1         Treasury Inflation Protected Securities (TIPS) Are a Government Security that Protects Your Investment from Inflation

            TIPS are issued by the U.S. government, and are generally one of the safest government investment options available. TIPS pay interest every six months, and pay you your principal upon maturity. Interest payments, as well as your principal, are adjusted upward to compensate for inflation. Because TIPS are such a safe investment, and because they automatically adjust for inflation, their returns are relatively low compared to other investments.

            TIPS use the consumer price index to adjust returns for inflation. When inflation rises, the purchasing power of the dollar is decreased. Also, the return on investments is undermined relative to what those returns could purchase. TIPS protect the investor from the effects of inflation. TIPS are also known as Treasury inflation-indexed securities.

 2         TIPS Adjust Downward in a Period of Deflation, but Protect You from Deflation upon Maturity

            In a period of deflation, the principal and the interest payments of your TIPS investment will decrease. However, upon maturity in a period of deflation, you will be paid your original principal amount if it is higher than the principal adjusted for deflation.Even with this safeguard, however, TIPS are investments that generally have more advantages in   a period of inflation rather than deflation.

 3         TIPS Inflation Index Ratios Allow You to Calculate the Effects of Inflation on Your Investment.

            Visit http://www.treasurydirect.gov/instit/annceresult/tipscpi/tipscpi.htm for information on the current consumer price index, TIPS inflation index ratios, and their effect on your investment.

 4         TIPS Are Sold in Increments of $100

            The minimum purchase for TIPS is $100. TIPS are sold in 5, 10, and 20 year terms. They may be redeemed before maturity at any time, and earn interest up to the time of maturity.

 5         To Purchase TIPS, You Bid on Price and Interest Rate

            The price and the interest rate of TIPS are set at auction. There are two ways to bid for TIPS:

• Noncompetitive bid: With a noncompetitive bid, you accept the yield determined for the TIPS at auction. This process allows you to receive the TIPS you want, and guarantees the amount you want. Noncompetitive bids may be made through Treasury Direct, Legacy Treasury Direct, brokers, bankers, or dealers.

• Competitive bid: With a competitive bid, you designate the yield you want for your TIPS. If the amount you designate is less than the amount set at auction, your bid will be accepted for the full amount. If the amount you designate is equal to the amount set at auction, your bid will be accepted for less than the full amount. If the amount you designate is greater than the amount set at auction, your bid will be rejected.

Competitive bids must be placed with banks, brokers, or dealers.

            Visit http://www.treasurydirect.gov/indiv/research/indepth/tips/res_tips_buy.htm for details on TIPS auctions and the bidding processes.

 6         You May Sell Your TIPS Prior to Maturity

            How you sell your TIPS will depend upon whether you originally purchased TIPS through Treasury Direct or Legacy Treasury Direct. Visit  http://www.treasurydirect.gov/indiv/research/indepth/tips/res_tips_sell.htm for details on selling TIPS.

 7         Tax on TIPS Is Handled Differently at the Federal and the State/Local Levels

            While all interest and any increases in principal are tax exempt at the state and local levels, these         increases are federally taxable. Treasury Direct will withhold up to 50% of your interest income if you request it. Visit     http://www.treasurydirect.gov/indiv/research/indepth/tips/res_tips_tax.htm for more information on TIPS and tax implications.

 8         TIPS Auctions Occur During Specific Months

            The U.S. government auctions TIPS according to this schedule:

•      April and October: 5-year TIPS
•      January, April, July, October: 10-year TIPS
•      January and July: 20-year TIPS

            Visit http://www.treasurydirect.gov/RI/OFAnnce for an official schedule of auctions.

 9         You Can Invest in TIPS through a Mutual Fund Rather than Purchasing Individual Securities

            If you are looking for diversity in the types of TIPS that you hold, consider a mutual fund which can provide that for you. Additionally, if you want to defer reportable federal taxes on TIPS, consider investing in a tax deferred mutual fund.

 10       You Can Purchase TIPS Online or through Commercial Institutions

• Visit www.treasurydirect.gov for information on TIPS.

• Purchase TIPS online at: http://www.treasurydirect.gov/indiv/myaccount/myaccount_treasurydirect.htm. Only individuals may purchase TIPS through Treasury Direct. 

• TIPS may also be purchased online at Legacy Treasury Direct: http://www.treasurydirect.gov/indiv/myaccount/myaccount_legacytd.htm.

      Legacy Treasury Direct does not sell the 20-year TIP.