a)(2) of the Securities Act of 1933, as amended, and Section 3(a)(12)
of the Securities Exchange Act of 1934, as amended.
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LEGAL MATTERS
The legality of the Discount Notes has been passed upon by the Vice
President and General Counsel of the Bank and by Brown & Wood, counsel for the
Dealers, who, with respect to certain matters, have relied upon the opinion of
the counsel of the Bank.
USE OF PROCEEDS
The net proceeds to the Bank from the sale of Discount Notes will be used in
the general operations of the Bank.
TAX MATTERS
The following is a summary of the provisions of the Articles affecting the
taxation of Discount Notes and of certain anticipated United States Federal
income, withholding and estate tax consequences resulting from the ownership of
Discount Notes. This is a limited summary based upon certain generally
applicable United States Federal income, withholding and estate tax laws as now
in effect and as currently interpreted and does not include any description of
the tax laws of any state, local or foreign government that may apply. It is not
intended as tax advice to any person, and all persons considering the purchase
of Discount Notes should consult their own tax counsel or other expert.
Discount Notes and the interest and original issue discount ("OID") thereon
generally will be subject to taxation, including United States Federal income
and estate taxation. Under the Internal Revenue Code of 1986, as amended (the
"Code"), a United States citizen or resident alien individual, as well as a
United States domestic corporation, trust or estate, will be taxable on the
interest and OID accrued or received with respect to Discount Notes depending on
such taxpayer's method of accounting and any special rules applicable to such
taxpayer. Accrual-basis taxpayers generally will be required to include OID in
income ratably over the period in which a Discount Note is held, under methods
provided in the Code. For cash-basis taxpayers generally, OID will not be
subject to ratable inclusion, but gain on the sale or redemption of Discount
Notes will be treated as ordinary income to the extent of the OID attributable
to the period during which the selling taxpayer held such Discount Notes.
The United States Treasury Department has issued to the Bank rulings dated
May 4, 1988 and May 5, 1989 (the "Rulings") regarding certain United States tax
consequences under the Code of the receipt of interest on securities issued by
the Bank. The Rulings provide that interest paid by the Bank on such securities,
including accrued OID, constitutes income from sources outside the United
States.
Under the Rulings, the Bank's payments of interest and original issue
discount ordinarily would not be subject to United States Federal income tax, if
paid to a nonresident alien individual (or foreign partnership, estate or trust)
or to a foreign corporation, whether or not such person is engaged in trade or
business in the United States. However, absent any special statutory or treaty
exception, such payments would be subject to United States Federal income tax
if: (a) such payments are derived by such person in the active conduct of a
banking, financing or similar business within the United States or are received
by a corporation the principal business of which is trading in stock or
securities for its own account, and in either case such payments are
attributable to an office or other fixed place of business of such person within
the United States; or (b) such person is a foreign corporation taxable as an
insurance company carrying on a United States insurance business and such
payments are attributable to its United States business.
The Bank's Articles provide that the Bank's securities and interest, if any,
thereon are not subject to any tax by a member (a) which tax discriminates
against the securities solely because they are issued by the Bank or (b) if the
sole jurisdictional basis for the tax is the place or currency in which the
securities are issued, made payable or paid, or the location of any office or
place of business maintained by the Bank. The imposition of United States
Federal income tax in the manner described above is not inconsistent with the
Bank's Articles.
Under its Articles, the Bank is not under any obligation to withhold or pay
any taxes on any interest on the securities it issues. The Rulings accordingly
determined that neither the Bank nor an agent appointed by it for the purpose of
paying interest on securities issued by the Bank is required to withhold tax on
interest paid by the Bank. Payments of interest and accrued OID on Discount
Notes will be made by the Fiscal Agent without deduction in respect of any such
tax.
Furthermore, the Bank is not subject to the reporting requirements that are
imposed by United States tax law with respect to certain payments of interest
and principal and accruals of OID on debt obligations. Neither the Bank
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nor the Fiscal Agent is required to implement backup withholding with respect to
such payments and accruals, as confirmed by temporary regulations issued by the
Internal Revenue Service. However, the Fiscal Agent may file information returns
with the Internal Revenue Service with respect to payments of interest and
principal and accruals of OID within the United States to certain non-corporate
United States persons as if such returns were required of it.
In addition, brokers, trustees, custodians and other intermediaries within
the United States are subject to the reporting and backup withholding
requirements with respect to certain payments of interest and principal and
accruals of OID on Discount Notes held for the account of certain non-corporate
United States persons. Foreign persons holding Discount Notes within the United
States through such intermediaries may be required to establish their status in
order to avoid information reporting and backup withholding of tax by such
intermediaries in respect of payments and accruals on such Discount Notes.
In the case of United States Federal estate tax, the Rulings determined
that, unless an applicable death tax convention with a foreign country provides
otherwise, securities of the Bank are deemed to be situated outside the United
States for purposes of the United States Federal estate tax and are not
includable in the value of the gross estate for purposes of such tax in the case
of the estate of a nonresident of the United States who is not a citizen of the
United States.
AVAILABILITY OF INFORMATION AND INCORPORATION BY REFERENCE
The Bank is subject to certain informational requirements of Regulation BW,
promulgated by the Securities and Exchange Commission (the Commission) under
Section 15(a) of the Bretton Woods Agreements Act, and in accordance therewith
files its regular quarterly financial statements, the annual report of the Bank
to its Board of Governors and other information with the Commission.
In addition the Bank periodically files with the Commission an information
statement which describes the Bank, its capital, operations, administration,
Articles of Agreement, legal status and certain features of its debt securities
(the "Information Statement"). Each Information Statement also includes the
Bank's latest audited financial statements and its latest unaudited quarterly
financial statements, if any. The current Information Statement dated March 31,
1997 contains the Bank's audited financial statements as of June 30, 1996 and
its latest financial statements (unaudited).
The Information Statement and such regular quarterly and audited financial
statements, reports and other information can be inspected and copied at the
offices of the Commission at Room 1026, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies of such material can be obtained from the Public Reference
Section of the Commission at the above address at prescribed rates. The
Information Statement, annual reports and financial statements also may be
inspected at the SEC Library of the New York Stock Exchange.
The Information Statement dated March 31, 1997 and any Information Statement
and any quarterly or annual financial statements filed by the Bank pursuant to
Regulation BW subsequent to March 31, 1997 and prior to the termination of the
offering of Discount Notes under this Supplemental Information Statement shall
be deemed to be incorporated by reference into this Supplemental Information
Statement and to be a part hereof. The Bank will provide without charge copies
of the Information Statement and any quarterly or annual financial statements
incorporated herein by reference. Written or telephone requests should be
directed to the World Bank, 1818 H Street, N.W., Washington, D.C. 20433,
ATTENTION: Financial Operations Department, (202) 458-0765.
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