<PAGE> 1
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C>
DISTRICT OF COLUMBIA 52-089-1669
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
2201 COOPERATIVE WAY
HERNDON, VIRGINIA 20171-3025
(703) 709-6700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
JOHN JAY LIST, GENERAL COUNSEL
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
2201 COOPERATIVE WAY
HERNDON, VIRGINIA 20171-3025
(703) 709-6700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
<TABLE>
<S> <C>
COPIES TO:
MARK L. WEISSLER THOMAS R. BROME
MILBANK, TWEED, HADLEY & MCCLOY LLP CRAVATH, SWAINE & MOORE
1 CHASE MANHATTAN PLAZA 825 EIGHTH AVENUE
NEW YORK, NEW YORK 10005 NEW YORK, NEW YORK 10019
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after the effective date of this registration statement as determined by
market conditions.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED PURSUANT
TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR INTEREST
REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT
TO RULE 462(b) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX AND LIST
THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(c) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities....................... $3,000,000,000 100% $3,000,000,000 $834,000
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Expressed as the principal amount of Securities, or in the case of Original
Issue Discount Securities, the offering price thereof.
(2) Estimated solely for purposes of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
PURSUANT TO RULE 429 OF THE COMMISSION UNDER THE SECURITIES ACT OF 1933,
THE WITHIN PROSPECTUS RELATES TO DEBT SECURITIES REGISTERED HEREBY AND TO DEBT
SECURITIES PREVIOUSLY REGISTERED BY REGISTRATION STATEMENT NO. 333-78931.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE DEBT SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE DEBT SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
DEBT SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
SUBJECT TO COMPLETION, SEPTEMBER 24, 1999
[COOPERATIVE FINANCE CORPORATION LOGO]
National Rural Utilities
Cooperative Finance Corporation
$3,181,694,000
Debt Securities
------------------------
We plan to issue from time to time up to $3,181,694,000 of debt securities. We
will provide the specific terms of these debt 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 debt 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 debt securities unless
accompanied by a prospectus supplement.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE> 3
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, 1999;
(b) Current Report on Form 8-K dated June 10, 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
---------------------
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 DEBT SECURITIES IN ANY STATE WHERE THE OFFER
IS NOT PERMITTED.
2
<PAGE> 4
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 1,057 members as of May 31, 1999 included 908 rural utility system
members, virtually all of which are consumer-owned cooperatives, 76 service
organization members and 73 associate members. The rural utility system members
included 838 distribution systems and 70 generation and transmission systems
operating in 48 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 May 31, 1999, CFC had a total of $13,703.4 million of loans outstanding
and $1,684.5 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 $947.3 million of the
guaranteed pollution control debt (at May 31, 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 May 31, 1999, the allowance was $212.2 million. At May 31, 1999,
CFC's ten largest borrowers had outstanding loans totaling $2,241.5 million,
which
3
<PAGE> 5
represented approximately 16.4% of CFC's total loans outstanding. As of May 31,
1999, outstanding guarantees for these same ten largest borrowers totaled $702.7
million, which represented 41.7% 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 May 31, 1999,
loans outstanding to Deseret accounted for 4.2% of total loans outstanding.
Guarantees outstanding for Deseret accounted for 4.0% of total guarantees
outstanding.
CFC's fixed charge coverage ratio was as follows for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
- ---------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
1.12 1.12 1.12 1.12 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 debt 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 debt securities. Each prospectus supplement will state the
particular terms of the debt securities and the extent, if any, to which the
general provisions may apply to the debt securities included in the supplement.
The debt 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 debt 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. Debt securities may also be
issued in temporary or definitive global bearer form. Unless specified otherwise
in the prospectus supplement all debt securities will be denominated in U.S.
dollars, registered debt securities will be issued in
4
<PAGE> 6
denominations of $1,000 or multiples of $1,000 and bearer securities will be
issued in denominations of $5,000 or multiples of $5,000.
The debt securities will be direct, unsecured obligations of CFC.
If any of the debt securities are offered for any foreign currency or
currency unit or if principal of, any premium or any interest on any of the debt
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 debt
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 debt
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 debt
securities;
- the percentage of their principal amount at which the debt securities
will be sold;
- the date or dates on which the debt 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 debt 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 debt securities;
- any redemption or sinking fund terms;
- the principal amount of original issue discount debt securities payable
upon acceleration;
- the means of satisfaction and discharge of the Indenture with respect to
the debt 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 debt
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 debt securities may elect payment in a
currency, currencies or currency unit or units other than that in which
the debt 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 debt securities are stated to be payable, then the
manner in which such amounts shall be determined;
- whether the debt 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 debt 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 debt securities rather than pay additional
amounts;
5
<PAGE> 7
- whether the covenants described below under "Restriction on Indebtedness"
will apply to the debt securities; and
- any other terms of the debt securities not inconsistent with the
Indenture. (Section 301)
EXCHANGE, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable prospectus supplement,
registered debt securities of any series that are not global debt securities
will be exchangeable for other registered debt securities of the same series and
of a like aggregate principal amount and tenor of different authorized
denominations. In addition, if debt securities of any series are issuable as
both registered debt securities and bearer debt securities, the holder may
choose, upon written request and subject to the terms of the Indenture, to
exchange bearer debt securities and the appropriate related coupons of that
series into registered debt securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor. Bearer debt
securities with attached coupons surrendered in exchange for registered debt
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 debt security issued in exchange for that bearer debt
security. The interest will be payable only to the holder of that coupon when
due in accordance with the terms of the Indenture. Bearer debt securities will
not be issued in exchange for registered debt securities. No service charge will
be made for any registration of transfer or exchange of the debt securities, but
CFC may require payment of a sum sufficient to cover any applicable tax.
(Section 305)
You may present debt securities for exchange as provided above. In
addition, you may present registered debt 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 debt 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 Harris
Trust Company of New York 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 debt 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
debt 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 debt securities.
(Section 1002)
In the event of any redemption in part, CFC will not be required to:
- issue, register the transfer of or exchange debt securities of any series
during a period beginning at the opening of business 15 days before any
selection of debt securities of that series to be redeemed and ending at
the close of business on:
- if debt securities of the series are issuable only as registered debt
securities, the day of mailing of the relevant notice of redemption;
- if debt securities of the series are issuable only as bearer debt
securities, the day of the first publication of the relevant notice of
redemption; or
- if debt securities of the series are also issuable as registered debt
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 debt security, or
portion thereof, called for redemption, except the unredeemed portion
of any registered debt security being redeemed in part; or
6
<PAGE> 8
- exchange any bearer debt security called for redemption, except to
exchange such bearer debt security for a registered debt 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 debt 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 debt securities to the person in whose name that
registered debt 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 Harris Trust Company of New York 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 debt securities and as CFC's
paying agent in the Borough of Manhattan, The City of New York, for payments
with respect to debt 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
debt securities of a series are issuable solely as registered debt securities,
CFC will be required to maintain a paying agent in each place of payment for
such series. If debt securities of a series are issuable as bearer debt
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
debt securities of the series and for payments with respect to bearer debt
securities of the series in certain circumstances and (ii) a paying agent in a
place of payment located outside the United States where bearer debt 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 debt 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 debt 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 May 31, 1999, CFC had $13,544.0
million outstanding of superior indebtedness. Within the restrictions of the
Indenture, CFC was permitted to have outstanding an additional $25,151.4 million
of superior indebtedness.
7
<PAGE> 9
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 debt 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 debt securities of any series, changing or eliminating any restriction on the
manner or place of payment of principal of or interest on bearer debt 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 debt 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 debt
securities:
- changing the maturity, installment or interest rate of any of the debt
securities;
- reducing the principal amount, any premium or the interest rate of any of
the debt securities;
- reducing the amount of the principal of original issue discount debt
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 debt 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 debt securities affected waive compliance with the
restrictive covenants. (Section 1009)
8
<PAGE> 10
EVENTS OF DEFAULT, NOTICE AND WAIVER
An event of default in respect of any series of debt 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 debt security for 30 days after the
security becomes due;
- failure to pay the principal of or any premium on any of the debt
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 debt
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 debt securities of such series may declare the
principal (or, if the debt securities are original issue discount debt
securities, such portion of the principal amount as may be specified by the
terms of such debt securities) of all of the outstanding debt 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 debt 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 debt 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 debt securities of any series may on behalf of the
holders of all of the outstanding debt 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 debt 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 debt 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 debt securities to
act with the required standard of care, to be indemnified by the holders of the
debt 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 debt securities, give to the
holders of the debt 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 debt 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
9
<PAGE> 11
any sinking fund installment with respect to, any of the debt securities of such
series. The term default for the 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 debt 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
debt securities of a series if debt securities of that series are issuable as
bearer debt 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 debt 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 debt securities of that series
and (ii) 66 2/3% in aggregate principal amount of outstanding debt 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 debt 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 debt securities of that series and (ii) a majority in
principal amount of outstanding debt securities of such series represented and
voting at the meeting. Any resolution passed or decision taken at any meeting of
holders of debt securities of any series duly held in accordance with the
Indenture will be binding on all holders of debt 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 debt securities of all series affected (acting as one
class), only the principal amount of outstanding debt 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 debt securities of all series affected favoring such action.
(Section 1204)
NOTICES
Except as otherwise provided in the Indenture, notices to holders of bearer
debt 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 debt 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 debt
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 debt security (including any bearer debt 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 debt security and the bearer of any coupon and the
registered owner of any registered debt security as the absolute owner thereof
(whether or not such debt security or coupon is
10
<PAGE> 12
overdue and notwithstanding any notice to the contrary) for the purpose of
making payment and for all other purposes. (Section 308)
REPLACEMENT OF DEBT SECURITIES AND COUPONS
CFC will replace any mutilated debt security and any debt security with a
mutilated coupon at the expense of the holder upon surrender of such mutilated
debt security or debt security with a mutilated coupon to the Trustee. CFC will
replace debt 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 debt security with all related
coupons not destroyed, stolen or lost by issuance of a new debt security in
exchange for the debt security to which such coupon relates. In the case of a
destroyed, lost or stolen debt security or coupon an indemnity satisfactory to
the Trustee and CFC may be required at the expense of the holder of such debt
security or coupon before a replacement debt 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 debt
securities and hold moneys for payment in trust) with respect to the debt
securities when:
- all the debt securities have been cancelled by the Trustee, or;
- in the case of debt securities and coupons not delivered to the Trustee
for cancellation; the debt 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 debt securities and coupons denominated in U.S. dollars, U.S.
government obligations or, in the case of debt securities and coupons
denominated in a foreign currency, foreign government debt 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 debt
securities are payable all the principal of, and interest on, the offered
debt securities on the dates such payments are due in accordance with the
terms of the offered debt securities, or;
- the debt 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 debt securities
provides otherwise, CFC at its option:
- will be discharged from any and all obligations in respect of the offered
debt securities (except for certain obligations to register the transfer
or exchange of debt securities, replace stolen, lost or mutilated debt
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 debt securities and coupons denominated in U.S. dollars, U.S.
government obligations or, in the case of debt securities and coupons
denominated in a foreign currency, foreign government debt 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 debt
securities are payable all the principal of, and interest on, the offered
debt securities on the dates such payments are due in accordance with the
terms of the offered debt securities.
11
<PAGE> 13
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 debt
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)
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 debt 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 debt 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 debt security, in any prospectus supplement
providing for the issuance of bearer debt 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 debt
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 debt securities
that hold the debt 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 debt 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
12
<PAGE> 14
debt 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 debt securities other than a U.S. holder.
U.S. HOLDERS
Payments of Interest
Interest on a debt 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 debt 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 debt 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 debt 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 debt security for each day during the year on which such
holder held the debt 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 debt security has OID for U.S. federal income tax purposes to the extent
that the debt security's stated redemption price at maturity exceeds its issue
price. The issue price of a debt security is the initial offering price at which
a substantial amount of the debt securities is sold to the public (excluding
bond houses, brokers or similar persons). The stated redemption price of a debt
security is the total of all payments due on the debt security other than
payments of "qualified stated interest." A debt 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 debt security is less than 1/4 of 1
percent of the debt security's stated redemption price at maturity multiplied by
the number of complete years to maturity ("de minimis original issue discount").
If a debt security bears interest for any accrual period at a rate below the
rate for the remaining term of the debt security (e.g., a debt security with a
"teaser rate") the debt security's stated redemption price at maturity, for
purposes of determining whether the debt security has de minimis original issue
discount, is treated as equal to the debt security's issue price plus the
greater of the amount of foregone interest on such debt security or any "true"
discount on such debt security (i.e., the excess of the debt security's stated
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 debt securities," the
amount of original issue 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 debt 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 debt security at the beginning of any
accrual period generally equals the issue price of the debt security increased
by the aggregate amount of original issue discount that accrued on that debt
security in all prior accrual periods and reduced by the amount of payments in
prior accrual periods other than payments of qualified stated interest.
13
<PAGE> 15
A U.S. holder of a debt security issued at a discount that purchases the
debt security for more than the security's adjusted issue price but less than or
equal to the debt 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 debt security.
Variable Rate Debt Securities. Special rules apply to the U.S. holder of a
debt security that bears interest at certain types of variable rates (a
"variable rate debt security"). For these purposes, a variable rate debt
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 debt 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 debt 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 debt 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 debt security's term. A qualified inverse floating rate is a
fixed rate minus a qualified floating rate whose variations can reasonably be
expected to reflect inversely 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 debt security,
the OID regulations convert the variable rate debt 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 debt 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 debt 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 debt
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 debt security.
If the variable rate debt 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 debt 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 debt
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 debt 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 debt
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
14
<PAGE> 16
rate debt 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 debt 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 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 debt 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 debt 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 debt security is treated as a contingent
payment debt 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 debt security, CFC will be presumed to exercise any right to redeem a debt
security before its stated maturity or to extend the maturity of a debt security
if exercise would reduce the yield on the debt security. Likewise, the holder
will be presumed to exercise any right to require the redemption of a debt
security or to extend the maturity of the debt security if exercise would
increase the yield on the debt security. If the debt security is not actually
redeemed on the date when the option was presumed to have been exercised, the
debt security will be treated only for purposes of determining yield as having
been reissued at a price equal to that debt security's adjusted issue price on
that date.
Short-Term Debt 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 debt securities maturing within one year of
original issuance until they receive payments on the debt 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 debt 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 debt securities into income based on
acquisition discount rather than original issue discount. Acquisition discount
is the excess of a debt security's stated redemption price at maturity over the
U.S. holder's basis in the debt security.
Gain recognized on the sale or exchange of a short-term debt security by a
U.S. holder that has not accrued discount on the debt 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 debt security to the extent that
the expense does not exceed accrued but unrecognized interest and original issue
discount (or acquisition discount) on the debt security.
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 debt security
15
<PAGE> 17
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 debt securities).
Market Discount
A U.S. holder that purchases a debt 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 and to treat
gain on the sale of the debt security as ordinary income to the extent of the
accrued market discount not previously included in income. See "Sale or Exchange
of Debt securities" below. Market discount is the amount by which the stated
redemption price at maturity (or, in the case of a debt security with OID, the
revised issue price) exceeds the purchaser's basis in the security immediately
after acquisition. A debt 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 debt security is its initial issue price increased
by the amount of OID includible in the gross income of previous holders.) Market
discount on a debt 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 debt 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 debt 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 debt 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 debt 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 debt security, to treat all interest on any debt 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 debt
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.
16
<PAGE> 18
Sale or Exchange of Debt 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
debt security equal to the difference between the amount realized and the U.S.
holder's adjusted basis in the debt security. The gain or loss generally will be
long term if the debt 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 debt security previously included in the U.S. holder's gross
income and reduced by the payments previously received on the debt security,
other than payments of qualified stated interest, and by any amortized premium.
The tax consequences of the partial prepayment of a debt security will
depend upon the price at which the U.S. holder purchased the debt security. A
U.S. holder that purchased a debt security at a de minimis market discount or
that purchased a debt 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 debt security. If a U.S. holder purchased a debt 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 debt security will be capital gain. If a
U.S. holder purchased a debt 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 debt 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 debt security
has been held for more than one year. It is possible that capital gain realized
by holders of one or more classes of debt 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 debt security substantially contemporaneously with acquiring the debt
security, (ii) the debt security is part of a straddle, (iii) the debt 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 debt securities would be
treated as ordinary income instead of capital gain.
Foreign Currency Debt Securities
The tax treatment of debt 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 debt securities. The
tax considerations relevant to such debt securities will be described in an
applicable prospectus supplement, and each prospective purchaser should consult
its tax adviser about such matters.
Contingent Payment Debt Securities
The OID regulations contain special rules for determining the timing and
amount of OID to be accrued in respect of debt securities providing for one or
more contingent payments ("Contingent Payment Debt Securities"). For this
purpose, a debt security is not a Contingent Payment Debt Security if it (i) is
a variable rate debt 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 security. Under the OID regulations, U.S.
holders generally would be required to take contingent interest payments on
Contingent Payment Debt 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.
17
<PAGE> 19
Prospective purchasers should consult their own tax advisers regarding the OID
regulations in connection with ownership of a debt security that provides for
contingent payments.
NON-U.S. HOLDERS
Interest received on a debt security by a non-U.S. holder is exempt from
U.S. federal income tax unless the holder is for U.S. federal 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 dividend, partnership
distribution, or similar payment made by CFC or a related person.
To qualify for the interest withholding 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 debt 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 debt 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.
Debt 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 debt securities
and to the proceeds from the disposition of a debt 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 debt securities being offered hereby (i) directly to
purchasers, (ii) through agents or (iii) through underwriters or dealers which
may include Lehman Brothers Inc., Banc of America Securities LLC, Goldman, Sachs
& Co., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
and J.P. Morgan Securities Inc.
18
<PAGE> 20
CFC may sell debt 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 debt 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 debt securities, CFC will
sell those debt securities to the dealer, as principal. The dealer may then
resell the debt 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 debt securities or warrants by them may be deemed to be
underwriting discounts and commissions under the securities Act of 1933. Any
such 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 debt 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 debt
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 debt
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 debt
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 debt 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 debt securities which are issuable in bearer form will agree that it
will not offer, sell or deliver, directly or indirectly, offered debt 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 debt securities. See "Limitations on Issuance
of Bearer Debt Securities".
The offered debt 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 debt securities will be a new issue of debt securities with no
established trading market. Any underwriters to whom offered debt securities are
sold by CFC for public offering and sale may make a market
19
<PAGE> 21
in such offered debt 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
debt 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 debt 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 debt securities, and short
positions created by the agents involve the sale by the agents of a greater
aggregate principal amount of debt 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 debt securities sold in the offering
may be reclaimed by the agents if such debt securities are repurchased by the
agents in stabilizing or covering transactions. These activities may stabilize,
maintain or otherwise affect the market price of the debt securities, which may
be higher 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, 1999 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.
20
<PAGE> 22
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities covered hereby, other than underwriting commissions, are, subject to
further contingencies, estimated to be as follows:
<TABLE>
<S> <C>
Registration Statement Filing Fee........................... $ 834,000
Printing.................................................... 50,000
Legal Fees and Expenses..................................... 100,000
Blue Sky Fees and Expenses.................................. 15,000
Accounting Fees............................................. 13,000
Fees of Trustee............................................. 80,000
Fees of Rating Agencies..................................... 100,000
Miscellaneous............................................... 10,000
----------
Total............................................. $1,202,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 29-1104(9) of the District of Columbia Cooperative Association Act
provides that an association such as the Registrant shall have the capacity "to
exercise . . . any power granted to ordinary business corporations, save those
powers inconsistent with this chapter." Section 29-304(16) of the District of
Columbia Business Corporation Act permits any corporation:
"To indemnify any and all of its directors or officers or former
directors or officers or any person who may have served at its request as a
director or officer of another corporation in which it owns shares of
capital stock or of which it is a creditor against expenses actually and
necessarily incurred by them in connection with the defense of any action,
suit, or proceeding in which they, or any of them, are made parties, or a
party, by reason of being or having been directors or officers or a
director or officer of the corporation, or of such other corporation,
except in relation to matters as to which any such director or officer or
former director or officer or person shall be adjudged in such action,
suit, or proceeding to be liable for negligence or misconduct in the
performance of duty. Such indemnification shall not be deemed exclusive of
any other rights to which those indemnified may be entitled, under any
bylaw, agreement, vote of stockholders, or otherwise."
The Board of Directors of CFC has resolved to indemnify all CFC directors,
officers and employees in accordance with the terms of the first sentence of the
above Section. The Bylaws of CFC also provide for indemnification of all CFC
directors, officers and employees as set forth above.
II-1
<PAGE> 23
ITEM 16. LIST OF EXHIBITS
<TABLE>
<S> <C>
1.1 -- Securities Underwriting Agreement Basic Provisions has been
filed as exhibit 1.1 to Post-Effective Amendment No. 1 to
Registration No. 33-2194 filed December 18, 1987 and is
incorporated herein by reference. An Underwriting Agreement
with respect to each particular offering of securities
registered hereunder will be filed as an exhibit to a
current report on Form 8-K and incorporated herein by
reference.
1.2 -- Agency Agreement dated June 8, 1999 between CFC and the
agents named therein, relating to distribution of CFC's
Medium-Term Notes, Series C, within the United States.
Incorporated by reference to Exhibit 1.1 to the current
report on Form 8-K filed by CFC on June 10, 1999.
1.3 -- A form of Placement Agency Agreement between CFC and the
agents named therein relating to the distribution, if any,
of CFC's Medium-Term Notes outside the United States will be
filed as an exhibit to a current report on Form 8-K and
incorporated herein by reference prior to the use of such
agreement.
4.1 -- Indenture between CFC and Chemical Bank, as Trustee.
Incorporated by reference to Exhibit 4.1 to Amendment No. 1
to Registration Statement on Form S-3 filed on October 12,
1990 (Registration No. 33-34927).
4.2 -- First Supplemental Indenture between CFC and Chemical Bank,
as Trustee. Incorporated by reference to Exhibit 4.2 to
Registration Statement on Form S-3 filed on April 5, 1995
(Registration No. 33-58445).
4.3 -- Instrument of Resignation, Appointment and Acceptance among
CFC, Chemical Bank, Harris Trust and Savings Bank and Harris
Trust Company of New York dated as of October 1, 1993.
Incorporated by reference to Exhibit 4.3 to Registration
Statement on Form S-3 filed on October 1, 1993 (Registration
No. 33-50463).
4.4 -- A form of Fixed Rate Medium-Term Note (for offerings within
the United States) has been filed as Exhibit 4.4 to
Registration Statement No. 33-58445 filed on April 5, 1995
and is incorporated herein by reference.
4.5 -- A form of Floating Rate Medium-Term Note (for offerings
within the United States) has been filed as Exhibit 4.5 to
Registration Statement No. 33-58445 filed on April 5, 1995
and is incorporated herein by reference.
4.6 -- A form of Fixed or Floating Rate Registered Medium-Term Note
(for offerings outside the United States) will be filed as
an exhibit to a current report on Form 8-K and incorporated
herein by reference prior to the issuance of any such Note.
4.7 -- A form of Fixed or Floating Rate Bearer Medium-Term Note
(for offerings outside the United States) will be filed as
an exhibit to a current report on Form 8-K and incorporated
herein by reference prior to the issuance of any such Note.
4.8 -- A form of Temporary Global Bearer Fixed or Floating Rate
Medium-Term Note (for offerings outside the United States)
will be filed as an exhibit to a current report on Form 8-K
and incorporated herein by reference prior to the issuance
of any such Note.
4.9 -- A form of Definitive Global Bearer Fixed or Floating Rate
Medium-Term Note (for offerings outside the United States)
will be filed as an exhibit to a current report on Form 8-K
and incorporated herein by reference prior to the issuance
of any such Note.
5 -- Opinion and consent of Milbank, Tweed, Hadley & McCloy LLP.
8 -- Opinion of Milbank, Tweed, Hadley & McCloy LLP. Included as
part of Exhibit 5.
12 -- Schedule of computation of ratio of margins to fixed
charges.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Milbank, Tweed, Hadley & McCloy LLP. Included as
part of Exhibit 5.
24 -- Power of Attorney (included on signature pages).
25 -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of Harris Trust and Savings Bank, as Trustee has
been filed as Exhibit 25 to Registration Statement No.
33-58445 filed on April 5, 1995 and is incorporated herein
by reference.
</TABLE>
II-2
<PAGE> 24
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement (other than
as provided in the proviso and instructions to Item 512(a) of Regulation
S-K):
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the debt securities offered
therein, and the offering of such debt securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the debt securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such debt securities at
that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the debt securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE> 25
THE REGISTRANT AND EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY
AUTHORIZES EACH OF SHELDON C. PETERSEN, STEVEN L. LILLY AND JOHN JAY LIST (THE
"AGENTS") TO FILE ONE OR MORE AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS)
TO THE REGISTRATION STATEMENT WHICH AMENDMENTS MAY MAKE SUCH CHANGES IN THE
REGISTRATION STATEMENT AS SUCH AGENT DEEMS APPROPRIATE AND THE REGISTRANT AND
EACH SUCH PERSON HEREBY APPOINTS EACH SUCH AGENT AS ATTORNEY-IN-FACT TO EXECUTE
IN THE NAME AND ON BEHALF OF THE REGISTRANT AND EACH SUCH PERSON, INDIVIDUALLY
AND IN EACH CAPACITY STATED BELOW, ANY SUCH AMENDMENTS TO THE REGISTRATION
STATEMENT.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT OR AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE COUNTY OF FAIRFAX, COMMONWEALTH OF VIRGINIA, ON THE 24TH
DAY OF SEPTEMBER, 1999.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
By: /s/ SHELDON C. PETERSEN
------------------------------------
SHELDON C. PETERSEN
Governor and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REPORT HAS
BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ SHELDON C. PETERSEN Governor and Chief
- ------------------------------------------------ Executive Officer
SHELDON C. PETERSEN
/s/ STEVEN L. LILLY Senior Vice President and
- ------------------------------------------------ Chief Financial Officer
STEVEN L. LILLY (Principal Financial Officer)
/s/ STEVEN L. SLEPIAN Controller (Principal
- ------------------------------------------------ Accounting Officer)
STEVEN L. SLEPIAN September 24, 1999
/s/ BENSON HAM President and Director
- ------------------------------------------------
BENSON HAM
/s/ R.B. SLOAN, JR. Vice President and
- ------------------------------------------------ Director
R.B. SLOAN, JR.
/s/ WADE R. HENSEL Secretary-Treasurer and Director
- ------------------------------------------------
WADE R. HENSEL
</TABLE>
II-4
<PAGE> 26
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES M. ANDREW Director
- ------------------------------------------------
JAMES M. ANDREW
/s/ ROBERT A. CAUDLE Director
- ------------------------------------------------
ROBERT A. CAUDLE
Director
- ------------------------------------------------
GLENN ENGLISH
/s/ ALDEN J. FLAKOLL Director
- ------------------------------------------------
ALDEN J. FLAKOLL
/s/ JAMES A. HUDELSON Director
- ------------------------------------------------
JAMES A. HUDELSON
/s/ KENNETH KRUEGER Director
- ------------------------------------------------
KENNETH KRUEGER
/s/ STEPHEN R. LOUDER Director
- ------------------------------------------------
STEPHEN R. LOUDER
/s/ EUGENE MEIER Director
- ------------------------------------------------
EUGENE MEIER
/s/ R. LAYNE MORRILL Director
- ------------------------------------------------
R. LAYNE MORRILL
/s/ ROBERT J. OCCHI Director September 24, 1999
- ------------------------------------------------
ROBERT J. OCCHI
/s/ CLIFTON M. PIGOTT Director
- ------------------------------------------------
CLIFTON M. PIGOTT
/s/ TIMOTHY REEVES Director
- ------------------------------------------------
TIMOTHY REEVES
/s/ BRIAN D. SCHLAGEL Director
- ------------------------------------------------
BRIAN D. SCHLAGEL
/s/ THOMAS W. STEVENSON Director
- ------------------------------------------------
THOMAS W. STEVENSON
Director
- ------------------------------------------------
CLIFFORD G. STEWART
/s/ ROBERT STROUP Director
- ------------------------------------------------
ROBERT STROUP
/s/ ROBERT C. WADE Director
- ------------------------------------------------
ROBERT C. WADE
/s/ ROBERT O. WILLIAMS Director
- ------------------------------------------------
ROBERT O. WILLIAMS
/s/ ELDWIN A. WIXSON Director
- ------------------------------------------------
ELDWIN A. WIXSON
</TABLE>
II-5
<PAGE> 27
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
- ------- -------- ------------
<C> <S> <C> <C>
1.1 -- Securities Underwriting Agreement Basic Provisions has been
filed as exhibit 1.1 to Post-Effective Amendment No. 1 to
Registration No. 33-2194 filed December 18, 1987 and is
incorporated herein by reference. An Underwriting Agreement
with respect to each particular offering of Securities
registered hereunder will be filed as an exhibit to a
current report on Form 8-K and incorporated herein by
reference. .................................................
1.2 -- Agency Agreement dated June 8, 1999 between CFC and the
agents named therein, relating to distribution of CFC's
Medium-Term Notes, Series C, within the United States.
Incorporated by reference to Exhibit 1.1 to the current
report on Form 8-K filed by CFC on June 10, 1999. ..........
1.3 -- A form of Placement Agency Agreement between CFC and the
agents named therein relating to the distribution, if any,
of CFC's Medium-Term Notes outside the United States will be
filed as an exhibit to a current report on Form 8-K and
incorporated herein by reference prior to the use of such
agreement. .................................................
4.1 -- Indenture between CFC and Chemical Bank, as Trustee.
Incorporated by reference to Exhibit 4.1 to Amendment No. 1
to Registration Statement on Form S-3 filed on October 12,
1990 (Registration No. 33-34927). ..........................
4.2 -- First Supplemental Indenture between CFC and Chemical Bank,
as Trustee. Incorporated by reference to Exhibit 4.2 to
Registration Statement on Form S-3 filed on April 5, 1995
(Registration No. 33-58445). ...............................
4.3 -- Instrument of Resignation, Appointment and Acceptance among
CFC, Chemical Bank, Harris Trust and Savings Bank and Harris
Trust Company of New York dated as of October 1, 1993.
Incorporated by reference to Exhibit 4.3 to Registration
Statement on Form S-3 filed on October 1, 1993 (Registration
No. 33-50463). .............................................
4.4 -- A form of Fixed Rate Medium-Term Note (for offerings within
the United States) has been filed as Exhibit 4.4 to
Registration Statement No. 33-58445 filed on April 5, 1995
and is incorporated herein by reference. ...................
4.5 -- A form of Floating Rate Medium-Term Note (for offerings
within the United States) has been filed as Exhibit 4.5 to
Registration Statement No. 33-58445 filed on April 5, 1995
and is incorporated herein by reference. ...................
4.6 -- A form of Fixed or Floating Rate Registered Medium-Term Note
(for offerings outside the United States) will be filed as
an exhibit to a current report on Form 8-K and incorporated
herein by reference prior to the issuance of any such
Note. ......................................................
4.7 -- A form of Fixed or Floating Rate Bearer Medium-Term Note
(for offerings outside the United States) will be filed as
an exhibit to a current report on Form 8-K and incorporated
herein by reference prior to the issuance of any such
Note. ......................................................
4.8 -- A form of Temporary Global Bearer Fixed or Floating Rate
Medium-Term Note (for offerings outside the United States)
will be filed as an exhibit to a current report on Form 8-K
and incorporated herein by reference prior to the issuance
of any such Note. ..........................................
4.9 -- A form of Definitive Global Bearer Fixed or Floating Rate
Medium-Term Note (for offerings outside the United States)
will be filed as an exhibit to a current report on Form 8-K
and incorporated herein by reference prior to the issuance
of any such Note. ..........................................
5 -- Opinion and consent of Milbank, Tweed, Hadley & McCloy
LLP. .......................................................
8 -- Opinion of Milbank, Tweed, Hadley & McCloy LLP. Included as
part of Exhibit 5. .........................................
12 -- Schedule of computation of ratio of margins to fixed
charges. ...................................................
23.1 -- Consent of Arthur Andersen LLP. ............................
23.2 -- Consent of Milbank, Tweed, Hadley & McCloy LLP. Included as
part of Exhibit 5. .........................................
24 -- Power of Attorney (included on signature pages). ...........
25 -- Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of Harris Trust and Savings Bank, as Trustee has
been filed as Exhibit 25 to Registration Statement No.
33-58445 filed on April 5, 1995 and is incorporated herein
by reference. ..............................................
</TABLE>
<PAGE> 1
EXHIBIT 5
September 24, 1999
National Rural Utilities Cooperative
Finance Corporation
2201 Cooperative Way
Herndon, Virginia 20171-3025
Dear Sirs:
We have acted as counsel for National Rural Utilities Cooperative Finance
Corporation ("CFC") in connection with the proposed public offering from time to
time, directly to purchasers or through agents or underwriters to be designated
from time to time, of debt securities of CFC, such debt securities 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 (as so supplemented, the
"Indenture"), between CFC and Harris Trust and Savings Bank, as successor
Trustee, as contemplated in the CFC's Registration Statement filed on Form S-3
on the date hereof pursuant to Rule 415 under the Securities Act of 1933 (the
"Registration Statement"). We submit this opinion for use as Exhibits 5 and 8 to
the Registration Statement and hereby consent to the use of this opinion in the
Registration Statement and to the use of our name under the caption "Legal
Opinions" in the prospectus.
We have investigated the corporate status of CFC and have examined the
corporate proceedings authorizing the creation and issuance of the debt
securities.
Based upon the foregoing, and having regard to legal considerations that we
deem relevant, we are of the opinion that the debt securities, when duly
authorized and executed by CFC and authenticated by or on behalf of the Trustee
pursuant to the terms of the Indenture, and issued for value in accordance with
the terms of the Indenture and applicable resolutions of the Board of Directors
of CFC, will be the validly issued, binding obligations of CFC.
In our opinion, the discussions under the caption "United States Taxation"
in the prospectus included as part of the Registration Statement are correct in
all material respects.
Very truly yours,
Milbank, Tweed, Hadley & McCloy LLP
<PAGE> 1
EXHIBIT 12
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
COMPUTATION OF RATIO OF MARGINS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED MAY 31,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net margins before extraordinary loss..... $ 76,439 $ 62,216 $ 54,736 $ 50,621 $ 45,212
Add: Fixed charges........................ 664,109 540,535 475,729 426,079 361,338
-------- -------- -------- -------- --------
Margins available for fixed charges....... $740,548 $602,751 $530,465 $476,700 $406,550
======== ======== ======== ======== ========
Fixed charges:
Interest on all debt (including
amortization of discount and issuance
costs)............................... $664,109 $540,535 $475,729 $426,079 $361,338
-------- -------- -------- -------- --------
Total fixed charges............. $664,109 $540,535 $475,729 $426,079 $361,338
======== ======== ======== ======== ========
Ratio of margins to fixed charges......... 1.12 1.12 1.12 1.12 1.13
======== ======== ======== ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of our report dated July 16, 1999
included in National Rural Utilities Cooperative Finance Corporation's Form 10-K
for the year ended May 31, 1999 and to all references to our Firm included in
this Registration Statement.
ARTHUR ANDERSEN LLP
Vienna, VA
September 23, 1999
