The Michigan Education Savings Program

1 Program DISCLOSURE BOOKLET AND PARTICIPATION AGREEMENTS The Michigan Education Savings Program ADMINISTERED BY: The Michigan Department of Treasury Program MANAGER: TIAA-CREF Tuition Financing, Inc. June 12, 2006 No security issued by MESP has been registered with or approved by the United States Securities and Exchange Commission or any state securities commission. 2006 State of Michigan No dealer, broker, salesperson or other person has been authorized by the Program Manager or the State of Michigan ( State ) to give any information or to make any representations other than those contained in this document and, if given or made, such other information or representations must not be relied upon as having been authorized by the Program Manager or the State.

2 This Program Disclosure Booklet ( Disclosure Booklet ) includes the attached appendix (the Appendix ), Addendum I The Participation Agreements, each of which incorporates this Disclosure Booklet by reference, and is the contract with an Account Owner, and Addendum II Notice of TIAA-CREF Privacy Policy, which is not to be construed as a contract with an Account Owner. Statements contained in this Disclosure Booklet which involve estimates, forecasts or matters of opinion, whether or not expressly so described therein, are intended solely as such and are not to be construed as representations of facts. The information and opinions in this Disclosure Booklet are subject to change without notice, and neither delivery of this Disclosure Booklet nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Program Manager or the State since the date of this Disclosure Booklet.

3 This Disclosure Booklet does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of a security in the Michigan Education Savings Program ( MESP ) by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Disclosure Booklet is available as public information on MESP s Web site at LOCATOR TABLE You can find information in this Disclosure Booklet on these important topics: Topic Principal Location(s) in this Booklet Page Number Glossary IMPORTANT DEFINED TERMS .. 1 Material Terms of the Program SUMMARY OF KEY FEATURES .. 5 FEES AND EXPENSES.

4 20 Fees and Costs Fee Table .. 21 INVESTMENT OPTIONS .. 30 THE TIAA-CREF INSTITUTIONAL MUTUAL FUNDS .. 47 THE TIAA-CREF LIFE INSURANCE COMPANY FUNDING AGREEMENT .. 63 OVERSIGHT OF MESP .. 65 Investment Options and Investment Managers and How and When the State Issuer May Change These THE Program MANAGER .. 66 Investment Performance PAST PERFORMANCE .. 43 SUMMARY OF KEY FEATURES .. 5 Circular 230 Disclosure .. 12 Tax Matters .. 5 CHANGING THE BENEFICIARY AND TRANSFERRING FUNDS .. 24 WITHDRAWALS .. 26 RISKS OF INVESTING IN MESP .. 67 Risks Related to Changes in Law .. 68 Risks Related to Expiration of 2001 Tax Act . 68 REPORTING.

5 70 Tax Reports .. 71 Tax Withholding .. 71 Federal and State Tax Considerations APPENDIX TAX INFORMATION .. A-1 Risk Factors RISKS OF INVESTING IN MESP .. 67 OPENING AND MAINTAINING YOUR ACCOUNT .. 13 Limitations on Participation in the Program How to Participate in MESP .. 13 OPENING AND MAINTAINING YOUR ACCOUNT .. 13 Contributions .. 15 Limitations on Contributions and Withdrawals WITHDRAWALS .. 26 CHANGING THE BENEFICIARY AND TRANSFERRING FUNDS .. 24 OPENING AND MAINTAINING YOUR ACCOUNT .. 13 Selecting and Revising Investment Options .. 26 WITHDRAWALS .. 26 Limitations or Penalties Imposed by the Program Upon Transfers Between Investment Options, Transfers to Other Section 529 Plans or Non-Qualified Distributions Generally APPENDIX TAX INFORMATION.

6 A-1 Contact Information NOTICES .. 71 TABLE OF CONTENTS i IMPORTANT DEFINED TERMS .. 1 SECTION I: Michigan Education Savings Program SUMMARY OF KEY FEATURES .. 5 Program 5 Fees and Expenses .. 5 No Insurance or Guarantee .. 5 Tax Matters .. 5 Use Of Your Account For The Beneficiary .. 6 Investment Options .. 8 Limitations on Contributions, Withdrawals and Transfers Between Investment Options .. 10 Risks Of Investing In MESP .. 11 MESP Administration .. 11 Other Michigan 529 Program Michigan Education 12 Circular 230 Disclosure .. 12 This Disclosure Booklet and Additional Information .. 12 SECTION II: Michigan Education Savings Program DETAILED Program DESCRIPTION.

7 13 OPENING AND MAINTAINING YOUR ACCOUNT .. 13 How to Participate in MESP .. 13 Individual 13 Entity 13 UGMA/UTMA Custodian 14 Important Information About Procedures for Opening a New 15 15 Minimum 15 Maximum Account 15 Method of 16 Naming a Contingent Account 17 No Pledging of 17 Bankruptcy and Related 17 MATCHING GRANTS .. 18 FEES AND EXPENSES ..20 CHANGING THE BENEFICIARY AND TRANSFERRING FUNDS .. 24 Changing Account Ownership .. 25 Selecting and Revising Investment Options .. 26 WITHDRAWALS .. 26 Qualified Withdrawals .. 27 Withdrawals Due to Death, Disability, Scholarship or Attendance at the Military Academies .. 28 Non-Qualified Withdrawals and Additional Excise Tax.

8 28 Refunds of Payments of Qualified Higher Education 29 Rollover 29 INVESTMENT OPTIONS .. 30 Choosing Your Investment Options and How the Investment Options are Invested .. 30 The Age-Based Allocation Options .. 31 TABLE OF CONTENTS (Continued) ii Moderate Age-Based Allocation 33 Conservative Age-Based Allocation 35 Aggressive Age-Based Allocation 37 100% Equity 39 100% Fixed Income Option .. 40 Balanced 41 Principal Plus Interest Option .. 42 PAST PERFORMANCE .. 43 THE TIAA-CREF INSTITUTIONAL MUTUAL FUNDS .. 47 Equity Funds .. 47 Equity Index Funds .. 51 Principal Risks of Investing in the Equity 54 Real Estate Securities 56 Principal Risks of Investing in the Real Estate Securities Fund.

9 57 Fixed Income 58 Principal Risks of Investing in the Fixed Income Funds .. 61 Money Market 62 Net Asset Value (NAV) .. 63 THE TIAA-CREF LIFE INSURANCE COMPANY FUNDING AGREEMENT .. 63 UNIT VALUE .. 64 PURCHASE AND WITHDRAWAL OF UNITS .. 65 OVERSIGHT OF MESP .. 65 THE Program MANAGER .. 66 TFI s Term As Program 66 RISKS OF INVESTING IN MESP .. 67 Investment Risks .. 67 No Guarantee of Attendance or Expense .. 67 Risks Related to Changes in Law .. 68 Risks Related to Expiration of the 2001 Tax Act .. 68 Risks Related to Illiquidity .. 68 Limitations on Investment 69 Potential Change of the Program Manager and Other MESP Changes .. 69 Potential Impact on Financial Aid and Medicaid Eligibility.

10 69 Suitability and Investment Alternatives .. 70 No Insurance or Guarantee .. 70 REPORTING .. 70 Account 70 Tax Reports .. 71 Tax Withholding .. 71 Continuing 71 Financial Statements .. 71 71 APPENDIX TAX Tax Law Changes Affecting TABLE OF CONTENTS (Continued) iii Federal Income Tax Treatment ..A-1 Federal Gift, Estate and Generation-Skipping Transfer Taxes ..A-5 State Tax Treatment ..A-7 Tax Reports ..A-8 Lack of Certainty of Tax Consequences; Future Changes in Federal Tax Effects of the Expiration of the 2001 Tax Act ..A-9 ADDENDUM I PARTICIPATION AGREEMENTS .. I-1 ADDENDUM II NOTICE OF TIAA-CREF PRIVACY POLICY .. II-1 OBTAINING ADDITIONAL Back Cover 1 IMPORTANT DEFINED TERMS The Disclosure Booklet and Agreements are intended to be as clear and understandable as possible.