KP Funds

The Funds file their complete schedules of investments with the Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year on Form N-Q within sixty days after period end. The Funds’ Forms N-Q are available on the Commission’s website at http://www.sec.gov, and may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities, as well as information relating to how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, is available (i) without charge, upon request, by calling 855-457-3637 (855-4KPFNDS); and (ii) on the Commission’s website at http://www.sec.gov.

Fiscal Year 2015 was characterized by a healthy US economy, a strengthening US dollar, further slowing in the Chinese economy, and a continuation of the plunge in commodities prices that began in 2014. Performance across the major asset classes ranged from modestly positive for US stocks and bonds, to sharply negative for commodities and emerging markets. Fixed income returns were slightly positive for the year with the Barclays U.S. Aggregate Bond Index returning 0.55%. Large Cap US stocks as measured by the Russell 1000 Index returned 0.92% for the year. Non-US equity markets did not fare as well with the MSCI ACWI ex-US Index losing 5.66% for the year and the MSCI Emerging Markets Equity Index dropping by 14.60%. Returns for inflation sensitive (or real) assets were also modestly positive to sharply negative. US REITs (as measured by the FTSE NAREIT Composite Index) returned 2.05% for the year, while Commodities (as measured by the Bloomberg Commodity Index) dropped by 24.70%.

The KP Retirement Path Funds were launched during the early part of January 2014 to provide participants in KP-sponsored defined contribution plans with diversified exposure to all of these asset classes, as well as a number of others including small cap US equity, natural resource equity, global listed infrastructure, Treasury Inflation Protected Securities, floating rate notes, emerging market debt, and short term bonds. Each of the 10 KP Retirement Path Funds is designed with a specific retirement date in mind. Participants are expected to choose the fund that best aligns with the year that they turn 65 and then contribute to the Fund appropriately over the course of their career. The Funds are designed to take care of the rest by investing in a diversified mix of strategies and asset classes which automatically adjusts to become increasingly conservative over time. By gradually changing its asset allocation in this way, each Fund is designed to help shareholders achieve the appropriate balance between long-term capital growth, inflation protection, and current income for each stage of their savings and investing career.

Since the KP Retirement Path Funds’ inception we have been quite pleased with the performance of the operational infrastructure that was assembled to coordinate the activities of the 19 different investment management organizations responsible for the management of the Funds’ assets. We have also been satisfied from an investment performance perspective. All of the KP Retirement Path Funds outperformed their strategic benchmarks in fiscal year 2015, and with the exception of the KP Retirement Path 2015 and 2020 Funds, are ahead of their benchmarks since their inception in January of 2014 (through December 31, 2015). In terms of absolute performance, fiscal year 2015 was generally characterized by flat to negative returns across the major asset classes. Consequently the returns for the KP Retirement Path Funds ranged from modestly positive (0.14% for the 2015 Fund) to modestly negative (-0.73% for the 2040 Fund).

We continue to believe that the KP Retirement Path Funds are well-designed and include a diverse set of complementary asset classes and strategies managed by a highly capable team of sub-advisors. We remain confident that the Funds are well-positioned to achieve their objectives going into 2016 and beyond.

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth less than their original cost and current performance may be lower than the performance quoted. Returns greater than one year are average annual total returns. For performance data current to the most recent month end, please call 855-4-KPFNDS.

Performance for the KP Retirement Path Funds for Fiscal Year 2015 was modestly positive to modestly negative on an absolute basis, but was positive across the board on a relative basis compared to the Funds’ strategic benchmarks. In order to better understand the sources of outperformance for the year it is helpful to review the design of the Funds.

Each of the KP Retirement Path Funds is itself a “fund-of-funds”. This means that each of the Funds is composed of a collection of sub-funds, each with a specific purpose that contributes to the overall design. At the highest level these sub-funds can be grouped into six major categories which include: large cap US equities, small cap US equities, international equities, broad fixed income, real (or inflation sensitive) assets, and short term fixed income. Each of the KP Retirement Path Funds varies its exposure to these asset categories over time to ensure that it is achieving the appropriate balance of capital appreciation, current income, inflation protection, and capital preservation. The 2060 Fund, for example, is primarily invested in large cap US equity, small cap US equity, and international equity. The 2015 Fund, on the other hand, has a much greater emphasis on broad fixed income, real assets, and short term fixed income.

The performance of each Fund is compared to its own strategic benchmark. The strategic benchmarks are designed to reflect the target asset allocation for each Fund, while also assuming that each of the underlying asset classes is implemented using a passive index. While Management makes extensive use of passive strategies in the Funds’ implementation to keep costs low, we also employ a number of active strategies in our attempt to add value relative to the strategic benchmarks. Management does not attempt to add value by trying to time markets using tactical asset allocation. Instead we have designed a sophisticated rebalancing algorithm that keeps the Funds very close to their strategic asset allocation targets over time. As a result, virtually all of the relative performance of the Funds versus their strategic benchmarks can be explained by the relative performance of the strategies within each of the six underlying asset classes. Given this understanding, we can now put the relative performance of the KP Retirement Path Funds into perspective by examining the relative performance of each of the underlying asset classes.

The KP Retirement Path Funds achieve their large cap US equity exposure through the use of the KP Large Cap Equity Fund. This Fund is benchmarked to the Russell 1000 Index. The Fund employs five strategies including: a passive S&P 500 Index strategy; an active large cap growth strategy; an active large cap value strategy, and two active large cap blend strategies. The Fund returned 2.91% for the year versus 0.92% for the benchmark. This outperformance of 1.99% at the Fund level was largely explained by the outperformance of the both the active large cap growth strategy and the active large cap value strategy. These strategies outperformed their benchmarks for the year by 5.01% and 3.86% respectively. Because large cap is a significant part of the asset allocation for all of the KP Retirement Path Funds, this was a meaningful source of outperformance across the entire fund family.

The KP Retirement Path Funds achieve their small cap US equity exposure through the use of the KP Small Cap Equity Fund. This Fund is benchmarked to the Russell 2000 Index. The Fund employs seven strategies including a passive Russell 2000 strategy, two active small cap growth strategies, two active small cap value strategies, and two active small cap blend strategies. The Fund returned -4.73% for the year versus -4.41% for the benchmark. This underperformance of -0.32% was largely explained by the underperformance of one of the actively managed value strategies. We have spent considerable time analyzing the performance and have concluded that the underperformance is cyclical and consistent with the sub-advisor’s long-term investment approach. We remain confident in the sub-advisor and the strategy. Because the underperformance at the fund level was minimal, and because small cap is a relatively small part of the asset allocation for the KP Retirement Path Funds, this was not a significant source of relative underperformance across the fund family.

The KP Retirement Path Funds achieve their international equity exposure through the use of the KP International Equity Fund. This Fund is benchmarked to the MSCI ACWI ex-US Index. The Fund employs four strategies including a passive MSCI EAFE strategy, an active MSCI EAFE strategy, an active MSCI ACWI ex-US strategy, and an active emerging markets strategy. The Fund returned -2.79% for the year versus -5.66% for the benchmark. This outperformance of 1.81% was primarily attributable to the active ACWI ex-US strategy which outperformed its benchmark by over 9%. Because international equity is a large part of the asset allocation for the KP Retirement Path Funds, this was a significant source of relative outperformance across the fund family.

The KP Retirement Path Funds achieve their broad fixed income exposure through the use of the KP Fixed Income Fund. This Fund is benchmarked to the Barclays U.S. Aggregate Bond Index. The Fund employs four strategies including a passive Barclays Intermediate Government/Credit Index strategy, an active Barclays U.S. Aggregate strategy, an active emerging market debt strategy, and an active bank loan strategy. The KP Fixed Income Fund returned 0.57% for the year versus 0.55% for the benchmark. This relatively modest outperformance of 0.02% did not significantly impact the relative performance of the KP Retirement Path Fund series.

The KP Retirement Path Funds achieve their real assets exposure through the use of a diversified collection of non-affiliated sub-funds each specializing in a different inflation-sensitive strategy. Collectively these strategies returned -3.50% over the measurement period versus -6.41% for their composite benchmark. Four of the seven underlying real assets funds met or exceeded the performance of their respective benchmarks over the measurement period. The global infrastructure strategy did particularly well outperforming its benchmark by over 20% for the year. Because real assets are a relatively small part of the asset allocation for the KP Retirement Path Funds, they had only a modest impact on the relative performance across the series.

The KP Retirement Path Funds achieve their short term fixed income exposure through the use of low-cost index strategies. These sub-funds performed in line with their benchmarks and did not have a material effect on the relative performance across the series.

To determine if one of these funds is an appropriate investment for you, carefully consider the fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information may be found in the fund’s summary and full prospectuses, which may be obtained by calling (855)4-KPFNDS or by visiting the website at www.kp-funds.com. Please read the prospectus carefully before investing.

The KP Retirement Path Funds and the KP Core Funds are mutual funds. They are part of The KP Funds Series Trust, an open-end management investment company that offers shares of diversified portfolios. The funds are advised by Callan Associates Inc., a registered investment advisor. They are administered by SEI Investments Global Funds Services and distributed by SEI investments Distribution Co., which are not affiliated with Callan Associates.

Only participants in the Kaiser Permanente defined contribution plans and 403(b) plans can invest in the funds.

There can be no assurance that a Fund will achieve its stated objectives. An investor may experience losses, at any time, including near, at or after the Fund’s target year. In addition, there is no guarantee that an investor’s investment in the fund will provide any income at or through the years following the Fund’s target year in amounts adequate to meet the investor’s goals or retirement needs.

Investing involves risk including loss of principal. Bond and bond funds are subject to interest rate risk and will decline in value as interest rates rise. Mortgage-backed securities are subject to pre-payment and extension risk and therefore react differently to changes in interest rates than other bonds. Small movements in interest rates may quickly and significantly reduce the value of certain mortgage-backed securities. Non-investment grade bonds involve greater risks of default and are more volatile than investment grade securities, due to the speculative nature of the investment. International investments involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. These risks are heightened when investing in emerging markets or in a single state.

Currency risk is the risk that foreign currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency hedged. In either event, the dollar value of an investment in the Underlying Fund would be adversely affected. The use of leverage by the fund managers may accelerate the velocity of potential losses. Furthermore, the use of derivatives are often more volatile than other investments and magnify the Fund’s gains or losses. Diversification does not protect against market loss.

The S&P Target Date^® Series comprises eleven multi-asset class indices, each corresponding to a particular target retirement date. Each index provides varying levels of exposure to equities and fixed income. Each target date allocation is created and retired according to a pre-determined schedule related to the respective target date.

The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000^® Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the Russell 3000 Index.

The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000^® Index representing approximately 8% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership.

The MSCI ACWI ex-US Indes is a free float-adjusted market capitalization-weighted index comprised of equity securities issued by companies from 44 developed market and emerging market countries. It is designed to be a broad measure of the performance of world equity markets excluding the US.

The MSCI EAFE Index captures large, mid, small and micro cap representation across 22 Developed Markets countries (excluding Canada and the United States).

The MSCI Emerging Markets Equity Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.

The Barclays U.S. Aggregate Bond Index is a broad-based and measures the performance of the U.S. investment grade bond market. It invests in a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States – including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than 1 year.

The FTSE NAREIT Composite Index is a headline index that consists of all REITs included in the FTSE NAREIT All REITs Index that also meet the minimum size and liquidity criteria. The FTSE NAREIT Composite Index is free float adjusted.

The S&P 500 Index is based on market capitalizations of 500 large companies having common stock listed on the New York Stock Exchange or NASDAQ.