The interest rate may be either fixed or floating for the term of the investment. Currently, a fixed option is available at 5.0 percent.

The interest rate is based on a 360-day year of 12 30-day months (30/360).

Each April 1 and October 1 and at maturity.

If an interest payment date falls on a non-business day, the interest will be paid on the succeeding business day.

March 15

September 15

Member Capital Securities are subordinated to:

·     Senior indebtedness of CFC

·     Subordinated indebtedness holdable by or transferable to non-members of CFC

Member Capital Securities rank equally with:

·     CFC member subordinated certificates

Payments will not be made in the event of:

·     Default by CFC in payment of principal or mandatory prepayments of or premium, if any, sinking funds or interest on any senior indebtedness or subordinated indebtedness; or,

·     An event of default (other than a default in the payment of principal, premium, if any, mandatory prepayments, sinking funds or interest) with respect to any senior indebtedness or subordinated indebtedness as defined herein or in the instrument under which the same is outstanding permitting the holders thereof (or of the indebtedness secured thereby) to accelerate the maturity thereof (or of the indebtedness secured thereby), and such event of default shall not have been cured or waived or shall not have ceased to exist.

·     Interest on Member Capital Securities can be deferred for up to 10 consecutive interest payment periods.

·     Interest that has accrued and not been paid must be paid in full at the end of the deferral period.

·     During a deferral period, CFC may not declare or make any payment in regard to a member’s subordinated certificate, equity or patronage capital.

·     Additional deferral of interest may be made before the termination of any deferral period, as long as it does not exceed 10 consecutive interest payment periods or exceed the maturity of the Member Capital Securities.

·     Upon payment of all amounts due and the deferral period’s termination, CFC can select a new deferral period based on the parameters above.

Member Capital Securities holders will be given 10 business days’ notice before the earlier of:

·     Next interest payment date

·     Required notice date of record or payment of interest

When we began issuing Member Capital Securities (MCS) in 2008, access to funding was very tight and the cost of capital in the markets was significantly higher; therefore, CFC offered an interest rate of 7.5 percent on the MCS it issued at that time.

Today, with the more accessible credit markets, CFC is able to obtain funding at much lower interest rates. It just doesn’t make good business sense for us to continue to pay interest at 7.5 percent on these securities.

The MCS we began offering in 2008 become redeemable at CFC’s option on the five-year anniversary of issuance. We are redeeming the MCS to eliminate the need to pay such a high rate of interest on the funds received from the sale of those securities.

Yes. Your purchase of the new MCS will help CFC maintain a strong member investment position, which is viewed favorably by banks, investors and the credit rating agencies.

Unlike publicly traded, stock-owned companies, CFC’s ability to raise equity is limited. Like other cooperatives, we rely on our members for the equity capital that reduces our adjusted debt-to-equity ratio, expands our funding capacity and helps to ensure we are prepared to meet the future financing needs of our members.

The MCS we began offering in 2008 had an interest rate of 7.5 percent, matured in 35 years and became redeemable at CFC’s option at par five years from issuance.

The new MCS (Series 2013) will have an interest rate of 5 percent, mature in 30 years and become redeemable at CFC’s option at par 10 years from issuance.

Please read the term sheet and prospectus supplement for more details.

Yes. Around the same time you receive the redemption notice from the U.S. Bank trustee, you also will receive an information packet from CFC.

If you wish to reinvest your MCS funds in the new MCS (Series 2013), you simply need to indicate your decision on the Reinvestment Election Form in the MCS packet that you receive from CFC—which includes the term sheet for the new MCS, these Frequently Asked Questions and a new prospectus supplement—and return it to CFC prior to the redemption date indicated in the notice of redemption received from the trustee.

The Reinvestment Election Form offers two choices for the outstanding MCS principal amount:

·      Return the principal amount to the system’s bank account via wire transfer on the redemption date or

·      Invest the entire principal amount in new MCS on the redemption date.

Select the second option to invest in the new MCS. You will still receive a wire transfer for the interest earned but not yet paid on the outstanding MCS.

The 5-percent interest rate on the new MCS (Series 2013) is greater than the current rates offered on the CFC Daily Liquidity Fund, Commercial Paper or Select Notes. Additionally, the new MCS offer an extended noncall period of 10 years, so your investment cannot be redeemed for a decade.

Also, an MCS investment is viewed more favorably by CFC’s rating agencies, which give CFC partial equity credit for MCS investments. In these regards, the MCS investment is better for both the member and CFC.

If you don’t want to reinvest your MCS funds on the redemption date, you can use the Reinvestment Election Form to select that you want the principal amount sent to your system’s bank account.

Not returning a Reinvestment Election Form to CFC will have the same effect as an election to have the principal amount returned to your bank account via wire transfer on the redemption date.

U.S. Bank will make a wire transfer to your bank account on file with CFC on the redemption date, which is five years from the original issue date.

The amount transferred will be the original principal investment amount plus interest accrued since the last semiannual payment.