The folder %1 refers to a drive that is not formatted for the NTFS file system. Because the SYSVOL folder is replicated among ...

The folder %1 refers to a drive that is not formatted for the NTFS file system. Because the SYSVOL folder is replicated among Active Directory domain controllers, NTFS is required. Select a folder on a drive formatted for NTFS.  (You can convert drives formatted with the FAT file system with the convert.exe command-line tool.)