Benefits of a Brokered CD

• All new issue CDs offered by Fidelity are fee-free.¹
• All new issue CDs offered by Fidelity are FDIC-insured.¹
• The secondary CDs Fidelity offers come from multiple sources, providing investors with a single location to view brokered CDs from many banks.²
• Brokered CDs have some important advantages over bank CDs² including the ability to avoid penalties if the CD is sold before maturity. They also have some inherent risks.

Product Overview

Brokered Certificates of deposit (CDs) are securities offered by commercial banks and thrifts to raise funds for their business activities. Investors lock in the market interest rate at the time of purchase, which is usually fixed for the term of the CD. There is no limit on the denomination of a CD.

Features and Benefits

Maturities

• The minimum maturity is seven days. There is no maximum maturity on CDs.
• Most CDs with maturities of one year or less will pay interest at maturity.
• CDs with maturities longer than one year normally pay interest on a semiannual basis. The payment is calculated using the actual number of days divided by 365.
• Any fixed income security sold prior to maturity may be subject to a substantial gain or loss. If sold prior to maturity, CDs may be sold on the secondary market subject to market conditions.

Insurance

CDs issued by FDIC–insured institutions and held in Fidelity accounts are generally eligible for FDIC insurance insured up to the following limits³:

• Up to $250,000 per account owner per institution for depository assets held in non-retirement accounts. On October 3, 2008, certain FDIC insurance coverage limits were temporarily increased from $100,000 to $250,000. These temporary increases will remain in effect until December 31, 2013. Additional information can be found on the FDIC website. CDs which mature after 12/31/2013 will have the $250,000 coverage up to the 12/31/2013 date. After that the insurance will revert to the $100,000 level.
• FDIC insurance only covers the principal amount of the CD and any accrued interest. In some cases, CD's may be purchased on the secondary market at a price which reflects a premium to their principal value. This premium is ineligible for FDIC insurance.
• Effective 4/1/2006, up to $250,000 per account owner per institution for depository assets held in qualifying retirement accounts such as traditional or Roth IRAs.

All of the new issue Brokered CDs Fidelity offers are FDIC insured. For more information regarding FDIC coverage, please consult www.fdic.gov.

Liquidity

• There is generally a secondary market for CDs sold prior to maturity.
• While Fidelity attempts to support the secondary trading of the CDs it offers, the new issue market garners the most interest. Accordingly, investors attempting to sell CDs may experience limited liquidity in secondary markets.

Risks

• Lower yields – Because of the inherent safety and short-term nature of a CD investment, yields on CDs tend to be lower than other higher risk investments.
• Interest rate fluctuation – Like all fixed income securities, CD prices are susceptible to fluctuations of interest rates. If interest rates rise, the market price of outstanding CDs will generally decline. However, since changes in interest rates will have the most effect on longer maturities, short-term CDs are generally less susceptible to interest rate movements.
• Credit risk – Since CDs are a debt instrument, there is credit risk associated with their purchase. The insurance offered by the FDIC may help mitigate this risk. Customers are responsible for evaluating both the CDs and the creditworthiness of the underlying issuing institution. It is not Fidelity’s responsibility to perform these evaluations.
• Insolvency of the Issuer – In the event the Issuer approaches insolvency or becomes insolvent; the Issuer may be placed in regulatory conservatorship with FDIC typically appointed the conservator. As with any deposits of a depository institution placed in conservatorship, the CDs of Issuer for which a conservator has been appointed may be paid off prior to maturity or transferred to another depository institution. If the CDs are transferred to another institution, the new institution may offer you a choice of retaining the CD at a lower interest rate or having the CD paid off.
• Selling before maturity – CDs sold prior to maturity are subject to a concession and may be subject to a substantial gain or loss due to interest rate changes. The secondary market may also be limited. The market value of a CD in the secondary market may be influenced by a number of factors including, but not necessarily limited to, interest rates, provisions such as call or step features, and credit rating of the issuer. Fidelity currently makes a market in the CDs we make available, but may not do so in the future.
• Coverage limits – FDIC insurance limits apply to aggregate amounts on deposit at each covered institution. Investors should consider the extent to which other accounts, deposits or accrued interest may exceed applicable FDIC limits.³