Annual report. June 30, 2017

Transcription

1 Annual report June 30, 2017 Money Market Short-Term Moderate Short-Term Moderate THE KANSAS POSTSECONDARY EDUCATION SAVINGS PROGRAM

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3 Table of Contents Schedules of Investments Statements of Assets and Liabilities Statements of Operations Statements of Changes in Net Assets Notes to Financial Statements Financial Highlights Report of Independent Auditors The Schwab 529 College Savings Plan is available through Charles Schwab & Co., Inc., and is managed by American Century Investment Management, Inc. The Plan was created by the Kansas State Legislature under the provisions of Section 529 of the Internal Revenue Code and is administered by the Kansas State Treasurer Jake LaTurner. NOTICE: Accounts established under the Schwab 529 Plan and their earnings are neither insured nor guaranteed by the State of Kansas, the Kansas State Treasurer, American Century Investments or Charles Schwab & Co., Inc. Accounts established under the Schwab 529 Plan are domiciled at American Century Investments and not Schwab. This report and the financial statements contained herein are for the general information and use of the Kansas State Treasurer s Office and the Schwab 529 Plan account owners and beneficiaries. The report is not authorized for distribution to prospective account owners unless preceded or accompanied by the Schwab 529 Guide and Participation Agreement. As with any investment, your withdrawal may be more or less than your original investment. If you are not a Kansas taxpayer, consider before investing whether your or the beneficiary s home state offers a 529 Plan that provides its taxpayers with state tax and other benefits not available through this plan.

4 Schedules of Investments JUNE 30, 2017 Money Market MUTUAL FUNDS 100.0% Money Market Funds Schwab Retirement Government Money Fund (Cost $94,234,337) 94,234,337 $ 94,234,337 OTHER ASSETS AND LIABILITIES (25,654) TOTAL NET ASSETS 100.0% $ 94,208,683 NOTES TO SCHEDULE OF INVESTMENTS Category is less than 0.05% of total net assets. Shares Value Short-Term MUTUAL FUNDS 100.0% Money Market Funds 60.1% Schwab Retirement Government Money Fund 120,552,004 $ 120,552,004 Domestic Fixed Income Funds 34.9% American Century Investments Short Duration Inflation Protection Bond Fund Investor Class 592,651 6,039,111 Baird Core Plus Bond Fund Institutional Class 2,857,730 32,035,153 MetWest Total Return Bond Fund Class I 3,008,355 32,038,986 International Fixed Income Funds 5.0% Shares Value 70,113,250 American Century Investments International Bond Fund Investor Class (1) 787,389 10,054,956 TOTAL INVESTMENT SECURITIES 100.0% (Cost $200,268,529) 200,720,210 OTHER ASSETS AND LIABILITIES 40,395 TOTAL NET ASSETS 100.0% $ 200,760,605 NOTES TO SCHEDULE OF INVESTMENTS Category is less than 0.05% of total net assets. (1) Non-income producing. 2

5 JUNE 30, 2017 MUTUAL FUNDS 100.0% Domestic Fixed Income Funds 44.0% American Century Investments Short Duration Inflation Protection Bond Fund Investor Class 1,101,388 $ 11,223,148 Baird Core Plus Bond Fund Institutional Class 3,897,613 43,692,239 MetWest Total Return Bond Fund Class I 4,098,140 43,645,186 Money Market Funds 30.0% Shares Value 98,560,573 Schwab Retirement Government Money Fund 67,376,037 67,376,037 Domestic Equity Funds 15.0% American Beacon Large Cap Value Fund Institutional Class 153,730 4,518,121 American Century Investments Equity Growth Fund Investor Class 175,828 5,589,575 American Century Investments Growth Fund Investor Class 345,165 11,093,614 American Century Investments Value Fund Investor Class 760,567 6,761,442 JPMorgan Disciplined Equity Fund Institutional Class 217,350 5,559,806 International Fixed Income Funds 6.0% 33,522,558 American Century Investments International Bond Fund Investor Class (1) 1,056,934 13,497,049 International Equity Funds 5.0% American Century Investments International Growth Fund Investor Class 359,526 4,468,911 Laudus International MarketMasters Fund Select Shares 138,216 3,373,851 Schwab Fundamental International Large Company Index Fund 382,435 3,373,078 11,215,840 TOTAL INVESTMENT SECURITIES 100.0% (Cost $219,608,623) 224,172,057 OTHER ASSETS AND LIABILITIES 109,960 TOTAL NET ASSETS 100.0% $ 224,282,017 NOTES TO SCHEDULE OF INVESTMENTS Category is less than 0.05% of total net assets. (1) Non-income producing. 3

6 JUNE 30, 2017 MUTUAL FUNDS 100.0% Domestic Fixed Income Funds 43.9% American Century Investments Short Duration Inflation Protection Bond Fund Investor Class 1,188,663 $ 12,112,474 Baird Core Plus Bond Fund Institutional Class 4,217,142 47,274,158 MetWest Total Return Bond Fund Class I 4,434,525 47,227,687 Domestic Equity Funds 30.0% Shares Value 106,614,319 American Beacon Large Cap Value Fund Institutional Class 249,025 7,318,837 American Century Investments Equity Growth Fund Investor Class 304,459 9,678,749 American Century Investments Growth Fund Investor Class 640,632 20,589,919 American Century Investments Small Company Fund Investor Class 812,334 12,217,500 American Century Investments Value Fund Investor Class 1,506,146 13,389,640 JPMorgan Disciplined Equity Fund Institutional Class 378,089 9,671,519 International Equity Funds 10.1% 72,866,164 American Century Investments International Growth Fund Investor Class 683,937 8,501,340 Laudus International MarketMasters Fund Select Shares 301,041 7,348,399 Schwab Fundamental International Large Company Index Fund 972,225 8,575,028 Money Market Funds 10.0% 24,424,767 Schwab Retirement Government Money Fund 24,297,299 24,297,299 International Fixed Income Funds 6.0% American Century Investments International Bond Fund Investor Class (1) 1,144,407 14,614,083 TOTAL INVESTMENT SECURITIES 100.0% (Cost $234,730,933) 242,816,632 OTHER ASSETS AND LIABILITIES 96,297 TOTAL NET ASSETS 100.0% $ 242,912,929 NOTES TO SCHEDULE OF INVESTMENTS Category is less than 0.05% of total net assets. (1) Non-income producing. 4

7 JUNE 30, 2017 Moderate MUTUAL FUNDS 100.0% Domestic Equity Funds 46.2% American Beacon Large Cap Value Fund Institutional Class 702,640 $ 20,650,589 American Century Investments Equity Growth Fund Investor Class 955,949 30,389,615 American Century Investments Growth Fund Investor Class 1,864,206 59,915,591 American Century Investments Small Company Fund Investor Class 3,362,478 50,571,665 American Century Investments Value Fund Investor Class 4,497,414 39,982,009 JPMorgan Disciplined Equity Fund Institutional Class 1,184,531 30,300,295 Domestic Fixed Income Funds 29.7% Shares Value 231,809,764 American Century Investments Short Duration Inflation Protection Bond Fund Investor Class 2,418,254 24,642,013 Baird Core Plus Bond Fund Institutional Class 5,532,081 62,014,623 MetWest Total Return Bond Fund Class I 5,828,560 62,074,168 International Equity Funds 15.2% 148,730,804 American Century Investments International Growth Fund Investor Class 2,039,700 25,353,470 Laudus International MarketMasters Fund Select Shares 1,042,797 25,454,686 Schwab Fundamental International Large Company Index Fund 2,897,186 25,553,179 Money Market Funds 4.9% 76,361,335 Schwab Retirement Government Money Fund 24,652,867 24,652,867 International Fixed Income Funds 4.0% American Century Investments International Bond Fund Investor Class (1) 1,568,220 20,026,168 TOTAL INVESTMENT SECURITIES 100.0% (Cost $477,019,632) 501,580,938 OTHER ASSETS AND LIABILITIES 185,884 TOTAL NET ASSETS 100.0% $ 501,766,822 NOTES TO SCHEDULE OF INVESTMENTS Category is less than 0.05% of total net assets. (1) Non-income producing. 5

8 JUNE 30, 2017 MUTUAL FUNDS 100.0% Domestic Equity Funds 60.0% American Beacon Large Cap Value Fund Institutional Class 1,358,335 $ 39,921,480 American Century Investments Equity Growth Fund Investor Class 1,852,985 58,906,395 American Century Investments Growth Fund Investor Class 3,622, ,437,904 American Century Investments Small Company Fund Investor Class 7,878, ,487,012 American Century Investments Value Fund Investor Class 8,816,511 78,378,780 JPMorgan Disciplined Equity Fund Institutional Class 2,294,141 58,684,121 International Equity Funds 20.1% Shares Value 470,815,692 American Century Investments International Growth Fund Investor Class 4,425,305 55,006,540 Laudus International MarketMasters Fund Select Shares 2,102,220 51,315,181 Schwab Fundamental International Large Company Index Fund 5,840,899 51,516,733 Domestic Fixed Income Funds 12.9% 157,838,454 Baird Core Plus Bond Fund Institutional Class 4,521,578 50,686,887 MetWest Total Return Bond Fund Class I 4,754,327 50,633,588 Money Market Funds 5.0% 101,320,475 Schwab Retirement Government Money Fund 38,974,721 38,974,721 International Fixed Income Funds 2.0% American Century Investments International Bond Fund Investor Class (1) 1,228,885 15,692,861 TOTAL INVESTMENT SECURITIES 100.0% (Cost $734,739,894) 784,642,203 OTHER ASSETS AND LIABILITIES 181,432 TOTAL NET ASSETS 100.0% $ 784,823,635 NOTES TO SCHEDULE OF INVESTMENTS Category is less than 0.05% of total net assets. (1) Non-income producing. 6

9 JUNE 30, 2017 MUTUAL FUNDS 100.0% Domestic Equity Funds 70.1% American Beacon Large Cap Value Fund Institutional Class 1,048,742 $ 30,822,532 American Century Investments Equity Growth Fund Investor Class 1,393,551 44,300,991 American Century Investments Growth Fund Investor Class 2,900,042 93,207,341 American Century Investments Small Company Fund Investor Class 7,425, ,681,349 American Century Investments Value Fund Investor Class 7,168,302 63,726,202 JPMorgan Disciplined Equity Fund Institutional Class 1,729,318 44,235,950 International Equity Funds 25.0% Shares Value 387,974,365 American Century Investments International Growth Fund Investor Class 3,774,941 46,922,513 Laudus International MarketMasters Fund Select Shares 1,816,966 44,352,149 Schwab Fundamental International Large Company Index Fund 5,345,569 47,147,920 Money Market Funds 4.9% 138,422,582 Schwab Retirement Government Money Fund 27,379,295 27,379,295 TOTAL INVESTMENT SECURITIES 100.0% (Cost $511,822,071) 553,776,242 OTHER ASSETS AND LIABILITIES 34,051 TOTAL NET ASSETS 100.0% $ 553,810,293 NOTES TO SCHEDULE OF INVESTMENTS Category is less than 0.05% of total net assets. Short-Term MUTUAL FUNDS 99.8% Money Market Funds 60.0% Schwab Retirement Government Money Fund 34,407,446 $ 34,407,446 Domestic Fixed Income Funds 39.8% Schwab Treasury Inflation Protected Securities Index Fund 206,006 2,268,129 Vanguard Total Bond Market Index Fund Institutional Plus Shares 1,909,089 20,560,893 22,829,022 TOTAL INVESTMENT SECURITIES 99.8% (Cost $57,246,729) 57,236,468 OTHER ASSETS AND LIABILITIES 0.2% 90,111 TOTAL NET ASSETS 100.0% $ 57,326,579 Shares Value 7

10 JUNE 30, 2017 MUTUAL FUNDS 99.9% Domestic Fixed Income Funds 49.9% Schwab Treasury Inflation Protected Securities Index Fund 530,379 $ 5,839,473 Vanguard Total Bond Market Index Fund Institutional Plus Shares 4,000,118 43,081,268 48,920,741 Money Market Funds 30.0% Schwab Retirement Government Money Fund 29,461,961 29,461,961 Domestic Equity Funds 15.0% Schwab S&P 500 Index Fund 390,991 14,712,995 International Equity Funds 5.0% Schwab International Index Fund 249,072 4,894,256 TOTAL INVESTMENT SECURITIES 99.9% (Cost $95,334,140) 97,989,953 OTHER ASSETS AND LIABILITIES 0.1% 136,562 TOTAL NET ASSETS 100.0% $ 98,126,515 Shares Value MUTUAL FUNDS 99.6% Domestic Fixed Income Funds 49.7% Schwab Treasury Inflation Protected Securities Index Fund 581,966 $ 6,407,443 Vanguard Total Bond Market Index Fund Institutional Plus Shares 4,395,497 47,339,504 53,746,947 Domestic Equity Funds 29.9% Schwab S&P 500 Index Fund 716,766 26,971,916 Schwab Small-Cap Index Fund 183,819 5,424,510 32,396,426 Money Market Funds 10.0% Schwab Retirement Government Money Fund 10,787,147 10,787,147 International Equity Funds 10.0% Schwab International Index Fund 548,406 10,776,170 TOTAL INVESTMENT SECURITIES 99.6% (Cost $101,781,001) 107,706,690 OTHER ASSETS AND LIABILITIES 0.4% 437,418 TOTAL NET ASSETS 100.0% $ 108,144,108 Shares Value 8

11 JUNE 30, 2017 Moderate MUTUAL FUNDS 100.0% Domestic Equity Funds 46.1% Schwab S&P 500 Index Fund 1,730,060 $ 65,102,167 Schwab Small-Cap Index Fund 617,066 18,209,605 Domestic Fixed Income Funds 33.9% Shares Value 83,311,772 Schwab Treasury Inflation Protected Securities Index Fund 975,142 10,736,310 Vanguard Total Bond Market Index Fund Institutional Plus Shares 4,683,880 50,445,382 International Equity Funds 15.0% 61,181,692 Schwab International Index Fund 1,376,797 27,054,067 Money Market Funds 5.0% Schwab Retirement Government Money Fund 9,019,278 9,019,278 TOTAL INVESTMENT SECURITIES 100.0% (Cost $167,061,244) 180,566,809 OTHER ASSETS AND LIABILITIES 51,073 TOTAL NET ASSETS 100.0% $ 180,617,882 NOTES TO SCHEDULE OF INVESTMENTS Category is less than 0.05% of total net assets. MUTUAL FUNDS 100.1% Domestic Equity Funds 60.1% Schwab S&P 500 Index Fund 3,498,936 $ 131,664,958 Schwab Small-Cap Index Fund 1,492,047 44,030,306 International Equity Funds 20.0% Shares Value 175,695,264 Schwab International Index Fund 2,965,421 58,270,523 Domestic Fixed Income Funds 15.0% Vanguard Total Bond Market Index Fund Institutional Plus Shares 4,072,599 43,861,891 Money Market Funds 5.0% Schwab Retirement Government Money Fund 14,621,536 14,621,536 TOTAL INVESTMENT SECURITIES 100.1% (Cost $263,234,978) 292,449,214 OTHER ASSETS AND LIABILITIES (0.1)% (170,036) TOTAL NET ASSETS 100.0% $ 292,279,178 9

12 JUNE 30, 2017 MUTUAL FUNDS 99.7% Domestic Equity Funds 69.8% Schwab S&P 500 Index Fund 3,703,754 $ 139,372,255 Schwab Small-Cap Index Fund 1,905,489 56,230,966 International Equity Funds 24.9% Shares Value 195,603,221 Schwab International Index Fund 3,545,403 69,667,177 Money Market Funds 5.0% Schwab Retirement Government Money Fund 13,952,682 13,952,682 TOTAL INVESTMENT SECURITIES 99.7% (Cost $247,654,343) 279,223,080 OTHER ASSETS AND LIABILITIES 0.3% 974,023 TOTAL NET ASSETS 100.0% $ 280,197,103 10

13 JUNE 30, 2017 Assets Statements of Assets and Liabilities Money Market Short-Term Moderate Investment securities, at cost $ 94,234,337 $ 200,268,529 $ 219,608,623 $ 234,730,933 $ 477,019,632 $ 734,739,894 $ 511,822,071 Investment securities, at value $ 94,234,337 $ 200,720,210 $ 224,172,057 $ 242,816,632 $ 501,580,938 $ 784,642,203 $ 553,776,242 Cash 165, ,350 16, ,464 Receivable for investments sold 107, , , ,192 Receivable for capital units sold 135,287 73,213 27,749 31,278 67, , ,791 Distributions receivable 31, , ,467 95, , ,576 9,243 94,508, ,057, ,425, ,108, ,880, ,137, ,170,740 Liabilities Disbursements in excess of demand deposit cash 92, ,394 85,084 Payable for investments purchased 126,585 28,341 20,215 Payable for capital units redeemed 191, ,334 21,026 29,418 3, , ,949 Accrued program management fees 16,468 32,983 36,989 39,796 82, ,432 91, , , , , , , ,447 Net Assets $ 94,208,683 $ 200,760,605 $ 224,282,017 $ 242,912,929 $ 501,766,822 $ 784,823,635 $ 553,810,293 Capital Units Outstanding (unlimited number of units authorized) 94,208,683 14,404,978 12,410,182 11,145,416 20,498,410 29,362,492 19,632,232 Net asset value per unit $1.00 $13.94 $18.07 $21.79 $24.48 $26.73 $

14 JUNE 30, 2017 Assets Short-Term Moderate Investment securities, at cost $ 57,246,729 $ 95,334,140 $ 101,781,001 $ 167,061,244 $ 263,234,978 $ 247,654,343 Investment securities, at value $ 57,236,468 $ 97,989,953 $ 107,706,690 $ 180,566,809 $ 292,449,214 $ 279,223,080 Cash 19,637 53, ,901 93, , ,008 Receivable for capital units sold 57,355 41, , , ,296 1,127,052 Distributions receivable 62, , , , ,376 4,704 57,375,954 98,204, ,286, ,915, ,134, ,549,844 Liabilities Payable for investments purchased 12,392 38,608 99,558 65, , ,078 Payable for capital units redeemed 29,484 23,718 24, , , ,485 Accrued program management fees 7,499 15,339 17,950 28,103 42,987 37,178 49,375 77, , , , ,741 Net Assets $ 57,326,579 $ 98,126,515 $ 108,144,108 $ 180,617,882 $ 292,279,178 $ 280,197,103 Capital Units Outstanding (unlimited number of units authorized) 5,527,492 8,579,216 8,761,531 13,714,608 21,012,533 19,366,723 Net asset value per unit $10.37 $11.44 $12.34 $13.17 $13.91 $

15 YEAR ENDED JUNE 30, 2017 Investment Income (Loss) Income: Statements of Operations Money Market Short-Term Moderate Income distributions from underlying funds $ 363,825 $ 2,289,593 $ 3,549,889 $ 3,998,590 $ 7,298,755 $ 9,958,192 $ 5,708,647 Expenses: Program management fees 171, , , , ,722 1,504,430 1,056,219 Fees waived (5,037) 166, , , , ,722 1,504,430 1,056,219 Net investment income (loss) 197,495 1,931,367 3,115,080 3,546,783 6,353,033 8,453,762 4,652,428 Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Sale of investments in underlying funds (202,915) (428,886) (297,096) (273,098) (1,399,863) (1,504,231) Capital gain distributions received from underlying funds 49, ,506 1,218,384 3,485,010 6,802,275 5,285,653 (153,335) 284, ,288 3,211,912 5,402,412 3,781,422 Change in net unrealized appreciation (depreciation) on investments in underlying funds (1,295,807) 4,646,160 11,999,368 42,248,122 93,570,964 80,617,569 Net realized and unrealized gain (loss) (1,449,142) 4,930,780 12,920,656 45,460,034 98,973,376 84,398,991 Net Increase (Decrease) in Net Assets Resulting from Operations $ 197,495 $ 482,225 $ 8,045,860 $ 16,467,439 $ 51,813,067 $ 107,427,138 $ 89,051,419 13

16 YEAR ENDED JUNE 30, 2017 Investment Income (Loss) Income: Short-Term Moderate Income distributions from underlying funds $ 572,545 $ 1,465,185 $ 1,873,316 $ 3,041,716 $ 4,725,399 $ 4,339,126 Expenses: Program management fees 72, , , , , ,761 Net investment income (loss) 500,439 1,312,817 1,695,302 2,768,747 4,306,928 3,980,365 Realized and Unrealized Gain (Loss) Net realized gain (loss) on: Sale of investments in underlying funds (84,225) (72,808) (82,142) (172,126) (498,457) (457,181) Capital gain distributions received from underlying funds 2,333 66, , ,810 1,413,678 1,659,950 (81,892) (6,786) 144, , ,221 1,202,769 Change in net unrealized appreciation (depreciation) on investments in underlying funds (405,587) 1,353,065 4,296,790 12,215,025 27,870,847 32,209,680 Net realized and unrealized gain (loss) (487,479) 1,346,279 4,441,337 12,666,709 28,786,068 33,412,449 Net Increase (Decrease) in Net Assets Resulting from Operations $ 12,960 $ 2,659,096 $ 6,136,639 $ 15,435,456 $ 33,092,996 $ 37,392,814 14

17 YEAR ENDED JUNE 30, 2017 Increase (Decrease) in Net Assets Operations Statements of Changes in Net Assets Money Market Short-Term Moderate Net investment income (loss) $ 197,495 $ 1,931,367 $ 3,115,080 $ 3,546,783 $ 6,353,033 $ 8,453,762 $ 4,652,428 Net realized gain (loss) (153,335) 284, ,288 3,211,912 5,402,412 3,781,422 Change in net unrealized appreciation (depreciation) (1,295,807) 4,646,160 11,999,368 42,248,122 93,570,964 80,617,569 Net increase (decrease) in net assets resulting from operations 197, ,225 8,045,860 16,467,439 51,813, ,427,138 89,051,419 Distributions to Shareholders From net investment income (197,495) Capital Unit Transactions Proceeds from units sold 54,146,171 95,078,823 85,807,442 74,635, ,184, ,073,833 67,899,491 Proceeds from reinvestment of distributions 197,495 Payments for units redeemed (36,868,796) (66,973,284) (85,838,371) (63,517,903) (139,744,807) (171,980,508) (105,953,895) Net increase (decrease) in net assets from capital unit transactions 17,474,870 28,105,539 (30,929) 11,117,126 4,440,093 (44,906,675) (38,054,404) Net increase (decrease) in net assets 17,474,870 28,587,764 8,014,931 27,584,565 56,253,160 62,520,463 50,997,015 Net Assets Beginning of period 76,733, ,172, ,267, ,328, ,513, ,303, ,813,278 End of period $ 94,208,683 $ 200,760,605 $ 224,282,017 $ 242,912,929 $ 501,766,822 $ 784,823,635 $ 553,810,293 Transactions in Units of the Portfolios Sold 54,146,171 6,853,854 4,852,962 3,550,160 6,208,467 5,078,294 2,592,832 Issued in reinvestment of distributions 197,495 Redeemed (36,868,796) (4,831,803) (4,859,933) (3,029,501) (6,017,766) (6,895,515) (4,074,425) Net increase (decrease) in units of the portfolios 17,474,870 2,022,051 (6,971) 520, ,701 (1,817,221) (1,481,593) 15

18 YEAR ENDED JUNE 30, 2017 Increase (Decrease) in Net Assets Operations Short-Term Moderate Net investment income (loss) $ 500,439 $ 1,312,817 $ 1,695,302 $ 2,768,747 $ 4,306,928 $ 3,980,365 Net realized gain (loss) (81,892) (6,786) 144, , ,221 1,202,769 Change in net unrealized appreciation (depreciation) (405,587) 1,353,065 4,296,790 12,215,025 27,870,847 32,209,680 Net increase (decrease) in net assets resulting from operations 12,960 2,659,096 6,136,639 15,435,456 33,092,996 37,392,814 Capital Unit Transactions Proceeds from units sold 39,980,765 59,940,237 59,703,891 90,959, ,016, ,974,852 Payments for units redeemed (18,945,342) (28,561,483) (28,206,974) (37,993,545) (44,954,343) (33,652,255) Net increase (decrease) in net assets from capital unit transactions 21,035,423 31,378,754 31,496,917 52,966,202 76,061,763 72,322,597 Net increase (decrease) in net assets 21,048,383 34,037,850 37,633,556 68,401, ,154, ,715,411 Net Assets Beginning of period 36,278,196 64,088,665 70,510, ,216, ,124, ,481,692 End of period $ 57,326,579 $ 98,126,515 $ 108,144,108 $ 180,617,882 $ 292,279,178 $ 280,197,103 Transactions in Units of the Portfolios Sold 3,865,818 5,344,903 5,018,906 7,275,815 9,288,460 7,896,927 Redeemed (1,834,753) (2,549,022) (2,370,600) (3,041,566) (3,461,098) (2,521,119) Net increase (decrease) in units of the portfolios 2,031,065 2,795,881 2,648,306 4,234,249 5,827,362 5,375,808 16

19 Notes to Financial Statements JUNE 30, Organization The Kansas Postsecondary Education Savings Program (the program) was created to authorize the establishment of family postsecondary education savings accounts the Schwab 529 College Savings Plan (the plan) and to provide guidelines for the maintenance of such accounts. The objective of the plan is to enable residents of the state of Kansas and other states to benefit from the tax incentive provided for qualified state tuition programs as defined in Section 529 of the Internal Revenue Code of 1986, as amended. The Kansas State Treasurer is the Administrator of the program. The plan is available through Charles Schwab & Co., Inc., is managed by American Century Investment Management, Inc. (ACIM) (the program manager) and is distributed by American Century Investment Services, Inc. The plan is comprised of thirteen portfolios (the portfolios), each of which may invest in a mix of domestic equity, domestic fixed income, international equity, international fixed income, and/or money market funds (the underlying funds) managed by multiple investment companies: American Century Investments, Schwab Funds, Laudus Funds TM, American Beacon Funds, MetWest Funds, Vanguard, Baird Funds and J.P. Morgan Funds. Each account owner s beneficial interest in the net assets of the portfolios is represented by units. Purchases into and withdrawals from the portfolios are subject to the terms and limitations defined by the plan and the Administrator. Purchases and withdrawals are recorded upon receipt of the account owner s instructions at the next determined daily net asset value per unit. 2. Significant Accounting Policies The following is a summary of significant accounting policies consistently followed by the portfolios in preparation of their financial statements. The portfolios are investment companies and follow accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Investment Valuations The portfolios determine the fair value of their investments and compute their net asset value per unit as of the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. Investments in the underlying funds are valued at their reported net asset value. Security Transactions Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis. Investment Income Income and capital gain distributions, if any, from the underlying funds are recorded as of the ex-dividend date. Long-term capital gain distributions, if any, from the underlying funds are a component of net realized gain (loss). Expenses Expenses of the program can be directly attributed to a portfolio. The expenses included in the accompanying financial statements reflect the expenses of each portfolio and do not include any expenses associated with the underlying funds. See Note 3 for more information on fees and expenses of the portfolios. Distributions For all portfolios except Money Market, there are no distributions of net investment income or net realized gains to the account owners or beneficiaries of the plan in accordance with Section 529 of the Internal Revenue Code of 1986, as amended. For Money Market, distributions of net investment income and short-term capital gains, if any, are accrued daily and paid monthly. Withdrawals The earnings portions of nonqualified and penalty-free withdrawals are taxable to the account owner or the beneficiary. Earnings portions of nonqualified withdrawals also may be subject to a federal penalty tax. For Kansas taxpayers, the earnings portion of a nonqualified withdrawal as well as the contribution portion that was previously deducted will be subject to Kansas state taxes. Indemnifications Under the program s organizational documents, the Kansas State Treasurer, the State of Kansas, Charles Schwab & Co., Inc., the program manager, their officers, employees or other agents of the program are indemnified against certain liabilities arising out of the performance of their duties to the portfolios. In addition, in the normal course of business, the portfolios enter into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a portfolio. The risk of material loss from such claims is considered by management to be remote. 17

20 3. Fees Program Management Fee The Kansas State Treasurer has entered into a management and administrative services agreement with ACIM to provide administrative, record keeping, marketing, consulting, and investment management services to the plan, in exchange for a single program management fee. The fee is computed and accrued daily based on each portfolio s daily net assets and paid monthly in arrears. The annual program management fee is 0.20% for each portfolio, except the Index portfolios. The Index portfolios are subject to an annual all-inclusive fee of 0.30%, which consists of the underlying fund expenses and a program management fee. In order to maintain a positive yield for Money Market, all or a portion of the program management fee may voluntarily be waived on a daily basis. The fee waiver may be revised or terminated at any time without notice. For the year ended June 30, 2017, the annual program management fee waiver ratio to average net assets was 0.01%. Underlying Fund Expenses Each portfolio will indirectly realize its pro rata share of the fees and expenses of the underlying funds in which it invests. These fees and expenses are already reflected in the valuation of the underlying funds. 4. Investment Transactions Investment transactions for the year ended June 30, 2017 were as follows: Money Market Short-Term Moderate Purchases $109,597,803 $174,504,908 $86,191,383 $51,434,286 $60,918,144 $86,332,504 $65,282,543 Sales $92,042,837 $144,378,239 $82,396,924 $35,605,124 $46,622,478 $116,016,562 $93,124,285 Short-Term Moderate Purchases $53,471,050 $58,814,436 $46,114,217 $67,425,840 $101,023,592 $94,810,725 Sales $32,013,779 $26,186,965 $13,002,915 $11,034,667 $18,838,264 $17,707, Fair Value Measurements The portfolios investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the portfolios. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels. Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). Level 3 valuation inputs consist of unobservable data (including a portfolio s own assumptions). The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments. There were no significant transfers between levels during the period. As of period end, the portfolios investment securities were classified as Level 1. The Schedules of Investments provide additional information on the portfolios holdings. 6. Other Information The portfolios do not invest in the underlying funds for the purpose of exercising management or control; however, investments by the portfolios within their investment strategies may represent a significant portion of the underlying funds net assets. 18

21 7. Subsequent Events Effective July 14, 2017 the following fund names will be updated as indicated below. Fund name prior to July 14, 2017 Fund name beginning July 14, % Equity () 40% Equity ( ) Moderate 60% Equity (Moderate) 80% Equity ( ) 95% Equity () 20% Equity Index ( Index) 40% Equity Index ( Index) Moderate 60% Equity Index (Moderate Index) Index 80% Equity Index ( Index) 95% Equity Index ( Index) Management has evaluated events or transactions that may have occurred since June 30, 2017, that would merit recognition or disclosure in the financial statements. This evaluation was completed through August 23, 2017, the date the financial statements were available to be issued. 19

22 For a Unit Outstanding Throughout the Year Ended June 30, 2017 Per-Unit Data Net Asset Value, Beginning of Period Income From Investment Operations: Net Investment Income (Loss) (1) Distributions From Net Investment Income Net Asset Value, End of Period Financial Highlights Total Return (2) Ratios and Supplemental Data Ratio to Average Net Assets of: Operating Expenses (3) Operating Expenses (before expense waiver) (3) Net Investment Income (Loss) Net Investment Income (Loss) (before expense waiver) Net Assets, End of Period (in thousands) Money Market $1.00 (4) (4) $ % 0.19% 0.20% 0.24% 0.23% $94,209 Notes to Financial Highlights (1) Computed using average units outstanding throughout the period. (2) Total returns are calculated based on the net asset value of the last business day. (3) Ratio of operating expenses to average net assets does not include any fees and expenses of the underlying funds. (4) Per-unit amount was less than $0.005.

23 For a Unit Outstanding Throughout the Year Ended June 30, 2017 Per-Unit Data Net Asset Value, Beginning of Period Short-Term Net Investment Income (Loss) (1) Ratios and Supplemental Data Income From Investment Operations: Ratio to Average Net Assets of: Net Realized and Unrealized Gain (Loss) Total From Investment Operations Net Asset Value, End of Period Total Return (2) Operating Expenses (3) Net Investment Income (Loss) Net Assets, End of Period (in thousands) $ (0.11) 0.04 $ % 0.20% 1.08% $200,761 $ $ % 0.20% 1.43% $224,282 Moderate $ $ % 0.20% 1.57% $242,913 $ $ % 0.20% 1.34% $501,767 $ $ % 0.20% 1.12% $784,824 $ $ % 0.20% 0.88% $553,810 Short-Term $ (0.12) (0.01) $10.37 (0.10)% 0.16% 1.09% $57,327 $ $ % 0.19% 1.62% $98,127 $ $ % 0.20% 1.92% $108,144 Moderate $ $ % 0.19% 1.92% $180,618 $ $ % 0.18% 1.85% $292,279 $ $ % 0.16% 1.81% $280,197 Notes to Financial Highlights (1) Computed using average units outstanding throughout the period. (2) Total returns are calculated based on the net asset value of the last business day. (3) Ratio of operating expenses to average net assets does not include any fees and expenses of the underlying funds.

24 Report of Independent Auditors To the Administrator of the Kansas Postsecondary Education Savings Program and the Account Owners and Beneficiaries of the Schwab 529 College Savings Plan: We have audited the accompanying financial statements of the Money Market Portfolio, Short-Term Portfolio, Portfolio, Portfolio, Moderate Portfolio, Portfolio, Portfolio, Short-Term Portfolio, Portfolio, Portfolio, Moderate Portfolio, Portfolio, and Portfolio (the thirteen portfolios comprising the Schwab 529 College Savings Plan, hereafter referred to as the Portfolios ), which comprise the statements of assets and liabilities, including the schedules of investments, as of June 30, 2017 and the related statements of operations and of changes in net assets and the financial highlights for the year then ended. These financial statements and financial highlights are hereafter collectively referred to as "financial statements." Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Portfolios' preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolios' internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Money Market Portfolio, Short-Term Portfolio, Portfolio, Portfolio, Moderate Portfolio, Portfolio, Portfolio, Short-Term Portfolio, Portfolio, Portfolio, Moderate Portfolio, Portfolio, and Portfolio as of June 30, 2017, and the results of each of their operations and each of their changes in net assets and each of the financial highlights for the year then ended, in accordance with accounting principles generally accepted in the United States of America. /s/ PricewaterhouseCoopers LLP Kansas City, Missouri August 23,

25 Notes 23

26 Notes 24

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28 P.O. Box 2906 Shawnee Mission, KS Administered by Kansas State Treasurer Jake LaTurner Managed by American Century Investment Management, Inc. American Century Investment Services, Inc., Distributor and Underwriter 2017 American Century Proprietary Holdings, Inc. All rights reserved. SC-ANN Printed in the USA