NextGen Direct Program Description

NEXTGEN COLLEGE INVESTING PLAN®

PROGRAM DESCRIPTION

AND

PARTICIPATION AGREEMENT

September 20, 2010

CLIENT DIRECT SERIES

The NextGen College Investing Plan is a Section 529 Program administered by the Finance Authority of Maine. Merrill Lynch, Pierce, Fenner& Smith Incorporated is the Program Manager of the NextGen College Investing Plan. This Program Description and Participation Agreementcontains information you should know before participating in the Program, including information about fees, expenses and risks. Pleaseread it before you invest and keep it for future reference.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securitiesor passed upon the adequacy of this Program Description and the Participation Agreement. Any representation to the contrary is a criminaloffense. These securities have not been registered with the U.S. Securities and Exchange Commission or any state securities commission.

2

This Program Description and Participation Agreement will be updated from time to time to reflect changes to the Program and is subjectto change without notice. The information contained in this Program Description and Participation Agreement amends and supersedes allinformation contained in prior Program Descriptions and Participation Agreements. Participants should rely only on the informationcontained in this Program Description and Participation Agreement. No one is authorized to provide information that is different from theinformation contained in this Program Description and Participation Agreement.

The Client Direct Series of the NextGen College Investing Plan (offered through this Program Description) offers a variety of investment optionsdirectly through the Finance Authority of Maine and Maine Distribution Agents. The Client Select Series of the NextGen College Investing Plan(offered through a different program description) offers different fees, sales charges, expenses and investment options exclusively throughfinancial advisors.

Program accounts are not bank deposits, are not insured by the Federal Deposit Insurance Corporation or the National Credit UnionAdministration, are not debt or obligations of, or guaranteed by, any bank or other financial institution or the Finance Authority of Maine,the State of Maine, the Program Manager, BlackRock Investment Management, LLC, Massachusetts Financial Services Company, FranklinTempleton Investments, or Maine Distribution Agents. Participation in the Program involves investment risks, including the possible loss ofprincipal.

Where to Obtain More Information, Forms or Ask Questions:

The Program Manager may be contacted at Merrill Lynch, College Plan Services,P.O. Box 1518, Pennington, NJ 08534-1518, or at (877) 4-NEXTGEN (463-9843).

FAME may be contacted at P.O. Box 949, Augusta, ME 04332-0949, or at (800) 228-3734.

You can also contact your Maine Distribution Agent,or visit the Program’s Web site located at www.nextgenplan.com.

Section 529 Qualified Tuition Programs are intended to be used only to save for qualified higher education expenses. These Programs arenot intended to be used, nor should they be used, by any taxpayer for the purpose of evading federal or state taxes or tax penalties. Inaddition, in order to comply with requirements of the U.S. Treasury Department and Internal Revenue Service (“IRS”), we advise you thatthis Program Description (i) is not intended as individual tax advice to any person (including any Participant or Designated Beneficiary), (ii)is provided as general information in connection with the promotion or marketing of the Program and (iii) is not provided or intended to beused, and cannot be used, by any taxpayer, for the purpose of avoiding U.S. tax penalties. Taxpayers may wish to seek tax advice from anindependent tax advisor based on their own particular circumstances.

3

FINANCE AUTHORITY OF MAINE PRIVACY POLICY

Protecting the privacy of your personal information is important to us at the Finance Authority of Maine.

• We collect nonpublic personal information about you from the following sources:– Information we receive from you on applications, correspondence, communications and other forms.– Information about your transactions with respect to your Account.

• We do not disclose any nonpublic personal information about you or our other current or former customers to anyone,except as permitted by law. We never rent or sell your name or personal financial information. (We do sharesuch information with our contractors and agents such as Merrill Lynch and any Maine Distribution Agent foryour Account, and as needed to administer your Account transactions in conformance with law.)

• We restrict access to nonpublic personal information about you to our employees who need to know the information,and to contractors and agents in order to provide service to you. We maintain physical, electronic and proceduralsafeguards in compliance with federal regulations to safeguard your nonpublic personal information.

BANK OF AMERICA PRIVACY POLICY

Account owners will receive the Bank of America Privacy Policy(the "Privacy Policy") at the time a NextGen College Investing PlanAccount is opened and as required by law. The Privacy Policydescribes Bank of America's policies applicable to U.S.consumers across a number of Bank of America companies.Except for Program Accounts opened in connection with a MerrillLynch Financial Advisor, no Bank of America company (as definedin the Privacy Policy), including but not limited to Merrill Lynch,will use Customer Information (as defined in the Privacy Policy)provided in connection with Program Accounts to make non-Program direct marketing offers by postal mail, telephone and/or

e-mail. Accordingly, for Participants and Designated Beneficiarieswith Program Accounts that were not opened in connection witha Merrill Lynch Financial Advisor, no action is required in order toprevent direct marketing offers from such Bank of Americacompanies. You are encouraged to read the complete PrivacyPolicy as it contains other important information, including howBank of America collects, manages and protects your CustomerInformation and what actions you can take. If you would like acopy of the Privacy Policy, please call 1-888-341-5000 or visitBank of America's Web site at bankofamerica.com/privacy.

4

THIS PAGE IS INTENTIONALLY LEFT BLANK

5


PROGRAM DESCRIPTION


September 20, 2010

6


7

TABLE OF CONTENTS

Finance Authority of Maine Privacy Policy ................... 3

Bank of America Privacy Policy .................................... 3

Program Highlights........................................................ 8

Key Terms..................................................................... 10

Participation and Accounts Establishing an Account ........................................... 13Contributions.............................................................14 Ownership of Contributions ...................................... 16 Change of Designated Beneficiary............................ 16 Successor Participants ............................................. 17Investment of Contributions...................................... 17Statements and Reports ............................................18Other Provisions ....................................................... 18Withdrawals ............................................................. 18Qualified Withdrawals............................................... 19Non-Qualified Withdrawals and the Additional Tax .... 20Qualifying Rollovers to Other Section 529 Programs... 20Residual Account Balances and Termination............. 21Community Property................................................. 21Penalties for Misrepresentation ................................ 21

The NextGen PortfoliosInvestment Options .................................................. 21Portfolio Series ......................................................... 22Portfolio Allocations .................................................. 22Portfolio Investments ............................................... 23Portfolio Selection .................................................... 23

Program Fees and ExpensesPortfolio Investment Fees and Expenses................... 24Annual Asset-Based and Other Fees......................... 24Client Direct Series................................................... 25Adjustment of Management Fee............................... 26Other Compensation................................................. 26Investment Cost Charts ............................................ 26Cost Example – Principal Plus Portfolio .................... 27Exchanges of Existing Account Assets

to Another Portfolio ............................................... 27

Tax Treatment of Investments and WithdrawalsGeneral .................................................................... 28Federal Taxation of Section 529 Programs .............. 28Taxation by Maine .................................................... 30Taxation by Other States .......................................... 30Tax Reports and Filings ............................................ 31

Program and Portfolio Risks and Other Considerations ............................................... 32

Investment Risks of Underlying Funds................... 34Investment Risks of BlackRock iSharesPortfolios Investments........................................... 37Investment Risks of Principal Plus Portfolio Investments .......................................................... 37

The Program and the Program FundThe Program ............................................................ 38The Program Fund ................................................... 38 The Investment Fund................................................ 38Special Benefits Available to Maine Residents .......... 38

Program Management and AdministrationGeneral .................................................................... 39Finance Authority of Maine ....................................... 39The Treasurer ........................................................... 39Advisory Committee ................................................. 39Merrill Lynch and FDS .............................................. 39Sub-Advisors............................................................ 40

The Program Management AgreementServices and Terms.................................................. 40Standard of Care ...................................................... 40Termination of Agreement ........................................ 40Audits....................................................................... 40

MiscellaneousSecurities Laws........................................................ 41Method of Offering ................................................... 41Continuing Disclosure............................................... 41SIPC Insurance and Additional Coverage .................. 41Obtaining Additional Information About the Program... 41

NextGen Portfolios – Performance and InvestmentsGeneral .................................................................... 42Age-Based Diversified Portfolios............................... 42Diversified Portfolios................................................. 42Single Fund Portfolio ................................................ 42Principal Plus Portfolio.............................................. 42BlackRock Portfolios................................................. 44Cash Allocation Account ........................................... 50iShares Portfolios ..................................................... 51Franklin Templeton Portfolio ..................................... 57MFS Portfolio............................................................ 63Principal Plus Portfolio.............................................. 66

Participation Agreement.............................................. 69

8

PROGRAM HIGHLIGHTSThe NextGen College Investing Plan was established by the State of Maine to encourage investing to pay for Qualified Higher Education Expenses (asdefined below). These Program Highlights only summarize certain features of the Program. More detailed information about the Program, includingestablishing a NextGen Account, the Portfolios, fees and expenses, investment risks, and tax consequences, are described in the pages that follow.

Please read this entire Program Description and the Participation Agreement carefully before investing and keep them for future reference.

Certain Key Terms used in this Program Description and the Participation Agreement are defined beginning on page 10. For MoreInformation

Program Administrator

Program Manager;Portfolio Servicing Agent

Participant (AccountOwner) Eligibility

DesignatedBeneficiary Eligibility

Control of Account

Contributions

Maximum Contribution Limit

Qualified Withdrawals

Client Direct Series

Investment Options

The Finance Authority of Maine administers the Program.

Merrill Lynch is responsible for the day-to-day operation of the Program as well asthe marketing and distribution of the Program. Financial Data Services, Inc., anaffiliate of Merrill Lynch, provides certain administrative services to the Program.

The Program is available (without restriction on state of residence or income) to:• Individuals who are at least 18 years of age and have a valid social security number.• Custodial and trust accounts and state or local government or tax-exempt

organizations described in section 501(c)(3) of the Code or certain other entities,with a valid taxpayer identification number.

The Designated Beneficiary (i.e., the individual for whom Qualified Higher EducationExpenses are expected to be paid) may be any individual, regardless of age, with avalid social security number, including the Participant.

The Participant:• Retains control of how and when Account assets are used.• May change the Designated Beneficiary.• May take Non-Qualified Withdrawals, subject to applicable federal and state

income taxes on earnings and a 10% additional federal tax on earnings.

Initial Contribution - $250 minimum (no such minimum when funding an Account throughpayroll deduction or automated Contributions and in certain other circumstances).

Subsequent Contributions - $50 minimum.

$340,000 per Designated Beneficiary (adjusted periodically).

Assets in an Account can be used to pay for Qualified Higher Education Expenses(see definition on page 19) at any eligible post-secondary school in the U.S. orabroad.

Available by contacting FAME or the Program Manager directly, or through certainMaine Distribution Agents.

9 investment options managed by BlackRock, MFS and Franklin Templeton, as well asthe Principal Plus Portfolio:

• 2 Age-Based Diversified Portfolio Options• 5 Diversified Portfolio Options• 1 Single Fund Portfolio Option• 1 Principal Plus Portfolio

Page 39

Page 39

Page 13

Page 13

Page 16

Page 14

Page 15

Page 19

Page 21

Pages 21-23

9

PROGRAM HIGHLIGHTS

For MoreInformation

Total Annual Asset-Based Fees, which include Program Fees and Underlying Fundexpenses, vary based on the Portfolio option selected.

*As a percentage of a Portfolio’s average annual net assets.

• Other fees and charges may apply.

• Assets in an Account are not guaranteed, and an Account may lose money.• Federal and state tax laws may change and may adversely affect certain tax

advantages of an investment in the Program.• Investment options, Sub-Advisors, fees and expenses may change.• Contributions to an Account may affect the eligibility of the Designated Beneficiary

or the Participant for federal and state benefits, such as financial aid or Medicaid.

• Account earnings accrue federal income tax-free.• No federal income tax on the earnings portion of Qualified Withdrawals.• No federal gift tax on Contributions up to $65,000 ($130,000 for spouses electing

to split gifts) – subject to certain limitations.• Contributions are generally considered completed gifts for federal gift and estate

tax purposes.• Contributions are generally not included in the Participant’s estate for federal

estate tax purposes.

Portfolio performance information as of June 30, 2010 for those Portfolios in operationas of that date is contained in this Program Description. Updated Portfolioperformance information for all Portfolios will be available on the Program’s Web siteat www.nextgenplan.com. Past Portfolio performance is not indicative of futurePortfolio performance.

• BlackRock Portfolios Performance• Franklin Templeton Portfolio Performance• MFS Portfolio Performance• Principal Plus Portfolio Performance

• State tax treatment varies from state to state.• If Maine is not a Participant’s home state, the Participant should contact his or her

home state’s Section 529 Program to learn more about potential favorable statetax treatment or other benefits offered by such home state for investing in thatstate’s Section 529 Program.

• A tax deduction of $250 per Designated Beneficiary for Contributions to anySection 529 Program by Maine taxpayers.

State tax deduction, Maine Matching Grant Programs, Harold Alfond College ChallengeGrant, Account Maintenance Fee waiver, Maine Administration Fee rebate program, andMaine Scholarship Programs.

Pages24-27

Pages32-37

Pages28-30

Page 46Page 58Page 63Page 67

Pages30-31

Page 30

Page 38

Range of Total Annual Asset-Based Fees*

Client Direct Series Units 0.20% - 0.99%

Fees and Charges

Investment Risks andOther Considerations

Federal Tax Treatment

Portfolio Performance

State Tax Treatment

Maine State TaxTreatment

Special Benefits Availableto Maine Residents

10

KEY TERMS

Note: Other terms are defined elsewhere in this Program Description

“Account” The repository of all Contributions and Units identified by a formal record of transactionswith respect to a particular Participant and Designated Beneficiary.

“Account Application” The Program application which is used to establish an Account.

“Age-Based Diversified A Portfolio for which the assets are invested in a combination of Underlying Funds, basedPortfolio” on the age of the Designated Beneficiary specified for such Portfolio.

"Cash Allocation Account" The Cash Allocation Account is a separate account that seeks current income,preservation of capital and liquidity. This Account is invested directly in a diversifiedportfolio of money market securities and Maine CDs.

“Code” The Internal Revenue Code of 1986, as amended.

“Contribution” The amount contributed to an Account by a Participant or other source.

“Designated Beneficiary” The individual whose Qualified Higher Education Expenses are expected to be paid from theAccount, or if the Participant is a state or local government or qualifying tax-exempt organizationoperating a scholarship program, the recipient of a scholarship paid from the Account.

“Diversified Portfolio” A Portfolio for which assets are invested in one or more Portfolio Investments, inaccordance with a fixed asset allocation specified for such Portfolio.

“Eligible Institutions of Accredited post-secondary educational institutions offering credit toward a bachelor’sHigher Education” degree, an associate’s degree, a graduate level or professional degree, or another

recognized post-secondary credential which are eligible to participate in certain federalstudent financial aid programs. This includes certain proprietary institutions, foreigninstitutions and post-secondary vocational institutions.

“FAME” The Finance Authority of Maine, which is the administrator of the Program.

“FDS” Financial Data Services, Inc., an affiliate of Merrill Lynch, which serves as PortfolioServicing Agent for the Program.

“Investment Fund” The portion of the Program Fund invested in the Portfolio Investments.

“Maine CDs” Certificates of deposit issued by Maine financial institutions.

“Maine Distribution Agent” Participating broker-dealers located in Maine (other than Merrill Lynch) and participatingMaine financial institutions.

“Merrill Lynch” Merrill Lynch, Pierce, Fenner & Smith Incorporated, which serves as Program Manager ofthe Program.

“Participant” The individual or entity establishing an Account or any successor to such individual or entity.

“Participation Agreement” The contract between the Participant and FAME, which establishes the Account and theobligations of FAME and the Participant, as amended.

“Portfolio” One of the NextGen Portfolios established within the Investment Fund to whichContributions may be allocated, and that are invested in Portfolio Investments.

11

KEY TERMS

Note: Other terms are defined elsewhere in this Program Description

“Portfolio Investments” The Underlying Funds and/or the Principal Plus Portfolio Investments, as applicable.

“Principal Plus Portfolio The guaranteed investment contracts issued by one or more insurance companies, investmentsInvestments” in the Cash Allocation Account, corporate fixed-income investments and/or similar instruments.

“Program” The Maine College Savings Program (also known as the NextGen College Investing Plan).As of the date of this Program Description, the Program includes the Client Direct Seriesdescribed in this Program Description and a Client Select Series that is offered throughfinancial advisors and described in a separate program description.

“Program Description” This current NextGen College Investing Plan Client Direct Series Program Description andany effective supplements to it.

“Program Fund” The Maine College Savings Program Fund.

“Program Manager” The company that is responsible for the day-to-day operation of the Program as well asits marketing and distribution. Currently, Merrill Lynch is the Program Manager.

“Qualified Higher Expenses including tuition, fees, and the cost of books, supplies and certain equipmentEducation Expenses” required for the enrollment or attendance of a Designated Beneficiary (including expenses

for special needs services in the case of a special needs beneficiary) at an EligibleInstitution of Higher Education, along with room and board expenses (for students attendingat least half-time, subject to certain limitations under Section 529 of the Code). In calendaryears 2009 and 2010 only, unless extended by Congress, Qualified Higher EducationExpenses also include expenses for the purchase of certain computer technology orequipment (as defined in Section 170(e)(6)(F)(i) of the Code) or Internet access and relatedservices, if such technology, equipment or services are to be used primarily by theDesignated Beneficiary while enrolled at an Eligible Institution of Higher Education.However, expenses for computer technology and equipment do not include expenses forcomputer software designed for sports, games, or hobbies unless the software ispredominantly educational in use.

“Qualified Withdrawals” Withdrawals from an Account that are used to pay the Qualified Higher EducationExpenses of the Designated Beneficiary.

“Section 529 Program” A “qualified tuition program” established under and operated in accordance with Section529 of the Code.

“Single Fund Portfolio” A Portfolio for which assets are invested in one Underlying Fund.

“Sub-Advisor” A registered investment adviser, other than the Program Manager, that recommendsUnderlying Funds and the allocation of such Underlying Funds for one or more Portfolioscomprised of Underlying Funds advised by such investment adviser or any of its affiliates.

“Treasurer” The Treasurer of Maine.

“Underlying Funds” One or more mutual funds, exchange traded funds or separate accounts in which assetsof Portfolios (other than the Principal Plus Portfolio) are invested.

“Units” Interests in a Portfolio that are purchased with Contributions to an Account.

12


13

PARTICIPATION AND ACCOUNTS

PARTICIPATION ANDACCOUNTS

Accounts may be established by a Participant with a valid socialsecurity or taxpayer identification number without regard toresidency, domicile or income level of the Participant orDesignated Beneficiary. A Participant must be at least 18 yearsof age to establish an Account; there is no age restriction for aDesignated Beneficiary.

Establishing an AccountAccount Application – To establish an Account, a Participantmust complete an Account Application and consent and agree tothe terms and conditions of the Participation Agreement. EitherFAME or the Program Manager may require the completion ofcertain other documents for an Account to be established. Thereis no fee or charge for establishing an Account. Accounts will notbe established, orders will not be executed, and the AccountApplication and Contribution amount will be returned if theAccount Application is not complete. Signing an AccountApplication acknowledges receipt of this Program Descriptionand Participation Agreement and acceptance of the terms andconditions of the Participation Agreement. There may be only oneParticipant and one Designated Beneficiary for each Account. ASuccessor Participant (defined below) may be identified for anAccount on the Account Application. There is no limit to thenumber of Accounts that a Participant can open.

Identifying a Designated Beneficiary – On the AccountApplication a Participant (other than a state or local governmentor tax-exempt organization described in section 501(c)(3) of theCode opening a Scholarship Account as described below) mustidentify a Designated Beneficiary whose Qualified HigherEducation Expenses are expected to be paid from the Account.There is no limit on the number of Accounts that can be openedfor the same Designated Beneficiary by a single Participant ordifferent Participants. The Designated Beneficiary may be theParticipant or any other individual. There is no requirement thatthe Participant and Designated Beneficiary be related by blood ormarriage.

Accounts Opened by Trustees, Custodians, Guardians, andConservators – An authorized trustee or custodian must beidentified if Contributions to an Account come from an existingtrust or custodial account. Trustees opening an Account on behalfof a trust must provide representations or documentationconcerning the trustees’ authority or such other matters asrequired by the Program Manager. In addition, guardians andconservators may open an Account provided copies of theapplicable governing documents are acceptable to the ProgramManager.

Powers of Attorney – A Participant may authorize anotherindividual or entity to exercise his or her rights over an Account or

to open an Account through a power of attorney. However, FAME and the Program Manager reserve the right to take instructionsfrom a Participant’s agent only if the Participant is incompetent.A copy of the power of attorney must be presented to theProgram Manager. If applicable, the power of attorney must bedurable, and must include other language acceptable to theProgram Manager including the power to make or revoke gifts.

Scholarship Accounts – Accounts may be established by state orlocal governments or tax-exempt organizations described insection 501(c)(3) of the Code and most types of legal entities,including trusts, whose purposes and powers so permit. As aParticipant, a government or tax-exempt organization mayestablish an Account as part of a scholarship program operated bysuch government or organization (a “Scholarship Account”).Governments and tax-exempt organizations may designate aDiversified Portfolio, Single Fund Portfolio, an Age-BasedDiversified Portfolio or any combination of Portfolios in whichContributions to a Scholarship Account are to be invested.Contributions to such Scholarship Accounts will be permittedeven if they cause the balance of the Account to exceed theProgram’s maximum Contribution limit. Questions regarding theestablishment of Scholarship Accounts should be addressed to theProgram Manager at (877) 4-NEXTGEN (463-9843) or a MaineDistribution Agent.

Selection of Investment Option(s) – Investment option(s) andthe percentage of each Contribution to be allocated to thePortfolio(s) selected must be indicated on the AccountApplication, except as noted in Harold Alfond College ChallengeGrant Investment Option below. The total allocation may notexceed 100%. All subsequent Contributions will be invested inthe selected Portfolio(s) and at the designated allocations until anew designated allocation is selected by the Participant. See“Investment and Account Balances-Investment Changes” forinformation about changing existing investment allocationsand/or changing the investment allocation of future Contributions.

Harold Alfond College Challenge Grant Investment Option –The Harold Alfond College Challenge Grant is further described in“THE PROGRAM AND THE PROGRAM FUND – Special BenefitsAvailable to Maine Residents.” No initial or subsequentContributions are required to obtain this benefit. An AccountApplication submitted for the purpose of obtaining this benefit willbe accepted without investment option(s) selected. However, anyContributions received with such an Account Applicationsubmitted until October 20, 2010, and subsequent Contributions,will be allocated 100% to and invested in the appropriateBlackRock Age-Based Portfolio, unless and until a differentinvestment allocation for existing and/or future Contributions isdirected by the Participant. Any Contributions received with suchan Account Application submitted beginning October 21, 2010,and subsequent Contributions, will be allocated 100% to andinvested in the appropriate BlackRock iShares Age-BasedPortfolio, unless and until a different investment allocation forexisting and/or future Contributions is directed by the Participant.

14


See “Investment and Account Balances – Investment Changes”for information about changing existing investment allocationsand/or changing the investment allocation of future Contributions.

Request for Duplicate Statements – A Participant may identifyan interested party to receive duplicate Account statements. Theinterested party cannot initiate, approve or otherwise authorizeany transactions or changes to the Account.

Personal Information – Establishment of an Account is subject toacceptance by the Program Manager, including the verification of aParticipant’s identity and other information in compliance with therequirements of the USA PATRIOT Act and other applicable law. Ifa Participant does not provide the information as requested on theAccount Application, the Program Manager may refuse to open anAccount for the Participant. If reasonable efforts to verify thisinformation are unsuccessful, the Program Manager may takecertain actions regarding the Account without prior notice to theParticipant, including, among others, rejecting Contributions andwithdrawal and transfer requests, suspending Account services, or closing the Account. Units redeemed as a result of closing anAccount will be valued at the Units’ Net Asset Value next calculatedafter the Program Manager closes the Account. The risk of marketloss, tax implications, and any other expenses, as a result of theliquidation, will be solely the Participant’s responsibility.

ContributionsContributions must be made by personal check, cashier’s checkor money order (collectively, “check”), direct deposit throughpayroll deduction or through an automated method for makingContributions from a bank account through the Program’sAutomated Funding Service (“AFS”). All Contributions must be inU.S. dollars. A Participant will receive statements confirming theinvestment of his or her Contributions (and including such otherinformation as may be required by law).

Contributions by Check• Initial Contributions – A Participant making an initial

Contribution by check must generally include an initialminimum amount of $250 with his or her AccountApplication, and check(s) should be made payable to“NextGen FBO [Name of Designated Beneficiary]”. Aseparate check must be provided for each AccountApplication. The initial minimum amount will be reduced fora Participant receiving a Maine Initial Matching Grant or theHarold Alfond College Challenge Grant. See “THE PROGRAMAND THE PROGRAM FUND-Special Benefits Available toMaine Residents.”

• Subsequent Contributions – A Participant wishing to makesubsequent Contributions by check must contribute aminimum of $50 (and must allocate a minimum of $25 perPortfolio) and check(s) should be made payable to“NextGen FBO [NextGen Account Number]”. A separatecheck must be provided for each Account receiving asubsequent Contribution.

• Where to send Contributions – Participants should mail aninitial or subsequent Contribution(s) by check to MerrillLynch College Plan Services, P.O. Box 1518, Pennington, NJ08534-1518. A Maine resident Participant may also sendan initial or subsequent Contribution(s) by check to FAME.

• Returned Checks – A fee of $20, which may be deductedfrom the Account, is charged for each check returned tothe Program due to insufficient funds in an account onwhich the check is drawn.

Automatic Funds Transfer from Checking/Savings Account• In General – A Participant may authorize the Program Manager

to perform automated, periodic debits to make Contributionsto an Account from a checking or savings account at afinancial institution (including certain accounts held at MerrillLynch). An authorization to perform automated, periodicdeposits will remain in effect until the Program Manager hasreceived notification of its termination. A Participant or theProgram Manager may terminate the enrollment in theProgram’s AFS at any time. Any termination of suchservice initiated by a Participant must be in writing andwill become effective as soon as the Program Managerhas had a reasonable amount of time to act on it. TheProgram does not impose a fee for enrolling in theProgram’s AFS; however, the institution from which thefunds are being debited may charge a fee. Please checkwith the institution.

• Initial Contribution – There is no initial Contribution amountrequired when AFS is established for an Account. Toinitiate this Contribution method, a Participant mustcomplete the AFS section of the Account Application orrequest and complete the Merrill Lynch Automated FundsService Enrollment and Authorization Form.

• Subsequent Contributions – Subsequent automatedContributions must be at least $50 monthly. A Participantelecting to have Contributions invested in more than onePortfolio must allocate a minimum of $25 per Portfolio.

Payroll Deduction• Individuals and employees of employers offering the

Program as an employee benefit may make an automatic,periodic Contribution to Account(s) through Payroll DirectDeposit. No initial Contribution is required when aParticipant chooses to fund an Account through PayrollDirect Deposit. The minimum Contribution through PayrollDirect Deposit is $50 monthly (required minimumallocation of $25 per Portfolio). Employers willing toprocess Payroll Direct Deposit Contributions must be ableto meet the Program Manager’s operational andadministrative requirements. Participants who wish tomake such Contributions should verify with their employerthat the employer is willing to process Contributionsthrough Payroll Direct Deposit.

15


Rollover Contributions• Rollovers from Another State’s Section 529 Program –

Rollover Contributions directly from another Section 529Program to an established Account may be initiated byexecuting the NextGen College Investing Plan Transfer InForm and providing a statement issued by the distributingSection 529 Program that shows the principal andearnings portions of the Contribution.

Rollover Contributions from another Section 529 Programsent directly to a Participant must be accompanied by theNextGen College Investing Plan Incoming Rollover Form(“Incoming Rollover Form”) and a statement issued by thedistributing Section 529 Program that shows the principaland earnings portions of the Contribution.

Rollover Contributions to an Account from another Section529 Program are federal income tax-free only if therollover is into:

• an Account for the same Designated Beneficiary, andthere have been no other Section 529 Program rolloverswithin the immediately preceding 12 months for thesame Designated Beneficiary, or

• an Account for a Designated Beneficiary who is aMember of the Family (defined below) of the DesignatedBeneficiary of the rolled-over account (see “TAXTREATMENT OF INVESTMENTS AND WITHDRAWALS –Federal Taxation of Section 529 Programs – Federal Gift,Estate and Generation – Skipping Transfer Taxes” for adiscussion of possible gift or generation-skippingtransfer tax consequences).

• Rollovers from Coverdell Education Savings Accounts –Coverdell Education Savings Account (“Coverdell ESA”)assets can be rolled over to an Account. In order to takeadvantage of a tax-free rollover from a Coverdell ESA, therollover Contribution must be accompanied by anIncoming Rollover Form. An account statement issued bythe financial institution that acted as trustee or custodianof the Coverdell ESA that shows the principal and earningsportions of the rollover Contribution must also be providedto the Program Manager.

• Rollovers from Qualified U.S. Savings Bonds – Assets investedin certain U.S. savings bonds can be rolled-over to an Account.In order to take advantage of a tax-free rollover in connectionwith the liquidation of Series EE or Series I bonds, the rolloverContribution must be accompanied by an Incoming Rollover

Form. In addition, an account statement or IRS Form 1099-INT issued by the financial institution that redeemed thebonds showing the interest portion of the redemptionproceeds must also be provided to the Program Manager.

• Tax and Other Considerations – Rollovers require theliquidation of assets and the contribution of cash to anAccount. Rollover Contributions to an Account must be madewithin 60 days of the liquidation and withdrawal of suchassets from another account. If the Participant effects aqualifying rollover, the withdrawal from the originating Section529 Program account will not be subject to federal income taxor the 10% additional federal tax on earnings. Until astatement issued by the distributing Section 529 Program,trustee or custodian of the Coverdell ESA or financial institutionthat redeemed the U.S. savings bonds showing the principaland earnings portion of the Contribution is received, theProgram will treat the entire amount of the rolloverContribution as earnings in the receiving Account for taxpurposes. A Participant may be required to provide certaindocumentation to the distributing Section 529 Program.

Maximum Contribution – Currently, Contributions will bepermitted if they do not cause the aggregate balance of allAccounts in the Program for the same Designated Beneficiary(regardless of Participant) to exceed $340,000. FAME expects toadjust the Contribution limit annually, effective on or about January1, but reserves the right to effect adjustments on other dates.

Excess Contributions – The Program Manager may return all orany part of a Contribution or the principal portion of a Contribution,rollover or transfer that exceeds the maximum allowable Contributionlimit (“Excess Contribution”). Excess Contributions may be subject toa penalty imposed by FAME, which may be deducted from theAccount. The maximum allowable Contribution limit is based on theaggregate balance of all Account(s) for the same DesignatedBeneficiary (regardless of Participant), not on the aggregateContributions made to Accounts.

Year-End Contributions – Contributions for any calendar yearmust be received by the Program Manager by 4:00 P.M. EasternLocal Time on the last business day of the year. Contributionspostmarked in a calendar year and received by the ProgramManager in the next calendar year will not be included asContributions in the prior calendar year. Year-end Contributionsreceived by the Program Manager that do not include allnecessary documentation in good order will not be credited to anAccount for that calendar year.

Contribution Method

Check

Automated Funding Serviceor

Payroll Direct Deposit

Minimum InitialContribution

$250*(must allocate a minimum of $25 per Portfolio)

None

Minimum SubsequentContribution

$50(must allocate a minimum of $25 per Portfolio)

$50 monthly(must allocate a minimum of $25 per Portfolio)

* The minimum Contribution may be reduced or waived in certain circumstances.

16


UGMA/UTMA – Custodians under the Uniform Gifts to Minors Actor Uniform Transfers to Minors Act of any state (“UGMA/UTMA”)must execute Account Applications as UGMA/UTMA custodians tocontribute UGMA/UTMA property to the Account. All Contributionsto an Account held by a UGMA/UTMA custodian will be treated bythe Program as being subject to the applicable UGMA/UTMA.Participants who are UGMA/UTMA custodians but also wish toretain control and ownership of other non UGMA/UTMA assets inthe Program, without being subject to the UGMA/UTMA, mustestablish separate Accounts for such non UGMA/UTMA assets.

A Participant maintaining an Account as a UGMA/UTMA custodianmay not change the Designated Beneficiary of the Account, may nottransfer ownership of the Account to anyone other than a successorUGMA/UTMA custodian or the Designated Beneficiary, and mustnotify the Program Manager when a successor UGMA/UTMAcustodian is appointed or when the custodianship terminates underthe UGMA/UTMA (at which time the successor custodian orDesignated Beneficiary will become the Participant of the Account).

Because only cash Contributions to an Account are permitted,UGMA/UTMA assets outside the Program may need to be liquidatedin order to contribute them to an Account, which may have incometax consequences. Also, because the Designated Beneficiary of anAccount under the UGMA/UTMA is the sole beneficial owner of theAccount, any tax consequences associated with the Account,including any withdrawals from the Account, will be imposed on theDesignated Beneficiary (and not the UGMA/UTMA custodian who isthe Participant and legal owner of the Account).

Contribution Policies – Following receipt of Contributions bycheck or by transfer of funds electronically, the Program reservesthe right, subject to applicable law, to not allow withdrawals ofthose funds (or their equivalent) for up to 15 calendar days forchecks, and up to 6 business days for electronic transfers.

A Contribution, rollover or transfer may be refused if FAMEreasonably believes that (i) the purpose is for other than fundingthe Qualified Higher Education Expenses of the DesignatedBeneficiary of an Account, (ii) there appears to be an abuse of theProgram, or (iii) such transaction is unlawful. The Program maynot be able to determine that a specific Contribution, rollover ortransfer is for other than funding the Qualified Higher EducationExpenses of a Designated Beneficiary, abusive or unlawful. TheProgram therefore makes no representation that all suchContributions, rollovers or transfers can or will be rejected.

Ownership of ContributionsUnder Maine law, the Participant retains ownership of all Contributionsmade to an Account and all earnings credited to such Account up tothe date withdrawn for payment of the Designated Beneficiary’sQualified Higher Education Expenses or otherwise transferred tosomeone other than the Participant. Special rules apply to Accountsestablished by UGMA/UTMA custodian Participants. An EligibleInstitution of Higher Education obtains ownership of the amounts

disbursed from an Account to such Institution with respect to theQualified Higher Education Expenses paid to the Institution at the timeeach disbursement is made to the Institution, subject to anyapplicable refund policy or other policies of the Institution. Althoughcontributions under the Maine Matching Grant Program or the MaineFirst Step Grant Program or the Harold Alfond College Challenge Grantmay appear on a Participant’s Account statement and suchcontributions may be included in the Account’s activity or portfoliovalue, they are not considered to be Contributions held in the Account.Contributions under the Maine Matching Grant Program, the MaineFirst Step Grant Program, and the Harold Alfond College ChallengeGrant are not owned by the Participant, and may only be used to paythe Qualified Higher Education Expenses of the DesignatedBeneficiary. See “THE PROGRAM AND THE PROGRAM FUND – SpecialBenefits Available to Maine Residents.”

Any individual or entity may make Contributions to an Account. Onlythe Participant will receive confirmation of Account transactions.Individuals or entities other than the Participant that contribute fundsto an Account will have no subsequent control over thoseContributions. Only the Participant may direct transfers, rollovers,investment changes (as permitted under federal law), withdrawalsand changes in the Participant or Designated Beneficiary.

Change of Designated BeneficiaryGeneral – Section 529 of the Code and the Proposed Regulations(defined on page 32) generally allow for changes of theDesignated Beneficiary without federal income taxconsequences, so long as the new Designated Beneficiary is aMember of the Family (defined below) of the current DesignatedBeneficiary. Special rules apply to Accounts established byUGMA/UTMA custodians. In addition, no federal gift tax or anygeneration-skipping transfer tax will result provided the newDesignated Beneficiary is a Member of the Family of the currentDesignated Beneficiary and is assigned to the same generationas or a higher generation than the current DesignatedBeneficiary. Any change of the Designated Beneficiary to anindividual who is not a Member of the Family of the currentDesignated Beneficiary should be treated as a Non-QualifiedWithdrawal. See “TAX TREATMENT OF INVESTMENTS ANDWITHDRAWALS - Federal Taxation of Section 529 Programs.”

To initiate a change of Designated Beneficiary to a Member of theFamily of the current Designated Beneficiary, the Participant mustcomplete and provide a NextGen College Investing Plan Changeof Designated Beneficiary Form (and any additional requireddocumentation) to the Program Manager. The change will bemade upon the Program Manager’s acceptance and processingof a properly completed form. A Participant also may achieve achange of Designated Beneficiary by transferring part of theassets in an existing Account to another Account for the benefit ofa different Designated Beneficiary. If this is a new Account, thiswill require completion of an Account Application Form as well asa Change of Designated Beneficiary Form. There is no fee orcharge for changing a Designated Beneficiary.

17


A Participant may choose to reinvest amounts currently held in anAccount to any of the available Portfolio(s) when changing theDesignated Beneficiary for an Account. If the Participant’s Accountis currently invested in an Age-Based Diversified Portfolio, theProgram Manager will reinvest such amounts in a new Age-BasedDiversified Portfolio (of Underlying Funds managed by the sameSub-Advisor) based on the age of the new Designated Beneficiary,unless otherwise instructed by the Participant.

Member of the Family – A Member of the Family is theDesignated Beneficiary’s:

• Father or mother, or an ancestor of either;• Son or daughter, or a descendant of either;• Stepfather or stepmother;• Stepson or stepdaughter;• Brother, sister, stepbrother or stepsister;• Brother or sister of the father or mother;• Brother-in-law, sister-in-law, son-in-law, daughter-in-law,

father-in-law or mother-in-law;• Son or daughter of a brother or sister;• Spouse or the spouse of any of the foregoing individuals; or• First cousin.

For purposes of determining who is a “Member of the Family,” alegally adopted child or foster child of an individual is treated asthe child of such individual by blood relationship, and a brother orsister includes a brother or sister by half blood.

Successor ParticipantsDeath or Incapacity – A Participant may designate a successorParticipant (“Successor Participant”). The Successor Participantshall assume all of the rights, title and interest of the currentParticipant with respect to an Account (including the right towithdraw assets from the Account or change the DesignatedBeneficiary) upon the death or incapacity of the currentParticipant. Such designation must be in writing and is noteffective until received by the Program Manager. Special rulesapply to UGMA/UTMA Accounts. The Successor Participant will berequired to provide the Program Manager with a certified copy ofa death certificate in the case of the death of a Participant or anacceptable medical authorization or court order in the case of theincapacity of a Participant and such other information as theProgram Manager requires prior to taking any action regardingthe Account. A designation of a Successor Participant that isexecuted by a Participant prior to his or her death or incapacityand is accepted following the Participant’s death or incapacitywill govern all directions with respect to the Account following(but not prior to) the Program Manager’s acceptance of thedesignation. In the event no Successor Participant is named onthe Account Application or on another form accepted by theProgram Manager, or the named Successor Participantpredeceases the Participant or does not accept ownership of theAccount, the surviving spouse of the Participant, provided he orshe is the natural or adoptive parent of the DesignatedBeneficiary, will become the Participant for the Account. In the

event the surviving spouse is not the natural or adoptive parent ofthe Designated Beneficiary and the Designated Beneficiary is nota minor, the Designated Beneficiary will become the Participantfor the Account. In the event there is no surviving spouse who isa parent of the Designated Beneficiary and the DesignatedBeneficiary is a minor, the Designated Beneficiary’s custodialguardian will become the Participant for the Account. If theDesignated Beneficiary has more than one custodial guardian,the guardian born earlier in the calendar year will become theParticipant for the Account. If the Designated Beneficiarypredeceases the Participant or dies in a manner that it cannot bedetermined who died first, the estate of the DesignatedBeneficiary will become the Participant for the Account.

Lifetime Transfers – A Participant may transfer ownership of anAccount, without penalty, to another individual or entity to be theParticipant in the Program. A transfer of ownership of an Accountdoes not require a change of the Designated Beneficiary. A transferof ownership of an Account will only be effective if it is irrevocableand transfers all rights, title, interest and power over the Account.A transfer of ownership of an Account may have income or gift taxconsequences; contact a tax advisor before transferring ownershipof an Account. To transfer ownership of an Account call theProgram Manager at (877) 4-NEXTGEN (463-9843).

Investment of ContributionsThe Program Manager will generally credit Contributions to anAccount as of the business day received by the ProgramManager. Contributions are invested on the next business dayfollowing the credit of the Contribution to the Account. TheProgram Manager will separately maintain each Account, butContributions to an Account will be commingled withContributions to other Accounts for purposes of investment.

Investment Changes – A Participant may change how previousContributions (and any earnings thereon) have been allocatedamong the available Portfolio options for all Accounts in theProgram for the same Designated Beneficiary once per calendaryear or upon a change of the Designated Beneficiary. However,the investment allocation of future Contributions can be changedat any time. A Participant holding multiple Accounts for the sameDesignated Beneficiary must submit investment changeinstructions, if any, for all such Accounts on the same day, in orderfor all the changes to count as just one investment change (in theaggregate) for these purposes.

Currently, investment change requests must be in writing on anInvestment Change Form; however, the Program Manager maywaive this requirement or provide additional means for providinginvestment change instructions. An investment change will notaffect instructions on how additional Contributions to an Accountshould be allocated. Investment changes may take up to fivebusiness days to process after they are received in good form bythe Program Manager, particularly during periods of marketvolatility and at year-end.

18


Net Asset Value – The Program Manager calculates a Net AssetValue for each Unit of a particular Portfolio, after 4:00 P.M.Eastern Local Time, on each day that the New York StockExchange is open for trading. “Net Asset Value” is computed bydividing the value of each Portfolio Investment held in a Portfolio,plus any receivables and less any liabilities of such Portfolio, bythe number of outstanding Units. The Net Asset Value forpurposes of calculating the investment or reinvestment ofContributions to an Account will be the Net Asset Value calculatedfor the business day on which Contributions are invested orreinvested as described in this Program Description.

Statements and ReportsThe Program Manager will keep accurate and detailed records ofall transactions concerning Accounts and will provide eachParticipant with periodic statements of each Account.

If a Participant does not write to the Program Manager to object toa statement within 60 days after it has been sent to suchParticipant, such Participant will be considered to have approvedit and to have released FAME and the Program Manager from allresponsibility for matters covered by the statement. EachParticipant agrees to provide all information FAME or the ProgramManager may need to comply with any legal requirements.

Other ProvisionsProhibition Against Assignment, Transfer or Pledging asSecurity – Neither an Account nor any portion thereof may beassigned, transferred or pledged as security (including as collateralfor a loan used to make Contributions to the Account) either bythe Participant or the Designated Beneficiary of the Account.

Limitations on Satisfaction of Judgments - Maine Law –Under Maine law, all assets in, or credited to, an Account are notsubject to levy, execution, judgment or other operation of law,garnishment or other judicial enforcement, and such assets arenot an asset or property of either the Participant or theDesignated Beneficiary for purposes of Maine insolvency laws. AParticipant, however, should consult an attorney regarding thepotential treatment of an Account in a specific situation underMaine or other applicable law.

Treatment of Account Assets under Federal Bankruptcy LawFederal bankruptcy law provides that Contributions to an Accountthat are made less than 365 days before the date of the filing ofa bankruptcy petition by a Participant are part of the Participant’sbankruptcy estate, and thus available to creditors.

Contributions to all Accounts for a single Designated Beneficiarymade between 365 days and 720 days before the filing of abankruptcy petition by a Participant are not considered part of theParticipant’s bankruptcy estate to the extent the aggregate of suchContributions does not exceed $5,850, and thus such Contributionsthat do not exceed $5,850 are not generally available to creditors inbankruptcy; provided that (i) such Contributions do not exceed theProgram’s maximum Contribution limit, and (ii) the Designated

Beneficiary of such Accounts is a child, stepchild, grandchild or stepgrandchild of the Participant (a legally adopted child or a foster childof a Participant is treated as a child of such Participant by blood).

All Contributions to all Accounts for a single DesignatedBeneficiary listed in the paragraph above, if made at least 720days before the filing of a bankruptcy petition by a Participant, arenot considered part of the Participant’s bankruptcy estate, andthus are not generally available to creditors in bankruptcy.

A Participant filing a bankruptcy petition must report to the bankruptcycourt any interest that the Participant has in a Section 529 Program.

Account Duration – There is no specific deadline for the use ofassets in an Account to pay for Qualified Higher EducationExpenses. However, FAME reserves the right to establish amaximum duration for an Account.

WithdrawalsIn General – A Participant may direct a withdrawal from anAccount at any time by notifying the Program Manager bytelephone or in writing. Generally, only the Participant of anAccount may direct withdrawals from the Account. The frequencyof withdrawals in a single month may be limited. A minimumwithdrawal amount may also be established.

To request a withdrawal by telephone, a Participant shouldcontact the Program Manager at 1-877-4-NEXTGEN (463-9843).To authorize a withdrawal by telephone, a Participant should havethe following information available: (i) Account number; (ii)amount to be distributed; and (iii) Portfolios to be liquidated.Written requests for withdrawals from an Account must besubmitted on a NextGen College Investing Plan WithdrawalRequest Form; however, the Program Manager may waive thisrequirement or provide additional means for withdrawal requests.

Following the acceptance and processing of a properly completedwithdrawal request by the Program Manager, the proceedsdelivered to the payee will be calculated at the next Net AssetValue for a Unit of a particular Portfolio applicable to a withdrawalcalculated for such Unit of such Portfolio. During periods ofmarket volatility and at year end, withdrawal requests may takeup to five business days to process following receipt of awithdrawal request.

When a withdrawal is processed by check, the check willgenerally be drawn on a bank in New York City, where theProgram Manager’s headquarters are located and where mostsecurities transactions are settled. If a withdrawal is processedby wire transfer, the Program Manager will automatically chargea fee of $30 for this service in addition to the requested amount.This fee may be deducted from the withdrawal proceeds.Alternatively, this fee may be added to the amount requested tobe withdrawn from an Account.

Although a Participant designates the Portfolio(s) from which aparticular withdrawal is made, special rules apply if the dollar

19


amount of the withdrawal request is equal to or greater than themarket value of the Units held in such Portfolio(s). In such cases, theProgram Manager will process the withdrawal request as follows:

1. The Program Manager will sell all of the Units held in thePortfolio(s) selected by the Participant for full withdrawal(starting with the Portfolios with the smallest market value).

2. If the requested withdrawal amount is not satisfied, theProgram Manager will sell Units held in the other Portfolio(s)selected by the Participant starting with the Portfolios with thehighest market value. If the same withdrawal dollar amount isrequested from two or more Portfolios, the Program Managerwill sell Units held in the Portfolio with the highest marketvalue, which could result in full liquidation of all Units in suchPortfolio or a liquidation of Units only in that Portfolio.

3. In order to satisfy adjustments to a withdrawal request (forexample, when the market value of Units has changed betweenthe date of the withdrawal request and the processing date), theProgram Manager will sell Units held in the Portfolio(s) selectedby the Participant for full withdrawal. In order to satisfy anyremaining adjustments, the Program Manager will sell Unitsheld in the other Portfolio(s) selected by the Participant startingwith the Portfolio with the highest market value.

4. If the requested withdrawal amount is not satisfied afterselling all of the Units held in the Portfolio(s) selected by theParticipant, the Program Manager will sell Units in otherPortfolio(s) held in the Participant’s Account starting with thePortfolio with the highest market value.

If the requested withdrawal amount would not be satisfied afterselling all of the Units in all of the Portfolio(s) held in aParticipant’s Account, the withdrawal request will not beprocessed and the Participant will be notified that there areinsufficient assets in the Account to process the withdrawalrequest. If at any point in the process outlined above therequested withdrawal amount is satisfied, no further PortfolioUnits will be sold.

Withdrawal requests generally will not be processed on the sameday that other withdrawal requests, exchanges among Portfoliosor annual Account Maintenance Fee deductions are processed.

Tax Reporting – For purposes of determining whether awithdrawal is taxable and/or subject to the 10% additional federaltax on earnings, the Participant must determine whether thewithdrawal is made for the payment of Qualified Higher EducationExpenses as defined under the Code and/or fits within certainexceptions as discussed below.

On or before January 31 of each calendar year, the Program willsend Form 1099-Q to each distributee for any withdrawals madefrom an Account in the previous calendar year. If a withdrawal ismade payable to the Eligible Institution of Higher Education forthe Designated Beneficiary or directly to the DesignatedBeneficiary, then the Designated Beneficiary is considered the

distributee; for all other distributions, the Participant isconsidered the distributee. Upon receipt of the Form 1099-Q, thetaxpayer will need to determine whether the distributions wereused for Qualified Higher Education Expenses. If so, there isnothing to report; if the distributions were not used exclusively forQualified Higher Education Expenses, then the taxpayer will needto report only the earnings portion of any nonqualifieddistributions on his or her federal income tax forms, and mayincur a 10% additional federal tax on such earnings. See “TAXTREATMENT OF INVESTMENTS AND WITHDRAWALS - FederalTaxation of Section 529 Programs - Contributions, Earnings, andWithdrawals.”

Recordkeeping – Although the Program Manager does notrequire any documentation from a Participant directing awithdrawal from an Account other than a NextGen CollegeInvesting Plan Withdrawal Request Form, distributees shouldretain all receipts for Qualified Higher Education Expenses withtheir other important tax documents. The Program is notresponsible for determining whether a withdrawal is a QualifiedWithdrawal or Non-Qualified Withdrawal (each as defined below).

Qualified WithdrawalsA withdrawal used to pay Qualified Higher Education Expenses isa Qualified Withdrawal.

Qualified Higher Education Expenses – “Qualified HigherEducation Expenses” include:

• tuition, fees and the costs of books, supplies and equipmentrequired for the enrollment or attendance of a DesignatedBeneficiary at an Eligible Institution of Higher Education;

• the actual costs of room and board of a DesignatedBeneficiary living in campus owned or operated housing oran amount equal to the allowance for room and boardincluded in the cost of attendance of the Eligible Institutionof Higher Education incurred while attending on at least ahalf-time basis;

• expenses for special needs services in the case of a specialneeds Designated Beneficiary which are incurred inconnection with enrollment or attendance at an EligibleInstitution of Higher Education; and

• in calendar years 2009 and 2010 only, unless extended byCongress, expenses paid or incurred for the purchase of certaincomputer technology or equipment (as defined in Section170(e)(6)(F)(i) of the Code) or Internet access and relatedservices, if such technology, equipment or services are to beused primarily by the Designated Beneficiary while enrolled atan Eligible Institution of Higher Education. Expenses forcomputer technology and equipment do not include expensesfor computer software designed for sports, games, or hobbiesunless the software is predominantly educational in use.

A Designated Beneficiary will be considered to be enrolled at leasthalf-time if the Designated Beneficiary is enrolled for at least half

20


the full-time academic workload for the course of study theDesignated Beneficiary is pursuing, as determined under thestandards of the Eligible Institution of Higher Education where theDesignated Beneficiary is enrolled. The Institution’s standard for afull-time workload must equal or exceed a standard established bythe U.S. Department of Education under the Higher Education Actof 1965, as amended through June 7, 2001. The DesignatedBeneficiary need not be enrolled on at least a half-time basis to usea Qualified Withdrawal to pay for expenses relating to tuition, fees,books, supplies and equipment or, in the case of a special needsDesignated Beneficiary, expenses for special needs services.

Eligible Institutions of Higher Education – Generally, anaccredited post-secondary educational institution offering credittoward a bachelor’s degree, an associate’s degree, a graduatelevel or professional degree, or another recognized post-secondary credential, including certain proprietary institutions,foreign institutions and post-secondary vocational institutions, isan Eligible Institution of Higher Education provided it is eligible toparticipate in U.S. Department of Education student financialassistance programs.

Non-Qualified Withdrawals and the Additional TaxGeneral – A “Non-Qualified Withdrawal” is any withdrawal froman Account other than a Qualified Withdrawal or a qualifyingrollover. The earnings portion of a Non-Qualified Withdrawal issubject to federal and applicable state income tax and, in mostcases, a 10% additional federal tax on earnings.

Exceptions to the Additional Tax – There is an exception to the10% additional federal tax imposed for any withdrawal onaccount of:

• the death of the Designated Beneficiary if paid to theDesignated Beneficiary’s estate;

• the disability of the Designated Beneficiary within themeaning of section 72(m)(7) of the Code;

• the receipt of a scholarship by the Designated Beneficiary tothe extent the amount withdrawn does not exceed theamount of such scholarship;

• the use of Hope Scholarship tax credits (also known asAmerican Opportunity tax credits for 2009 and 2010) orLifetime Learning tax credits (together “Education TaxCredits”) as allowed under federal income tax law; or

• the attendance of the Designated Beneficiary at certainspecified military academies.

Death of Designated Beneficiary – In the event of the death ofthe Designated Beneficiary, the Participant may exercise one ormore of the following options. The Participant may requestpayment of the Account balance to the Designated Beneficiary’sestate in which case the earnings portion will be subject tofederal income tax and possibly state income tax on the earningsportion of the withdrawal, without imposition of the 10%

additional federal tax on earnings. Alternatively, the Participantcan request the return of the Account balance, the earningsportion of which will be subject to federal income tax and may besubject to a 10% additional federal tax. Another option would beto initiate a change of Designated Beneficiary, as described in“Change of Designated Beneficiary.” Special rules apply toAccounts established by UGMA/UTMA custodians.

Disability of Designated Beneficiary – If the DesignatedBeneficiary becomes disabled within the meaning of section72(m)(7) of the Code, the Participant may exercise one or more ofthe following options. The Participant may request the return ofall or a portion of the Account balance, in which case the earnings portion will be subject to federal income tax and possibly stateincome tax on the earnings portion of the withdrawal, withoutimposition of the 10% additional federal tax. Alternatively, theParticipant may initiate a change of Designated Beneficiary, asdescribed in “Change of Designated Beneficiary.” Special rulesapply to Accounts established by UGMA/UTMA custodians.

Receipt of Scholarship – If the Designated Beneficiary receivesa qualified scholarship, Account funds up to the amount of thescholarship can be withdrawn by the Participant, subject tofederal income tax and possibly state income tax on the earnings portion of the withdrawal, without imposition of the 10% additional federal tax. Special rules apply to Accountsestablished by UGMA/UTMA custodians. Under the ProposedRegulations, a qualified scholarship includes certain educationalassistance allowances under federal law and certain paymentsfor educational expenses, or attributable to attendance at certaineducational institutions, that are exempt from federal income tax.You should consult a qualified tax advisor to determine whether aparticular payment or benefit constitutes a qualified scholarship.

Attendance at Certain Specified Military Academies – If theDesignated Beneficiary attends the United States MilitaryAcademy, the United States Naval Academy, the United States AirForce Academy, the United States Coast Guard Academy, or theUnited States Merchant Marine Academy, Account funds may bewithdrawn, subject to federal income tax and possibly stateincome tax on the earnings portion of the withdrawal, withoutimposition of the 10% additional federal tax on earnings to theextent the withdrawal does not exceed the costs of qualifyingexpenses attributable to such attendance.

Qualifying Rollovers to Other Section 529ProgramsRequests for withdrawals from an Account for the purpose of arollover to an account in another Section 529 Program must besubmitted on a NextGen College Investing Plan WithdrawalRequest Form. If the Participant effects a qualifying rollover, thewithdrawal will not be subject to federal income tax or the 10% additional federal tax on earnings if properlycompleted. Special rules apply to Accounts established byUGMA/UTMA custodians.

21

THE NEXTGEN PORTFOLIOS

Residual Account Balances and TerminationResidual Account Balances – If the Designated Beneficiarygraduates from an Eligible Institution of Higher Education, orchooses not to pursue higher education, and funds remain in anAccount, the Participant has three options. First, the Participantmay request that all or any portion of the remaining funds bewithdrawn and paid (less any fees and expenses) to either theParticipant or the Designated Beneficiary. This withdrawal maybe treated as a Non-Qualified Withdrawal (subject to federal andany applicable state income tax, and possibly the 10% additionalfederal tax, on earnings). Second, the Participant may authorize achange of Designated Beneficiary for the remaining funds in theAccount. See “Change of Designated Beneficiary.” Special rulesapply to Accounts established by UGMA/UTMA custodians. Third,the Participant may keep the funds in the Account to pay futureQualified Higher Education Expenses, such as graduate orprofessional school expenses, of the Designated Beneficiary.

Termination – The Participant may at any time close an Accountby providing a NextGen College Investing Plan Withdrawal RequestForm to the Program Manager, requesting that all the remainingfunds be withdrawn and paid (less any fees and expenses) toeither the Participant or the Designated Beneficiary. Thiswithdrawal may be treated as a Non-Qualified Withdrawal (subjectto federal and any applicable state income tax, and possibly the10% additional federal tax, on earnings). FAME may terminate anAccount at any time and for any reason, including if it determinesthat: (i) the Designated Beneficiary of an Account does not attendan Eligible Institution of Higher Education; (ii) a Participant haschanged Designated Beneficiaries of an Account primarily to avoidor significantly defer federal or state income tax; or (iii) the assetsin an Account are too small to be economically administered.Upon termination of an Account by FAME, the Program Managershall liquidate the investments in the Account and distribute thebalance to the Participant, less any fees and expenses. Thiswithdrawal may be treated as a Non-Qualified Withdrawal (subjectto federal and any applicable state income tax and possibly the10% additional federal tax on earnings).

Community PropertyA resident of a state that has a community property law shouldconsult his or her legal advisor for advice concerning theapplication of that law with respect to Accounts and relatedContributions to and withdrawals from Accounts. Communityproperty issues are beyond the scope of this Program Description.

Penalties for MisrepresentationsIn the event a Participant makes any material misrepresentations orprovides any erroneous information in any communication with FAMEor the Program Manager, including, without limitation, on the AccountApplication or any Account maintenance and servicing form, FAMEmay terminate a Participant’s Account and charge fees or expenses inaddition to a 15% penalty on the investment earnings of the Account.


Contributions made to an Account on behalf of a DesignatedBeneficiary are invested in one or more Portfolios based on anelection on the Account Application (or any change to suchelection) made by a Participant. Assets of Portfolios are theninvested in one or more Portfolio Investments recommended bythe Program Manager or a Sub-Advisor that reflect theinvestment strategies of the respective Portfolios, which FAMEreviews and approves. There is no assurance that the strategy ofany Portfolio will be successful. Participation in the Program is notconsidered to be part of an investment advisory service.Accordingly, the Participant will be responsible for monitoring andmaking investment decisions concerning his or her Account.

A Participant should consider which investment options are mostappropriate given the other resources expected to be available tofund the Designated Beneficiary’s Qualified Higher EducationExpenses, the age of the Designated Beneficiary, and theanticipated date of first use of funds in the Account for theDesignated Beneficiary. A Participant should also consider thelimited ability to change investment options for Contributions (andany earnings thereon) that have already been invested in anAccount.

Portfolios generally invest in one or more mutual funds, exchangetraded funds or separate accounts managed by one of the ClientDirect Series three Sub-Advisors: BlackRock InvestmentManagement, LLC, or its affiliates (“BlackRock”), MassachusettsFinancial Services Company (“MFS”), and Franklin TempletonInvestments (“Franklin Templeton”). The Principal Plus Portfoliowill invest in one or more guaranteed investment contracts issuedby one or more insurance companies, the Cash Allocation Account,corporate fixed-income investments and/or similar instruments.

Investment OptionsThe Client Direct Series currently consists of two Age-BasedDiversified Portfolios, five Diversified Portfolio options, one SingleFund Portfolio, and a Principal Plus Portfolio. A Participant maychoose from among one or more of the Portfolios. None of thePortfolios has been designed to provide any particular total returnover any particular time period or investment horizon.

Age-Based Diversified Portfolios – The Age-Based DiversifiedPortfolios are invested in a manner that seeks to balance risk andexpected returns of the Underlying Funds with the time periodsremaining until a typical Designated Beneficiary is expected toneed assets for Qualified Higher Education Expenses. The Age-Based Diversified Portfolios for the benefit of younger DesignatedBeneficiaries (for example, the BlackRock Age-Based 0-7 YearsPortfolio) generally are more heavily invested in Underlying Fundsthat invest in equity securities, while Age-Based DiversifiedPortfolios for older Designated Beneficiaries (for example, the

22


BlackRock Age-Based 20+ Years Portfolio) generally are moreheavily invested in Underlying Funds that invest in fixed incomesecurities, including money market securities. Please note thatthe age ranges in the names of the Age-Based DiversifiedPortfolios indicate the ages of the Designated Beneficiaries forwhom such Portfolios may be appropriate; they do not refer to thenumber of years remaining until a typical Designated Beneficiaryis expected to need such assets for Qualified Higher EducationExpenses. There is no guarantee that investing in the Age-BasedDiversified Portfolios will ensure investment gain, or protectagainst investment losses over time. For a description of thecurrent Underlying Funds in each respective Age-BasedDiversified Portfolio, see “NEXTGEN PORTFOLIOS-PERFORMANCEAND INVESTMENTS.”

If the Designated Beneficiary is likely to need Portfolio assets atan earlier or later date than a typical Designated Beneficiary isexpected to need Portfolio assets, you may want to considerwhether the Age-Based Diversified Portfolios are appropriate foryour Designated Beneficiary.

Diversified Portfolios – The Diversified Portfolios are invested ina combination of Portfolio Investments that is consistent with thesector allocation of each Portfolio. Within the equity securitiessegment of a Diversified Portfolio, if any, investments will beallocated among Portfolio Investments investing in domesticequity and international equity investments. Within the fixedincome segment of a Diversified Portfolio, if any, investments willbe allocated among Portfolio Investments investing in investmentgrade debt, non-investment grade debt and money marketsecurities. Certain Diversified Portfolios invest a segment of theirassets in an Underlying Fund that invests primarily in Real EstateInvestment Trusts. For a description of the current PortfolioInvestments in each respective Diversified Portfolio, see“NEXTGEN PORTFOLIOS-PERFORMANCE AND INVESTMENTS.”

Single Fund Portfolio – The Single Fund Portfolio is invested inonly one Underlying Fund. For a description of the currentPortfolio Investment in the Single Fund Portfolio, see “NEXTGENPORTFOLIOS-PERFORMANCE AND INVESTMENTS.”

Principal Plus Portfolio – Prior to November 20, 2010, thePrincipal Plus Portfolio is expected to invest exclusively in asingle guaranteed investment contract (“GIC”) issued by aninsurance company. Thereafter, the Principal Plus Portfolioexpects to begin allocating a portion of its assets to the CashAllocation Account, although the Principal Plus Portfolio retainsthe ability to invest in one or more other GICs issued by otherinsurance companies, corporate fixed-income investmentsand/or similar instruments.

A Participant may choose to invest new Contributions in any ofthe investment options, but may only change how previousContributions (and any earnings thereon) have been allocatedamong the available Portfolio options for all Accounts for thesame Designated Beneficiary once per calendar year or upon achange of the Designated Beneficiary. Portfolios may merge,

terminate, reorganize or cease accepting new Contributions. See“PROGRAM AND PORTFOLIO RISKS AND OTHERCONSIDERATIONS – Program and Portfolio Risks and OtherConsiderations – Limitations on Investment Direction.”

For more details concerning each Age-Based Diversified Portfolio,Diversified Portfolio, Single Fund Portfolio and Principal PlusPortfolio, see “NEXTGEN PORTFOLIOS-PERFORMANCE ANDINVESTMENTS.”

Portfolio SeriesA particular NextGen Series may not offer some or all Portfoliosavailable through the other Series. Although each of the Seriesmay offer the same Portfolios, expenses associated with theClient Select Series may be higher than those associated with theClient Direct Series. The Client Select Series is available bycontacting a Merrill Lynch Financial Advisor, or through certainMaine Distribution Agents.

Each Series may be offered through additional or differentdistribution channels, as determined by FAME and the ProgramManager.

Portfolio AllocationsFAME is responsible for structuring the Portfolios, the assets ofwhich are part of the Investment Fund. The Program Manager ora Sub-Advisor provides recommendations as to both theinvestment sectors in which assets of each Portfolio are allocatedand the specific Portfolio Investments for each such sector ofeach Portfolio. For this purpose, the investment sectors are:domestic equity, international equity, investment grade debt, non-investment grade debt and money market securities. TheProgram Manager or a Sub-Advisor may recommend a PortfolioInvestment with a global investment objective for use in theinternational equity investment sector. In accordance with theinvestment strategies described in this Program Description,certain Portfolios may only be invested in one or a limited numberof specific sectors.

Under the Program Management Agreement, FAME may: (i)approve any proposed sector allocation or combination ofPortfolio Investments recommended by the Program Manager ora Sub-Advisor; (ii) request that the Program Manager or a Sub-Advisor deliver a revised proposed sector allocation or a differentcombination of proposed Portfolio Investments; or (iii) object toany proposed sector allocation or combination of PortfolioInvestments. In the event that the Program Manager or a Sub-Advisor and FAME disagree as to any proposed sector allocationor a combination of Portfolio Investments, the parties mustmutually agree upon a third party arbiter who shall recommend a proposed sector allocation or a combination of PortfolioInvestments. Unless FAME objects to the arbiter’srecommendation of sector allocations or Portfolio Investments,such recommendations will become the approved allocation orapproved Portfolio Investments. If FAME objects to the arbiter’s

23


recommendation, FAME will determine the sector allocations orcombination of Portfolio Investments.

It is anticipated that the sector allocations and combination ofPortfolio Investments will be reviewed annually and may changefrom year to year. In particular, the current target Underlying Fundallocation and current target asset allocation may be changed atany time. The Program Manager or a Sub-Advisor may from timeto time recommend a revised sector allocation or a revisedcombination of Portfolio Investments. FAME will determinewhether to approve any such recommendation. It is anticipatedthat Portfolios will be re-balanced to reflect each new allocation.

Portfolio InvestmentsUnderlying Funds – The assets of each Portfolio are invested inUnderlying Funds in accordance with the sector allocation andUnderlying Fund determinations made by FAME.

Under the terms of the Program Management Agreement andSub-Advisory Agreements, the Underlying Funds proposed by theProgram Manager or any Sub-Advisor for the Investment Fundare expected to be mutual funds, exchange traded funds orseparate accounts managed by a Sub-Advisor. See “THEPROGRAM MANAGEMENT AGREEMENT.” FAME may selectUnderlying Funds that are not managed by a Sub-Advisor if thereare no available Underlying Funds managed by a Sub-Advisorwithin a particular investment sector that meet certainperformance standards set forth in the Program ManagementAgreement.

FAME has approved one Underlying Fund, the Cash AllocationAccount, for the Principal Plus Portfolio, as well as Portfoliosinvesting in cash equivalent securities. The assets of the CashAllocation Account are invested in a diversified portfolio of money

market securities and Maine CDs. BlackRock is responsible forthe selection and management of the money market securities inthe Cash Allocation Account, other than Maine CDs. TheTreasurer will select the financial institutions from which anyMaine CDs are purchased and is responsible for ensuring thatany Maine CDs are insured by the Federal Deposit InsuranceCorporation or are fully collateralized. The Treasurer will alsodetermine the percentage of the assets of the Cash AllocationAccount that is invested in Maine CDs. Currently, it is anticipatedthat a maximum of 10 percent (10%) of the assets of the CashAllocation Account will be invested in Maine CDs. The CashAllocation Account is not a registered mutual fund.

Principal Plus Portfolio Investments – The assets of thePrincipal Plus Portfolio are invested in Principal Plus PortfolioInvestments selected by FAME. Prior to November 20, 2010, thePrincipal Plus Portfolio is expected to invest exclusively in a singleguaranteed investment contract (“GIC”) issued by an insurancecompany. Thereafter, the Principal Plus Portfolio expects to beginallocating a portion of its assets to the Cash Allocation Account,although the Principal Plus Portfolio retains the ability to invest inone or more other GICs issued by other insurance companies,corporate fixed-income investments and/or similar instruments.The Program Manager provides administrative services withrespect to the Principal Plus Portfolio and performs creditanalyses on the issuers of GICs.

Portfolio SelectionA Participant may select one or more Age-Based DiversifiedPortfolio, Diversified Portfolio, Single Fund Portfolio or PrincipalPlus Portfolio investment options for Contributions made to his orher Account(s). For more information about the Portfolio optionscurrently available, see “NEXTGEN PORTFOLIOS-PERFORMANCEAND INVESTMENTS.”

Age-Based Diversified Portfolios

BlackRock Age-Based Portfolios

iShares Age-Based Portfolios

Diversified Portfolios

BlackRock 100% Equity Portfolio

iShares Diversified Equity PortfolioiShares Diversified Fixed Income PortfolioFranklin Templeton Balanced PortfolioMFS Fixed Income Portfolio

Single Fund Portfolio

BlackRock Equity Index Portfolio

Principal Plus Portfolio

Principal Plus Portfolio

24

PROGRAM FEES AND EXPENSES


Each Account bears certain on-going Portfolio fees, which arecharged against the assets of the Portfolios, to provide for thecosts associated with the distribution, servicing andadministration of the Account. These Portfolio fees will reducethe value of the Account as they are incurred. Shares ofUnderlying Funds held by a Portfolio may be liquidated to payPortfolio fees charged to the Portfolio. Accounts also willindirectly bear the fees and expenses, if any, of the PortfolioInvestments in which the Portfolios invest. In addition to thesefees and expenses, certain Accounts will bear an annualAccount Maintenance Fee of $25 (the “Account MaintenanceFee”), which may be waived in certain circumstances, andwhole or fractional Units in the Accounts may be liquidated topay the annual Account Maintenance Fee.

The Portfolio fees and expenses described below are subject tochange from time to time.

Portfolio Investment Fees and ExpensesEach Portfolio indirectly bears its proportional share of the feesand expenses incurred by the Portfolio Investments in which itinvests. Accordingly, each Portfolio’s investment return will benet of both the fees and expenses of the Portfolio Investmentsand the Portfolio fees described herein.

Annual Asset-Based and Other FeesUnderlying Fund Expenses – All Portfolios (except the PrincipalPlus Portfolio, which does not invest in mutual funds, and theiShares Age-Based Portfolios, the iShares Diversified EquityPortfolio and the iShares Diversified Fixed Income Portfolio, whichinvest in Underlying Funds that are exchange traded funds) investin the Institutional Class shares of their Underlying Funds. ForPortfolios that invest in more than one Underlying Fund, theUnderlying Fund expenses are based on a weighted average ofeach Underlying Fund’s expense ratio that corresponds to thePortfolio’s target asset allocation. Each Portfolio’s target assetallocation for Portfolio Investments is effective as of the ProgramDescription date, and each Portfolio’s fees and expenses arebased on the most recent fiscal year reported upon in theUnderlying Fund(s) most recent prospectus as of June 30, 2010.

Management and Portfolio Servicing Fees – Merrill Lynch isentitled to receive a management fee for acting as ProgramManager (the “Management Fee”). FDS is entitled to receive aportfolio servicing fee for acting as Portfolio Servicing Agent tothe Program (the “Portfolio Servicing Fee”). In addition, FAMEreceives an administration fee for acting as administrator of theProgram (the "Maine Administration Fee"). Currently, the MaineAdministration Fee is only assessed on certain Portfolios. TheProgram Manager may also receive compensation from Sub-Advisors or from Portfolio Investments.

Annual Account Maintenance Fee and Other Fees – There is a$25 annual Account Maintenance Fee, waived under certaincircumstances described below. For purposes of calculating theAccount Maintenance Fee, a “fee year” is used. Each fee yearbegins on the first day of the calendar quarter in which theAccount is established and ends on the day before theanniversary of that date. For example, if the Account isestablished on April 14, the fee year would begin on April 1 andend on March 31. The Account Maintenance Fee is chargedapproximately 30 days after the end of the fee year.

The Account Maintenance Fee may be waived for certainAccounts, including: (i) all Accounts established where either theParticipant or the Designated Beneficiary is a resident of Maine;(ii) if total Contributions to the Account made during a fee year areat least $2,500; or (iii) the value of the Account at the end of a feeyear is at least $20,000. The Account Maintenance Fee may bewaived or reduced in other instances as determined by theProgram Manager.

If an Account that is subject to an Account Maintenance Fee isclosed or transferred before the Account Maintenance Fee ischarged, the Account Maintenance Fee for such year will be$6.25 for each whole or partial calendar quarter of the final feeyear. When the fees described in this paragraph are charged andan Account holds Units of more than one Portfolio, the largestPortfolio position, based on dollar value, will be liquidated first.Accounts with $25 or less will be closed to pay the AccountMaintenance Fee. See “PARTICIPATION AND ACCOUNTS-Contributions-Deposits by Check-Returned Checks” and“PARTICIPATION AND ACCOUNTS-Withdrawals-In General.”

Account Maintenance Fee $25

Non-Sufficient Funds Fee $20

Wire Transfer Fee $30


25


Portfolios incur the following Annual Asset-Based Fees2

Unless waived, a $25 Annual Account Maintenance Fee Applies1

SalesCharges

PortfolioServicing Fee

Total AnnualAsset-Based

Fees6

MaineAdministration

Fee5

AdditionalInvestor Expenses

ManagementFee4

EstimatedUnderlying

Fund Expenses3

BlackRock PortfoliosBlackRock Age-Based 0-7 Years Portfolio 0.75% 0.10% 0.10% N/A 0.95% noneBlackRock Age-Based 8-10 Years Portfolio 0.68% 0.10% 0.10% N/A 0.88% noneBlackRock Age-Based 11-13 Years Portfolio 0.56% 0.10% 0.10% N/A 0.76% noneBlackRock Age-Based 14-16 Years Portfolio 0.45% 0.10% 0.10% N/A 0.65% noneBlackRock Age-Based 17-19 Years Portfolio 0.65% 0.10% 0.10% N/A 0.85% noneBlackRock Age-Based 20+ Years Portfolio 0.50% 0.10% 0.10% N/A 0.70% noneBlackRock 100% Equity Portfolio 0.79% 0.10% 0.10% N/A 0.99% noneBlackRock Equity Index Portfolio 0.35% 0.07% 0.00% N/A 0.42% noneiShares Age-Based 0-7 Years Portfolio 0.24% 0.21% 0.10% 0.05% 0.60% noneiShares Age-Based 8-10 Years Portfolio 0.24% 0.21% 0.10% 0.05% 0.60% noneiShares Age-Based 11-13 Years Portfolio 0.24% 0.21% 0.10% 0.05% 0.60% noneiShares Age-Based 14-16 Years Portfolio 0.24% 0.21% 0.10% 0.05% 0.60% noneiShares Age-Based 17-19 Years Portfolio 0.20% 0.21% 0.10% 0.05% 0.56% noneiShares Age-Based 20+ Years Portfolio 0.16% 0.21% 0.10% 0.05% 0.52% noneiShares DiversifiedEquity Portfolio 0.23% 0.21% 0.10% 0.05% 0.59% noneiShares DiversifiedFixed Income Portfolio 0.26% 0.21% 0.10% 0.05% 0.62% none

Franklin Templeton PortfolioFranklin Templeton Balanced Portfolio 0.74% 0.10% 0.10% N/A 0.94% none

MFS PortfolioMFS Fixed Income Portfolio 0.70% 0.10% 0.10% N/A 0.90% none

Principal Plus PortfolioPrincipal Plus Portfolio 0.00% 0.10% 0.10% N/A 0.20% none

1 This fee may be waived in certain circumstances.2 Expressed as an annual percentage of the average daily net assets of each Portfolio.3 For Portfolios that invest in more than one Underlying Fund, the Underlying Fund fees and expenses are based on a weighted average of each Underlying Fund’s

expense ratio that corresponds to the Portfolio’s target asset allocation. Each Portfolio’s target asset allocation for Portfolio Investments is effective as of theProgram Description date, and each Portfolio’s fees and expenses are based on the Underlying Fund’s or Funds’ most recent prospectus as of June 30, 2010.Underlying Fund fee and expense information may change from time to time. Updated expense information, if any, will be available on the Internet atwww.nextgenplan.com or from the Program Manager by calling (877) 4-NEXTGEN (463-9843).

4 The Management Fee for any Portfolio may be voluntarily reduced at any time on a temporary or permanent basis by the Program Manager.5 FAME expects to provide a rebate approximately equal to the Maine Administration Fee for all Accounts with Maine Participants or Maine Designated Beneficiaries

with a minimum aggregate balance of $1,000 at the end of the calendar year.6 Annual Asset-Based Fees are subject to change at any time, and are assessed against assets over the course of the year and do not include sales charges or the annual Account

Maintenance Fee. See “Investment Cost Charts” on page 31 for the approximate cost of investing in the Program’s Portfolios over 1-, 3-, 5- and 10-year periods.

26


Adjustment of Management FeeIf FAME exercises its rights in any Program year (July 1 – June30) to approve a combination of Portfolio Investments (the“Approved Portfolio Investments”) for a Portfolio that is differentthan the combination of Portfolio Investments proposed by theProgram Manager (the “Proposed Portfolio Investments”), theManagement Fee payable during the next Program year withrespect to such Portfolio may be adjusted either (i) downwards bythe amount that the aggregate expense ratio of the ApprovedPortfolio Investments exceeds the aggregate expense ratio of theProposed Portfolio Investments, but not in excess of 0.21%, or (ii)upwards by the amount that the aggregate expense ratio of theProposed Portfolio Investments exceeds the aggregate expenseratio of the Approved Portfolio Investments, but not in excess of0.21%.

Other CompensationFAME and the Treasurer have authorized the Program Managerand/or its affiliates, with the prior notice to each of FAME and theTreasurer, to receive certain payments from the Sub-Advisors orfrom Portfolio Investments or the providers of the Principal PlusPortfolio Investments for a variety of services with respect toProgram assets invested in the Underlying Funds or Principal PlusPortfolio Investments. The Program Manager provides varioussub-transfer agency and other related administrative serviceswith respect to Underlying Funds positions. These servicesinclude, for example, processing purchases, redemptions, andexchanges, dividend reinvestments, consolidated statements, taxreporting, and other recordkeeping. The Program Manager alsoprovides a variety of marketing services and other support toSub-Advisors. These services include, but are not limited to,review and implementation of features of Underlying Funds;strategic planning support to assist Sub-Advisors; makingavailable employees for education regarding Underlying Funds;sales related reports and other information. In consideration forthese services, the Program Manager receives compensationfrom Sub-Advisors, Portfolio Investments or the providers of thePrincipal Plus Portfolio Investments of up to 0.30% of the averageannual amount invested by the Portfolios in the PortfolioInvestments. Because different Sub-Advisors and PortfolioInvestments may be subject to different fee arrangements, theProgram Manager has agreed to advise FAME and the Treasurerin writing of each specific fee arrangement prior to the initiationor amendment thereof and to provide FAME and the Treasurerwith such additional information as either may reasonablyrequest with respect to any such arrangement.

Investment Cost ChartsThe following table compares the approximate costs of investingin the Client Direct Series Portfolios (other than the Principal PlusPortfolio). As a result of changes in fees and expenses over time,a Participant’s actual cost may be higher or lower.

The following table is based on the following assumptions:

• A $10,000 Contribution invested for the time periodsshown.

• Reflects Portfolio Fees and the Underlying Fundexpenses.

• A 5% annually compounded rate of return on the netamount invested throughout the time periods shown.

• The fees and expenses described in this ProgramDescription apply for all periods shown.

• The $25 annual Account Maintenance Fee is notincluded.

• All Units are redeemed at the end of the period shownfor Qualified Higher Education Expenses (this tabledoes not consider the impact of any potential state orfederal taxes on the redemption).

27


Client Direct Series Portfolios 1 Year 3 Years 5 Years 10 Years

BlackRock Portfolios

BlackRock Age-Based 0-7 Years Portfolio $100 $311 $539 $1,195


BlackRock Age-Based 11-13 Years Portfolio $79 $248 $432 $963

BlackRock Age-Based 14-16 Years Portfolio $68 $213 $371 $830


BlackRock Age-Based 20+ Years Portfolio $74 $231 $402 $898

BlackRock 100% Equity Portfolio $104 $325 $564 $1,250

BlackRock Equity Index Portfolio $44 $138 $242 $543

iShares Age-Based 0-7 Years Portfolio $63 $128 $196 $267





iShares Age-Based 20+ Years Portfolio $55 $112 $172 $234

iShares Diversified Equity Portfolio $62 $127 $194 $265

iShares Diversified Fixed Income Portfolio $65 $132 $203 $276

Franklin Templeton Portfolio

Franklin Templeton Balanced Portfolio $99 $309 $537 $1,191

MFS Portfolio

MFS Fixed Income Portfolio $95 $295 $513 $1,139

Cost of a $10,000 Contribution:

Cost Example – Principal Plus PortfolioThe following table shows the approximate costs of investing inthe Principal Plus Portfolio. A Participant’s actual cost may behigher or lower. The following table is based on the followingassumptions:

• A $10,000 Contribution invested for the time periods shown.

• Reflects Portfolio Fees.

• A 3.00% annually compounded rate of return on the netamount invested throughout each period shown.

• The fees and expenses described in this Program Descriptionapply for all periods shown.

• The $25 annual Account Maintenance Fee is not included.• All Units are redeemed at the end of the period shown for Qualified

Higher Education Expenses (this table does not consider theimpact of any potential state or federal taxes on the redemption).

Client Direct Series 1 Year 3 Years 5 Years 10 YearsPrincipal Plus Portfolio $21 $64 $109 $234

Cost of a $10,000 Contribution:

Exchanges of Existing Account Assets to Another PortfolioCurrent Account assets may be reallocated once each calendar year or upon a change of the Designated Beneficiary. Client Direct SeriesUnits may only be exchanged for Client Direct Series Units in another Portfolio.

28

TAX TREATMENT OF INVESTMENTS AND WITHDRAWALS

TAX TREATMENT OFINVESTMENTS AND

WITHDRAWALS

This Program Description (i) is not intended as individual taxadvice to any person (including any Participant orDesignated Beneficiary), (ii) is provided as generalinformation in connection with the promotion or marketingof the Program and (iii) is not provided or intended to beused, and cannot be used, by any taxpayer, for the purposeof avoiding U.S. tax penalties. A taxpayer should seek advicebased on the taxpayer’s particular circumstances from anindependent tax advisor.

GeneralThe following discussion is a summary of certain aspects offederal and state income taxation and federal and state estateand gift taxation relating to contributions to and withdrawals fromSection 529 Programs. It is not exhaustive and is not intended astax advice. The federal and state tax consequences associatedwith an investment in the Program are complex, and a Participantshould consult a tax advisor regarding the application of thepertinent tax rules to his or her particular circumstances.

The IRS issued Proposed Regulations on August 24, 1998 (the“Proposed Regulations”), which will remain pending untilwithdrawn or until final regulations are issued under Section 529of the Code. The Program as described in this ProgramDescription and Participation Agreement has been designed tocomply with Section 529 of the Code and the ProposedRegulations (to the extent not inconsistent with subsequent taxlegislation and guidance from the IRS). The preamble thataccompanied the Proposed Regulations states that taxpayers mayrely on the Proposed Regulations. However, the ProposedRegulations do not reflect significant changes made to Section529 of the Code since their issuance and subsequent guidancefrom the IRS on Section 529 Programs. Consequently, it is notlikely that the Proposed Regulations will be issued as finalregulations in their current form. It is not possible to predict theeffect of amendment or withdrawal of the Proposed Regulationsupon the Program or when final regulations may be issued. OnJanuary 18, 2008, the IRS issued an Advance Notice of ProposedRulemaking with respect to Section 529 of the Code. However,this Advance Notice did not specify when final regulations wouldbe issued or provide new separate guidance from the IRS.

FAME has received a private letter ruling from the IRS that theProgram is a qualified tuition program and exempt from federalincome tax under Section 529 of the Code. (A copy of the letterruling may be obtained on the Program’s Web site atwww.nextgenplan.com.) The ruling expressly states that finalregulations have not been issued under Section 529 and thatsuch regulations, when issued, could affect the validity of theruling. If necessary, FAME and the Program Manager intend to

modify the Program within the constraints of applicable law toenable the Program to continue to meet the requirements ofSection 529 of the Code.

Federal Taxation of Section 529 ProgramsThe following discussion is based on the Code, ProposedRegulations, IRS published guidance and interpretations ofapplicable federal and Maine law existing on the date of thisProgram Description and Participation Agreement. It is possiblethat Congress, the Treasury Department, the IRS, or the courtsmay take actions that will affect the Code and ProposedRegulations and interpretations thereof. FAME and the ProgramManager intend to modify the Program from time to time withinthe constraints of applicable law to enable the Program tocontinue to meet the requirements of Section 529 of the Code. Inthe event that the Program, as currently structured or assubsequently modified, does not meet the requirements ofSection 529 of the Code for any reason, the tax consequences toParticipants and Designated Beneficiaries will differ from thosedescribed below. Future state legislation may likewise affect thestate tax treatment of Participants and Designated Beneficiariesin connection with the Program. See “Taxation by Other States.”

Contributions, Earnings and Withdrawals – Contributions toSection 529 Programs are not deductible for federal income taxpurposes. Earnings that accumulate in an account and are notwithdrawn are not subject to federal income tax. In addition,earnings on contributions are not subject to federal income tax tothe extent that they are withdrawn from an account and used forQualified Higher Education Expenses of the designatedbeneficiary.

While qualified withdrawals are exempt from federal income tax,the earnings portion of non-qualified withdrawals will generallybe subject to federal income tax and a 10% additional federal taxon earnings. If the amount withdrawn exceeds the designatedbeneficiary’s Qualified Higher Education Expenses, the amountincludible as ordinary income in computing the distributee’sfederal taxable income is the earnings portion of the withdrawalreduced by an amount which bears the same ratio to the earningsportion of the amount withdrawn as the designated beneficiary’sQualified Higher Education Expenses paid by the withdrawal fromthe account bears to the amount of such withdrawal.

Withdrawals not used for Qualified Higher Education Expensesconsist of two parts for federal income tax purposes. A part of thewithdrawal will be treated as a non-taxable return of principaland the remainder will be treated as a taxable withdrawal ofearnings. The earnings portion of a withdrawal will be treated asincome to the individual who is considered to have received thedistribution. A 10% additional federal tax also will be imposed onthe earnings portion of the non-qualified withdrawal; however,there are certain exceptions to the imposition of the additionaltax. The exceptions are: (i) withdrawals paid to the designatedbeneficiary’s estate made on account of the death of thedesignated beneficiary; (ii) withdrawals made on account of the

29


disability (within the meaning of section 72(m)(7) of the Code) ofthe designated beneficiary; (iii) withdrawals made on account ofa scholarship received by the designated beneficiary, providedwithdrawals do not exceed the amount of the scholarship; (iv)withdrawals made on account of a reduction in the amount ofQualified Higher Education Expenses solely because of expensestaken into account in determining the Education Tax Creditsallowed under federal income tax law and (v) withdrawals madeon account of the attendance of the designated beneficiary atcertain specified military academies. Qualifying rollovers are notsubject to federal income tax or the 10% additional federal tax onearnings. See “PARTICIPATION AND ACCOUNTS - Non-QualifiedWithdrawals and the Additional Tax.”

For purposes of calculating the earnings portion of withdrawalsfrom an account, withdrawals from all of the account owner’saccounts of which an individual is a designated beneficiary willbe treated as one account and, except to the extent provided bythe IRS, all withdrawals during a taxable year will be treated asone withdrawal. The calculation of earnings is made at the timeeach withdrawal is made.

Rollovers between Section 529 Programs – A Section 529Program account owner may roll over all or part of the balance ofan account to another Section 529 Program that accepts rolloverswithout subjecting the rollover amount to federal income tax,provided certain conditions are met: (i) the amount withdrawnmust be placed in another Section 529 Program within 60 daysof the withdrawal; and (ii) the designated beneficiary of thereceiving Section 529 Program account must be the samedesignated beneficiary (with no other rollover to a Section 529Program having occurred for the same designated beneficiary inthe preceding 12 months) or else a Member of the Family of thecurrent designated beneficiary. Provided appropriatedocumentation is received by the Section 529 Program receivingthe rollover, the portion of the rollover which represents earningswill be added to the earnings portion of the receiving account andamounts representing contributions will be added to thecontribution portion of the receiving Section 529 Programaccount. See “PARTICIPATION AND ACCOUNTS - Change ofDesignated Beneficiary” for the definition of Member of theFamily and see “Federal Gift, Estate and Generation – SkippingTransfer Taxes” for certain additional information about changesof designated beneficiaries.

Rollovers from Coverdell Education Savings Accounts – TheCode provides that for purposes of determining whether adistribution from a Coverdell ESA is includible in gross income,any amount contributed to a Section 529 Program may be treatedas a qualified education expense of the designated beneficiary.Therefore, amounts held in a Coverdell ESA may be rolled over toa Section 529 Program account for the same designatedbeneficiary without subjecting the rollover amount to federalincome tax or penalties. Provided appropriate documentation isreceived by the Section 529 Program receiving the rollover, theportion of the rollover representing earnings in the Coverdell ESAwill be added to the earnings portion of the receiving account and

the portion representing contributions will be added to thecontributions portion of the account.

Series EE and Series I Bonds – Interest on Series EE bondsissued after December 31, 1989, as well as interest on all SeriesI bonds, may be completely or partially excluded from federalincome tax if bond proceeds are used to pay certain QualifiedHigher Education Expenses at an Eligible Institution of HigherEducation or are contributed to a Section 529 Program or aCoverdell ESA in the same calendar year the bonds areredeemed. Certain income and other limitations apply, and youshould consult with a qualified tax adviser. If appropriatedocumentation is received by the Section 529 Program receivingthe proceeds of the sale of Series EE or Series I bonds, theoriginal purchase price of the bonds redeemed and contributed tothe Section 529 Program will be added to the contributionsportion of the receiving account, with the interest added toearnings.

Federal Gift, Estate and Generation-Skipping Transfer Taxes– Contributions (other than most rollover contributions) to aSection 529 Program are generally considered completed gifts tothe designated beneficiary for federal gift, estate and generation-skipping transfer (“GST”) tax purposes and are thus eligible forthe annual gift and GST tax exclusions, which is currently$13,000 per recipient per year (or $26,000 per recipient per year,in the case of a married couple electing to split gifts on a dulyfiled gift tax return). Except as described in the followingparagraph, if the contributor were to die while assets remained inan account, the value of the account would not be included in thecontributor’s gross estate.

In general, contributions (other than rollover contributions) to aSection 529 Program are completed gifts in the year ofcontribution that qualify for the gift tax annual exclusion and GSTtax exclusion, currently $13,000 per year per beneficiary,available under the Code. However, if a contribution in a singleyear is greater than $13,000, the contributor may elect to proratethe contribution against the annual exclusion ratably over a five-year period. Thus, a contributor who makes a $65,000 ($130,000in the case of a married couple electing to split gifts on a dulyfiled gift tax return) contribution in a year, makes the election andmakes no other gifts to the designated beneficiary during thatcalendar year or the next four calendar years would not incur agift or GST tax as a result of the contribution. Any excess over the$65,000 (or $130,000, as the case may be) would be treated asa taxable gift in the calendar year of the contribution. However, ifa contributor dies before the first day of the fifth calendar year,the portion of the contribution allocable to the calendar yearsafter that of the contributor’s death would be includible in thecontributor’s estate for federal estate tax and, if applicable, GSTtax purposes.

The gift tax annual exclusion is periodically adjusted for inflation.If the $13,000 annual exclusion is increased during the five-yearperiod after an election is made an additional contribution can bemade in any one or more of the remaining years without gift

30


or GST tax consequences up to the difference between theadjusted exclusion amount and the pro-rated amount of theoriginal contribution attributed to such year. The five-yearelection must be made on a federal gift tax return by a contributor(and his or her spouse with respect to a contribution consideredto be made one-half by each spouse) for the calendar year inwhich the contribution is made.

If the designated beneficiary for an account is changed to, oramounts in an account are rolled over to an account for, a newdesignated beneficiary who is a Member of the Family of thecurrent designated beneficiary and is assigned to the same orhigher generation as the current designated beneficiary for GSTtax purposes, there will be no gift or GST tax consequences. If thenew designated beneficiary is a Member of the Family of thecurrent designated beneficiary but is assigned to a youngergeneration than the current designated beneficiary for GST taxpurposes, the change of designated beneficiary will be deemed agift from the current designated beneficiary to the newdesignated beneficiary for federal gift and GST tax purposes, inwhich case the five-year election discussed above may beavailable for such purposes. (If the new designated beneficiary isnot a Member of the Family of the current designated beneficiary,the income and transfer tax consequences are uncertain but maybe substantial and adverse, and the Program will not knowinglypermit a change of Designated Beneficiary to, or a rollover to anaccount for, someone who is not a Member of the Family of thecurrent Designated Beneficiary.)

The gross estate of a designated beneficiary of a Section 529Program may include the value of any interest the designatedbeneficiary has in the Section 529 Program or amountsdistributed on account of the designated beneficiary’s death. Ifthe account owner and the designated beneficiary are the sameperson, the value of the account will be includible in the accountowner/designated beneficiary’s gross estate.

Coverdell ESAs and Education Tax Credits – Amounts may becontributed to a Coverdell ESA and a Section 529 Program in thesame year for the account of the same designated beneficiarywithout imposition of a penalty. Taxpayers meeting certain incomethreshold and other requirements may be eligible to take anEducation Tax Credit against their federal income tax liability forcertain education expenses. Taxpayers receiving tax-freedistributions from a Section 529 Program for qualified educationexpenses will not be able to claim an Education Tax Credit for thesame expenses. Furthermore, expenses used in determining theallowed Education Tax Credits will reduce the amount of adesignated beneficiary’s Qualified Higher Education Expenses tobe paid from a Section 529 Program account and may result in ataxable withdrawal. A Participant should consult a tax advisorregarding his or her eligibility to contribute to a Coverdell ESA, theavailability of Education Tax Credits and the coordination of rulesapplicable to Coverdell ESAs, Section 529 Programs and theEducation Tax Credits.

Certain Current Federal Tax Treatment Relating to Section529 Programs Scheduled to Expire After 2010 – Unless furtheraction is taken by Congress, after December 31, 2010, a 6%excise tax would apply to contributions made to a Coverdell ESAin the same year as a contribution to a Section 529 Program forthe same designated beneficiary.

Taxation by MaineUnder Maine law, the assets of the Program Fund, all Programearnings and income from operations are exempt from alltaxation by the State of Maine or any of its political subdivisions.Maine law also provides that a deposit to any Account, transfer ofthat Account to a Successor Participant, designation of asuccessor Designated Beneficiary of that Account, credit ofProgram earnings to that Account or distribution from thatAccount used for the purposes of paying Qualified HigherEducation Expenses of the Designated Beneficiary of that Accountdoes not subject that Participant, the estate of that Participant orany Designated Beneficiary to any Maine income or estate taxliability. Maine law further provides, however, that, in the event ofcancellation or termination of a Participation Agreement anddistribution of funds to a Participant, the increase in value overthe amount deposited in the Account by the Participant may betaxable to that Participant in the year distributed.

Individuals who file individual Maine state income tax returns willbe able to deduct up to $250 per Designated Beneficiary per taxyear for their total, combined contributions to any Section 529Program during that tax year. The deduction is not available totaxpayers with federal adjusted gross income over $100,000(single or married filing separately) or $200,000 (married filingjointly or head of household).

Taxation by Other StatesIf the Program is not the home state plan of both theParticipant and the Designated Beneficiary, the Participantshould be aware of the following:

• Depending upon the laws of the Participant’s homestate or the Designated Beneficiary’s home state,favorable state tax treatment or other benefits offeredby such home state for investing in Section 529Programs may be available only if the Participantinvests in that home state’s Section 529 Program.

• Any state-based benefits offered with respect to aparticular Section 529 Program should be one of themany appropriately weighted factors to be consideredin making an investment decision.

• The Participant should consult with tax or otheradvisors to learn more about how state-basedbenefits (including any limitations) would applyto the Participant’s specific circumstances and theParticipant may also wish to contact the Participant’shome state or any other Section 529 Program to learnmore about the features, benefits and limitations ofthat state’s Section 529 Program.

31


Designated Beneficiaries and/or other distributees shouldlikewise consult tax or other advisors with respect to state-basedbenefits and state tax treatment. The consequences to aParticipant or Designated Beneficiary of taking withdrawals froman Account, and the treatment of earnings that accumulate in anAccount and are not withdrawn, will vary from state to state.

In general, if a state’s income tax law conforms to the federalincome tax law, a Participant who is a resident of the state shouldnot recognize income on earnings that accumulate in an Accountand are not withdrawn. When assets are withdrawn from anAccount, the earnings portion should be tax-free to the extentused to pay the Qualified Higher Education Expenses of theDesignated Beneficiary. However, it is possible that a statewhose income tax laws otherwise conform to the federal incometax law may assess state tax on withdrawals, transfers and/orrollovers differently than under federal income tax law.

If a state’s definition of taxable income or adjusted gross incomedoes not conform to the federal definition and the state does nothave an explicit provision addressing the tax consequences ofSection 529 Programs, the tax consequences to a Participant,other contributor (if any) or Designated Beneficiary may beunclear. In such cases, the earnings on an Account may beincluded in the Participant’s or Designated Beneficiary’s statetaxable income when earned or withdrawn.

Tax Reports and FilingsThe Program Manager will report all distributions from anAccount to the IRS, the Participant and any other requiredpersons, if any, to the extent required by federal, state or locallaw. Under federal law, the Program Manager will report to theIRS on IRS Form 1099-Q gross distributions from an Accountduring the calendar year along with information regarding theearnings and basis (i.e., contributions) portions of the amountdistributed. By January 31 of the year following the distribution,the Participant (or Designated Beneficiary, in the case ofdistributions made directly to the Designated Beneficiary or to anEligible Educational Institution for the benefit of the DesignatedBeneficiary) will receive a copy of such Form 1099-Q or anacceptable substitute statement. Participants and DesignatedBeneficiaries should check with their tax advisors about the taximpact to them of any distributions from an Account and aboutwhat, if any, information must be reported on a tax return.Because it is the responsibility of the distributee receiving Form1099-Q to determine whether distributions from an Accountresult in federal and/or state tax liability and/or the 10%additional federal tax on earnings, Participants and DesignatedBeneficiaries should retain adequate records, invoices or otherdocuments and information to support any exemption fromfederal and/or state taxes as well as any exemption from the 10%additional federal tax on earnings, as applicable.

32

PROGRAM AND PORTFOLIO RISKS AND OTHER CONSIDERATIONS

PROGRAM AND PORTFOLIORISKS AND OTHERCONSIDERATIONS

A Participant should carefully consider the matters set forthbelow in addition to the other information contained or referred toin this Program Description and the Participation Agreement inevaluating the establishment of an Account and the making ofContributions. The contents of this Program Description or theParticipation Agreement should not be construed as legal,financial or tax advice. A Participant should consult his or herown attorneys and financial and tax advisors as to legal, financialand tax advice.

Program and Portfolio Risks and OtherConsiderationsAccounts are subject to certain risks associated with participationin the Program. In addition, certain Portfolios are more subject tocertain risks than are other Portfolios. Portfolios investing inUnderlying Funds are subject to certain risks associated withinvesting in Underlying Funds. See “Investment Risks ofUnderlying Funds.” Portfolios investing in Principal Plus PortfolioInvestments are subject to certain risks associated with investingin Principal Plus Portfolio Investments. See “Investment Risks ofPrincipal Plus Portfolio Investments.”

A Participant should consider such risks in light of the possibilitythat they may arise at any time during the period an Account isopen. Except to the extent permitted by federal tax law, aParticipant cannot direct the investment of Contributions to anAccount. Non-Qualified Withdrawals are subject to income taxesand may be subject to the 10% additional federal tax on earnings.

No Guarantee of Income or Principal – The investments made bya Participant or others in Accounts are subject to market, interestrate and other investment risks, including the loss of principal. Thevalue of an Account may increase or decrease, based on the returnof the Portfolio(s) to which Contributions have been allocated, andthe value of an Account may be more or less than the totalContributions to the Account. None of the State of Maine, FAME, theTreasurer, any agency or instrumentality of Maine, Merrill Lynch,FDS, BlackRock, or any Sub-Advisor or any of their affiliates, anyagent or representative retained in connection with the Program orany other person, is an insurer of, makes any guarantee of or hasany legal or moral obligation to insure the ultimate payout of any orall of the amount of any Contribution to an Account or that there willbe any investment return, or investment return at any particularlevel, with respect to any Account.

Limitations on Investment Direction – FAME, not a Participant,determines the investment allocations for the Portfolio(s) to whichContributions are allocated and selects Portfolio Investments forsuch Portfolio(s). These determinations are effected from time totime as described under “THE NEXTGEN PORTFOLIOS –PORTFOLIO ALLOCATIONS” and “NEXTGEN PORTFOLIOS –

PERFORMANCE AND INVESTMENTS.” Any Portfolio may at anytime be merged, terminated, reorganized or cease issuing newUnits. Any Portfolio Fee structure may at any time be terminatedor modified. Any such action affecting a Portfolio may result in aParticipant’s Contributions being reinvested in a Portfolio differentfrom the Portfolio in which Contributions were originally invested.With certain limited exceptions, the Participant is not permitted towithdraw funds from the Account without imposition of federaland applicable state income tax, and the 10% additional federaltax on earnings, except for application to the Qualified HigherEducation Expenses of the Designated Beneficiary.

Effect of Investment Strategy and Inflation on QualifiedHigher Education Expenses – Contributions to an Account arelimited to amounts projected to be sufficient to permit allAccounts established for a Designated Beneficiary to fundQualified Higher Education Expenses for such DesignatedBeneficiary for a five-year period of undergraduate attendanceand a two year period of graduate attendance. However, thebalance in an Account or Accounts maintained on behalf of aDesignated Beneficiary may or may not be adequate to cover theQualified Higher Education Expenses of that DesignatedBeneficiary, even if Contributions to an Account are made in themaximum amount per Designated Beneficiary permitted underthe Program. In addition, the level of future inflation in QualifiedHigher Education Expenses is uncertain and could exceed therate of investment return earned by any or all of the Portfoliosover the corresponding periods. There is no obligation on the partof any educational institution to maintain a rate of increase inQualified Higher Education Expenses which is in any way relatedto Portfolio investment results.

The investment strategy of the Age-Based Diversified Portfolioinvestment option seeks to balance risk and expected returns ofthe Portfolio Investments with the time periods remaining until atypical Designated Beneficiary is expected to need assets forQualified Higher Education Expenses. In general, the assetallocation strategy for each of the Age-Based Diversified Portfolioinvestment option is expected to become increasinglyconservative over time.

The investment strategies of the Diversified Portfolio, Single FundPortfolio and Principal Plus Portfolio investment options varysignificantly from each other and from that of the Age-BasedDiversified Portfolio investment options. The strategies of theDiversified Portfolio, Single Fund Portfolio and Principal PlusPortfolio investment options are not currently expected to changeover time. Further, Diversified Portfolio, Single Fund Portfolio andPrincipal Plus Portfolio investment options may have moreconcentration risk. None of the Diversified Portfolios and SingleFund Portfolios investing exclusively in Underlying Funds thatinvest in equity securities will provide for capital preservation atany particular time and the Diversified Portfolio investingexclusively in Underlying Funds that invest in fixed incomesecurities will not seek capital appreciation. Portfolios thatprimarily invest in Underlying Funds investing in equity securitiesmay underperform certain other Portfolios, particularly if equitysecurities generally underperform other asset classes for any

33


particular period of time. Portfolios that primarily invest inUnderlying Funds investing in fixed income securities mayunderperform certain other Portfolios, particularly if fixed incomesecurities generally underperform other asset classes for anyparticular period of time.

A Participant selecting Portfolios that invest in Underlying Fundsinvesting in equity securities should carefully review theinvestment risks applicable to Underlying Funds investing inequity securities. See “Investment Risks of Underlying Funds -Underlying Funds Investing in Equity Securities.” A Participantselecting Portfolios that invest in Underlying Funds investing infixed income securities should carefully review the investmentrisks applicable to Underlying Funds investing in fixed incomesecurities. See “Investment Risks of Underlying Funds -Underlying Funds Investing in Fixed Income Securities (IncludingMoney Market Securities).” A Participant selecting the PrincipalPlus Portfolio should carefully review the investment risksdescribed under the heading “Investment Risks of Principal PlusPortfolio Investments.”

Education Savings and Investment Alternatives – A number ofother Section 529 Programs and education savings andinvestment programs are currently available to a Participant.These programs may offer benefits, including state tax benefits,to some or all Participants or Designated Beneficiaries that arenot available under the terms of the Program or applicable law.See “TAX TREATMENT OF INVESTMENTS AND WITHDRAWALS -Taxation by Other States.” If a Participant or DesignatedBeneficiary is not a Maine resident, the state(s) where he or shelives or pays taxes may offer one or more direct sold,advisor/broker sold or prepaid tuition Section 529 Programs, andthose programs may offer the Participant or DesignatedBeneficiary state or local income tax or other benefits notavailable through the Program. For instance, several states offerunlimited state income tax deductions for contributions to theirown state’s Section 529 Program. Such deductions may not beavailable for Contributions under this Program. Other Section 529Programs may involve fees and expenses that are more or lessthan those borne by Accounts under the Program and may involveinvestment consequences (such as recapture of deductionspreviously taken) that differ. Accordingly, a Participant shouldconsider other investment alternatives before establishing anAccount in the Program. Investment options also differ by Section529 Programs.

Amounts may currently be contributed in the same year to anAccount and a Coverdell ESA for the same DesignatedBeneficiary, without imposition of a penalty. However, unlessCongress enacts legislation to the contrary, after December 31,2010, a 6% excise tax would apply to Contributions made to aCoverdell ESA in the same year as a Contribution to an Accountfor the same Designated Beneficiary.

Potential Program Enhancements/Changes – FAME may offerchanges to the Program, including additional investment options.A Participant who has established Accounts prior to the time anenhancement is made available may be limited in his or her

ability to participate in any such enhancement. The Portfolio feesand other charges described in this Program Description and theParticipation Agreement are subject to change at any time.

Status of Applicable Law and Regulations – Final regulationsunder Section 529 of the Code or other administrative guidanceor court decisions might be issued which could adversely impactthe federal tax consequences or requirements with respect to theProgram or Contributions to, or distributions from, Accounts.Congress could also amend Section 529 of the Code or otherfederal law, and states could amend state law, in a manner thatwould materially change or eliminate the federal or state taxtreatment described in this Program Description. There can be noassurance that such changes in law will not adversely affect thevalue to any Participant or Designated Beneficiary of participationin the Program. It is not possible to determine the effects, if any,on the Program of such changes.

Under certain circumstances, neither FAME nor the ProgramManager is required to continue the Program. Changes in the lawgoverning the federal and/or state tax consequences describedabove might necessitate material changes to the Program for theanticipated federal tax consequences to apply.

Treatment for Federal, State and Institutional Financial AidPurposes – The treatment of Account assets may have a materialadverse effect on the Designated Beneficiary’s eligibility toreceive assistance under various federal, state, and institutionalfinancial aid programs. For federal financial aid purposes,beginning July 1, 2009 (pursuant to the College Cost Reductionand Access Act of 2007), Account assets will be considered (i)assets of a student’s parent, if the student is a dependent studentand the owner of the Account is the parent or the student, or (ii)assets of the student, if the student is the owner of the Accountand not a dependent student. For purposes of financial aidprograms offered by states and educational institutions, thetreatment of Account assets may follow or differ from thetreatment described above for federal financial aid purposes.Participants and Designated Beneficiaries are advised to consulta financial aid professional and/or the state or educationalinstitution offering a particular financial aid program, todetermine how assets held in an Account may affect eligibility forfinancial aid.

Medicaid and Other Federal and State Non-EducationalBenefits – The effect of owning Account balances on eligibilityfor Medicaid or other state and federal benefits is uncertain. It ispossible that assets held in an Account will be viewed as a“countable resource” in determining a Participant’s financialeligibility for Medicaid. Withdrawals from an Account duringcertain periods may also have the effect of delaying thedisbursement of Medicaid payments. A Participant shouldconsult a tax advisor to determine how assets held in an Accountmay affect eligibility for Medicaid or other state and federal non-educational benefits.

No Guarantee of Performance – Performance information for thePortfolios should not be viewed as a prediction of future performance

34


of any Portfolio. In view of the anticipated periodic determinations ofinvestment allocations and Portfolio Investments for each Portfolio,the future investment results of any Portfolio cannot be expected, forany period, to be similar to the past performance of any otherPortfolios or combination of Underlying Funds.

Certain Considerations in Connection with the Termination ofthe Program Management Agreement and SuccessorProgram Managers – A new Program Manager and PortfolioServicing Agent may be appointed either upon expiration of thecurrent term of the Program Management Agreement or earlier inthe event Merrill Lynch, FDS or FAME terminates the ProgramManagement Agreement prior to its current term. See “THEPROGRAM MANAGEMENT AGREEMENT.” Merrill Lynch would beeligible for selection as the new Program Manager after the endof the term. Regardless of whether Merrill Lynch or some otherentity is the new Program Manager, the fee and compensationstructure of the new Program Manager and Portfolio ServicingAgent might be higher or different, respectively, than theManagement Fee and Portfolio Servicing Fee. In addition, asuccessor Program Manager may achieve different investmentresults than might have been achieved by Merrill Lynch.

No Guarantees by an Eligible Institution of Higher Education– There is no guarantee that: (i) any Designated Beneficiary willbe admitted to any Eligible Institution of Higher Education; (ii)assuming a Designated Beneficiary is admitted to an EligibleInstitution of Higher Education, that the Designated Beneficiarywill be permitted to continue to attend such institution; (iii) anyDesignated Beneficiary will be treated as a state resident of anystate for tuition or any other purpose; or (iv) any DesignatedBeneficiary will graduate or receive a degree from an EligibleInstitution of Higher Education.

Investment Risks of Underlying FundsAccounts are subject to a variety of investment risks which willvary based on the sector allocations of the different Portfolios andthe particular Underlying Funds selected by FAME for thePortfolios. Set forth below is a summary of certain investmentrisks to which specific categories of Underlying Funds may besubject, followed by a summary of general risks to whichUnderlying Funds may be subject. The Underlying Funds may besubject to additional risks that are not set forth below. AParticipant should review the principal risks to which particularUnderlying Funds may be subject, described in “NEXTGENPORTFOLIOS – PERFORMANCE AND INVESTMENTS” in thisProgram Description. Additionally, each Underlying Fund’s currentprospectus and statement of additional information containsadditional information not set forth in this Program Description,which may identify additional principal risks to which therespective Underlying Fund may be subject. You may request acopy of any Underlying Fund’s current prospectus and statementof additional information, or an Underlying Fund’s most recentsemi-annual or annual report, by contacting the Sub-Advisordirectly. Information on how to do so with respect to each Sub-Advisor is included in “NEXTGEN PORTFOLIOS – PERFORMANCEAND INVESTMENTS” in this Program Description.

Underlying Funds Investing in Equity Securities• Market and Selection Risk – Market risk is the risk that the

stock markets will go down in value, including thepossibility that the markets will go down sharply andunpredictably. Selection risk is the risk that theinvestments an Underlying Fund selects will underperformthe market or other funds with similar investmentobjectives and investment strategies. The investmentadvisors of the Underlying Funds may emphasize aparticular investment style (such as growth or value styleinvesting). The success of these styles varies at differenttimes and the style of a particular advisor may lead toinvestments that decline in value or do not achieveanticipated results.

Terrorist attacks in the United States and abroad, and thecontinued threat thereof, and related events, includingU.S. military actions in Iraq and continued unrest in theMiddle East, have led to increased short term marketvolatility and may have long term effects on U.S. and worldeconomies and markets. The Program does not know theextent to which and how long the securities markets maybe affected by such events and cannot predict the effectsof such events on the economies of the U.S. or of othercountries, or on Portfolio Investments.

• Risk of Small Capitalization and Emerging GrowthSecurities – Small capitalization or emerging growthcompanies may have limited product lines or markets.They may be less financially secure than larger, moreestablished companies. They may depend on a smallnumber of key personnel. If a product fails, or ifmanagement changes, or there are other adversedevelopments, an Underlying Fund’s investment in a smallcap or emerging growth company may lose substantialvalue. Small capitalization or emerging growth securitiesgenerally trade in lower volumes and are subject togreater and more unpredictable price changes than largercapitalization securities or the stock market as a whole.

• Geographic Concentration Risk – An Underlying Fund thatinvests a substantial amount of its assets in issuerslocated in a single country or a limited number ofcountries assumes the risk that economic, political andsocial conditions in those countries will have a significantimpact on its investment performance.

• Emerging Markets Risk – Foreign investment risk mayaffect the prices of securities issued by foreign companieslocated in developing countries more than those incountries with mature economies. For example, manydeveloping countries have, in the past, experienced highrates of inflation, expropriated assets or sharply devaluedcurrencies against the U.S. dollar, thereby causing thevalue of investments in companies located in thosecountries to decline. Transaction costs are often higher indeveloping countries and there may be delays insettlement procedures.

35


• Investing in a Master Portfolio – Investors in a feeder fundwill acquire an indirect interest in the correspondingmaster portfolio. Each portfolio accepts investments fromother feeder funds, and all the feeders of a given Portfoliobear the portfolio’s expenses in proportion to their assets.This structure may enable the funds to reduce coststhrough economies of scale. A larger investment portfoliomay also reduce certain transaction costs to the extentthat contributions to and redemptions from the portfoliofrom different feeders may offset each other and producea lower net cash flow. However, each feeder can set itsown transaction minimums, fund-specific expenses, andother conditions. This means that one feeder could offeraccess to the same portfolio on more attractive terms, orcould experience better performance, than another feeder.In addition, large purchases or redemptions by one feederfund could negatively affect the performance of otherfeeder funds that invest in the same portfolio. Whenevera portfolio holds a vote of its feeder funds, the fundinvesting in that portfolio will pass the vote through to itsown shareholders. Smaller feeder funds may be harmedby the actions of larger feeder funds. For example, alarger feeder fund could have more voting power than asmaller feeder fund over the operations of its portfolio. Afund may withdraw from its master portfolio at any timeand may invest all of its assets in another pooledinvestment vehicle or retain an investment adviser tomanage the fund’s assets directly.

Underlying Funds Investing in Fixed Income Securities(Including Money Market Securities)

• Market and Selection Risk – Underlying Funds investing infixed income securities are subject to both market risk andselection risk as described above.

• Credit Risk – Credit risk is the risk that an issuer will beunable to pay interest or repay principal when due. Thedegree of credit risk depends on both the financialcondition of the issuer and the terms of the obligation.

• Interest Rate Risk – Interest rate risk is the risk that pricesof bonds generally increase when interest rates declineand decrease when interest rates increase. Prices oflonger-term obligations generally change more inresponse to interest rate changes than prices of shorter-term obligations. Generally, a rise in interest rates willcause the market value of a fixed rate obligation to fall,while a decline in interest rates will cause the marketvalue of a fixed rate obligation to rise. Debt securitiespurchased at a premium or discount from their principalamount may respond differently to changes in interestrates.

• Redemption and Prepayment Risk – A bond’s issuer maycall a bond for redemption before it matures. If thishappens to a bond the Underlying Fund holds, theUnderlying Fund may lose income and may have to invest

the proceeds in bonds with lower yields. This risk, whichis known as “prepayment risk,” may particularly affectasset-backed securities. In a period of declining interestrates, borrowers may pay what they owe on theunderlying assets more quickly than anticipated.

• Extension Risk – Extension risk is the risk that, wheninterest rates rise, certain obligations will be paid off moreslowly than anticipated and the value of these securitieswill fall.

• Risk of Non-investment Grade Bonds – Non-investmentgrade bonds (also referred to as “junk bonds”) are debtsecurities that are rated below investment grade by therating agencies or are unrated securities that anUnderlying Fund’s management believes are ofcomparable quality. Although non-investment gradebonds generally pay higher rates of interest thaninvestment grade bonds, they are high-risk investmentsthat may cause income and principal losses for theUnderlying Fund. Non-investment grade bonds generallyexperience more price volatility than higher rated debtsecurities. In the event of an issuer’s bankruptcy, claimsof other creditors may have priority over the claims of non-investment grade bond holders, leaving few or no assetsavailable to repay non-investment grade bond holders.Non-investment grade bonds may be subject to greaterprepayment risk than higher rated debt securities.Underlying Funds investing in the non-investment gradebonds may invest in distressed securities, which aresecurities that are subject to bankruptcy proceedings orare in default, or are at risk of being in default.

• Considerations Relating to the Cash Allocation Account – Asdescribed under “BLACKROCK PORTFOLIOS – CashAllocation Account,” a portion of the assets of the CashAllocation Account may be invested in Maine CDs. Suchinvestments are generally limited to not more than 10% ofthe assets of the Cash Allocation Account, but there is noprescribed limit on such investments. To the extent that theyield on Maine CDs is less than the yield on the moneymarket securities in which the assets of the Cash AllocationAccount would otherwise be invested, the yield of Portfoliosinvesting in the Cash Allocation Account will be reduced.

• Mortgage Securities and Asset-Backed Securities Risk –Mortgage securities differ from conventional debtsecurities because principal is paid back over the life ofthe security rather than at maturity. An Underlying Fundmay receive unscheduled prepayments of principal beforethe security’s maturity date due to voluntary prepayments,refinancing or foreclosure on the underlying mortgageloans. To the Underlying Fund this means a loss ofanticipated interest and a portion of its principalinvestment represented by any premium the UnderlyingFund may have paid. Mortgage prepayments generallyincrease when interest rates fall.

36


Mortgage securities also are subject to extension risk. Anunexpected rise in interest rates could reduce theexpected rate of prepayments on mortgage securities andextend their anticipated life. This could cause the price ofthe mortgage securities and the Underlying Fund’s shareprice to fall and would make the mortgage securities moresensitive to interest rate changes.

Issuers of asset-backed securities may have limited abilityto enforce the security interest in the underlying assets,and credit enhancements provided to support thesecurities, if any, may be inadequate to protect investorsin the event of default. Like mortgage securities, asset-backed securities are subject to prepayment andextension risks.

• Maturity Risk – Fixed income securities with shortermaturities will generally be less volatile but provide lowerreturns than fixed income securities with longermaturities. The average maturity of an Underlying Fund’sfixed income investments will affect the volatility of theUnderlying Fund’s share price.

• Short Sale Risk – Potential losses from a short sale areunlimited if the short sale cannot be closed out.

General Investment Risks Applicable to the Underlying Funds• Index Fund Selection Risk and Other Index Fund

Considerations – Index funds are subject to a specialselection risk. This is the risk that the funds, which maynot fully replicate the relevant index, may performdifferently from the securities in the index. Index fundsgenerally do not attempt to hedge against adverse marketmovements and may decline in value more than othermutual funds in the event of a general market decline. Inaddition, an index fund has operating and other expensesthat an index does not have. As a result, an index fund willtend to underperform the index to some degree over time.

• Foreign Investment Risk – Investments by an UnderlyingFund outside the United States involve special risks notpresent in U.S. investments that can increase the chancesthat an Underlying Fund will lose money. In particular,changes in foreign currency exchange rates will affect thevalue of securities denominated in a particular currency.Investments in foreign markets also may be affected byeconomic or political developments or by governmentalactions such as the imposition of capital controls,expropriation of assets or the imposition of punitive taxes.Other foreign market risks include foreign exchangecontrol, settlement and custody issues, the limited size ofmany trading markets and the limited availability of legalremedies to investors.

• Risk of Illiquid Securities – An Underlying Fund may investa portion of its assets in securities that lack a secondarytrading market or are otherwise considered illiquid.

Liquidity of a security relates to the ability to easilydispose of the security and the price to be obtained upondisposition of the security, which may be less than wouldbe obtained for a comparable more liquid security. Suchinvestments may affect the Underlying Fund’s ability torealize its net asset value in the event of a voluntary orinvoluntary liquidation of its assets.

• Risk of Borrowing and Leverage – Certain UnderlyingFunds may borrow for investment purposes or fortemporary emergency purposes including to meetredemptions. Borrowing may exaggerate changes in thenet asset value of the Underlying Fund’s shares and in thereturn on the Underlying Fund’s investments. Borrowingwill cost the Underlying Fund interest expense and otherfees. The costs of borrowing may reduce the UnderlyingFund’s return. Certain securities that the UnderlyingFunds buy may create leverage including, for example,options.

• Derivatives – An Underlying Fund may use derivativeinstruments, including futures, forwards, options, indexedsecurities, inverse securities and swaps. Derivatives arefinancial instruments whose value is derived from anothersecurity, a commodity (such as oil or gas) or an index suchas the Standard & Poor’s 500 Composite Stock PriceIndex. Derivatives allow an Underlying Fund to increase ordecrease its risk exposure more quickly and efficientlythan other types of instruments. Derivatives are volatileand involve significant risks, including credit, currency,leverage, liquidity and interest rate risks.

• Non-diversification Risk – A non-diversified UnderlyingFund may invest a greater percentage of its assets in theobligations of a single issuer than a diversified UnderlyingFund, and consequently is more susceptible than adiversified Underlying Fund to any economic, political orregulatory occurrence that affects an individual issuer.

• Risk of Indexed and Inverse Floating Rate Securities – AnUnderlying Fund may invest in securities whose potentialreturns are directly related to changes in an underlyingindex or interest rate, known as indexed securities. AnUnderlying Fund also may invest in securities whosereturn is inversely related to changes in an interest rate(inverse floaters). In general, income on inverse floaterswill decrease when interest rates increase and increasewhen interest rates decrease. Indexed securities andinverse floaters are derivative securities and can beconsidered speculative. Indexed and inverse securitiesinvolve credit risk, and certain indexed and inversesecurities may involve currency risk, leverage risk andliquidity risk. As a result, the market value of suchsecurities will generally be more volatile than that of fixedrate securities.

37


• Real Estate Investment Risk – Investment in equitysecurities in the real estate sector is subject to many ofthe same risks associated with the direct ownership ofreal estate, such as adverse changes in national, state orlocal real estate conditions (resulting from, for example,oversupply of or reduced demand for space and changesin market rental rates); obsolescence or reduceddesirability of properties; general economic conditions;catastrophic events or other casualty or condemnationlosses; changes in the availability, cost and terms ofmortgage funds; and the impact of tax, environmental, andother laws. In recent years, investments in the real estatesector have generally experienced a significant decline invalue.

• Frequent or Active Trading Risk – Short-term or activetrading may increase a Fund’s expenses and have adversetax consequences for the Fund. It can also cause a greateramount of the Fund’s distributions to be ordinary incomerather than long term capital gains. Active trading alsoinvolves market risk and selection risk.

Investment Risks of BlackRock iSharesPortfolios InvestmentsIn addition to the applicable investment risks described above,Accounts investing in the BlackRock iShares Portfolios (the “ETFPortfolios”) are subject to a variety of investment risks particularto exchange-traded index funds. Set forth below is a summary ofcertain investment risks to which the ETF Portfolios may besubject.

• Exchange Trading Risk – The ETF Portfolios investprimarily in shares of Underlying Funds that areexchange-traded funds that, unlike mutual funds, arelisted and traded on securities exchanges. There can beno assurance that an active trading market for theseparticular Underlying Funds will develop or be maintained.Secondary market trading in such Underlying Funds maybe halted by a national securities exchange because ofmarket conditions or for other reasons. There can be noassurance that the requirements necessary to maintainthe listing of the shares of such Underlying Funds willcontinue to be met or will remain unchanged. BlackRockwill purchase or sell shares of such Underlying Funds onthe stock exchange on behalf of the ETF Portfolios atprices that, depending on market supply and demand,may be significantly higher or lower than the UnderlyingFund’s most recently determined net asset value, whichcould affect the performance of the ETF Portfolios.

• Potential Conflicts of Interest – The Program Managerand/or its affiliates may be buying or selling shares ofsuch Underlying Funds at the same time the ETF Portfoliosare selling or buying such shares. Although BlackRock hasprocedures governing its purchases and sales of shares of

such Underlying Funds on a stock exchange, it is possiblethat the Program Manager may be considered to benefitfrom such transactions if it or any of its affiliates areindirectly involved in the trade on the stock exchange.

• Index Tracking Risk – An ETF Portfolio’s ability to track itsUnderlying Fund(s) may be affected by such factors asfees and expenses, rounding of prices, dailycontributions/redemptions, asset levels and cashbalances. Additionally, because the ETF Portfolios investprimarily in Underlying Funds that are index-based, theyare subject to the risks described above in Index FundSelection Risk and Other Index Fund Considerations.

Investment Risks of Principal Plus PortfolioInvestments

Accounts investing in the Principal Plus Portfolio are subject to avariety of investment risks based on the particular Principal PlusPortfolio Investments selected by FAME. Set forth below is asummary of certain investment risks to which Principal PlusPortfolio Investments may be subject.

• Non-diversification – Because the Principal Plus Portfoliois expected to invest exclusively in a single guaranteedinvestment contract (“GIC”) prior to November 20, 2010,and thereafter is expected to continue to maintain itsinvestment in that GIC, the Principal Plus Portfolio is non-diversified. A non-diversified Portfolio has more risk than adiversified Portfolio.

• No Third-Party Guarantees – None of the State of Maine,FAME, the Treasurer, the Program or the Program Managerguarantee the principal of Contributions to the PrincipalPlus Portfolio, returns thereon or any rate of return.

• Failure to Perform – There is a risk that an insurancecompany could fail to perform its obligations under a GICfor financial or other reasons. Such a failure could result ina loss by an affected Participant of all or part of his or herAccount balances invested in the Principal Plus Portfolio.

• No Minimum Rate of Return – While a GIC is designed toprovide a minimum rate of return on the amount investedin the GIC before the deduction of fees and expenses,because the Principal Plus Portfolio does not expect toinvest exclusively in GICs effective November 20, 2010,the Principal Plus Portfolio will not provide a minimumoverall rate of return after such date.

• In addition to the applicable investment risks describedabove, because the Principal Plus Portfolio will beginallocating a portion of its assets to the Cash AllocationAccount beginning November 20, 2010, it will be subjectto the risks described above in Underlying FundsInvesting in Fixed Income Securities (Including MoneyMarket Securities), including but not limited toConsiderations Relating to the Cash Allocation Account.

38

THE PROGRAM AND THE PROGRAM FUND

THE PROGRAM AND THEPROGRAM FUND

The ProgramThe Program was established to encourage the investment offunds to be used for higher education expenses at EligibleInstitutions of Higher Education.

The Program FundMaine law provides that the Treasurer shall invest and reinvestthe Program Fund for the benefit of the Program on behalf ofParticipants and Designated Beneficiaries, under the direction ofFAME and with the advice of the Advisory Committee. TheTreasurer is the chair of the Advisory Committee. Amounts paidinto the Program Fund generally consist of Contributions made bya Participant to the Accounts in the Investment Fund, ProgramFund earnings, and any other money that has been appropriated,granted, gifted or otherwise made available for deposit in theProgram Fund. All money in the Program Fund is required to becontinuously applied by FAME to administer the Program and forno other purpose. Under Maine law, assets of the Program Fundmust at all times be preserved, invested and expended only forpurposes of the Program and must be held for the benefit ofParticipants and Designated Beneficiaries. Assets may not betransferred or used by the State of Maine or FAME for anypurposes other than the purposes of the Program.

Maine law provides that FAME may use amounts in the ProgramFund to administer the Program, including to rebate fees paid bya Participant or any class of Participants, to match Contributionsby a Participant or any class of Participants or to providescholarships to certain Designated Beneficiaries. See “SpecialBenefits Available to Maine Residents.”

The Investment FundThe Investment Fund is the portion of the Program Fund investedin Underlying Funds through Contributions to Accounts. Accountsare established by a Participant pursuant to a ParticipationAgreement for purposes of investing Contributions in one or morePortfolios. Interests in Portfolios purchased with Contributionsare represented by Units. See “PROGRAM FEES AND EXPENSES.”

Special Benefits Available to Maine ResidentsAny program that provides a benefit to Maine residents may atany time be modified, added or terminated, without prior notice.

State Tax Deduction – Individuals who file individual Mainestate income tax returns will be able to deduct up to $250 perDesignated Beneficiary per tax year for their total, combinedcontributions to any Section 529 Program during that tax year.The deduction is not available to taxpayers with federal adjustedgross incomes over $100,000 (single or married filing separately)or $200,000 (married filing joint or head of household).

Maine First Step Grant Program – This benefit is no longeravailable for babies born on or after January 1, 2009.

Maine Matching Grant Program – Currently, if either theParticipant or the Designated Beneficiary is a Maine resident andif the Participant’s family federal adjusted gross income was$75,000 or less for the previous tax year, the Account may beeligible for the Maine Matching Grant Program. A Participant mayapply for an Initial Matching Grant in an amount to be determinedannually by FAME when opening a new Account with only $50.No Initial Contribution is required to obtain the Initial MatchingGrant if subsequent Contributions are made through payrolldeduction or Automatic Funds Transfer. FAME may also offer anAnnual Matching Grant to an existing Account which has receivedat least $50 in Contributions in a calendar year, in an amount andup to a maximum amount for any one Designated Beneficiary tobe determined annually by FAME. No Annual Matching Grant isavailable for Contributions made in 2010. Other terms andconditions apply.

Harold Alfond College Challenge Grant – A $500 grant isavailable from the Alfond Scholarship Foundation for each Maineresident child named as the Designated Beneficiary of an Accountbefore the child's first birthday. No initial or additionalContribution is required to receive the Harold Alfond CollegeChallenge Grant. Other conditions apply.

Account Maintenance Fee Waived for Maine Residents – The$25 annual Account Maintenance Fee is waived on Accountswhen either the Participant or the Designated Beneficiary is aMaine resident.

Maine Administration Fee Rebate Program – If either theParticipant or the Designated Beneficiary is a Maine resident, andthe Account was subject to the annual Maine Administration Fee,an amount approximately equal to the Maine Administration Feepaid during the year is automatically rebated back to the Accountin January of the following year. (Only Accounts with a balanceof $1,000 or more are eligible.)

Maine Scholarship Programs – FAME has opened Accounts toprovide scholarships to eligible Maine students, to certainindividuals in Maine’s incumbent workforce seeking to save foradditional education, including training and retraining, and to thedependant child or children of Maine resident members of theU.S. armed services killed while deployed in support of combatoperations in Iraq or Afghanistan during certain periods of time.

Investments in Maine Financial Institutions– A percentage ofthe cash portion of the Investment Fund is invested in Maine CDs.

For more information about special benefits available to Maineresidents, call FAME at 1-800-228-3734.

39

PROGRAM MANAGEMENT AND ADMINISTRATION

PROGRAM MANAGEMENTAND ADMINISTRATION

GeneralFAME administers the Program. The Program Fund is held by theTreasurer. Maine law requires that amounts deposited in theProgram Fund be invested in a reasonable manner to achieve theobjectives of the Program and with the discretion and care of aprudent person in similar circumstances with similar objectives.Maine law also requires that due consideration be given to rate ofreturn, term or maturity, diversification and liquidity of investmentswithin the Program Fund or any account in the Program Fundpertaining to the projected disbursements and expenditures fromthe Program Fund and the expected payments, deposits,contributions and gifts to be received. FAME is authorized underMaine law to enter into contracts for any services it determinesnecessary for the effective and efficient operation of the Program,which may include investment advisory and managerial services.Merrill Lynch has been selected to serve as the Program Manager.

Finance Authority of MaineFAME was established by statute in 1983 as a body corporate andpolitic and a public instrumentality of the State of Maine. Itconsists of 15 voting members, as follows: the Commissioner ofEconomic and Community Development; the Treasurer; onenatural resources commissioner designated by the Governor; andtwelve members appointed by the Governor (including a certifiedpublic accountant, an attorney, a commercial banker, twoveterans, two persons knowledgeable in the field of naturalresources enterprises or financing; an individual knowledgeable inthe field of student financial assistance and an individualknowledgeable in the field of higher education), whichappointments are subject to confirmation by the Maine legislature.The chief executive officer of FAME is nominated by the Governorand confirmed by the Maine legislature. The exercise by FAME ofits powers is “deemed and held to be the performance of essentialgovernmental functions.” FAME has been entrusted by the Mainelegislature with responsibility for the administration of numerousprograms that are important to the economy of Maine in additionto the Program. Other than a Participant’s right to access theassets in his or her Account, no Participant or DesignatedBeneficiary has access or rights to any assets of FAME or the Stateof Maine. The principal office of FAME is located in Augusta,Maine. FAME has established rules for the implementation of theProgram, which are set forth in Chapter 611 of the Rules of FAME,as amended from time to time (the “Rule”).

The TreasurerThe Treasurer is an officer of the State of Maine established in theMaine Constitution. The Treasurer is chosen biennially, at the firstsession of the Maine legislature, by a joint ballot of the MaineSenators and Representatives in convention, and serves until hisor her successor is elected. In general, the Treasurer is the Maineofficer responsible for investment, debt and cash management.

Advisory CommitteeThe Advisory Committee provides advice to FAME on theoperation of the Program and investment of the Program Fund.The Advisory Committee consists of seven members, as follows:the Treasurer (who chairs the Advisory Committee), two memberswith experience in and knowledge of institutional investment offunds, two members representing institutions of higher educationwith experience in and knowledge of higher education financialand investment matters, one member with knowledge of studentfinancial assistance and one member from at large. All members,except the Treasurer, are appointed by the Governor.

Merrill Lynch and FDSMerrill Lynch and FDS are wholly-owned subsidiaries of Bank ofAmerica Corporation.

Merrill Lynch provides investment management, securitiesbrokerage, investment banking and numerous other financialservices, with more than $1.4 trillion in total client assets as ofJune 30, 2010. Merrill Lynch offers individual securities, mutualfunds, annuities, life insurance, trusts and various types ofretirement vehicles and is a leading provider of 401(k) retirementsavings plan services and Individual Retirement Accounts(“IRAs”). Merrill Lynch is a registered broker-dealer andinvestment adviser, a member of industry self-regulatoryorganizations, including the Financial Industry RegulatoryAuthority, the New York Stock Exchange and other exchanges,and is a member of the Securities Investor Protection Corporation(“SIPC”). Merrill Lynch is also regulated by the U.S. Securitiesand Exchange Commission (“SEC”) and by each state’s securitiesregulator.

FDS is a Florida corporation with its principal place of businesslocated in Jacksonville, Florida. FDS is a transfer agentregistered with the SEC and performs transfer agent andshareholder servicing functions for Merrill Lynch and its affiliates.

Neither Merrill Lynch nor FDS is a bank, and securities offered byMerrill Lynch, unless otherwise indicated, are not backed orguaranteed by any bank, nor are they insured by the FederalDeposit Insurance Corporation (“FDIC”).

40

THE PROGRAM MANAGEMENT AGREEMENT

Sub-AdvisorsCurrently, the Client Direct Series has three Sub-Advisors:BlackRock, MFS and Franklin Templeton. FAME may terminatethe Sub-Advisory Agreement with MFS or Franklin Templeton atany time.

Merrill Lynch & Co., Inc. has a substantial financial interest inBlackRock, Inc. Consistent with the corporate relationshipsbetween Merrill Lynch and BlackRock and applicable law,management and employees of BlackRock may be provided alevel of access to Merrill Lynch’s employees and information thatis not available to affiliated persons of Portfolio Investmentssponsored, managed, or distributed by other asset managementcompanies. Merrill Lynch may receive more economic benefitswith respect to Portfolios invested in Portfolio Investmentssponsored, managed and/or distributed by companies such asBlackRock in which Merrill Lynch has an economic interest asthose companies receive compensation for providing investmentadvisory, administrative, transfer agency, distribution and/or otherservices to such Portfolio Investments.

THE PROGRAMMANAGEMENT AGREEMENT

Services and TermsOn May 27, 1999, FAME, the Treasurer, Merrill Lynch and FDSentered into the Program Management Agreement (the “ProgramManagement Agreement”), which provides that Merrill Lynch andFDS will serve as the Program Manager and the PortfolioServicing Agent, respectively, through June 30, 2014. Under theProgram Management Agreement, Merrill Lynch and FDS willperform certain administrative, recordkeeping and investmentservices, and will market and distribute the Program (collectively,the “Services”). Merrill Lynch and FDS are permitted to delegatecertain of their responsibilities to their affiliates without the priorconsent of FAME or the Treasurer. Merrill Lynch has dulydelegated certain of its investment advisory responsibilities toBlackRock. Merrill Lynch has delegated certain fund accountingand custody services to Bank of America, N.A. ("BANA"), anaffiliate of Bank of America Corporation. No delegation orassignment by Merrill Lynch or FDS shall relieve Merrill Lynch andFDS of any of their responsibilities under the ProgramManagement Agreement.

Merrill Lynch has irrevocably and unconditionally guaranteed toFAME and the Treasurer: (i) the full and prompt payment whendue of any payments required to be credited or made by FDSunder the Program Management Agreement to any Account, or to

FAME and the Treasurer, when the same shall become due andpayable under the Program Management Agreement; and (ii) thefull and prompt performance and observance of all obligations onthe part of FDS and BANA pursuant to the Program ManagementAgreement.

Merrill Lynch may periodically propose to FAME and the Treasurerthat the Program be amended to include one or more additionalPortfolios.

Standard of CareMerrill Lynch, FDS and the Sub-Advisors are responsible for, andmust apply due diligence to effect, the performance of theServices under the Program Management Agreement inaccordance with certain applicable legal requirements and themore favorable of certain Merrill Lynch and FDS practices or ofcertain financial services industry practices.

Termination of AgreementEach of FAME, FDS and Merrill Lynch may terminate the ProgramManagement Agreement at any time, in response to a materialbreach, after providing notice and an opportunity to cure. FAMEmay also terminate in the event subsequent federal legislationmakes it unreasonable for FAME or the Treasurer to continue theProgram. Merrill Lynch or FDS may also terminate if: (i) Maineadopts legislation providing that FAME, or any successor to itsfunctions, shall no longer be authorized to administer theProgram and the Program Fund; or (ii) subsequent Mainelegislation adversely affects the ability of Merrill Lynch or FDS tocontinue to provide the Services or to receive applicable fees.See “PROGRAM AND PORTFOLIO RISKS AND OTHERCONSIDERATIONS - Program and Portfolio Risks and OtherConsiderations - Certain Considerations in Connection with theTermination of the Program Management Agreement andSuccessor Program Managers.” The Sub-Advisory Agreementswith each of the Sub-Advisors of the Portfolios may be terminatedupon 60 days’ notice.

AuditsPursuant to the Program Management Agreement and the Sub-Advisory Agreements, Merrill Lynch, FDS, the Sub-Advisors andFAME have agreed to cooperate to generate annual auditedfinancial statements of the Portfolios and the Investment Fund.Beginning with the year ending June 30, 2010, such auditedfinancial statements will be provided by PricewaterhouseCoopersLLP, an independent public accountant. Prior thereto, suchaudited financial statements were provided by anotherindependent public accountant. A copy of the Program’s mostrecent Annual Report is available by request from the ProgramManager at (877) 4-NEXTGEN (463-9843), and is available on theProgram’s Web site at www.nextgenplan.com.

41

MISCELLANEOUS

MISCELLANEOUS

Securities LawsThe staff of the SEC has advised FAME that it will not recommendany enforcement action to the Commission if, among otherthings, the Participation Agreements and the interests in theProgram represented by Accounts which are established therebyare distributed in reliance upon the exemption from registrationprovided in section 3(a)(2) under the Securities Act of 1933, asamended, in reliance on an opinion of counsel to that effect.

Method of OfferingParticipation Agreements and Investment Fund interests may beoffered by FAME and the Program Manager’s registered salesagents, and by Maine Distribution Agents. Certain officers andemployees of FAME and of the Office of the Treasurer may, in thecourse of their official duties and without compensation, offer andsell Participation Agreements and Investment Fund interestswithout registering with the SEC as a broker-dealer. A Participantwhose Accounts are established as a result of an offer by FAMEor Maine Distribution Agents will be considered a broker-dealercustomer of the Program Manager to the extent required by law.

Continuing DisclosureTo comply with Rule 15c2-12(b)(5) of the Securities andExchange Commission promulgated under the SecuritiesExchange Act of 1934, as amended (“Rule 15c2-12”), FAME hasexecuted a Continuing Disclosure Certificate (the “ContinuingDisclosure Certificate”) for the benefit of Participants. Under theContinuing Disclosure Certificate, FAME will provide certainfinancial information and operating data (the “AnnualInformation”) relating to the Program, and FAME will providenotices of the occurrence of certain enumerated events set forthin the Continuing Disclosure Certificate, if material. The AnnualInformation will be filed by or on behalf of the Program with eachNationally Recognized Municipal Securities InformationRepository (the “NRMSIRs”) and with any Maine informationdepository. Notices of certain enumerated events will be filed byor on behalf of the Program with the NRMSIRs or the MunicipalSecurities Rulemaking Board and with any Maine informationdepository.

The respective directors, officers, members and employees ofFAME shall have no liability for any act or failure to act under theContinuing Disclosure Certificate. FAME reserves the right to

modify its provisions for release of information pursuant to theContinuing Disclosure Certificate to the extent not inconsistentwith the valid and effective provisions of Rule 15c2-12.

SIPC Insurance and Additional Coverage The securities and cash held in an Account are protected by theSecurities Investor Protection Corporation (SIPC) for up to$500,000 (inclusive of up to a maximum of $100,000 cash).

In addition, Merrill Lynch has obtained "excess-SIPC" coveragefrom Lloyd's of London. The Lloyd's policy provides furtherprotection for each customer (including up to $1.9 million forcash), subject to an aggregate loss limit of $1 billion for allcustomer claims.

Neither SIPC protection nor the additional "excess-SIPC"coverage applies to deposits made through a bank depositprogram or to other assets that are not securities.

Each Account held by a separate customer (as defined byapplicable law) is treated separately for purposes of the aboveprotection.

You may obtain further information about SIPC, including the SIPCBrochure, via SIPC's website at http://www.sipc.org or callingSIPC at (202) 371-8300.

Obtaining Additional Information About theProgramReferences made herein to certain documents and reports aresummaries thereof which are not complete or definitive, andreference is made to those documents and reports for full andcomplete information as to the contents thereof.

Individuals or entities having questions concerning the Program,including procedures for opening an Account, or wishing torequest Account Applications, Account maintenance forms or acopy of the Program’s most recent Annual Report should call theProgram Manager toll free at (877) 4-NEXTGEN (463-9843),access the Program’s Web site located at www.nextgenplan.comor contact their Maine Distribution Agent. Questions or requestsfor information also may be addressed in writing to Merrill Lynch,College Plan Services, P.O. Box 1518, Pennington, NJ 08534-1518. FAME may be contacted at P.O. Box 949, Augusta, ME04332-0949. For information about benefits available to Maineresidents, contact FAME at (800) 228-3734.

42

NEXTGEN PORTFOLIOS – PERFORMANCE AND INVESTMENTS

NEXTGEN PORTFOLIOS –PERFORMANCE AND

INVESTMENTS

GeneralEach Portfolio offers a separate investment strategy. TheProgram’s investment alternatives currently consist of Age-BasedDiversified Portfolio options, Diversified Portfolio options, a SingleFund Portfolio, and the Principal Plus Portfolio. The performanceof each Portfolio (other than the Principal Plus Portfolio, whichinvests in Principal Plus Portfolio Investments) depends on theweighted average performance of the Underlying Funds in whichit invests. The value of Units in each Portfolio varies from day today. A Participant does not have any direct beneficial interests inthe Underlying Fund(s) held by a Portfolio and, accordingly, has norights as an owner or shareholder of such Underlying Fund(s).

Age-Based Diversified PortfoliosSelecting Age-Based Diversified Portfolios will provide for achanging investment allocation based on the age of theDesignated Beneficiary that appears on the Account Application.Participants that are state or local governments or tax-exemptorganizations described in section 501(c)(3) of the Code mayselect any Age-Based Diversified Portfolio without designating abeneficiary. The assets of each Age-Based Diversified Portfolioare expected to be invested in a combination of Underlying Fundsthat is periodically adjusted. Contributions to an Age-BasedDiversified Portfolio will remain assigned to that Portfolio until theDesignated Beneficiary’s age has exceeded the maximum age forthat particular Age-Based Diversified Portfolio. At that time, Unitsin that Age-Based Diversified Portfolio are automaticallyredeemed and reinvested in the next Age-Based DiversifiedPortfolio in the applicable Age-Based Diversified Portfoliosequence on the business day prior to the birthday of theDesignated Beneficiary (an “Age-Based Exchange”). Units in thenew Age-Based Diversified Portfolio will be posted in the Accounton the Designated Beneficiary’s birthday. If the DesignatedBeneficiary’s birthday falls on a weekend or holiday, then theUnits in the new Age-Based Diversified Portfolio will be posted inthe Account on the first business day after the DesignatedBeneficiary’s birthday.

For the five business days prior to an Age-Based Exchange,Contributions that are made to an Age-Based Diversified Portfoliowithin an Account will be held and invested in the next Age-BasedDiversified Portfolio in the Age-Based Diversified Portfoliosequence.

For the two business days prior to an Age-Based Exchange, aParticipant may not:

• move any Account assets to another Program Account;

• move any assets invested in another Program Account intothe Account;

• direct any withdrawals from any Portfolio in the Account;

• roll any Account assets into another Section 529 Program.

Age-Based Exchanges will continue until Units of an Age-BasedDiversified Portfolio are exchanged for an equal dollar value ofUnits of the last Age-Based Diversified Portfolio in the sequence,in which assets will remain invested until withdrawn orreinvested.

The assets held within each Age-Based Diversified Portfolio willbe invested in different investment sectors depending on theages of the Designated Beneficiaries assigned to that Portfolio.For example, an Age-Based Diversified Portfolio designed for veryyoung Designated Beneficiaries will typically invest most of itsassets in equity Underlying Funds. By contrast, an Age-BasedDiversified Portfolio designed for Designated Beneficiaries closeto college age will typically invest a smaller portion of its assetsin equity Underlying Funds and a greater portion of its assets infixed income Underlying Funds.

Diversified PortfoliosDiversified Portfolios may invest in designated allocations ofUnderlying Funds. Each Diversified Portfolio will have a differentinvestment strategy. The Underlying Funds in which theDiversified Portfolios invest and the percentage of assets targetedfor equity, fixed income, real estate and cash equivalentUnderlying Funds are reviewed at least annually and may change.

Single Fund PortfolioThe Single Fund Portfolio invests in a single Underlying Fund. TheSingle Fund Portfolio will be reviewed at least annually.

Principal Plus PortfolioThe Principal Plus Portfolio invests in guaranteed investmentcontracts issued by one or more insurance companies, the CashAllocation Account, corporate fixed-income investments and/orsimilar instruments.

43


44

BLACKROCK PORTFOLIOS


The following charts illustrate the current target asset allocationof each BlackRock Age-Based Diversified Portfolio other than theiShares Portfolios which begin on page 51.

DomesticEquity 64%

InternationalEquity 16%

InvestmentGrade FixedIncome 20%

BlackRock Age-Based 0-7 Years Portfolio

DomesticEquity 48%




DomesticEquity 36%




DomesticEquity 24%




DomesticEquity 16%



Cash AllocationAccount 15%


DomesticEquity 4%



CashAllocation

Account 65%

BlackRock Age-Based 20+ Years Portfolio

General – Substantially all of the assets of each BlackRock Portfolioare invested in either Institutional Class shares of the underlyingBlackRock mutual funds or in iShares Exchange Traded Funds thatare recommended by BlackRock for that Portfolio and approved byFAME for use in the BlackRock Portfolios. A portion of certainBlackRock Portfolios may be held in the Cash Allocation Account asdescribed under “THE NEXTGEN PORTFOLIOS.”

All of these Underlying Funds in which BlackRock Portfolios investare currently managed by BlackRock. BlackRock and its affiliateshad approximately $3.15 trillion in assets under management asof June 30, 2010. BlackRock manages 102 mutual funds and 205iShares Exchange Traded Funds as of June 30, 2010.

45


The following charts illustrate the current target asset allocation of the BlackRock Diversified Portfolio and the Single Fund Portfolio otherthan the iShares Portfolios which begin on page 51.

DomesticEquity 80%


BlackRock 100% Equity Portfolio BlackRock Equity Index Portfolio

Current Target Underlying Fund Allocations – The following charts illustrate the current target asset allocations and the current targetUnderlying Fund allocations within those target asset allocations for the BlackRock Portfolios other than the iShares Portfolios which beginon page 51. This information is presented for informational purposes only.

1 S&P 500 is a registered trademark of The McGraw-Hill Companies.

BlackRockAge-Based Age-Based Age-Based Age-Based Age-Based Age-Based0-7 Years 8-10 Years 11-13 Years 14-16 Years 17-19 Years 20+ Years

Underlying Fund Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio

Domestic Equity Funds

BlackRock Basic Value Fund, Inc. 13% 9.5% 7% 5% 3% 1%

BlackRock Capital Appreciation Fund 13% 9.5% 7% 5% 3% 1%

BlackRock Large Cap Core Fund 13% 9.5% 7% 5% 3% 1%

BlackRock S&P 500® Index Fund1 13% 9.5% 8% 4% 4% 1%

BlackRock Value Opportunities Fund, Inc. 6% 5% 3.5% 2.5% 1.5% 0%

BlackRock Small Cap Growth Fund II 6% 5% 3.5% 2.5% 1.5% 0%

International Equity Funds

BlackRock International Value Fund 8% 6% 4% 3% 2% 0%

BlackRock International Index Fund 8% 6% 5% 3% 2% 1%

Investment Grade Fixed Income Funds

BlackRock Short Term Bond Fund 0% 0% 0% 0% 30% 20%

BlackRock Total Return Fund 20% 35% 35% 35% 35% 10%

BlackRock Bond Portfolio 0% 5% 20% 35% 0% 0%

Cash Allocation Account

Cash Allocation Account 0% 0% 0% 0% 15% 65%

46


Current Target Underlying Fund Allocations – The following charts illustrate the current target asset allocations and the current targetUnderlying Fund allocations within those target asset allocations for the BlackRock Portfolios other than the iShares Portfolios which beginon page 51. This information is presented for informational purposes only.

1 S&P 500 is a registered trademark of The McGraw-Hill Companies.

BlackRockUnderlying Fund 100% Equity Portfolio Equity Index Portfolio


BlackRock Basic Value Fund, Inc. 16% 0%

BlackRock Capital Appreciation Fund 16% 0%

BlackRock Large Cap Core Fund 16% 0%

BlackRock S&P 500® Index Fund1 16% 100%

BlackRock Value Opportunities Fund, Inc. 8% 0%

BlackRock Small Cap Growth Fund II 8% 0%


BlackRock International Value Fund 10% 0%

BlackRock International Index Fund 10% 0%

Historical Investment Performance – The following tablessummarize the average annual total return after deducting on-going Portfolio fees of each BlackRock Portfolio, other than theiShares Portfolios, in existence as of June 30, 2010. The $25annual Account Maintenance Fee, which is waived in certaincircumstances, is not included in the returns set forth below. Ifthat fee were reflected, returns would be less than those shown.Updated performance data will be available on the Internet at

www.nextgenplan.com or from the Program Manager by calling(877) 4-NEXTGEN (463-9843). Each BlackRock Portfolio’s fiscalyear runs from July 1 to June 30, which also is the Program’sfiscal year. The performance data relating to the BlackRockPortfolios set forth below is for the limited time periodpresented and is not indicative of the future performance ofthe BlackRock Portfolios.

Average Annual Total Return* as of June 30, 2010

Commencement1 Year 3 Years Since Inception of Operations

Age-Based Diversified Portfolios

BlackRock Age-Based Age 0-7 Years Portfolio 12.57% -9.09% -7.92% 04/30/07




BlackRock Age-Based Age 17-19 Years Portfolio 8.32% -0.17% 0.09% 04/30/07

BlackRock Age-Based Age 20+ Years Portfolio 4.52% 1.15% 1.28% 04/30/07

Diversified Portfolio

BlackRock 100% Equity Portfolio 12.04% -10.58% -9.26% 04/30/07

Single Fund Portfolio

BlackRock Equity Index Portfolio 14.04% -10.10% -9.11% 04/30/07

* Average annual total return is a hypothetical rate of return that, if achieved annually, would have produced the same cumulative total return if performancehad been constant over the entire period. (Cumulative total return reflects actual change in the value of an investment over a given period.) Average annualtotal return smoothes out variations in performance; it is not the same as actual year-by-year results. Returns covering periods of less than one year representcumulative total returns.

47


Summary of Investment Objectives and Policies of theUnderlying Funds for the BlackRock Portfolios – The followingdescriptions summarize the investment goals and policies of theUnderlying Funds in which the BlackRock Portfolios, other thanthe iShares Portfolios, are currently invested. The descriptionsalso identify certain principal risks to which particular UnderlyingFunds may be subject. Additional discussion of risks related tothe various categories of Underlying Funds is set forth under“PROGRAM AND PORTFOLIO RISKS AND OTHERCONSIDERATIONS.” The Underlying Funds’ investment strategiesare subject to change.

These summaries are qualified in their entirety by referenceto the detailed information included in each UnderlyingFund’s current prospectus and statement of additionalinformation, which contain additional information notsummarized herein and which may identify additionalprincipal risks to which the respective Underlying Fund maybe subject. You may request a copy of any Underlying Fund’scurrent prospectus and statement of additional information,or an Underlying Fund’s most recent semi-annual or annualreport by calling (800) 441-7762 or by locating it onBlackRock’s Web site at www.blackrock.com.

BlackRock Basic Value Fund, Inc.Investment Objectives, Strategy and Policies – The Fund’sinvestment objective is growth of capital. The Fund also seeksincome, but its investments emphasize growth of capital more thanincome. The Fund tries to achieve its objective by investing in adiversified portfolio consisting primarily of common stocks. Inselecting securities, Fund management emphasizes stocks that itbelieves are undervalued. Fund management places particularemphasis on companies with below-average price/earnings ratiosthat may pay above-average dividends. Fund management alsomay determine that a company is undervalued if its stock price isdown because of temporary factors from which Fund managementbelieves the company will recover. As a result, the Fund may investa large portion of its net assets in stocks that have weak researchratings. The Fund focuses its investments on companies with amarket capitalization over $5 billion. The Fund may invest up to25% of its total assets in the securities of foreign companies.

Principal Risks of Investing – The Fund is subject to the marketand selection risks of equity investments, value investments andto the risks of investment in foreign securities.

BlackRock Capital Appreciation FundInvestment Objectives, Strategy and Policies – The Fund’sinvestment objective is long-term growth of capital. The Fundtries to achieve its objective by investing in a diversified portfolioconsisting primarily of common stocks. The Fund generallyinvests total assets in the following equity securities: (i) commonstock; (ii) convertible preferred stock; (iii) securities convertibleinto common stock; and (iv) rights to subscribe to common stock.Of these securities the Fund generally invests in common stock. Inselecting securities, Fund management emphasizes commonstock of companies that have above-average rates of earningsgrowth. Fund management believes that the common stock ofcompanies with above-average rates of earnings growthfrequently have the potential for above-average increases in price.The Fund may invest in companies of any size but emphasizescommon stock of companies that have a medium to large stockmarket capitalization (current, approximately $2 billion or more).

Principal Risks of Investing – The Fund is subject to the marketand selection risks of equity investments, growth investmentsand to the risks of Mid Cap securities.

BlackRock Large Cap Core FundInvestment Objectives, Strategy and Policies – The investmentobjective of the Fund is to seek long-term capital growth. TheFund invests all of its assets in the Master Large Cap CorePortfolio of the Master Large Cap Series LLC (the MasterPortfolio). The Master Portfolio has the same investment objectiveas the Fund. The Master Portfolio tries to achieve its objective byinvesting primarily in a diversified portfolio of equity securities oflarge cap companies, selected from companies in the Russell1000® Index, that management believes have sustainableearnings growth with current momentum at attractive pricevaluations. Management combines a quantitative model thatemploys various factors with fundamental analysis to find theselarge cap companies. The Master Portfolio's evaluation of theprospects for a company's industry or market sector is animportant factor in evaluating a particular company's earningsprospects. A company's stock is considered to be undervaluedwhen its price is less than what management believes it is worth.The Master Portfolio may purchase common stock, preferredstock, convertible securities and other instruments.

Principal Risks of Investing – The Fund is subject to the marketand selection risks of equity investments, and investing in theMaster Portfolio. The Fund cannot guarantee that it will achieveits investment objective. As with any fund, the value of a Fund’sinvestments – and, therefore, the value of the Fund’s shares –may fluctuate. These changes may occur because a particularmarket in which the Fund invests is rising or falling. In addition,there are specific factors that may affect the value of a particularsecurity. Also, Fund management may select securities thatunderperform the markets, the relevant indices or securitiesselected by other funds with similar investment objectives andinvestment strategies. If the value of a Fund’s investments goesdown, you may lose money. The Fund follows an investing stylethat emphasizes growth and value investments.

DOMESTIC EQUITY FUNDS


BlackRock S&P 500® Index FundInvestment Objectives, Strategy and Policies – The investmentobjective of the Fund is to match the performance of the Standard& Poor’s 500 Composite Stock Price Index (the “S&P 500”) asclosely as possible before the deduction of Fund expenses. TheS&P 500 is a market-weighted index composed of 500 commonstocks issued by large-capitalization U.S. companies in a widerange of businesses. The Fund may also invest in derivativeinstruments linked to the S&P 500. At times the Fund may notinvest in all of the common stocks in the S&P 500, or in the sameweightings as in the S&P 500. At those times, the Fund choosesinvestments so that the market capitalizations, industry weightingand other fundamental characteristics of the stocks and derivativeinstruments chosen are similar to the S&P 500 as a whole.

Principal Risks of Investing – The Fund is subject to the marketand selection risks of equity investments as well as the risks andspecial considerations associated with investing in an index fund.

BlackRock Value Opportunities Fund, Inc.Investment Objectives, Strategy and Policies – The investmentobjective of the Fund is to seek long term growth of capital. TheFund tries to achieve its objective by investing primarily in adiversified portfolio of securities, primarily common stock, ofrelatively small companies that Fund management believes havespecial investment value and emerging growth companiesregardless of size. Fund management will look for companiesthat have long-term potential to grow in size or to become moreprofitable or that the stock market may value more highly in thefuture. Fund management seeks to invest in small companiesthat are trading at the low end of their historical price-book valueor enterprise value-sales ratios, and that possess a specificcatalyst for stock price appreciation. Fund management alsoseeks to invest in emerging growth companies that occupy

dominant positions in developing industries, have strongmanagement and demonstrate successful product developmentand marketing capabilities. The Fund will invest primarily in U.S.companies that do most of their business in the United States, butmay invest a portion of its assets in foreign companies.

Principal Risks of Investing – The Fund is subject to the marketand selection risks of equity investments as well as the specialrisks of investing in smaller and emerging growth companies andforeign securities and derivatives.

BlackRock Small Cap Growth Fund IIInvestment Objectives, Strategy and Policies – The investmentobjective of the Fund is to seek long-term capital growth. Currentincome from dividends and interest will not be an importantconsideration in selecting portfolio securities. The Fund tries toachieve its objective by investing primarily in a diversifiedportfolio of equity securities of small cap companies located inthe U.S. that Fund management believes have above averageprospects for earnings growth. The Fund also may invest insecurities that Fund management believes are undervalued. Inaddition, the Fund may invest up to 10% of its assets in stocks ofcompanies of any market capitalization located outside the U.S.The Fund's evaluation of the prospects for a company's industryor market sector is an important factor in evaluating a particularcompany's earnings prospects. A company's stock is consideredto be undervalued when its price is less than what Fundmanagement believes it is worth. The Fund may purchasecommon stock, preferred stock, convertible securities and otherinstruments.

Principal Risks of Investing – The Fund is subject to the marketand selection risks of equity investments as well as the specialrisks of investing in smaller and emerging growth companies,convertible securities, derivatives and foreign securities.

BlackRock International Index FundInvestment Objectives, Strategy and Policies – The investmentobjective of the International Index Fund is to match the performanceof the Morgan Stanley Capital International (“MSCI”) Europe,Australasia and Far East (Capitalization Weighted) Index in U.S. dollarswith net dividends (the “EAFE Index”) as closely as possible before thededuction of Fund expenses. The Fund invests in a statisticallyselected sample of equity securities included in the EAFE Index and inderivative instruments correlated with components of the EAFE Index.The Fund will, under normal circumstances, invest in all of thecountries represented in the EAFE Index. The Fund may not, however,invest in all of the companies within a country represented in the EAFEIndex, or in the same weightings as in the EAFE Index.

Principal Risks of Investing – The Fund is subject to the marketand selection risks of equity investments as well as the risks and

special considerations associated with investing in an index fund.The Fund may also invest in foreign securities and is subject torisks associated with investments in these securities. In addition,as a non-diversified fund, the Fund may have more risk thandiversified funds.

BlackRock International Value FundInvestment Objectives, Strategy and Policies – The Fund’sinvestment objective is to seek current income and long-termgrowth of income, accompanied by growth of capital. The Fundinvests primarily in stocks of companies in developed countrieslocated outside the United States. The Fund may purchasecommon stock, depository receipts, preferred stock andconvertible securities. Normally, the Fund invests at least 80% ofits total assets in stocks that pay dividends. In investing the

48

INTERNATIONAL EQUITY FUNDS

49


BlackRock Short Term Bond FundInvestment Objectives, Strategy and Policies – The investmentobjective of the Fund is to seek to maximize total return, consistentwith income generation and prudent investment management. Undernormal circumstances, the Fund normally invests at least 80% of itsassets in bonds and maintains an average portfolio duration that iswithin ±20% of the duration of its benchmark. The Fund only buyssecurities that are rated investment grade at the time of purchase byat least one major rating agency or determined by the Fundmanagement team to be of similar quality. In addition, the Fund’sdollar-weighted average maturity will be between 3 and 10 years.

The Fund selects bonds from several sectors including: U.S.Treasuries and agency securities, commercial and residentialmortgage-backed securities, collateralized mortgage obligations,asset-backed securities and corporate bonds. The Fund investsprimarily in dollar-denominated investment grade bonds, but mayinvest up to 10% of its assets in non-dollar denominated bondsand bonds of emerging market issuers. The Fund also invests inderivatives and may seek to obtain market exposure to thesecurities in which it primarily invests by entering into a series ofpurchase and sale contracts or by using other investmenttechniques such as reverse repurchase agreements or dollarrolls. The Fund may engage in active and frequent trading ofportfolio securities to achieve its primary investment strategies.

Principal Risks of Investing – The Fund is subject to the risks of fixedincome investments, including credit risk, interest rate risk, borrowingrisk, derivatives risk, dollar rolls risk, emerging markets risk, leveragerisk, market and selection risk, and U.S. government issuer risk. TheFund may invest in mortgage-backed and asset-backed securities. Inaddition to the normal fixed income investment risks, these securitiesare subject to prepayment risk and extension risk, and may involvemore volatility than other bonds of similar maturities. The Fund is alsosubject to the special risks associated with investments in foreignsecurities, derivatives, and sovereign debt. High portfolio turnoverresulting from active and frequent trading results in higher mark upsand other transaction costs and can result in a greater amount ofdividends from ordinary income rather than capital gains.

BlackRock Total Return Fund

Investment Objectives, Strategy and Policies – The primaryobjective of the Total Return Fund is to realize a total return thatexceeds that of the Barclays Capital U.S. Aggregate Index. The Fundtypically invests more than 90% of its assets in a diversified portfolioof fixed income securities such as corporate bonds and notes,mortgage backed securities, asset-backed securities, convertible

securities, preferred securities and government obligations. Both U.S.and foreign companies and governments may issue these securities.

Under normal circumstances, the Fund invests at least 80% of itsassets in bonds and invests primarily in investment grade fixed-income securities. The Fund may invest in fixed income securitiesof any duration or maturity. The Fund will invest most of its assetsin securities issued by U.S. issuers, but may also invest a portionof its assets in securities issued by foreign issuers. The Fund mayalso invest in derivative securities for hedging purposes or toincrease the return on its investments.

Principal Risks of Investing – The Fund is subject to the risks of fixedincome investments, such as interest rate risk and credit risk.The Fundmay invest its assets in foreign securities, which may involve additionalrisks beyond those of U.S. securities, such as changes in foreigncurrency exchange rates, liquidity risk, and political, social andeconomic instability. In addition, because the Fund may invest asubstantial portion of its assets in derivative instruments, the Fund isexposed to the risks associated with such investments. Derivativesmay be volatile and involve significant risks, including credit risk,counterparty risk (the risk that the counterparty in a transaction will beunable to honor its obligations), leverage risk (the risk that relativelysmall market movements may result in large changes in the value ofan investment) and liquidity risk (the risk that certain securities may bedifficult or impossible to sell at the time or price that the seller wouldlike). The Fund may invest in mortgage-backed and asset backedsecurities, which may be subject to prepayment risk (when interestrates fall) or extension risk (when interest rates rise). The Fund is alsosubject to the special risks associated with investments in foreignsecurities, derivatives, junk bonds and sovereign debt.

BlackRock Bond Portfolio

Investment Objectives, Strategy and Policies – The investmentobjective of the Fund is to seek to maximize total return,consistent with income generation and prudent investmentmanagement. Under normal circumstances, the Fund normallyinvests at least 80% of its assets in bonds and maintains anaverage portfolio duration that is within ±20% of the duration ofits benchmark. The Fund only buys securities that are ratedinvestment grade at the time of purchase by at least one majorrating agency or determined by the Fund management team to beof similar quality. In addition, the Fund’s dollar-weighted averagematurity will be between 3 and 10 years.

The Fund selects bonds from several sectors including: U.S.Treasuries and agency securities, commercial and residentialmortgage-backed securities, collateralized mortgage obligations,

INVESTMENT GRADE FIXED INCOME FUNDS

Fund’s assets, Fund management follows a value investing style.This means that Fund management buys stocks that it believesare currently undervalued by the market and thus have a lowerprice than their true worth.

Principal Risks of Investing – The Fund is subject to the marketand selection risks of equity investments and to the risk ofinvestment in foreign securities. In addition, the Fund is subject torisks associated with value investing, depository receipts andconvertible securities.

INTERNATIONAL EQUITY FUNDS

50


Many of the Portfolios invest in the Cash Allocation Account.

Investment Objectives – The Cash Allocation Account is a separateaccount that seeks current income, preservation of capital andliquidity. The Cash Allocation Account is invested directly in adiversified portfolio of money market securities, and Maine CDs.The Cash Allocation Account is not a registered mutual fund.

Principal Risks of Investing – An investment in the Cash AllocationAccount is not insured or guaranteed by any government agency,Bank of America, the Program Manager, the Sub-Advisors or

FAME and involves credit and interest rate risks. Investment inMaine CDs involve some of the special considerations discussedunder “PROGRAM AND PORTFOLIO RISKS AND OTHERCONSIDERATIONS-Investment Risks of Underlying Funds -Underlying Funds Investing in Fixed Income Securities (IncludingMoney Market Securities).”

Composition – Since September 5, 2001, the Cash AllocationAccount has been invested in securities substantially similar tothose held by the Retirement Reserves Money Fund (the “MoneyFund”), and Maine CDs.

Average Annual Total Returnas of June 30, 2010

* From August 5, 1999 through September 4, 2001, the Cash Allocation Account was invested in Class II shares of the Money Fund. For the period August 5,1999 through September 4, 2001, the average annual total return of the Money Fund’s Class II shares was 5.28%.

1 Year 3 Years 5 Years Since Inception Commencement of Operations

Cash Allocation Account 0.12% 1.95% 2.87% 2.10% September 5, 2001*

CASH ALLOCATION ACCOUNT

BlackRock High Income FundInvestment Objectives, Strategy and Policies – The investmentobjective of the Fund’s Investment Grade Portfolio is currentincome. The Fund also seeks capital appreciation whenconsistent with its primary goal of current income. The Fundinvests at least 80% of its assets primarily in a diversified portfolioof fixed income securities that are rated in the lower ratingcategories of the recognized rating agencies (Baa or lower byMoody’s or BBB or lower by S&P or Fitch), or unrated securitiesthat Fund management believes are of comparable quality.Securities rated below Baa by Moody's or below BBB by S&P orFitch are commonly known as “junk bonds.” The Fund may alsoinvest in foreign securities and secondary market purchases ofcorporate loans. The Fund may invest in fixed income securities ofany duration or maturity. The Fund may invest in derivativesecurities for hedging purposes or to increase the return oninvestments.

Principal Risks of Investing – The Fund may invest its assets inforeign securities, which may involve additional risks beyondthose of U.S. securities, such as changes in foreign currencyexchange rates, liquidity risk, and political, social and economicinstability. In addition, because the Fund may invest a substantialportion of its assets in derivative instruments, the Fund is exposedto the risks associated with such investments. Derivatives may bevolatile and involve significant risks, including credit risk,counterparty risk (the risk that the counterparty in a transactionwill be unable to honor its obligations), leverage risk (the risk thatrelatively small market movements may result in large changes inthe value of an investment) and liquidity risk (the risk that certainsecurities may be difficult or impossible to sell at the time or pricethat the seller would like). The Fund is subject to the general risksof fixed income investments such as interest rate risk and creditrisk and to the separate risks associated with junk bonds. TheFund is also subject to the risk of investing in corporate loans.

NON-INVESTMENT GRADE FIXED INCOME FUND

asset-backed securities and corporate bonds. The Fund investsprimarily in dollar-denominated investment grade bonds, but mayinvest up to 10% of its assets in non-dollar denominated bondsand bonds of emerging market issuers. The Fund also invests inderivatives and may seek to obtain market exposure to thesecurities in which it primarily invests by entering into a series ofpurchase and sale contracts or by using other investmenttechniques such as reverse repurchase agreements or dollarrolls. The Fund may engage in active and frequent trading ofportfolio securities to achieve its primary investment strategies.

Principal Risks of Investing – The Fund is subject to the risks of fixed

income investments, including credit risk, interest rate risk, borrowingrisk, derivatives risk, dollar rolls risk, emerging markets risk, leveragerisk, market and selection risk, and U.S. government issuer risk. TheFund may invest in mortgage-backed and asset-backed securities. Inaddition to the normal fixed income investment risks, these securitiesare subject to prepayment risk and extension risk, and may involvemore volatility than other bonds of similar maturities. The Fund is alsosubject to the special risks associated with investments in foreignsecurities, derivatives, and sovereign debt. High portfolio turnoverresulting from active and frequent trading results in higher mark upsand other transaction costs and can result in a greater amount ofdividends from ordinary income rather than capital gains.


51


iSHARES PORTFOLIOS

DomesticEquity 58%


Real Estate6%


iShares Age-Based 0-7 Years Portfolio

DomesticEquity 44%


Real Estate4%



DomesticEquity 33%


Real Estate3%



DomesticEquity 22%



Real Estate2%


DomesticEquity 15%



Real Estate1%


DomesticEquity 4% International

Equity 1%


iShares Age-Based 20+ Years Portfolio

The following charts illustrate the current target asset allocation of each iShares Age-Based Portfolio.

52


The following charts illustrate the current target asset allocation of each iShares Diversified Portfolio.

Real Estate7%

DomesticEquity 73%


iShares DiversifiedEquity Portfolio

Investment GradeFixed Income

80%

Non-Investment GradeFixed Income

20%

iShares DiversifiedFixed Income Portfolio

Current Target Underlying Fund Allocations – The following chart illustrates the current target asset allocations and the current targetUnderlying Fund allocations within those target asset allocations for the iShares Age-Based Portfolios. This information is presented forinformational purposes only.

iShares Age-Based PortfoliosAge-Based Age-Based Age-Based Age-Based Age-Based Age-Based0-7 Years 8-10 Years 11-13 Years 14-16 Years 17-19 Years 20+ Years

Underlying Fund Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio


iShares Russell 1000 Index Fund 48% 36% 27% 18% 12% 3%

iShares Russell 2000 Index Fund 10% 8% 6% 4% 3% 1%


iShares MSCI EAFE Index Fund 12% 9% 7% 5% 3% 1%

iShares MSCI Emerging Markets Index Fund 4% 3% 2% 1% 1% 0%

Real Estate Fund

iShares Cohen & Steers Realty Majors Index Fund 6% 4% 3% 2% 1% 0%


iShares Barclays Aggregate Bond Fund 20% 40% 55% 70% 35% 10%

iShares Barclays Short Treasury Bond Fund 0% 0% 0% 0% 15% 65%

iShares Barclays 1-3 Year Treasury Bond Fund 0% 0% 0% 0% 30% 20%

53

BLACKROCK PORTFOLIOSCurrent Target Underlying Fund Allocations – The following charts illustrate the current target asset allocations and the current target UnderlyingFund allocations within those target asset allocations for the iShares Diversified Portfolios.This information is presented for informational purposes only.

iSharesUnderlying Fund Diversified Equity Portfolio Diversified Fixed Income Portfolio


iShares Russell 1000 Index Fund 60% 0%

iShares Russell 2000 Index Fund 13% 0%


iShares MSCI EAFE Index Fund 16% 0%

iShares MSCI Emerging Markets Index Fund 4% 0%

Real Estate Fund

iShares Cohen & Steers Realty Majors Index Fund 7% 0%


iShares Barclays Aggregate Bond Fund 0% 40%

iShares Barclays Short Treasury Bond Fund 0% 1%

iShares Barclays 1-3 Year Treasury Bond Fund 0% 39%

Non-Investment Grade Fixed Income Fund

iShares iBoxx $ High Yield Corporate Bond Fund 0% 20%

Historical Investment Performance – Since the iSharesPortfolios will commence operations on September 20, 2010, noperformance information for these Portfolios is presented.Portfolio performance information will be available on theProgram’s website at www.nextgenplan.com. Past performanceinformation for the iShares Portfolios is not indicative of thefuture performance of the iShares Portfolios.

Summary of Investment Objectives and Policies of theUnderlying Funds for the iShares Portfolios – An index is a groupof securities that an index provider selects as representative of amarket, market segment or specific industry sector. The indexprovider determines the relative weightings of the securities in theindex and publishes information regarding the market value of theindex. Each Underlying Fund of the iShares Portfolios (other than theCash Allocation Account) (an "Underlying ETF") is an “index fund”that seeks investment results that correspond generally to the priceand yield performance, before fees and expenses, of a particularindex (its “Underlying Index”) as developed by an index provider.

Each Underlying ETF's index generally includes investments insecurities that correspond generally to one of the below assetclasses, as set forth in the tables on the previous pages. Theasset classes are defined as follows:

U.S. Equities – U.S. domiciled publicly traded common stocks.International Equities – Non-U.S. domiciled publicly tradedcommon stocks.Real Estate – Property and real estate as represented by REITs.Fixed Income – Bonds and other income-producing debt securities.

BlackRock Fund Advisors ("BFA"), the investment adviser to eachUnderlying ETF, is a subsidiary of BlackRock Institutional Trust Company,N.A. ("BTC").BFA and its affiliates are not affiliated with the index provider.

Principal Investment Strategies of the Underlying ETFs – BFA uses a“passive” or indexing approach to achieve each Underlying ETF'sinvestment objective. Unlike many investment companies, the UnderlyingETFs do not try to “beat”the indexes they track and do not seek temporarydefensive positions when markets decline or appear overvalued.

Indexing may eliminate the chance that the Fund will substantiallyoutperform its Underlying Index but also may reduce some of therisks of active management, such as poor security selection. Factorssuch as the fees and expenses of an Underlying Fund, rounding ofprices, and changes to an index and regulatory policies, may affectthe advisor’s ability to achieve close correlation with an index.Therefore, the return of an Underlying Fund that seeks to track anindex may deviate from that of the index. All Underlying ETFs mayinvest a portion of their assets in futures contracts, options onfutures contracts, options, and swaps related to its Underlying Index,as well as cash and cash equivalents, including shares of moneymarket funds affiliated with BFA. For all Underlying ETFs, BFA usesa representative sampling indexing strategy.

These summaries are qualified in their entirety by reference tothe detailed information included in each Underlying Fund’scurrent prospectus and statement of additional information,which contain additional information not summarized hereinand which may identify additional principal risks to which therespective Underlying Fund may be subject. You may requesta copy of any Underlying Fund’s current prospectus andstatement of additional information, or an Underlying Fund’smost recent semi-annual or annual report. BFA, the investmentadviser of iShares® Funds, is located at 400 Howard Street, SanFrancisco, CA 94105. Additional information about iSharesFunds is available free of charge by calling toll-free: 1-800-iShares (1-800-474-2737) or by visiting www.iShares.com.

54


iShares Russell 1000 Index FundInvestment Objectives, Strategy and Policies – iShares Russell1000 Index Fund seeks results that correspond generally to the priceand yield performance, before fees and expenses, of the Russell1000 Index (the “Russell 1000”).The Russell 1000 is a float-adjustedcapitalization-weighted index of equity securities issued by theapproximately 1,000 largest issuers in the Russell 3000 Index. TheRussell 1000 measures the performance of the large-capitalizationsector of the U.S. equity market. The Fund may also invest anyportion of its assets in securities not included in the Russell 1000,and in futures contracts, options on futures contracts, options andswaps as well as cash and cash equivalents, including shares ofmoney market funds. The Fund may not invest in all of the equitysecurities in the Russell 1000, or in the same weightings as in theRussell 1000. The Fund chooses investments that are expected tohave, in the aggregate, investment characteristics (based on factorssuch as market capitalization and industry weightings), fundamentalcharacteristics (such as return variability and yield) and liquiditymeasures similar to those of the Russell 1000 as a whole.


iShares Russell 2000 Index FundInvestment Objectives, Strategy and Policies – The iSharesRussell 2000 Index Fund seeks results that correspond generally tothe price and yield performance, before fees and expenses, of theRussell 2000 Index (the “Russell 2000”). The Russell 2000 is acapitalization-weighted index of equity securities issued by theapproximately 2,000 smallest issuers in the Russell 3000 Index.TheUnderlying Index measures the performance of the small-capitalization sector of the U.S. equity market. The Fund may alsoinvest in securities not included in the Russell 2000, and in futurescontracts, options on futures contracts, options and swaps as wellas cash and cash equivalents, including shares of money marketfunds. The Fund may not invest in all of the equity securities in theRussell 2000, or in the same weightings as in the Russell 2000. TheFund chooses investments that are expected to have, in theaggregate, investment characteristics (based on factors such asmarket capitalization and industry weightings), fundamentalcharacteristics (such as return variability and yield) and liquiditymeasures similar to those of the Russell 2000 as a whole.


iShares MSCI EAFE Index FundInvestment Objectives, Strategy and Policies – The iSharesMSCI EAFE Index Fund seeks results that correspond generally to

the price and yield performance, before fees and expenses, of theMSCI EAFE Index (the “MSCI EAFE”). The MSCI EAFE has beendeveloped by MSCI as an equity benchmark for internationalstock performance. The MSCI EAFE includes stocks from Europe,Australasia and the Far East and as of September 30, 2009,consisted of the following 21 developed market country indexes:Australia, Austria, Belgium, Denmark, Finland, France, Germany,Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, NewZealand, Norway, Portugal, Singapore, Spain, Sweden,Switzerland and the United Kingdom. The Fund may also investin American Depositary Receipts (“ADRs”), Global DepositaryReceipts (“GDRs”) or European Depositary Receipts (“EDRs”)representing securities in the MSCI EAFE Index, in securities notincluded in the MSCI EAFE, and in futures contracts, options onfutures contracts, options and swaps as well as cash and cashequivalents, including shares of money market funds. The Fundmay not invest in all of the equity securities in the MSCI EAFE, orin the same weightings as in the MSCI EAFE. The Fund choosesinvestments that are expected to have, in the aggregate,investment characteristics (based on factors such as marketcapitalization and industry weightings), fundamentalcharacteristics (such as return variability and yield) and liquiditymeasures similar to those of the MSCI EAFE as a whole.

Principal Risks of Investing – The Fund is subject to the marketand selection risks of equity investments as well as the risks andspecial considerations associated with investing in foreignsecurities and an index fund.

iShares MSCI Emerging Markets Index FundInvestment Objectives, Strategy and Policies – The iSharesMSCI Emerging Markets Index Fund seeks investment resultsthat correspond generally to the price and yield performance,before fees and expenses, of the MSCI Emerging Markets Index.The iShares MSCI Emerging Markets Index Fund generally willinvest at least 90% of its assets in securities of the MSCIEmerging Markets Index or in ADRs and GDRs representing suchsecurities. In order to improve portfolio liquidity and give the fundthe flexibility to comply with the requirements of the U.S. InternalRevenue Code and other regulatory requirements and to managefuture corporate actions and index changes in smaller markets,the iShares MSCI Emerging Markets Index Fund may invest theremainder of its securities that are not included in the MSCIEmerging Markets Index or in ADRs and GDRs representing suchsecurities. The iShares MSCI Emerging Markets Index Fund mayinvest the remainder of its assets in other iShares funds that seekto track the performance of equity securities of constituentcountries of the MSCI Emerging Markets Index. BFA will notcharge portfolio management fees on that portion of the Fund’sassets invested in shares of other iShares funds. The MSCIEmerging Markets Index was developed by MSCI as an equitybenchmark for international stock performance. The MSCI

iSHARES® FUNDS


Emerging Markets Index is designed to measure equity marketperformance in the global emerging markets.

Principal Risks of Investing – The Fund is subject to the marketand selection risks of equity investments as well as the risks andspecial considerations associated with investing in foreignsecurities, including emerging market securities, and an index fund.

iShares Cohen & Steers Realty Majors Index FundInvestment Objectives, Strategy and Policies – The iSharesCohen & Steers Realty Majors Index Fund seeks investmentresults that correspond generally to the price and yieldperformance, before fees and expenses, of the Cohen & SteersRealty Majors Index. The Cohen & Steers Realty Majors Indexconsists of selected U.S. REITs. The objective of the Cohen &Steers Realty Majors Index is to represent relatively large andliquid REITs that may benefit from future consolidation andsecuritization of the U.S. real estate industry. REITs are selectedfor inclusion in the Cohen & Steers Realty Majors Index based ona rigorous review of several factors, including management,portfolio quality, and sector and geographic diversification. TheCohen & Steers Realty Majors Index is weighted according to thetotal market value of each REIT’s outstanding shares and isadjusted quarterly so that no REIT represents more than 8% ofthe Cohen & Steers Realty Majors Index.

Principal Risks of Investing – The Fund is subject to the marketand selection risks of equity investments as well as the risks andspecial considerations associated with investing in real estateand an index fund.

iShares Barclays Aggregate Bond FundInvestment Objectives, Strategy and Policies – The investmentobjective of the Fund is to match the price and yield performance,before fees and expenses, of the Barclays Capital U.S. AggregateBond Index (the “Barclays Aggregate Bond Index”). The BarclaysAggregate Bond Index measures the performance of the U.S.investment grade bond market, which includes investment gradeU.S. Treasury bonds, government-related bonds, investment-grade corporate bonds, mortgage pass-through securities,commercial mortgage-backed securities and asset-backedsecurities that are publicly offered for sale in the United States.The securities in the Barclays Aggregate Bond Index have $250million or more of outstanding face value and have at least oneyear remaining to maturity. In addition, the securities must bedenominated in U.S. dollars and must be fixed-rate and non-convertible. Certain types of securities, such as state and localgovernment series bonds, structured notes with embeddedswaps or other special features, private placements, floating-ratesecurities and Eurobonds are excluded from the BarclaysAggregate Bond Index. The Barclays Aggregate Bond Index ismarket capitalization weighted and the securities in the BarclaysAggregate Bond Index are updated on the last calendar day ofeach month. The Fund may also invest in securities not included

in the Barclays Aggregate Bond Index, and in cash and high-quality, liquid short-term instruments, including shares of moneymarket funds, for example, in order to reflect various corporateactions (such as mergers) and other changes in the BarclaysAggregate Bond Index (such as reconstitutions, additions anddeletions). The Fund may not invest in all of the bonds in theBarclays Aggregate Bond Index, or in the same weightings as inthe Barclays Aggregate Bond Index.

Principal Risks of Investing – The Fund is subject to the risksof fixed income investments as well as the risks and specialconsiderations associated with investing in an index fund.

iShares Barclays Short Treasury Bond FundInvestment Objectives, Strategy and Policies – The investmentobjective of the Fund is to match the price and yield performance,before fees and expenses, of the Barclays Capital U.S. ShortTreasury Bond Index (the “Barclays U.S. Short Treasury BondIndex”). The Barclays U.S. Short Treasury Bond Index measuresthe performance of public obligations of the U.S. Treasury thathave a remaining maturity of between one and 12 months. TheBarclays U.S. Short Treasury Bond Index includes all publicly-issued U.S. Treasury securities that have a remaining maturity ofbetween one and 12 months and have $250 million or more ofoutstanding face value. In addition, the securities must bedenominated in U.S. dollars and must be fixed-rate and non-convertible. Excluded from the Barclays U.S. Short Treasury BondIndex are certain special issues, such as flower bonds, targetedinvestor notes, state and local government series bonds andcoupon issues that have been stripped from bonds. The BarclaysU.S. Short Treasury Bond Index is market capitalization weightedand the securities in the Barclays U.S. Short Treasury Bond Indexare updated on the last calendar day of each month. The Fundmay also invest in securities not included in the Barclays U.S.Short Treasury Bond Index, and in cash and high-quality, liquidshort-term instruments, including shares of money market funds,for example, in order to reflect various corporate actions (such asmergers) and other changes in the Barclays U.S. Short TreasuryBond Index (such as reconstitutions, additions and deletions).The Fund may not invest in all of the bonds in the Barclays U.S.Short Treasury Bond Index, or in the same weightings as in theBarclays U.S. Short Treasury Bond Index.


iShares Barclays 1-3 Year Treasury Bond FundInvestment Objectives, Strategy and Policies – The investmentobjective of the Fund is to match the price and yield performance,before fees and expenses, of the Barclays 1-3 Year Treasury Index(the “Barclays 1-3 Year Treasury Index”). The Barclays 1-3 YearTreasury Index measures the performance of public obligations ofthe U.S. Treasury that have a remaining maturity of greater than

55

56


or equal to one year and less than three years. The Barclays 1-3Year Treasury Index includes all publicly-issued U.S. Treasurysecurities that have a remaining maturity of greater than or equalto one year and less than three years, are rated investment grade,and have $250 million or more of outstanding face value. Inaddition, the securities must be denominated in U.S. dollars andmust be fixed-rate and non-convertible. Excluded from theBarclays 1-3 Year Treasury Index are state and local governmentseries bonds and coupon issues that have been stripped frombonds. The Barclays 1-3 Year Treasury Index is marketcapitalization weighted and the securities in the Barclays 1-3 YearTreasury Index are updated on the last calendar day of eachmonth. In addition, the securities must be denominated in U.S.dollars and must be fixed-rate and non-convertible. Excludedfrom the Barclays 1-3 Year Treasury Index are state and localgovernment series bonds and coupon issues that have beenstripped from bonds. The Barclays 1-3 Year Treasury Index ismarket capitalization weighted and the securities in the Barclays1-3 Year Treasury Index are updated on the last calendar day ofeach month. The Fund may also invest in securities not includedin the Barclays 1-3 Year Treasury Index, and in cash and high-quality, liquid short-term instruments, including shares of moneymarket funds, for example, in order to reflect changes in itsUnderlying Index (such as reconstitutions, additions and

deletions). The Fund may not invest in all of the bonds in theBarclays 1-3 Year Treasury Index, or in the same weightings as inthe Barclays 1-3 Year Treasury Index.


iShares iBoxx $ High Yield Corporate Bond FundInvestment Objectives, Strategy and Policies – The Fundseeks investment results that correspond generally to the priceand yield performance, before fees and expenses, of the iBoxx$ Liquid High Yield Index (the “Underlying Index”). The UnderlyingIndex is a rules-based index consisting of liquid U.S. dollar-denominated, high yield corporate bonds for sale in the UnitedStates, as determined by the Index Provider. The Underlying Indexis designed to provide a broad representation of the U.S. dollar-denominated high yield liquid corporate bond market. TheUnderlying Index is a modified market value weighted index.


The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Cohen & Steers Capital Management, Inc., iBoxx®, MSCI Inc., Russell Investment Groupor Barclays Capital. None of these companies make any representation regarding the advisability of investing in the Funds. Neither BlackRock Institutional TrustCompany, N.A., nor any of their affiliates, are affiliated with the companies listed above.

The methodology of the iBoxx® $ Liquid High Yield Index is owned by International Index Company Limited, may be covered by one or more patents or pendingpatent applications, and is provided under license from International Index Company Limited.

iShares® is a registered trademark of BlackRock Institutional Trust Company, N.A. All other trademarks, servicemarks or registered trademarks are the property oftheir respective owners.

57

FRANKLIN TEMPLETON PORTFOLIO

FRANKLIN TEMPLETONPORTFOLIO

General – Substantially all of the assets of the Franklin TempletonBalanced Portfolio are invested in Institutional Class shares of theUnderlying Fund(s) that are recommended by Franklin Templetonand approved by FAME for use. A portion of the FranklinTempleton Balanced Portfolio may be held in the Cash AllocationAccount as described under “THE NEXTGEN PORTFOLIOS.”

All of the Underlying Funds (excluding the Cash AllocationAccount) in which the Franklin Templeton Balanced Portfolioinvests are currently managed by the advisory subsidiaries ofFranklin Resources, Inc. (NYSE: BEN), an investment organizationoperating as Franklin Templeton Investments, which had $570.5billion in assets under management as of June 30, 2010. FranklinTempleton currently manages over 132 mutual funds registeredunder the Investment Company Act of 1940.

CashAllocation

Account 10%

DomesticEquity 35%



Non-InvestmentGrade FixedIncome 5%

Franklin TempletonBalanced Portfolio

The following chart illustrates the current target asset allocationof the Franklin Templeton Balanced Portfolio.

Current Target Underlying Fund Allocation – The following chart illustrates the current target asset allocation and the current targetUnderlying Fund allocation within that target asset allocation for the Franklin Templeton Balanced Portfolio. This information is presentedfor informational purposes only.

Franklin TempletonUnderlying Fund Balanced Portfolio


Franklin Flex Cap Growth Fund 12.50%

Franklin Small-Mid Cap Growth Fund 12.50%

Mutual Shares Fund 10.00%


Mutual European Fund 10.50%

Templeton Foreign Fund 4.50%


Franklin Total Return Fund 10.00%

Franklin U.S. Securities Fund 20.00%

Templeton Global Bond Fund 5.00%

Non-Investment Grade Fixed Income Funds

Franklin Strategic Income Fund 5.00%

Cash Allocation Account

Cash Allocation Account 10.00%

58

FRANKLIN TEMPLETON PORTFOLIO

Historical Investment Performance – The following tablesummarizes the average annual total return after deductingongoing Portfolio fees of the Franklin Templeton Portfolio as ofJune 30, 2010. The $25 annual Account Maintenance Fee,which is waived in certain circumstances, is not included in thereturns set forth below. If that fee were reflected, returns wouldbe less than those shown. Updated performance data will beavailable on the Internet at www.nextgenplan.com or from the

Program Manager by calling (877) 4-NEXTGEN (463-9843). TheFranklin Templeton Portfolio’s fiscal year runs from July 1 toJune 30, which also is the Program’s fiscal year. Theperformance data relating to the Franklin Templeton Portfolioset forth below is for the limited time period presented and isnot indicative of the future performance of the FranklinTempleton Portfolio.

Summary of Investment Objectives and Policies of theUnderlying Funds for the Franklin Templeton BalancedPortfolio – The following descriptions summarize the investmentgoals and policies of the Underlying Funds in which the FranklinTempleton Balanced Portfolio is currently invested. The CashAllocation Account is described on page 50 of this ProgramDescription. The descriptions also identify certain principal risksto which particular Underlying Funds may be subject. Additionaldiscussion of risks related to the various categories of UnderlyingFunds is set forth under “PROGRAM AND PORTFOLIO RISKS ANDOTHER CONSIDERATIONS.” The investment strategy and risks ofeach Underlying Fund is subject to change.

These summaries are qualified in their entirety by referenceto the detailed information included in each UnderlyingFund’s current prospectus and statement of additionalinformation, which contain additional information notsummarized herein and which may identify additionalprincipal risks to which the respective Underlying Fund maybe subject. You may request a copy of any Underlying Fund’scurrent prospectus or statement of additional information, orthe Underlying Fund’s most recent semi-annual or annualreport by calling Franklin Templeton Investments at1-800/DIAL BEN® (1-800/342-5236) or by locating it onFranklin Templeton’s Web site at www.franklintempleton.com.

DOMESTIC EQUITY FUNDS

Franklin Flex Cap Growth FundInvestment Objectives, Strategy and Policies – The Fund’sinvestment goal is capital appreciation. The Fund seeks to meetthis goal by investing, under normal market conditions, in equitysecurities of companies the manager believes have the potentialfor capital appreciation. The Fund has the flexibility to invest incompanies located, headquartered, or operating inside the UnitedStates, across the entire market capitalization spectrum fromsmall, emerging growth companies to well-established, largecompanies. A substantial portion of the Fund’s investments maybe in smaller and mid-sized companies. The Fund may also investa substantial portion of its assets in equity securities ofcompanies headquartered or conducting a substantial portion oftheir operations in, or generating a substantial portion of theirrevenue from businesses within, the state of California. Whensuitable opportunities are available, the Fund may invest in initialpublic offerings of securities.

Principal Risks of Investing – The Fund is subject to the marketand selection risks of equity investments. The Fund is alsosubject to the special risks of investing in smaller, mid-sized, andemerging growth companies. Historically, smaller and mid-sizedcompany securities have been more volatile in price than largercompany securities, especially over the short-term. The Fundmay have significant investments in the financial servicessectors, which includes such issuers as commercial banks, thriftinstitutions, insurance companies and finance companies. As aresult, general market and economic conditions as well as otherrisks specific to the financial services industry may impact theFund’s investments and performance. The Fund’s investment intechnology sectors may be subject to abrupt or erratic pricemovements and may be more volatile, especially over the short-term, due to the rapid pace of product change and developmentaffecting such companies. To the extent that the Fund hassignificant investments in one or a few sectors, it bears more riskthan a fund which maintains broad sector diversification.


Commencement1 Year Since Inception of Operations


Franklin Templeton Balanced Portfolio N/A 8.30% 7/27/09

59

FRANKLIN TEMPLETON PORTFOLIODOMESTIC EQUITY FUNDS

Franklin Small-Mid Cap Growth FundInvestment Objectives, Strategy and Policies – The Fund’sinvestment goal is long-term capital growth. The Fund seeks tomeet its goal, under normal market conditions, by investing atleast 80% of its net assets in the equity securities of small-capitalization and mid-capitalization companies. For this Fund,mid-capitalization companies are those companies with marketcapitalization values not exceeding $8.5 billion and smallcapitalization companies are those companies with marketcapitalization values that do not exceed: (i) $1.5 billion; or (ii) thehighest market capitalization value in the Russell 2000 Index(that index consists of 2,000 small companies that have publiclytraded securities); whichever is greater, at the time of purchase.In most instances, the manager intends to hold an investment forfurther capital growth opportunities even if, through marketappreciation, the company’s market capitalization value exceedsthe small or mid capitalization measures described above. Inaddition to its main investments, the Fund may invest in equitysecurities of larger companies. The Fund, from time to time, mayhave significant portions of its assets in particular sectors such aselectronic technology and technology services.

Principal Risks of Investing – The Fund is subject to the marketand selection risks of equity investments as well as the specialrisks of investing in smaller, mid-size and emerging growthcompanies. To the extent that the Fund has significant investmentsin one or a few sectors, it bears more risk than a fund whichmaintains broad sector diversification. The Fund’s investment inthe electronic technology and technology services sectors may besubject to abrupt or erratic price movements and may be morevolatile, especially over the short term, due to the rapid pace ofproduct change and development affecting such companies.

Mutual Shares FundInvestment Objectives, Strategy and Policies – The Fund’sprincipal investment goal is capital appreciation, which mayoccasionally be short-term, with a secondary goal of income. TheFund seeks to meet its goal, under normal market conditions, byinvesting primarily in equity securities (including securitiesconvertible into, or that the manager expects to be exchanged for,common or preferred stock) of companies the manager believesare available at market prices less than their value based oncertain recognized or objective criteria (intrinsic value). Followingthis value-oriented strategy the Fund primarily invests in

undervalued stocks (stocks trading at a discount to intrinsicvalue). To a lesser extent, the Fund also invests in securities ofcompanies that are involved in restructurings and securities ofcompanies that are, or are about to be, involved inreorganizations, financial restructurings, or bankruptcy. TheFund’s investments in restructuring and distressed companiestypically involve the purchase of bank debt, lower rated ordefaulted debt securities, comparable unrated debt securities, orother indebtedness. The Fund invests primarily in mid- and largecapitalization companies with market capitalization valuesgreater than $1.5 billion. The Fund also may invest a portion of itsassets in small capitalization companies. The Fund may alsoengage from time to time in an “arbitrage” strategy. Whenengaging in an arbitrage strategy, the Fund typically buys onesecurity while at the same time selling short another security. TheFund generally buys the security that the manager believes iseither cheap relative to the price of the other security orotherwise undervalued, and sells short the security that themanager believes is either expensive relative to the price of theother security or otherwise overvalued. In doing so, the Fundattempts to profit from a perceived relationship between thevalue of the two securities. The Fund generally engages in anarbitrage strategy in connection with an announced corporaterestructuring, such as a merger, acquisition or tender offer, orother corporate action or event. The Fund may also invest up to35% of its total assets in foreign securities.

Principal Risks of Investing –The Fund is subject to the marketand selection risks of equity investments as well as the specialrisks of investing in smaller and emerging growth companies. TheFund may also invest in foreign securities and is subject to risksassociated with investment in these securities. The Fund issubject to the special risk of value investments, since theseinvestments may not increase in price as anticipated by themanager, and may decline even further if other investors favorinvesting in faster-growing companies, or if factors that theFund’s manager believes will increase the price do not occur. TheFund is also subject to the risk of fixed income investments,including interest rate risk, income risk and prepayment risk, andthe risk of convertible securities. In addition, Fund investmentsmay include companies engaged in mergers, reorganizations orliquidations, as well as lower-rated or defaulted bonds that entailhigher credit risks. Changes in an issuer’s financial strength or ina security’s credit rating may affect a security’s value, and thus,impact Fund performance.

60

FRANKLIN TEMPLETON PORTFOLIOINTERNATIONAL EQUITY FUNDS

Mutual European FundInvestment Objectives, Strategy And Policies – The Fund’sprincipal investment goal is capital appreciation, which mayoccasionally be short-term, with a secondary goal of income. TheFund seeks to meet its objective, under normal marketconditions, by investing at least 80% of its net assets in securitiesof European companies the manager believes are available atmarket prices less than their value based on certain recognizedor objective criteria (intrinsic value). Following this value-orientedstrategy the Fund primarily invests in undervalued stocks (stockstrading at a discount to intrinsic value). To a lesser extent, theFund also invests in securities of companies that are involved inrestructurings and securities of companies that are, or are aboutto be, involved in reorganizations, financial restructurings, orbankruptcy. The Fund’s investments in restructuring anddistressed companies typically involve the purchase of bank debt,lower-rated or defaulted debt securities, comparable unrateddebt securities, or other indebtedness. The Fund will normallyinvest in securities from at least five different countries, although,from time to time, it may invest all of its assets in a singlecountry. The Fund invests primarily in mid- and large-capitalization companies with market capitalization valuesgreater than $1.5 billion. The Fund also may invest a significantportion of its assets in small-capitalization companies. The Fundmay also engage from time to time in an “arbitrage” strategy.When engaging in an arbitrage strategy, the Fund typically buysone security while at the same time selling short another security.The Fund generally buys the security that the manager believesis either cheap relative to the price of the other security orotherwise undervalued, and sells short the security that themanager believes is either expensive relative to the price of theother security or otherwise overvalued. In doing so, the Fundattempts to profit from a perceived relationship between thevalue of the two securities. The Fund generally engages in anarbitrage strategy in connection with an announced corporaterestructuring, such as a merger, acquisition or tender offer, orother corporate action or event. The Fund may also invest up to20% of its total assets in securities of U.S. issuers, as well as insecurities of issuers from Levant, the Middle East and theremaining regions of the world. The Fund generally seeks tohedge (protect) against currency risks, largely using forwardcurrency exchange contracts.

Principal Risks Of Investing – The Fund is subject to the marketand selection risks of equity investments as well as the specialrisks of investing in smaller and emerging growth companies. TheFund may also invest in foreign securities and is subject to risksassociated with investment in these securities. The Fund issubject to the special risk of value investments, since these

investments may not increase in price as anticipated by themanager, and may decline even further if other investors favorinvesting in faster-growing companies, or if factors that theFund’s manager believes will increase the price do not occur. TheFund is subject to greater risk of adverse events which occur inEurope and may experience greater volatility than a fund that ismore broadly diversified geographically. In addition, Fundinvestments may include companies engaged in mergers,reorganizations or liquidations, as well as lower-rated ordefaulted bonds that entail higher credit risks. Changes in anissuer’s financial strength or in a security’s credit rating mayaffect a security’s value, and thus, impact Fund performance.

Templeton Foreign FundInvestment Objectives, Strategy And Policies – The Fund’sinvestment goal is long-term capital growth. The Fund seeks tomeet its goal, under normal market conditions, by investing atleast 80% of its net assets in “foreign securities,” which mayinclude emerging markets. “Foreign securities” means thosesecurities issued by companies: (1) whose principal securitiestrading markets are outside the U.S.; (2) that derive a significantshare of their total revenue from either goods or servicesproduced or sales made in markets outside the U.S.; (3) that havea significant portion of their assets outside the U.S.; (4) that arelinked to non-U.S. dollar currencies; or (5) that are organizedunder the laws of, or with principal offices in, another country.The Fund also invests in American, European and globaldepository receipts. The Fund may, from time to time, havesignificant investments in one or more countries or in particularsectors such as technology (including computer hardware andsoftware, electronics, and telecommunications) and financialinstitutions. Depending upon current market conditions, the Fundgenerally invests a portion of its total assets in debt securities ofcompanies and governments located anywhere in the world. TheFund may use various derivative strategies and may invest up to5% of its total assets in swap agreements.

Principal Risks Of Investing – The Fund is subject to the marketand selection risks of equity investments and to the risk ofinvestment in foreign securities. There is a special risk ofinvesting in foreign companies located in developing countries.The Fund is also subject to risks from the use of derivatives. TheFund is also subject to the risk of fixed income investments,including interest rate, income risk and prepayment risk. Becausethe Fund may from time to time have significant investments inone or a few sectors or countries, it will have more risk than afund which always maintains broad diversification among sectorsand countries. The technology sector has historically been volatiledue to the rapid pace of product change and development.

61

FRANKLIN TEMPLETON PORTFOLIOINVESTMENT GRADE FIXED INCOME FUNDS

Franklin Total Return FundInvestment Objectives, Strategy And Policies – The Fund’sprincipal investment goal is to provide high current income,consistent with preservation of capital. Its secondary goal is capitalappreciation over the long term.The Fund seeks to achieve its goal,under normal market conditions, by investing at least 80% of itsassets in investment grade debt securities. The Fund focuses ongovernment and corporate debt securities and mortgage andasset-backed securities. The mortgage securities purchased by theFund are generally issued or guaranteed by the U.S. government,its agencies or instrumentalities. These securities may be fixed-rate or adjustable rate mortgage securities (ARMS). The Fund mayinvest up to 20% of total assets in non-investment grade debtsecurities, including up to 5% in securities rated lower than B byStandard & Poor’s® (S&P®) or Moody’s, which may includedefaulted securities. The Fund may invest up to 20% of its totalassets in foreign securities and up to 10% of its total assets in non-U.S. dollar denominated securities. The Fund may also buy and sellfinancial futures contracts or options on such contracts in order tohelp manage risk relating to interest rates and other marketfactors, to increase liquidity, to invest in particular instruments in amore efficient or less expensive way, or to quickly and efficientlycause cash to be invested in the securities markets.

Principal Risks Of Investing – The Fund is subject to thegeneral risks of fixed income investments, including interest raterisk, income risk and prepayment risk, and credit risk. There areseparate risks associated with lower-rated securities whichgenerally have more risk than higher-rated securities. The Fundis also subject to a special risk associated with mortgagesecurities and asset-backed securities. The Fund is subject to therisk of investment in foreign securities. There is a special risk ofinvesting in foreign companies located in developing countries.The Fund is also subject to risks from the use of derivatives.

Franklin U.S. Government Securities FundInvestment Objectives, Strategy And Policies – The Fund’sinvestment goal is income. Under normal market conditions, theFund invests at least 80% of its net assets in U.S. governmentsecurities. The Fund presently invests substantially all of itsassets in Government National Mortgage Association obligations(Ginnie Maes). The Fund may also invest in other U.S. governmentsecurities which are backed by the full faith and credit of the U.S.government, such as U.S. Treasury STRIPS, bills, bonds andnotes, and in repurchase agreements collateralized by U.S.government securities. The Fund’s short-term investmentsinclude short-term government securities and cash.

Principal Risks Of Investing – The Fund is subject to the risksof Ginnie Maes, including risks of unscheduled prepayments ofprincipal and changes in the values of such prepayments. TheFund is also subject to the risk of fixed income investments,including interest rate risk, income risk and prepayment risk.

Templeton Global Bond FundInvestment Objectives, Strategy And Policies – The Fund’sinvestment goal is current income with capital appreciation andgrowth of income. Under normal market conditions, the Fundinvests at least 80% of its net assets in “bonds.” “Bonds” includedebt securities of any maturity, such as bonds, notes anddebentures. In addition, the Fund’s assets will be invested inissuers located in at least three countries (including the U.S.).Bonds represent an obligation of the issuer to repay a loan ofmoney to it, and generally provide for the payment of interest.Although the Fund may buy bonds rated in any category, it focuseson “investment grade” bonds. These are issues rated in the topfour rating categories by independent rating agencies such asStandard & Poor’s Ratings Group (S&P®) or Moody’s InvestorsService, Inc. (Moody’s) or, if unrated, determined by the Fund’smanager to be comparable. The Fund may invest up to 25% of itstotal assets in bonds that are rated below investment grade.Generally, lower rated securities pay higher yields than morehighly rated securities to compensate investors for the higher risk.The Fund also may invest a significant portion of its assets inemerging markets. The manager allocates the Fund’s assetsbased upon its assessment of changing market, political andeconomic conditions. It will consider various factors, includingevaluation of interest and currency exchange rate changes andcredit risks. When the manager believes market or economicconditions are unfavorable for investors, the manager may investup to 100% of the Fund’s assets in a temporary defensive mannerby holding all or a substantial portion of its assets in cash, cashequivalents or other high quality short-term investments.Temporary defensive investments generally may include short-term U.S. government securities, commercial paper, short-termbank time deposits, and bankers’ acceptances. The manager alsomay invest in these types of securities or hold cash while lookingfor suitable investment opportunities or to maintain liquidity. Inthese circumstances, the Fund may be unable to achieve itsinvestment goal.

Principal Risks Of Investing – The Fund is subject to thegeneral risks of fixed income investments and the separate risksassociated with lower-rated securities. These securities generallyhave more risk than higher-rated securities. The Fund is subjectto the risk of investing in foreign securities funds and the specialrisk of investing in bonds issued by less developed countries,sometimes called emerging markets. This Fund is a non-diversified fund, meaning it may invest a greater portion of itsassets in the securities of one or more issuers than a diversifiedfund. As a result, non-diversified funds have more risk thandiversified funds. Because the Fund may from time to time havesignificant investments in one or a few sectors, it will have morerisk than a Fund which always maintains broad diversificationamong sectors. The manager’s attempt to keep the Fund’sportfolio of bonds at an optimum level of interest rate sensitivitymay cause the Fund’s portfolio turnover rate to be high. Highturnover will increase the Fund’s transaction costs.

62

FRANKLIN TEMPLETON PORTFOLIONON-INVESTMENT GRADE FIXED INCOME FUND

Franklin Strategic Income FundInvestment Objectives, Strategy And Policies – The Fund’sprincipal investment goal is to earn a high level of current incomewith a secondary goal of capital appreciation over the long term.The Fund seeks to meet this objective by investing, under normalmarket conditions, at least 65% of its assets in U.S. and foreigndebt securities including those of emerging markets. The Fundshifts its investments among: (1) high yield and investment gradecorporate bonds and preferred stocks of issuers located in the U.S.and foreign countries, including emerging markets; (2) developedcountry (non-U.S.) government and agency bonds; (3) emergingmarket government and agency bonds; (4) U.S. government andagency bonds; (5) mortgage securities and other asset-backedsecurities; and (6) convertible securities, including bonds andpreferred stocks. The Fund may invest significantly in floating andvariable interest rate investments and may also invest a portion ofits assets in bank loans and loan participations. The Fund mayinvest up to 100% of its total assets in bonds that are rated belowinvestment grade, sometimes called “junk bonds.” The Fundgenerally invests in bonds rated at least Caa by Moody’s InvestorsService, Inc. or CCC by Standard & Poor’s® Rating Group. The Fundis a non-diversified fund, which means it may invest a greaterportion of its assets in the securities of one issuer than a diversifiedfund. The Fund may have significant investments in one or a fewsectors, such as telecommunications.

Principal Risks Of Investing – The Fund is subject to thegeneral risks of fixed income investments and the separate risksassociated with lower-rated securities. These securities generallyhave more risk than higher-rated securities. The Fund is subjectto the risk of investing in foreign securities funds and the specialrisk of investing in foreign companies located in emergingmarkets. The Fund is also subject to a special risk associatedwith mortgage securities and asset-backed securities. Inaddition, non-diversified funds have more risk than diversifiedfunds. Because the Fund may from time to time have significantinvestments in one or a few sectors, it will have more risk than afund which always maintains broad diversification amongsectors. The telecommunications sector has historically beenvolatile due to the rapid pace of product change anddevelopment.

MFS PORTFOLIO

MFS PORTFOLIO

General – All of the assets of the MFS Portfolio are invested inInstitutional Class shares of the Underlying Funds that arerecommended by MFS for that Portfolio and approved by FAMEfor use in the MFS Fixed Income Portfolio.

All of these Underlying Funds in which the MFS Fixed IncomePortfolio invests are currently managed by MFS or its affiliates.MFS is America’s oldest mutual fund organization. MFS and itsaffiliates had approximately $183.2 billion in assets undermanagement as of June 30, 2010. MFS and its affiliates currentlymanage over 130 investment companies registered under theInvestment Company Act of 1940. MFS Fixed Income Portfolio

The following chart illustrates the current target asset allocationof the MFS Fixed Income Portfolio.

Current Target Underlying Fund Allocation. The following chart illustrates the current target asset allocation and the current target UnderlyingFund allocation within that target asset allocation for the MFS Fixed Income Portfolio. This information is presented for informational purposes only.

Historical Investment Performance – The following tablesummarizes the average annual total return after deducting on-going Portfolio fees of the MFS Fixed Income Portfolio as of June30, 2010. The $25 annual Account Maintenance Fee, which iswaived in certain circumstances, is not included in the returns setforth below. If that fee were reflected, returns would be less thanthose shown. Updated performance data will be available on the

Internet at www.nextgenplan.com or from the Program Manager bycalling (877) 4-NEXTGEN (463-9843). The MFS Fixed IncomePortfolio’s fiscal year runs from July 1 to June 30, which also is theProgram’s fiscal year. The performance data relating to the MFSFixed Income Portfolio set forth below is for the limited timeperiod presented and is not indicative of the futureperformance of the MFS Fixed Income Portfolio.

MFSUnderlying Fund Fixed Income Portfolio


MFS Government Securities Fund 30%

MFS Research Bond Fund 40%

Non-Investment Grade Fixed Income Fund

MFS High Yield Opportunities Fund 30%




MFS Fixed Income Portfolio 17.52% 7.04% 6.32% 04/30/07

* Average annual total return is a hypothetical rate of return that, if achieved annually, would have produced the same cumulative total return if performancehad been constant over the entire period. (Cumulative total return reflects actual change in the value of an investment over a given period.) Average annualtotal return smoothes out variations in performance; it is not the same as actual year-by-year results. Returns covering periods of less than one year representcumulative total returns.

63

64

MFS PORTFOLIO

MFS Government Securities FundInvestment Objectives, Strategy and Policies – The Fund’sinvestment objective is to seek total return with an emphasis oncurrent income, but also considering capital appreciation. MFS,the Fund’s investment adviser, normally invests at least 80% ofthe Fund’s net assets in U. S. Government securities. U.S.Government securities are securities issued or guaranteed by theU.S. Treasury, by an agency or instrumentality of the U.S.Government, or by a U.S. Government-sponsored entity. CertainU.S. Government securities are not be supported as to thepayment of principal and interest by the full faith and credit of theU.S. Treasury or the ability to borrow from the U.S. Treasury. SomeU.S. Government securities are supported as to the payment ofprincipal and interest only by the credit of the entity issuing orguaranteeing the security. MFS generally invests substantiallyall of the Fund’s assets in investment grade debt instruments.Debt instruments represent obligations of corporations,governments, and other entities to repay money borrowed. MFSmay invest a relatively large percentage of the Fund’s assets inthe debt instruments of a single issuer or a small number ofissuers. MFS may use derivatives for any investment purpose,including to earn income and enhance returns, to increase ordecrease exposure to a particular market, to manage or adjustthe risk profile of the Fund, or as alternatives to directinvestments.

Principal Risks of Investing – The Fund is subject to the risk offixed income investments, including interest rate, credit, maturityand prepayment risk, to issuer focused risk and to active andfrequent trading risk, as well as the special risks of mortgage-backed securities, inflation-adjusted debt instruments andderivative securities. In addition, government guarantees apply tothe underlying securities only and not to the prices and yields ofthe managed fund.

MFS Research Bond Fund:Investment Objectives, Strategy and Policies – The Fund’sinvestment objective is to seek total return with an emphasis oncurrent income, but also considering capital appreciation. MFS,the Fund’s investment adviser, normally invests at least 80% ofthe Fund’s net assets in debt instruments. Debt instrumentsrepresent obligations of corporations, governments, and otherentities to repay money borrowed. MFS primarily invests theFund’s assets in investment grade debt instruments, but may alsoinvest in lower quality debt instruments. MFS may invest theFund’s assets in foreign securities, including emerging marketsecurities. MFS may use derivatives for any investment purpose,including to earn income and enhance returns, to increase ordecrease exposure to a particular market, to manage or adjustthe risk profile of the Fund, or as alternatives to directinvestments. A team of investment research analysts selectsinvestments for the Fund. MFS allocates the Fund’s assets toanalysts by sectors of the debt market.

Principal Risks of Investing - The Fund is subject to the risk offixed income investments, including interest rate, credit, maturity,and prepayment risk, to active or frequent trading risk, as well asthe special risks of lower-rated securities, foreign securities,including emerging market securities, derivative securities,inflation-adjusted debt instruments and municipal instruments.


Summary of Investment Objectives and Policies of theUnderlying Funds for the MFS Fixed Income Portfolio – Thefollowing descriptions summarize the investment goals andpolicies of the Underlying Funds in which the MFS Fixed IncomePortfolio is currently invested. The descriptions also identifycertain principal risks to which particular Underlying Funds maybe subject. Additional discussion of risks related to the variouscategories of Underlying Funds is set forth under “PROGRAM ANDPORTFOLIO RISKS AND OTHER CONSIDERATIONS.” Theinvestment objective of each Underlying Fund may be changedwithout shareholder approval. The investment strategy andpolicies of each Underlying Fund is also subject to change.

These summaries are qualified in their entirety by referenceto the detailed information included in each UnderlyingFund’s current prospectus and statement of additionalinformation, which contain additional information notsummarized herein and which may identify additionalprincipal risks to which the respective Underlying Fund maybe subject. You may request a copy of any Underlying Fund’scurrent prospectus and statement of additional information,or an Underlying Fund’s most recent semi-annual or annualreport by calling MFS at 1-800-225-2606 or by locating it onMFS’ Web site at www.mfs.com.

65

MFS PORTFOLIO

NON-INVESTMENT GRADE FIXED INCOME FUNDMFS High Yield Opportunities FundInvestment Objectives, Strategy and Policies – The Fund’sinvestment objective is to seek total return with an emphasis onhigh current income, but also considering capital appreciation.MFS, the Fund's investment advisor, normally invests at least80% of the Fund’s net assets in high income debt instruments.MFS may invest the Fund’s assets in other types of debtinstruments and equity securities. Debt instruments representobligations of corporations, governments, and other entities torepay money borrowed. Equity securities include commonstocks, preferred stocks, securities convertible into stocks, anddepository receipts for those securities. MFS may invest up to100% of the Fund's assets in lower quality debt instruments. MFS

may invest the Fund’s assets in foreign securities, includingemerging market securities. MFS may use derivatives for anyinvestment purpose, including to earn income and enhancereturns, to increase or decrease exposure to a particular market,to manage or adjust the risk profile of the Fund, or as alternativesto direct investments.

Principal Risks of Investing – The Fund is subject to the generalrisks of fixed income investments, including interest rate, credit,maturity and prepayment risk, and to active or frequent tradingrisk, as well as the special risks of investing in lower-ratedsecurities, derivative securities and foreign securities, includingemerging market securities. The Fund is also subject to themarket and selection risks of equity investments.

66

PRINCIPAL PLUS PORTFOLIO


Investment Objective, Strategy and Policies – The PrincipalPlus Portfolio seeks to provide current income while maintainingstability of principal. The investments of the Principal PlusPortfolio will consist of one or more GICs, investments in the CashAllocation Account, corporate fixed-income investments and/orsimilar instruments (“Principal Plus Portfolio Investments”).While a GIC is designed to provide a minimum rate of return onthe amount invested in the GIC before the deduction of fees andexpenses, because the Principal Plus Portfolio does not expect toinvest exclusively in GICs effective November 20, 2010, thePrincipal Plus Portfolio will not provide a minimum overall rate ofreturn after such date. The Principal Plus Portfolio’s investmentobjective is subject to change. There can be no assurance thatthe Principal Plus Portfolio’s investment strategy will besuccessful.

Under a GIC issued to the Investment Fund, an insurancecompany guarantees principal, accumulated interest and a futureinterest rate on amounts invested in that GIC. The guaranteesavailable through such GICs are made by the insurance companyto the Investment Fund, not to an individual Participant. The GICis not a registered mutual fund. None of FAME, the Treasurer, theProgram or Merrill Lynch guarantee the principal, accumulatedinterest or the future interest rate.

The GIC purchased as an investment underlying the Principal PlusPortfolio was issued by Transamerica Life Insurance Company(“Transamerica”). Transamerica guarantees principal,accumulated interest and a future interest rate on amountsinvested in that GIC. Transamerica currently holds a credit ratingas to its financial strength from Moody’s Investors Service, Inc. ofAa3 and from Standard & Poor’s Rating Group of AA.1 EveryMarch 1, June 1, September 1 and December 1, Transamericaannounces the interest rate that it will pay for the next threemonth period under the GIC for all existing Account balances andContributions during the period. Transamerica sets the interestrate each period. Transamerica’s commitment to the Program isbased solely on its ability to pay its obligations from its generalaccount. The commitment to the Program is not secured by anycollateral.

Merrill Lynch manages the Principal Plus Portfolio and performscredit analyses on Transamerica. Certain fees (including theManagement Fee and the Portfolio Servicing Fee) will be chargedagainst the assets of the Principal Plus Portfolio.

Principal Risks of Investing – The GIC in which the PrincipalPlus Portfolio invests is subject to the risks of an investment thatis non-diversified, has no third-party guarantees, is subject to afailure to perform by the issuer of the GIC investment andtermination of the GIC by the issuer. Beginning November 20,2010, the Principal Plus Portfolio is also subject to the risksassociated with the Cash Allocation Account. See “PROGRAMAND PORTFOLIO RISKS AND OTHER CONSIDERATIONS -Investment Risks of Principal Plus Portfolio Investments.”

1 According to Moody’s Investors Service, Inc.’s publications, “Aa3” is the fourth-highest of 21 ratings and is assigned to insurance companies that offer excellentfinancial security. Standard & Poor's publications report that the “AA” rating, the third-highest of 20 ratings, is assigned to insurance companies that have verystrong financial security. Neither Moody’s nor Standard & Poor’s makes any representation regarding an investment in the Portfolio.

67


Historical Investment Performance – Principal Plus Portfolio –The following table summarizes the average annual total returnafter deducting on-going Portfolio fees of the Principal PlusPortfolio as of June 30, 2010. The $25 annual AccountMaintenance Fee, which is waived in certain circumstances, isnot included in the returns set forth below. If that fee werereflected, returns would be less than those shown. Updatedperformance data will be available on the Internet atwww.nextgenplan.com or from the Program Manager by calling(877) 4-NEXTGEN (463-9843). The Principal Plus Portfolio’s fiscalyear runs from July 1 to June 30, which also is the Program’sfiscal year. The performance data relating to the Principal

Plus Portfolio set forth below is for the limited time periodpresented and is not indicative of the future performance ofthe Principal Plus Portfolio. For the periods shown, thePrincipal Plus Portfolio was invested exclusively in a singleGIC issued by an insurance company. Effective November20, 2010, the Principal Plus Portfolio expects to continue tomaintain its investment in that GIC and to invest newContributions in the Cash Allocation Account. If a portion ofthe Principal Plus Portfolio had been invested in the CashAllocation Account during the periods shown, theperformance of the Principal Plus Portfolio would have beenlower.

Client Direct Series



Principal Plus Portfolio 3.11% 3.85% 3.88% 04/30/07

* Average annual total return is a hypothetical rate of return that, if achieved annually, would have produced the same cumulative total return if performancehad been constant over the entire period. (Cumulative total return reflects actual change in the value of an investment over a given period.) Average annualtotal return smoothes out variations in performance; it is not the same as actual year-by-year results.

68

September 20, 2010


PARTICIPATION AGREEMENT

69

MAINE COLLEGE SAVINGS PROGRAMA Section 529 Qualified Tuition Program

NextGen College Investing Plan®

Participation AgreementTHIS PARTICIPATION AGREEMENT contains the terms governingthe Account to be established by you pursuant to the MaineCollege Savings Program (the “NextGen College Investing Plan”or the “Program”) of the Finance Authority of Maine (“FAME”).The Program has been designed to qualify for treatment as aqualified tuition program within the meaning of Section 529 of theInternal Revenue Code of 1986, as amended (“Section 529Program”). By signing the NextGen College Investing PlanAccount Application (the “Account Application”), you agree to bebound by the terms of this Participation Agreement.

1. Definitions. In this Participation Agreement, the words“you,” “your,” or “Participant” mean the individual who,or entity on whose behalf an individual, has signed theAccount Application. The term “Designated Beneficiary”means (i) the individual identified by you, or (ii) if you area governmental entity or a tax-exempt organizationdescribed in section 501(c)(3) of the Code, theDesignated Beneficiary is the individual or individualsnamed by you at the time you initiate a qualifiedwithdrawal from the Account. The term “Merrill Lynch”means Merrill Lynch, Pierce, Fenner & Smith Incorporatedand its affiliates. The term “Act” means Chapter 417-Eof Title 20-A of the Maine Revised Statutes Annotated of1964, as amended. The term “Program Manager” meansMerrill Lynch or any successor program managerappointed by FAME. The term “Rule” means Chapter 611of the Rules of FAME, as amended from time to time.Other capitalized terms used but not defined in thisParticipation Agreement shall have the same meaning asin the NextGen College Investing Plan ProgramDescription, as amended from time to time (the “ProgramDescription”). Unless the context otherwise requires, theterm “Agreement” shall include the Program Description,to the extent not inconsistent with this ParticipationAgreement.

2. Contributions. Contributions to your Account may bemade by check or by electronic funds transfer acceptableto the Program Manager and FAME. RolloverContributions to your Account must be accompanied by arollover certification in a form approved by FAME and theProgram Manager. Individuals or entities other than youthat contribute funds to your Account will have nosubsequent control over the Contributions. Only you maydirect transfers, rollovers, investment changes (aspermitted under federal law), withdrawals and changesin the Designated Beneficiary.

(a) The minimum initial Contribution to an Account is$250, and the minimum subsequent Contribution is$50. If you are eligible for an Initial Matching Grantfrom FAME, the minimum initial and subsequentContribution is $50. If you are eligible for the HaroldAlfond College Challenge Grant, that grant amountmay be used to fulfill the initial minimum Contributionrequirement. If automatic, periodic Contributions aremade through the Program's AFS or through PayrollDirect Deposit, the minimum Contribution is $50monthly and no minimum initial Contribution amountis required to open an Account. A Participant electingto have Contributions invested in more than onePortfolio must allocate a minimum of $25 perPortfolio.

(b) Contributions with respect to all Accounts for the sameDesignated Beneficiary will not be permitted if theywould cause the aggregate balance of all Accounts forthe same Designated Beneficiary (regardless ofParticipant) to exceed the maximum amountperiodically established by FAME as the maximumAccount balance for a Designated Beneficiary. AnyExcess Contribution will be returned by the ProgramManager to the contributor. FAME reserves the right toestablish a minimum Account balance.

(c) A Contribution, rollover or transfer may be refused ifFAME reasonably believes that (i) the purpose is forother than funding the Qualified Higher EducationExpenses of the Designated Beneficiary of an Account,(ii) there appears to be an abuse of the Program, or (iii)such transaction is unlawful. The Program may not beable to determine that a specific Contribution, rolloveror transfer is for other than funding the Qualified HigherEducation Expenses of a Designated Beneficiary,abusive or unlawful. The Program therefore makes norepresentation that all such Contributions, rollovers ortransfers can or will be rejected.

3. Investment of Contributions. Your Account will beestablished by the Program Manager so that Contributionsare automatically allocated to the Portfolio(s) selected onthe Account Application. For each Diversified Portfolio,Single Fund Portfolio, or Principal Plus Portfolioinvestment option selected, the Program Manager willautomatically invest Contributions to the designatedDiversified Portfolio, Single Fund Portfolio, or PrincipalPlus Portfolio investment option(s). For each Age-Basedinvestment option selected, the Program Manager will

70


automatically invest Contributions to the applicable Age-Based Diversified Portfolio based upon the date of birth ofthe Designated Beneficiary (or, if so approved by theProgram Manager and FAME, upon the anticipated date ofintended use specifically identified by you with respect tothe current Designated Beneficiary) that appears on theAccount Application (or that is otherwise certified by you).State or local governmental entities or tax-exemptorganizations described in section 501(c)(3) of the Codemay designate a Diversified Portfolio, a Single FundPortfolio, an Age-Based Diversified Portfolio, the PrincipalPlus Portfolio, or any combination of Portfolios in whichContributions are to be invested. FAME reserves the right,but is not obligated, to reassign investments in an Age-Based Diversified Portfolio on the basis of the intendeduse specifically identified by you with respect to thecurrent Designated Beneficiary (or as otherwise certifiedby you) if it receives satisfactory assurance that suchreassignment would not disqualify the affected Accountsor the Program from treatment, for federal tax purposes,as a Section 529 Program. Initial and subsequentContributions to your Account will be invested inaccordance with the Portfolio(s) selected, and allocationschosen, by you, as described in the Program Description,and Units of the Portfolio(s) (or any successor Portfolio(s))selected will be allocated to your Account. Your Accountwill be separately maintained by the Program Manager,but Contributions to your Account will be commingled withamounts credited to other Accounts for purposes ofinvestment. Except to the extent permitted by federal taxlaw, you may not direct the investment of Contributions toyour Account. You are the owner of all Contributions andall Program earnings credited to your Account under thisAgreement. However, you understand and agree that youare not the owner of any Maine Matching Grant or HaroldAlfond College Challenge Grant contributions and earningsthereon credited to your Account.

Notwithstanding anything in this Participation Agreement tothe contrary, you understand and agree that if your Accountwas opened for the purpose of obtaining the Harold AlfondCollege Challenge Grant, and you did not select investmentoption(s) on the Account Application, any Contributionsreceived with the Account Application, and/or futureContributions, will be allocated 100% to and invested in theappropriate BlackRock Age-Based Portfolio, for AccountApplications received prior to October 21, 2010, and in theappropriate iShares Age-Based Portfolio for AccountApplications received beginning October 21, 2010, unlessand until you direct differently in accordance with theProgram procedures for making investment changes.

4. Withdrawals from Account. Any amount you, yourDesignated Beneficiary or another person receives from

your Account, as directed by you, is called a“withdrawal.” Withdrawals will be made from yourAccount after (i) your verbal authorization confirmed viatelephone; or (ii) your submission of a NextGen CollegeInvesting Plan Withdrawal Request Form (and anyadditional required documentation) and its acceptance by the Program Manager. Rules and limitations onwithdrawals are described in the Program Descriptionunder the section titled “PARTICIPATION AND ACCOUNTS.”

5. Change of Designated Beneficiary. You may requestthat an individual who is a Member of the Family of yourcurrent Designated Beneficiary be substituted as yournew Designated Beneficiary by submitting a Change ofDesignated Beneficiary Form (and any additional requireddocumentation) to the Program Manager. The changewill be made upon the Program Manager’s acceptance ofthe request.

6. Fees and Expenses. Certain fees (which may be rebated,reduced, waived or changed from time to time) will becharged against the assets of the Portfolios to provide forthe costs of administration of the Program and theAccounts. These fees include fees of the ProgramManager, Portfolio Servicing Agent and FAME, as morefully described in the Program Description. Accounts willindirectly bear expenses of the Underlying Funds in whichthe Portfolios invest. In addition, each Account will besubject to such other fees and charges (which may berebated, reduced, waived or changed from time to time)as described in the Program Description. On-goingPortfolio fees and other charges are subject to change atany time. Whole or fractional Units in your Account maybe liquidated to pay any fees, expenses or liabilities owedto the Program Manager or FAME.

7. Statements and Reports. The Program Manager willkeep accurate and detailed records of all transactionsconcerning your Account and will provide periodicstatements of your Account to you. FAME and theProgram Manager will cause reports to be sent to you,the Internal Revenue Service and such other regulatoryauthorities as required by law. If you do not write to theProgram Manager to object to a statement or reportwithin 60 days after it has been sent to you, you will beconsidered to have approved it and to have releasedFAME and the Program Manager from all responsibilityfor matters covered by the statement or report. Youagree to provide all information FAME or the ProgramManager may need to comply with any legal statement or reporting requirements. You will continue to beresponsible for filing your federal tax return and any otherreports required of you by law.

71


8. Participant’s Representations. You represent asfollows:

(a) You have received and read the most current versionof the Program Description (including any applicableamendments thereto), have carefully reviewed theinformation it contains, and agree that its terms areincorporated into this Participation Agreement as ifthey were set forth herein.

(b) You have not relied on any representations or otherinformation, whether oral or written, and whethermade by any agent or representative of FAME, theProgram Manager, or otherwise, other than as set forthin the Program Description (including any applicableamendments thereto) and in this ParticipationAgreement.

(c) You are opening this Account to provide funds forQualified Higher Education Expenses of theDesignated Beneficiary of the Account.

(d) YOU UNDERSTAND THAT THE VALUE OF YOURACCOUNT MAY INCREASE OR DECREASE, BASEDON THE INVESTMENT PERFORMANCE OF THEPORTFOLIO(S) TO WHICH CONTRIBUTIONS TO YOURACCOUNT HAVE BEEN ALLOCATED, THAT THE VALUEOF YOUR ACCOUNT MAY BE MORE OR LESS THANTHE AMOUNT CONTRIBUTED TO YOUR ACCOUNT,AND THAT NO PERSON MAKES ANY GUARANTEETHAT YOU WILL NOT SUFFER A LOSS OF THEAMOUNT CONTRIBUTED TO THE ACCOUNT OR THATTHE VALUE OF YOUR ACCOUNT WILL BE ADEQUATETO FUND ACTUAL HIGHER EDUCATION EXPENSES.

(e) You understand that: (i) all Portfolio asset allocationand investment decisions will be made by theTreasurer and FAME; (ii) except to the extentpermitted by federal law, you cannot direct theinvestment of any Contributions to your Account (orthe earnings on Contributions); and (iii) each Portfoliowill invest in Portfolio Investments or Maine CDs.

(f) You understand that: (i) the state(s) where you or yourDesignated Beneficiary reside or pay taxes may offerone or more direct sold, advisor/broker sold orprepaid tuition plans under Section 529 of the Code(each, an “In-State Plan”); and (ii) such In-State Plansmay offer you state income tax or other benefits notavailable to you through the Program. The ProgramDescription, this Participation Agreement, the AccountApplication, and the other forms approved for use inconnection with the Program do not address taxesimposed by a state other than Maine, or theapplicability of state or local taxes other than theMaine income tax to the Program, the InvestmentFund, your participation in the Program, yourinvestment in the Investment Fund or your Account.

(g) You have considered investing in an In-State Plan andconsulted with your tax advisor regarding the statetax consequences of investing in the Program ifrealizing state or local income tax or other benefits isimportant to you.

(h) You have considered: (i) the availability of alternativeeducation savings and investment programs includingother Section 529 Programs available through theProgram Manager; (ii) the identity and contract termof the Program Manager; (iii) the impact aninvestment in the Program may have on eligibility forfederal and state financial aid and non-educationalbenefits, such as Medicaid; (iv) the risks and otherconsiderations of investing in the Program;(v) limitations on Contributions, withdrawals andtransfers among the Portfolios; (vi) the Program’s feesand expenses; and (vii) the federal, state and localestate and gift tax implications of investing in theProgram.

(i) You understand that: (i) each of the DiversifiedPortfolio, Single Fund Portfolio, Principal Plus Portfolioand the Age-Based Diversified Portfolio investmentoptions may not be suitable; and (ii) the Program maynot be suitable, for all investors as a means ofinvesting for higher education costs.

(j) You understand that: (i) any Portfolio may at any timebe merged, terminated, reorganized or ceaseaccepting new Contributions, in FAME’s solediscretion; (ii) any such action affecting a Portfoliomay result in your Contributions being reinvested in aPortfolio different from the Portfolio in which yourContributions were originally invested, in FAME’s solediscretion; and (iii) FAME and Merrill Lynch may at anytime terminate or modify the Portfolio fee structures.

(k) You understand that although you own interests in aPortfolio, you do not have a direct beneficial interestin the Portfolio Investment or Maine CDs held by thatPortfolio and, therefore, you do not have the rights ofan owner or shareholder of such mutual funds or theother instruments or certificates of deposit.

(l) You understand that: (i) once a Contribution is madeto an Account, your ability to withdraw funds withoutpenalty or adverse tax consequences will be limited;(ii) the earnings portion of Non-Qualified Withdrawalsmay be subject to taxes and/or penalties; and (iii)withdrawals may be subject to federal and stateincome tax withholding.

(m)You understand that participation in the Program doesnot guarantee that any Designated Beneficiary: (i) willbe accepted as a student by any Eligible Institution ofHigher Education; (ii) if accepted, will be permitted tocontinue as a student; (iii) will be treated as a state

72


resident of any state for tuition purposes; (iv) willgraduate from any Eligible Institution of HigherEducation; or (v) will receive any particular treatmentunder applicable state or federal financial aid programs.

(n) You understand that FAME or the Program Managermay ask you to provide additional documentation thatmay be required by applicable law or the Rule,including anti-money laundering laws, in connectionwith your participation in the Program and you agreeto promptly comply with any such requests foradditional documents.

(o) You have accurately and truthfully completed theAccount Application and any other documentationthat you have furnished or subsequently furnish inconnection with the opening or maintenance of, orany withdrawals from, the Account.

(p) You understand that any false statements made byyou in connection with the opening of the Account orotherwise will be deemed to be unsworn falsificationwithin the meaning of 17-A Maine Revised StatutesAnnotated Section 453 and that FAME and theProgram Manager may take such action as ispermitted by the Act and the Rule, includingtermination and distribution of your Account.

(q) You understand that purchases and sales of Unitsheld in your Account may be confirmed to you onperiodic Account statements in lieu of an immediateconfirmation. Only the Participant, and personsdesignated by the Participant, will receiveconfirmation of Account transactions.

(r) You understand that any Contributions credited to yourAccount will be deemed by FAME and the ProgramManager to have been received from you and thatContributions by third parties may result in adverse taxor other consequences to you or such third parties.

(s) You understand that if you open your Account througha Maine Distribution Agent, FAME or the ProgramManager may periodically provide such distributorwith information regarding your Account.

(t) You affirm that if you are entering into thisParticipation Agreement on behalf of a non-naturalperson, you have the authority to open your Accountfor the Designated Beneficiary.

(u) You understand that, unless otherwise provided in awritten agreement between you and FAME or theProgram Manager, no part of your participation in theProgram will be considered the provision of aninvestment advisory service.

(v) You understand that you should retain adequaterecords relating to withdrawals from the Account for

your own tax reporting purposes.

(w) You understand that if the person establishing theAccount is a legal entity, in addition to the items setforth herein, the individual signing the AccountApplication and entering into this ParticipationAgreement for the entity represents and warrantsthat: (i) the entity may legally become, and thereafterbe, the Participant; (ii) he or she is duly authorized toso act for the entity; (iii) the Program Description maynot discuss tax consequences and other aspects ofthe Program of particular relevance to the entity andindividuals having an interest therein; and (iv) theentity has consulted with and relied on a professionaladvisor, as deemed appropriate by the entity beforebecoming a Participant.

(x) You understand that in order to help the governmentfight the funding of terrorism and money launderingactivities, federal law requires all financial institutionsto obtain, verify and record information that identifieseach person who opens an Account. When you openan Account, the Program Manager and/or FAME willask for your name, address, date of birth and otherinformation that will allow the Program Manager andFAME to identify you. The Program Manager or FAMEmay also ask to see your driver’s license or otheridentifying documents.

(y) You (i) are aware that the Program is offered in twoseparate series, each with its own sales charge,expense structure and investment options, (ii) areaware that the expenses associated with the ClientSelect Series may be higher than those associatedwith the Client Direct Series, and (iii) believe that theClient Direct Series is suitable for you.

9. Limitation on Liability. You recognize that FAME, theTreasurer and the Program Manager are relying uponyour representations set forth in this ParticipationAgreement and the Account Application. You agree torepay FAME, the Treasurer or the Program Manager forany liabilities or expenses they may incur as the result ofany misstatement or misrepresentation made by you oryour Designated Beneficiary, any breach by you or yourDesignated Beneficiary of the representations containedin this Participation Agreement or any breach by you oryour Designated Beneficiary of this ParticipationAgreement, other than those arising out of FAME’s or theProgram Manager’s failure to perform their dutiesspecified in this Participation Agreement or the ProgramDescription. All of your statements, representations, andagreements shall survive the termination of thisParticipation Agreement.

73


10. Duties of FAME, the Treasurer and the ProgramManager. None of FAME, the Treasurer or the ProgramManager has a duty to perform any action other thanthose specified in this Participation Agreement or theProgram Description. FAME and the Program Managermay accept and rely conclusively on any instructions orother communications reasonably believed to havebeen given by you or another authorized person andmay assume that the authority of any other authorizedperson continues in effect until they receive writtennotice to the contrary. None of FAME, the Treasurer orthe Program Manager has any duty to determine oradvise you of the investment, tax or otherconsequences of your actions, of their actions infollowing your directions, or of their failing to act in theabsence of your directions.

11. Transfers and Assignments. Transfers of an Account byyou to another Participant may only be made incompliance with the Program Description and withapplicable law. No Account may be used as security fora loan, and any attempt to do so shall be void.

12. Rules and Regulations. The Account and thisAgreement are subject to the Act and the Rule.

13. Effectiveness of this Participation Agreement. ThisParticipation Agreement shall become effective upon theProgram Manager’s acceptance of your AccountApplication on behalf of FAME, subject to FAME’s right toreject your Account Application if, in processing theAccount Application, it is determined that the AccountApplication has not been fully and properly completed.

14. Amendment/Termination. FAME may at any time: (i)amend the Program or this Participation Agreement(including, but not limited to, any amendment required forthe Program to qualify for favorable federal tax treatmentas a Section 529 Program) by giving written notice to you,which amendment shall be effective upon the datespecified in the notice; or (ii) terminate the Program or thisParticipation Agreement or cause a distribution to be madefrom your Account to satisfy applicable laws, includinganti-money laundering laws, by giving written notice toyou. No provision of this Participation Agreement can beamended or waived except in writing signed by anauthorized representative of FAME and the ProgramManager. A termination of the Program or this ParticipationAgreement or such distribution from your Account by FAMEmay result in a Non-Qualified Withdrawal, unless certainexceptions apply, for which tax on the earnings portionthereof and penalties may be assessed.

15. Binding Nature. This Participation Agreement shall bebinding upon the parties and their respective heirs,successors, beneficiaries and permitted assigns. Youagree that all of your representations and obligationsunder this Participation Agreement shall inure to thebenefit of the Program Manager as well as to FAME eitherof whom can rely upon and enforce your representationsand obligations contained in this Participation Agreement.

16. Communications. Communications may be sent to youat your permanent address appearing on your AccountApplication or at such other permanent address as yougive to the Program Manager in writing. Allcommunications so sent, whether by mail, facsimile, e-mail, messenger or otherwise, will be considered to havebeen given to you personally upon such sending, whetheror not you actually receive them. FAME and Merrill Lynch,to the extent permitted by FAME, may direct mailings toyou or your Designated Beneficiary regarding products orservices other than the Program.

17. Extraordinary Events. FAME and the Program Managershall not be liable for loss caused directly or indirectly bygovernment restrictions, exchange or market rulings,suspension of trading, war, acts of terrorism, strikes orother conditions beyond their control.

18. Severability. If any provision of this Agreement is heldto be invalid, illegal, void or unenforceable, by reason ofany law, rule, administrative order, or judicial decision,such determination will not affect the validity of theremaining provisions of this Agreement.

19. Headings. The heading of each provision of thisAgreement is for descriptive purposes only and shall notbe deemed to modify or qualify any of the rights orobligations set forth in each such provision.

20. Governing Law. THIS PARTICIPATION AGREEMENT WILLBE GOVERNED BY MAINE LAW, WITHOUT REGARD TO THECOMMUNITY PROPERTY LAWS OR CHOICE OF LAWRULES OF ANY STATE.

21. Lawsuits Involving Your Account. Except as tocontroversies arising between you or your DesignatedBeneficiary and FAME or the Program Manager, FAME orthe Program Manager may apply to a court at any timefor judicial settlement of any matter involving yourAccount. If FAME or the Program Manager does so, theymust give you or your Designated Beneficiary theopportunity to participate in the court proceeding, butthey also can involve other persons. Any expense

74


incurred by FAME or the Program Manager in legalproceedings involving your Account, including attorney’sfees and expenses, are chargeable to your Account andpayable by you or your Designated Beneficiary if not paidfrom your Account.

22. Disputes. In the event of a dispute between you or yourDesignated Beneficiary and the chief executive officer ofFAME, the dispute may be resolved in accordance withthe procedures set forth in Section 15 of the Rule. Youhereby submit (on behalf of yourself and your DesignatedBeneficiary) to exclusive jurisdiction of courts in Maine forall legal proceedings arising out of or relating to thisAgreement. In any such proceeding, you (on behalf ofyourself and your Designated Beneficiary) and FAME eachagree to waive your rights to a trial by jury.

23. Arbitration. This Participation Agreement contains apredispute arbitration clause; by signing the AccountApplication you (on behalf of yourself and yourDesignated Beneficiary) agree as follows:

• You; your Designated Beneficiary and MerrillLynch (each, a “party”) are giving up the right tosue each other in court, including the right to atrial by jury, except as provided by the rules of thearbitration forum in which a claim is filed.

• Arbitration awards are generally final and binding;a party’s ability to have a court reverse or modifyan arbitration award is very limited.

• The ability of the parties to obtain documents,witness statements and other discovery isgenerally more limited in arbitration than in courtproceedings.

• The arbitrators do not have to explain thereason(s) for their award.

• The panel of arbitrators will typically include aminority of arbitrators who were or are affiliatedwith the securities industry.

• The rules of some arbitration forums may imposetime limits for bringing a claim in arbitration. Insome cases, a claim that is ineligible forarbitration may be brought in court.

• The rules of the arbitration forum in which theclaim is filed, and any amendments thereto, shallbe incorporated into this agreement.

You agree (on behalf of yourself and your DesignatedBeneficiary) that all controversies that may arisebetween you or your Designated Beneficiary andMerrill Lynch involving any transaction in yourAccounts with the Program or the construction,

performance or breach of this ParticipationAgreement shall be determined by arbitration.

Any arbitration pursuant to this provision shall beconducted only before the New York Stock Exchange,Inc., an arbitration facility provided by any otherexchange of which Merrill Lynch is a member, or theNational Association of Securities Dealers, Inc., but ifyou fail to make such election by registered letter ortelegram addressed to Merrill Lynch at the officewhere you maintain your Account before theexpiration of five days after receipt of a writtenrequest from Merrill Lynch to make such election,then Merrill Lynch may make such election.

Judgment upon the award of the arbitrators may beentered in any court, state or federal, havingjurisdiction.

No person shall bring a putative or certified classaction to arbitration, nor seek to enforce any pre-dispute arbitration agreement against any personwho has initiated in court a putative class action orwho is a member of a putative class who has notopted out of the class with respect to any claimsencompassed by the putative class action until: (i)the class certification is denied; (ii) the class isdecertified; or (iii) the customer is excluded from theclass by the court. Such forbearance to enforce anagreement to arbitrate shall not constitute a waiverof any rights under this Participation Agreementexcept to the extent stated herein.

September 20, 2010

75


Program AdministratorNextGen and NextGen College Investing Plan are registered

trademarks of the Finance Authority of Maine.© 2010 Finance Authority of Maine. Printed in the U.S.A.

Code:PDCD-0910L-09-10

Merrill Lynch is the marketing name for Merrill Lynch Wealth Management and Merrill Edge which are made available through Merrill Lynch, Pierce,Fenner & Smith Incorporated (MLPF&S).

Merrill Lynch Wealth Management makes available products and services offered by MLPF&S and other subsidiaries of Bank of America Corporation.Merrill Edge is the marketing name for two businesses: Merrill Edge Advisory Center, which offers team-based advice and guidance brokerage services;and a self-directed online investing platform.

Investment products:

Are Not FDIC Insured Are Not Bank, State or Federal Guaranteed May Lose Value

MLPF&S is a registered broker-dealer, Member SIPC and a wholly owned subsidiary of Bank of America Corporation.

Merrill Lynch, Pierce, Fenner & Smith Incorporated, Program Manager

Documents

NextGen Direct Program Description