With Scholar s Edge, New Mexico s 529 College Savings Plan,

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2 With Scholar s Edge, New Mexico s 529 College Savings Plan, You Can Get an Edge When You Save for College Table of Contents 1 3 EDGE 1 A 529 Plan that s almost as smart as your child EDGE 2 Potentially save more and borrow less 5 7 EDGE 3 Potential tax benefits that make saving easier EDGE 4 Choose your own investments

3 EDGE 1 A 529 Plan that s almost as smart as your child

4 Why should I open a Scholar s Edge 529 College Savings Plan? For the vast majority of families, paying for a child s college education is rarely an all or nothing proposition. Because only a select few students receive full scholarships, most families typically take a three-pronged approach: Savings Financial Aid Student Loans By incorporating a tax-advantaged 529 plan such as Scholar s Edge into your family s overall financial plan, you can take a smart, pragmatic approach toward this important goal. Money you invest in a 529 college savings plan has the opportunity to grow tax-free and may also benefit from compounded growth. In other words, your earnings may generate additional earnings and help your account grow faster. And remember, you don t have to save the entire amount, but the more you are able to save in advance, the less you or your child will have to borrow through student loans later. Any U.S. resident who is at least 18 years old can open an account. Once the account is open, anyone can contribute, including grandparents. The money invested in a 529 college savings plan can be used to pay for qualified higher education expenses. With Scholar s Edge you choose: How much you contribute Your investment approach When and how your savings are used 2

5 EDGE 2 A 529 Plan that potentially allows you to save more and borrow less

6 You have the control. As the account owner, the plan is in your name, so you and you alone retain control. If your beneficiary opts out of college, you can change it Starting early and saving often gives you an edge toward funding a college education. This chart demonstrates how saving more may lower your total out-of-pocket costs for a 4-year college education. to another child without penalty. 1 Total out-of-pocket cost Making smart choices today can have a positive $120K $115,752 Monthly amount contributed to a tax-advantaged account impact on the real cost of college tomorrow. Saving even a modest amount each month in a 529 $90K $107,678 $100K Total estimated cost of a 4-year $87,940 college education college savings plan can be an effective strategy to reduce or eliminate your reliance on student loans, which can substantially add to your out-of-pocket costs. Plus, every dollar saved may amount to more than a dollar earned because your investment in a 529 college savings plan has the opportunity to benefit from possible compounded earnings that may also grow tax free over time. Total out-of-pocket cost Total out-of-pocket cost $60K $30K $0 $5,400 $20,520 $60,128 $41,040 $0 $25 $95 $190 Monthly amount contributed to a tax-advantaged account How much to contribute? You can create an account with just $25 if you set up a monthly automatic contribution plan, which transfers a set amount per month to your account. 2 Otherwise, the minimum to open an account is $250, or $1,000 should you and your financial advisor opt for Portfolio Allocator. The more you save, the more Monthly amount contributed to a tax-advantaged account All four scenarios show the out-of-pocket cost based on an estimated $100,000 4-year college education at a public university. These scenarios also assume the receipt of approximately $25,000 in financial aid, which will vary depending upon how much is accumulated in a tax-advantaged account. The loan portion assumed in each column is calculated to include a fixed interest rate of 6.2 to be repaid over 180 months as defined by Sallie Mae (that s like paying off a 15-year mortgage) following graduation with 54 monthly payments of $25 made during college. All savings in the tax-advantaged account depicted in this chart assume monthly compounded growth from the beneficiary s birth until age 18. Source: OppenheimerFunds The hypothetical examples are for illustrative purposes only and do not predict or depict the performance of any specific investment. Actual results may vary. likely you are to avoid unnecessary debt Depending on who the new beneficiary is, there may be gift or generation-skipping tax consequences. Your investment professional can provide more information. See the Plan description and Participation Agreement for more information. Consult your tax advisor about how 529 tax treatment would apply to your situation. 2. Systematic investment plans do not assure a profit nor guarantee against loss in declining markets. Before investing, investors should evaluate their long-term financial ability to participate in such a plan. 3. You can contribute a maximum of $400,000 per beneficiary. All assets, including earnings, under all 529 plan accounts established in any New Mexico-sponsored 529 plan for the benefit of a particular beneficiary must be aggregated when applying this limit. New contributions will not be allowed once this limit is reached. Earnings, however, will continue to accrue. 4

7 EDGE 3 A 529 Plan with potential tax benefits that make saving easier

8 Another way to save. New Mexico residents can take advantage of state tax deductions when investing in Scholar s Edge. 4 Residents of several other states may also be eligible for a state tax deduction from their own state when investing in Scholar s Edge. 5 Regardless of where your child lives or plans to go to school, you can take advantage of the many benefits of Scholar s Edge. Saving for college with Scholar s Edge may bring a wealth of tax benefits. Investments may grow faster than those in comparable taxable accounts. Withdrawals are free from federal taxes, and from state taxes where applicable, as long as the money is used for qualified higher education expenses. 7 BENEFITS OF TAX-FREE GROWTH Tax-free gifting. Scholar s Edge has gift and estate planning advantages. Parents and grandparents can contribute $14,000 per child in a single year ($28,000 per couple). You can also take advantage of five years worth of tax-free gifts at once. 6 Completed gifts are removed from your estate for tax purposes, so the money goes toward the child s education, not taxes. 6 This hypothetical illustration assumes an initial investment of $10,000 and a annual rate of return. The taxable account assumes a 28% federal and state tax rate. You should consult with your tax advisor to determine if this applies in your state of residence. The illustration does not represent the performance of any specific account or investment and does not reflect any plan fees or sales charges that may apply. If such fees or sales charges were taken into account, returns would have been lower. 4. New Mexico residents who invest in Scholar s Edge can deduct their contributions from their taxable New Mexico income. When it s time to withdraw the funds, New Mexico residents won t owe state taxes as long as the assets are used for qualified higher education expenses. 5. Some states restrict favorable tax treatments to residents who invest in their state s own plan. Before investing through Scholar s Edge, find out if your home state offers any state tax or other benefits that are available only for investments in that state s 529 plan. States that offer tax parity include Arizona, Pennsylvania, Maine, Montana, Kansas and Missouri. Source : July Account owners cannot make another tax-free gift to the same beneficiary for five years from the original contribution. If the account owner dies within five years of the funding date, a prorated portion of the contribution allocable to the remaining years in the five-year period, beginning with the year after the contributor s death, will be included in his or her estate for federal estate purposes. Consult your tax advisor for information about how 529 tax treatment would apply to your situation. 7. If money in a 529 account is used for non-qualified purposes, the earnings portion of the withdrawal will be subject to ordinary federal income tax, plus an additional 10% federal income tax and any applicable state income tax. 6

9 EDGE 4 A 529 Plan that let s you choose your own investments More options means more flexibility. Scholar s Edge is a smart option for parents seeking to grow their child s college fund as it offers a suite of distinct investment approaches. With the Age Based, Custom Choice and Portfolio Allocator approaches, you can tailor your portfolio to suit your risk tolerance and growth requirements. OPTION 1 Age Based This approach contains three age based tracks: Aggressive, Growth and Balanced. Each track is designed to allow you to more closely align your college savings goals with your risk tolerance and return expectations. As your child grows older, the money in the account automatically shifts to increasingly conservative portfolios. 0-5 YEARS 6-8 YEARS 9-11 YEARS YEARS YEARS 18 AND OVER Aggressive Age Based Track The equity to fixed income and money market fund allocations are modestly higher than industry averages in the early years. 33% 67% 4% 16% 53% % 27% 27% 4 13% 10% 14% 62. 6% 3% 7% 62. PORTFOLIO 100 PORTFOLIO 80 PORTFOLIO 60 PORTFOLIO 40 PORTFOLIO 20 PORTFOLIO 10 Growth Age Based Track The equity to fixed income and money market fund allocations are modestly lower than the industry averages. 4% 16% 53% % 27% 27% 4 13% 10% 14% 62. 6% 3% 7% PORTFOLIO 80 PORTFOLIO 60 PORTFOLIO 40 PORTFOLIO 20 PORTFOLIO 10 FIXED INCOME PORTFOLIO Balanced Age Based Track The equity to fixed income and money market fund allocations are meaningfully lower than the industry averages % 27% 4 13% 10% 14% 62. 6% 3% 7% PORTFOLIO 60 PORTFOLIO 40 PORTFOLIO 20 PORTFOLIO 10 FIXED INCOME PORTFOLIO LOW DURATION FIXED INCOME PORTFOLIO Domestic Equity Global and International Equity Domestic Fixed Income Global Fixed Income Money Market 7

10 OPTION 2 Custom Choice This approach allows you and your financial advisor to design an investment strategy that is more tailored to your needs and your risk tolerance. You can mix and match any combination of available portfolios with any of the Individual Fund Portfolios listed on page 9 of this brochure. 8 7% 2% 4% 14% 11% 18% 4. 10% 4% 13% 4% 6% 12% 6% 13% 16% 10. 8% 8% 14% 10. 7% 4% 9% 11% 8% 8% Portfolio 100 Invests all assets in equities. Portfolio 80 Invests in a combination of equity and fixed income to seek capital appreciation and income. Portfolio 60 Invests in a combination of equity and fixed income to seek capital appreciation and income. 1% 2% 2% 1% 1% 1% 1% 1% 1% 7% 4% 2% 10% 4. 8% 4% 6% % 9% 3% 4. 24% 4% 2%3% % 1% % Portfolio 40 Invests in a combination of equity, fixed income and money market investments to seek capital appreciation and income. Portfolio 20 Invests in a combination of equity, fixed income and money market investments to seek capital appreciation and income. Portfolio 10 Invests in a combination of equity, fixed income and money market investments to seek income and principal protection % Fixed Income Portfolio Invests in a combination of fixed income and money market investments to seek income and principal protection. Low Duration Fixed Income Portfolio Invests in a combination of primarily short term fixed income and money market investments to seek income with an emphasis on principal protection. Capital Preservation Portfolio Invests in a combination of 5-year investment contracts that each pay a rate of return, in combination with money market investments to seek a competitive rate of interest, which varies over time, along with stability of principal. DOMESTIC EQUITY Oppenheimer Value Fund GLOBAL AND INTERNATIONAL EQUITY DOMESTIC FIXED INCOME Oppenheimer Limited-Term Government Fund GLOBAL FIXED INCOME Oppenheimer International Bond Fund Dreyfus Research Growth Fund Oppenheimer Main Street Fund Oppenheimer Main Street Mid Cap Fund Oppenheimer Main Street Small Cap Fund Oppenheimer International Growth Fund Oppenheimer Global Fund Oppenheimer Global Value Fund Oppenheimer Senior Floating Rate Fund American Century Diversified Bond Fund MainStay High Yield Corporate Bond Fund Oppenheimer Limited-Term Bond Fund MONEY MARKET Oppenheimer Institutional Money Market Fund OTHER New York Life Insurance Company Funding Agreement 8. Once you invest in a portfolio, your money will remain in that portfolio until you instruct the plan to move it to another portfolio or approach. None of these portfolios is designed to provide any particular total return over any period or investment time horizon. You should work with your financial advisor to determine which portfolios are appropriate to your situation. 8

11 Individual Fund Portfolios You can choose from any of the Individual Fund Portfolio options listed below along with any of the Age Based and Custom Choice Portfolios and customize your investment allocation even further. 8 Choose from any of the Individual Fund Portfolio options below. DOMESTIC EQUITY Monetta Young Investor Portfolio Dreyfus Research Growth Portfolio Oppenheimer Rising Dividends Portfolio Oppenheimer Discovery Portfolio Oppenheimer Equity Income Portfolio Oppenheimer Value Portfolio Oppenheimer Main Street Portfolio Oppenheimer Main Street Mid Cap Portfolio Oppenheimer Main Street Small Cap Portfolio DOMESTIC FIXED INCOME Oppenheimer Limited Term Government Portfolio Oppenheimer Senior Floating Rate Portfolio American Century Diversified Bond Portfolio MainStay High Yield Corporate Bond Portfolio Oppenheimer Limited Term Bond Portfolio GLOBAL FIXED INCOME Oppenheimer Global Strategic Income Portfolio Oppenheimer International Bond Portfolio GLOBAL AND INTERNATIONAL EQUITY Oppenheimer International Small-Mid Company Portfolio Oppenheimer Global Opportunities Portfolio Oppenheimer International Diversified Portfolio Oppenheimer International Growth Portfolio Oppenheimer Developing Markets Portfolio Oppenheimer Global Portfolio Oppenheimer Global Value Portfolio ALTERNATIVES Oppenheimer Commodity Strategy Total Return Portfolio Oppenheimer Gold and Special Minerals Portfolio Oppenheimer Real Estate Portfolio MULTI ASSET Oppenheimer Capital Income Portfolio MONEY MARKET Oppenheimer Institutional Money Market Portfolio 8. Once you invest in a portfolio, your money will remain in that portfolio until you instruct the plan to move it to another portfolio or approach. None of these portfolios is designed to provide any particular total return over any period or investment time horizon. You should work with your financial advisor to determine which portfolios are appropriate to your situation. There is always the potential to lose money when you invest in securities. Each underlying investment has its own risks. For example, the prices of small-cap stocks are generally more volatile than large company stocks. There are special risks inherent to international investing, including currency, political, social and economic risks. Investments in growth stocks may be more volatile than other securities. With value investing, if the marketplace does not recognize that a security is undervalued, the expected price increase may not occur. Fixed income investing entails credit and interest rate risks. When interest rates rise, bond prices generally fall, and the underlying investment s or account s value can fall. Diversification does not guarantee a profit or protect against loss. Derivative instruments, investments whose values depend on the performance of an underlying security or asset, interest rate, index or currency, entail potentially higher volatility and risk of loss compared to traditional stock or bond investments. An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. 9

12 OPTION 3 Portfolio Allocator This approach allows you and your financial advisor to craft your own asset allocation by choosing any of the 28 Individual Fund Portfolios listed on page 9 of this brochure that include options from OppenheimerFunds, MainStay, Monetta, Dreyfus Investments and American Century. With so many attractive options, you ll have no trouble tailoring your account specifically to suit your investment preferences. 8 In addition to a wide selection of investment options, Portfolio Allocator automatically rebalances the account on a quarterly basis to conform to your original asset allocations. This is important because even though the underlying funds will fluctuate in value, your account won t stray from your chosen allocations, as determined by you and your advisor, for very long, if at all, unless you make changes to them. PORTFOLIO ALLOCATOR Once you invest in a portfolio, your money will remain in that portfolio until you instruct the plan to move it to another portfolio or approach. None of these portfolios is designed to provide any particular total return over any period or investment time horizon. You should work with your financial advisor to determine which portfolios are appropriate to your situation. 10

13 This material is provided for general and educational purposes only and is not intended to provide legal, tax or investment advice, or for use to avoid penalties that may be imposed under U.S. federal tax laws. Contact your attorney or tax advisor regarding your specific legal, investment or tax situation. Scholar s Edge is operated as a qualified tuition program offered by The Education Trust Board of New Mexico and is available to all U.S. residents. OFI Private Investments Inc., a subsidiary of OppenheimerFunds, Inc., is the program manager for Scholar s Edge, and OppenheimerFunds Distributor, Inc. is the distributor of Scholar s Edge. Some states offer favorable tax treatment to their residents only if they invest in the state s own plan. Investors should consider before investing whether their or their designated beneficiary s home state offers any state tax or other benefits that are only available for investments in such state s qualified tuition program. Any state-based benefit offered with respect to a particular 529 College Savings Plan should be one of the many appropriately weighted factors considered in making an investment decision. You should consult with your tax or other advisor to learn more about how state-based benefits (including any limitations) would apply to their specific circumstances. In addition, some states may offer an income tax deduction to any qualified tuition programs. These securities are neither FDIC insured nor guaranteed and may lose value. Before investing in a plan, investors should carefully consider the investment objectives, risks, charges and expenses associated with municipal fund securities. The Plan Description and Participation Agreement contain this and other information about Scholar s Edge and may be obtained by asking your financial advisor, visiting ScholarsEdge529.com or calling SAVE ( ). Investors should read these documents carefully before investing. Account owners do not invest in, and do not have ownership or other rights relating to, the underlying investments. The underlying investments of Scholar s Edge are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. Scholar s Edge is distributed by OppenheimerFunds Distributor, Inc., Member FINRA, SIPC. New York, NY Scholar s Edge and the Scholar s Edge logo are registered trademarks of The Education Trust Board of New Mexico used under license. SE December 29,

14 Choose to pay less for college, and start saving today. Contact your financial advisor to see how Scholar s Edge may fit into your overall financial plan Visit ScholarsEdge529.com for more information OppenheimerFunds OppenheimerFunds offers investment portfolios in every major asset class through a variety of vehicles including retirement and college saving plans. Our staff of 2,000 employees includes more than 160 investment professionals, who are committed to serving the needs of the individual and institutional investors and financial advisors who entrust us as the stewards of their capital. The Right Way to Invest We believe investors are best served by adhering to four key principles that, in our view, constitute the Right Way to Invest. Make Global Connections Throughout our history, we have been pioneers in global stock and bond investing. Today, we are one of the largest managers of global assets. We have experience with finding opportunities for investors around the world. Invest with Proven Teams We recognize the value of having experienced teams who have managed assets through a variety of market conditions. Our investment teams are led by some of the most respected and successful managers in the industry. They have long tenures with the firm. Our 13 investment teams have the independence to exercise their expertise in the markets where they invest, but they also work collaboratively, sharing ideas across teams so that every decision is informed by multiple perspectives. Take Intelligent Risks We understand that investment rewards only come with risks, but we seek to understand and manage the risks we assume. Our risk management team makes their risk assessments with complete independence from our investment staff, but they still evaluate risks at every stage of our investment process. Look to the Long Term Our investment horizons are aligned with our clients interests. We invest for the long term because we know investors are trying to meet long-term goals. We are active managers because we believe our experience and expertise can seek to help investors realize their financial goals. 12