SUPPLEMENT NO. 3 DATED OCTOBER 4, 2016, TO THE KENTUCKY EDUCATIONAL SAVINGS PLAN TRUST DISCLOSURE BOOKLET DATED APRIL 30, 2013

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2 SUPPLEMENT NO. 3 DATED OCTOBER 4, 2016, TO THE KENTUCKY EDUCATIONAL SAVINGS PLAN TRUST DISCLOSURE BOOKLET DATED APRIL 30, 2013 This Supplement No. 3 provides new and additional information beyond that contained in the April 30, 2013 Plan Disclosure Booklet and Participation Agreement, as supplemented (the Disclosure Booklet ) of the Kentucky Educational Savings Plan Trust (the Program ). It should be retained and read in conjunction with the Disclosure Booklet and prior supplements. Changes to FREQUENTLY USED TERMS On page 3 of the Disclosure Booklet, the definition of Qualified Higher Education Expenses is revised to read: Generally, tuition, certain room and board expenses, fees, the cost of computers, hardware, certain software, and internet access and related services, and the cost of books, supplies and equipment required for the enrollment or attendance of a Beneficiary at an Eligible Educational Institution. Changes to CONTRIBUTIONS On page 5 of the Disclosure Booklet, the sentence under the sub-heading Impermissible Methods of Contribution is revised to read: The Program cannot accept contributions made by cash, starter check, traveler s check, credit card, convenience check or money order. Changes to PROGRAM FEES Beginning on page 7 of the Disclosure Booklet, the section entitled Program Fees is deleted in its entirety and replaced with the following: The following table describes the Program s current fees. KHEAA reserves the right to change the fees or to impose additional fees in the future. Fee Table Investment Option Program Manager Fee (1)(2) State Administrative Fee Estimated Expenses of an Investment Option s Underlying Investments (3) Total Annual Asset-Based Fees (4) Managed Allocation Option Age Band 0 4 Years 0.48% None 0.12% 0.60% Age Band 5 8 Years 0.47% None 0.13% 0.60% Age Band 9 10 Years 0.46% None 0.14% 0.60% Age Band Years 0.45% None 0.15% 0.60% Age Band Years 0.45% None 0.15% 0.60% Age Band 15 Years 0.45% None 0.15% 0.60% Age Band 16 Years 0.47% None 0.13% 0.60% Age Band 17 Years 0.49% None 0.11% 0.60% Age Band 18 Years and over 0.52% None 0.08% 0.60% Active Equity Option 0.41% None 0.50% 0.91% Equity Index Option 0.47% None 0.07% 0.54% 1 A15552 KY1609.XXP2

3 Estimated Expenses of an Investment Option s Underlying Investments (3) Investment Option Program Manager Fee (1)(2) State Administrative Fee Balanced Option 0.47% None 0.26% 0.73% Total Annual Asset-Based Fees (4) Fixed Income Option 0.47% None 0.16% 0.63% Guaranteed Option (5) None None None None (1) Although the Program Manager fee is deducted from an Investment Option, not from your Account, each Account in the Investment Option indirectly bears its pro rata share of the Program Manager fee as this fee reduces the Investment Option s return. (2) Each Investment Option (with the exception of the Guaranteed Option) pays the Program Manager an annualized fee equal to a stated percentage of the average daily net assets held by that Investment Option. However, for the Managed Allocation Option and the Active Equity Option, the percentages listed in this column may fluctuate because such Investment Options are subject to a fixed Total Annual Asset-Based Fee amount. Thus, generally, if the underlying investment expenses increase, then the Program Manager fee decreases with respect to the Managed Allocation Option and the Active Equity Option. (3) The percentages set forth in this column are based on the expense ratios of the mutual funds in which an Investment Option invests. The percentages are calculated using the expense ratio reported in each mutual fund s most recent prospectus available prior to the date of this Disclosure Booklet and weighted according to the Investment Option s allocation among the mutual funds in which it invests. Although these expenses are not deducted from an Investment Option s assets, each Investment Option (other than the Guaranteed Option, which does not invest in mutual funds) indirectly bears its pro rata share of the expenses of the mutual funds in which it invests as these expenses reduce such mutual fund s return. (4) These figures represent the estimated weighted annual expense ratios of the mutual funds in which an Investment Option invests plus the fees paid to the Program Manager. (5) The Guaranteed Option does not pay a Program Manager fee. Life Insurance Company ( TIAA- CREF Life ), the issuer of the funding agreement in which this Investment Option invests and an affiliate of TFI, makes payments to the Program Manager. These payments, among many other factors, is considered by the issuer when determining the interest rate credited under the funding agreement with KHEAA. Investment Cost Example. The example in the following table is intended to help you compare the cost of investing in the different Investment Options over various periods of time. This example assumes that: You invest $10,000 in an Investment Option for the time periods shown below. Your investment has a 5% compounded return each year. You withdraw your entire investment from the Investment Option at the end of the specified periods for Qualified Higher Education Expenses. Total annual asset-based fees remain the same as those shown in the Fee Table above. Although your actual costs may be higher or lower, based on the above assumptions, your costs would be: INVESTMENT OPTION APPROXIMATE COST OF $10,000 INVESTMENT 1 Year 3 Years 5 Years 10 Years Managed Allocation Option Age Band 0 4 Years $62 $193 $336 $752 Age Band 5 8 Years $62 $193 $336 $752 2

4 INVESTMENT OPTION APPROXIMATE COST OF $10,000 INVESTMENT 1 Year 3 Years 5 Years 10 Years Age Band 9 10 Years $62 $193 $336 $752 Age Band Years $62 $193 $336 $752 Age Band Years $62 $193 $336 $752 Age Band 15 Years $62 $193 $336 $752 Age Band 16 Years $62 $193 $336 $752 Age Band 17 Years $62 $193 $336 $752 Age Band 18 Years and over $62 $193 $336 $752 Active Equity Option $93 $291 $506 $1,123 Equity Index Option $55 $174 $302 $678 Balanced Option $75 $234 $407 $909 Fixed Income Option $65 $202 $352 $788 Guaranteed Option None None None None Changes to INVESTMENT OPTIONS On page 9 of the Disclosure Booklet, the first sentence under the subheading Investment Strategy is deleted and replaced with the following: Depending on the Beneficiary s age, contributions to this Investment Option will be placed in one of nine age bands, each of which has a different investment objective and investment strategy. The table at the top of page 10 of the Disclosure Booklet is replaced with the following table: Allocations for the Managed Allocation Option Age Bands Equity Index Fund International Equity Index Fund Emerging Markets Equity Index Fund Real Estate Securities Fund Bond Index Fund Inflation-Linked Bond Fund Short-Term Bond Fund Life Funding Agreement 0-4 Years 43.70% 21.90% 7.30% 8.10% 13.50% 4.00% 1.50% 0.00% 5 8 Years 37.80% 18.90% 6.30% 7.00% 18.50% 5.50% 6.00% 0.00% 9 10 Years 32.40% 16.20% 5.40% 6.00% 21.50% 6.50% 12.00% 0.00% Years 27.00% 13.50% 4.50% 5.00% 27.00% 8.00% 15.00% 0.00% Years 22.70% 11.30% 3.80% 4.20% 29.00% 9.00% 15.00% 5.00% 15 Years 19.50% 9.70% 3.20% 3.60% 27.50% 8.50% 18.00% 10.00% 16 Years 16.70% 8.40% 2.80% 3.10% 26.00% 8.00% 15.00% 20.00% 17 Years 14.10% 7.00% 2.30% 2.60% 24.50% 7.50% 12.00% 30.00% 18 Years and over 10.80% 5.40% 1.80% 2.00% 15.50% 4.50% 10.00% 50.00% Explanation of the Investment Risks of the Investment Options On page 13 of the Disclosure Booklet, the risk explanation entitled Interest Rate Risk is replaced with the following: Interest Rate Risk (a type of Market Risk) The risk that increases in interest rates can cause the prices of fixedincome investments to decline. This risk is heightened to the extent a mutual fund invests in longer duration fixed-income investments and during periods when prevailing interest rates are low or negative. As of the date of this Supplement, interest rates in the United States and in certain foreign markets are at or near historic lows, which may increase a mutual 3

5 fund s exposure to risks associated with rising interest rates. In general, changing interest rates could have unpredictable effects on the markets and may expose fixed-income and related markets to heightened volatility. Changes to PAST PERFORMANCE Beginning on page 15 of the Disclosure Booklet, the section entitled Past Performance is replaced with the following: The following tables show the returns of each Investment Option over the time period(s) indicated. No performance data is included for the Managed Allocation Option because the structure of the age bands within this Investment Option has changed as of the date of this Supplement. The tables below compare the average annual total return of an Investment Option (after deducting fees and expenses) to the returns of a benchmark. The benchmark included in the tables combine the benchmark(s) for the underlying investment(s) in which an Investment Option invests weighted according to the allocations to those underlying investment(s) and adjusted to reflect any changes in the allocations and/or the benchmark(s) during the relevant time period. Benchmarks are not available for investment, are not managed and do not reflect the fees or expenses of investing. Past performance is not a guarantee of future results. Performance may be substantially affected over time by changes in the allocations and changes in the investments in which an Investment Option invests. Investment returns and the value of your Account will fluctuate, so your Account, when redeemed, may be worth more or less than the amounts contributed to your Account. For monthly performance information, visit the Program s website or call the Program. Risk-Based Investment Options Average Annual Total Returns for the Period Ended June 30, 2016 Since Investment Option 1 Year 3 Year 5 Year 10 Year Inception Inception Date Active Equity Option -5.86% 6.46% 6.85% N/A 6.26% September 5, 2008 Benchmark -3.03% 7.15% 7.51% N/A 6.56% Equity Index Option -3.21% 6.87% 7.17% 5.00% 4.05% February 23, 2001 Benchmark -3.06% 7.14% 7.50% 5.17% 4.51% Balanced Option 1.54% 6.00% 5.99% N/A 7.76% November 2, 2009 Benchmark 2.12% 6.27% 6.37% N/A 8.18% Fixed Income Option 4.84% 2.94% 2.79% N/A 3.63% September 9, 2008 Benchmark 5.27% 3.52% 3.43% N/A 4.32% Guaranteed Option 1.25% 1.11% 1.35% 2.27% 2.46% May 15, 2003 Changes to WITHDRAWALS On page 16 of the Disclosure Booklet, under the heading Withdrawals, the first sentence of the third paragraph is revised to read: To request a withdrawal from your Account, complete and mail the appropriate form to the Program, make a request through the secure portion of the Program s website or call the Program. On page 17 of the Disclosure Booklet, the following paragraph is added as the second full paragraph in the lefthand column: You may make withdrawals from your Account using the systematic withdrawal option, which allows an Account Owner to make periodic withdrawals from a selected Investment Option. You can add the systematic withdrawal option, change the timing and amount of your withdrawal or stop your participation in the option by completing the appropriate Program form. 4

6 On page 17 of the Disclosure Booklet, under the sub-heading Qualified Withdrawals, the first sentence of the second paragraph is revised to read: Qualified Higher Education Expenses are defined generally to include tuition, certain room and board expenses, fees, the cost of computers, hardware, certain software, and internet access and related services, and the cost of books, supplies and equipment required for the enrollment or attendance of a Beneficiary at an Eligible Educational Institution. On page 17 of the Disclosure Booklet, under the sub-heading Qualified Withdrawals, the following sentences are added to the end of the second paragraph: To be treated as Qualified Higher Education Expenses, computers, hardware, software, and internet access and related services must be used primarily by the Beneficiary while enrolled at an Eligible Educational Institution. Qualified Higher Education Expenses do not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. Changes to FEDERAL TAX INFORMATION On page 19 of the Disclosure Booklet, under the sub-heading Withdrawals, the last sentence is revised to read: The proportion of contributions and earnings for each withdrawal is determined by the Program based on the relative portions of earnings and contributions as of the withdrawal date for the Account from which the withdrawal was made. On page 19 of the Disclosure Booklet, the paragraph under the sub-heading Refunds of Payments of Qualified Higher Education Expenses is revised to read: If an Eligible Educational Institution refunds any portion of an amount previously withdrawn from an Account and treated as a Qualified Withdrawal, unless you contribute such amount to a qualified tuition program for the same Beneficiary not later than 60 days after the date of the refund, you may be required to treat the amount of the refund as a Nonqualified Withdrawal or Taxable Withdrawal (depending on the reason for the refund) for purposes of federal income tax. Different treatment may apply if the refund is used to pay other Qualified Higher Education Expenses of the Beneficiary. On pages of the Disclosure Booklet, the disclosure under the sub-heading Federal Gift, Estate and Generation-Skipping Transfer Tax Treatment is amended by: replacing the current individual lifetime exemption amount of $5,250,000 with $5,450,000 in the second sentence of the fourth paragraph; replacing the current combined lifetime exemption amount of $10,500,000 with $10,900,000 in the third sentence of the fourth paragraph; replacing the current estate tax exemption amount of $5,250,000 with $5,450,000 in the second to last sentence of the fifth paragraph; and replacing the current generation-skipping transfer tax exemption amount of $5,250,000 with $5,450,000 in the third to last sentence of the sixth paragraph of that section.

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8 SUPPLEMENT NO. 2 DATED DECEMBER 31, 2015, TO THE KENTUCKY EDUCATIONAL SAVINGS PLAN TRUST DISCLOSURE BOOKLET DATED APRIL 30, 2013 This Supplement No. 2 provides new and additional information beyond that contained in the April 30, 2013 Plan Disclosure Booklet and Participation Agreement, as supplemented (the Disclosure Booklet ) of the Kentucky Educational Savings Plan Trust (the Program ). It should be retained and read in conjunction with the Disclosure Booklet and prior supplements. I. THE PROGRAM MANAGER On page 18 of the Disclosure Booklet, the first paragraph of the section entitled The Program Manager is deleted in its entirety and replaced with the following: The Board selected TFI as the Program Manager. TFI is a wholly owned, direct subsidiary of Teachers Insurance and Annuity Association of America ( TIAA ). TIAA, together with its companion organization, the College Retirement Equities Fund ( CREF ), forms one of America s leading financial services organizations and one of the world s largest pension systems, based on assets under management. Effective December 31, 2015, Individual & Institutional Services, LLC ( Services ), a wholly owned, direct subsidiary of TIAA, serves as the primary distributor and underwriter for the Program and provides certain underwriting and distribution services in furtherance of TFI s marketing plan for the Program. Services is registered as a brokerdealer under the Securities Exchange Act of 1934 and is a member of the Financial Industry Regulatory Authority. II. OTHER INFORMATION On page 18 of the Disclosure Booklet, the section entitled Confirmations, Account Statements and Tax Reports is renamed Other Information. The following paragraph is added to the end of the section: Continuing Disclosure. To comply with Rule 15c2-12(b)(5) of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934, as amended ( Rule 15c2-12 ), the Program Manager has executed a Continuing Disclosure Certificate (the Continuing Disclosure Certificate ) for the benefit of the Account Owners. Under the Continuing Disclosure Certificate, the Program Manager will provide certain financial information and operating data (the Annual Information ) relating to the Program and notices of the occurrence of certain enumerated events set forth in the Continuing Disclosure Certificate, if material. The Annual Information will be filed on behalf of the Program with the Electronic Municipal Market Access system (the EMMA System ) maintained by the Municipal Securities Rulemaking Board (the MSRB ). Notices of certain enumerated events will also be filed on behalf of the Program with the MSRB. The Board of Directors of the Kentucky Higher Education Assistance Authority, Administrator and Trustee Tuition Financing, Inc., Program Manager Individual & Institutional Services, LLC, Distributor/Underwriter A15257 KY1512.XXP2

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10 SUPPLEMENT NO. 1 DATED MARCH 25, 2015, TO THE KENTUCKY EDUCATIONAL SAVINGS PLAN TRUST PROGRAM DISCLOSURE BOOKLET DATED APRIL 30, 2013 This Supplement No. 1 provides new and additional information beyond that contained in the April 30, 2013 Program Disclosure Booklet and Participation Agreement (the Disclosure Booklet ) of the Kentucky Educational Savings Plan Trust (the Program ). It should be retained and read in conjunction with the Disclosure Booklet. SPECIAL NOTICE TWO TRANSFERS AMONG INVESTMENT OPTIONS PERMITTED Effective January 1, 2015, the Internal Revenue Service allows the Program to permit Account Owners to transfer funds among Investment Options twice per calendar year, rather than once per calendar year as set forth in the Disclosure Booklet. Changes to MAXIMUM ACCOUNT BALANCE The current maximum account balance for all Accounts in the Program, as well as any amounts held in KAPT for the same Beneficiary, has been increased from $235,000 to $350,000. The references to the maximum account balance in the Overview of the Program on page 2 and under the sub-heading Maximum Account Balance on page 6 of the Disclosure Booklet should be changed from $235,000 to $350,000. Changes to PROGRAM FEES Beginning on page 7 of the Disclosure Booklet, the section entitled Program Fees is replaced with the following: The following table describes the Program s current fees. KHEAA reserves the right to change the fees or to impose additional fees in the future. Fee Table Investment Option Program Manager Fee (1)(2) State Administrative Fee Estimated Expenses of an Investment Option s Underlying Investments (3) Total Annual Asset-Based Fees (4) Managed Allocation Option Age Band 0 3 Years 0.48% None 0.12% 0.60% Age Band 4 7 Years 0.46% None 0.14% 0.60% Age Band 8 11 Years 0.45% None 0.15% 0.60% Age Band Years 0.43% None 0.17% 0.60% Age Band Years 0.47% None 0.13% 0.60% Age Band 18 Years and over 0.50% None 0.10% 0.60% Active Equity Option 0.41% None 0.50% 0.91% Equity Index Option 0.47% None 0.07% 0.54% Balanced Option 0.47% None 0.26% 0.73% Fixed Income Option 0.47% None 0.16% 0.63% Guaranteed Option (5) None None None None

11 (1) Although the Program Manager fee is deducted from an Investment Option, not from your Account, each Account in the Investment Option indirectly bears its pro rata share of the Program Manager fee as this fee reduces the Investment Option s return. (2) Each Investment Option (with the exception of the Guaranteed Option) pays the Program Manager an annualized fee equal to a stated percentage of the average daily net assets held by that Investment Option. However, for the Managed Allocation Option and the Active Equity Option, the percentages listed in this column may fluctuate because such Investment Options are subject to a fixed Total Annual Asset-Based Fee amount. Thus, generally, if the underlying investment expenses increase, then the Program Manager fee decreases with respect to the Managed Allocation Option and the Active Equity Option. (3) The percentages set forth in this column are based on the expense ratios of the mutual funds in which an Investment Option invests. The percentages are calculated using the expense ratio reported in each mutual fund s most recent prospectus available prior to the date of this Disclosure Booklet and weighted according to the Investment Option s allocation among the mutual funds in which it invests. Although these expenses are not deducted from an Investment Option s assets, each Investment Option (other than the Guaranteed Option, which does not invest in mutual funds) indirectly bears its pro rata share of the expenses of the mutual funds in which it invests as these expenses reduce such mutual fund s return. (4) These figures represent the estimated weighted annual expense ratios of the mutual funds in which an Investment Option invests plus the fees paid to the Program Manager. (5) The Guaranteed Option does not pay a Program Manager fee. Life Insurance Company ( TIAA- CREF Life ), the issuer of the funding agreement in which this Investment Option invests and an affiliate of TFI, makes payments to the Program Manager. This payment, among many other factors, is considered by the issuer when determining the interest rate credited under the funding agreement with KHEAA. Investment Cost Example. The example in the following table is intended to help you compare the cost of investing in the different Investment Options over various periods of time. This example assumes that: You invest $10,000 in an Investment Option for the time periods shown below. Your investment has a 5% compounded return each year. You withdraw your entire investment from the Investment Option at the end of the specified periods for Qualified Higher Education Expenses. Total Annual Asset-Based Fees remain the same as those shown in the Fee Table above. Although your actual costs may be higher or lower, based on the above assumptions, your costs would be: INVESTMENT OPTION APPROXIMATE COST OF $10,000 INVESTMENT 1 Year 3 Years 5 Years 10 Years Managed Allocation Option Age Band 0 3 Years $62 $193 $336 $752 Age Band 4 7 Years $62 $193 $336 $752 Age Band 8 11 Years $62 $193 $336 $752 Age Band Years $62 $193 $336 $752 Age Band Years $62 $193 $336 $752 Age Band 18 Years and over $62 $193 $336 $752 Active Equity Option $93 $291 $506 $1,123 Equity Index Option $55 $174 $303 $680 Balanced Option $75 $235 $409 $913 Fixed Income Option $64 $201 $351 $785 Guaranteed Option $0 $0 $0 $

12 Changes to INVESTMENT OPTIONS On page 8 of the Disclosure Booklet, the first sentence under the subheading Underlying Investments of the Investment Options in the left-hand column, is replaced with the following: Each Investment Option will be invested in two or more mutual funds and/or in a funding agreement. Age-Based Investment Option On page 9 of the Disclosure Booklet, the last sentence in the first paragraph under the sub-heading Investment Strategy in the left-hand column, is replaced with the following: As the Beneficiary nears college age, the age bands invest less in mutual funds that invest primarily in equity securities (including real estate securities) and invest more heavily in mutual funds that invest primarily in debt securities and in a funding agreement to attempt to preserve capital. On page 9 of the Disclosure Booklet, the third paragraph under the sub-heading Investment Strategy in the lefthand column is replaced with the following: Each age band invests in multiple mutual funds to varying degrees. Certain of the age bands for older Beneficiaries will also invest in a funding agreement that is substantially similar to the funding agreement in which the Guaranteed Option invests 100% of its assets. (See Guaranteed Option for a description of the funding agreement.) The percentages of each age band s assets allocated to each mutual fund and the funding agreement are set forth in the table below. Beginning on page 9 of the Disclosure Booklet, the second sentence in the last paragraph in the left-hand column under the sub-heading Investment Strategy, is replaced with the following: As a Beneficiary ages, an age band s combined investment in these funds, and in the funding agreement described above, will increase. On page 9 of the Disclosure Booklet, the second bullet in the right-hand column under the sub-heading Investment Strategy, is replaced with the following: debt securities whose principal value increases or decreases based on changes in the Consumer Price Index for All Urban Consumers over the life of the security (typically U.S. Treasury Inflation-Linked Securities, but also including inflation-linked bonds that are issued or guaranteed by U.S. and non-u.s. public or private sector entities); and On page 9 of the Disclosure Booklet, the last paragraph under the sub-heading Investment Strategy following the bullet points in the right-hand column and directly preceding the sub-heading Investment Risks is deleted in its entirety. On page 9 of the Disclosure Booklet, the two paragraphs under the sub-heading Investment Risks are replaced with the following: Investment Risks. Because the Managed Allocation Option invests in a funding agreement and invests in mutual funds that, taken together, invest in a diversified portfolio of securities, the Managed Allocation Option is subject to the following risks to varying degrees: Active Management Risk; Call Risk; Credit Risk; Derivatives Risk; Downgrade Risk; Emerging Markets Risk; Extension Risk; Fixed-Income Foreign Investment Risk; Foreign Investment Risk; Funding Agreement Risk; Income Volatility Risk; Index Risk; Interest Rate Risk; Issuer Risk; Large-Cap Risk; Market Risk; Market Volatility, Liquidity, and Valuation Risk; Mid-Cap Risk; Non-Investment-Grade Securities Risk; Illiquid Investments Risk; Prepayment Risk; Real Estate Investing Risk; Small-Cap Risk and Special Risks for Inflation-Indexed Bonds. The age bands for younger Beneficiaries are subject to Emerging Markets Risk; Foreign Investment Risk; Large- Cap Risk; Market Risk; Mid-Cap Risk; Real Estate Investing Risk and Small-Cap Risk to a greater extent than are the age bands for older Beneficiaries. Likewise, the age bands for older Beneficiaries are subject to Call Risk; Credit Risk; Extension Risk; Fixed-Income Foreign Investment Risk; Funding Agreement Risk; Income Volatility Risk; Interest Rate Risk; Market Volatility, Liquidity, and Valuation Risk; Prepayment Risk and Special Risks for Inflation-Indexed Bonds to a greater extent than are the age bands for younger Beneficiaries. The table on page 10 of the Disclosure Booklet is replaced with the following table:

13 Allocations for the Managed Allocation Option Age Bands Equity Index Fund International Equity Index Fund Emerging Markets Equity Index Fund Real Estate Securities Fund Bond Index Fund Inflation-Linked Bond Fund Short-Term Bond Fund Life Funding Agreement 0-3 Years 44.10% 22.05% 7.35% 8.00% 13.00% 4.00% 1.50% 0.00% 4 7 Years 34.20% 17.10% 5.70% 6.00% 22.75% 7.00% 7.25% 0.00% 8 11 Years 28.80% 14.40% 4.80% 5.00% 26.00% 8.00% 13.00% 0.00% Years 23.40% 11.70% 3.90% 4.00% 26.00% 8.00% 23.00% 0.00% Years 18.00% 9.00% 3.00% 3.00% 22.75% 7.00% 17.25% 20.00% 18 Years and over 9.30% 4.65% 1.55% 1.50% 16.25% 5.00% 16.75% 45.00% Explanation of the Investment Risks of the Investment Options On page 12 of the Disclosure Booklet, the investment risk explanation entitled Derivatives Risk is replaced with the following: Derivatives Risk The risks associated with investing in derivatives may be different or greater than the risks associated with directly investing in the underlying securities and other instruments. A mutual fund may use futures, options, single name or index credit default swaps, or forwards, and a mutual fund may also use more complex derivatives such as swaps that might present liquidity, credit and counterparty risk. When investing in derivatives, a mutual fund may lose more than the principal amount invested. On page 13 of the Disclosure Booklet, the following risk explanation is added after Foreign Investment Risk : Funding Agreement Risk The risk that Life could fail to perform its obligations under the funding agreement for financial or other reasons. On page 13 of the Disclosure Booklet, the investment risk explanation entitled Growth Investing Risk (a type of Style Risk) is replaced with the following: Growth Investing Risk (a type of Style Risk) Style Risk is the risk that use of a particular investing style may fall out of favor in the marketplace for various periods of time and result in underperformance relative to the broader market sector or significant declines in the value of a mutual fund s portfolio investments. Due to their relatively high valuations, growth stocks are typically more volatile than value stocks and may experience a larger decline on a forecast of lower earnings, or a negative event or market development, than would a value stock. On page 13 of the Disclosure Booklet, the investment risk explanation entitled Illiquid Investments Risk is replaced with the following: Illiquid Investments Risk The risk that illiquid investments may be difficult to sell for their fair market value, if at all, or at any price. On page 13 of the Disclosure Booklet, the risk explanation entitled Interest Rate Risk is replaced with the following: Interest Rate Risk (a type of market risk) The risk that increases in interest rates can cause the prices of fixedincome investments to decline. This risk is heightened to the extent a mutual fund invests in longer duration fixed-income investments and during periods when prevailing interest rates are low. Throughout 2014, interest rates in the United States have been at or near historic lows, which may increase a mutual fund s exposure to risks associated with rising interest rates. Rising interest rates could have unpredictable effects on the markets and may expose fixed-income and related markets to heightened volatility. On page 14 of the Disclosure Booklet, the investment risk explanation Value Investing Risk (a type of Style Risk) is replaced with the following: Value Investing Risk (a type of Style Risk) Style Risk is the risk that use of a particular investing style may fall out of favor in the marketplace for various periods of time and result in underperformance relative to the broader market sector or significant declines in the value of a mutual fund s portfolio investments. Securities believed to be undervalued are subject to the risks that the issuer s potential business prospects are not realized, its potential value is never recognized by the market or the securities were appropriately priced when acquired. As a result, value stocks can be overpriced when acquired and may not perform as anticipated. 4

14 Changes to PAST PERFORMANCE Beginning on page 15 of the Disclosure Booklet, the section entitled Past Performance is replaced with the following: Past Performance The following tables show the returns of each Investment Option over the time period(s) indicated. The tables below compare the average annual total return of an Investment Option (after deducting fees and expenses) to the returns of a benchmark. The benchmark included in the tables combine the benchmark(s) for the underlying investment(s) in which an Investment Option invests weighted according to the allocations to those underlying investment(s) and adjusted to reflect any changes in the allocations and/or the benchmark(s) during the relevant time period. Benchmarks are not available for investment, are not managed and do not reflect the fees or expenses of investing. Past performance is not a guarantee of future results. Performance may be substantially affected over time by changes in the allocations and changes in the investments in which an Investment Option invests. Investment returns and the value of your Account will fluctuate, so your Account, when redeemed, may be worth more or less than the amounts contributed to your Account. For monthly performance information, visit the Program s website or call the Program. Managed Allocation Option Average Annual Total Returns for the Period Ended January 31, 2015 Since Age Bands 1 Year 3 Year 5 Year 10 Year Inception Inception Date 0 3 Years 9.22% 11.22% 11.01% 6.21% 6.28% January 16, 2004 Benchmark 9.49% 11.73% 11.40% 6.76% 6.89% 4 7 Years 8.02% 8.92% 9.33% 5.78% 5.85% January 16, 2004 Benchmark 8.40% 9.48% 9.82% 6.46% 6.54% 8 11 Years 7.56% 7.77% 8.44% 5.58% 5.65% January 16, 2004 Benchmark 7.68% 8.29% 8.97% 6.23% 6.32% Years 6.65% 6.60% 7.57% 5.19% 5.37% January 16, 2004 Benchmark 6.75% 7.08% 8.09% 5.91% 6.09% Years 5.52% 5.24% 6.05% 4.47% 4.63% January 16, 2004 Benchmark 5.60% 5.58% 6.48% 5.13% 5.28% 18 Years and over 3.61% 3.07% 3.74% 3.39% 3.45% January 16, 2004 Benchmark 3.58% 3.25% 4.04% 3.81% 3.88% 5

15 Risk-Based Investment Options Average Annual Total Returns for the Period Ended January 31, 2015 Since Investment Option 1 Year 3 Year 5 Year 10 Year Inception Inception Date Active Equity Option 4.78% 13.99% 12.06% N/A 7.62% September 5, 2008 Benchmark 8.17% 13.67% 12.32% N/A 7.81% Equity Index Option 7.91% 13.25% 11.92% 6.25% 4.37% February 23, 2001 Benchmark 8.13% 13.67% 12.30% 6.37% 4.86% Balanced Option 8.37% 9.27% 9.40% N/A 9.45% November 2, 2009 Benchmark 8.84% 9.37% 9.80% N/A 9.87% Fixed Income Option 5.71% 1.87% 3.93% N/A 4.14% September 9, 2008 Benchmark 6.17% 2.49% 4.54% N/A 4.84% Guaranteed Option 1.05% 1.29% 1.74% 2.55% 2.61% May 15, 2003 Changes to THE PROGRAM MANAGER On page 18 of the Disclosure Booklet under the subheading The Program Manager, the term of the Management Agreement between the Board and TFI has been extended to November 2, This term will be automatically extended for [additional two-year terms], subject to certain rights of KHEAA and TFI to terminate such extension[s]. Changes to FEDERAL TAX INFORMATION On page 19 of the Disclosure Booklet, under the heading Federal Tax Information and the sub-heading Withdrawals, the following sentence is added at the end of the paragraph: The proportion of contributions and earnings for each withdrawal is determined by the Plan based on the relative portions of total earnings and contributions as of the withdrawal date for the Account. replacing the third to last sentence of the fifth paragraph of that section with the following: Each taxpayer has an estate tax exemption that is reduced by lifetime taxable gifts. replacing the estate tax exemption amount of $5,250,000 with $5,430,000 in the second to last sentence of the fifth paragraph of that section; replacing the third sentence of the sixth paragraph of that section with the following: Each taxpayer has a generation-skipping transfer tax exemption that may be allocated during life or at death; and replacing the generation-skipping transfer tax exemption amount of $5,250,000 with $5,430,000 in the third to last sentence of the sixth paragraph of that section. The section of the Disclosure Booklet under the heading Federal Tax Information and the sub-heading Federal Gift, Estate and Generation-Skipping Transfer Tax Treatment beginning on page 19 is amended by: replacing the first sentence of the fourth paragraph of that section with the following: In addition, to the extent not previously used, each contributor has a lifetime exemption that will be applied to gifts in excess of the annual exclusion amounts described above. replacing the individual lifetime exemption amount of $5,250,000 with $5,430,000 in the second sentence of the fourth paragraph of that section; replacing the combined lifetime exemption amount of $10,500,000 with $10,860,000 in the third sentence of the fourth paragraph of that section; 6

16 A13997 THE KENTUCKY EDUCATIONAL SAVINGS PLAN TRUST PROGRAM DISCLOSURE BOOKLET AND PARTICIPATION AGREEMENT APRIL 30, 2013 ADMINISTRATOR AND TRUSTEE: THE BOARD OF DIRECTORS OF THE KENTUCKY HIGHER EDUCATION ASSISTANCE AUTHORITY KY1304.XXP

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18 Please keep this Disclosure Booklet and the Participation Agreement with your other records about the Kentucky Educational Savings Plan Trust (the Program ). You should read and understand this Disclosure Booklet before you make contributions to the Program. You should rely only on the information contained in this Disclosure Booklet and the attached Participation Agreement. No person is authorized to provide information that is different from the information contained in this Disclosure Booklet and the attached Participation Agreement. The information in this Disclosure Booklet is subject to change without notice. An Account in the Program should be used only to save for qualified higher education expenses of a designated beneficiary. Accounts in the Program are not intended for use, and should not be used, by any taxpayer for the purpose of evading federal or state taxes or tax penalties. The tax information contained in this Disclosure Booklet was written to support the promotion and marketing of the Program and was neither written nor intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding federal or state taxes or tax penalties. Taxpayers should consult with a qualified advisor to seek tax advice based on their own particular circumstances. 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 Program by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. If you or your intended beneficiary reside in a state other than Kentucky, or have taxable income in a state other than Kentucky, it is important for you to note that if that state has established a qualified tuition program under Section 529 of the Internal Revenue Code (a 529 Plan ), such state may offer favorable state tax or other benefits that are available only if you invest in that state s 529 Plan. Those benefits, if any, should be one of the many appropriately weighted factors you consider before making a decision to invest in the Program. You should consult with a qualified advisor or review the offering document for that state s 529 Plan to find out more about any such benefits (including any applicable limitations) and to learn how they may apply to your specific circumstances. i

19 TABLE OF CONTENTS Introduction to the Program... 1 Overview of the Program... 2 Frequently Used Terms... 3 Opening an Account... 4 Making Changes to Your Account... 5 Contributions... 5 Unit Value... 6 Program Fees... 7 Investment Options... 8 Risks of Investing in the Program Past Performance Withdrawals Oversight of the Program The Program Manager Confirmations, Account Statements and Tax Reports Federal Tax Information Kentucky Tax Information Other Information About Your Account Participation Agreement... I-1 Privacy Policy... II-1 ii

20 Introduction to the Program The Program was created by the Commonwealth of Kentucky ( Kentucky ) to help people save for the costs of postsecondary education. The Program is administered by the Board of Directors (the Board ) of the Kentucky Higher Education Assistance Authority ( KHEAA ), which is the trustee of the Kentucky Educational Savings Plan Trust. The Program is intended to meet the requirements of a qualified tuition program under Internal Revenue Code ( IRC ) Section 529 ( Section 529 ). Kentucky established the Program in the Kentucky Educational Savings Plan Trust Act codified at sections 164A.300 to 164A.380 of Title XIII of the Kentucky Revised Statutes Annotated, as amended (the Act ). No other qualified tuition programs have been established under the Act. KHEAA also offers a pre-paid tuition plan option, Kentucky s Affordable Prepaid Tuition Plan ( KAPT ). KAPT has been closed for new enrollment since 2004 although KHEAA may decide to allow for new enrollment in the future. To contact the Program: Visit the Program s website at Call the Program toll-free at KY-TRUST ( ); or Write to the Program at P.O. Box 8100, Boston, MA

21 Overview of the Program This section provides summary information about the Program, but it is important that you read the entire Disclosure Booklet for detailed information. Capitalized terms used in this section are defined in Frequently Used Terms or elsewhere in this Disclosure Booklet. Feature Kentucky Administrator and Trustee Description The Board of Directors of the Kentucky Higher Education Assistance Authority. Additional Information Oversight of the Program, page 18. Program Manager Tuition Financing, Inc. (the Program Manager or TFI ) The Program Manager; page 18. Eligible Account Owner Eligible Beneficiary Minimum Contribution Any U.S. citizen or resident alien with a valid Social Security number or taxpayer identification number. Certain types of entities with a valid taxpayer identification number may also open an Account (additional restrictions may apply to such Accounts). Any U.S. citizen or resident alien with a valid Social Security number or taxpayer identification number. The minimum initial and subsequent contribution amount is $25 per Investment Option ($15 per Investment Option via payroll deduction). Opening an Account, page 4. Opening an Account, page 4. Contributions, page 5. Current Maximum Account Balance $235,000 for all accounts in the Program or KAPT for a Beneficiary. Contributions, page 5. Qualified Withdrawals Investment Options Changing Investment Strategy for Amounts Previously Contributed Federal Tax Benefits Kentucky Tax Treatment Withdrawals from an Account used to pay for the Qualified Higher Education Expenses of the Beneficiary at an Eligible Educational Institution. These withdrawals are tax free. One age-based option that invests in multiple mutual funds. Four risk-based options that invest in multiple mutual funds. One principal plus interest option. Once you have contributed to your Account and selected Investment Option(s) in which to invest your contribution, you may move these amounts to a different Investment Option only once per calendar year, or if you change the Beneficiary on your Account to a Member of the Family of the previous Beneficiary. Earnings accrue free of federal income tax. Qualified Withdrawals are not subject to federal income tax or the Additional Tax. No federal gift tax on contributions of up to $70,000 (single filer) and $140,000 (married couple) if prorated over 5 years. Contributions are generally considered completed gifts to the Beneficiary for federal gift and estate tax purposes. Contributions are not deductible for Kentucky income tax purposes. Qualified Withdrawals, certain outgoing rollovers, and certain Taxable Withdrawals are not subject to Kentucky income tax. Kentucky tax benefits related to the Program are available only to Kentucky taxpayers. 2 Withdrawals, page 16. Investment Options, page 8. For information about performance, see Past Performance, page 15. Making Changes to Your Account page 5. Federal Tax Information, page 19. Kentucky Tax Information, page 20.

22 Feature Fees Risks of Investing in the Program Vesting of Participation Agreements Description For the services provided to it, each Investment Option (excluding the Guaranteed Option) pays a Program management fee, currently at the annual rate of 0.37% to 0.47%, depending upon the Investment Option. Assets in an Account are not guaranteed or insured. The value of your Account may decrease. You could lose money, including amounts you contributed. Federal or Kentucky tax law changes could negatively affect the Program. Fees could increase. KHEAA may terminate, add or merge Investment Options, change the investments in which an Investment Option invests, or change allocations to those investments. Contributions to an Account may adversely affect the Beneficiary s eligibility for financial aid or other benefits. Beneficiaries who reside in Kentucky for eight continuous years and are designated on a continuously open Account for that eight-year period will qualify for Kentucky resident tuition rates at certain Eligible Educational Institutions in the Commonwealth of Kentucky. Net contributions of at least $2,400 must be in the Account at the end of the eight-year period. Additional restrictions apply. Additional Information Program Fees, page 7. Risks of Investing in the Program, page 14. Other Information About Your Account, page 20. Frequently Used Terms For your convenience, certain frequently used terms are defined below. Account Account Owner/You Additional Tax Beneficiary Eligible Educational Institutions Investment Options Member of the Family Non-Qualified Withdrawal Program Qualified Higher Education Expenses An account in the Program. The individual or entity participant that enters into a Participation Agreement to open an Account in the Program. A 10% additional federal tax imposed on the earnings portion of a Non-Qualified Withdrawal. The beneficiary for an Account as designated by you, the Account Owner. Any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. This includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be able to tell you if it is an eligible educational institution. Certain educational institutions located outside the United States also participate in the U.S. Department of Education s Federal Student Aid (FSA) programs. The Program investment options in which you may invest your contributions. A person related to the Beneficiary as follows: (1) a child or a descendant of a child; (2) a brother, sister, stepbrother or stepsister; (3) the father or mother, or an ancestor of either; (4) a stepfather or stepmother; (5) a son or daughter of a brother or sister; (6) a brother or sister of the father or mother; (7) a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-inlaw; (8) the spouse of any of the foregoing individuals or the spouse of the Beneficiary; or (9) a first cousin of the Beneficiary. For this purpose, a child includes a legally adopted child and a stepson or stepdaughter, and a brother or sister includes a half-brother or half-sister. Any withdrawal that does not meet the requirements of being: (1) a Qualified Withdrawal; (2) a Taxable Withdrawal; or (3) an outgoing rollover to another 529 Plan or to an Account within the Program for a different Beneficiary. The Kentucky Educational Savings Plan Trust. Generally, tuition, certain room and board expenses, fees, books, supplies and equipment required for the enrollment or attendance of a Beneficiary at an Eligible Educational Institution. 3

23 Qualified Withdrawal Taxable Withdrawal Unit Any withdrawal from your Account that is used to pay the Qualified Higher Education Expenses of the Beneficiary at an Eligible Educational Institution. A withdrawal from your Account that is: (1) paid to a beneficiary of, or the estate of, the Beneficiary on or after the Beneficiary s death or attributable to the permanent disability of the Beneficiary; (2) made on account of the receipt by the Beneficiary of a scholarship award or veterans or other nontaxable educational assistance (other than gifts or inheritances), but only to the extent of such scholarship or assistance; or (3) made on account of the Beneficiary s attendance at a military academy, but only to the extent of the costs of education attributable to such attendance. In addition, the amount of the Beneficiary s relevant Qualified Higher Education Expenses that is taken into account in determining the Beneficiary s Hope/American Opportunity Credit or Lifetime Learning Credit is treated as a Taxable Withdrawal. An ownership interest in an Investment Option that is purchased by making a contribution to an Account. Opening an Account Account Application. To open an Account, you need to complete and sign a Program application (the Application ). Your signature on the Application indicates your agreement to and acceptance of all terms in this Disclosure Booklet and in the attached Participation Agreement between you and KHEAA. On your Application, you need to designate a Beneficiary for the Account and select the Investment Option(s) in which you want to invest your contributions. To obtain an Application and enrollment kit, call or write to the Program (contact information is located on page 1 and the back cover of this Disclosure Booklet) or go to the Program s website. You may complete and submit the Application online or you may mail a completed Application to the Program. After the Program receives your completed Application in good order, including a check or authorization for your initial contribution, the Program will open an Account for you. To open an Account, you need to provide your name, address (must be a permanent U.S. address and not a post office box), Social Security number or taxpayer identification number and other information that will allow the Program to identify you, such as your telephone number. Until you provide the required information, the Program will not be able to open your Account. There may be only one Account Owner per Account. Account Ownership. To be an Account Owner, you must be: A U.S. citizen or resident alien with a valid Social Security number or taxpayer identification number. A trust, estate, corporation (including an IRC Section 501(c)(3) organization) or other type of entity with a valid taxpayer identification number. A state or local government organization. Accounts opened by entities, Section 501(c)(3) organizations, trusts and UGMA/UTMA custodians are subject to additional restrictions and must provide 4 documentation evidencing the legal status of the entity and the authorization of the representative to open an Account and to request Account transactions. UGMA/UTMA custodians are also subject to certain limitations on their ability to make changes to, and transfers to and from, such Accounts. UGMA/UTMA custodians and trust representatives should consult with a qualified advisor about the tax and legal consequences of opening an Account and their rights and responsibilities as custodians and representatives. Selecting a Beneficiary. You must designate a Beneficiary on your Application (unless you are a state or local government or a 501(c)(3) tax-exempt organization establishing a scholarship account). Anyone with a valid Social Security number or taxpayer identification number can be the Beneficiary, including you. You do not need to be related to the Beneficiary. There may be only one Beneficiary on your Account. You may establish only one Account for each Beneficiary. Choosing Investment Options. The Program offers multiple Investment Options. On the Application, you must select the Investment Option(s) in which you want to invest your contributions. You may select one or a combination of the Investment Options, subject to the minimum contribution amount per Investment Option. (For minimum contribution amounts, see the Overview table in the front of this Disclosure Booklet.) If you select more than one Investment Option, you must designate what portion of your contribution should be invested in each Investment Option. See Investment Options for summaries of the Investment Options offered under the Program. Naming a Contingent Account Owner. On the Application, you may designate a person to be the contingent account owner in the event of your death. Only Account Owners who are individuals are able to make such a designation.