Interests in CollegeAmerica are sold through unaffiliated intermediaries. © 2007 American Funds...

Interests in CollegeAmerica are sold through unaffiliated intermediaries. © 2007 American Funds Distributors, Inc. AI-99974

© American Funds Distributors, Inc. AI-90002

Planning for college


Agenda

Paying for college is harder than ever

Saving for college is easier

Introducing CollegeAmerica®


Paying for college is harder than ever


Cost of college

Based on figures from the College Board for the 2006-2007 school year and assuming college costs increase an average 6% per year.For illustration only.

Expenses for four years of college

Today

Private college $145,679

Public college $71,556

In 18 years

$415,818

$204,244


Saving for college is easier


New ways to save for college

Coverdell Education Savings Accounts

529 college savings plans


Coverdell Education Savings Accounts

Earnings can grow free from tax

Qualified withdrawals for K-12 education expenses are free from federal tax

Qualified withdrawals for higher education expenses are free from federal tax

$2,000 annual contribution limit

Investment flexibility

Income limits apply



Earnings can grow tax free

Withdrawals for qualified higher education expenses are free from federal tax

Maximum flexibility– Investor maintains control– No income limits– Can be opened for anyone


Based on a hypothetical $300 monthly investment earning 8% annually, compounding monthly, for 18 years in both a taxable account (assuming a tax rate of 25%) and a tax-free account. The typical mutual fund investor falls into the 25% tax bracket. Your tax rate may differ. The current lower tax rates on capital gains and dividends would make the return for the taxable investment higher, thus reducing the difference between the two ending values shown. The results shown here are not intended to represent an investment in a specific fund. Investors’ investment experiences may differ.

Paying no federal taxes can make a big difference

18 years0

$144,984Tax-free account

$116,787Taxable account

Hypothetical Growth of a college savings plan

Difference: $28,197

$150,000

90,000

60,000

0

120,000

30,000



Withdrawals for non-qualified higher education expenses will be subject to federal income taxes and a 10% federal tax penalty on earnings

Holdings could reduce a beneficiary’s ability to qualify for grants and student loans

Some states offer residents a tax incentive to invest in their state-sponsored 529 college savings plans

Investment changes limited to one per year

A few things to note


She wants to be a doctorInvest for the long term

Your college savings guide

Featuring CollegeAmerica,® a 529 college savings plan


CollegeAmerica

Sponsored by theVirginia College Savings PlanSM

Available nationwide

American Funds– Proven investment management– 22 funds


American Funds

Long-term, value-oriented approach

Extensive global research effort

Multiple portfolio counselor system

Experienced investment professionals

Commitment to low operating expenses


CollegeAmerica: investment flexibility

Invest in a U.S. or global growth fund

Select a single “all-weather” fund

Diversify with a portfolio of funds

With 21 investment choices, investors can:


Getting a head start

Asset allocation

This sample asset allocation is for illustrative purposes only.

45%Growth

40%Growth-and-

income

15%Equity-income/

balanced


Newborn to 7 years old

Asset allocation


25%Growth 35%

Growth-and-income

20%Equity-income/

balanced

20%Bond


8 – 12 years old

Asset allocation

15%Growth 25%

Growth-and-income

20%Equity-income/

balanced40%Bond

This sample asset allocation is for illustrative purposes only.© American Funds Distributors, Inc. AI-70114

13 – 15 years old

Asset allocation

5%Growth

15%Equity-income/

balanced

20%Growth-and-

income

60%Bond

This sample asset allocation is for illustrative purposes only. © American Funds Distributors, Inc. AI-70115

16+ years old

Asset allocation


10%Equity-income/

balanced

10% Growth-and-income

80%Bond


Planning for college

College is expensive

529 savings plans make paying for college easier

Get started with CollegeAmerica


Investors should carefully consider the investment objectives, risks, charges, expenses and tax implications of the American Funds and CollegeAmerica. This and other important information is contained in the prospectus(es) and/or program description, which can be obtained from their financial adviser and should be read carefully before investing.American Funds Distributors is the distributor of CollegeAmerica.


If you reside in a state other than Virginia, there may be an in-state plan that provides tax and other benefits not available through CollegeAmerica.

You should discuss the tax implications of 529 plans with your legal and/or tax advisers, as features may vary significantly from state to state. You should read the appropriate 529 Plan Program Description before investing. It includes details about the plan’s risks, charges and tax treatment.

Most 529 plans will accept both “in-state” and “out-of-state” applicants.While federal tax treatment of 529 plans is identical regardless of the state plan, state tax treatment varies. State tax treatment may also vary for in-state and out-of-state residents.

Generally, state tax laws affect the contributor by way of deductibility of money going into the account, and the beneficiary by way of the possible taxation of distributions coming out of the account.

Each state’s 529 plan must be evaluated based upon its own merits relative to your needs, including the tax effects on the contributor and the beneficiary.


© American Funds Distributors, Inc.

The return of principal in bond funds, as well as in funds with significant bond holdings, is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the fund(s). Bond prices and a bond fund's share price will generally move in the opposite direction of interest rates.

Diversifying investments does not ensure against market loss.

Investing outside the U.S. (especially in developing countries) entails additional risks, such as currency fluctuations, as more fully described in the prospectus.

Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal.

AI-44440

© American Funds Distributors, Inc.

Although a money market 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.

AI-44440

© 2007 American Funds Distributors, Inc. AI-99997

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