OVERVIEW
Fixed Rate Non Callable Corporate Securities are fixed income notes with protection against calls purchased at FISN, a brokerage firm. FISN searches nationwide in the secondary market for Non Callable Corporate notes with the highest return and offers these securities for investment. Non-investment grade notes pay a higher return than investment grade issues. FISN looks at notes that are widely traded, thus liquid. Since they are not callable there is no risk of calls taking away a high rate when market interest rates fall. Brokerage firms team-up to distribute these investments across the nation. FISN has access to the widest inventory from major Wall Street firms. Investors select corporate securities that meet their needs for yield and return of principal. Caution is warranted when investing in non-investment grade securities. The security is held in a brokerage account.

PROCESS
Investors start by selecting suitable Fixed Rate Non Callable Corporate Securities for investment and then open a standard brokerage account at FISN in their name. These securities are not new issues. They are investments outstanding in the  secondary market and are rated below investment grade. A brokerage account can hold many corporate securities from any corporate issuer but caution is warranted when investing in non-investment grade bonds. The investor wires funds or sends a check to fund this new account. FISN sends new account paperwork and purchase confirmations to the investor. The brokerage forms are completed and the transaction confirmation is verified. Only one account needs to be opened for each ownership category. Paperwork is returned to FISN along with the required identification.

CREDIT QUALITY
Issuers of Fixed Rate Non Callable Corporate Securities listed here carry a rating below Investment Grade. A credit rating is the measurement of the financial strength of a bond issuer. This measurement helps an investor to understand an issuer’s ability to make timely interest payments and repay the investment principal upon maturity. Generally, the higher the credit quality of a bond issuer, the lower the interest rate paid by the issuer because the risk of default is lower. Credit quality ratings are provided by nationally recognized rating agencies. Caution is warranted when investing in non-investment grade bonds in which risk is more inherent. The notes are not bank deposits and are not FDIC insured. Principal is protected at maturity by the issuer.

The following is an explanation of the top credit ratings. The rating for each individual investment should be evaluated based the rating criteria. Credit ratings fluctuate with business conditions. Upgrades and downgrades in credit ratings change the risk profile of issuers and possibility the market prices of their securities.

Long Term Credit Ratings

Investment Grade
AAA ratings denote the highest rating assigned. This rating is assigned to the "best" credit risk relative to all other issuers or issues.

AA ratings denote a very strong credit risk relative to other issuers or issues. The credit risk inherent in these financial commitments differs only slightly from the highest rated issuers or issues. 

A ratings denote a strong credit risk relative to other issuers or issues. However, changes in circumstances or economic conditions may affect the capacity for timely repayment of these financial commitments to a greater degree than for financial commitments denoted by a higher rated category.

BBB ratings denote an adequate credit risk relative to other issuers or issues. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment of these financial commitments than for financial commitments denoted by a higher rated category.

Below Investment Grade
BB ratings denote a fairly weak credit risk relative to other issuers or issues. The payment of the financial commitments is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.

B ratings denote a significantly weak credit risk relative to other issuers or issues in the country. Financial commitments are currently being met but a limited margin of safety remains and capacity for continued timely payments is contingent upon a sustained, favorable business and economic environment.

See Corporate Bond Ratings chart for a simple description and comparison of credit quality ratings issued by S&P, Moody’s and Fitch.

INVESTMENT FEATURES
Fixed Rate, Non Callable corporate securities are unsecured and un-subordinated obligations of the corporate issuer. Non-investment grade notes offer higher yield opportunities compared to investment grade and other higher credit quality investments such as FDIC insured CDs. The issuers are major U. S. corporations and are not FDIC insured, like banks. The notes are not callable nor are they new issues. The notes are purchased in the secondary market and accrued interest needs to be paid to the seller, in addition to the discount or premium price. The yield to maturity (YTM) is based upon the price, accrued interest paid, coupon payments and remaining time to maturity. They pay interest at a fixed rate over the life of the investment. The interest is paid on a semi-annual basis into the brokerage account where it can continue to earn interest in a money market fund account. Key information is the name of the issuer, the issuer credit quality, sale price, accrued interest due, YTM and the maturity date. There is no early withdrawal permitted but the note can be resold in the secondary market. Securities sold prior to maturity are subject to market conditions and could result in a loss. Most of these bonds and notes do not have a payable on death provision. Non-investment grade debt requires extra caution.

Interest can be disbursed immediately or periodically via checks or electronic funds transmission straight to your local bank. Available cash also can be withdrawn from the account via checks, automatic teller machines or debit cards. There may be fees for accounts with ATM or debit cards.

See An Investor’s Guide to Corporate Bonds.

ID REQUIREMENTS     
Brokerage accounts are opened at FISN’s brokerage division, First Internet Securities Network. Securities in FISN accounts are carried by National Financial Services LLC, Member NYSE/SIPC, a Fidelity Investments company. FISN is required under U.S. government rules to verify ownership of all accounts. Individuals are required to provide a copy of a government-issued photo identification. Business accounts, trusts and other non-individual accounts have special documentation requirements.

FEES  
There are no investment fees or commissions paid by the investor. Most investments require a minimum purchase amount. Secondary market securities are sold net to the investor without any commissions and are usually offered at a market price indicating a discount or premium to par.

The above disclosure is typical for this type of issue. Actual disclosures are published for each new issue in most cases. Look for the related disclosure for each deal on the FISN web site or ask your FISN Registered Representative to send it to you. Current disclosures are made available to purchasers for new issues either by mail or online after the trade date or settlement date. Disclosures for secondary issues were publish at the time of the original settlement and may not be available or up-to-date.

UNIQUE RISKS FOR FIXED RATE, NON CALLABLE & NON INVESTMENT GRADE CORPORATE SECURITIES
These fixed rate securities present unique risks related to their credit quality. They are below investment grade by definition. All types of risk are present and can impact value and liquidity. The rating agencies and the market have signaled that the caution is warranted and close supervision is necessary.

MARKET RISK
All investments held in a securities account are subject to market risk. Market risk is always present but has no effect if investments are held to maturity. Most investments are purchased with the intention of holding them to maturity. This risk arises from the valuation that potential buyers in the market put on an investment that could be offered for sale. The potential risk is that the value may fall and transaction cost may be incurred if the item is put up for sale. This risk could become a real loss if holdings are actually sold. Market values are estimated on FISN monthly statements. Current market values can be requested from your FISN Investment Manager. It is possible that the value could rise as well and then it would be a market value gain. Market risk is an overall risk caused many factors such as interest rate movements, transaction cost and availability of purchasers.

INTEREST RATE RISK
All investments that pay interest or dividends are subject to interest rate risk. CD Alternative Investments sold by FISN are included since their primary purpose is to produce income in the form of interest. Interest rate risk is present if interest rates are moving up from their original level but has no effect if investments are held to maturity. Most investments are purchased with the intention of holding them to maturity. The rule is simple: if rates rise, the “market” value will fall. All purchasers in the secondary market demand the yield on previously issued investments be increased to current levels before they buy them. Yields are increased by reducing the price. This risk could become a real loss if holdings are actually sold. Market values are estimated on FISN monthly statements. Current market values can be requested from your FISN Investment Manager. Of course, the value may rise if interest rates fall and then it would be a market value gain if sold.

SECONDARY MARKET AVAILABILITY RISK
All investments are subject to the availability of a secondary market. Income producing investments including CD Alternative Investments sold by FISN are included since they don’t trade such as stocks do on an established “stock market”. The risk is the availability of such an organized and active place to sell your investment. This risk is present if you plan to sell your investment but has no effect if investments are held to maturity. Most investments are purchased with the intention of holding them to maturity. FISN, though not obligated to do so, may maintain a secondary market in these investments. Simply stated - buyers are needed to sell something. This risk could become a real loss if holdings are actually sold. Market values are estimated on FISN monthly statements. Current market values can be requested from your FISN Investment Manager.

CALL RISK
These investments are typically not callable.

RE-INVESTMENT RISK
All fixed income investments are subject to re-investment risk. This risk is related to what you do when an investment ends, regardless of the reason. If you plan to continue investing, you have to re-enter the marketplace to find a new, replacement investment. One side of this “risk” is that rates may be lower and/or less product is available. The other side of this “risk” is that rates may be higher and/or more product is available. Strategies to lessen this risk are to time investment maturities close to when you might need the money or to go long when rates appear high and to go short term when rates appear low. Some investors do both by laddering the maturities between long and short terms. Long term maturities capture higher returns paid for longer investments. Shorter maturities keep the remainder of your funds regularly available so rate swings are not missed.

PRINCIPAL RISK
All investments are subject to principal risk. This risk is connected to the issuer. If the financial outlook of issuer declines, the issuer’s credit rating could be downgraded or the issuer could actually default on its debt. With most debt, if the issuer is less creditworthy, the debt will fall in value. And, if the issuer cannot repay the debt at all, the investment may be near worthless. The principal value will diminish in either case.

OVERVIEW
Fixed income securities are less liquid than trading investments such as stocks. Fixed income securities are designed to be held long term, or to maturity, rather than being bought and sold, over and over again. Although there are no early withdrawal rights, nearly every investment can be sold in an active market.

EARLY WITHDRAWAL
Fixed income securities held in a brokerage account do not have early withdrawal rights for any reason, like some certificates of deposit.

INVESTMENT SALE
Securities purchased through FISN can be sold in the secondary market for fixed income investments. This market is an “over the counter” market which is actually conducted over the telephone between brokerage firms. There is no mechanism such as the New York Stock Exchange where orders can be entered and a sale is guaranteed. The availability of this secondary market cannot be guaranteed. And, there may not be buyers willing to pay an acceptable price if a security is put up for sale. Also impacting the price is that any investment posted for sale will compete with other fixed income investments being offered at the same time. To start the sale process, the investor has to offer their investment for sale to their broker. The broker will consider whether the brokerage firm wants to hold the security in its own inventory for resale at a later time or to sell it to another brokerage firm on the “street”. The broker will offer a net price to the investor for each security. The FISN broker and other “middle men” will build into their prices a trading incentive to cover their cost and profit objectives. The investor can accept the price or continue to hold the security. There is no assurance how high the “bid” price will be or that this price will be close to estimated prices shown online or printed on recent statements. Prices are simply reflections of the market and business objectives of participating firms.

TRANSFERABILITY
Most securities can be transferred amongst brokerage firms. The receiving firm generally requests the delivering firm to transfer cash and securities between accounts registered in the same ownership capacity. All debits and fees need to be paid prior to a transfer. Every firm has a process including minimums, fees and forms. It is not typical for certificates to be issued and sent to owners of record. Holding certificates outside the brokerage community reduces liquidity, prolongs an ownership transfer and lengthens the time for any sale.

PAYABLE ON DEATH
Some securities have a feature that permits the investment to be paid off following the death of an owner. Fixed rate, corporate securities typically don’t have this feature although there are some exceptions. Ask you FISN Investment Manager whether the bond you are interested in has any "payable on death" provisions.