<PAGE> 1
PROSPECTUS SUPPLEMENT
(To prospectus dated June 4, 1999)
[CFC LOGO]
$2,143,529,000
National Rural Utilities
Cooperative Finance Corporation
Medium-Term Notes, Series C
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Each note will mature on a date nine months or more from its date of original
issuance. Unless specified otherwise in the applicable pricing supplement to
this prospectus supplement, interest on fixed rate notes will be paid on each
January 15 and July 15 and at maturity. Interest on floating rate notes will be
paid on the dates specified in the applicable pricing supplement. Generally,
there will not be a sinking fund. Notes may contain optional redemption
provisions or may obligate us to repay at the option of the holder. The pricing
supplement will describe the specific terms of each note. National Rural
Utilities Cooperative Finance Corporation may offer from time to time up to
$2,143,529,000 of its Medium-Term Notes, Series C.
<TABLE>
<CAPTION>
PER NOTE TOTAL
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<S> <C> <C>
Public Offering Price....................................... 100.0% $2,143,529,000
Agents' Discounts and Commissions........................... 0.0% 0
Proceeds to National Rural Utilities 100.0% $2,143,529,000
Cooperative Finance Corporation...........................
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if the
prospectus supplement or attached prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The notes are being offered on a continuing basis through Lehman Brothers Inc.,
Banc of America Securities LLC, Goldman, Sachs & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and J.P. Morgan Securities Inc., which are acting as
agents. Each agent has agreed to use its reasonable best efforts to solicit
offers to purchase the notes. The notes may be sold at or above par or at a
discount to any agent, acting as principal, for a commission as set forth in the
table above. We may also sell the notes directly to investors. No discount or
commission will be paid to any agent for a direct sale of notes by us. The notes
will not be listed on any securities exchange. You cannot be assured that the
notes offered by this prospectus supplement will be sold or that there will be a
secondary market for the notes.
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June 7, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
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<S> <C>
About This Prospectus Supplement; Pricing Supplements....... S-2
Description of the Medium-Term Notes........................ S-3
Plan of Distribution........................................ S-7
PROSPECTUS
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Where You Can Find More Information About National Rural
Utilities Cooperative Finance Corporation................. 2
CFC......................................................... 3
Use of Proceeds............................................. 4
Description of Debt Securities.............................. 4
Limitations on Issuance of Bearer Securities................ 12
United States Taxation...................................... 12
Plan of Distribution........................................ 18
Legal Opinions.............................................. 20
Experts..................................................... 20
</TABLE>
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the attached prospectus or any attached
pricing supplement. We have authorized no one to provide you with different
information. You should not assume that the information contained in this
prospectus supplement, the attached prospectus or any attached pricing
supplement is accurate as of any date other than the date on the front cover of
the document. We are not making an offer of these securities in any state where
the offer is not permitted.
ABOUT THIS PROSPECTUS SUPPLEMENT; PRICING SUPPLEMENTS
National Rural Utilities Cooperative Finance Corporation ("CFC") may use
this prospectus supplement, together with the attached prospectus and an
attached pricing supplement, to offer CFC's Medium-Term Notes, Series C, at
various times. The total initial public offering price of notes that may be
offered by use of this prospectus supplement is $2,143,529,000 (or the
equivalent in foreign or composite currencies).
This prospectus supplement sets forth certain terms of the notes that CFC
may offer. It supplements the description of the debt securities contained in
the attached prospectus. If information in this prospectus supplement is
inconsistent with the prospectus, this prospectus supplement will apply and will
supersede that information in the prospectus.
Each time CFC issues notes CFC will attach a pricing supplement to this
prospectus supplement. The pricing supplement will contain the specific
description of the notes being offered and the terms of the offering. The
pricing supplement may also add, update or change information in this prospectus
supplement or the attached prospectus. Any information in the pricing
supplement, including any changes in the method of calculating interest on any
note, that is inconsistent with this prospectus supplement will apply and will
supersede that information in this prospectus supplement.
It is important for you to read and consider all information contained in
this prospectus supplement and the attached prospectus and pricing supplement in
making your investment decision. You should also read and consider the
information in the documents CFC has referred you to in "Where You Can Find More
Information About National Rural Utilities Cooperative Finance Corporation" on
page 2 of the attached prospectus.
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<PAGE> 3
DESCRIPTION OF THE MEDIUM-TERM NOTES
The Medium-Term Notes, Series C ("notes") are to be issued under an
indenture dated as of December 15, 1987, as supplemented by a first supplemental
indenture dated as of October 1, 1990 (the "indenture"), with Harris Trust and
Savings Bank, as successor trustee (the "trustee"). National Rural Utilities
Cooperative Finance Corporation ("CFC") has initially designated Bank of
Montreal Trust Company as its paying agent and security registrar for the notes.
GENERAL
The following summary of certain terms of the notes is not complete. You
should refer to the indenture, a copy of which is incorporated as an exhibit to
the registration statement. A number of terms used but not defined in this
prospectus supplement have the same meanings as in the indenture.
The notes will constitute a single series of securities under the
Indenture, unlimited in aggregate principal amount. See "Plan of Distribution".
Unless specified otherwise all currency amounts in this prospectus supplement,
the accompanying prospectus and any pricing supplement are stated in United
States dollars ("$", "dollars", "U.S. dollars" or "U.S. $").
CFC will issue notes with maturities of nine months or greater, as selected
by the initial purchaser.
Notes will be issued in registered form. Notes denominated in U.S. dollars
will be sold in denominations of $1,000 and multiples of $1,000. Notes
denominated in other currencies will be sold in denominations specified in the
prospectus supplement.
The supplement relating to a note will describe the following terms:
- the foreign currency or currency unit of the note;
- if other than 100%, the price (expressed as a percentage of the aggregate
principal amount thereof) at which the note will be issued;
- the date on which the note will be issued;
- the date on which the note will mature;
- the rate per annum at which the note will bear interest;
- whether the note will be issued initially as a book-entry note or a
certificated note; and
- any other terms of the note not inconsistent with the provisions of the
indenture.
Each note will be issued initially as either a book-entry note or a
certificated note. The depositary for the book-entry notes will initially be the
Depository Trust Company in the City of New York (the "DTC"). See "Book-Entry
Notes".
An original issue discount note is a note issued at a price lower than the
principal amount and provides that upon redemption or acceleration of the note
an amount less than the principal amount shall become due and payable. In the
event of redemption or acceleration of an original issue discount note, the
amount payable to the holder of such note will be determined in accordance with
the terms of the note. For information respecting "original issue discount" for
United States federal income tax purposes, see "United States Taxation--U.S.
Holders--Original Issue Discount" in the prospectus.
Unless specified otherwise in the applicable supplement, the notes will be
denominated in U.S. dollars and payments of principal, premium and any interest
on the notes will be made in U.S. dollars. If any of the notes are denominated
in a foreign currency (a currency other than U.S. dollars) or currency unit, or
if the principal, premium and any interest on any of the notes is payable at the
option of the holder or CFC in a currency, including a currency unit, other than
that in which the note is denominated, the applicable supplement will provide
additional information, including applicable exchange rate information,
pertaining to the terms of those notes and other matters of interest to the
holders.
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<PAGE> 4
Payments on book-entry notes will be made through the paying agent to the
DTC. See "Book-Entry Notes".
Payments of principal, premium and any interest on certificated notes
payable at maturity or upon redemption will be made in immediately available
funds at the office of the paying agent in the Borough of Manhattan, the City of
New York. Payments in immediately available funds will be made only if the
certificated notes are presented to the paying agent in time for the paying
agent to make payments in immediately available funds in accordance with its
normal procedures. CFC has initially designated Bank of Montreal Trust Company,
acting through its office in the Borough of Manhattan, the City of New York, as
its paying agent for the notes. Interest on certificated notes (other than
interest payable at maturity or upon redemption) will be paid by check mailed to
the address of the person entitled to the interest. A holder of $10,000,000 or
more in aggregate principal amount of certificated notes of like tenor and terms
will be entitled to receive payment of interest by wire transfer in immediately
available funds, but only if appropriate instructions have been received in
writing by the paying agent on or prior to the applicable regular record date
for the payment of interest.
Certificated notes may be presented for registration of transfer or
exchange at the office of Bank of Montreal Trust Company in the Borough of
Manhattan, the City of New York. Book-entry notes may be transferred or
exchanged through a participating member of the DTC. See "Book-Entry Notes".
The notes will be direct, unsecured obligations of CFC.
For a description of the rights attaching to different series of securities
under the indenture, see "Description of Securities" in the prospectus.
INTEREST AND INTEREST RATES
Each note will bear interest from the date of issue or from the most recent
interest payment date to which interest on that note has been paid or duly
provided for at the fixed rate per annum, or at the rate per annum determined by
the interest rate formula, stated in the note and in the applicable supplement
until the principal of the note is paid or made available for payment. Interest
will be payable on each interest payment date and at maturity or upon earlier
redemption or repayment. See "Description of Securities--Payment and Paying
Agents" in the prospectus. Interest will be payable to the registered holder at
the close of business on the regular record date; provided, however, that
interest payable at maturity will be payable to the person to whom principal
shall be payable. Unless specified otherwise in the applicable supplement, the
first payment of interest on any note originally issued between a regular record
date and an interest payment date will be made on the interest payment date
following the next succeeding regular record date to the registered holder on
that next succeeding regular record date.
CFC may change interest rates or interest rate formulas from time to time,
but no such change will affect any note already issued or for which CFC has
accepted an offer to purchase.
Unless otherwise indicated in the applicable supplement, the interest
payment dates for the notes will be January 15 and July 15 of each year and the
regular record dates will be January 1 and July 1 of each year. Interest on
notes will be computed and paid on the basis of a 360-day year of twelve 30-day
months. Interest payments on notes will equal the amount of interest accrued
from and including the prior interest payment date or from and including the
date of issue, but excluding the related interest payment date or maturity. If
any interest payment date or the maturity of a note falls on a day that is not a
business day, the related payment of principal, any premium or interest will be
made on the next business day and no interest will accrue on the amount payable
for the period from and after that interest payment date or maturity.
BOOK-ENTRY NOTES
The DTC will act as securities depositary for book-entry notes. The
book-entry notes will be issued as fully-registered securities registered in the
name of Cede & Co., the Depositary's partnership nominee. One fully-registered
global security will be issued for each issue of the notes, each in the
aggregate principal amount of such issue, and will be deposited with the DTC.
If, however, the aggregate principal amount of any issue
S-4
<PAGE> 5
exceeds $200 million, one global security will be issued with respect to each
$200 million of principal amount and an additional global security will be
issued with respect to any remaining principal amount of such issue.
The DTC is a limited-purpose trust company organized under the New York
Banking Law, 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 pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. The DTC holds securities that its participants have
deposited. The DTC also facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. The DTC is
owned by a number of its direct participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the NASD. Access to DTC's system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly. The rules applicable to the DTC and
its participants are on file with the Securities and Exchange Commission.
Purchases of book-entry notes under the DTC's system must be made by or
through direct participants, which will receive a credit for the book-entry
notes on the DTC's records. The ownership interest of each actual purchaser of
each book-entry note is in turn to be recorded on the direct and indirect
participants' records. Owners of notes will not receive written confirmation
from the DTC of their purchase, but are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the direct or indirect participant through
which the owner entered into the transaction. Transfers of ownership interests
in the book-entry notes are to be accomplished by entries made on the books of
participants acting on behalf of owners. Owners will not receive certificates
representing their ownership interests in book-entry notes, except in the event
that use of the book-entry system for one or more book-entry notes is
discontinued.
To facilitate subsequent transfers, all global securities deposited by
participants with the DTC are registered in the name of the DTC's partnership
nominee, Cede & Co. The deposit of global securities with the DTC and their
registration in the name of Cede & Co. effects no change in beneficial
ownership. The DTC has no knowledge of the actual owners of the book-entry
notes; the DTC's records reflect only the identity of the direct participants to
whose accounts such book-entry notes are credited, which may or may not be the
owners. The participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by the DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the
book-entry notes are being redeemed, and unless otherwise notified by either CFC
or the trustee, the DTC's practice is to determine by lot the amount of the
interest of each direct participant in such issue to be redeemed.
Neither the DTC nor Cede & Co. will consent or vote with respect to
book-entry notes. Under its usual procedures, the DTC will mail an omnibus proxy
to CFC as soon as possible after the record date. The omnibus proxy assigns Cede
& Co.'s consenting or voting rights to those direct participants to whose
accounts the book-entry notes are credited on the record date.
Principal and interest payments on the book-entry notes will be made to the
DTC. The DTC's practice is to credit direct participants' accounts on the
payable date in accordance with their respective holdings shown on the DTC's
records unless the DTC has reason to believe that it will not receive payment on
the payable date. Payments by participants to owners will be governed by
standing instructions and customary practices as is the case with securities
held for the accounts of customers in bearer form or registered in
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<PAGE> 6
"street name" and will be the responsibility of such participant and not of the
DTC, any agents, or CFC, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal and interest to the DTC
is the responsibility of CFC or agents, disbursement of such payments to direct
participants will be the responsibility of the DTC, and disbursement of such
payments to the owners will be the responsibility of direct and indirect
participants.
An owner must give notice to elect to have its book-entry notes purchased
or tendered, through its participant, to the paying agent, and must effect
delivery of such book-entry notes by causing the direct participant to transfer
the participant's interest in the book-entry notes, on the DTC's records, to the
paying agent. The requirement for physical delivery of book-entry notes in
connection with a demand for purchase or a mandatory purchase will be deemed
satisfied when the ownership rights in the book-entry notes are transferred by
direct participants on the DTC's records.
The DTC may discontinue providing its services as securities depositary
with respect to the book-entry notes at any time by giving reasonable notice to
CFC or the agents. Under such circumstances, in the event that a successor
securities depositary is not obtained, certificated notes are required to be
printed and delivered in exchange for the book-entry notes represented by the
global securities held by the DTC.
DTC management is aware that some computer applications, systems, and the
like for processing date ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its Participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries, and settlement of trades within DTC ("DTC Services"), continue to
function appropriately. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan includes a
testing phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information of the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to: (i)
impress upon them the importance of such services being Year 2000 compliant; and
(ii) determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
CFC may decide to discontinue use of system of book-entry transfers through
the DTC. In that event, certificated notes will be printed and delivered in
exchange for the book-entry notes represented by the global securities held by
the DTC.
The information in this section concerning the DTC and their book-entry
system has been obtained from sources that CFC believes to be reliable, but CFC
takes no responsibility for the accuracy thereof.
Neither CFC, the trustee, any paying agent nor the registrar for the notes
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interest in a global
security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
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PLAN OF DISTRIBUTION
The notes are offered on a continuing basis by CFC on its own behalf
directly to its members and members of RTFC. CFC will have the sole right to
accept offers to purchase notes and may reject any such offer, in whole or in
part.
CFC will provide separate instructions on how to purchase notes in its
brochure entitled "CFC Medium-Term Notes". Unless otherwise indicated in the
prospectus supplement, payment of the purchase price of notes will be required
to be made in immediately available funds to the Trustee in New York City.
In addition to the offering of the notes directly by CFC as described
herein, the notes are being offered on a continuing basis by CFC through Lehman
Brothers Inc. Banc of America Securities LLC, Goldman, Sach & Co., Merrill Lynch
& Co. and J.P. Morgan & Co., which have agreed to use their best efforts to
solicit purchases of the Notes under the terms of an Agency Agreement dated June
8, 1999. CFC will pay each agent a commission of from .125% to .625% of the
principal amount of each note, depending on its stated maturity or such other
fee as is mutually agreed upon by CFC and the agent.
CFC also may sell notes to each agent, acting as principal, at or above par
or at a discount to be agreed upon at the time of sale, for resale to one or
more investors at varying prices related to prevailing market prices at the time
of such resale, as determined by such agent. CFC has reserved the right to sell
notes directly on its own behalf other than to its members.
Any notes sold pursuant to the agency agreement, or sold by CFC to the
agents for resale as contemplated by the agency agreement, will reduce the
remaining principal amount of notes which may be offered by this prospectus
supplement and the prospectus.
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PROSPECTUS
#CFC LOGO#
National Rural Utilities
Cooperative Finance Corporation
$2,143,929,000
Debt Securities
------------------------
We plan to issue from time to time up to $2,143,929,000 of securities. We will
provide the specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplements carefully.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------
This prospectus may not be used to consummate the sale of securities unless
accompanied by a prospectus supplement.
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THE DATE OF THIS PROSPECTUS IS JUNE 4, 1999
<PAGE> 9
WHERE YOU CAN FIND MORE INFORMATION ABOUT
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
National Rural Utilities Cooperative Finance Corporation ("CFC") files
annual, quarterly and current reports, proxy statements and other information
with the SEC. You may read and copy any document CFC files at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. CFC's SEC filings are also available to the public at the SEC's
web site at http://www.sec.gov.
The SEC allows the incorporation by reference of information filed in other
documents into this prospectus, which means that CFC can disclose information
important to you by referring you to those documents. The information
incorporated by reference is considered to be a part of this prospectus, and
later information filed with the SEC will update and supersede this information.
CFC incorporates by reference the documents listed below and any future filings
made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until this offering is completed:
(a) Annual Report on Form 10-K for the year ended May 31, 1998;
(b) Quarterly Reports on Form 10-Q for the quarters ended August 31,
1998, November 30, 1998 and February 28, 1999;
(c) Current Reports on Form 8-K dated June 22, 1998, August 28, 1998,
September 25, 1998, October 7, 1998, November 5, 1998, December 7, 1998,
January 12, 1999 and March 22, 1999.
You may request a copy of these filings, at no cost, by writing to or
telephoning us at the following address:
Steven L. Lilly
Senior Vice President and Chief Financial Officer
National Rural Utilities Cooperative Finance Corporation
Woodland Park, 2201 Cooperative Way
Herndon, VA 20171-3025
(703) 709-6700
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE AUTHORIZED NO
ONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT COVER OF THE DOCUMENT.
WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS
NOT PERMITTED.
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<PAGE> 10
CFC
CFC was incorporated as a private, not-for-profit cooperative association
under the laws of the District of Columbia in 1969. CFC's principal purpose is
to provide its members with a source of financing to supplement the loan program
of the Rural Utilities Service ("RUS") (formerly the Rural Electrification
Administration) of the United States Department of Agriculture. CFC makes loans
primarily to its rural utility system members to enable them to acquire,
construct and operate electric distribution, generation, transmission and
related facilities. CFC also makes loans to service organization members to
finance office buildings, equipment, related facilities and services provided by
them to the rural utility systems. CFC has also provided guarantees for
tax-exempt financing of pollution control facilities and other properties
constructed or acquired by its members, and in addition has provided loans or
guarantees through National Cooperative Services Corporation in connection with
certain lease transactions of its members. Also, through Rural Telephone Finance
Cooperative, a controlled affiliate of CFC established in 1987, CFC provides
financing to rural telephone and telecommunications companies and their
affiliates. In addition, through Guaranty Funding Cooperative, a controlled
affiliate of CFC established in 1991, CFC provides financing for members to
refinance their debt to the Federal Financing Bank of the United States
Treasury. CFC's offices are located at Woodland Park, 2201 Cooperative Way,
Herndon, VA 20171-3025 and its telephone number is (703) 709-6700.
CFC's 1,052 members as of May 31, 1998 included 903 rural utility system
members, virtually all of which are consumer-owned cooperatives, 75 service
organization members and 74 associate members. The rural utility system members
included 835 distribution systems and 68 generation and transmission systems
operating in 46 states and U.S. territories.
CFC's long-term loans to rural utility system members generally have
35-year maturities. Loans are made directly to members or in conjunction with
concurrent RUS loans. Loans made to members that do not also have RUS loans are
generally secured by a mortgage or substantially all the rural utility system
member's property (including revenues). Loans made to members that also have RUS
loans are generally secured ratably with RUS's loans by a common mortgage on
substantially all the rural utility system member's property (including
revenues). Interest rates on these loans are either fixed or variable. Fixed
rates are offered weekly based on the overall cost of long-term funds and may be
obtained for any period from one to 35 years. Variable rates are adjusted
monthly in line with changes in the cost of short-term funds.
CFC makes short-term line-of-credit loans and intermediate-term loans with
up to five-year maturities. These loans are made on either a secured or an
unsecured basis. Rates on these loans may be adjusted semi-monthly in line with
changes in the short-term cost of funds. The intermediate-term loans are
generally made to power supply systems in connection with the planning and
construction of new generating plants and transmission facilities.
CFC also makes loans to telecommunication systems through Rural Telephone
Finance Cooperative. These loans are long-term fixed or variable rate loans with
maturities not exceeding 15 years and short-term loans.
At February 28, 1999, CFC had a total of $13,325.9 million of loans
outstanding and $1,728.1 million of guarantees outstanding.
CFC's guarantees are senior obligations ranking on a par with its other
senior debt. Even if the system defaults in payment of the guaranteed
obligations, the debt cannot be accelerated as long as CFC pays the debt service
under its guarantee as due. The system is generally required to reimburse CFC on
demand for amounts paid on the guarantee, and this obligation is usually secured
by a mortgage (often joint with RUS) on the system's property or, in the case of
a lease transaction, on the leased property. Holders of $992.2 million of the
guaranteed pollution control debt (at February 28, 1999) had the right at
certain times to tender their bonds for remarketing, and, if they cannot
otherwise be remarketed, CFC has committed to purchase bonds so tendered.
By policy, CFC maintains an allowance for loan losses at a level believed
to be adequate in relation to the quality and size of its loans and guarantees
outstanding. At February 28, 1999, the allowance was $264.0 million. At February
28, 1999, CFC's ten largest borrowers, which were primarily power supply
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members, had outstanding loans totaling $1,967.6 million, which represented
approximately 14.7% of CFC's total loans outstanding. As of February 28, 1999,
outstanding guarantees for these same ten largest borrowers totaled $707.9
million, which represented 41.0% of CFC's total guarantees outstanding,
including guarantees of the maximum amounts of lease obligations at such date.
On that date, no member had loans and guarantees outstanding in excess of 10% of
the aggregate amount of CFC's outstanding loans and guarantees; however, one of
the ten largest borrowers, Deseret Generation & Transmission Co-operative
("Deseret"), was operating under a restructuring agreement. At February 28,
1999, Deseret (excluding loans guaranteed by RUS) accounted for 4.4% of loans
outstanding. Guarantees outstanding for Deseret accounted for 3.1% of total
guarantees outstanding. Total loans and guarantees outstanding to and for
Deseret accounted for 35.7% of total Members' Equity, Members' Subordinated
Certificates and the allowance for loan losses.
CFC's fixed charge coverage ratio was as follows for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FEBRUARY 28, YEAR ENDED MAY 31,
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1999 1998 1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C> <C>
1.12 1.12 1.12 1.12 1.12 1.13 1.13
</TABLE>
Margins used to compute the fixed charge coverage ratio represent net
margins before extraordinary loss resulting from redemption premiums on bonds
plus fixed charges. The fixed charges used in the computation of the fixed
charge coverage ratio consist of interest and amortization of bond discount and
bond issuance expenses.
USE OF PROCEEDS
Unless otherwise specified in a prospectus supplement, CFC will add the net
proceeds from the sale of the securities to the general funds, which will be
used to make loans to members, repay short-term borrowings, refinance existing
long-term debt and for other corporate purposes. CFC expects to incur additional
indebtedness from time to time, the amount and terms of which will depend upon
the volume of its business, general market conditions and other factors.
DESCRIPTION OF DEBT SECURITIES
The following description summarizes the general terms and provisions that
may apply to the securities. Each prospectus supplement will state the
particular terms of the securities and the extent, if any, to which the general
provisions may apply to the securities included in the supplement.
The securities will be issued under an Indenture dated as of December 15,
1987, as supplemented by a First Supplemental Indenture dated as of October 1,
1990 between CFC and Harris Trust and Savings Bank, as successor Trustee (as so
supplemented, the "Indenture"). The Indenture does not limit the aggregate
principal amount of securities which may be issued thereunder.
The following summary of certain provisions of the Indenture is not
complete. You should refer to the applicable provisions of the following
documents for more detailed information:
- the Indenture, which is incorporated by reference to Exhibit 4.1 to
Amendment No. 1 to Registration Statement No. 33-34927, filed with the
SEC on October 12, 1990, and
- the First Supplemental Indenture, which is incorporated by reference to
Exhibit 4.2 to Registration Statement No. 33-58445, filed with the SEC on
April 5, 1995.
Some of the capitalized terms used in the following discussion are defined in
the Indenture, and their definitions are incorporated by reference into this
prospectus. Section references below are to the sections in the Indenture.
GENERAL
The securities will be issued in fully registered form without coupons
unless the applicable prospectus supplement provides for an issuance to be in a
form registered as to principal only with or without coupons or in bearer form
with or without coupons or any combination thereof. Securities may also be
issued in
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temporary or definitive global bearer form. Unless specified otherwise in the
applicable prospectus supplement securities denominated in U.S. dollars in
denominations of $1,000 or multiples of $1,000 for registered securities and in
denominations of $5,000 or multiples of $5,000 for bearer securities.
The securities will be direct, unsecured obligations of CFC.
If any of the securities are offered for any foreign currency or currency
unit or if principal of, any premium or any interest on any of the securities is
payable in any foreign currency or currency unit, the applicable prospectus
supplement will describe the restrictions, elections, tax consequences, specific
terms and other information relative to those securities.
CFC may issue securities in one or more series with the same or various
maturities at or above par or with an original issue discount. Original issue
discount securities bearing no interest or interest at a rate which at the time
of issuance is below market rates will be sold at a discount (which may be
substantial) below their stated principal amount. See "United States
Taxation--U.S. Holders--Original Issue Discount" for a discussion of certain
Federal income tax considerations with respect to any original issue discount
securities.
The prospectus supplement relating to the particular series of securities
being offered will specify the amounts, prices and terms of those securities.
These terms may include:
- the title and the limit on the aggregate principal amount of securities;
- the percentage of their principal amount at which the securities will be
sold;
- the date or dates on which the securities will mature;
- the annual rate or rates (which may be fixed or variable) or the method
of determining any rate or rates at which the securities will bear
interest;
- the date or dates from which such interest shall accrue and the date or
dates at which interest will be payable;
- the place where payments may be made on the securities;
- any redemption or sinking fund terms;
- the principal amount of original issue discount securities payable upon
acceleration;
- the means of satisfaction and discharge of the Indenture with respect to
the securities;
- any changes to the events of default or covenants described in this
prospectus;
- the currency, currencies or currency unit or units for which the
securities may be purchased and the currency, currencies or currency unit
or units in which the payment of principal of (and premium) and interest
on such securities will be made;
- either CFC or the holders of securities may elect payment in a currency,
currencies or currency unit or units other than that in which the
securities are stated to be payable, then the period or periods within
which, and the terms upon which, the election may be made and, if the
amount of those payments may be determined with reference to an index
based on a currency, currencies or currency unit or units, other than
that in which the securities are stated to be payable, then the manner in
which such amounts shall be determined;
- whether the securities will be issued as registered securities, in a form
registered as to principal only with or without coupons, or as bearer
securities including temporary and definitive global form, or any
combination thereof and applicable exchange provisions;
- whether CFC will pay additional amounts to any holder of securities who
is not a United States person (as defined under "United States Taxation")
in respect of any tax, assessment or governmental charge required to be
withheld or deducted and whether CFC will have the option to redeem the
applicable securities rather than pay additional amounts;
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- whether the covenants described below under "Restriction on Indebtedness"
will apply to the securities; and
- any other terms of the securities not inconsistent with the Indenture.
(Section 301)
EXCHANGE, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable prospectus supplement,
registered securities of any series that are not global securities will be
exchangeable for other registered securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations. In
addition, if securities of any series are issuable as both registered securities
and bearer securities, the holder may choose, upon written request and subject
to the terms of the Indenture, to exchange bearer securities and the appropriate
related coupons of that series into registered securities of the same series of
any authorized denominations and of a like aggregate principal amount and tenor.
Bearer securities with attached coupons surrendered in exchange for registered
securities between a regular record date or a special record date and the
relevant date for payment of interest must be surrendered without the coupon
relating to the interest payment date. Interest will not be payable in respect
of the registered security issued in exchange for that bearer security. The
interest will be payable only to the holder of that coupon when due in
accordance with the terms of the Indenture. Bearer securities will not be issued
in exchange for registered securities. No service charge will be made for any
registration of transfer or exchange of the securities, but CFC may require
payment of a sum sufficient to cover any applicable tax. (Section 305)
You may present securities for exchange as provided above. In addition, you
may present registered securities for registration of transfer together with the
duly executed form of transfer at the office of the security registrar or at the
office of any transfer agent designated by CFC for that purpose with respect to
any series of securities and referred to in an applicable prospectus supplement.
The security registrar or the transfer agent will effect the transfer or
exchange upon being satisfied with the documents of title and identity of the
person making the request. CFC has appointed Bank of Montreal Trust Company as
security registrar. (Section 305) If a prospectus supplement refers to any
transfer agents (in addition to the security registrar) initially designated by
CFC with respect to any series of securities, CFC may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts. However, if securities of a series
are issuable solely as registered securities, CFC will be required to maintain a
transfer agent in each place of payment for such series and, if securities of a
series are issuable as bearer securities, CFC will be required to maintain (in
addition to the security registrar) a transfer agent in a place of payment for
such series. CFC may at any time designate additional transfer agents with
respect to any series of securities. (Section 1002)
In the event of any redemption in part, CFC will not be required to:
- issue, register the transfer of or exchange securities of any series
during a period beginning at the opening of business 15 days before any
selection of securities of that series to be redeemed and ending at the
close of business on:
- if securities of the series are issuable only as registered
securities, the day of mailing of the relevant notice of redemption;
- if securities of the series are issuable only as bearer securities,
the day of the first publication of the relevant notice of redemption;
or
- if securities of the series are also issuable as registered securities
and bearer securities and there is no publication of the relevant
notice of redemption, the day of mailing of the relevant notice of
redemption;
- register the transfer of or exchange any registered security, or
portion thereof, called for redemption, except the unredeemed portion
of any registered security being redeemed in part; or
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- exchange any bearer security called for redemption, except to exchange
such bearer security for a registered security of that series and like
tenor which is simultaneously surrendered for redemption. (Section
305)
PAYMENT AND PAYING AGENTS
Unless otherwise specified in an applicable prospectus supplement, payment
of principal of, any premium and any interest on registered securities will be
made at the office of the paying agent or paying agents that CFC may designate
at various times. However, CFC may also make interest payments by check mailed
to the address, as it appears in the security register, of the person entitled
to the payments. (Section 301) Unless otherwise specified in an applicable
prospectus supplement, CFC will make payment of any installment of interest on
registered securities to the person in whose name that registered security is
registered at the close of business on the regular record date for such
interest. (Section 307)
Unless otherwise specified in an applicable prospectus supplement, the
office of Bank of Montreal Trust Company in the Borough of Manhattan, The City
of New York will be designated as sole paying agent for payments with respect to
securities that are issuable solely as registered securities and as CFC's paying
agent in the Borough of Manhattan, The City of New York, for payments with
respect to securities. Any paying agents outside the United States and any other
paying agents in the United States initially designated by CFC for the
securities will be named in an applicable prospectus supplement. CFC 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.
However, unless otherwise specified in an applicable prospectus supplement, if
securities of a series are issuable solely as registered securities, CFC will be
required to maintain a paying agent in each place of payment for such series. If
securities of a series are issuable as bearer securities, CFC will be required
to maintain (i) a paying agent in the Borough of Manhattan, The City of New
York, for payments with respect to any registered securities of the series and
for payments with respect to bearer securities of the series in certain
circumstances and (ii) a paying agent in a place of payment located outside the
United States where bearer securities of such series and any coupons may be
presented and surrendered for payment. (Section 1002)
All moneys paid by CFC to a paying agent for the payment of principal,
premium, or interest on any security or coupon that remains unclaimed at the end
of two years after becoming due and payable will be repaid to CFC. After that
time, the holder of the security or coupon will, as an unsecured general
creditor, look only to CFC for payment out of those repaid amounts. (Section
1003)
RESTRICTION ON INDEBTEDNESS
CFC may not incur any superior indebtedness or make any optional prepayment
on any capital term certificate if, as a result, the principal amount of
superior indebtedness outstanding, less the principal amount of government or
government insured obligations held by CFC, on any future date would exceed 20
times the sum of the members' equity in CFC at the time of determination plus
the principal amount of capital term certificates outstanding at the time of
determination or at the given future date. The principal amounts of superior
indebtedness and capital term certificates to be outstanding on any future given
date will be computed after giving effect to maturities and sinking fund
requirements. (Section 1007) "Superior indebtedness" means all indebtedness of
CFC (including all guarantees by CFC of indebtedness of others) except capital
term certificates. A "capital term certificate" is defined as a note of CFC
substantially in the form of the capital term certificates of CFC outstanding on
the date of the Indenture and any other indebtedness having substantially
similar provisions as to subordination. As of February 28, 1999, CFC had
$13,164.4 million outstanding of superior indebtedness. Within the restrictions
of the Indenture, CFC was permitted to have outstanding an additional $25,311.6
million of superior indebtedness.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
CFC may not consolidate with or merge into any other corporation or
transfer its assets substantially as an entirety to any person unless:
- the successor is a corporation organized under the laws of any domestic
jurisdiction;
- the successor corporation assumes CFC's obligations under the Indenture
and the securities issued under the Indenture;
- immediately after giving effect to the transaction, no event of default
and no event that, after notice or lapse of time, or both, would become
an event of default, has occurred and is continuing; and
- certain other conditions are met. (Section 801)
MODIFICATION OF THE INDENTURE
Any actions that CFC or the Trustee may take toward adding to CFC's
covenants, adding additional events of default, establishing the form or terms
of securities of any series, changing or eliminating any restriction on the
manner or place of payment of principal of or interest on bearer securities will
not require the approval of any holder of debt securities. In addition, CFC or
the Trustee may cure ambiguities or inconsistencies in the Indenture or make
other provisions as long as no holders' interests are materially and adversely
affected. (Section 901)
Under the Indenture, CFC's rights and obligations and the rights of the
holders may be modified with the consent of the holders of at least a majority
in principal amount of the then outstanding securities of all affected series.
None of the following modifications, however, is effective against any holders
without the consent of the holders of all the affected outstanding securities:
- changing the maturity, installment or interest rate of any of the
securities;
- reducing the principal amount, any premium or the interest rate of any of
the securities;
- reducing the amount of the principal of original issue discount
securities payable on any acceleration of maturity;
- changing the currency, currencies or currency unit or units in which any
principal, premium or interest of any of the securities is payable;
- changing any of CFC's obligations to maintain an office or agency in the
places and for the purposes required by the Indenture;
- impairing any right to take legal action for an overdue payment;
- reducing the percentage required for modifications to or waivers of
compliance with the Indenture; or
- with certain exceptions, modifying the provisions for the waivers of
certain covenants and defaults and any of the foregoing provisions.
(Section 902)
WAIVER OF CERTAIN COVENANTS
Under the Indenture CFC will not be required to comply with certain
restrictive covenants (including that described above under "Restriction on
Indebtedness") if the holders of at least a majority in principal amount of all
series of outstanding securities affected waive compliance with the restrictive
covenants. (Section 1009)
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EVENTS OF DEFAULT, NOTICE AND WAIVER
An event of default in respect of any series of securities (unless it is
either inapplicable to a particular series or has been modified or deleted with
respect to any particular series) is defined in the Indenture to be:
- failure to pay interest on any security for 30 days after the security
becomes due;
- failure to pay the principal of or any premium on any of the securities
when due;
- failure to deposit any sinking fund payment when the payment becomes due;
- failure to perform or breach of the covenant described above under
"Restrictions on Indebtedness" that continues for 60 days after the
default becomes known to an officer of CFC;
- failure to perform or breach of any other covenants or warranties in the
Indenture that continues for 60 days after notice from the Trustee or the
holders of at least 25% in principal amount of the outstanding securities
of the series;
- certain events of bankruptcy, insolvency or reorganization of CFC; and
- such other events as may be specified for each series. (Section 501)
The Indenture provides that if an event of default has happened and is
continuing, either the Trustee or the holders of at least 25% in principal
amount of the outstanding securities of such series may declare the principal
(or, if the securities are original issue discount securities, such portion of
the principal amount as may be specified by the terms of such securities) of all
of the outstanding securities of that series to be immediately due and payable.
(Section 502)
The Indenture provides that the holders of at least a majority in principal
amount of the outstanding securities of any series may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee, with respect to the
securities of that series. The Trustee may act in any way that is consistent
with these directions and may decline to act if any such direction is contrary
to law or to the Indenture or would involve the Trustee in personal liability.
(Section 507)
The Indenture provides that the holders of at least a majority in principal
amount of the outstanding securities of any series may on behalf of the holders
of all of the outstanding securities of the series waive any past default with
respect to such series and its consequences, except a default:
- in the payment of the principal of or any premium or any interest on any
of the securities of the series or;
- in respect of a covenant or provision which, under the terms of the
Indenture, cannot be modified or amended without the consent of the
holders of all of the outstanding securities of the series affected.
(Section 508)
The Indenture contains provisions entitling the Trustee, subject to the
duty during an event of default in respect of any series of securities to act
with the required standard of care, to be indemnified by the holders of the
securities of the relevant series before proceeding to exercise any right or
power at the request of those holders. (Sections 601 and 603)
The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default in respect of any series of Securities, give to the
holders of the securities of that series notice of all uncured and unwaived
defaults known to it. However, except in the case of a default in the payment of
the principal of or any premium or any interest on, or any sinking fund or
purchase fund installment with respect to, any of the securities of that series,
the Trustee will be protected in withholding this notice if it in good faith
determines that the withholding of such notice is in the interest of those
holders. The above notice shall not be given until at least 60 days after the
occurrence of an event of default regarding the performance or breach of any
covenant or warranty other than for the payment of the principal of or premium
or any interest on, or any sinking fund installment with respect to, any of the
securities of such series. The term default for the
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purpose of this provision only means any event that is, or after notice or lapse
of time, or both, would become, an event of default with respect to the
securities of that series. (Section 602)
The Indenture requires CFC to file annually with the Trustee a certificate,
executed by two officers of CFC, indicating whether CFC is in default under the
Indenture. (Section 1008)
MEETINGS
The Indenture contains provisions for convening meetings of the holders of
securities of a series if securities of that series are issuable as Bearer
Securities. (Section 1201) A meeting may be called at any time by the Trustee,
and also, upon request, by CFC or the holders of at least 10% in principal
amount of the outstanding securities of such series, upon notice given in
accordance with "Notices" below. (Section 1202) Persons entitled to vote a
majority in principal amount of the outstanding securities of a series shall
constitute a quorum at a meeting of holders of securities of the series.
However, that in the absence of a quorum, a meeting, called by CFC or the
Trustee shall be adjourned for a period of at least 10 days, and in the absence
of a quorum at the adjourned meeting, the meeting shall be further adjourned for
a period of at least 10 days, at which further adjourned meeting persons
entitled to vote 25% in aggregate principal amount of the outstanding securities
of that series shall constitute a quorum. Except for any consent which must be
given by the holder of each outstanding security affected thereby, as described
above under "Modification of the Indenture", and subject to the provisions
described in the last sentence under this subheading, any resolution presented
at a meeting or adjourned meeting duly reconvened at which a quorum is present
may be adopted by the affirmative vote of the lesser of (i) the holders of a
majority in principal amount of the outstanding securities of that series and
(ii) 66 2/3% in aggregate principal amount of outstanding securities of such
series represented and voting at the meeting. However, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action which may be made, given or taken by the holders of a
specified percentage, which is less than a majority, in principal amount of
outstanding securities of a series may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the lesser of (i) the holders of such specified percentage in principal amount
of the outstanding securities of that series and (ii) a majority in principal
amount of outstanding securities of such series represented and voting at the
meeting. Any resolution passed or decision taken at any meeting of holders of
securities of any series duly held in accordance with the Indenture will be
binding on all holders of securities of that series and the related coupons.
With respect to any consent, waiver or other action which the Indenture
expressly provides may be given by the holders of a specified percentage of
outstanding securities of all series affected (acting as one class), only the
principal amount of outstanding securities of any series represented at a
meeting or adjourned meeting duly reconvened at which a quorum is present as
described above and voting in favor of such action shall be counted for purposes
of calculating the aggregate principal amount of outstanding securities of all
series affected favoring such action. (Section 1204)
NOTICES
Except as otherwise provided in the Indenture, notices to holders of bearer
securities will be given by publication at least once in a daily newspaper in
The City of New York and London and in such other city or cities as may be
specified in the bearer securities and will be mailed to the persons whose names
and addresses were previously filed with the Trustee, within the time prescribed
for the giving of such notice. Notices to holders of registered securities will
be given by mail to the address of those holders as they appear in the security
register. (Section 106)
TITLE
Title to any bearer security (including any bearer security in temporary or
definitive global bearer form) and any coupons will pass by delivery. CFC, the
Trustee and any agent of CFC or the Trustee may treat the bearer of any Bearer
Security and the bearer of any coupon and the registered owner of any registered
security as the absolute owner thereof (whether or not such security or coupon
is overdue and notwithstanding any notice to the contrary) for the purpose of
making payment and for all other purposes. (Section 308)
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REPLACEMENT OF SECURITIES AND COUPONS
CFC will replace any mutilated security and any security with a mutilated
coupon at the expense of the holder upon surrender of such mutilated security or
security with a mutilated coupon to the Trustee. CFC will replace securities or
coupons that become destroyed, stolen or lost at the expense of the holder upon
delivery to the Trustee of evidence of the destruction, loss or theft thereof
satisfactory to CFC and the Trustee. In the case of any coupon which becomes
destroyed, stolen or lost, that coupon will be replaced upon surrender to the
Trustee of the security with all related coupons not destroyed, stolen or lost
by issuance of a new security in exchange for the security to which such coupon
relates. In the case of a destroyed, lost or stolen security or coupon an
indemnity satisfactory to the Trustee and CFC may be required at the expense of
the holder of such security or coupon before a replacement security will be
issued. (Section 306)
SATISFACTION AND DISCHARGE; DEFEASANCE
At CFC's request, the Indenture will cease to be in effect as to CFC
(except for certain obligations to register the transfer or exchange of
securities and hold moneys for payment in trust) with respect to the securities
when:
- all the securities have been cancelled by the Trustee, or;
- in the case of securities and coupons not delivered to the Trustee for
cancellation;
- the securities or coupons have become due and payable, will become due
and payable at their stated maturity within one year, or are to be called
for redemption within one year, and, in each case, CFC has deposited with
the Trustee, in trust, money, and, in the case of securities and coupons
denominated in U.S. dollars, U.S. government obligations or, in the case
of securities and coupons denominated in a foreign currency, foreign
government securities, which through the payment of interest and
principal in accordance with their terms will provide money in an amount
sufficient to pay in the currency, currencies or currency units or units
in which the offered securities are payable all the principal of, and
interest on, the offered securities on the dates such payments are due in
accordance with the terms of the offered securities, or;
- the securities or coupons are deemed paid and discharged in the manner
described in the next paragraph. (Section 401)
Unless the prospectus supplement relating to the offered securities
provides otherwise, CFC at its option:
- will be discharged from any and all obligations in respect of the offered
securities (except for certain obligations to register the transfer or
exchange of securities, replace stolen, lost or mutilated securities and
coupons, maintain paying agencies and hold moneys for payment in trust)
or;
- need not comply with certain restrictive covenants of the Indenture
(including those described above under "Restriction on Indebtedness"), in
each case after CFC deposits with the Trustee, in trust, money, and, in
the case of securities and coupons denominated in U.S. dollars, U.S.
government obligations or, in the case of securities and coupons
denominated in a foreign currency, foreign government securities, which
through the payment of interest and principal in accordance with their
terms will provide money in an amount sufficient to pay in the currency,
currencies or currency unit or units in which the offered securities are
payable all the principal of, and interest on, the offered securities on
the dates such payments are due in accordance with the terms of the
offered securities.
Among the conditions to CFC's exercising any such option, CFC is required
to deliver to the Trustee an opinion of counsel to the effect that the deposit
and related defeasance would not cause the holders of the offered securities to
recognize income, gain or loss for United States federal income tax purposes and
that the holders will be subject to United States federal income tax in the same
amounts, in the same manner and at the same times as would have been the case if
the deposit and related defeasance has not occurred. (Section 403)
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At CFC's request, the Trustee will deliver or pay to CFC any U.S.
government obligations, foreign government securities or money deposited, for
the purposes described in the preceding two paragraphs, with the Trustee by CFC
and which, in the opinion of a nationally-recognized firm of independent public
accountants, are in excess of the amount which would then have been required to
be deposited for such purposes. In addition, the Trustee, in exchange for,
simultaneously, other U.S. government obligations, foreign government securities
or money, will deliver or pay to CFC, at CFC's request, U.S. government
obligations, foreign government securities or money deposited with the Trustee
for the purposes described in the preceding two paragraphs, if, in the opinion
of a nationally-recognized firm of independent public accountants, immediately
after such exchange the obligations, securities or money then held by the
Trustee will be in the amount then required to be deposited with the Trustee for
such purposes. (Section 403)
GOVERNING LAW
The Indenture, the securities and the coupons will be governed by, and
construed in accordance with, the laws of the State of New York. (Section 113)
THE TRUSTEE
Harris Trust and Savings Bank, Chicago, Illinois is the Trustee under the
Indenture.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
Under U.S. federal tax laws, certain limitations on offers, sales and
delivery apply to bearer securities. CFC will set forth these limitations, as
well as additional information regarding the U.S. federal income tax
consequences in respect of a bearer security, in any prospectus supplement
providing for the issuance of bearer securities.
UNITED STATES TAXATION
The following is a summary of the principal U.S. federal income tax
consequences of the acquisition, ownership and disposition of registered
securities. The summary reflects present law, which is subject to prospective
and retroactive changes. It is not intended as tax advice, and it does not
describe all of the tax considerations that may be relevant to a prospective
purchaser. The summary addresses only original purchasers of the securities that
hold the securities as capital assets. It does not address U.S. federal income
tax issues relevant to purchasers subject to special rules, such as banks,
securities dealers, life insurance companies, controlled foreign corporations,
persons holding securities in connection with a hedge or as a position in a
"straddle" or persons having a functional currency other than the U.S. dollar.
The summary does not consider the tax consequences of securities with terms
other than those described in this prospectus. PROSPECTIVE PURCHASERS ARE URGED
TO CONSULT THEIR TAX ADVISERS ABOUT THE TAX CONSEQUENCES OF AN INVESTMENT IN THE
SECURITIES UNDER THE LAWS OF THE UNITED STATES AND OTHER JURISDICTIONS WHERE
PURCHASERS ARE SUBJECT TO TAXATION.
For the purposes of this discussion, "U.S. holder" means (i) a beneficial
owner of the securities that is a citizen or resident of the United States, a
corporation organized in or under the laws of the United States or any political
subdivision thereof, a trust subject to the control of a United States person
and the primary supervision of a United States Court, or an estate the income of
which is subject to U.S. federal income taxation regardless of its source or
(ii) any other beneficial owner as to which income from the securities is
effectively connected with the conduct of a trade or business within the United
States. The term "Non-U.S. holder" refers to any beneficial owner of the
securities other than a U.S. holder.
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U.S. HOLDERS
Payments of Interest
Interest on a security generally will be taxable to a U.S. holder as
ordinary interest income at the time of receipt or accrual in accordance with
the U.S. holder's method of accounting for U.S. federal income tax purposes.
Special rules for the interest on securities with original issue discount are
described below.
Original Issue Discount
The following is a summary of the U.S. federal income tax consequences to
U.S. Holders of the purchase, ownership and disposition of securities issued
with original issue discount ("OID"). The following summary is based on sections
1271 through 1273 and section 1275 of the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), and on certain final regulations of the U.S. Department of
Treasury (the "OID Regulations") interpreting these provisions.
General. A U.S. holder of a security issued at a discount with a maturity
of more than one year after the date of issue must include OID in income over
the term of the security. The U.S. holder generally must include in gross income
for the taxable year the sum of the daily portions of OID that accrue on the
security for each day during the year on which such holder held the security.
Accordingly, a U.S. holder will be required to include amounts attributable to
OID in income before receiving cash attributable to that income.
A security has OID for U.S. federal income tax purposes to the extent that
the security's stated redemption price at maturity exceeds its issue price. The
issue price of a security is the initial offering price at which a substantial
amount of the securities is sold to the public (excluding bond houses, brokers
or similar persons). The stated redemption price of a security is the total of
all payments due on the security other than payments of "qualified stated
interest." A security is not treated as issued with OID, however, if the
difference between the stated redemption price at maturity and the issue price
of the security is less than 1/4 of 1 percent of the security's stated
redemption price at maturity multiplied by the number of complete years to
maturity ("de minimis original issue discount"). If a security bears interest
for any accrual period at a rate below the rate for the remaining term of the
security (e.g., a security with a "teaser rate") the security's stated
redemption price at maturity, for purposes of determining whether the security
has de minimis original issue discount, is treated as equal to the security's
issue price plus the greater of the amount of foregone interest on such security
or any "true" discount on such security (i.e., the excess of the security's
stored principal amount over its issue price).
Qualified stated interest is interest that is payable unconditionally in
cash or in property (other than debt of the issuer) at least annually at either
(a) a single fixed rate that appropriately takes into account the length of the
interval between payments or (b) certain variable rates.
To determine the daily portions of original issue discount, original issue
discount accruing during an accrual period is divided by the number of days in
the period. Except as described below under "variable rate securities," the
amount of original discount accruing during an accrual period is determined by
using a constant yield to maturity method. The accrued amount for any period is
the excess of (i) the product of the security's adjusted issue price at the
beginning of the accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted for the length of the accrual period) over (ii) the amount of any
qualified stated interest payments allocable to the accrual period. The adjusted
issue price of a security at the beginning of any accrual period generally
equals the issue price of the security increased by the aggregate amount of
original issue discount that accrued on that security in all prior accrual
periods and reduced by the amount of payments in prior accrual periods other
than payments of qualified stated interest.
A U.S. holder of a security issued at a discount that purchases the
security for more than the security's adjusted issue price but less than or
equal to the security's stated redemption price at maturity may reduce the daily
portions of original issue discount includible in gross income by daily portions
of the acquisition premium paid for the security.
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Variable Rate Securities. Special rules apply to the U.S. holder of a
security that bears interest at certain types of variable rates (a "variable
rate security"). For these purposes, a variable rate security is one that bears
interest at the current values of (i) one or more "qualified floating rates,"
(ii) a single fixed rate followed by one or more qualified floating rates, (iii)
a single "objective rate" or (iv) a single fixed rate and an objective rate that
is a qualified inverse floating rate. A qualified floating rate is any floating
rate the variations in which reasonably can be expected to measure
contemporaneous variations in the cost of newly-borrowed funds (e.g., LIBOR).
Although a multiple of a qualified floating rate will generally not itself
constitute a qualified floating rate, a variable rate is a qualified floating
rate if it is equal to either (i) the product of a qualified floating rate and a
fixed multiple rate that is greater than 0.65 but not more than 1.35 or (ii) the
product of a qualified floating rate and a fixed multiple rate that is greater
than 0.65 but not more than 1.35, increased or decreased by a fixed rate. In
addition, under the OID regulations, two or more qualified floating rates with
values within 25 basis points of each other (as determined on the variable rate
security's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute a
qualified floating rate but which is subject to one or more restrictions such as
a maximum or minimum numerical limitation (i.e., a cap or floor) may, under
certain circumstances, fail to be treated as a qualified floating rate under the
OID regulations unless such cap or floor is fixed throughout the term of the
security. An objective rate is a rate, other than a qualified floating rate,
that is determined using a single fixed formula and that is based on objective
financial or economic information outside of the issuer's control. A rate will
not be considered an objective rate, however, if it is reasonably expected that
the average value of the rate during the first half of the security's term will
be either significantly less than or significantly greater than the average
value of the rate during the final half of the security's term. A qualified
inverse floating rate is a fixed rate minus a qualified floating rate whose
variations can reasonably be expected to inversely reflect contemporaneous
variations in the cost of newly borrowed funds. A fixed rate for an initial
period of one year or less followed by a qualified floating rate or an objective
rate together constitute a single qualified floating objective rate if the value
of the qualified floating rate or objective rate on the issue date is intended
to approximate the fixed rate.
In general, to compute the accrual of OID on a variable rate security, the
OID regulations convert the variable rate security into a fixed rate debt
instrument and then apply the general rules discussed above to the deemed fixed
rate debt instrument. If a variable rate security provides for stated interest
at either a single qualified floating rate or objective rate that is
unconditionally payable at least annually, (a) all stated interest with respect
to the variable rate security is treated as qualified stated interest and (b)
the amount of OID, if any, is determined under the rules applicable to fixed
rate debt instruments discussed above by assuming that the variable rate is a
fixed rate equal to (i) in the case of a qualified floating rate or qualified
inverse floating rate, the value, as of the issue date of the variable rate
security, of the qualified floating rate or the qualified inverse floating rate,
or (ii) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is reasonably expected
for the variable rate security.
If the variable rate security does not provide for stated interest as
described in the preceding paragraph, to determine the amounts of interest and
OID accruals, an "equivalent fixed rate debt instrument" must be constructed.
The equivalent fixed rate debt instrument has terms that are identical to those
provided under the variable rate security, except that the equivalent fixed rate
debt instrument provides for fixed rate substitutes in lieu of the qualified
floating rates or objective rate provided under the variable rate security. The
fixed rate substitute (a) for each qualified floating rate is the value of each
such rate as of the issue date of the variable rate security (with appropriate
adjustment for any differences in intervals between interest adjustment dates),
(b) for a qualified inverse floating rate is the value of the qualified inverse
floating rate as of the issue date of the variable rate security and (c) for an
objective rate (other than a qualified inverse floating rate) is a fixed rate
that reflects the yield that is reasonably expected for the variable rate
security. The amounts of qualified stated interest and OID, if any, are
determined for the equivalent fixed rate debt instrument under the rules
applicable to fixed rate debt instruments as described above and are taken into
account as if the holder of the security held the equivalent fixed rate debt
instrument. Qualified stated interest or OID allocable to an accrual period is
increased (or decreased) if the interest actually accrued or paid during an
accrual period exceeds (or is less than) the interest assumed to be accrued or
paid during the accrual period under the equivalent fixed rate debt instrument.
This increase or decrease is an adjustment to
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qualified stated interest of the accrual period if the equivalent fixed rate
debt instrument provides for qualified stated interest and the increase or
decrease is reflected in the amount actually paid during the accrual period.
Otherwise, this increase or decrease is an adjustment to OID for the accrual
period. If the variable rate security provides for interest at a qualified
floating rate or qualified inverse floating rate and also provides for stated
interest at a single fixed rate (other than a single fixed rate for an initial
period of one year or less that is intended to approximate the value of the
qualified floating or objective rate), in constructing the equivalent fixed rate
debt instrument, such a variable rate security is treated as if it provided for
a qualified floating rate (or qualified inverse floating rate, as the case may
be) instead of the fixed rate, which qualified floating (or inverse floating)
rate is such that the variable rate security would have a fair market value as
of its issue date that is approximately the same as the fair market value of an
otherwise identical debt instrument that provides for either the qualified
floating rate or the qualified inverse floating rate rather than the fixed rate.
The foregoing rules do not apply, and a security is treated as a contingent
payment security, if its issue price exceeds the total of noncontingent
principal payments by more than the lesser of (i) the product of .015, the total
noncontingent principal payments and the number of complete years to maturity
(or a lesser amount if principal is payable in installments) and (ii) 15 percent
of the total noncontingent principal payments.
Optional Redemption. For purposes of determining the yield and maturity of
a security, CFC will be presumed to exercise any right to redeem a security
before its stated maturity or to extend the maturity of a security if exercise
would reduce the yield on the security. Likewise, the holder will be presumed to
exercise any right to require the redemption of a security or to extend the
maturity of the security if exercise would increase the yield on the security.
If the security is not actually redeemed on the date when the option was
presumed to have been exercised, the security will be treated only for purposes
of determining yield as having been reissued at a price equal to that security's
adjusted issue price on that date.
Short-Term Securities. U.S. holders that do not use the accrual method of
accounting for tax purposes generally will not be required to recognize original
issue discount on securities maturing within one year of original issuance until
they receive payments on the securities. Taxpayers on the accrual method,
regulated investment companies, common trust funds, and certain others, however,
must accrue original issue discount on such short-term securities on a
straight-line basis unless they elect to accrue the discount on a constant yield
basis with daily compounding. The original issue discount on a short-term
security is the amount by which the total principal and interest payments on the
security exceed its issue price. U.S. holders may elect to include discount on
such short-term securities into income based on acquisition discount rather than
original issue discount. Acquisition discount is the excess of a security's
stated redemption price at maturity over the U.S. holder's basis in the
security.
Gain recognized on the sale or exchange of a short-term security by a U.S.
holder that has not accrued discount on the security will be ordinary income to
the extent attributable to accrued interest and original issue discount. Such a
holder also must defer deductions for net interest expense on any borrowing
attributable to the short-term security to the extent that the expense does not
exceed accrued but unrecognized interest and original issue discount (or
acquisition discount) on the security. A recent proposal by the Clinton
Administration, if enacted, would require banks that are holders of short-term
securities to currently accrue interest on all such securities that it either
acquires or originates.
Anti-Abuse Rule
The Internal Revenue Service can apply or depart from the rules contained
in the OID regulations as necessary or appropriate to achieve a reasonable
result where a principal purpose in structuring a security or applying the
otherwise applicable rules is to achieve a result that is unreasonable in light
of the purposes of the applicable statutes (which generally are intended to
achieve the clear reflection of income for both sellers and purchasers of the
securities).
Market Discount
A U.S. holder that purchases a security at a market discount generally will
be required to treat payments other than qualified stated interest payments as
ordinary income to the extent of the accrued market discount
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and to treat gain on the sale of the security as ordinary income to the extent
of the accrued market discount not previously included in income. See "Sale or
Exchange of Securities" below. Market discount is the amount by which the stated
redemption price at maturity (or, in the case of a security with OID, the
revised issue price) exceeds the purchaser's basis in the security immediately
after acquisition. A security is not treated as purchased at a market discount,
however, if the discount is less than 1/4 of 1 percent of the stated redemption
price at maturity (or the revised issue price) multiplied by the number of
complete years remaining to maturity ("de minimis market discount"). (The
revised issue price of a security is its initial issue price increased by the
amount of OID includible in the gross income of previous holders.) Market
discount on a security will accrue, at the election of the holder, either
ratably or at a constant yield to maturity. The U.S. holder may elect to take
market discount into income as it accrues. Such election applies to all debt
instruments acquired in the tax year the election is made and thereafter, and
may not be revoked without the consent of the Internal Revenue Service. Under
certain circumstances, the U.S. holder may be required to defer deductions for
interest expense attributable to debt incurred or continued to purchase a
security with market discount.
Premium
A U.S. holder that purchases a security for more than its stated redemption
price at maturity may elect to amortize the bond premium. If a U.S. holder makes
such an election, the amount of interest on the security otherwise to be
included in the U.S. holder's income will be reduced each year by the amount of
amortizable bond premium allocable to such year on a constant yield to maturity
basis (except to the extent regulations may provide otherwise). Amortized bond
premium will reduce the U.S. holder's basis in the security. If the security may
be optionally redeemed after the U.S. holder acquires it at a price in excess of
its stated redemption price at maturity, special rules would apply which could
result in a deferral of the amortization of some premium until later in the term
of the security. An election to amortize bond premium will apply to certain
other debt instruments that the U.S. holder acquired at a premium, and the
election may have different tax consequences depending on when the debt
instruments were issued or acquired.
Interest Election
A U.S. holder may elect, in the taxable year in which the U.S. holder
acquires a security, to treat all interest on any security as OID and calculate
the amount includible in gross income under the constant yield method described
above. For 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 U.S. holder makes this election for a security with
market discount or amortizable bond premium, the election is treated as an
election under the market discount or amortizable bond premium provisions,
described above, and the electing U.S. holder will be required to amortize bond
premium or include market discount in income currently for all of its other debt
instruments with market discount or amortizable bond premium acquired during
such tax year and in any subsequent tax year. The election, once made, may not
be revoked without the consent of the Internal Revenue Service. U.S. holders
should consult with their own tax advisers before making this election.
Sale or Exchange of Securities
Except to the extent that gain or loss is attributable to accrued but
unpaid interest or accrued market discount, a U.S. holder generally will
recognize capital gain or loss upon a sale, exchange or complete retirement of a
security equal to the difference between the amount realized and the U.S.
holder's adjusted basis in the security. The gain or loss generally will be
long-term if the security has been held for more than one year. The adjusted
basis of a security generally will equal its initial cost increased by any
original issue discount, market discount or acquisition discount with respect to
the security previously included in the U.S. holder's gross income and reduced
by the payments previously received on the security, other than payments of
qualified stated interest, and by any amortized premium.
The tax consequences of the partial redemption of a security will depend
upon the price at which the U.S. holder purchased the security. A U.S. holder
that purchased a security at a de minimis market discount
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or purchased a security for more than its revised issue price, but less than its
principal amount, will recognize capital gain equal to the difference between
the principal prepayment and the U.S. holder's adjusted basis in the prepaid
portion of the security. If a U.S. holder purchased a security at a market
discount, (i) the principal prepayment will be included in ordinary income to
the extent of the accrued market discount (and it is possible that amounts
allocable to unaccrued market discount will be recognized as capital gain) and
(ii) any principal prepayment exceeding the revised issue price allocable to the
prepaid portion of the security will be capital gain. If a U.S. holder purchased
a security for more than its stated principal amount and has not elected to
amortize bond premium, the U.S. holder will recognize a capital loss equal to
any amount by which the U.S. holder's adjusted basis in the prepaid portion of
the security exceeds the amount of the principal prepayment. If the U.S. holder
has elected to amortize bond premium, all or part of such excess might be
deductible as amortizable bond premium rather than as capital loss. Any capital
gain or loss will be long-term if the security has been held for more than one
year. It is possible that capital gain realized by holders of one or more
classes of Securities could be considered gain realized upon the disposition of
property that was part of a "conversion transaction." A "conversion transaction"
is any transaction in which substantially all of the expected return is
attributable to the time value of the U.S. holder's net investment, if (i) the
U.S. holder entered the contract to sell the security substantially
contemporaneously with acquiring the security, (ii) the security is part of a
straddle, (iii) the security is marketed or sold as producing capital gains, or
(iv) the transaction is specified in certain Treasury regulations. If the sale
or other disposition of the security is part of a conversion transaction, all or
any portion of the gain realized upon the sale or other disposition of the
securities would be treated as ordinary income instead of capital gain.
Foreign Currency Securities
The tax treatment of securities the interest or principal on which may be
determined by reference to one or more foreign currencies will depend on the
application of special rules to the particular terms of the securities. The tax
considerations relevant to such securities will be described in an applicable
prospectus supplement, and each prospective purchaser should consult its tax
adviser about such matters.
Contingent Payment Securities
The OID regulations contain special rules for determining the timing and
amount of OID to be accrued in respect of securities providing for one or more
contingent payments ("Contingent Payment Securities"). For this purpose, a
security is not a contingent payment security if it (i) is a variable rate
security, (ii) provides for alternate payment schedules upon the occurrence of
contingencies if certain other requirements are met or (iii) is a foreign
currency debt instrument. Under the OID regulations, U.S. holders generally
would be required to take contingent interest payments on contingent payment
securities into income on a yield to maturity basis in accordance with a
schedule of projected payments provided by CFC to U.S. holders and would make
annual adjustments to income to account for the difference between actual
payments received and projected payment amounts accrued. Additional disclosure
will be provided for in a prospectus supplement in connection with any offering
of contingent payment securities. Prospective purchasers should consult their
own tax advisers regarding the OID regulations in connection with ownership of a
security that provides for contingent payments.
NON-U.S. HOLDERS
Interest received by a non-U.S. holder is exempt from U.S. federal income
tax unless the holder actually or constructively owns at least 10% of the total
combined voting power of the issuer's stock or the holder is for U.S. income tax
purposes a controlled foreign corporation related to the issuer through stock
ownership or is a bank receiving interest described in Section 881(c)(3)(A) of
the Code. However, "contingent interest" paid to a non-U.S. holder will be
subject to a 30% tax (unless an applicable tax treaty eliminates or reduces the
rate of the tax and the non-U.S. holder complies with the requirements for
obtaining that reduction or elimination of the tax). For this purpose,
contingent interest is an amount of interest determined by reference to (i)
receipts, sales, or other cash flows of CFC or a related person, (ii) income or
profits of CFC or a related person, (iii) any change in the value of any
property of CFC or a related person, or (iv) any
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dividend, partnership distribution, or similar payment made by CFC or a related
person. To qualify for that exemption, a non-U.S. holder must provide a
statement signed under penalties of perjury certifying that the holder is not a
U.S. person for U.S. tax purposes and providing the holder's name and address.
This statement may be made on IRS form W-8BEN or a substantially similar form
and the beneficial owner must inform the withholding agent of any change of the
information on the statement within 30 days of the change. In addition, the
Treasury Department has recently issued regulations regarding the withholding
and information reporting rules. In general, the new regulations do not alter
the substantive withholding and information reporting requirements but unify
current certification procedures and forms and clarify reliance standards.
However, the regulations would require in the case of securities held by a
foreign partnership that the certification requirement described above be
provided by the partners rather than by the foreign partnership unless the
partnership meets certain requirements and is authorized as a "withholding
foreign partnership" by the IRS. A look-through rule would apply in the case of
tiered partnerships. The regulations also generally require a non-U.S. holder to
provide a taxpayer identification number in order to claim a reduced rate of
withholding pursuant to a treaty. The regulations are generally effective for
payments made after December 31, 2000, subject to certain transition rules. Gain
from the sale or other disposition of a security by a non-U.S. holder is not
subject to U.S. federal income tax unless the non-U.S. holder is an individual
who is present in the United States for at least 183 days during the taxable
year of the disposition and certain other conditions are met.
Securities held by a non-U.S. holder will not be subject to the U.S.
federal estate tax unless the holder actually or constructively owns at least
10% of the total combined voting power of the issuer's stock.
INFORMATION REPORTING AND BACKUP WITHHOLDING
A 31% backup withholding of federal income tax and certain information
reporting requirements may apply to certain payments made on the securities and
to the proceeds from the disposition of a security if the holder is not a
corporation, a financial institution or otherwise entitled to an exemption. U.S.
holders that provide a correct taxpayer identification number and non-U.S.
holders that provide the statement described above to establish an exemption
from withholding tax generally are exempt from backup withholding. Amounts
withheld under the backup withholding rules can be claimed as a refund or taken
as a credit against the holder's U.S. federal income tax liability on a properly
filed annual income tax return.
PLAN OF DISTRIBUTION
CFC may sell the securities being offered hereby (i) directly to
purchasers, (ii) through agents or (iii) through underwriters or dealers which
may include Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Goldman, Sachs & Co., J.P. Morgan Securities Inc.
and Banc of America Securities LLC.
CFC may sell securities directly or through agents designated by CFC from
time to time. Unless otherwise indicated in the prospectus supplement, any such
agent will be acting on a reasonable best-efforts basis for the period of its
appointment.
If underwriters are utilized in the sale, CFC will enter into an
underwriting agreement with those underwriters and the names of the underwriters
and the terms of the transaction will be set forth in the supplement, which will
be used by the underwriters to make resales of the securities or warrants in
respect of which this prospectus is delivered to the public.
If a dealer is utilized in the sale of any of the securities, CFC will sell
those securities to the dealer, as principal. The dealer may then resell the
securities to the public at varying prices to be determined by the dealer at the
time of resale.
The agents and underwriters may be deemed to be underwriters and any
discounts, commissions or concessions received by them from CFC or any profit on
the resale of offered securities or warrants by them may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933. Any
such
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<PAGE> 26
person who may be deemed to be an underwriter and any such compensation received
from CFC will be described in the prospectus supplement.
Under agreements entered into with CFC, agents and underwriters who
participate in the distribution of offered securities may be entitled to
indemnification by CFC against certain civil liabilities, including liabilities
under the Securities Act of 1933, or to contribution with respect to payments
which the agents or underwriters may be required to make.
If indicated in the prospectus supplement, CFC will authorize agents and
underwriters to solicit offers by certain institutions to purchase offered
securities from CFC at the public offering price set forth in the prospectus
supplement pursuant to delayed delivery contracts providing for payment and
delivery on the date stated in the prospectus supplement. Each contract will be
for an amount not less than, and unless CFC otherwise agrees the aggregate
principal amount of offered securities sold pursuant to contracts will be not
less nor more than, the respective amounts stated in the prospectus supplement.
Institutions with whom contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions, but
will in all cases be subject to CFC's approval. Contracts will not be subject to
any conditions except that the purchase by an institution of the offered
securities covered by its contract shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to which such
institution is subject. A commission indicated in the prospectus supplement will
be granted to agents and underwriters soliciting purchases of offered securities
pursuant to contract accepted by CFC. Agents and underwriters will have no
responsibility in respect of the delivery or performance of contracts.
The place and time of delivery for the offered securities in respect of
which this prospectus is delivered are set forth in the supplement.
Each underwriter, dealer and agent participating in the distribution of any
offered securities which are issuable in bearer form will agree that it will not
offer, sell or deliver, directly or indirectly, offered securities in bearer
form in the United States or its possessions or to United States persons (other
than qualifying financial institutions) in connection with the original issuance
of the offered securities. See "Limitations on Issuance of Bearer Securities".
The offered securities may not be offered or sold directly or indirectly in
Great Britain other than to persons whose ordinary business it is to buy or sell
shares or debentures (except in circumstances which do not constitute an offer
to the public within the meaning of the Companies Act of 1985), and this
prospectus and any prospectus supplement or any other offering material relating
to the offered securities may not be distributed in or from Great Britain other
than to persons whose business involves the acquisition and disposal, or the
holding, of securities whether as principal or as agent.
All offered securities will be a new issue of securities with no
established trading market. Any underwriters to whom offered securities are sold
by CFC for public offering and sale may make a market in such offered
securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for any offered securities.
Certain of the underwriters or agents and their associates may engage in
transactions with and perform services for CFC in the ordinary course of
business.
In connection with the offering made hereby, the agents may purchase and
sell the securities in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover short
positions created by the agents in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the securities, and short
positions created by the agents involve the sale by the agents of a greater
aggregate principal amount of securities than they are required to purchase from
CFC. The agents also may impose a penalty bid, whereby selling concessions
allowed to broker-dealers in respect of the securities sold in the offering may
be reclaimed by the agents if such securities are repurchased by the agents in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the securities, which may be higher
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than the price that might otherwise prevail in the open market. These
activities, if commenced, may be discontinued at any time. These transactions
may be effected in the over-the-counter market or otherwise.
LEGAL OPINIONS
The validity of the securities offered hereby will be passed upon for CFC
by Milbank, Tweed, Hadley & McCloy LLP, 1 Chase Manhattan Plaza, New York, New
York, and for the agents or underwriters, if any, by Cravath, Swaine & Moore,
Worldwide Plaza, 825 Eighth Avenue, New York, New York.
EXPERTS
The audited financial statements included in CFC's Annual Report on Form
10-K for the year ended May 31, 1998 incorporated by reference in this
prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in giving said reports.
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[CFC LOGO]
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
$2,143,529,000
MEDIUM-TERM NOTES
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PROSPECTUS SUPPLEMENT
June 7, 1999
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