Barclays Global Investors

100%

Core U.S. Treasury Inflation-Protected Securities fund

Barclays Capital U.S. Treasury Inflation-Protected Securities Index

Passively Managed

None

A flat asset based fee of 0.02%.

Fees and expenses are only one of several factors that should be considered when making investment decisions. More information on fees and expenses can be found in the FAQs on the MyFRS.com website.

Barclays Global Investors' (BGI) objective in managing the fund is to deliver a high quality and cost-effective index-based portfolio to institutional investors.

See Security Selection and Portfolio

The U.S. TIPS Fund shall be invested and reinvested primarily in a portfolio of debt securities with the objective of closely approximating the total rate of return for all outstanding United State Treasury Inflation Protected Securities with a maturity of one year or greater, as defined by the Barclays Capital United States Treasury Inflation Protected Securities Index.

Futures and Options
BGI does not use futures to add value; futures are used only to decrease tracking error. Futures contracts are employed within the collective funds to "equitize" cash flows. These flows are generated from dividends and other cash flows associated with securities in the portfolio. Futures contracts are purchased to provide immediate market exposure proportionate to the size of both cash flows and residual cash within the portfolio. The goal is to reduce the overall portfolio tracking error that would be incurred should cash remain uninvested in the portfolio. Cash in excess of 0.15% would be equitized using Barclays Aggregate futures contracts.

Securities Lending:
This fund participates in securities lending. BGI lends all major asset classes and is present in all major markets. As part of the Global Index and Markets Group (GIMG), the securities lending activities are closely linked to the index management services, cash management, trading and risk management groups.

BGI currently deals with only 34 counterparties. Their philosophy on borrower selection is to concentrate their lending to highest credit quality borrowers of those who meet stringent capital, financial and risk requirements and who are able to meet their obligations within the terms of the lending contract. Their risk management controls include:

• Credit screening of borrowers to determine capital adequacy, liquidity and operations efficiency.
• Collateral requirements that govern receipt and monitoring of collateral received in lieu of securities borrowed. BGI accepts only cash, obligations of the U.S. Government and irrevocable letters of credit.
• A minimum of 102% and 105% of the market value for domestic and international loans is required at the outset, respectively.
• A daily mark-to-market procedure.
• Investment policy controls applied to the investment of cash received as collateral.
• Record-keeping guidelines, written agreements and regulatory reporting managed in compliance with all applicable regulatory controls of the securities lending programs of financial institutions.

Not applicable.