497 1 a497.htm a497.htm
COMBINED PROXY STATEMENT AND PROSPECTUS
  
FOR THE REORGANIZATION OF
  
 
Stephens Small Cap Growth Fund
Stephens Mid Cap Growth Fund
(each a series of Professionally Managed Portfolios)

615 East Michigan Street
Milwaukee, Wisconsin  53202
(800) 458-6589

INTO

American Beacon Stephens Small Cap Growth Fund
American Beacon Stephens Mid-Cap Growth Fund
(each a series of American Beacon Funds)

4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(800) 967-9009

 

 
And
  
 
STATEMENT OF ADDITIONAL INFORMATION
 
TO COMBINED PROXY STATEMENT AND PROSPECTUS
 
 
December 22, 2011
 
 
 

 
 
PROFESSIONALLY MANAGED PORTFOLIOS
Stephens Small Cap Growth Fund
Stephens Mid Cap Growth Fund
 

 
615 East Michigan Street
Milwaukee, WI 53202
 

December 22, 2011

To the Shareholders:

We are pleased to announce that the Stephens Small Cap Growth Fund and the Stephens Mid Cap Growth Fund (each, a “Stephens Fund” and together, the “Stephens Funds”), each a series of Professionally Managed Portfolios (the “Trust”), are proposing to reorganize into the American Beacon Stephens Small Cap Growth Fund (the “AB Small Cap Fund”) and the American Beacon Stephens Mid-Cap Growth Fund (the “AB Mid-Cap Fund”), respectively.  The AB Small Cap Fund and the AB Mid-Cap Fund are each a newly created series of the American Beacon Funds (the “AB Trust”).  The AB Small Cap Fund and the AB Mid-Cap Fund (together, the “AB Funds”) are designed to be substantially similar from an investment perspective to the Stephens Small Cap Growth Fund and Stephens Mid Cap Growth Fund.

A Special Meeting of Shareholders of the Stephens Funds is to be held at 10:00 a.m. Central time on Thursday, February 23, 2012, at 777 E. Wisconsin Avenue, 4th Floor Conference Room, Milwaukee, WI 53202, where (1) shareholders of the Stephens Small Cap Growth Fund will be asked to vote on the proposal to reorganize the Stephens Small Cap Growth Fund into the AB Small Cap Fund, and (2) shareholders of the Stephens Mid Cap Growth Fund will be asked to vote on the proposal to reorganize the Stephens Mid Cap Growth Fund into the AB Mid-Cap Fund.  A Combined Proxy Statement and Prospectus (the “Proxy Statement”) regarding the meeting, a proxy card for your vote at the meeting and a postage-prepaid envelope in which to return your proxy card are enclosed.

The primary purpose of the reorganization transactions (the “Reorganizations”) is to move the Stephens Funds to the American Beacon Family of Funds.  The Reorganizations will shift management oversight responsibility for the Stephens Funds from Stephens Investment Management Group, LLC (“SIMG”) to American Beacon Advisors, Inc. (the “Manager”).  The Manager is an experienced provider of investment advisory services to institutional and retail investors, with over $16 billion mutual fund and $44 billion overall assets under management, as of October 31, 2011.  Since 1986, the Manager has offered a variety of services and products, including corporate cash management, separate account management, and mutual funds.  SIMG believes that each Reorganization has the potential to expand the Stephen Fund’s presence in more distribution channels, increase its asset base and lower operating expenses as a percentage of assets.
 
By engaging SIMG as a sub-adviser (the “Sub-Adviser”) to the AB Funds, the Manager will provide continuity of the portfolio management team that has been responsible for the Stephens Funds’ performance records since the inception of each of the Stephens Funds.  The portfolio managers of the Sub-Adviser who are primarily responsible for the day-to-day portfolio management of each of the Stephens Funds will remain the same.
 
The Reorganizations will not result in any increase in the advisory fees payable by the AB Funds as compared to the advisory fees that are currently paid by the Stephens Funds.  The Reorganization will not result in any increase in the overall net expense ratio during the first two years as compared to the net expense ratio currently paid by the Stephens Funds.  In addition, the Reorganization will not result in any increase in the gross expense ratio for the AB Mid-Cap Fund’s Investor Class or Institutional Class or for
 

 
 

 

the AB Small Cap Fund’s Institutional Class although there will be an increase in the gross expense ratio for the AB Small Cap Fund’s Investor Class.
 
If shareholders of the Stephens Funds approve the Reorganizations, the Reorganizations will take effect on or about February 24, 2012.  At that time, the Class A and Class I shares of the Stephens Fund that you currently own would, in effect, be exchanged on a tax-free basis for, respectively, Investor Class shares and Institutional Class shares respectively, of the applicable AB Fund with the same aggregate value, as follows:
 
Stephens Small Cap Growth Fund
à
American Beacon Stephens Small Cap Growth Fund
Class A shares
à
Investor Class shares
Class I shares
à
Institutional Class shares
Stephens Mid Cap Growth Fund
à
American Beacon Stephens Mid-Cap Growth Fund
Class A shares
à
Investor Class shares
Class I shares
à
Institutional Class shares

 
No sales loads, commissions or other transactional fees will be imposed on shareholders in connection with the tax-free exchange of their shares.
 
The Board of Trustees of the Trust, on behalf of Stephens Small Cap Growth Fund and Stephens Mid Cap Growth Fund, unanimously recommends that the shareholders of the Stephens Funds vote in favor of the proposed Reorganizations.
 
Detailed information about the proposals is contained in the enclosed materials.  Whether or not you plan to attend the meeting in person, we need your vote.  Once you have decided how you will vote, please promptly complete, sign, date and return the enclosed proxy card or vote by telephone or internet.  If you have any questions regarding the proposal to be voted on, please do not hesitate to call (877) 216-4236.

Your vote is very important to us. Thank you for your response and for your continued investment in the Stephens Funds.

Respectfully,

/s/ J. Warren Simpson
J. Warren Simpson
President
Stephens Investment Management Group, LLC


 
 

 

PROFESSIONALLY MANAGED PORTFOLIOS
Stephens Small Cap Growth Fund
Stephens Mid Cap Growth Fund
 
615 East Michigan Street
Milwaukee, WI 53202
 
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 23, 2012.

To the Shareholders of the Stephens Small Cap Growth Fund and the Stephens Mid Cap Growth Fund:

NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the “Special Meeting”) of the Stephens Small Cap Growth Fund and the Stephens Mid Cap Growth Fund (together, the “Stephens Funds”), each a series of Professionally Managed Portfolios (the “Trust”), is to be held at 10:00 a.m. Central time on Thursday, February 23, 2012, at 777 E. Wisconsin Avenue, 4th Floor Conference Room, Milwaukee, WI 53202.

The Special Meeting is being held to consider an Agreement and Plan of Reorganization and Termination (the “Plan”) providing for the transfer of all of the assets of the Stephens Small Cap Growth Fund to the American Beacon Stephens Small Cap Growth Fund (the “AB Small Cap Fund”), and all of the assets of the Stephens Mid Cap Growth Fund to the American Beacon Stephens Mid-Cap Growth Fund (the “AB Mid-Cap Fund”).  Both the AB Small Cap Fund and the AB Mid-Cap Fund are newly created series of American Beacon Funds (the “AB Trust”).

Each transfer effectively would be an exchange of your Class A and Class I shares of the Stephens Fund for, respectively, Investor Class shares and Institutional Class shares of the corresponding AB Fund, which would be distributed pro rata by the Stephens Fund to the holders of its shares in complete liquidation of the Stephens Fund, and the AB Fund’s assumption of all of the liabilities of the Stephens Fund, as follows:

Stephens Small Cap Growth Fund
à
American Beacon Stephens Small Cap Growth Fund
Class A shares
à
Investor Class shares
Class I shares
à
Institutional Class shares
Stephens Mid Cap Growth Fund
à
American Beacon Stephens Mid-Cap Growth Fund
Class A shares
à
Investor Class shares
Class I shares
à
Institutional Class shares

Those present and the appointed proxies also will transact such other business, if any, as may properly come before the Special Meeting or any adjournments or postponements thereof.

Holders of record of the shares of beneficial interest in each Stephens Fund as of the close of business on December 19, 2011 are entitled to vote at the Special Meeting or any adjournments or postponements thereof.

If the necessary quorum to transact business or the vote required to approve any proposal is not obtained at the Special Meeting or if quorum is obtained but sufficient votes required to approve the Plan are not obtained, the persons named as proxies on the enclosed proxy card may propose one or more adjournments of the Special Meeting to permit, in accordance with applicable law, further solicitation of proxies with respect to the proposal.  Whether or not a quorum is present, any such adjournment as to a matter will require the affirmative vote of the holders of a majority of the shares represented at that meeting, either in person or by proxy.  The meeting may be held as adjourned within a reasonable time

 
 

 

after the date set for the original meeting without further notice unless a new record date is established for the adjourned meeting and the adjourned meeting is held more than 60 days from the date set for the original meeting.  The persons designated as proxies may use their discretionary authority to vote as instructed by management of the Stephens Funds on questions of adjournment and on any other proposals raised at the Special Meeting to the extent permitted by the proxy rules of the Securities and Exchange Commission (the “SEC”), including proposals for which timely notice was not received, as set forth in the SEC’s proxy rules.

By order of the Board of Trustees,

 
/s/ Elaine E. Richards
Elaine E. Richards, Secretary
 
December 22, 2011
 
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting of Shareholders to be Held on Thursday, February 23, 2012 or any adjournment or postponement thereof.  This Notice and Combined Proxy Statement and Prospectus are available on the internet at www.stephensfunds.com. On this website, you will be able to access the Notice, the Combined Proxy Statement and Prospectus, any accompanying materials and any amendments or supplements to the foregoing material that are required to be furnished to shareholders.  We encourage you to access and review all of the important information contained in the proxy materials before voting.
 
IMPORTANT — We urge you to sign and date the enclosed proxy card and return it in the enclosed addressed envelope, which requires no postage and is intended for your convenience. You also may vote through the internet, by visiting the website address on your proxy card, or by telephone, by using the toll-free number on your proxy card. Your prompt vote may save the Stephens Funds the necessity of further solicitations to ensure a quorum at the Special Meeting. If you can attend the Special Meeting and wish to vote your shares in person at that time, you will be able to do so.

 
 

 

PROFESSIONALLY MANAGED PORTFOLIOS
Stephens Small Cap Growth Fund
Stephens Mid Cap Growth Fund
 
615 East Michigan Street
Milwaukee, WI 53202

 
 
QUESTIONS AND ANSWERS
 
 

YOUR VOTE IS VERY IMPORTANT!
 
 
 
 
Dated: December 22, 2011

Question:  What is this document and why did you send it to me?

Answer:  The attached document is a proxy statement for the Stephens Small Cap Growth Fund and the Stephens Mid Cap Growth Fund (collectively, the “Stephens Funds”), each a series of Professionally Managed Portfolios (the “Trust”), and a prospectus for Investor Class shares and Institutional Class shares of American Beacon Stephens Small Cap Growth Fund (the “AB Small Cap Fund”) and American Beacon Stephens Mid-Cap Growth Fund (the “AB Mid-Cap Fund”) (collectively, the “AB Funds”), each a newly created series of American Beacon Funds (the “AB Trust”).  The purposes of this Combined Proxy Statement and Prospectus (the “Proxy Statement”) are to (1) solicit votes from shareholders of the Stephens Small Cap Growth Fund to approve the proposed reorganization of the Stephens Small Cap Growth Fund into the AB Small Cap Fund and from shareholders of the Stephens Mid Cap Growth Fund to approve the proposed reorganization of the Stephens Mid Cap Growth Fund into the AB Mid-Cap Fund (each, a “Reorganization” and together, the “Reorganizations”) as described in the Agreement and Plan of Reorganization and Termination between the Trust and the AB Trust (the “Plan”) and (2) provide information regarding the Investor Class and Institutional Class shares of the AB Small Cap Fund and the AB Mid-Cap Fund.

The Proxy Statement contains information that shareholders of the Stephens Funds should know before voting on the Reorganizations.  The Proxy Statement should be retained for future reference.

Question:  What is the purpose of the Reorganizations?

Answer:  The primary purpose of the Reorganizations is to move the Stephens Funds to the American Beacon Family of Funds.  Reconstituting each of the Stephens Funds as a series of the AB Trust has the potential to (a) expand the Stephens Funds’ presence in more distribution channels, (b) increase the asset base of each of the Stephens Funds, and (c) lower operating expenses as a percentage of assets.  Stephens Investment Management Group, LLC (“SIMG”), the current adviser to the Stephens Funds, recommends that the Stephens Small Cap Growth Fund and Stephens Mid Cap Growth Fund each be reorganized as a series of the AB Trust.
 
Question:  How will the Reorganizations work?
 
Answer:  In order to reconstitute each Stephens Fund as a series of the AB Trust, substantially similar funds, referred to as the “AB Funds,” have been created as new series of the AB Trust.  If

 
 

 

shareholders of the Stephens Small Cap Growth Fund approve the Plan, the Stephens Small Cap Growth Fund will transfer all of its assets to the AB Small Cap Fund in return for shares of the AB Small Cap Fund and the AB Small Cap Fund’s assumption of the Stephens Small Cap Growth Fund’s liabilities, and if the shareholders of the Stephens Mid Cap Growth Fund approve the Plan, the Stephens Mid Cap Growth Fund will transfer all of its assets to the AB Mid-Cap Fund in return for shares of the AB Mid-Cap Fund and the AB Mid-Cap Fund’s assumption of the Stephens Mid Cap Growth Fund’s liabilities.  The Stephens Small Cap Growth Fund and Stephens Mid Cap Growth Fund each will then distribute the shares it receives from the corresponding AB Fund to shareholders of the Stephens Small Cap Growth Fund and the Stephens Mid Cap Growth Fund, respectively.

Existing shareholders of Class A and Class I shares of the Stephens Small Cap Growth Fund and the Stephens Mid Cap Growth Fund will become shareholders of Investor Class and Institutional Class shares, respectively, of the AB Small Cap Fund or AB Mid-Cap Fund. Immediately after the Reorganization, each shareholder will hold the same number of Investor Class and Institutional Class shares of the AB Fund, with the same net asset value per share and total value, as the Class A and Class I shares of the Stephens Fund that he or she held immediately prior to the Reorganization.  Subsequently, the Stephens Funds will be liquidated.

Please refer to the Proxy Statement for a detailed explanation of the proposal.  If the Plan is approved by shareholders of the Stephens Funds at the Special Meeting of Shareholders (the “Special Meeting”), the Reorganizations presently are expected to be effective on or about February 24, 2012.

Question:  How will the Reorganizations affect me as a shareholder?

Answer:  If you are a shareholder of the Stephens Small Cap Growth Fund you will become a shareholder of the AB Small Cap Fund, and if you are a shareholder of the Stephens Mid Cap Growth Fund you will become a shareholder of the AB Mid-Cap Fund.  The shares of the AB Small Cap Fund and AB Mid-Cap Fund that you receive will have a total net asset value equal to the total net asset value of the shares you hold in the Stephens Small Cap Growth Fund or Stephens Mid Cap Growth Fund, respectively, as of the closing date of the Reorganization.  The Reorganizations will not affect the value of your investment at the time of the Reorganizations. The Reorganizations are expected to be tax-free to the Stephens Funds and their shareholders.

The Reorganizations will shift management oversight responsibility for the Stephens Funds from SIMG to American Beacon Advisors, Inc. (the “Manager”).  By engaging SIMG, the current adviser to the Stephens Funds, as the sub-adviser (the “Sub-Adviser”), the Manager will provide continuity of the portfolio management team that has been responsible for the Stephens Funds’ performance records since each Stephens Fund’s inception. The portfolio managers of the Sub-Adviser who are primarily responsible for the day-to-day portfolio management of the Stephens Funds will remain the same.  The investment objective and strategies of the AB Funds will be substantially similar to those of the Stephens Funds.  However, the AB Funds may make greater use of investments in cash or cash equivalents such as money market funds and also have more latitude to purchase and sell futures contracts to gain market exposure on cash balances or to reduce market exposure in anticipation of liquidity needs than the Stephens Funds.  The investment limitations of the AB Funds are substantially similar to those of the Stephens Funds; however, the investment limitations of the AB Funds have been harmonized to align with the limitations with those of other funds in the AB Trust complex.
 
The Reorganizations will affect other services currently provided to the Stephens Funds.  Foreside Fund Services, LLC will be the distributor and principal underwriter of the AB Funds’ shares; Quasar Distributions, LLC currently serves as the distributor and principal underwriter of the Stephens Funds’ shares.  The AB Funds will engage State Street as their custodian and accounting agent; U.S.

 
2

 

Bank, National Association, currently serves as the custodian for the Stephens Funds and U.S. Bancorp currently serves as accounting agent for the Stephens Funds.  The AB Funds will engage Boston Financial Data Services, a State Street affiliate, as their transfer agent.  The Manager will provide administration services for the AB Funds; U.S. Bancorp Fund Services, LLC currently provides administration services and fund accounting for the Stephens Funds.

The Reorganizations will move the assets of the Stephens Funds from the Trust, which is a Massachusetts business trust, to the AB Funds, each a series of the AB Trust, which also is organized as a Massachusetts business trust.  As a result of the Reorganizations, the AB Funds will operate under the supervision of a different Board of Trustees.

Question:  Who will manage the AB Funds?

Answer:  The Manager will be responsible for overseeing the management of the AB Funds, and the portfolio managers of the Sub-Adviser who are primarily responsible for the day-to-day portfolio management of the Stephens Funds will continue to manage the portfolio of the AB Funds.

The Manager is an experienced provider of investment advisory services to institutional and retail investors, with over $16 billion mutual fund and $44 billion overall assets under management, as of October 31, 2011.  Since 1986, the Manager has offered a variety of services and products, including corporate cash management, separate account management, and mutual funds.  The Manager serves retail clients as well as defined benefit plans, defined contribution plans, foundations, endowments, corporations, and other institutional investors. There are currently 21 series of the AB Trust.  The American Beacon Family of Funds advised by the Manager currently includes international and domestic equity portfolios spanning a variety of longer-range investment strategies through balanced portfolios, as well as short-term investment options such as bond funds and money market funds.

The Sub-Adviser was established in 2005 and is a subsidiary of Stephens Investments Holdings LLC, a privately held and family owned company.  As of September 30, 2011 the Sub-Adviser’s assets under management were approximately $842.46 million.

Question:  How will the Reorganizations affect the fees and expenses I pay as a shareholder of the Stephens Funds?

Answer:  The Reorganizations will not result in any increase in the advisory fees payable by the AB Funds over those advisory fees currently incurred by the Stephens Funds.  The Reorganization will not result in any increase in the overall net expense ratios during the first two years compared to the net expense ratios currently paid by the Stephens Funds.  In addition, the Reorganization will not result in any increase in the gross expense ratio for the AB Mid-Cap Fund’s Investor Class or Institutional Class or for the AB Small Cap Fund’s Institutional Class although there will be an increase in the gross expense ratio for the AB Small Cap Fund’s Investor Class.  The total annual fund operating expenses of each of the Class A and Class I shares of the Stephens Small Cap Growth Fund as of the semi-annual period ended May 31, 2011 are 1.42% and 1.17%, respectively, of its average daily net assets before the cap on expenses, and 1.36% and 1.11%, respectively, after fee waivers.  The total annual fund operating expenses of each of the Class A and Class I Shares of the Stephens Mid Cap Growth Fund as of the semi-annual period ended May 31, 2011 are 2.01% and 1.76%, respectively, of its average daily net assets before the cap on expenses, and 1.51% and 1.26%, respectively, after fee waivers.  The projected total annual operating expenses for the Investor Class shares and Institutional Class shares of the AB Funds, based on the same asset levels, are 1.53%, and 1.15%, respectively for the AB Small Cap Growth Fund, and 1.63%, and 1.25%, respectively for the AB Mid-Cap Growth Fund, of that Fund’s average daily net assets before the cap on expenses. The Manager has contractually agreed to cap Fund expenses through

 
3

 

April 30, 2014, to the extent that total annual fund operating expenses of the Investor Class shares and Institutional Class shares exceed the annual rate of 1.35% and 1.09%, respectively, for the AB Small Cap Fund and 1.37% and 0.99%, respectively, for the AB Mid-Cap Fund excluding taxes, interest, portfolio transaction expenses and other extraordinary expenses.

Question:  Will the Reorganizations result in any taxes?

Answer:  We expect that neither the Stephens Funds nor their shareholders will recognize any gain or loss for federal income tax purposes as a direct result of the Reorganizations, and the Trust and the AB Trust expect to receive a tax opinion confirming this position. Shareholders should consult their tax adviser about possible state and local tax consequences of the Reorganizations, if any, because the information about tax consequences in this document relates to the federal income tax consequences of the Reorganizations only.

Question:  Will I be charged a sales charge or contingent deferred sales charge (CDSC) as a result of the Reorganizations?

Answer:  No sales loads, commissions or other transactional fees will be imposed on shareholders in connection with the Reorganizations.

Question:  Why do I need to vote?

Answer:  Your vote is needed to ensure that a quorum and sufficient votes are present at the Special Meeting so that the proposal can be acted upon. Your immediate response on the enclosed Proxy Card will help prevent the need for any further solicitations for a shareholder vote, which will result in additional expenses.  Your vote is very important to us regardless of the number of shares you own.

Question:  How does the Trust’s Board of Trustees (the “Board”) recommend that I vote?

Answer:  After careful consideration and upon recommendation of SIMG, the Board unanimously recommends that shareholders vote “FOR” the Plan.

Question:  Who is paying for expenses related to the Special Meeting and the Reorganizations?
 
Answer:  SIMG and the Manager will pay all direct costs relating to the Reorganizations, including the costs relating to the Special Meeting and the Proxy Statement.

Question:  What will happen if the Plan is not approved by shareholders?

Answer:  The consummation of a Reorganization of a Stephens Fund is contingent on the consummation of the Reorganization of the other Stephens Fund. Thus, if shareholders of one or both of the Stephens Funds do not approve the Plan, neither of the Stephens Funds will be reorganized into its corresponding AB Fund and the Board will meet to consider other alternatives.

Question:  How do I vote my shares?
 
Answer:  You can vote your shares by mail, telephone or internet by following the instructions on the enclosed proxy card.

 
4

 

Question:  Who do I call if I have questions?

Answer:  If you have any questions about the proposal or the proxy card, please do not hesitate to call (877) 216-4236.


 
5

 


COMBINED PROXY STATEMENT AND PROSPECTUS


December 22, 2011


FOR THE REORGANIZATION OF
 
 
Stephens Small Cap Growth Fund
Stephens Mid Cap Growth Fund
(each a series of Professionally Managed Portfolios)

615 East Michigan Street
Milwaukee, Wisconsin 3202
(800) 458-6589

INTO

American Beacon Stephens Small Cap Growth Fund
American Beacon Stephens Mid-Cap Growth Fund
(each a series of American Beacon Funds)

4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(800) 967-9009

_________________________________________


This Combined Proxy Statement and Prospectus (the “Proxy Statement”) is being sent to you in connection with the solicitation of proxies by the Board of Trustees (the “Board”) of the Stephens Small Cap Growth Fund and the Stephens Mid Cap Growth Fund (each, a “Stephens Fund” and together, the “Stephens Funds”) for use at a Special Meeting of Shareholders (the “Special Meeting”) of the Stephens Funds, each a series of Professional Managed Portfolios (the “Trust”), managed by Stephens Investment Management Group, LLC (“SIMG”), at the offices of U.S. Bancorp Fund Services, LLC, located at 777 E. Wisconsin Avenue, 4th Floor Conference Room, Milwaukee, WI 53202, February 23 2012, at 10:00 a.m. Central time.  At the Special Meeting, shareholders of the Stephens Funds will be asked:

Proposal
Shareholders Entitled to
Vote on the Proposal
 
1.  To approve an Agreement and Plan of Reorganization and Termination (the “Plan”) providing for the transfer of all of the assets of the Stephens Small Cap Growth Fund to the American Beacon Stephens Small Cap Growth Fund, a newly created series of American Beacon Funds (the “AB Trust”), in exchange for:
 
(a) Investor Class shares and Institutional Class shares of the American Beacon Stephens Small Cap Growth Fund equal in number and value to the Stephens Small Cap Growth Fund’s Class A and Class I shares, respectively,
 
Shareholders of Stephens
Small Cap Growth Fund
 
 
 
 

 
 
which will be distributed pro rata by Stephens Small Cap Growth Fund to the holders of its shares in complete liquidation of the Stephens Small Cap Growth Fund as follows:
 
Stephens Small                                   American Beacon Stephens
Cap Growth Fund                                    Small Cap Growth Fund
Class A shares                          à          Investor Class shares
Class I shares                            à         Institutional Class shares
 
(b) The American Beacon Stephens Small Cap Growth Fund’s assumption of all of the liabilities of the Stephens Small Cap Growth Fund.
 
 
2.  To approve the Plan providing for the transfer of all of the assets of the Stephens Mid Cap Growth Fund to the American Beacon Stephens Mid-Cap Growth Fund, a newly created series of the AB Trust, in exchange for:
 
(a) Investor Class shares and Institutional Class shares of the American Beacon Stephens Mid-Cap Growth Fund equal in number and value to the Stephens Mid Cap Growth Fund’s Class A and Class I shares, respectively, which will be distributed pro rata by Stephens Mid Cap Growth Fund to the holders of its shares in complete liquidation of the Stephens Mid Cap Growth Fund as follows:
 
Stephens Mid                                 American Beacon Stephens
Cap Growth Fund                                    Mid-Cap Growth Fund
Class A Shares                          à         Investor Class shares
Class I Shares                            à       Institutional Class Shares
 
(b) The American Beacon Stephens Mid-Cap Growth Fund’s assumption of all of the liabilities of the Stephens Mid Cap Growth Fund.
 
 
Shareholders of Stephens
Mid Cap Growth Fund
3.  To transact any other business, not currently contemplated, that may properly come before the Special Meeting, in the direction of the proxies or their substitutes, or any adjournments thereof.
 
Shareholders of each
Stephens Fund, as
applicable
 

The consummation of a Reorganization of a Stephens Fund is contingent on the consummation of the Reorganization of the other Stephens Fund.  If shareholders of one or both of the Stephens Funds do not approve the Plan, neither of the Stephens Funds will be reorganized into its corresponding AB Fund.  In such a case, the Board will meet to consider other alternatives.

Each of the Stephens Funds is a series of the Trust, which is an open-end management investment company registered with the SEC and organized as a Massachusetts business trust.  Each of the AB Funds is a newly created series of the AB Trust, which is an open-end management investment company registered with the SEC and organized as a Massachusetts business trust.

This Proxy Statement sets forth the basic information you should know before voting on the proposals.  You should read it and keep it for future reference.  Additional information relating to the American Beacon Stephens Small Cap Growth Fund and the American Beacon Stephens Mid-Cap Growth Fund (each an “AB Fund”, and together, the “AB Funds”) and the Proxy Statement is set forth in

 
 

 

the Statement of Additional Information to this Proxy Statement dated December 22, 2011, which is incorporated by reference into this Proxy Statement.  Additional information about the AB Funds has been filed with the Securities and Exchange Commission (the “SEC”) and is available upon request and without charge by writing to the AB Funds or by calling (800) 658-5811.  The Stephens Funds expect that the Proxy Statement will be mailed to shareholders on or about January 5, 2012.

The following documents regarding the Stephens Funds have been filed with the SEC and are incorporated by this reference into this Proxy Statement, which means that these documents are considered legally to be part of the Proxy Statement:

Statement of Additional Information to this Proxy Statement, dated December 22, 2011;
   
Prospectuses and Statement of Additional Information of the Stephens Funds, each dated March 31, 2011; and
   
Semi-Annual Report to Shareholders of the Stephens Funds for the semi-annual period ended May 31, 2011, and Annual Report to Shareholders of the Stephens Funds for the fiscal year ended November 30, 2010.

The Stephens Funds’ Prospectuses dated March 31, 2011 and Annual Reports to Shareholders for the fiscal year ended November 30, 2010, containing audited financial statements, have been previously mailed to shareholders.  Copies of these documents are available upon request and without charge by writing to the Trust, through the internet at www.stephensfunds.com or by calling (866) 735-7464.

Because the AB Funds have not yet commenced operations as of the date of this Proxy Statement, no annual or semi-annual reports are available for the AB Funds at this time.


 

THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES NOR HAS IT PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

The shares offered by this Proxy Statement are not deposits or obligations of any bank, and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.  An investment in the AB Funds involves investment risk, including the possible loss of principal.

 


 
 

 


TABLE OF CONTENTS

I.
ABOUT THE REORGANIZATIONS
1
II.
PROPOSALS TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
2
 
A.
PROPOSALS ONE AND TWO
2
   
1.
Comparison of Principal Investment Objectives, Strategies and Policies of the Funds
2
   
2.
Comparison of Investment Restrictions and Limitations
10
   
3.
Comparison of Fees and Expenses
17
   
4.
Comparative Performance Information
20
   
5.
Capitalization
26
 
B.
INFORMATION ABOUT THE REORGANIZATIONS
27
   
1.
Reasons for the Reorganizations
27
   
2.
Board Considerations
27
   
3.
Comparison of Principal Risks
30
   
4.
Comparison of Distribution and Purchase, Redemption and Exchange Procedures
32
 
C.
KEY INFORMATION ABOUT THE PROPOSALS
35
   
1.
Summary of the Proposed Reorganizations
35
   
2.
Description of the AB Funds’ Shares
36
   
3.
Federal Income Tax Consequences
36
   
4.
Comparison of Forms of Organization and Shareholder Rights
38
 
D.
ADDITIONAL INFORMATION ABOUT THE AB FUNDS
39
   
1.
Investment Adviser and Sub-Adviser
39
   
2.
Other Service Providers
40
   
3.
Tax Considerations
40
   
4.
Payments to Broker-Dealers and Other Financial Intermediaries
40
II.
VOTING INFORMATION
40
 
A.
RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED
41
 
B.
HOW TO VOTE
41
 
C.
PROXIES
41
 
D.
QUORUM AND ADJOURNMENTS
42
 
E.
EFFECT OF ABSTENTIONS AND BROKER “NON-VOTES”
42
 
F.
SOLICITATION OF PROXIES
42
III.
OTHER INFORMATION
43
 
A.
OTHER BUSINESS
43
 
B.
NEXT MEETING OF SHAREHOLDERS
43
 
C.
LEGAL MATTERS
43
 
D.
INFORMATION FILED WITH THE SEC
43
APPENDIX A  FORM OF AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
A-1
APPENDIX B  OWNERSHIP OF SHARES OF THE STEPHENS FUNDS
B-1
APPENDIX C  VALUATION, PURCHASE, REDEMPTION AND TAX INFORMATION FOR THE AB FUNDS
C-1
APPENDIX D  FINANCIAL HIGHLIGHTS OF THE AB FUNDS
D-1

 
 

 


 
I.ABOUT THE REORGANIZATIONS
 
           The Board, including all the Trustees who are not “interested persons,” as that term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”), of the Trust, upon the recommendation of SIMG and after consideration of the matters discussed below, proposes that each Stephens Fund reorganize into the corresponding AB Fund and that each shareholder of a Stephens Fund become a shareholder of the corresponding AB Fund, pursuant to the Plan, the form of which is attached to this Proxy Statement as Appendix A.  The Board considered the Reorganizations at its regularly scheduled meetings held on August 9, 2011 and November 8, 2011. The Board believes that the Reorganizations are in the best interests of each Stephens Fund and its shareholders.
 
In order to reorganize each Stephens Fund into a series of the AB Trust, substantially similar funds, referred to as the “AB Funds,” have been created as new series of the AB Trust.  If the shareholders of the Stephens Funds approve the Plan, the Reorganizations will have three primary steps:
 
           *           First, each Stephens Fund will transfer all of its assets to the applicable AB Fund in exchange solely for Investor Class and Institutional Class shares of the AB Fund and the AB Fund’s assumption of all of the Stephens Fund’s liabilities;
 
           *           Second, holders of each of the Stephens Fund will receive a pro rata distribution of the corresponding AB Fund’s Investor Class and/or Institutional Class shares, as the case may be; and
 
           *           Third, the Stephens Funds will be liquidated.
 
Approval of the Plan by shareholders of a Stephens Fund will constitute approval of the transfer of that Stephens Fund’s assets, the assumption of its liabilities, the distribution of the corresponding AB Fund’s Investor Class and Institutional Class shares, and liquidation of that Stephens Fund.  The Investor Class and Institutional Class shares issued in connection with each Reorganization will have an aggregate net asset value equal to the net value of the assets that the Stephens Fund transferred to the AB Fund, less the Stephens Fund’s liabilities that the AB Fund assumes.  The value of a Stephens Fund shareholder’s account with the AB Fund immediately after a Reorganization will be the same as the value of such shareholder’s account with the Stephens Fund immediately prior to the Reorganization.  No sales charge or fee of any kind will be charged to the shareholders of the Stephens Funds in connection with the Reorganizations.
 
The Trust believes that the Reorganizations will constitute a tax-free transaction for federal income tax purposes.  The Trust and the AB Trust will receive an opinion from tax counsel to the AB Trust substantially to that effect.  Therefore, shareholders should not recognize any gain or loss on their shares of the Stephens Funds for federal income tax purposes as a direct result of the Reorganizations.

The Board has fixed the close of business on December 19, 2011 as the record date for the determination of shareholders entitled to notice of and to vote at the Special Meeting and any adjournments thereof.  In considering whether to approve a proposal relating to a Reorganization, you should review the proposal for each Stephens Fund of which you were a shareholder on December 19, 2011. In addition, you should review the information in this Proxy Statement that relates to both of the proposals and the Reorganizations generally.

 
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II.           PROPOSALS TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION

A.PROPOSALS ONE AND TWO
 
 
PROPOSAL ONE.  Approval of the Agreement and Plan of Reorganization and Termination, which provides for the reorganization of the Stephens Small Cap Growth Fund into the American Beacon Stephens Small Cap Growth Fund (“AB Small Cap Fund”).
   
PROPOSAL TWO. Approval of the Agreement and Plan of Reorganization and Termination, which provides for the reorganization of the Stephens Mid Cap Growth Fund into the American Beacon Stephens Mid-Cap Growth Fund (“AB Mid-Cap Fund”).
   
Proposal One and Proposal Two (each, a “Proposal” and together the “Proposals”) request your approval of the Reorganization of the Stephens Funds into the corresponding AB Fund.  In considering whether to approve a Proposal please review the following information.
 
1.Comparison of Principal Investment Objectives, Strategies and Policies of the Funds
 
Each Stephens Fund and the corresponding AB Fund have substantially similar investment objectives and strategies, which are presented in the table below.  However, the AB Funds have great latitude with respect to investing cash balances in money market funds and the purchase and sale of futures contracts to gain market exposure on cash balances or to reduce market exposure in anticipation of liquidity needs.  While the Stephens Funds seek to remain fully invested, they can invest in cash and cash equivalents and money market funds for temporary defensive purposes or in response to unusual circumstances such as large cash inflows or redemptions.  The Stephens Funds are also more limited in their ability to use futures contracts.
 
Each AB Fund has been created as a shell series of the AB Trust solely for the purpose of acquiring its corresponding Stephens Fund’s assets and continuing its business investment strategy, and will not conduct any investment operations until after the closing of the Reorganization.  The Manager has reviewed each of the Stephens Fund’s current portfolio holdings and determined that those holdings are compatible with the corresponding AB Fund’s investment objectives and policies.  As a result, the Manager believes that, if the Reorganization is approved, all or substantially all of each Stephens Fund’s assets will be transferred to and held by the corresponding AB Fund.

 
 
Stephens Funds
 
AB Funds
Investment
Objective
Each Stephens Fund seeks long-term growth of capital.
 
Each Stephens Fund’s investment objective is non-fundamental, which means it may be changed by the Board without the approval of Stephens Fund shareholders. The Stephens Fund will only change its investment objective upon a 30-day written notice to
 
Same.
 
 
Although the AB Funds will provide shareholders with notice of any change to the investment objective, the AB Funds will not adopt an identical notification policy.

 

 
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Stephens Funds
 
AB Funds
 
shareholders.
 
   
Principal
Investment
Strategies
 
 
 
 
 
Stephens Small Cap Growth Fund
 
Under normal market conditions, the Stephens Fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in stocks of small capitalization companies.
 
 
The Stephens Fund considers a company to be a small-cap company if it has a market capitalization, at the time of purchase, of $2.5 billion or less.
 
 
 
The Stephens Fund may invest up to 20% of its net assets in equity securities of issuers that have market capitalizations, at the time of purchase, greater than $2.5 billion.
 
 
Stephens Mid Cap Growth Fund
 
Under normal market conditions, the Stephens Fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in stocks of medium capitalization companies.
 
The principal investment strategies of the AB Small Cap Fund and AB Mid-Cap Fund are substantially similar to the principal investment strategies of the Stephens Small Cap Growth Fund and Stephens Mid Cap Growth Fund, respectively, except for the differences highlighted below.
 
 
 
Under normal market conditions, the AB Small Cap Fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of small capitalization companies, whereas under normal market conditions, the Stephens Small Cap Growth Fund invests 80% of its net assets (plus any borrowings for investment purposes) in stocks of small capitalization companies.
 
The AB Small Cap Fund considers a company to be a small-cap company if it has a market capitalization, at the time of investment, of $3 billion or less, whereas the Stephens Small Cap Growth Fund considers a company to be a small-cap company if it has a market capitalization, at the time of purchase, of $2.5 billion or less.  In addition, the AB Small Cap Fund may not invest in any security that at the time of purchase, has a market capitalization greater than $3.5 billion.
 
The AB Small Cap Fund may invest up to 20% of its net assets in equity securities of issuers that have market capitalizations, at the time of purchase, greater than $3 billion and less than or equal to $3.5 billion.
 
 
 
 
Under normal market conditions, the AB Mid-Cap Fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of medium capitalization companies, whereas under normal market conditions, the Stephens Mid Cap Growth Fund invests 80% of its net assets

 

 
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Stephens Funds
 
AB Funds
 
 
 
 
The Stephens Fund considers a company to be a mid-cap company if it has a market capitalization, at the time of purchase, of $1.5 billion to $12.5 billion.
 
 
 
 
 
 
 
The Stephens Fund may invest up to 20% of its net assets in equity securities of issuers that have market capitalizations, at the time of purchase, of less than $1.5 billion or greater than $12.5 billion.
 
Both Stephens Funds
 
Most of the assets of the Stephens Funds will be invested in U.S. common stocks SIMG believes have clear indicators of future earnings growth, or that demonstrate other potential for growth of capital.  The Stephens Funds may invest in other equity securities, including convertible debt securities and preferred stock, as well as exchange-traded funds (“ETFs”).  Not all ETFs in which the Stephens Small Cap Growth Fund or the Stephens Mid Cap Growth Fund may invest will be invested exclusively in small-cap companies or mid-cap companies, respectively.  The Stephens Funds may also invest in equity index futures, investment grade, non-
 
(plus any borrowings for investment purposes) in stocks of medium capitalization companies.
 
The AB Mid-Cap Fund considers a company to be a mid-cap company if it has a market capitalization, at the time of investment, between $1 billion and the market capitalization of the largest company in the Russell Midcap Index, whereas the Stephens Mid Cap Growth Fund considers a company to be a mid-cap company if it has a market capitalization, at the time of purchase, of $1.5 billion to $12.5 billion.  In addition, if the market capitalization of any mid-cap company reaches $25 billion, the sub-advisor of the AB Mid-Cap Fund will sell the holdings in such company unless the Manager approves the retention of such company.
 
 
Notwithstanding the above restriction on any mid-cap company reaching $25 billion, the AB Mid-Cap Fund may invest up to 20% of its net assets in equity securities of issuers that have market capitalizations, at the time of purchase, of less than $1 billion or greater than the market capitalization of the largest company in the Russell Midcap Index.
 
Same, except for the following:
 
The AB Fund may also invest in REITs and shares of other investment companies.
 
Each AB Fund’s strategies and policies may be changed without the approval of the AB Fund’s shareholders, but the AB Fund will not adopt the policy that it must provide a 30-day written notice to shareholders before such a change is made.
 
Whereas the Stephens Small Cap Growth Fund and Stephens Mid Cap Growth Fund will not change its investment policy of investing at least 80% of its net assets in small-cap companies or mid-cap companies, respectively, without first changing the Stephens Fund’s name and providing shareholders with at least a 60-day prior written notice, if an AB Fund changes its 80% policy, a notice will be sent to shareholders at least 60 days in advance of the change, and the Fund’s prospectus will be supplemented.

 

 
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Stephens Funds
 
AB Funds
 
convertible debt securities, U.S. government securities, high quality money market instruments and money market funds.  In addition, the Stephens Funds may invest up to 25% of its net assets in securities of foreign issuers, including American Depositary Receipts (“ADRs”) and European Depositary Receipts (“EDRs”), including in emerging markets.  In selecting companies for the Stephens Funds, SIMG employs quantitative analysis and fundamental research with a focus on earnings growth.  SIMG will sell a security when appropriate and consistent with the Stephens Funds’ investment objectives and policies.
 
Each Stephens Fund’s strategies and policies described above may be changed without the approval of the Stephens Fund’s shareholders upon a 30-day written notice to shareholders.  The Stephens Small Cap Growth Fund and Stephens Mid Cap Growth Fund will not change its investment policy of investing at least 80% of its net assets in small-cap companies or mid-cap companies, respectively, without first changing the Stephens Fund’s name and providing shareholders with at least a 60-day prior written notice.
 
In connection with each AB Fund’s temporary or cash investments strategy and cash management investment strategy, both of which are described below, an AB Fund may invest in ETFs, equity index futures, high quality money market instruments or money market funds.

 

 
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Stephens Funds
 
AB Funds
Temporary
or Cash
Investments
In anticipation of or in response to adverse market or other conditions or atypical circumstances such as unusually large cash inflows or redemptions, each Stephens Fund may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments.  As a result, the Stephens Fund may not achieve its investment objective.  To the extent the Stephens Fund invests in ETFs or uses a money market fund for its cash position, there will be some duplication of expenses because the Stephens Fund would bear its pro rata portion of such fund’s advisory fees and other operational expenses.
 
Each AB Fund may depart from its principal investment strategy by taking temporary defensive or interim positions in response to adverse market, economic, political or other conditions. During these times, the AB Fund may not achieve its investment goal.

 
 
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Stephens Funds
 
AB Funds
Cash
Management
Investments
See “Temporary or Cash Investments” above.
 
Each AB Fund can invest cash balances in money market funds that are registered investment companies under the 1940 Act, including money market funds that are sponsored or advised by the Manager, and in futures contracts.  If the AB Fund invests in money market funds, shareholders will bear their proportionate share of the expenses, including, for example, advisory and administrative fees, of the money market funds in which the AB Fund invests.  Shareholders also would be exposed to the risks associated with money market funds and the portfolio investments of such money market funds, including that a money market fund’s yield will be lower than the return that the AB Fund would have derived from other investments that would provide liquidity.
 
To gain market exposure on cash balances or reduce market exposure in anticipation of liquidity needs, the AB Fund also may purchase and sell futures contracts on a daily basis that relate to securities in which it may invest directly and indices comprised of such securities. A futures contact is a contract to purchase or sell a particular security, or the cash value of an index, at a specified future date at a price agreed upon when the contract is made. Under such contracts, no delivery of the actual securities is required. Rather, upon the expiration of the contract, settlement is made by exchanging cash in an amount equal to the difference between the contract price and the closing price of a security or index at expiration, net of the variation margin that was previously paid. As cash balances are invested in securities, the AB Fund may invest simultaneously those balances in futures contracts until the cash balances are delivered to settle the securities transactions.  Because the AB Fund will have market exposure simultaneously in both the invested securities and futures contracts, the AB Fund may have more than 100% of its assets exposed to the markets.  This can magnify gains and losses in the AB Fund. The AB Fund also may have to sell assets at inopportune times to satisfy its settlement or collateral obligations. The risks associated with the use of futures contracts also include that there may be an imperfect correlation between the changes in market value of the securities held by the AB Fund and the prices of futures contracts and that there may not be a liquid secondary market for a futures contract.

 
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Stephens Funds
 
AB Funds
Investment
Adviser
Stephens Investment Management Group, LLC
 
American Beacon Advisors, Inc.
Investment
Sub-Adviser
None.
 
Stephens Investment Management Group, LLC
Portfolio
Managers
Ryan Crane, John Thornton, Kelly Ranucci and Sam Chase of SIMG serve as the Stephens Funds’ portfolio managers and share responsibilities for the day-to-day management of the Stephens Funds’ investment portfolio.
 
Ryan Crane is the Senior Portfolio Manager for the Stephens Funds and Chief Investment Officer of SIMG, and is primarily responsible for day-to-day management of the Stephens Funds’ portfolios.  Mr. Crane has served as Senior Portfolio Manager and Chief Investment Officer since SIMG was formed in 2005. Mr. Crane joined Stephens Inc., an affiliate of SIMG, in September of 2004 as a Senior Portfolio Manager in charge of small and small/mid-cap growth accounts.  Prior to joining Stephens Inc., Mr. Crane worked for AIM Management Group (“AIM”) since 1994.  While at AIM, Mr. Crane was the lead manager of the AIM Small Cap Growth Fund and served as co-manager on various other AIM funds.  Mr. Crane earned a B.A. with honors in Economics at the University of Houston.  Mr. Crane is a CFA Charterholder and is FINRA Series 7, 9, 10 and 63 registered.
 
John Thornton is the Co-Portfolio Manager of the Stephens Funds and is jointly responsible for the day-to-day
 
Same.  In addition:
 
Wyatt L. Crumpler will lead the Manager’s portfolio management team that has joint responsibility for the day-to-day oversight of the AB Funds.  Mr. Crumpler is responsible for developing each AB Fund’s investment program and recommending sub-advisers to each AB Fund’s Board of Trustees.  In addition, Mr. Crumpler, Gene L. Needles, Jr. and Cynthia M. Thatcher oversee the sub-advisers, review each sub-adviser’s performance and allocate the AB Funds’ assets among the sub-advisers and the Manager, as applicable.
 
Mr. Crumpler is Vice President, Asset Management. Mr. Crumpler joined the Manager in January 2007 as Vice President of Trust Investments and a member of the portfolio management team. Mr. Crumpler’s title was redesignated as Vice President, Asset Management in July 2009. From January 2004 to January 2007, Mr. Crumpler was Managing Director of Corporate Accounting at American Airlines, Inc. Prior to that time, he was Director of IT Strategy and Finance for American Airlines, Inc.
 
Mr. Needles has served as President and Chief Executive Officer of the Manager since April 2009 and has served on the portfolio management team since June 2011. Prior to joining the Manager, Mr. Needles was President of Touchstone Investments from 2008 to 2009, President of AIM Distributors from 2003 to 2007 and CEO of AIM Distributors from 2004 to 2007.
 
Ms. Thatcher is Portfolio Manager, Asset Management, and became a member of the team upon joining the Manager in December 1999.  Ms. Thatcher is a CFA Charterholder.

 

 
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Stephens Funds
 
AB Funds
 
management of the Stephens Funds’ portfolios.  Mr. Thornton has served as Co-Portfolio Manager since SIMG was formed in 2005. Mr. Thornton joined Stephens Inc. in September 2004 as Co-Portfolio Manager in charge of small and small/mid-cap growth accounts.  Prior to joining Stephens Inc., Mr. Thornton worked for AIM since 2000.  While at AIM, Mr. Thornton was the senior analyst of the AIM Small Cap Growth Fund and various AIM technology funds.  Mr. Thornton earned a B.A. in Engineering at Vanderbilt University and an M.B.A. from the University of Texas – Austin.  Mr. Thornton is a CFA Charterholder and is FINRA Series 6, 7 and 63 registered.
 
Kelly Ranucci is the Co-Portfolio Manager of the Stephens Funds and is jointly responsible for the day-to-day management of the Stephens Funds’ portfolios.  Ms. Ranucci has served as Co-Portfolio Manager since March 2011.  Prior thereto she was Senior Equity Analyst from March 2008 to March 2011 and Equity Analyst from September 2004 to March 2008.  Ms. Ranucci joined Stephens Inc. in September 2004 as an Equity Analyst of small/mid-cap growth accounts.  Prior to joining Stephens Inc., Ms. Ranucci worked for AIM since 1994.  While at AIM, Ms. Ranucci was responsible for research and analysis of small and medium capitalization securities for AIM’s Small Cap Growth and Mid-Cap Growth Funds.  Ms.
   

 

 
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Stephens Funds
 
AB Funds
 
Ranucci earned a B.B.A. from Texas A&M University and an M.B.A. with a concentration in Finance from the University of Houston.  Ms. Ranucci is a CFA Charterholder and is FINRA Series 6, 7 and 63 registered.
 
Sam Chase is the Co-Portfolio Manager of the Stephens Funds and is jointly responsible for the day-to-day management of the Stephens Funds’ portfolios.  Mr. Chase has served as Co-Portfolio Manager since March 2011.  Prior thereto he was Senior Equity Analyst from March 2008 to March 2011 and Equity Analyst from September 2004 to March 2008.  Mr. Chase joined Stephens Inc. in September 2004 as an Equity Analyst of small/mid-cap growth accounts.  Prior to joining Stephens Inc., Mr. Chase worked for AIM.  While at AIM, Mr. Chase was responsible for research and analysis of small capitalization securities for AIM’s Small Cap Growth Fund.  Mr. Chase earned his bachelor’s degree in History at Washington and Lee University and his M.B.A. from Southern Methodist University.  Mr. Chase is a CFA Charterholder and is FINRA Series 7, 63 and 65 registered.
   

 
2.Comparison of Investment Restrictions and Limitations
 
The investment restrictions and limitations of the Stephens Funds and AB Funds (each sometimes referred to herein as a “Fund”) are substantially similar, except that the investment limitations of the AB Funds differ from those of the Stephens Funds to the extent necessary to harmonize them with the investment limitations of other American Beacon Funds.  Unlike the Stephens Funds, each AB Fund is expressly permitted to operate as a feeder fund in a master-feeder investment structure. The AB Funds have no current intention to operate under such a structure.
 

 
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Except as required by the 1940 Act or the Internal Revenue Code of 1986, as amended (“Code”), if any percentage restriction on investment or utilization of assets is adhered to at the time an investment is made, a later change in percentage resulting from a change in the market values of the Fund’s assets or purchases and redemptions of Fund shares will not be considered a violation of the limitation.
 
A fundamental limitation cannot be changed without the affirmative vote of the lesser of: (1) 50% of the outstanding shares of the Fund; or (2) 67% of the shares present or represented at a shareholders meeting at which the holders of more than 50% of the outstanding shares are present or represented. A non-fundamental limitation may be changed by the Board of Trustees without shareholder approval.
 
All of the investment policies noted in the table below are fundamental limitations, which cannot be changed by the Board of Trustees without affirmative shareholder approval as described above.  The AB Funds, however, have sought to harmonize the fundamental investment limitations of the Stephens Funds with those of the other funds in the AB Fund complex.  Although the wording appears different, the fundamental investment limitations of the Stephens Funds and the AB Funds are substantially similar.  Notwithstanding any other limitation on investments in other investment companies, however, the AB Funds, unlike the Stephens Funds, are each expressly permitted to operate as a feeder fund in a master-feeder investment structure.  The investment limitations for the Stephens Funds may be found in the Stephens Funds’ Statement of Additional Information (“SAI”), which is incorporated by reference into this Proxy Statement.  The investment limitations for the AB Funds may be found in the SAI to this Proxy Statement, which is incorporated by reference into this Proxy Statement.
 
   
Fundamental Investment Policies
   
Policy
 
Stephens Funds
 
AB Funds
 
Differences
Loans
 
The Stephens Fund may not make loans to others, except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any exemptive relief obtained by the Stephens Fund.  For purposes of this limitation, entering into repurchase agreements, lending securities and acquiring any debt security are not deemed to be the making of loans.
 
The AB Fund may not lend any security or make any other loan except (i) as otherwise permitted under the 1940 Act, (ii) pursuant to a rule, order or interpretation issued by the SEC or its staff, (iii) through the purchase of a portion of an issue of debt securities in accordance with the AB Fund’s investment objective, policies and limitations, or (iv) by engaging in repurchase agreements with respect to portfolio securities.
 
 
For purposes of the Stephens Fund’s limitation on loans, lending securities are not deemed to be the making of loans.
Borrowing Money and Issuing Senior Securities
 
The Stephens Fund may not: (a) borrow money or issue senior securities except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any
 
Borrowing: The AB Fund may not borrow money, except as otherwise permitted under the 1940 Act or pursuant to a rule, order or interpretation issued by the
 
The AB Fund separates restrictions on borrowing and senior securities.
Borrowing: The AB Fund specifically permits borrowing as a temporary

 

 
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Fundamental Investment Policies
   
Policy
 
Stephens Funds
 
AB Funds
 
Differences
   
exemptive relief obtained by the Stephens Fund; or (b) mortgage, pledge or hypothecate any of its assets except in connection with any such borrowings and only with respect to 33 1/3% of its assets.
 
SEC or its staff, including (i) as a temporary measure, (ii) by entering into reverse repurchase agreements, and (iii) by lending portfolio securities as collateral. For purposes of this investment limitation, the purchase or sale of options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars and other similar financial instruments shall not constitute borrowing.
 
Senior Securities: The AB Fund may not issue any senior security except as otherwise permitted (i) under the 1940 Act or (ii) pursuant to a rule, order or interpretation issued by the SEC or its staff.
 
measure, entering into a reverse repurchase agreement and lending portfolio securities as collateral.
 
The AB Fund clarifies that the purchase or sale of options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars and other similar financial instruments shall not constitute borrowing.
 
Senior Securities:
No material difference.
Margin and
Underwriting
 
The Stephens Fund may not purchase securities on margin, participate on a joint or joint and several basis in any securities trading account, or underwrite securities.  (Does not preclude the Stephens Fund from obtaining such short-term credit as may be necessary for the clearance of purchases and sales of its portfolio securities.)
 
Margin: The AB Fund has a non-fundamental policy regarding purchasing securities on margin.
 
Underwriting: The AB Fund may not engage in the business of underwriting securities issued by others, except to the extent that, in connection with the disposition of securities, the AB Fund may be deemed an underwriter under federal securities law.
 
Margin: The Stephens Fund’s policy provides that it may not purchase securities on margin or participate on a joint or joint and several basis in any securities trading account. The AB Fund does not have a fundamental policy regarding margin but does have a non-fundamental policy, which states that the AB Fund may not purchase securities on margin or effect short sales, except that the AB Fund may obtain such short term credits as may be necessary for the clearance or sales of securities.

 
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Fundamental Investment Policies
   
Policy
 
Stephens Funds
 
AB Funds
 
Differences
           
Underwriting: The Stephens Fund policy states that it may not underwrite securities, whereas the AB Fund may engage in the business of underwriting securities if, and to the extent that, in connection with the disposition of securities, the AB Fund is deemed an underwriter under federal securities law.
 
Commodities
 
The Stephens Fund may not purchase or sell commodities or commodity contracts (other than futures transactions for the purposes and under the conditions described in the Stephens Fund’s prospectus and SAI).
 
The AB Fund may not invest in physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Fund from purchasing or selling foreign currency, options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars, securities on a forward-commitment or delayed-delivery basis, and other similar financial instruments).
 
The AB Fund may not invest in physical commodities unless acquired as a result of ownership of securities or other instruments, whereas the Stephens Fund may not purchase or sell commodities or commodity contracts.
Industry
Concentration
 
The Stephens Fund may not invest 25% or more of the value of its net assets in the securities of companies engaged in any one industry or group of related industries.  The Stephens Fund may, however, invest for temporary defensive purposes up to 100% of the value of the total assets in securities issued or guaranteed by the U.S. government or its agencies or instrumentalities.
 
The AB Fund may not invest more than 25% of its total assets in the securities of companies primarily engaged in any one industry provided that: (i) this limitation does not apply to obligations issued by U.S. agencies; and (ii) tax-exempt municipalities and their agencies and authorities are not deemed to be industries. For purposes of this restriction, the AB Fund will regard tax-exempt securities issued by municipalities and their agencies not to be an
 
The AB Fund clarifies that (i) tax-exempt municipalities and their agencies and authorities are not deemed to be industries and (ii) for purposes of the AB Fund’s industry concentration limitation, it will regard tax-exempt securities issued by municipalities and their agencies not to be an industry.

 

 
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Fundamental Investment Policies
   
Policy
 
Stephens Funds
 
AB Funds
 
Differences
       
industry.
   
Diversification
 
 
The Stephens Fund may not purchase the securities of any issuer, if as a result more than 5% of the total assets of the Stephens Fund would be invested in the securities of that issuer, other than obligations of the U.S. Government, its agencies or instrumentalities, or if as a result the Stephens Fund would own more than 10% of the outstanding voting securities of such issuer, provided that up to 25% of the value of the Stephens Fund’s assets may be invested without regard to this limitation.
 
The AB Fund may not, with respect to 75% of its total assets, invest in the securities of any issuer if, immediately after such investment more than 5% of the total assets of the AB Fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities.
 
The AB Fund may not, with respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any one issuer.
 
No material difference.
Real Estate
 
The Stephens Fund may not purchase or sell real estate; however, the Stephens Fund may invest in debt securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein, including real estate investment trusts.
 
The AB Fund may not purchase or sell real estate or real estate limited partnership interests, provided, however, that the AB Fund may invest in securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein when consistent with the other policies and limitations described in the AB Fund’s prospectus.
 
No material difference.
Investment in
Investment
Company with
Substantially
Similar
Investment
Objectives and
 
None.
 
Notwithstanding any other limitation, the AB Fund may invest all of its investable assets in an open-end management investment company with substantially the same investment objectives, policies and
 
The Stephens Fund does not have a comparable policy.

 

 
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Fundamental Investment Policies
   
Policy
 
Stephens Funds
 
AB Funds
 
Differences
Policies
     
limitations as the AB Fund. For this purpose, “all of the Fund’s investable assets” means that the only investment securities that will be held by the AB Fund will be the AB Fund’s interest in the investment company.
   

 
The Stephens Funds have each adopted the following investment limitations that may be changed by the Board without shareholder approval, but the change will only be effective after notice is given to the shareholders of the Stephens Fund.  The AB Funds’ non-fundamental investment policies may be changed by the AB Board at any time.
 
   
Non-Fundamental Investment Policies
   
Policy
 
Stephens Funds
 
AB Funds
 
Differences
Issuer
Concentration
 
Subject to the Stephens Fund’s fundamental policy regarding diversification, the Stephens Fund may not purchase any security if as a result the Stephens Fund would then hold more than 10% of any class of securities of an issuer (taking all common stock issues of an issuer as a single class, all preferred stock issues as a single class, and all debt issues as a single class) or more than 10% of the outstanding voting securities of an issuer.
 
The AB Fund has a fundamental policy regarding diversification.
 
The AB Fund has a fundamental policy on diversification.
The AB Fund may not, with respect to 75% of its total assets, invest in the securities of any issuer if, immediately after such investment more than 5% of the total assets of the AB Fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities.
The AB Fund may not, with respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any one

 

 
15

 


 
   
Non-Fundamental Investment Policies
   
Policy
 
Stephens Funds
 
AB Funds
 
Differences
           
issuer.
Control of
Portfolio
Companies
 
The Stephens Fund may not invest in any issuer for purposes of exercising control or management.
 
None.
 
The AB Fund does not have a comparable investment policy.
Borrowing
 
With respect to the Stephens Fund’s fundamental policy regarding borrowing, the Stephens Fund will not purchase portfolio securities while outstanding borrowings exceed 5% of its assets.
 
The AB Fund has a fundamental policy regarding borrowing.
 
The AB Fund has a fundamental policy on borrowing.
The AB Fund does not have a similar policy on borrowing regarding the purchase of its portfolio securities while outstanding borrowings exceed a certain percentage of its assets.
Illiquid
Securities
 
The Stephens Fund may not invest more than 15% of the value of its net assets in illiquid securities.  Illiquid securities are those securities without readily available market quotations, including repurchase agreements having a maturity of more than seven days.  Illiquid securities may include restricted securities not determined to be liquid, non-negotiable time deposits, over-the-counter options, and repurchase agreements providing for settlement in more than seven days after notice.
 
The AB Fund may not invest more than 15% of its net assets in illiquid securities, including time deposits and repurchase agreements that mature in more than seven days.
 
No material difference.
Margin
 
The Stephens Fund has a fundamental policy regarding purchasing securities on margin.
 
The AB Fund may not purchase securities on margin except that (i) the AB Fund may obtain such short-term credits as are necessary for the clearance of transactions, and (ii) the AB Fund may make margin payments in
 
The Stephens Fund has a similar policy regarding margin, but it is a fundamental policy as opposed to a non-fundamental policy.
 

 

 
16

 


 
   
Non-Fundamental Investment Policies
   
Policy
 
Stephens Funds
 
AB Funds
 
Differences
       
connection with foreign currency, futures contracts, options, forward contracts, swaps, caps, floors, collars, securities purchased or sold on a forward-commitment or delayed-delivery basis or other financial instruments.
   

 
3.Comparison of Fees and Expenses
 
The tables below describe the fees and expenses that you pay if you buy and hold Class A or Class I shares of the Stephens Funds and the pro forma fees and expenses that you may pay if you buy and hold Investor Class and Institutional Class shares of the corresponding AB Fund after giving effect to the Reorganizations.  Expenses for each Fund are based on the operating expenses incurred by each class of shares of the Stephens Fund and estimated to have been incurred by the Investor Class and Institutional Class shares of the AB Fund as of the semi-annual period ended May 31, 2011.  The pro forma fees and expenses for the Investor Class and Institutional Class shares of each AB Fund assume that the Reorganization had been in effect for the same period.

The Manager has contractually agreed to cap Fund expenses through April 30, 2014, to the extent that total annual fund operating expenses of the Investor Class shares and Institutional Class shares exceed the annual rate of 1.35% and 1.09%, respectively, for the AB Small Cap Fund and 1.37% and 0.99%, respectively, for the AB Mid-Cap Fund excluding taxes, interest, portfolio transaction expenses and other extraordinary expenses.

Stephens Funds’ Class A Shares

Fees and Expenses
Stephens Small
Cap Growth
Fund
Class A
AB Small Cap
Fund Investor
Class
(Pro forma)
Stephens Mid
Cap Growth
Fund
Class A
AB Mid-Cap
Fund Investor
Class
(Pro forma)
         
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed On Purchases
(as a percentage of offering price)
5.25%
None
 
5.25%
 
None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or redemption proceeds, whichever is less)
None
None
None
None
Redemption Fee
(as a percentage of amount redeemed
2.00%
None
2.00%
None

 

 
17

 


 
Fees and Expenses
Stephens Small
Cap Growth
Fund
Class A
AB Small Cap
Fund Investor
Class
(Pro forma)
Stephens Mid
Cap Growth
Fund
Class A
AB Mid-Cap
Fund Investor
Class
(Pro forma)
within 30 days of purchase) (1)
       
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
Management Fees
0.75%
0.70%
0.75%
0.55%
Distribution (Rule 12b-1) Fees
0.25%
None
0.25%
None
Other Expenses
0.42%
0.83%
1.01%
1.08%
Total Annual Fund
Operating Expenses
 
1.42%
 
1.53%
 
2.01%
 
1.63%
Fee Waiver and
Expense Reimbursement
 
(0.06)%
 
(0.18)%
 
(0.50)%
 
(0.26)%
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
1.36%(2)(3)
1.35(4)
1.51%(2)(3)
1.37%(4)

(1)
The Redemption Fee currently charged by each Stephens Fund will be waived through the closing of that Reorganization.
   
(2)
SIMG has contractually agreed to reduce its fees and/or pay Stephens Fund expenses (excluding the expenses associated with the Stephens Fund’s investment in other investment companies referred to as “Acquired Fund Fees and Expenses,” interest expense in connection with investment activities, taxes and extraordinary expenses) in order to limit Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement for the Stephens Small Cap Growth Fund and Stephens Mid Cap Growth Fund to 1.35% and 1.50%, respectively, of each Stephens Fund’s Class A Shares’ average net assets (the “Expense Cap”).  The Expense Cap will remain in effect until at least March 31, 2012.  SIMG is permitted to be reimbursed for fee reductions and/or expense payments made in the prior three fiscal years.  Any such reimbursement is subject to review and approval by the Board.  A reimbursement may be requested by SIMG if the aggregate amount actually paid by the Stephens Fund toward operating expenses for such fiscal year (taking into account any reimbursement) does not exceed the Expense Cap.  The Agreement may be terminated at any time by the Board upon 60 days’ notice to SIMG, or by SIMG with the consent of the Board.
   
(3)
The Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement for the Stephens Fund do not correlate to the Ratio of Expenses to Average Net Assets provided in the Financial Highlights in Appendix D, which reflects the operating expenses of the Stephens Fund and does not include Acquired Fund Fees and Expenses.
   
(4)
The Manager has contractually agreed to waive and/or reimburse the Investor Class of the AB Funds for Distribution Fees and Other Expenses, as applicable, through April 30, 2014 to the extent that Total Annual Fund Operating Expenses for the AB Small Cap Fund and the AB Mid-Cap Fund exceed 1.35% and 1.37%, respectively, for the Investor Class (excluding taxes, brokerage commissions, acquired fund fees and expenses and other extraordinary expenses such as litigation). The contractual expense arrangement can be changed by approval of a majority of the AB Fund’s Board of Trustees. The Manager can be reimbursed by the AB Fund for any contractual or voluntary fee reductions or expense reimbursements if reimbursement to the Manager (a) occurs within three years after the Manager’s own reduction or reimbursement and (b) does not cause the Total Annual Fund Operating Expenses of a class to exceed the percentage limit contractually agreed.
   
Examples

The Example below is intended to help you compare the cost of investing in Class A shares of the Stephens Funds with the cost of investing in Investor Class shares of the corresponding AB Fund on a pro forma basis.  The Example assumes that you invest $10,000 in each Fund and then redeem all of your shares at the end of each period.  The Example also assumes that your investment has a 5% annual return each year and that each of the Fund’s Total Annual Fund Operating Expenses and Net Expenses remain

 
18

 

the same.  Although your actual costs may be higher or lower, based on these assumptions your costs would be:
 
 
 
One Year
Three Years
Five Years
Ten Years
Stephens Small Cap Growth Fund – Class A
$656
$945
$1,255
$2,133
         
AB Small Cap Fund – Investor Class
(Pro forma)
$137
$447
$799
$1,792

 
One Year
Three Years
Five Years
Ten Years
Stephens Mid Cap Growth Fund – Class A
$671
$1,077
$1,507
$2,702
         
AB Mid-Cap Fund – Investor Class
(Pro forma)
$139
$462
$836
$1,888

Stephens Funds’ Class I Shares

 
 
Fees and Expenses
Stephens
Small Cap
Growth
Fund
Class I
AB Small
Cap Fund
Institutional
Class
(Pro forma)
Stephens
Mid Cap
Growth
Fund Class I
AB Mid-Cap
Fund
Institutional
Class
(Pro forma)
 
 
     
Shareholder Fees
(fees paid directly from your investment)
 
None
None
None
None
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
Management Fees
0.75%
0.70%
0.75%
0.55%
Other Expenses
0.42%
0.45%
1.01%
0.70%
Total Annual Fund
Operating Expenses
 
1.17%
 
1.15%
 
1.76%
 
1.25%
Fee Waiver and/or
Expense Reimbursement
 
(0.06)%
 
(0.06)%
 
(0.50%)
 
(0.26)%
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
1.11%(1)(2) 1.09%(3) 1.26%(1)(2) 0.99%(3)


 
19

 


(1)
SIMG has contractually agreed to reduce its fees and/or pay Stephens Fund expenses (excluding the expenses associated with the Stephens Fund’s investment in other investment companies referred to as “Acquired Fund Fees and Expenses,” interest expense in connection with investment activities, taxes and extraordinary expenses) in order to limit Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement for the Stephens Small Cap Growth Fund and Stephens Mid Cap Growth Fund to 1.10% and 1.25%, respectively, of the Stephens Fund’s Class I Shares’ average net assets (the “Expense Cap”).  The Expense Cap will remain in effect until at least March 31, 2012.  SIMG is permitted to be reimbursed for fee reductions and/or expense payments made in the prior three fiscal years.  Any such reimbursement is subject to review and approval by the Board.  A reimbursement may be requested by SIMG if the aggregate amount actually paid by the Stephens Fund toward operating expenses for such fiscal year (taking into account any reimbursement) does not exceed the Expense Cap.  The Agreement may be terminated at any time by the Board upon 60 days’ notice to SIMG, or by SIMG with the consent of the Board.
   
(2)
The Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement for the Stephens Fund do not correlate to the Ratio of Expenses to Average Net Assets provided in the Financial Highlights in Appendix D, which reflects the operating expenses of the Stephens Fund and does not include Acquired Fund Fees and Expenses.
   
(3)
The Manager has contractually agreed to waive and/or reimburse the Institutional Class of the AB Funds for Distribution Fees and Other Expenses, as applicable, through April 30, 2014 to the extent that Total Annual Fund Operating Expenses for the AB Small Cap Fund and the AB Mid-Cap Fund exceed 1.09% and 0.99%, respectively, for the Institutional Class (excluding taxes, brokerage commissions, acquired fund fees and expenses and other extraordinary expenses such as litigation). The contractual expense arrangement can be changed by approval of a majority of the AB Fund’s Board of Trustees. The Manager can be reimbursed by the AB Fund for any contractual or voluntary fee reductions or expense reimbursements if reimbursement to the Manager (a) occurs within three years after the Manager’s own reduction or reimbursement and (b) does not cause the Total Annual Fund Operating Expenses of a class to exceed the percentage limit contractually agreed.

Examples

The Example below is intended to help you compare the cost of investing in Class I shares of the Stephens Funds with the cost of investing in Institutional Class shares of the corresponding AB Fund on a pro forma basis.  The Example assumes that you invest $10,000 in each Fund and then redeem all of your shares at the end of each period.  The Example also assumes that your investment has a 5% annual return each year and that the Funds’ Total Annual Fund Operating Expenses and Net Expenses remain the same.  Although your actual costs may be higher or lower, based on these assumptions your costs would be:
 
 
 
One Year
Three Years
Five Years
Ten Years
Stephens Small Cap Growth Fund – Class I
 
$113
$366
$638
$1,415
         
AB Small Cap Fund – Institutional Class
(Pro forma)
$111
$353
$621
$1,387

 
One Year
Three Years
Five Years
Ten Years
Stephens Mid Cap Growth Fund – Class I
$128
$505
$907
$2,032
         
AB Mid-Cap Fund – Institutional Class
(Pro forma)
$101
$344
$635
$1,464

 
4.Comparative Performance Information
 
Each AB Fund’s Investor Class and Institutional Class shares will adopt, respectively, the performance history of the corresponding Stephens Fund’s Class A and Class I shares.  The bar chart and the performance table below provide some indication of the risks of an investment in the AB Funds by showing each of the Stephens Fund’s performance last year and by showing how each of the Stephens

 
20

 

Fund’s average annual returns compare with a broad measure of market performance.  Of course, each Stephens Fund’s past performance, before and after taxes, does not necessarily represent how the corresponding AB Fund will perform in the future.  Sales charges are not reflected in the bar charts and tables below. If those charges were included, returns of Class A shares would be less than those shown. Updated performance information currently is available at www.stephensfunds.com or by calling (866) 735-7464.

Stephens Small Cap Growth Fund – Class A

Stephens Small Cap Growth Fund Class A Shares*
Year-By-Year Total Return
 
*
Calendar Year Total Returns in the bar chart do not reflect sales charges.  If sales charges were included, returns would be lower.

 
The Stephens Small Cap Growth Fund’s calendar year-to-date total return for Class A shares as of September 30, 2011 was -9.06%.
 
During the period shown in the bar chart, the highest quarterly return was 23.02% (for the quarter ended June 30, 2009) and the lowest quarterly return was -25.54% (for the quarter ended December 31, 2008).  The Stephens Small Cap Growth Fund Class A Shares commenced investment operations on December 1, 2005.
 
AVERAGE ANNUAL TOTAL RETURN
For the periods
Ended December 31, 2010
One
Year
Five
Years
Since
Inception
(12/1/05)
Stephens Small Cap Growth Fund Class A Shares
     
Return Before Taxes
19.78%
3.58%
3.23%
Return After Taxes on Distributions
19.56%
3.54%
3.19%
Return After Taxes on Distributions and Sale of Fund Shares
13.14%
3.07%
2.77%
S&P 500® Index(1)
(Index reflects no deductions for fees, expenses or taxes)
15.06%
2.29%
2.02%
Russell 2000® Growth Index(2)
(Index reflects no deductions for fees, expenses or taxes)
29.09%
5.30%
4.78%

 
21

 


 
(1)
The S&P 500® Index is an unmanaged index generally representative of the market for the stocks of large-sized U.S. companies.
   
(2)
The Russell 2000® Growth Index measures the performance of those Russell 2000® Index companies with higher price-to-book ratios and higher forecasted growth values, which includes the 2,000 smallest companies by market capitalization within the Russell 3000® Index.
 
Stephens Small Cap Growth Fund – Class I

Stephens Small Cap Growth Fund Class I
Shares Year-By-Year Total Return
 
 
The Stephens Small Cap Growth Fund’s calendar year-to-date total return for Class I shares as of September 30, 2011, was -8.84%.
 
During the period shown in the bar chart, the highest quarterly return was 23.26% (for the quarter ended June 30, 2009) and the lowest quarterly return was -25.45% (for the quarter ended December 31, 2008).  The Stephens Small Cap Growth Fund Class I Shares commenced investment operations on August 31, 2006.
 

 
For the periods
Ended December 31, 2010
One
Year
Since
Inception
(8/31/06)
 
  Stephens Small Cap Growth Fund Class I Shares
   
     
Return Before Taxes
26.77%
5.89%
Return After Taxes on Distributions
26.56%
5.85%
Return After Taxes on Distributions and Sale of Fund Shares
17.70%
5.08%

 

 
22

 


 
For the periods
Ended December 31, 2010
One
Year
Since
Inception
(8/31/06)
S&P 500® Index(1)
(Index reflects no deductions for fees, expenses or taxes)
15.06%
1.32%
Russell 2000® Growth Index(2)
(Index reflects no deductions for fees, expenses or taxes)
29.09%
5.29%

 
(1)
The S&P 500® Index is an unmanaged index generally representative of the market for the stocks of large-sized U.S. companies.
   
(2)
The Russell 2000® Growth Index measures the performance of those Russell 2000® Index companies with higher price-to-book ratios and higher forecasted growth values, which includes the 2,000 smallest companies by market capitalization within the Russell 3000® Index.

Stephens Mid Cap Growth Fund – Class A

 
Stephens Mid Cap Growth Fund Class A Shares*
Year-By-Year Total Return
 
*
Calendar Year Total Returns in the bar chart do not reflect sales charges.  If sales charges were included, returns would be lower.

The Stephens Mid Cap Growth Fund’s calendar year-to-date for Class A shares as of September 30, 2011, was -7.95%.
 
During the period shown in the bar chart, the highest quarterly return was 23.02% (for the quarter ended June 30, 2009) and the lowest quarterly return was -25.54% (for the quarter ended December 31, 2008).  The Stephens Mid Cap Growth Fund Class A shares commenced investment operations on February 1, 2006.
 

 
23

 

 

 
AVERAGE ANNUAL TOTAL RETURN
For the periods
Ended December 31, 2010
One
Year
Since
Inception

(2/1/06)
 
Stephens Mid Cap Growth Fund Class A Shares
   
 
Return Before Taxes
21.21%
2.36%
 
Return After Taxes on Distributions
21.21%
(2.69)%
 
Return After Taxes on Distributions and Sale of Fund Shares
13.79%
(2.28)%
 
S&P 500® Index(1)
(Index reflects no deductions for fees, expenses or taxes)
15.06%
1.75%
 
Russell Midcap® Growth Index(2)
(Index reflects no deductions for fees, expenses or taxes)
26.38%
3.71%

 
(1)
The S&P 500® Index is an unmanaged index generally representative of the market for the stocks of large-sized U.S. companies.
   
(2)
The Russell Midcap® Growth Index is an unmanaged index that measures the performance of the 800 smallest companies in the Russell 1000® Index, which represents approximately 30 percent of the total market capitalization of the Russell 1000® Index.

Stephens Mid Cap Growth Fund – Class I
 
Stephens Mid Cap Growth Fund Class I Shares
Year-By-Year Total Return
 

The Stephens Mid Cap Growth Fund’s calendar year-to-date for Class I shares as of September 30, 2011, was -7.73%.

 
24

 


 
During the period shown in the bar chart, the highest quarterly return was 16.40% (for the quarter ended September 30, 2009) and the lowest quarterly return was -28.30% (for the quarter ended December 31, 2008).  The Stephens Mid Cap Growth Fund Class I shares commenced investment operations on August 31, 2006.
 
For the periods
Ended December 31, 2010
One Year
Since Inception
(8/31/06)
S  Stephens Mid Cap Growth Fund Class I Shares
   
Return Before Taxes
28.26%
6.37%
Return After Taxes on Distributions
28.26%
6.37%
Return After Taxes on Distributions and Sale of Fund Shares
18.37%
5.50%
S&P 500® Index(1)
(Index reflects no deductions for fees, expenses or taxes)
15.06%
1.32%
Russell Midcap® Growth Index(2)
(Index reflects no deductions for fees, expenses or taxes)
26.38%
5.37%

 
(1)
The S&P 500® Index is an unmanaged index generally representative of the market for the stocks of large-sized U.S. companies.
 
(2)
The Russell Midcap® Growth Index is an unmanaged index that measures the performance of the 800 smallest companies in the Russell 1000® Index, which represents approximately 30 percent of the total market capitalization of the Russell 1000® Index.
 
After-Tax Returns

After-tax returns are calculated using the historical highest individual federal marginal income tax rate in effect at the time of each distribution and assumed sale, but do not reflect the impact of state and local taxes.

Actual after-tax returns depend on an investor’s tax situation and may differ from those shown.  After-tax returns reflect past tax effects and are not predictive of future tax effects.  After-tax returns may not be relevant to investors who hold their Fund shares in a tax-deferred account (including a 401(k) or individual retirement account), or to investors that are tax-exempt.

Portfolio Turnover

Each Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio).  A higher portfolio turnover rate may indicate higher transaction costs and may result in larger Fund distributions of net realized capital gains and, therefore, higher taxes for shareholders whose Fund shares are held in a taxable account.  These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example, affect each Fund’s performance.  For the fiscal year ended November 30, 2010, the Stephens Small Cap Growth Fund’s portfolio turnover rate was 66% of the average value of its portfolio, and the Stephens Mid Cap Growth Fund’s portfolio turnover rate was 20% of the average value of its portfolio.

 
25

 

           5.           Capitalization
 
The capitalization of the Stephens Funds as of November 30, 2011 and each of the AB Fund’s pro forma combined capitalization as of that date after giving effect to the Reorganization are as follows:

Stephens Small Cap Growth Fund

(unaudited)
Stephens  Small Cap Growth Fund
Class A
Pro forma
AB Small Cap Fund
Investor Class
Stephens Small Cap Growth Fund
Class I
Pro forma
AB Small Cap Fund
Institutional Class
Net Assets
$47,101,034
$47,101,034
$52,336,011
$52,336,011
         
Shares Outstanding
3,716,580
3,716,580
3,984,274
3,984,274
         
Net Asset Value per Share
$12.67
$12.67
$13.14
$13.14

 
Stephens Mid Cap Growth Fund
 
(unaudited)
Stephens  Mid Cap Growth Fund
Class A
Pro forma
AB Mid-Cap Fund
Investor Class
Stephens Mid Cap Growth Fund
Class I
Pro forma
AB Mid-Cap Fund
Institutional Class
Net Assets
$20,033,572
$20,033,572
$13,207,849
$13,207,849
         
Shares Outstanding
1,620,597
1,620,597
965,070
965,070
         
Net Asset Value per Share
$12.36
$12.36
$13.69
$13.69

 
Board’s Recommendation to Stephens Fund Shareholders
 
The Board recommends that you vote “FOR” Proposal One to approve the Reorganization with respect to the Stephens Small Cap Growth Fund, and “FOR” Proposal Two to approve the Reorganization with respect to the Stephens Mid Cap Growth Fund.
 

 
26

 

B.           INFORMATION ABOUT THE REORGANIZATIONS
 
1.Reasons for the Reorganizations
 
The primary purpose of the Reorganizations is to move the investment portfolio and shareholders of the Stephens Funds to the American Beacon Family of Funds.  SIMG believes that reconstituting each Stephens Fund as a series of American Beacon has the potential to expand each Stephens Fund’s distribution network and increase the Stephens Funds’ assets.
 
The Reorganizations will shift management oversight responsibility for the Stephens Funds from SIMG to American Beacon Advisors, Inc. (the “Manager”).  By engaging SIMG (the “Sub-Adviser”), the current adviser to the Stephens Funds, the Manager will provide continuity of the portfolio management team that has been responsible for the Stephens Funds’ performance record since the Stephens Small Cap Growth Fund’s inception on December 1, 2005 and the Stephens Mid Cap Growth Fund’s inception on February 1, 2006. The portfolio managers of the Sub-Adviser who are primarily responsible for the day-to-day portfolio management of the Stephens Funds will remain the same.  The investment objective and strategies of the AB Funds will be substantially similar to those of the applicable Stephens Fund.  The AB Funds’ fundamental and non-fundamental investment limitations are substantially similar to those of corresponding Stephens Fund; however, certain limitations and the language describing these limitations may be different for the AB Funds than their corresponding limitations in the Stephens Funds to conform them with current limitations of the other American Beacon Funds.  SIMG recommends that the Stephens Funds be reorganized as series of the AB Trust.
 
The Reorganizations also will affect other services currently provided to the Stephens Funds.  Foreside Fund Services, LLC (“Foreside”) will be the distributor and principal underwriter of the AB Funds’ shares; Quasar Distributions, LLC is the current distributor and principal underwriter of the Stephens Funds’ shares.  The AB Funds will engage State Street as their custodian and accounting agent; U.S. Bank, National Association, currently serves as the custodian for the Stephens Funds.  The AB Funds will engage Boston Financial Data Services as their transfer agent. The Manager will provide administration services for the AB Funds; U.S. Bancorp Fund Services, LLC currently provides administration services and fund accounting for the Stephens Funds.  The AB Small Cap Fund will engage Brown Brothers Harriman & Co. as its securities lending agent; the AB Mid-Cap Fund will not currently engage in securities lending.

The Reorganizations will not result in any increase in the advisory fees payable by the AB Funds over those advisory fees currently incurred by the Stephens Funds.  The Reorganizations will not result in any increase in the overall net expense ratios during the first two years compared to the net expense ratios currently paid by the Stephens Funds.  In addition, the Reorganization will not result in any increase in the gross expense ratio for the AB Mid-Cap Fund’s Investor Class or Institutional Class or for the AB Small Cap Fund’s Institutional Class although there will be an increase in the gross expense ratio for the AB Small Cap Fund’s Investor Class.
 
 
2.Board Considerations
 
           SIMG proposed, and the Board considered, the Reorganizations at in-person meetings of the Board held on August 9, 2011 and November 8, 2011.  Based upon the recommendation of SIMG, its evaluation of the relevant information presented to it, and in light of its fiduciary duties under federal and state law, the Board, including all trustees who are not “interested persons” of the Trust under the 1940
 

 
27

 

Act, determined that each Reorganization is in the best interests of the respective Stephens Fund and their shareholders and will not result in any dilution of the interests of the shareholders of the Stephens Fund.
 
In approving the proposed Reorganizations, the Board carefully considered that SIMG had come to the conclusion that it was unlikely, on its own, to be able to increase the distribution opportunities of the Stephens Funds and achieve substantial asset growth in the Stephens Funds which might then lead to a reduction in the Stephens Funds’ expense ratios to the benefit of shareholders.  The Board considered that SIMG had concluded that it did not have the requisite resources to successfully improve the distribution of the Stephens Funds and that it could not continue indefinitely to support the Stephens Funds expenses by waiving its fees or capping the Stephens Funds’ expenses.  The Board considered that SIMG had represented that it believed that the American Beacon Family of Funds provided the potential to grow the Stephens Funds’ assets meaningfully which would be potentially beneficial to the shareholders of the Stephens Funds.
 
           In considering the Reorganization, the Board also took into account a number of additional factors.  Some of the more prominent considerations are discussed below, in no particular order of priority:
 
           The Terms and Conditions of the Reorganizations.  The Board considered the terms of the Plan, including, (1) the requirement that the transfer of the assets of the Stephens Funds’ Class A and Class I shares be in exchange for Investor Class and Institutional Class shares, respectively, of the corresponding AB Fund, (2) the AB Funds’ assumption of all liabilities by the AB Funds of the corresponding Stephens Fund, and (3) the fact that Stephens Fund shareholders would receive AB Fund shares of equal number and value to their shares of their respective Stephens Fund at the time of the Reorganization.  The Board also took note of the fact that no sales charges would be imposed in connection with the Reorganizations.  The Board also noted that the Reorganizations would be submitted to shareholders of each of the Stephens Funds for approval.
 
           Similarity of Investment Objectives, Policies and Restrictions and Continuity of Sub-Adviser.  The Board considered that the AB Funds were newly created for the purpose of effecting the Reorganization and therefore were designed to largely replicate the Stephens Funds from an investment objective and strategy perspective.  As a result, the Board considered that the investment objectives and strategies of the Stephens Funds and the corresponding AB Fund are substantially similar.  The Board noted that while the investment limitations of AB Funds were in some cases worded differently from those of the Stephens Funds, those differences were not significant and were the result of the desire of the AB Funds to conform the limitations with the current limitations in the American Beacon Family of Funds complex.

The Board also considered that the existing day-to-day portfolio management arrangements for the Stephens Funds would not change as SIMG would be engaged as a sub-adviser to the AB Funds with responsibility for the day-to-day management of the AB Funds.  The Board noted that in the event the Manager proposes termination of SIMG as the sub-advisor to an AB Fund, the Manager would provide reasonable support to SIMG to reorganize the AB Fund into a new fund, upon approval of the AB Fund’s Board and shareholders.

Expenses Relating to Reorganization.  The Board considered that the Manager and SIMG will bear the direct costs associated with the Reorganization, Special Meeting, and solicitation of proxies, including the expenses associated with preparing and filing the registration statement that includes this Proxy Statement and the cost of copying, printing and mailing proxy materials.
 

 
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Relative Expense Ratios and Continuation of Cap on Expenses.  The Board reviewed information regarding comparative expense ratios (current and pro forma expense ratios are set forth in the “Comparison of Fees and Expenses” sections above).  The Board considered that except for the Stephens Small Cap Growth Fund Class A shares, the Total Annual Operating Expenses for each class of shares of the Stephens Funds was expected to be reduced following the Reorganizations of the Stephens Funds into the AB Funds.  The Board also considered that the Manager would contractually agree to cap expenses for each AB Fund through April 30, 2014, to the extent that total annual fund operating expenses of the Investor Class shares and Institutional Class shares exceed the annual rate of 1.35% and 1.09%, respectively, for the AB Small Cap Fund and 1.37% and 0.99%, respectively, for the AB Mid-Cap Fund.  As a result of this expense cap, the Board considered that for at least two years following the Reorganizations, shareholders of each of the Stephens Funds, including Stephens Small Cap Growth Fund Class A shareholders, would be subject to a net total operating expense ratio for each AB Fund, which was at least equal to or less than the net total operating expense ratios of the corresponding Stephens Fund.
 
           Potential Future Economies of Scale. The Board considered SIMG’s views as to the potential of each Stephens Fund to experience economies of scale following the Reorganization as a result of the potential for improved distribution and potential asset growth within the American Beacon Family of Funds.  The Board noted that such asset growth, if it were to occur, would allow fixed costs, such as legal, accounting, shareholder services and trustee expenses, to be spread over a larger fund complex.
 
           Distribution and Service Fees.  The Board considered representations as to the fund distribution capabilities of the Manager and its affiliates and their commitment to distribute the AB Funds.  The Board further considered that the 0.25% Rule 12b-1 distribution and service fees currently applicable to Class A shares of the Stephens Funds will not apply to the Investor Class shares of the AB Funds but that the Investor Class of the AB Funds will pay a 0.375% service fee.  The Board also considered that Class I shares of the Stephens Funds currently do not pay a Rule 12b-1 distribution and service fee, and that Institutional Class shares of the AB Funds will not pay any Rule 12b-1 distribution and services fees or additional service fees.
 
Tax Consequences.  The Board considered that the Reorganizations are expected to be free from adverse federal income tax consequences.

Other Alternatives.  The Board considered alternatives to the Reorganizations, including the potential liquidation of the Stephens Funds.  In considering these alternatives, the Board noted that current shareholders who did not wish to reorganize into the AB Funds could redeem their shares at any time prior to the Reorganization.  In this regard, the Board approved suspension of the 2% redemption fee charged by the Stephens Funds on Class A shares for redemptions made within 30 days of purchase to allow shareholders not wishing to reorganize into the AB Funds to redeem their shares prior to closing without imposition of that fee.  The Board also considered that the Reorganization would allow shareholders wishing to reorganize into the AB Funds to transfer their investment to a similar fund on a tax-free basis in the Reorganizations, whereas a liquidation would cause all shareholders to experience a taxable event.

           Based on the foregoing and together with other factors and information considered to be relevant, the Board approved the Reorganizations, subject to approval by shareholders of each of the Stephens Funds and the solicitation of the shareholders of each of the Stephens Funds to vote “FOR” the approval of the Plan, the form of which is attached to this Proxy Statement in Appendix A.
 

 
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3.           Comparison of Principal Risks
 
Risk is the chance that you will lose money on your investment or that it will not earn as much as you expect.  In general, the greater the risk, the more money your investment can earn for you and the more you can lose.  Like other investment companies, the value of each Fund’s shares may be affected by its investment objectives, principal investment strategies and particular risk factors.  The principal risks of investing in the Funds are discussed below.  However, other factors may also affect each Fund’s net asset value.  There is no guarantee that a Fund will achieve its investment objectives or that it will not lose principal value.
 
The main risks of investing in each AB Fund are substantially similar to the risks of investing in the corresponding Stephens Fund, as the investment objectives and strategies of each of the Stephens Funds and its corresponding AB Fund are also substantially similar.  The AB Funds have included certain additional risk disclosures, including futures contracts risk, and revised certain risk disclosures in its registration statement to clarify for shareholders the principal risks of investing in the AB Funds.  In addition, the AB Small Cap Fund currently intends to engage in securities lending and therefore will have the additional risk of securities lending.  Certain principal risks of the Stephens Funds will not be considered by the AB Funds to be principal risks, including portfolio turnover risk.
 
Management Risk
 
Management risk describes a Fund’s ability to meet its investment objective based on the adviser’s success or failure at implementing investment strategies for that Fund.  The value of your investment in a Fund is subject to the effectiveness of the adviser’s research, analysis and asset allocation among portfolio securities.  If the adviser’s investment strategies do not produce the expected results, your investment could be diminished or even lost.
 
General Market Risk
 
General market risk is the risk that the market value of a security may fluctuate, sometimes rapidly and unpredictably.  These fluctuations may cause a security to be worth less than its cost when originally purchased or less than it was worth at an earlier time.  General market risk may affect a single issuer, industry, sector of the economy or the market as a whole.
 
Equity Market Risk
 
Equity securities generally are subject to market risk. A Fund’s investments in equity securities may include common stocks, preferred stocks, securities convertible into or exchangeable for common stocks, real estate investment trusts (“REITs”), American Depositary Receipts (“ADRs”) and U.S. dollar-denominated foreign stocks trading on U.S. exchanges.  Investing in such securities may expose the Fund to additional risks.
 
Common stock generally is subordinate to preferred stock upon the liquidation or bankruptcy of the issuing company. Preferred stocks and convertible securities are sensitive to movements in interest rates.  In addition, convertible securities are subject to the risk that the credit standing of the issuer may have an effect on the convertible securities’ investment value.  Investments in ADRs and U.S. dollar-denominated foreign stocks trading on U.S. exchanges are subject to certain of the risks associated with investing directly in foreign securities.  Investments in REITs are subject to the risks associated with investing in the real estate industry such as adverse developments affecting the real estate industry and real property values.
 

 
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Small- and Medium-Sized Company Risk
 
Investing in securities of small- and medium-sized companies, even indirectly, may involve greater volatility than investing in larger and more established companies because small and medium-sized companies can be subject to more abrupt or erratic share price changes than larger, more established companies.  Smaller companies may have limited product lines, markets or financial resources and their management may be dependent on a limited number of key individuals.  Securities of those companies may have limited market liquidity and their prices may be more volatile.
 
Foreign Securities Risk
 
To the extent that a Fund invests in securities of foreign companies, including ADRs and EDRs, your investment in that Fund is subject to foreign securities risk.  These include risks relating to political, social and economic developments abroad and differences between U.S. and foreign regulatory requirements and market practices.  Securities that are denominated in foreign currencies are subject to the further risk that the value of the foreign currency will fall in relation to the U.S. dollar and/or will be affected by volatile currency markets or actions of U.S. and foreign governments or central banks.
 
In addition to developed markets, a Fund may invest in companies located in emerging markets, which are markets of countries in the initial stages of industrialization and that generally have low per capita income.  In addition to the risks of foreign securities in general, countries in emerging markets are generally more volatile and can have relatively unstable governments, social and legal systems that do not protect shareholders, economies based on only a few industries, and securities markets that trade a small number of issues, which could reduce liquidity.
 
Growth Style Investment Risk
 
Growth stocks can perform differently from the market as a whole and from other types of stocks.  Growth stocks may be designated as such and purchased based on the premise that the market will eventually reward a given company’s long-term earnings growth with a higher stock price when that company’s earnings grow faster than both inflation and the economy in general.  Thus a growth style investment strategy attempts to identify companies whose earnings may grow or are growing at a faster rate than inflation and the economy.  While growth stocks may react differently to issuer, political, market and economic developments that the market as a whole and other types of stocks by rising in price in certain environments, growth stocks also tend to be sensitive to changes in the earnings of their underlying companies and more volatile than other types of stocks, particularly over the short term.  During periods of adverse economic and market conditions, the stock prices of growth stocks may fall despite favorable earnings trends.  Growth stocks also typically lack the dividend yield that can cushion stock prices in market downturns.  Different investment styles tend to shift in and out of favor, depending on market conditions and investor sentiment.  A Fund’s growth style could cause it to underperform funds that use a value or non-growth approach to investing or have a broader investment style.
 

 
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Other Investment Companies Risk
 
A Fund may invest in shares of other registered investment companies, including open-end funds, closed-end funds, business development companies, ETFs and money market funds.  To the extent that a Fund invests in shares of other registered investment companies, you will indirectly bear fees and expenses charged by the underlying funds in addition to a Fund’s direct fees and expenses and will be subject to the risks associated with investments in those funds.
 
Futures Contract Risk
 
There may be an imperfect correlation between the changes in market value of the securities held by a Fund and the prices of futures contracts. There may not be a liquid secondary market for the futures contract.  When a Fund purchases or sells a futures contract, it is subject to daily variation margin calls that could be substantial in the event of adverse price movements.  If a Fund has insufficient cash to meet daily variation margin requirements, it might need to sell securities at a time when such sales are disadvantageous.
 
Securities Lending Risk
 
To the extent the AB Small Cap Fund lends its securities, it may be subject to the following risk.  Borrowers of the AB Small Cap Fund’s securities typically provide collateral in the form of cash that is reinvested in securities.  The securities in which the collateral is invested may not perform sufficiently to cover the return collateral payments owed to borrowers.  In addition, delays may occur in the recovery of securities from borrowers, which could interfere with the AB Small Cap Fund’s ability to vote proxies or to settle transactions.
 
4.Comparison of Distribution and Purchase, Redemption and Exchange Procedures
 
Quasar Distributions, LLC (“Quasar”) is the distributor and principal underwriter for the Stephens Funds.  Quasar is located at 615 East Michigan Street, Milwaukee, Wisconsin 53202.  The Stephens Funds have adopted a distribution and shareholder servicing plan (“12b-1 Plan”) under Rule 12b-1 of the 1940 Act with respect to Class A shares of each Stephens Fund. Under the 12b-1 Plan, each Stephens Fund pays a fee to Quasar for distribution services (the “Distribution Fee”) at an annual rate of 0.25% of the Stephen Fund’s Class A Shares’ average daily net asset value.  The 12b-1 Plan provides that Quasar may use all or any portion of the Distribution Fee to finance any activity that is principally intended to result in the sale of Stephens Fund shares, subject to the terms of the 12b-1 Plan, or to provide certain shareholder services.  The Distribution Fee is payable to Quasar regardless of the distribution-related expenses actually incurred.  Because the Distribution Fee is not directly tied to expenses, the amount of distribution fees paid by Class A shares of a Stephens Fund during any year may be more or less than actual expenses incurred pursuant to the 12b-1 Plan.  Class I shares of the Stephens Funds do not pay any Rule 12b-1 fees.  Investor Class and Institutional Class shares of the AB Funds will not pay any Rule 12b-1 fees.  However, Investor Class shares of the AB Funds will pay a 0.375% service fee as described below.
 
Under a Distribution Agreement with the Trust, Quasar acts as the Stephens Funds’ principal underwriter and distributor of the Stephens Funds’ shares and will act as the agent of the Stephens Funds for the sale and distribution of shares of the Stephens Funds in jurisdictions wherein the shares may be legally offered for sale, on the terms and conditions set forth in the Distribution Agreement.  Quasar is a registered broker-dealer and is a member of the Financial Industry Regulatory Authority (“FINRA”).  Quasar agrees to sell Stephens Fund shares on a best efforts basis.  Quasar has no obligation to sell any specific quantity of Stephens Fund shares. Quasar may, in its discretion, enter into agreements with such

 
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qualified broker-dealers as it may select, in order that such broker-dealer also may sell shares of the Stephens Funds.

Foreside will be the distributor and principal underwriter of the AB Funds’ shares.  Under a Distribution Agreement with the AB Trust, Foreside will act as the agent of the AB Trust in connection with the continuous offering of shares of the AB Funds.  Foreside will continually distribute shares of the AB Funds on a best efforts basis.  Foreside has no obligation to sell any specific quantity of AB Fund shares.  In addition, pursuant to a Sub-Administration Agreement between Foreside and the Manager, Foreside will receive a separate fee from the Manager for providing administrative services in connection with the marketing and distribution of shares of the AB Funds.

The AB Funds have adopted a shareholder services plan (the “Service Plan”) for Investor Class shares that provides for the payment of certain non-distribution shareholder services provided by financial intermediaries.  The Service Plan authorizes the annual payment of up to 0.375% per annum of the average daily net assets attributable to Investor Class shares.  The AB Board has authorized the Investor Class shares to pay the maximum amount of fees permissible under the Service Plan.  The fees, which are included as part of each AB Fund’s “Other Expenses” in the Table of Fees and Expenses in this Proxy Statement, will be payable monthly in arrears without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the entity for the services provided pursuant to the Service Plan.  Thus, the Manager may realize a profit or a loss based upon its actual servicing-related expenditures for the Investor Class shares.  The primary expenses expected to be incurred under the Service Plan are transfer agency fees and servicing fees paid to financial intermediaries such as plan sponsors and broker-dealers.
 
Purchase, Redemption and Exchange Procedures.
 
Purchase Procedures. The purchase procedures for the Stephens Funds and the AB Funds are similar.  Investors may invest by contacting the Funds through a broker or other financial institution who sells the Funds, or by mail, telephone or wire.  Investors may also contact the AB Funds through the internet.

Class A shares of the Stephens Funds are subject to a 5.25% maximum front-end sales load.  The AB Funds will not impose a front-end sales load on purchases of Investor Class shares.  The Stephens Funds do not charge a front-end sales load on purchases of Class I shares and the AB Funds will not charge a front-end sales load on purchases of Institutional Class shares.

Under the American Beacon Funds’ Rights of Accumulation Program, investors may qualify for a reduced sales charge by aggregating all of their investments held in certain accounts (“Qualified Accounts”). Qualified Accounts held in A Class shares of any American Beacon Funds mutual fund sold with a front-end sales charge or held in Investor Class shares of the AB Funds that were received by shareholders of Class A shares of the Stephens Funds pursuant to the Reorganization, may be grouped together to qualify for the reduced sales charge.  Additional information regarding the Rights of Accumulation Program and a description of Qualified Accounts is available in Appendix C to this Proxy Statement.

Each Stephens Fund pays 12b-1 fees at an annual rate of 0.25% of the Stephen Fund’s Class A Shares’ average daily net asset value.  Class I shares of the Stephens Funds do not pay any Rule 12b-1 fees.  Investor Class and Institutional Class shares of the AB Funds will not pay any Rule 12b-1 fees.  However, Investor Class shares of the AB Funds will pay a 0.375% service fee as described above.

 
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The minimum initial and minimum subsequent investment amounts for the Stephens Funds are different than the minimum initial and subsequent amounts for the AB Funds.  The minimum initial investment for Class A shares of each Stephens Fund is $2,500 for retail accounts and $1,000 for individual retirement accounts (“IRAs”).  There is no minimum initial investment amount for Class A shares of the Stephens Funds for asset or fee-based accounts managed by your financial advisor or for eligible employee benefit plans, SEP and SIMPLE IRA plans.  The minimum initial investment amount for Investor Class shares of each AB Fund is $2,500.  The minimum initial investment for Class I shares of each Stephens Fund is $1,000,000, which can be waived or changed by SIMG. The minimum initial investment for Institutional Class shares of the AB Fund is $250,000.

The minimum subsequent investment amount for Class A shares of each of the Stephens Funds is $100 for retail accounts and IRAs.  There is no minimum subsequent investment amount for Class A shares of the Stephens Funds for asset or fee-based accounts managed by your financial advisor or for eligible employee benefit plans, SEP, and SIMPLE IRA plans.  The minimum subsequent investment amount of Investor Class shares of each of the AB Funds is $500 if the investment is made by wire, and $50 if the investment is made by ACH, check or exchange.  There is no stated minimum for subsequent investment amounts for Class I shares of the Stephens Funds.  The minimum subsequent investment amount of Institutional Class shares of each of the AB Funds is $50 if made by ACH, check or exchange; there is no minimum subsequent investment amount for Institutional Class shares of the AB Funds made by wire.

Based on SIMG’s analysis of the size of the applicable market, market liquidity, portfolios holdings of the Stephens Small Cap Growth Fund and other accounts of SIMG as well as other issues, upon a 30-day written notice to Stephens Small Cap Growth Fund shareholders, the Stephens Small Cap Growth Fund may close to new investors when SIMG determines that the receipt of substantial additional assets would not be prudent from an investment perspective.  In such event, it is expected that then-existing shareholders would be allowed to make additional purchases.  If the Stephens Small Cap Growth Fund closes to new investors, the Board will review, on a periodic basis, market conditions and other factors presented by SIMG in order to determine whether to reopen the Stephens Small Cap Growth Fund to new investors.  The AB Funds will evaluate from time to time the capacity of SIMG to manage substantial additional assets and make appropriate determinations at that time.

Redemption Procedures.  The Stephens Funds permit, and the AB Funds will permit, redemptions by mail, wire, and telephone.  Investors may also contact the AB Funds through the internet. The AB Funds will not charge a redemption fee; a 2.00% redemption fee generally applies to Class A shares of the Stephens Funds redeemed within 30 days of purchase, however, such fee is being suspended in light of the Reorganizations.  If the Reorganizations do not occur, it is anticipated that the redemption fee will be reinstated.

Additionally, each Fund has also reserved the right to redeem shares “in kind.” Additional shareholder account information for the AB Funds is available in Appendix C to this Proxy Statement.

Exchange Procedures. The Stephens Funds and the AB Funds have similar exchange procedures.  Shares of any class of the Stephens Funds or the AB Funds may be exchanged for shares of the same class of another Stephens Fund or American Beacon Fund, respectively, under certain limited circumstances.  Since an exchange involves a concurrent purchase and redemption, please review the sections titled “Purchase Policies” and “Redemption Policies” in the AB Funds’ Prospectus for additional limitations that apply to purchases and redemptions.

There is no front-end sales charge on exchanges between Class A shares of a Stephens Fund.  Class A shares of a Stephens Fund, which are subject to a CDSC, will not be charged a CDSC in an

 
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exchange.  For the American Beacon Funds, if shares were purchased by check, to exchange out of one American Beacon Fund and into another, a shareholder must have owned shares of the redeeming American Beacon Fund for at least 10 days.

The minimum investment requirement must be met for the Stephens Fund or American Beacon Fund into which the shareholder is exchanging.  Shares may be acquired through exchange only in states in which they can be legally sold.  The American Beacon Funds reserve the right to charge a fee and to modify or terminate the exchange privilege at any time.  To learn more about exchanges for the Stephens Funds, call (toll-free) at (866) 735-7464.  For information on the American Beacon Funds’ policies regarding frequent purchases, redemptions, and exchanges please refer to the section titled “Frequent Trading and Market Timing” in the AB Funds’ Prospectus.

C.KEY INFORMATION ABOUT THE PROPOSALS
 
The following is a summary of key information concerning the Reorganizations.  Keep in mind that more detailed information appears in the Plan, the form of which is attached to this Proxy Statement as Appendix A.
 
1.Summary of the Proposed Reorganizations
 
At the Special Meeting, the shareholders of the Stephens Small Cap Growth Fund will be asked to approve the Plan to reorganize the Stephens Small Cap Growth Fund into the AB Small Cap Fund, and the shareholders of the Stephens Mid Cap Growth Fund will be asked to approve the Plan to reorganize the Stephens Mid Cap Growth Fund into the AB Mid-Cap Fund.  Each AB Fund is a newly organized series of the AB Trust that will commence operations upon consummation of the Reorganization.  If the Plan is approved by the shareholders of the Stephens Funds and the Reorganizations are consummated, each Stephens Fund will transfer all of its assets to the corresponding AB Fund in exchange solely for (1) the number of full and fractional Investor Class and Institutional Class shares of the AB Fund equal to the number of full and fractional Class A and Class I shares, respectively, of the Stephens Fund as of the close of business on the closing date referred to below (the Closing) and (2) the AB Fund’s assumption of all of the corresponding Stephens Fund’s liabilities.  Immediately thereafter, the Stephens Fund will distribute the AB Fund shares to its shareholders, by the AB Trust’s transfer agent establishing accounts on the AB Fund’s share records in the names of those shareholders and transferring those AB Fund shares to those accounts, by class, in complete liquidation of the Stephens Fund.  As a result, each shareholder of the Stephens Fund will receive Investor Class and/or Institutional Class shares of the AB Fund, as the case may be, having an aggregate Net Asset Value (“NAV”) equal to the aggregate NAV of the shareholder’s Stephens Fund shares. The expenses associated with the Reorganizations will not be borne by the Stephens Funds’ shareholders; record of ownership will be held in book entry form only.

Until the Closing, shareholders of the Stephens Funds will continue to be able to redeem their shares at the NAV per share next determined after receipt by the Stephens Funds’ transfer agent of a redemption request in proper form.  Redemption and purchase requests received by the transfer agent after the Closing will be treated as requests received for the redemption of shares of the AB Funds received by the shareholder in connection with the Reorganization or purchase of AB Fund shares.  After the Reorganization, all of the issued and outstanding shares of the Stephens Funds will be canceled on the books of the Stephens Funds, and the share transfer books of the Stephens Funds will be permanently closed.  If the Reorganizations are consummated, shareholders will be free to redeem the shares of the AB Fund that they receive in the transaction at their then-current NAV.  Shareholders of the Stephens Funds may wish to consult their tax advisors as to any different consequences of redeeming their shares prior to the Reorganizations or exchanging such shares for shares of the AB Funds in the Reorganizations.

 
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The Reorganizations are subject to a number of conditions, including the approval of the Plan by the shareholders of the Stephens Funds and the receipt of a legal opinion from counsel to the AB Trust with respect to certain tax matters (see Federal Income Tax Consequences, below). Assuming satisfaction of the conditions in the Plan, the closing date of the Reorganizations are expected to be February 24, 2012, or another date agreed to by the Trust and the AB Trust.

SIMG and the Manager have agreed to pay all direct costs relating to the Reorganization, including the costs relating to the Special Meeting and to preparing and filing the registration statement that includes this Proxy Statement. They also will incur the direct costs associated with the solicitation of proxies, including the cost of copying, printing and mailing proxy materials.

The Plan may be amended by the mutual agreement of the Trust and the AB Trust, notwithstanding approval thereof by the Stephens Funds’ shareholders, provided that no such amendment after that approval may have a material adverse effect on those shareholders’ interests.  In addition, the Plan may be terminated at or before the Closing by the mutual agreement of the Trust and the AB Trust or by either of them (1) in the event of the other’s material breach of any representation, warranty or covenant contained in the Plan to be performed at or before the Closing, (2) if a condition to its obligations has not been met and it reasonably appears that that condition will not or cannot be met, (3) if a governmental body issues an order, decree or ruling having the effect of permanently enjoining, restraining or otherwise prohibiting consummation of the Reorganization or (4) if the Closing has not occurred by August 31, 2012, or another date as to which they agree.
 
2.           Description of the AB Funds’ Shares
 
Investor Class and Institutional Class shares of the AB Funds issued to the shareholders of the Stephens Funds pursuant to the Reorganizations will be duly authorized, validly issued, fully paid and non-assessable when issued and will be transferable without restriction and will have no preemptive or conversion rights.  Investor Class and Institutional Class shares will be sold and redeemed based upon their NAV next determined after receipt of the purchase or redemption request, as described in Appendix C to this Proxy Statement.
 
3.           Federal Income Tax Consequences
 
The Trust believes the Stephens Funds have qualified for treatment as a regulated investment companies under Part I of Subchapter M of Chapter 1 of Subtitle A of the Code (“Subchapter M”) since their inception. Accordingly, the Trust believes the Stephens Funds have been, and expects the Stephens Funds to continue through the Closing to be, relieved of any federal income tax liability on its taxable income and net gains it distributes to shareholders to the extent provided for in Subchapter M.
 
 
The Reorganizations are intended to qualify for federal income tax purposes as tax-free reorganizations under section 368(a) of the Code.  As a condition to the Closing, the Trust and the AB Trust will receive an opinion of counsel to the AB Trust substantially to the effect that -- based on certain assumptions and conditioned on the representations set forth in the Plan (and, if such counsel requests, in separate letters from the Trust and the AB Trust) being true and complete at the time of the Closing and the Reorganizations being consummated in accordance with the Plan (without the waiver or modification of any terms or conditions thereof and without taking into account any amendment thereof that counsel has not approved) -- the Reorganizations will qualify as such reorganizations and that, accordingly, for federal income tax purposes:

·
Each Fund will be “a party to a reorganization” (within the meaning of section 368(b) of the Code);

 
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·
The Stephens Funds will recognize no gain or loss upon the transfer of its assets to the corresponding AB Fund in exchange solely for the AB Fund’s shares and the AB Funds’ assumption of the Stephens Fund’s liabilities or on the distribution of those shares to the Stephens Fund’s shareholders in exchange for their Stephens Fund shares;
 
·
A shareholder will recognize no gain or loss on the exchange of all of its Stephens Fund shares solely for AB Fund shares pursuant to the Reorganization;
·
A shareholder’s aggregate tax basis in the AB Fund shares it receives pursuant to the Reorganizations will be the same as the aggregate tax basis in its Stephens Fund shares it actually or constructively surrenders in exchange for those AB Fund shares, and its holding period for those AB Fund shares will include, in each instance, its holding period for those Stephens Fund shares, provided the shareholder holds them as capital assets as of the time of the Closing;
·
The AB Funds will recognize no gain or loss on its receipt of the corresponding Stephens Fund’s assets in exchange solely for the AB Fund shares and the AB Fund’s assumption of the Stephens Fund’s liabilities;
·
Each AB Fund’s basis in each transferred asset will be the same as the corresponding Stephens Fund’s basis therein immediately before the Reorganization, and each AB Fund’s holding period for each such asset will include the corresponding Stephen Fund’s holding period therefor (except where the AB Fund’s investment activities have the effect of reducing or eliminating an asset’s holding period); and
·
For purposes of section 381 of the Code, each AB Fund will be treated just as each Stephens Fund would have been treated if there had been no Reorganizations.  Accordingly, the Reorganizations will not result in the termination of the Stephens Funds’ taxable years, the Stephens Funds’ tax attributes enumerated in section 381(c) of the Code will be taken into account by the AB Funds as if there had been no Reorganizations, and the part of the Stephens Funds’ taxable years before the Reorganizations will be included in the AB Funds’ taxable years after the Reorganizations.

Notwithstanding the above, the opinion of counsel may state that no opinion is expressed as to the effect of the Reorganization of the Funds or any shareholder with respect to any asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting.
 
Opinions of counsel are not binding upon the Internal Revenue Service (“IRS”) or the courts.  If a Reorganization is consummated but does not qualify as a tax-free reorganization under the Code, the Stephens Fund would recognize gain or loss on the transfer of its assets to the corresponding AB Fund and each shareholder of the Stephens Fund would recognize a taxable gain or loss equal to the difference between its tax basis in the shares of the Stephens Fund and the fair market value of the shares of the AB Fund it receives.
 
Tracking Your Basis and Holding Period; State and Local Taxes.  After the Reorganizations, you will continue to be responsible for tracking the adjusted tax basis and holding period of your AB Fund shares for federal income tax purposes.  Pursuant to legislation passed by Congress in 2008, if you want to use the average cost method for determining basis with respect to any AB Fund shares you acquire after December 31, 2011 (“Covered Shares”), you will have to elect to do so in writing (which may be electronic).  If you fail to affirmatively elect that method, the basis determination will be made in accordance with the AB Fund’s default method, which might be a method other than average cost.  If, however, the AB Fund’s default method is average cost and you wish to use a different acceptable method for basis determination (e.g., a specific identification method), you will be able to elect to do so.
 

 
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That legislation also requires the AB Fund (or administrative agent) to report to the IRS and furnish to its shareholders the cost basis information for Covered Shares.  In addition to the current requirement to report the gross proceeds from the redemption of its shares, the AB Fund also will be required to report the cost basis information for Covered Shares and indicate whether they had a short-term or long-term holding period.  You should consult with your tax adviser to determine the best IRS-accepted cost basis method for your tax situation and to obtain more information about how the cost basis reporting law will apply to you.
 
 
4.Comparison of Forms of Organization and Shareholder Rights
 
Set forth below is a discussion of the material differences between the Funds and the rights of their shareholders.

Governing Law.  The Stephens Funds are each a series of the Trust, which is organized as a Massachusetts business trust.  Each AB Fund is a separate series of the AB Trust, which is organized as a Massachusetts business trust.  Each Fund is authorized to issue an unlimited number of shares of beneficial interest.  The Trust’s operations are governed by its Amended and Restated Agreement and Declaration of Trust, including any amendments thereto (collectively, “Stephens Declaration of Trust”) and By-Laws and applicable state law.  The AB Trust’s operations are governed by its Amended and Restated Declaration of Trust (the “AB Declaration of Trust”) and By-Laws and applicable state law.

Shareholder Liability.  Under the Stephens Declaration of Trust, any shareholder or former shareholder shall not be held personally liable for any obligation or liability of the Trust solely by reason of being or having been a shareholder and not because of such shareholder’s acts or omissions or for some other reason.  The Stephens Funds are required to indemnify shareholders and former shareholders against losses and expenses arising from any personal liability for any obligation of the Stephens Funds solely by reason of being or having been a shareholder of the Stephens Funds and not because of his or her acts or omissions or for some other reason.

Under the AB Declaration of Trust, any shareholder or former shareholder of the AB Funds shall not be held to be personally liable for any obligation or liability of the AB Trust solely by reason of being or having been a shareholder.  The AB Funds are required to indemnify shareholders and former shareholders against losses and expenses incurred in connection with proceedings relating to his or her being or having been a shareholder of the AB Funds and not because of his or her acts or omissions.

Board of Trustees.  The Reorganizations will result in a change in the Board of Trustees because the trustees of the Trust are different from the trustees of the AB Trust.  The Board has five trustees, four of whom are an “interested person,” as that term is defined under the 1940 Act, of the Trust.  For more information, refer to the Statement of Additional Information dated March 31, 2011 for the Stephens Funds, which is incorporated by reference into this Proxy Statement.

The AB Board has eight trustees, one of whom is deemed an “interested person” of the AB Trust.  For more information, refer to the Statement of Additional Information to this Proxy Statement, which is incorporated by reference into this Proxy Statement.

The Reorganizations also will result in a change in the officers because the officers of the Trust are different from the officers of the AB Trust.

Classes.  Each Stephens Fund offers two classes of shares:  Class A and Class I shares.  Each AB Fund is a separate series of the AB Trust that is expected to offer Investor Class, Institutional Class, A

 
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Class, C Class and Y Class shares.  It is anticipated that shareholders of each Stephens Fund will receive Investor Class and/or Institutional Class shares, as the case may be, of the corresponding AB Fund in the Reorganizations. Nothing contained herein shall be construed as an offer to purchase or otherwise acquire any other class of shares of the AB Funds.  The AB Board has reserved the right to create and issue additional classes of the AB Funds following the Reorganization.  Each share of a series or class represents an equal proportionate interest in that series or class with each other share of that series or class.  Shares of each series or class generally vote together on fund- or trust-wide matters, except when required under federal securities laws to vote separately on matters that only affect a particular class, such as the approval of a distribution plan for a particular class.  Structurally, there is no difference between Investor Class and Institutional Class shares of the AB Funds and, respectively, the Stephens Funds’ Class A and Class I shares.

D.      ADDITIONAL INFORMATION ABOUT THE AB FUNDS
 
1. Investment Adviser and Sub-Adviser
 
The Manager, located at 4151 Amon Carter Boulevard, Fort Worth, Texas 76155, is the AB Funds’ investment adviser.  The Manager is a wholly owned subsidiary of Lighthouse Holdings, Inc. (“Lighthouse”).  Lighthouse is indirectly controlled by investment funds affiliated with Pharos Capital Group, LLC and TPG Capital, L.P.  The Manager is paid a management fee as compensation for paying investment advisory fees and for providing the AB Trust with advisory and asset allocation services. Pursuant to management and administrative services agreements, the Manager provides the AB Trust with office space, office equipment and personnel necessary to manage and administer the AB Trust’s operations. This includes:
 
·
complying with reporting requirements;
·
corresponding with shareholders;
·
maintaining internal bookkeeping, accounting and auditing services and records; and
·
supervising the provision of services to the AB Trust by third parties.

The management agreement provides for the Manager to receive an annualized management fee that is calculated and accrued daily, equal to 0.05% of the net assets of each of the AB Funds, plus amounts paid by the Manager to the Sub-Adviser.
 
In addition to the management fee, each AB Fund pays the Manager an administrative services fee for providing administrative and management services (other than investment advisory services).  The administrative services fee for each AB Fund is equal to 0.30% of the net assets of that AB Fund’s Investor Class and Institutional Class.  The Manager may receive up to 25% of the net monthly income generated from the AB Small Cap Fund’s securities lending activities.  The Manager currently intends to receive 10% of such income. The Securities and Exchange Commission (“SEC”) has granted exemptive relief that permits the AB Small Cap Fund to invest cash collateral received from securities lending transactions in shares of one or more private or registered investment companies managed by the Manager.  Only the AB Small Cap Fund currently intends to engage in securities lending activities.
 
Each AB Fund is responsible for expenses not otherwise assumed by the Manager, including the following: audits by independent auditors; transfer agency, custodian, fund accounting, dividend disbursing agent and shareholder recordkeeping services; taxes, if any, and the preparation of the AB Fund’s tax returns; interest; costs of Trustee and shareholder meetings; printing and mailing prospectuses and reports to existing shareholders; fees for filing reports with regulatory bodies and the maintenance of the AB Fund’s existence; legal fees; fees to federal and state authorities for the registration of shares; fees and expenses of Trustees; insurance and fidelity bond premiums; fees paid to consultants providing
 

 
39

 

reports regarding adherence by the Sub-Adviser to the investment style of the AB Fund; fees paid for brokerage commission analysis for the purpose of monitoring best execution practices of the Sub-Adviser; and any extraordinary expenses of a nonrecurring nature.
 
The assets of each AB Fund may be allocated among one or more sub-advisers in the future by the Manager.  The sub-adviser has discretion to purchase and sell securities for its segment of the AB Fund’s assets in accordance with the AB Fund’s objectives, policies, restrictions and more specific strategies provided by the Manager.  Pursuant to an exemptive order issued by the SEC, the Manager is permitted to enter into new or modified investment advisory agreements with existing or new sub-advisers without approval of the AB Fund’s shareholders, but subject to approval of the AB Board.  The prospectus will be supplemented if additional sub-advisers are retained or the contract with any existing sub-adviser is materially changed or terminated.  The AB Funds’ advisory arrangements are set forth above.
 
The Sub-Adviser is a subsidiary of Stephens Investments Holdings LLC, a privately held and family owned company.  The Sub-Adviser was formed in 2005 and had approximately $842.46 million of assets under management as of September 30, 2011. The Sub-Adviser’s principal business location is 111 Center Street, Little Rock, Arkansas 72201.

The SAI to this Proxy Statement, which is incorporated by reference into this Proxy Statement, provides additional information about each portfolio manager’s compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the Stephens Funds.
 
2.Other Service Providers
 
Foreside Fund Services, LLC (“Foreside”), located at Three Canal Plaza, Suite 100, Portland, Maine 04101, is the distributor and principal underwriter of the AB Fund’s shares.  Pursuant to a Sub-Administration Agreement between Foreside and the Manager, Foreside receives a fee from the Manager for providing administrative services in connection with the marketing and distribution of shares of the series of the American Beacon Funds (including the AB Funds) and the American Beacon Select Funds.  Brown Brothers Harriman & Co., located at 40 Water Street, Boston, Massachusetts 02109, is the securities lending agent for the AB Small Cap Fund.
 
 
3.Tax Considerations
 
 
The AB Funds intend to make annual distributions that may be taxed to its shareholders as ordinary income or net capital gain.  For a discussion of relevant tax matters, please refer to Appendix C to this Proxy Statement.
 
4.Payments to Broker-Dealers and Other Financial Intermediaries
 
 
If you purchase an AB Fund through a broker-dealer or other financial intermediary (such as a bank), the AB Fund and its related companies may pay the intermediary for the sale of AB Fund shares and related services.  These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the AB Fund over another investment.  Ask your salesperson or visit your financial intermediary’s internet site for more information.

 
II.VOTING INFORMATION
 

 
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A.RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED
 
Proxies are being solicited from the shareholders of the Stephens Funds by the Board for the Special Meeting to be held on Thursday, February 23, 2012, at 10:00 a.m. Central time at offices of U.S. Bancorp Fund Services, LLC, located at 777 E. Wisconsin Avenue, 4th Floor Conference Room, Milwaukee, WI 53202, or at such later time made necessary by adjournment.  Unless revoked, all valid proxies will be voted in accordance with the specification thereon or, in the absence of specifications, “FOR” approval of the Plan.

The Board has fixed the close of business on December 19, 2011 (the “Record Date”) as the record date for the determination of shareholders entitled to notice of and to vote at the Special Meeting and any adjournments thereof.  Shareholders of record as of the Record Date will be entitled to one vote for each share held and to a proportionate fractional vote for each fractional share held.  As of the Record Date, the total number of issued and outstanding shares of beneficial interest of Class A and Class I shares of the Stephens Small Cap Growth Fund was 3,573,987 and 3,976,270 respectively.  As of the Record Date, the total number of issued and outstanding shares of beneficial interest of Class A and Class I shares of the Stephens Mid Cap Growth Fund was 1,612,351 and 959,381 respectively. Shareholders of record who own five percent or more of the Stephens Small Cap Growth Fund and shareholders of record who own five percent or more of the Stephens Mid Cap Growth Fund as of the Record Date are set forth on Appendix B to this Proxy Statement.  Approval of the Reorganizations with respect to each Stephens Fund will require an affirmative vote in favor of the Reorganization by at least 75% of the voted shares of that Stephens Fund.

B.HOW TO VOTE
 
You may vote in one of three ways:

complete and sign the enclosed proxy ballot and mail it to us in the prepaid return envelope (if mailed in the United States);
vote on the Internet at the website address listed on your proxy ballot; or
call the toll-free number printed on your proxy ballot.

PLEASE NOTE, TO VOTE VIA THE INTERNET OR TELEPHONE, YOU WILL NEED THE “CONTROL NUMBER” THAT APPEARS ON YOUR PROXY BALLOT.

C.PROXIES
 
All proxies solicited by the Board that are properly executed and received by the Secretary prior to the Special Meeting, and are not revoked, will be voted at the Special Meeting.  A proxy with respect to shares held in the name of two or more persons is valid if executed by any one of them unless at or prior to its use the Stephens Fund receives written notification to the contrary from any one of such persons.  Shares represented by such proxies will be voted in accordance with the instructions thereon. If no specification is made on a proxy, it will be voted FOR the matters specified on the proxy.  All shares that are voted and votes to ABSTAIN will be counted towards establishing a quorum, as will broker non-votes.  Broker non-votes are shares for which the beneficial owner has not voted and the broker holding the shares does not have discretionary authority to vote on the particular matter.

You may revoke a proxy once it is given.  If you desire to revoke a proxy, you must submit a subsequent later dated proxy or a written notice of revocation to the Stephens Fund.  You may also give written notice of revocation in person at the Special Meeting.  Attendance by a shareholder at the Special Meeting does not, by itself, revoke a proxy.

 
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D.QUORUM AND ADJOURNMENTS
 
Forty percent (40%), of the shares of each of the Stephens Fund that are entitled to vote will be considered a quorum for the transaction of business concerning each Stephens Fund.  If a quorum of shareholders of a Stephens Fund is not present at the Special Meeting, or if a quorum is present but sufficient votes to approve the Reorganizations described in this Proxy Statement are not received, the persons named as proxies may, but are under no obligation to, propose one or more adjournments of the Special Meeting of the Stephens Funds to permit further solicitation of proxies.  Any business that might have been transacted at the Special Meeting with respect to the Stephens Funds may be transacted at any such adjourned session(s) at which a quorum is present.  Whether or not a quorum is present, any such adjournment as to a matter will require the affirmative vote of the holders of a majority of the shares represented at the meeting, either in person or by proxy.  When a meeting of shareholders is adjourned to another time or place, notice need not be given of the adjourned meeting at which the adjournment is taken, unless a new record date of the adjourned meeting is fixed or unless the adjournment is for more than sixty (60) days from the date set for the original meeting, in which case the Board shall set a new record date. The persons designated as proxies may use their discretionary authority to vote as instructed by management of the Stephens Funds on questions of adjournment and on any other proposals raised at the Special Meeting to the extent permitted by the SEC’s proxy rules, including proposals for which timely notice was not received, as set forth in the SEC’s proxy rules.

 
E.EFFECT OF ABSTENTIONS AND BROKER “NON-VOTES”
 
All proxies voted, including abstentions and broker non-votes (shares held by brokers or nominees where the underlying holder has not voted and the broker does not have discretionary authority to vote the shares), will be counted toward establishing a quorum.  In addition, under the rules of the New York Stock Exchange, if a broker has not received instructions from beneficial owners or persons entitled to vote and the proposal to be voted upon may “affect substantially” a shareholder’s rights or privileges, the broker may not vote the shares as to that proposal even if it has discretionary voting power.  As a result, these shares also will be treated as broker non-votes for purposes of proposals that may “affect substantially” a shareholder’s rights or privileges (but will not be treated as broker non-votes for other proposals, including adjournment of the Special Meeting).

Abstentions and broker non-votes will be treated as shares voted against a proposal.  Treating broker non-votes as votes against a proposal can have the effect of causing shareholders who choose not to participate in the proxy vote to prevail over shareholders who cast votes or provide voting instructions to their brokers or nominees. In order to prevent this result, the Stephens Funds may request that selected brokers or nominees refrain from returning proxies on behalf of shares for which voting instructions have not been received from beneficial owners or persons entitled to vote.  The Stephens Funds also may request that selected brokers or nominees return proxies on behalf of shares for which voting instructions have not been received if doing so is necessary to obtain a quorum.  Abstentions and broker non-votes will not be voted “FOR” or “AGAINST” any adjournment.

F.      SOLICITATION OF PROXIES
 
The Stephens Funds expect that the solicitation of proxies will be primarily by mail and telephone. The solicitation also may include facsimile, Internet or oral communications by certain employees of SIMG, who will not be paid for these services.  SIMG has retained Broadridge Financial Solutions, Inc. to aid in the solicitation of proxies, at an anticipated cost of approximately $28,400, exclusive of printing costs.  The Manager and SIMG will bear the costs of the Special Meeting, including

 
42

 

legal costs, the costs of retaining Broadridge Financial Solutions, Inc., and other expenses incurred in connection with the solicitation of proxies.
 
III.OTHER INFORMATION
 
A.      OTHER BUSINESS
 
The Board knows of no other business to be brought before the Special Meeting.  If any other matters come before the Special Meeting, the Board intends that proxies that do not contain specific restrictions to the contrary will be voted on those matters in accordance with the judgment of the persons named in the enclosed proxy card.

B.      NEXT MEETING OF SHAREHOLDERS
 
The Stephens Funds do not hold regular meetings of shareholders.  Shareholders wishing to submit proposals for inclusion in a proxy statement for a subsequent meeting of shareholders should send their written proposals to Elaine E. Richards, Secretary of the Trust, U.S. Bancorp Fund Services, LLC, 2020 East Financial Way, Suite 100, Glendora, California 91741.  Proposals must be delivered to the Secretary of the Trust not later than the tenth day following the day on which public announcement of the date of the Special Meeting was first made by the Trust.  Such shareholder’s proposal shall set forth (a) a brief description of the business desired to be brought before the Special Meeting, the reasons for conducting such business at the Special Meeting and any material interest in such business of such shareholder and of the beneficial owner, if any, on whose behalf the proposal is made, and (b) as to the shareholder submitting the proposal and the beneficial owner, if any, on whose behalf the proposal is made, (i) the name and address of such shareholder, as they appear on the books of the Trust, and of such beneficial owner and (ii) the number of shares of each class of shares of the Stephens Fund which are owned beneficially and of record by such shareholder and such beneficial owner. Timely submission of a proposal does not necessarily mean that the proposal will be included.

 
C.      LEGAL MATTERS
 
Certain legal matters concerning the issuance of shares of the AB Funds in connection with the Reorganizations and the tax consequences of the Reorganizations will be passed upon by K&L Gates LLP.

D.      INFORMATION FILED WITH THE SEC
 
The Trust and the AB Trust are subject to the information requirements of the Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith, file reports and other information, including proxy materials and charter documents, with the SEC.  Reports, proxy statements, registration statements and other information filed by the Trust may be inspected without charge and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, DC 20549, and at the following regional offices of the SEC: Northeast Regional Office, 3 World Financial Center, Suite 400, New York, New York 10281; Southeast Regional Office, 801 Brickell Avenue, Suite 1800, Miami, Florida 33131; Midwest Regional Office, 175 West Jackson Boulevard, Suite 900, Chicago, Illinois 60604; Central Regional Office, 1801 California Street, Suite 1500, Denver, Colorado 80202; and Pacific Regional Office, 5670 Wilshire Boulevard, Suite 1100, Los Angeles, California 90036. Copies of such materials may also be obtained from the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, DC 20549 at prescribed rates.

 
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By Order of the Board of Trustees of Professionally Managed Portfolios,


/s/ Elaine E. Richards
Elaine E. Richards
Secretary

December 22, 2011

 
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APPENDIX A
 
FORM OF AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
 
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION (“Agreement”) is made as of ________ __, 2012, among AMERICAN BEACON FUNDS, a Massachusetts business trust, with its principal place of business at 4151 Amon Carter Boulevard, Fort Worth, Texas  76155 (“New Trust”), on behalf of each segregated portfolio of assets (“series”) thereof listed under the heading “New Funds” on Schedule A attached hereto (“Schedule A”) (each, a “New Fund”), PROFESSIONALLY MANAGED PORTFOLIOS, also a Massachusetts business trust, with its principal place of business at 615 East Michigan Street, Milwaukee, Wisconsin  53202 (“Old Trust”), on behalf of each series thereof listed under the heading “Old Funds” on Schedule A (each, an “Old Fund”), and, solely for purposes of paragraph 6, AMERICAN BEACON ADVISORS, INC., New Trust’s investment manager (“AmBeacon Manager”), and STEPHENS INVESTMENT MANAGEMENT GROUP, LLC, Old Fund’s investment advisor (“PMP Manager”).  (Each of New Trust and Old Trust is sometimes referred to herein as an “Investment Company,” and each New Fund and Old Fund is sometimes referred to herein as a “Fund.”)  Notwithstanding anything to the contrary contained herein, (1) the agreements, covenants, representations, warranties, actions, and obligations of and by each Fund, and of and by each Investment Company, as applicable, on its behalf, shall be the agreements, covenants, representations, warranties, actions, and obligations of that Fund only, (2) all rights and benefits created hereunder in favor of a Fund shall inure to and be enforceable by the Investment Company of which that Fund is a series on that Fund’s behalf, and (3) in no event shall any other series of an Investment Company (including the other Fund thereof) or the assets thereof be held liable with respect to the breach or other default by an obligated Fund or Investment Company of its agreements, covenants, representations, warranties, actions, and obligations set forth herein.
 
Each Investment Company wishes to effect two reorganizations described in section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (“Code”) (all “section” references are to the Code, unless otherwise noted), and intends this Agreement to be, and adopts it as, a “plan of reorganization” within the meaning of the regulations under the Code (“Regulations”).  Each reorganization will involve an Old Fund’s changing its identity -- by converting from a series of Old Trust to a series of New Trust -- by (1) transferring all its assets to the New Fund listed on Schedule A opposite its name (“corresponding New Fund”) (which is being established solely for the purpose of acquiring those assets and continuing that Old Fund’s business) in exchange solely for voting shares of beneficial interest (“shares”) in that New Fund and that New Fund’s assumption of all of that Old Fund’s liabilities, (2) distributing those shares pro rata to that Old Fund’s shareholders in exchange for their shares therein and in complete liquidation thereof, and (3) terminating that Old Fund, all on the terms and conditions set forth herein (all the foregoing transactions involving each Old Fund and its corresponding New Fund being referred to herein collectively as a “Reorganization”).  The consummation of each Reorganization shall be contingent on the consummation of the other Reorganization.  (For convenience, the balance of this Agreement refers only to a single Reorganization, one Old Fund, and one New Fund, but the terms and conditions hereof shall apply separately to each Reorganization and the Funds participating therein.)
 
Each Investment Company’s board of trustees (each, a “Board”), in each case including a majority of its members who are not “interested persons” (as that term is defined in the Investment Company Act of 1940, as amended (“1940 Act”)) (“Non-Interested Persons”) of either Investment Company, (1) has duly adopted and approved this Agreement and the transactions contemplated hereby, (2) has duly authorized performance thereof on its Fund’s behalf by all necessary Board action, and (3) has determined that participation in the Reorganization is in the best interests of the Fund that is a
 

 
A-1

 

series thereof and, in the case of Old Fund, that the interests of the existing shareholders thereof will not be diluted as a result of the Reorganization.
 
Old Fund currently offers two classes of shares, designated Class A shares and Class I shares (“Class A Old Fund Shares” and “Class I Old Fund Shares,” respectively, and collectively, “Old Fund Shares”).  Old Fund previously offered and issued a third class of shares, designated Class C shares (“Class C Old Fund Shares”), which were converted to Class A Old Fund Shares in November 2009 and thus are not included in the term “Old Fund Shares.”  New Fund will have multiple classes of shares, including two classes designated Investor Class shares and Institutional Class shares (“Investor Class New Fund Shares” and “Institutional Class New Fund Shares,” respectively, and collectively, “New Fund Shares”); New Fund’s other classes of shares (designated A Class shares, Y Class shares, and Class C shares) will not be involved in the Reorganization and thus are not included in the term “New Fund Shares.”  The Class A Old Fund Shares and the Investor Class New Fund Shares have substantially similar characteristics, as do the Class I Old Fund Shares and the Institutional Class New Fund Shares.
 
In consideration of the mutual promises contained herein, the Investment Companies agree as follows:
 
1.           PLAN OF REORGANIZATION AND TERMINATION
 
1.1.         Subject to the requisite approval of Old Fund’s shareholders and the terms and conditions set forth herein, Old Fund shall assign, sell, convey, transfer, and deliver all of its assets described in paragraph 1.2 (“Assets”) to New Fund.  In exchange therefor, New Fund shall:
 
 
(a)
issue and deliver to Old Fund the number of full and fractional (all references herein to “fractional” shares meaning fractions rounded to the third decimal place) (1) Investor Class New Fund Shares equal to the number of full and fractional Class A Old Fund Shares then outstanding and (2) Institutional Class New Fund Shares equal to the number of full and fractional Class I Old Fund Shares then outstanding, and
     
 
(b)
assume all of Old Fund’s liabilities described in paragraph 1.3 (“Liabilities”).
     
Those transactions shall take place at the Closing (as defined in paragraph 2.1).
 
1.2           The Assets shall consist of all assets and property of every kind and nature -- including all cash, cash equivalents, securities, commodities, futures interests, receivables (including interest and dividends receivable), claims and rights of action, rights to register shares under applicable securities laws, and books and records -- Old Fund owns at the Effective Time (as defined in paragraph 2.1) and any deferred and prepaid expenses shown as assets on Old Fund’s books at that time; and Old Fund has no unamortized or unpaid organizational fees or expenses that have not previously been disclosed in writing to New Trust.
 
1.3           The Liabilities shall consist of all of Old Fund’s liabilities, debts, obligations, and duties existing at the Effective Time, whether known or unknown, contingent, accrued, or otherwise, excluding Reorganization Expenses (as defined in paragraph 3.3(f)) borne by PMP Manager and AmBeacon Manager pursuant to paragraph 6.  Notwithstanding the foregoing, Old Fund will endeavor to discharge all its known liabilities, debts, obligations, and duties before the Effective Time (other than those under this Agreement and certain investment contracts, including options, futures, forward contracts, and swap agreements).
 
1.4           At or before the Closing, New Fund shall redeem the Initial Shares (as defined in paragraph 5.5) for the amount at which they are issued pursuant to that paragraph.  At the Effective Time (or as soon thereafter as is reasonably practicable), Old Fund shall distribute all the New Fund Shares it receives pursuant to paragraph 1.1(a) to its shareholders of record determined at the Effective Time (each, a “Shareholder”), in proportion to their Old Fund Shares then held of record and in constructive exchange
 

 
A-2

 

therefor, and shall completely liquidate.  That distribution shall be accomplished by New Trust’s transfer agent’s opening accounts on New Fund’s shareholder records in the Shareholders’ names and transferring those New Fund Shares thereto.  Pursuant to that transfer, each Shareholder’s account shall be credited with the number of full and fractional New Fund Shares equal to the number of full and fractional Old Fund Shares that Shareholder holds at the Effective Time, by class (i.e., the account for each Shareholder that holds Class A Old Fund Shares shall be credited with the number of full and fractional Investor Class New Fund Shares due that Shareholder, and the account for each Shareholder that holds Class I Old Fund Shares shall be credited with the number of full and fractional Institutional Class New Fund Shares due that Shareholder).  The aggregate net asset value (“NAV”) of New Fund Shares to be so credited to each Shareholder’s account shall equal the aggregate NAV of the Old Fund Shares that Shareholder holds at the Effective Time.  All issued and outstanding Old Fund Shares, including any represented by certificates, shall simultaneously be canceled on Old Fund’s shareholder records.  New Trust shall not issue certificates representing the New Fund Shares issued in connection with the Reorganization.
 
1.5           Any transfer taxes payable on the issuance and transfer of New Fund Shares in a name other than that of the registered holder on Old Fund’s shareholder records of the Old Fund Shares actually or constructively exchanged therefor shall be paid by the transferee thereof, as a condition of that issuance and transfer.
 
1.6           Any reporting responsibility of Old Fund to a public authority, including the responsibility for filing regulatory reports, tax returns, and other documents with the Securities and Exchange Commission (“Commission”), any state securities commission, any federal, state, and local tax authorities, and any other relevant regulatory authority, is and shall remain its responsibility up to and including the date on which it is terminated.
 
1.7           After the Effective Time, Old Fund shall not conduct any business except in connection with its termination.  As soon as reasonably practicable after distribution of the New Fund Shares pursuant to paragraph 1.4, but in all events within six months after the Effective Time, Old Fund shall be terminated as a series of Old Trust.
 
2.           CLOSING AND EFFECTIVE TIME
 
2.1           Unless the Investment Companies agree otherwise, all acts necessary to consummate the Reorganization (“Closing”) shall be deemed to take place simultaneously as of immediately after the close of business (4:00 p.m., Eastern Time) on February 24, 2012 (“Effective Time”).  The Closing shall be held at New Trust’s offices or at such other place as to which the Investment Companies agree.
 
2.2           Old Trust shall cause the custodian of Old Fund’s assets (“Old Custodian”) (a) to make Old Fund’s portfolio securities available to New Trust (or to its custodian (“New Custodian”), if New Trust so directs), for examination, no later than five business days preceding the Effective Time and (b) to transfer and deliver the Assets at the Effective Time to the New Custodian for New Fund’s account, as follows:  (1) duly endorsed in proper form for transfer in such condition as to constitute good delivery thereof in accordance with the custom of brokers, (2) by book entry, in accordance with the Old Custodian’s customary practices and any securities depository (as defined in Rule 17f-4 under the 1940 Act) in which Old Fund’s assets are deposited, in the case of Old Fund’s portfolio securities and instruments deposited with those depositories, and (3) by wire transfer of federal funds in the case of cash.  Old Trust shall also direct the Old Custodian to deliver at the Closing an authorized officer’s certificate (a) stating that pursuant to proper instructions provided to the Old Custodian by Old Trust, the Old Custodian has delivered all of Old Fund’s portfolio securities, cash, and other Assets to the New Custodian for New Fund’s account and (b) attaching a schedule setting forth information (including adjusted basis and holding period, by lot) concerning the Assets.  The New Custodian shall certify to New Trust that such information, as reflected on New Fund’s books immediately after the Effective Time, does or will conform to that information as so certified by the Old Custodian.
 

 
A-3

 

2.3           Old Trust shall deliver, or shall direct its transfer agent to deliver, to New Trust at the Closing an authorized officer’s certificate listing the Shareholders’ names and addresses together with the number of full and fractional outstanding Old Fund Shares, by class, each such Shareholder owns, at the Effective Time, certified by Old Trust’s Secretary or Assistant Secretary or by its transfer agent, as applicable.  New Trust shall direct its transfer agent to deliver at or as soon as reasonably practicable after the Closing an authorized officer’s certificate as to the opening of accounts on New Fund’s shareholder records in the names of the listed Shareholders and a confirmation, or other evidence satisfactory to Old Trust, that the New Fund Shares to be credited to Old Fund at the Effective Time have been credited to Old Fund’s account on those records.
 
2.4           Old Trust shall deliver to New Trust and AmBeacon Manager, within five days before the Closing, an authorized officer’s certificate listing each security, by name of issuer and number of shares, that is being carried on Old Fund’s books at an estimated fair market value provided by an authorized pricing vendor for Old Fund.
 
2.5           At the Closing, each Investment Company shall deliver to the other (a) bills of sale, checks, assignments, share certificates, receipts, and/or other documents the other Investment Company or its counsel reasonably requests and (b) a certificate executed in its name by its President or a Vice President in form and substance satisfactory to the recipient, and dated the Effective Time, to the effect that the representations and warranties it made in this Agreement are true and correct at the Effective Time except as they may be affected by the transactions contemplated hereby.
 
3.           REPRESENTATIONS AND WARRANTIES
 
3.1           Old Trust, on Old Fund’s behalf, represents and warrants to New Trust, on New Fund’s behalf, as follows:
 
(a)           Old Trust (1) is a trust operating under a written instrument or declaration of trust, the beneficial interest in which is divided into transferable shares (“Business Trust”), that is duly created, validly existing, and in good standing under the laws of the Commonwealth of Massachusetts (“Massachusetts”), and its Amended and Restated Agreement and Declaration of Trust dated June 13, 2005 (“Old Trust Declaration”) is on file with the Secretary of Massachusetts, (2) is duly registered under the 1940 Act as an open-end management investment company, (3) has the power to own all its properties and assets and to carry on its business as described in its current registration statement on Form N-1A, and (4) before January 1, 1997, “claimed” classification as an association taxable as a corporation and has never elected otherwise;
 
(b)           Old Fund is a duly established and designated series of Old Trust;
 
(c)           The execution, delivery, and performance of this Agreement have been duly authorized at the date hereof by all necessary action on the part of Old Trust’s Board; and this Agreement constitutes a valid and legally binding obligation of Old Trust, with respect to Old Fund, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, fraudulent transfer, reorganization, receivership, moratorium, and other laws affecting the rights and remedies of creditors generally and general principles of equity;
 
(d)           At the Effective Time, Old Trust will have good and marketable title to the Assets for Old Fund’s benefit and full right, power, and authority to sell, assign, transfer, and deliver the Assets hereunder free of any liens or other encumbrances (except securities that are subject to “securities loans,” as referred to in section 851(b)(2), or that are restricted as to resale by their terms); and on delivery and payment for the Assets, New Trust, on New Fund’s behalf, will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including restrictions that might arise under the Securities Act of 1933, as amended (“1933 Act”), except securities that are restricted as to resale by their terms;
 

 
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(e)           Old Trust, with respect to Old Fund,  is not currently engaged in, and its execution, delivery, and performance of this Agreement and consummation of the Reorganization will not result in, (1) a conflict with or material violation of any provision of Massachusetts law, the Old Trust Declaration or Old Trust’s Amended and Restated By-Laws, or any agreement, indenture, instrument, contract, lease, or other undertaking (each, an “Undertaking”) to which Old Trust, on Old Fund’s behalf, is a party or by which it is bound or (2) the acceleration of any obligation, or the imposition of any penalty, under any Undertaking, judgment, or decree to which Old Trust, on Old Fund’s behalf, is a party or by which it is bound;
 
(f)           At or before the Effective Time, either (1) all material contracts and other commitments of Old Fund (other than this Agreement and certain investment contracts, including options, futures, forward contracts, and swap agreements) will terminate, or (2) provision for discharge and/or New Fund’s assumption of any liabilities of Old Fund thereunder will be made, without either Fund’s incurring any penalty with respect thereto and without diminishing or releasing any rights Old Trust may have had with respect to actions taken or omitted or to be taken by any other party thereto before the Closing;
 
(g)           No litigation, administrative proceeding, action, or investigation of or before any court, governmental body, or arbitrator is presently pending or, to Old Trust’s knowledge, threatened against Old Trust, with respect to Old Fund or any of its properties or assets attributable or allocable to Old Fund, that, if adversely determined, would materially and adversely affect Old Fund’s financial condition or the conduct of its business; and Old Trust, on Old Fund’s behalf, knows of no facts that might form the basis for the institution of any such litigation, proceeding, action, or investigation and is not a party to or subject to the provisions of any order, decree, judgment, or award of any court, governmental body, or arbitrator that materially and adversely affects Old Fund’s business or Old Trust’s ability to consummate the transactions contemplated hereby;
 
(h)           Old Fund’s Statement of Assets and Liabilities, Schedule of Investments, Statement of Operations, and Statement of Changes in Net Assets (each, a “Statement”) at and for the fiscal year (in the case of the last Statement, for the two fiscal years) ended November 30, 2010, have been audited by Tait Weller & Baker LLP, an independent registered public accounting firm, and are in accordance with generally accepted accounting principles consistently applied in the United States (“GAAP”); and those Statements and Old Fund’s unaudited financial statements at and for the six months ended May 31, 2011 (copies of which Old Trust has furnished to New Trust), present fairly, in all material respects, Old Fund’s financial condition at their respective dates in accordance with GAAP and the results of its operations and changes in its net assets for the periods then ended, and there are no known contingent liabilities of Old Fund required to be reflected on a balance sheet (including the notes thereto) in accordance with GAAP at either such date that are not disclosed therein;
 
(i)           Since November 30, 2010, there has not been any material adverse change in Old Fund’s financial condition, assets, liabilities, or business, other than changes occurring in the ordinary course of business, or any incurrence by Old Fund of indebtedness maturing more than one year from the date that indebtedness was incurred (except indebtedness incurred in connection with certain investment contracts, including options, futures, forward contracts, and swap agreements); for purposes of this subparagraph, a decline in NAV per Old Fund Share due to declines in market values of securities Old Fund holds, the discharge of Old Fund liabilities, or the redemption of Old Fund Shares by its shareholders shall not constitute a material adverse change;
 
(j)           All federal and other tax returns, dividend reporting forms, and other tax-related reports (collectively, “Returns”) of Old Fund required by law to have been filed by the Effective Time (including any properly and timely filed extensions of time to file) shall have been filed and are
 

 
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or will be correct in all material respects, and all federal and other taxes shown as due or required to be shown as due on those Returns shall have been paid or provision shall have been made for the payment thereof; to the best of Old Trust’s knowledge, no such Return is currently under audit and no assessment has been asserted with respect to those Returns; and Old Fund is in compliance in all material respects with all applicable Regulations pertaining to the reporting of dividends and other distributions on and redemptions of its shares and to withholding in respect thereof and is not liable for any material penalties that could be imposed thereunder;
 
(k)           Old Fund is not classified as a partnership, and instead is classified as an association that is taxable as a corporation, for federal tax purposes and either has elected the latter classification by filing Form 8832 with the Internal Revenue Service (“Service”) or is a “publicly traded partnership” (as defined in section 7704(b)) that is treated as a corporation; Old Fund is a “fund” (as defined in section 851(g)(2), eligible for treatment under section 851(g)(1)); for each taxable year of its operation (including its current taxable year), Old Fund has met (and for that year will meet) the requirements of Part I of Subchapter M of Chapter 1 of Subtitle A of the Code (“Subchapter M”) for qualification as a regulated investment company (“RIC”) and has been (and for that year will be) eligible to and has computed (and for that year will compute) its federal income tax under section 852; Old Fund has not at any time since its inception been liable for, and is not now liable for, any material income or excise tax pursuant to sections 852 or 4982; and Old Fund has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M did not apply to it;
 
(l)           There are no outstanding Class C Old Fund Shares; all issued and outstanding Old Fund Shares are, and at the Effective Time will be, duly and validly issued and outstanding, fully paid, and non-assessable by Old Trust and have been offered and sold in every state and the District of Columbia in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities laws; all issued and outstanding Old Fund Shares will, at the Effective Time, be held by the persons and in the amounts set forth on Old Fund’s shareholder records, as provided in paragraph 2.3; and Old Fund does not have outstanding any options, warrants, or other rights to subscribe for or purchase any Old Fund Shares, nor are there outstanding any securities convertible into any Old Fund Shares;
 
(m)           Old Fund incurred the Liabilities, which are associated with the Assets, in the ordinary course of its business;
 
(n)           Old Fund is not under the jurisdiction of a court in a “title 11 or similar case” (as defined in section 368(a)(3)(A));
 
(o)           Not more than 25% of the value of Old Fund’s total assets (excluding cash, cash items, and Government securities) is invested in the stock and securities of any one issuer, and not more than 50% of the value of those assets is invested in the stock and securities of five or fewer issuers;
 
(p)           Old Fund’s current prospectus and statement of additional information (1) conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and (2) at the date on which they were issued did not contain, and as supplemented by any supplement thereto dated prior to or at the Effective Time do not contain, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
 
(q)           The information to be furnished by Old Trust for use in no-action letters, applications for orders, the Registration Statement (as defined in paragraph 3.3(a)), proxy materials, and other documents filed or to be filed with any federal, state, or local regulatory authority (including the
 

 
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Financial Industry Regulatory Authority, Inc. (“FINRA”)) that may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with federal securities laws and other laws and regulations; and such information furnished by Old Trust shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, on the effective date of the Registration Statement, at the Effective Time, and at the time of the Shareholders Meeting (as defined in paragraph 4.1);
 
(r)           The Old Trust Declaration permits Old Trust to vary its shareholders’ investment; Old Trust does not have a fixed pool of assets; and each series thereof (including Old Fund) is a managed portfolio of securities, and PMP Manager has the authority to buy and sell securities for it;
 
(s)           Old Fund’s investment operations from inception to the date hereof have been in compliance in all material respects with the investment policies and investment restrictions set forth in its prospectus, except as previously disclosed in writing to New Trust; and
 
(t)           The New Fund Shares to be delivered hereunder are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms hereof.
 
3.2           New Trust, on New Fund’s behalf, represents and warrants to Old Trust, on Old Fund’s behalf, as follows:
 
(a)           New Trust (1) is a Business Trust that is duly created, validly existing, and in good standing under the laws of Massachusetts, and its Amended and Restated Declaration of Trust, as amended by Written Instrument dated March 23, 2005 (“New Trust Declaration”) is on file with the Secretary of Massachusetts, (2) is duly registered under the 1940 Act as an open-end management investment company, (3) has the power to own all its properties and assets and to carry on its business as described in its current registration statement on Form N-1A, and (4) before January 1, 1997, “claimed” classification as an association taxable as a corporation and has never elected otherwise;
 
(b)           At the Effective Time, New Fund will be a duly established and designated series of New Trust; New Fund has not commenced operations and will not do so until after the Closing; and, immediately before the Closing, New Fund will be a shell series of New Trust, without assets (except the amount paid for the Initial Shares if they have not already been redeemed by that time) or liabilities, created for the purpose of acquiring the Assets, assuming the Liabilities, and continuing Old Fund’s business;
 
(c)           The execution, delivery, and performance of this Agreement have been duly authorized at the date hereof by all necessary action on the part of New Trust’s Board; and this Agreement constitutes a valid and legally binding obligation of New Trust, with respect to New Fund, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, fraudulent transfer, reorganization, receivership, moratorium, and other laws affecting the rights and remedies of creditors generally and general principles of equity;
 
(d)           Before the Closing, there will be no (1) issued and outstanding New Fund Shares, (2) options, warrants, or other rights to subscribe for or purchase any New Fund Shares, (3) securities convertible into any New Fund Shares, or (4) any other securities issued by New Fund, except the Initial Shares;
 
(e)           No consideration other than New Fund Shares (and New Fund’s assumption of the Liabilities) will be issued in exchange for the Assets in the Reorganization;
 

 
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(f)           New Trust, with respect to New Fund, is not currently engaged in, and its execution, delivery, and performance of this Agreement and consummation of the Reorganization will not result in, (1) a conflict with or material violation of any provision of Massachusetts law, the New Trust Declaration or New Trust’s By Laws, or any Undertaking to which New Trust, on New Fund’s behalf, is a party or by which it is bound or (2) the acceleration of any obligation, or the imposition of any penalty, under any Undertaking, judgment, or decree to which New Trust, on New Fund’s behalf, is a party or by which it is bound;
 
(g)           No litigation, administrative proceeding, action, or investigation of or before any court, governmental body, or arbitrator is presently pending or, to New Trust’s knowledge, threatened against New Trust, with respect to New Fund or any of its properties or assets attributable or allocable to New Fund, that, if adversely determined, would materially and adversely affect New Fund’s financial condition or the conduct of its business; and New Trust, on New Fund’s behalf, knows of no facts that might form the basis for the institution of any such litigation, proceeding, action, or investigation and is not a party to or subject to the provisions of any order, decree, judgment, or award of any court, governmental body, or arbitrator that materially and adversely affects New Fund’s business or New Trust’s ability to consummate the transactions contemplated hereby;
 
(h)           New Fund is not (and will not be) classified as a partnership, and instead is (and will be) classified as an association that is taxable as a corporation, for federal tax purposes and either has elected (or will timely elect) the latter classification by filing Form 8832 with the Service or is (and will be) a “publicly traded partnership” (as defined in section 7704(b)) that is treated as a corporation; New Fund has not filed any income tax return and will file its first federal income tax return after the completion of its first taxable year after the Effective Time as a RIC on Form 1120-RIC; New Fund will be a “fund” (as defined in section 851(g)(2), eligible for treatment under section 851(g)(1)) and has not taken and will not take any steps inconsistent with its qualification as such or its qualification and eligibility for treatment as a RIC under sections 851 and 852; assuming that Old Fund will meet the requirements of Subchapter M for qualification as a RIC for its taxable year in which the Reorganization occurs, New Fund will meet those requirements, and will be eligible to and will compute its federal income tax under section 852, for its taxable year in which the Reorganization occurs; and New Fund intends to continue to meet all those requirements, and to be eligible to and to so compute its federal income tax, for the next taxable year;
 
(i)           The New Fund Shares to be issued and delivered to Old Fund, for the Shareholders’ accounts, pursuant to the terms hereof, (1) will at the Effective Time have been duly authorized and duly registered under the federal securities laws, and appropriate notices respecting them will have been duly filed under applicable state securities laws, and (2) when so issued and delivered, will be duly and validly issued and outstanding New Fund Shares and will be fully paid and non-assessable by New Trust;
 
(j)           There is no plan or intention for New Fund to be dissolved or merged into another business or statutory trust or a corporation or any “fund” thereof (as defined in section 851(g)(2)) following the Reorganization;
 
(k)           Assuming the truthfulness and correctness of Old Trust’s representation and warranty in paragraph 3.1(o), immediately after the Reorganization (1) not more than 25% of the value of New Fund’s total assets (excluding cash, cash items, and Government securities) will be invested in the stock and securities of any one issuer and (2) not more than 50% of the value of those assets will be invested in the stock and securities of five or fewer issuers;
 
(l)           Immediately after the Effective Time, New Fund will not be under the jurisdiction of a court in a “title 11 or similar case” (as defined in section 368(a)(3)(A));
 

 
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(m)           The information to be furnished by New Trust for use in no-action letters, applications for orders, registration statements, proxy materials, and other documents filed or to be filed with any federal, state, or local regulatory authority (including FINRA) that may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with federal securities laws and other laws and regulations; and the Registration Statement (other than written information provided by Old Trust for inclusion therein) will, on its effective date, at the Effective Time, and at the time of the Shareholders Meeting, not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and
 
(n)           The New Trust Declaration permits New Trust to vary its shareholders’ investment; New Trust does not have a fixed pool of assets; and each series thereof (including New Fund after it commences operations) is (or will be) a managed portfolio of securities, and AmBeacon Manager and each investment sub-adviser thereof have (and New Fund’s investment sub-adviser will have) the authority to buy and sell securities for it.
 
3.3           Each Investment Company, on its Fund’s behalf, represents and warrants to the other Investment Company, on its Fund’s behalf, as follows:
 
(a)              No governmental consents, approvals, authorizations, or filings are required under the 1933 Act, the Securities Exchange Act of 1934, as amended, the 1940 Act, or state securities laws, and no consents, approvals, authorizations, or orders of any court are required, for its execution or performance of this Agreement on its Fund’s behalf, except for (1) New Trust’s filing with the Commission of a registration statement on Form N-14 relating to the New Fund Shares issuable hereunder, and any supplement or amendment thereto, including therein a prospectus and proxy statement (“Registration Statement”), and (2) consents, approvals, authorizations, and filings that have been made or received or may be required after the Effective Time;
 
(b)              The fair market value of the New Fund Shares each Shareholder receives will be approximately equal to the fair market value of its Old Fund Shares it actually or constructively surrenders in exchange therefor;
 
(c)              The Shareholders will pay their own expenses (such as fees of personal investment or tax advisers for advice regarding the Reorganization), if any, incurred in connection with the Reorganization;
 
(d)              The fair market value of the Assets will equal or exceed the Liabilities to be assumed by New Fund and those to which the Assets are subject;
 
(e)              None of the compensation received by any Shareholder who or that is an employee of or service provider to Old Fund will be separate consideration for, or allocable to, any of the Old Fund Shares that Shareholder holds; none of the New Fund Shares any such Shareholder receives will be separate consideration for, or allocable to, any employment agreement, investment advisory agreement, or other service agreement; and the compensation paid to any such Shareholder will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm’s-length for similar services;
 
(f)              No expenses incurred by Old Fund or on its behalf in connection with the Reorganization will be paid or assumed by New Fund, AmBeacon Manager, PMP Manager, or any other third party unless those expenses are solely and directly related to the Reorganization (determined in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B. 187) (“Reorganization Expenses”), and no cash or property other than New Fund Shares will be transferred to Old Fund or any of its shareholders with the intention that it be used to pay any expenses (even Reorganization Expenses) thereof; and
 

 
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(g)              Immediately following consummation of the Reorganization, (1) the Shareholders will own all the New Fund Shares and will own those shares solely by reason of their ownership of the Old Fund Shares immediately before the Reorganization and (2) New Fund will hold the same assets -- except for assets used to pay the Funds’ expenses incurred in connection with the Reorganization -- and be subject to the same liabilities that Old Fund held or was subject to immediately before the Reorganization, plus any liabilities for those expenses; and those excepted assets, together with the amount of all redemptions and distributions (other than regular, normal dividends) Old Fund makes immediately preceding the Reorganization, will, in the aggregate, constitute less than 1% of its net assets.
 
4.           COVENANTS
 
4.1           Old Trust covenants to call a meeting of Old Fund’s shareholders to consider and act on this Agreement and to take all other action necessary to obtain approval of the transactions contemplated hereby (“Shareholders Meeting”).
 
4.2           Old Trust covenants that it will assist New Trust in obtaining information New Trust reasonably requests concerning the beneficial ownership of Old Fund Shares.
 
4.3           Old Trust covenants that it will turn over its books and records pertaining to Old Fund (including all books and records required to be maintained under the 1940 Act and the rules and regulations thereunder) to New Trust at the Closing.
 
4.4           Each Investment Company covenants to cooperate with the other in preparing the Registration Statement in compliance with applicable federal and state securities laws.
 
4.5           Each Investment Company covenants that it will, from time to time, as and when requested by the other, execute and deliver or cause to be executed and delivered all assignments and other instruments, and will take or cause to be taken any further action(s), the other Investment Company deems necessary or desirable in order to vest in, and confirm to, (a) New Trust, on New Fund’s behalf, title to and possession of all the Assets, and (b) Old Trust, on Old Fund’s behalf, title to and possession of the New Fund Shares to be delivered hereunder, and otherwise to carry out the intent and purpose hereof.
 
4.6           New Trust covenants to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act, and applicable state securities laws it deems appropriate to commence and continue New Fund’s operations after the Effective Time.
 
4.7           Subject to this Agreement, each Investment Company covenants to take or cause to be taken all actions, and to do or cause to be done all things, reasonably necessary, proper, or advisable to consummate and effectuate the transactions contemplated hereby.
 
5.           CONDITIONS PRECEDENT
 
Each Investment Company’s obligations hereunder shall be subject to (a) performance by the other Investment Company of all its obligations to be performed hereunder at or before the Closing, (b) all representations and warranties of the other Investment Company contained herein being true and correct in all material respects at the date hereof and, except as they may be affected by the transactions contemplated hereby, at the Effective Time, with the same force and effect as if made at that time, and (c) the following further conditions that, at or before that time:
 
5.1           This Agreement and the transactions contemplated hereby shall have been duly adopted and approved by both Boards and by Old Fund’s shareholders at the Shareholders Meeting;
 

 
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5.2           All necessary filings shall have been made with the Commission and state securities authorities, and no order or directive shall have been received that any other or further action is required to permit the Investment Companies to carry out the transactions contemplated hereby.  The Registration Statement shall have become effective under the 1933 Act, no stop orders suspending the effectiveness thereof shall have been issued, and, to each Investment Company’s best knowledge, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened, or contemplated under the 1933 Act or the 1940 Act.  The Commission shall not have issued an unfavorable report with respect to the Reorganization under section 25(b) of the 1940 Act nor instituted any proceedings seeking to enjoin consummation of the transactions contemplated hereby under section 25(c) of the 1940 Act.  All consents, orders, and permits of federal, state, and local regulatory authorities (including the Commission and state securities authorities) either Investment Company deems necessary to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain same would not involve a risk of a material adverse effect on either Fund’s assets or properties;
 
5.3           At the Effective Time, no action, suit, or other proceeding shall be pending (or, to either Investment Company’s best knowledge, threatened to be commenced) before any court, governmental agency, or arbitrator in which it is sought to enjoin the performance of, restrain, prohibit, affect the enforceability of, or obtain damages or other relief in connection with, the transactions contemplated hereby;
 
5.4           The Investment Companies shall have received an opinion of K&L Gates LLP (“Counsel”) as to the federal income tax consequences mentioned below (“Tax Opinion”).  In rendering the Tax Opinion, Counsel may rely as to factual matters, exclusively and without independent verification, on the representations and warranties made in this Agreement, which Counsel may treat as representations and warranties made to it (that, notwithstanding paragraph 7, shall survive the Closing), and in separate letters, if Counsel requests, addressed to it and any certificates delivered pursuant to paragraph 2.5(b).  The Tax Opinion shall be substantially to the effect that -- based on the facts and assumptions stated therein and conditioned on those representations and warranties’ being true and complete at the Effective Time and consummation of the Reorganization in accordance with this Agreement (without the waiver or modification of any terms or conditions hereof and without taking into account any amendment hereof that Counsel has not approved) -- for federal income tax purposes:
 
(a)           New Fund’s acquisition of the Assets in exchange solely for New Fund Shares and its assumption of the Liabilities, followed by Old Fund’s distribution of those shares pro rata to the Shareholders actually or constructively in exchange for their Old Fund Shares, will qualify as a “reorganization” (as defined in section 368(a)(1)(F)), and each Fund will be “a party to a reorganization” (within the meaning of section 368(b));
 
(b)           Old Fund will recognize no gain or loss on the transfer of the Assets to New Fund in exchange solely for New Fund Shares and New Fund’s assumption of the Liabilities or on the subsequent distribution of those shares to the Shareholders in exchange for their Old Fund Shares;
 
(c)           New Fund will recognize no gain or loss on its receipt of the Assets in exchange solely for New Fund Shares and its assumption of the Liabilities;
 
(d)           New Fund’s basis in each Asset will be the same as Old Fund’s basis therein immediately before the Reorganization, and New Fund’s holding period for each Asset will include Old Fund’s holding period therefor (except where New Fund’s investment activities have the effect of reducing or eliminating an Asset’s holding period);
 
(e)           A Shareholder will recognize no gain or loss on the exchange of all its Old Fund Shares solely for New Fund Shares pursuant to the Reorganization;
 
(f)           A Shareholder’s aggregate basis in the New Fund Shares it receives in the Reorganization will be the same as the aggregate basis in its Old Fund Shares it actually or constructively
 

 
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surrenders in exchange for those New Fund Shares, and its holding period for those New Fund Shares will include, in each instance, its holding period for those Old Fund Shares, provided the Shareholder holds them as capital assets at the Effective Time; and
 
(g)           For purposes of section 381, New Fund will be treated just as Old Fund would have been treated if there had been no Reorganization.  Accordingly, the Reorganization will not result in the termination of Old Fund’s taxable year, Old Fund’s tax attributes enumerated in section 381(c) will be taken into account by New Fund as if there had been no Reorganization, and the part of Old Fund’s taxable year before the Reorganization will be included in New Fund’s taxable year after the Reorganization.
 
Notwithstanding subparagraphs (b) and (d), the Tax Opinion may state that no opinion is expressed as to the effect of the Reorganization on the Funds or any Shareholder with respect to any Asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting;
 
5.5           Before the Closing, New Trust’s Board shall have authorized the issuance of, and New Trust shall have issued, one Investor Class New Fund Share and one Institutional Class New Fund Share (“Initial Shares”) to AmBeacon Manager or an affiliate thereof, in consideration of the payment of $10.00 each (or other amount that Board determines), to vote on the investment management and sub-advisory contracts, distribution and service plan, and other agreements and plans referred to in paragraph 5.6 and to take whatever action it may be required to take as New Fund’s sole shareholder;
 
5.6           New Trust, on New Fund’s behalf, shall have entered into, or adopted, as appropriate, an investment management contract, a sub-advisory contract, a distribution and service plan pursuant to Rule 12b-1 under the 1940 Act, and other agreements and plans necessary for New Fund’s operation as a series of an open-end management investment company.  Each such contract, plan, and agreement shall have been approved by New Trust’s Board and, to the extent required by law (as interpreted by Commission staff positions), by its trustees who are Non-Interested Persons thereof and by AmBeacon Manager or its affiliate as New Fund’s sole shareholder; and
 
5.7           At any time before the Closing, either Investment Company may waive any of the foregoing conditions (except those set forth in paragraphs 5.1 and 5.4) if, in the judgment of its Board, such waiver will not have a material adverse effect on its Fund’s shareholders’ interests.
 
6.           EXPENSES
 
Subject to complying with the representation and warranty contained in paragraph 3.3(f), AmBeacon Manager and PMP Manager shall each bear 50% of the first $100,000 of Reorganization Expenses and AmBeacon Manager shall bear Reorganization Expenses in excess of $100,000.  The Reorganization Expenses include (1) costs associated with obtaining any necessary order of exemption from the 1940 Act, preparing and filing Old Fund’s prospectus supplements and the Registration Statement, and printing and distributing New Fund’s prospectus and Old Fund’s proxy materials, (2) legal and accounting fees, (3) transfer agent and custodian conversion costs, (4) transfer taxes for foreign securities, (5) proxy solicitation costs, (6) expenses of holding the Shareholders Meeting (including any adjournments thereof), and (7) legal expenses relating to preparing, reviewing, or responding to due diligence requests but exclude brokerage, PMP Manager’s and AmBeacon Manager’s travel expenses, and similar expenses in connection with the Reorganization.  Notwithstanding the foregoing, expenses shall be paid by the Fund directly incurring them if and to the extent that the payment thereof by another person would result in that Fund’s disqualification as a RIC or would prevent the Reorganization from qualifying as a tax-free reorganization.
 

 
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7.           ENTIRE AGREEMENT; NO SURVIVAL
 
Neither Investment Company has made any representation, warranty, or covenant not set forth herein, and this Agreement constitutes the entire agreement between the Investment Companies.  The representations, warranties, and covenants contained herein or in any document delivered pursuant hereto or in connection herewith shall not survive the Closing.
 
8.           TERMINATION
 
This Agreement may be terminated at any time at or before the Closing:
 
8.1           By either Investment Company (a) in the event of the other Investment Company’s material breach of any representation, warranty, or covenant contained herein to be performed at or before the Closing, (b) if a condition to its obligations has not been met and it reasonably appears that that condition will not or cannot be met, (c) if a governmental body issues an order, decree, or ruling having the effect of permanently enjoining, restraining, or otherwise prohibiting consummation of the Reorganization, or (d) if the Closing has not occurred on or before August 31, 2012, or such other date as to which the Investment Companies agree; or
 
8.2           By the Investment Companies’ mutual agreement.
 
In the event of termination under paragraphs 8.1(c) or (d) or 8.2, neither Investment Company (nor its trustees, officers, or shareholders) shall have any liability to the other Investment Company.
 
9.           AMENDMENTS
 
The Investment Companies may amend, modify, or supplement this Agreement at any time in any manner they mutually agree on in writing, notwithstanding Old Fund’s shareholders’ approval thereof; provided that, following that approval no such amendment, modification, or supplement shall have a material adverse effect on the Shareholders’ interests.  No subsequent amendments, modifications, or supplements to this Agreement will alter the obligations of the parties with respect to paragraph 6 without their express agreement thereto.
 
10.           SEVERABILITY
 
Any term or provision hereof that is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of that invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions hereof or affecting the validity or enforceability of any of the terms and provisions hereof in any other jurisdiction.
 
11.           MISCELLANEOUS
 
11.1           This Agreement shall be governed by and construed in accordance with the internal laws of Massachusetts, without giving effect to principles of conflicts of laws; provided that, in the case of any conflict between those laws and the federal securities laws, the latter shall govern.
 
11.2           Nothing expressed or implied herein is intended or shall be construed to confer on or give any person, firm, trust, or corporation other than New Trust, on New Fund’s behalf, or Old Trust, on Old Fund’s behalf, and their respective successors and assigns any rights or remedies under or by reason of this Agreement.
 
11.3           Notice is hereby given that this instrument is executed and delivered on behalf of each Investment Company’s trustees solely in their capacities as trustees, and not individually, and that each Investment Company’s obligations under this instrument are not binding on or enforceable against any of its trustees, officers, shareholders, or series other than its Fund but are only binding on and enforceable against its property attributable to and held for the benefit of its Fund (“Fund’s Property”) and not its property attributable to and held for the benefit of any other series thereof.  Each Investment Company, in asserting any rights or claims under this Agreement on its or its Fund’s behalf, shall look only to the other Fund’s
 

 
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Property in settlement of those rights or claims and not to the property of any other series of the other Investment Company or to those trustees, officers, or shareholders.
 
11.4           This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been executed by each Investment Company and delivered to the other Investment Company.  The headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation hereof.
 

 
A-14

 

IN WITNESS WHEREOF, each party has caused this Agreement to be executed and delivered by its duly authorized officer as of the day and year first written above.
 
 
AMERICAN BEACON FUNDS, on behalf of each
New Fund listed on Schedule A
 
By:                                                                
 
Gene L. Needles, Jr.
 
President
 
 
PROFESSIONALLY MANAGED PORTFOLIOS, on
behalf of each Old Fund listed on Schedule A
 
By:                                                                
 
Eric W. Falkeis
 
President
 
 
Solely for purposes of paragraph 6,
STEPHENS INVESTMENT MANAGEMENT GROUP, LLC
 
By:                                                                
 
J. Warren Simpson
 
President and Chief Executive Officer
 
 
AMERICAN BEACON ADVISORS, INC.
 
By:                                                                
 
Gene L. Needles, Jr.
 
President and Chief Executive Officer
 

 
A-15

 

SCHEDULE A
 

 

 
Old Funds
To be
Reorganized
into
New Funds
Stephens Small Cap Growth Fund
 
è
American Beacon Stephens Small Cap Growth Fund
Stephens Mid Cap Growth Fund
 
è
American Beacon Stephens Mid-Cap Growth Fund

 

 
 


 
A-1

 


 
APPENDIX B
 
 

 
 
OWNERSHIP OF SHARES OF THE STEPHENS FUNDS
 
1.           Stephens Small Cap Growth Fund

As of the Record Date, the Stephens Small Cap Growth Fund’s shareholders of record (to the Trust’s knowledge) who owned 5% or more of each class of the Stephens Small Cap Growth Fund shares are set forth below:

 
 
 
 
 
Name and Address
Class
No. of Shares
Owned
% of Shares
Charles Schwab & Co., Inc.
Special Custody Acct FBO Customers
Attn Mutual Fund Dept
101 Montgomery St
San Francisco, CA 94104-4151
 
 
Class A
 
 
1,397,429
 
39.10%
 
Charles Schwab & Co., Inc.
Special Custody Acct FBO Customers
Attn Mutual Fund Dept
101 Montgomery St
San Francisco, CA 94104-4151
 
 
Class I
 
622,684
 
15.66%
FFB Registration Reinvest
5100 N Classen Blvd Ste 620
Oklahoma City, OK 73118
 
 
Class I
 
437,787
 
11.01%
JP Morgan Chase Bank TR
HB Fuller Company 401K and Retirement Plan
11500 Outlook Street
Leawood, KS 66211
 
 
Class I
 
895,456
 
22.52%
Merrill Lynch Pierce Fenner & Smith FBO Customers
4800 Deer Lake Drive E Fl 2
Jacksonville, FL 32246
 
 
Class I
 
489,081
 
12.30%
NFS LLC FEBO Various Customers
200 Liberty Street
New York, NY 10281
 
Class I
 
1,139,201
 
28.65%

As of the Record Date, no shareholders may be deemed to “control” the Stephens Small Cap Growth Fund.  “Control” for this purpose is the beneficial ownership of more than 25% of the Stephens Small Cap Growth Fund’s voting securities.

 
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As of the Record Date, the Officers and Trustees of the Trust, as a group, owned of record and beneficially less than 1.00% of the outstanding voting securities of the Stephens Small Cap Growth Fund.

2.           Stephens Mid Cap Growth Fund

As of the Record Date, the Stephens Mid Cap Growth Fund’s shareholders of record (to the Trust’s knowledge) who owned 5% or more of each class of the Stephens Mid Cap Growth Fund shares are set forth below:

 
 
 
 
 
Name and Address
Class
No. of Shares
Owned
% of Shares
Charles Schwab & Co., Inc.
Special Custody Acct FBO Customers
Attn Mutual Fund Dept
101 Montgomery St
San Francisco, CA 94104-4151
 
 
Class A
 
 
143,983
 
8.93%
 
NFS LLC FEBO Various Customers
200 Liberty Street
New York, NY 10281
 
 
Class A
 
271,197
 
16.82%
Pershing LLC FBO Various Customers
1 Pershing Plz
Jersey City, NJ 07303
 
 
Class A
 
166,395
 
10.32%
Stephens Inc FBO Various Customers
111 Center Street
Little Rock, AR 72201
 
 
Class A
 
734,103
 
45.53%
NFS LLC FEBO Various Customers
200 Liberty Street
New York, NY 10281
 
 
Class I
 
466,259
 
48.60%
Pershing LLC FBO Various Customers
1 Pershing Plz
Jersey City, NJ 07303
 
 
Class I
 
403,515
 
42.06%
Stephens Inc FBO Various Customers
111 Center Street
Little Rock, AR 72201
 
Class I
 
52,766
 
5.50%

As of the Record Date, no shareholders may be deemed to “control” the Stephens Mid Cap Growth Fund.  “Control” for this purpose is the beneficial ownership of more than 25% of the Stephens Mid Cap Growth Fund’s voting securities.

As of the Record Date, the Officers and Trustees of the Trust, as a group, owned of record and beneficially less than 1.00% of the outstanding voting securities of the Stephens Mid Cap Growth Fund.
 


 
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APPENDIX C
 
VALUATION, PURCHASE, REDEMPTION AND TAX INFORMATION FOR THE AB FUNDS
 
Valuation of AB Fund Shares
 
           The price of each AB Fund’s shares is based on its net asset value (“NAV”) per share.  Each AB Fund’s NAV is computed by adding total assets, subtracting all of the AB Fund’s liabilities, and dividing the result by the total number of shares outstanding.  Equity securities are valued based on market value.  Debt securities (other than short-term securities) usually are valued on the basis of prices provided by a pricing service.  In some cases, the price of debt securities is determined using quotes obtained from brokers.
 
Securities may be valued at fair value, as determined in good faith and pursuant to procedures approved by the Board of Trustees, under certain limited circumstances.  For example, fair value pricing will be used when market quotations are not readily available or reliable, as determined by the Manager, such as when (i) trading for a security is restricted or stopped; (ii) a security’s trading market is closed (other than customary closings); or (iii) a security has been de-listed from a national exchange.  A security with limited market liquidity may require fair value pricing if the Manager determines that the available price does not reflect the security’s true market value.  In addition, if a significant event that the Manager determines to affect the value of one or more securities held by an AB Fund occurs after the close of a related exchange but before the determination of the AB Fund’s NAV, fair value pricing may be used on the affected security or securities.  The AB Funds may fair value securities as a result of significant events occurring after the close of the foreign markets in which the AB Funds invest.  Securities of small capitalization companies are also more likely to require a fair value determination because they are more thinly traded and less liquid than the securities of larger capitalization companies.
 
Attempts to determine the fair value of securities introduce an element of subjectivity to the pricing of securities.  As a result, the price of a security determined through fair valuation techniques may differ from the price quoted or published by other sources and may not accurately reflect the market value of the security when trading resumes.  If a reliable market quotation becomes available for a security formerly valued through fair valuation techniques, the Manager compares the new market quotation to the fair value price to evaluate the effectiveness of the AB Funds’ fair valuation procedures.  If any significant discrepancies are found, the Manager may adjust the AB Funds’ fair valuation procedures.
 
The NAV of each class of an AB Fund’s shares is determined based on a pro rata allocation of the AB Fund’s investment income, expenses and total capital gains and losses.  Each AB Fund’s NAV per share is determined as of the close of the New York Stock Exchange (“Exchange”), generally 4:00 p.m. Eastern Time, on each day on which it is open for business.
 
Policy on Prohibition of Foreign Shareholders
 
The AB Funds require that all shareholders be U.S. persons with a valid U.S. taxpayer identification number to open an account with the AB Funds.
 
Portfolio Holdings
 
A description of the AB Funds’ policies and procedures regarding the disclosure of portfolio holdings is available in the Statement of Additional Information to this Proxy Statement, which is incorporated by reference into this Proxy Statement.
 

 
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Redemptions In Kind
 
Although each AB Fund intends to redeem shares in cash, each reserves the right to pay the redemption price in whole or in part by a distribution of securities or other assets. However, shareholders always will be entitled to redeem shares for cash up to the lesser of $250,000 or 1% of the applicable AB Fund’s net asset value during any 90-day period. Redemption in kind is not as liquid as a cash redemption. In addition, to the extent an AB Fund redeems its shares in this manner; the shareholder assumes the risk of a subsequent change in the market value of those securities, the cost of liquidating the securities and the possibility of a lack of a liquid market for those securities.
 
Frequent Trading and Market Timing
 
Frequent trading by AB Fund shareholders poses risks to other shareholders in that AB Fund, including (i) the dilution of an AB Fund’s NAV, (ii) an increase in an AB Fund’s expenses, and (iii) interference with the portfolio manager’s ability to execute efficient investment strategies.  Frequent, short-term trading of AB Fund shares in an attempt to profit from day-to-day fluctuations in the AB Funds’ NAV is known as market timing.
 
The AB Funds’ Board of Trustees has adopted policies and procedures intended to discourage frequent trading and market timing.  Shareholders may transact one “round trip” in an AB Fund in any rolling 90-day period.  A “round trip” is defined as two transactions, each in an opposite direction. A round trip may involve (i) a purchase or exchange into an AB Fund followed by a redemption or exchange out of the same AB Fund or (ii) a redemption or exchange out of an AB Fund followed by a purchase or exchange into the same AB Fund.  If the Manager detects that a shareholder has exceeded one round trip in an AB Fund in any rolling 90-day period, the Manager, without prior notice to the shareholder, will prohibit the shareholder from making further purchases of that AB Fund.  In general, the AB Funds reserve the right to reject any purchase order, terminate the exchange privilege, or liquidate the account of any shareholder that the Manager determines has engaged in frequent trading or market timing, regardless of whether the shareholder’s activity violates any policy stated in this prospectus.
 
The round-trip limit does not apply to the following transaction types:
 
·
shares acquired through the reinvestment of dividends and distributions;
·
systematic purchases and redemptions;
·
shares redeemed to return excess IRA contributions; or
·
certain transactions made within a retirement or employee benefit plan, such as payroll contributions, minimum required distributions, loans, and hardship withdrawals, or other transactions that are initiated by a party other than the plan participant.
   
Financial intermediaries that offer AB Fund shares, such as broker-dealers, third party administrators of retirement plans, and trust companies, will be asked to enforce the AB Funds’ policies to discourage frequent trading and market timing by investors.  However, certain intermediaries that offer AB Fund shares have informed the AB Funds that they are currently unable to enforce the AB Funds’ policies on an automated basis.  In those instances, the Manager will monitor trading activity of the intermediary in an attempt to detect patterns of activity that indicate frequent trading or market timing by underlying investors.  In some cases, intermediaries that offer AB Fund shares have their own policies to deter frequent trading and market timing that differ from the AB Funds’ policies.  An AB Fund may defer to an intermediary’s policies.  For more information, please contact the financial intermediary through which you invest in the AB Funds.
 
The Manager monitors trading activity in the AB Funds to attempt to identify shareholders engaged in frequent trading or market timing.  The Manager may exclude transactions below a certain
 

 
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dollar amount from monitoring and may change that dollar amount from time to time.  The ability of the Manager to detect frequent trading and market timing activity by investors who own shares through an intermediary is dependent upon the intermediary’s provision of information necessary to identify transactions by the underlying investors.  The AB Funds have entered agreements with the intermediaries that service the AB Funds’ investors, pursuant to which the intermediaries agree to provide information on investor transactions to the AB Funds and to act on the AB Funds’ instructions to restrict transactions by investors who the Manager has identified as having violated the AB Funds’ policies and procedures to deter frequent trading and market timing.
 
Wrap programs offered by certain intermediaries may be designated “Qualified Wrap Programs” by the AB Funds based on specific criteria established by the AB Funds and a certification by the intermediary that the criteria have been met.  A Qualified Wrap Program is: (i) a wrap program whose sponsoring intermediary certifies that it has investment discretion over $50 million or more in client assets invested in mutual funds at the time of the certification, (ii) a wrap program whose sponsoring intermediary certifies that it directs transactions in accounts participating in the wrap program(s) in concert with changes in a model portfolio; (iii) managed by an intermediary that agrees to provide the Manager a description of the wrap program(s) that the intermediary seeks to qualify; and (iv) managed by an intermediary that agrees to provide the Manager sufficient information to identify individual accounts in the intermediary’s wrap program(s).  For purposes of applying the round-trip limit, transactions initiated by clients invested in a Qualified Wrap Program will not be matched to transactions initiated by the intermediary sponsoring the Qualified Wrap Program.  For example, a client’s purchase of an AB Fund followed within 90 days by the intermediary’s redemption of the same AB Fund would not be considered a round trip.  However, transactions initiated by a Qualified Wrap Program client are subject to the round-trip limit and will be matched to determine if the client has exceeded the round-trip limit.  In addition, the Manager will monitor transactions initiated by Qualified Wrap Program intermediaries to determine whether any intermediary has engaged in frequent trading or market timing.  If the Manager determines that an intermediary has engaged in activity that is harmful to an AB Fund, the Manager will revoke the intermediary’s Qualified Wrap Program status. Upon termination of status as a Qualified Wrap Program, all account transactions will be matched for purposes of testing compliance with the AB Funds’ frequent trading and market timing policies, including any applicable redemption fees.
 
The AB Funds reserve the right to modify the frequent trading and market timing policies and procedures and grant or eliminate waivers to such policies and procedures at any time without advance notice to shareholders. There can be no assurance that the AB Funds’ policies and procedures to deter frequent trading and market timing will have the intended effect nor that the Manager will be able to detect frequent trading and market timing.
 
Rights of Accumulation Program
 
Reduced Sales Charges

Under a “Rights of Accumulation Program,” you may be eligible to buy A Class shares of American Beacon Funds at the reduced sales charge rates that would apply to a larger purchase. The AB Funds reserve the right to modify or to cease offering these programs at any time.

This information is available, free of charge, on the AB Funds’ website. Please visit http://www.americanbeaconfunds.com (click on the link title “Sales Charge Information”).  You may also call (800) 658-5811 or consult with your financial advisor.

 
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Rights of Accumulation Program

Under the Rights of Accumulation Program, you may qualify for a reduced sales charge by aggregating all of your investments held in certain accounts (“Qualified Accounts”). The following Qualified Accounts that are held in A Class shares of any American Beacon Funds mutual fund sold with a front-end sales charge or are held in Investor Class shares of the AB Funds that were received by shareholders of Class A shares of the Stephens Funds pursuant to the reorganization of the Stephens Funds into the corresponding AB Fund, may be grouped together to qualify for the reduced sales charge under the Rights of Accumulation Program:

 
·
Accounts owned by you, your spouse or your minor children under the age of 21, including trust or other fiduciary accounts in which you, your spouse or your minor children are the beneficiary;
     
 
·
Uniform transfer or gift to minor accounts (“UTMA/UGTMA”);
     
 
·
Individual retirement accounts (“IRAs”), including traditional, Roth, SEP and SIMPLE IRAs; and
     
 
·
Coverdell Education Savings Accounts or qualified 529 plans.

A fiduciary can apply a right of accumulation to all shares purchased for a trust, estate or other fiduciary account that has multiple accounts.

You must notify your financial intermediary or the American Beacon Fund’s transfer agent in the case of shares held directly with the American Beacon Fund, at the time of purchase that a purchase qualifies for a reduced sales charge under the Rights of Accumulation Program.  In addition, you must provide either a list of account numbers or copies of account statements verifying your qualification. You may combine the historical cost or current NAV, determined as of the last close of the New York Stock Exchange (whichever is higher) of your existing A Class shares of any American Beacon Funds mutual fund sold with a front-end sales charge and your existing Investor Class shares of the AB Funds that were received by Class A shareholders of the Stephens Funds pursuant to the reorganization of the Stephens Funds into the corresponding AB Fund, with the amount of your current purchase in order to take advantage of the reduced sales charge. Historical cost is the price you actually paid for the shares you own, plus your reinvested dividends and capital gain distributions. If you are using historical cost to qualify for a reduced sales charge, you should retain any records to substantiate your historical costs since the Fund, its transfer agent or your financial intermediary may not maintain this information.

If your shares are held through financial intermediaries you may combine the current NAV of your existing A Class shares of any American Beacon Funds mutual fund sold with a front-end sales charge and your existing Investor Class shares of the AB Funds that were received by Class A shareholders of the Stephens Funds pursuant to the reorganization of the Stephens Funds into the corresponding AB Fund, with the amount of your current purchase in order to take advantage of the reduced sales charge. You or your financial intermediary must notify the American Beacon Fund’s transfer agent at the time of purchase that a purchase qualifies for a reduced sales charge under the Rights of Accumulation Program and must provide copies of account statements dated within three months of your current purchase verifying your qualification.

Upon receipt of the above referenced supporting documentation, the financial intermediary or the American Beacon Fund’s transfer agent will calculate the combined value of all of your Qualified Accounts to determine if the current purchase is eligible for a reduced sales charge. Purchases made for nominee or street name accounts (securities held in the name of a dealer or another nominee such as a bank trust department instead of the customer) may not be aggregated with purchases for other accounts

 
C-4

 

and may not be aggregated with other nominee or street name accounts unless otherwise qualified as described above.

Purchase and Redemption of AB Fund Shares
 
Eligibility
 
The Investor Class and Institutional Class shares are available to all investors who meet the minimum initial investment.  American Beacon Funds do not accept accounts registered to foreign individuals or entities including foreign correspondence accounts. Investor Class shares are available to retail investors who invest directly through intermediary organizations, such as broker-dealers or other financial intermediaries, or through employee directed benefit plans. Investor Class shares are available for Traditional and Roth IRA accounts investing directly through American Beacon.
 
Our investors include:
 
 
Ø
agents or fiduciaries acting on behalf of their clients (such as employee benefit plans, personal trusts and other accounts for which a trust company or financial advisor acts as agent or fiduciary);
     
 
Ø
endowment funds and charitable foundations;
     
 
Ø
employee welfare plans that are tax-exempt under Section 501(c)(9) of the Internal Revenue Code of 1986, as amended (“Code”);
     
 
Ø
qualified pension and profit sharing plans;
 
Ø
cash and deferred arrangements under Section 401(k) of the Code;
     
 
Ø
corporations; and
     
 
Ø
other investors who make an initial investment of at least the minimum investment amounts.
     
Subject to your eligibility, you may invest in the AB Funds directly through us or through intermediary organizations, such as broker-dealers, insurance companies, plan sponsors, third party administrators and retirement accounts.
 
If you invest directly with the AB Funds, the fees and policies with respect to the AB Funds’ shares that are outlined in this prospectus are set by the AB Funds.
 
If you invest through a financial intermediary, most of the information you will need for managing your investment will come from your financial intermediary.  This includes information on how to buy, sell and exchange shares of the AB Funds. If you establish an account through a financial intermediary, the investment minimums described in this section may not apply.  Investors investing in the AB Funds through a financial intermediary should consult with their financial intermediary to ensure they obtain any proper “breakpoint” discount and regarding the differences between available share classes.   Your broker-dealer or financial intermediary also may charge fees that are in addition to those described in this prospectus. Please contact your intermediary for information regarding investment minimums, how to purchase and redeem shares and applicable fees.
 
Minimum Initial Investment
 
Investor Class – $2,500
 

 
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Institutional Class – $250,000
 
The Manager may allow a reasonable period of time after opening an account for an Institutional Class investor to meet the initial investment requirement. In addition, for investors such as trust companies and financial advisors who make investments for a group of clients, the minimum initial investment can be met through an aggregated purchase order for more than one client.
 
Opening an Account
 
You may open an account through your broker-dealer or other financial intermediary. Please contact your financial intermediary for more information on how to open an account. Shares you purchase through your broker-dealer will normally be held in your account with that firm.
 
You may also open an account directly through us. A completed, signed application is required. You may download an account application from the AB Funds’ web site at www.americanbeaconfunds.com under “Open An Account”. You also may obtain an application form by calling:
 
1-800-658-5811
or, for Institutional shareholders:
 
1-800-967-9009

 
Complete the application, sign it and send it
 
Regular Mail to:
American Beacon Funds
P.O. Box 219643
Kansas City, MO 64121-9643
(or Institutional Class shareholders may)
 
Fax to:
(816) 374-7408
 
For Overnight Delivery
American Beacon Funds
c/o BFDS
330 West 9th Street
Kansas City, MO 64105
 
 

 
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. When you open an account with the AB Funds or your financial institution, you will be asked for information that will allow the AB Funds or your financial institution to identify you. Non-public corporations and other entities may be required to provide articles of incorporation, trust or partnership agreements, tax ID numbers, Social Security numbers for persons authorized to provide instructions on the account or other documentation. The AB Funds and your financial institution are
 

 
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required by law to reject your new account application if the required identifying information is not provided.
 
Purchase Policies
 
Shares of the AB Funds are offered and purchase orders are typically accepted until 4:00 p.m. Eastern Time or the close of the New York Stock Exchange (“NYSE”) (whichever comes first) on each day on which the NYSE is open for business. If a purchase order is received by an AB Fund in good order prior to the AB Fund’s deadline, the purchase price will be the net asset value (“NAV”) per share next determined on that day, plus any applicable sales charges. If a purchase order is received in good order after the applicable deadline, the purchase price will be the NAV per share of the following day that the AB Fund is open for business plus any applicable sales charge.
 
The AB Funds have authorized certain third party financial intermediaries, such as broker-dealers, insurance companies, third party administrators and trust companies, to receive purchase and redemption orders on behalf of the AB Funds and to designate other intermediaries to receive purchase and redemption orders on behalf of the AB Funds. An AB Fund is deemed to have received such orders when they are received by the financial intermediaries or their designees. Thus, an order to purchase or sell AB Fund shares will be priced at the AB Fund’s next determined NAV after receipt by the financial intermediary or its designee. You should contact your broker-dealer or other financial intermediary to find out by what time your purchase order must be received so that it can be processed the same day. It is the responsibility of your broker-dealer or financial intermediary to transmit orders that will be received by the AB Funds in proper form and in a timely manner.
 
Each AB Fund has the right to reject any purchase order or cease offering shares at any time. Checks to purchase shares are accepted subject to collection at full face value in U.S. funds and must be drawn in U.S. dollars on a U.S. bank. The AB Funds will not accept “starter” checks, credit card checks, money orders, cashier’s checks, official checks, or third party checks.
 
Please refer to the section titled “Frequent Trading and Market Timing” for information on the AB Funds’ policies regarding frequent purchases, redemptions, and exchanges.
 
Redemption Policies
 
If you purchased shares of the AB Funds through your financial intermediary, please contact your broker-dealer or other financial intermediary to sell shares of an AB Fund.
 
If you purchased your shares directly from the AB Funds, your shares may be redeemed by telephone by calling 1-800-658-5811, via the AB Funds’ website, or by mail on any day that the AB Funds are open for business.
 
The redemption price will be the NAV next determined after a redemption request is received in good order, minus any applicable CDSC and/or redemption fees. In order to receive the redemption price calculated on a particular business day, redemption requests must be received in good order by 4:00 p.m. Eastern Time or by the close of the NYSE (whichever comes first). You should contact your broker-dealer or other financial intermediary to find out by what time your order must be received so that it can be processed the same day.
 
Wire proceeds from redemption requests received in good order by 4:00 p.m. Eastern Time or by the close of the Exchange (whichever comes first) generally are transmitted to shareholders on the next day the AB Funds are open for business.  In any event, proceeds from a redemption request will typically be transmitted to a shareholder by no later than seven days after the receipt of a redemption request in good
 

 
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order.  Delivery of proceeds from shares purchased by check or pre-authorized automatic investment may be delayed until the funds have cleared, which may take up to ten days.
 
The AB Funds reserve the right to suspend redemptions or postpone the date of payment for more than seven days (i) when the Exchange is closed (other than for customary weekend and holiday closings); (ii) when trading on the Exchange is restricted; (iii) when the SEC determines that an emergency exists so that disposal of an AB Fund’s investments or determination of its NAV is not reasonably practicable; or (iv) by order of the SEC for protection of the AB Funds’ shareholders.
 
Although the AB Funds intend to redeem shares in cash, each AB Fund reserves the right to pay the redemption price in whole or in part by a distribution of securities or other assets held by the AB Fund.  To the extent that an AB Fund redeems its shares in this manner, the shareholder assumes the risk of a subsequent change in the market value of those securities, the cost of liquidating the securities and the possibility of a lack of a liquid market for those securities.
 
Please refer to the section titled “Frequent Trading and Market Timing” for information on the AB Funds’ policies regarding frequent purchases, redemptions, and exchanges.
 
Exchange Policies
 
If you purchased shares of the AB Funds through your financial intermediary, please contact your broker-dealer or other financial intermediary to determine if you may take advantage of the exchange policies described in this section and for its policies to effect an exchange.
 
If you purchased shares of the AB Funds directly through us, your shares may be exchanged by calling 1-800-658-5811 to speak to a representative, through our website, www.americanbeaconfunds.com or use the Automated Voice Response System for Investor Class shares.
 
Shares of any class of an AB Fund may be exchanged for shares of the same class of another American Beacon Fund under certain limited circumstances.  Shares of any class of an AB Fund may be exchanged for shares of another class of the same AB Fund under certain limited circumstances.  Since an exchange involves a concurrent purchase and redemption, please review the sections titled “Purchase Policies” and “Redemption Policies” for additional limitations that apply to purchases and redemptions. Shares otherwise subject to a CDSC will not be charged a CDSC in an exchange. However, when you redeem the shares acquired through the exchange, the shares you redeem may be subject to a CDSC, depending on when you originally purchased the exchanged shares. For purposes of computing the CDSC, the length of time you owned your shares will be measured from the date of original purchase and will not be affected by any exchange.
 
Before exchanging shares, shareholders should consider how the exchange may affect any CDSC that might be imposed on the subsequent redemption of remaining shares.
 
If shares were purchased by check, to exchange out of one AB Fund and into another, a shareholder must have owned shares of the redeeming AB Fund for at least ten days.
 
The eligibility and minimum investment requirement must be met for the class into which the shareholder is exchanging.  AB Fund shares may be acquired through exchange only in states in which they can be legally sold.  The AB Funds reserve the right to charge a fee and to modify or terminate the exchange privilege at any time.  Each AB Fund reserves the right to refuse exchange purchases if, in the judgment of an AB Fund, the transaction would adversely affect the AB Fund and its shareholders.  For Federal income tax purposes, exchanges of one share class for a different share class of the same fund should not result in the realization by the investor of a capital gain or loss.  There can be no assurance of any particular tax treatment, however, and you are urged and advised to consult with your own tax advisor before entering into a share class exchange.  Please refer to the section titled “Frequent Trading and
 

 
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Market Timing” for information on the AB Funds’ policies regarding frequent purchases, redemptions, and exchanges.
 
Payments to Financial Intermediaries
 
The AB Funds and their affiliates (at their own expense) may pay compensation to financial intermediaries for shareholder-related services and, if applicable, distribution-related services, including administrative, sub-transfer agency, recordkeeping and shareholder communication services. For example, compensation may be paid to make AB Fund shares available to sales representatives and/or customers of a fund supermarket platform or similar program sponsor or for services provided in connection with such fund supermarket platforms and programs.
 
The amount of compensation paid to different financial intermediaries may differ. The compensation paid to a financial intermediary may be based on a variety of factors, including average assets under management in accounts distributed and/or serviced by the financial intermediary, gross sales by the financial intermediary and/or the number of accounts serviced by the financial intermediary that invest in the AB Funds. To the extent that an AB Fund pays (a portion) of such compensation, it is designed to compensate the financial intermediary for providing services that would otherwise be provided by the AB Funds or their transfer agent. To the extent an AB Fund affiliate pays such compensation, it would likely include amounts from that affiliate’s own resources and constitute what is sometimes referred to as “revenue sharing.”
 
Compensation received by a financial intermediary from the Manager or another AB Fund affiliate may include payments for marketing and/or training expenses incurred by the financial intermediary, including expenses incurred by the financial intermediary in educating (itself and) its salespersons with respect to AB Fund shares. For example, such compensation may include reimbursements for expenses incurred in attending educational seminars regarding an AB Fund, including travel and lodging expenses. It may also cover costs incurred by financial intermediaries in connection with their efforts to sell AB Fund shares, including costs incurred compensating (registered) sales representatives and preparing, printing and distributing sales literature.
 
Any compensation received by a financial intermediary, whether from an AB Fund or its affiliate(s), and the prospect of receiving it may provide the financial intermediary with an incentive to recommend the shares of an AB Fund, or a certain class of shares of an AB Fund, over other potential investments. Similarly, the compensation may cause financial intermediaries to elevate the prominence of an AB Fund within its organization by, for example, placing it on a list of preferred funds.
 
How to Purchase Shares
 
Through your Broker – Dealer or Other Financial Intermediary
 
Contact your broker-dealer or other financial intermediary to purchase shares of an AB Fund. Your broker-dealer or financial intermediary can help you open a new account, review your financial needs and formulate long-term investment goals and objectives. Your broker-dealer or financial intermediary will transmit your request to the AB Funds and may charge you a fee for this service. Dealers or other financial intermediaries purchasing shares for their customers in omnibus accounts are responsible for determining the suitability of a particular share class for an investor.
 
By Check
 
·
The minimum initial and subsequent investment requirements for investments by check are:
 

 
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Share Class
Minimum Initial
Investment Amount
Minimum Subsequent
Investment Amount
Investor Class
$2,500
$50
Institutional Class
$250,000
$50

 
Make the check payable to American Beacon Funds.
·
Include the shareholder’s account number, AB Fund name and AB Fund number on the check.
·
Mail the check to:
 
American Beacon Funds
 
P.O. Box 219643
 
Kansas City, MO 64121-9643
   
 
For Overnight Delivery:
 
American Beacon Funds
 
c/o BFDS
 
330 West 9th Street
 
Kansas City, MO 64105

 
By Wire
 
·
The minimum initial and subsequent investment requirements for investments by wire are:
 

 
 
Share Class
Minimum Initial
Investment Amount
Minimum Subsequent
           Investment Amount
Investor Class
$2,500
$500
Institutional Class
$250,000
None
 

 
·
If your account has been established, call 1-800-658-5811 to purchase shares by wire.
 

 
Send a bank wire to State Street Bank and Trust Co. with these instructions:
 
ABA# 0110-0002-8; AC-9905-342-3,
Attn: American Beacon Funds
the AB Fund name and AB Fund number, and
shareholder account number and registration.

 
By Exchange
 
·
The minimum requirements to establish an account by making an exchange and to make subsequent exchanges are as follows:
 
 
 
Share Class
Minimum Amount to
Establish a New Account
Minimum Subsequent
           Exchange Amount
Investor Class
$2,500
$50
 

 

 
C-10

 

 
Institutional Class
$250,000
$50
 
·
The minimum initial and subsequent investment requirements for investments by wire are:
   
·
To exchange shares, send a written request to the address above, or call 1-800-658-5811 and speak to a representative.  You may use the Automated Voice Response System for exchanges in the Investor Class only.
   
·
You also may exchange shares by visiting www.americanbeaconfunds.com via “My Account.”
   
·
If you purchased shares through a financial intermediary, please contact your broker-dealer or other financial intermediary to exchange your shares.
 

 
Via “My Account” on www.americanbeaconfunds.com
 
·
You may purchase shares of all classes via “My Account” on www.americanbeaconfunds.com.
   
·
Funds will be transferred automatically from your bank account via Automated Clearing House (“ACH”) if valid bank instructions were included on your application.
   
·
If not, please call 1-800-658-5811 for assistance with establishing bank instructions.
   
·
A $50 minimum applies.
 
By Pre-Authorized Automatic Investment (Investor Class shares only)
 
·
The minimum account size of $2,500 for Investor Class shares must be met before establishing an automatic investment plan.
   
·
Fill in required information on the account application, including amount of automatic investment ($50 minimum). Attach a voided check to the account application.
   
·
You may also establish an automatic investment plan through www.americanbeaconfunds.com.
   
·
Funds will be transferred automatically from your bank account via ACH on or about the 5th day of each month or quarter, depending upon which periods you specify.
   
·
If you establish your automatic investment plan through www.americanbeaconfunds.com, you can choose the date and frequency of transfer.

How to Redeem Shares
 
Through your Broker – Dealer or other Financial Intermediary
 
Contact your broker-dealer or other financial intermediary to sell shares of an AB Fund. Your broker-dealer or other financial intermediary is responsible for transmitting your sale request to the transfer agent in proper form and in a timely manner. Your financial intermediary may charge you a fee for selling your shares.
 
By Telephone
 

 
C-11

 

 
·
Call 1-800-658-5811 to request a redemption.
 
·
Minimum redemption amounts and applicable class limitations, and policies as to the disposition of the proceeds of telephone redemptions are as follows:
 

 
Share Class
Minimum
Redemption
Limitations
Disposition of
Redemption Proceeds
Investor Class
$500 by wire or
 
$50 by check or ACH
$50,000 per
account
Mailed to account address of record; or
 
Transmitted to commercial bank designated on the account application form.
       
Institutional
Class
 
None
None
Transmitted to commercial bank designated on the account application form.

 
By Mail
 
Write a letter of instruction including:
the AB Fund name and AB Fund number,
shareholder account number,
shares or dollar amount to be redeemed, and
authorized signature(s) of all persons required to sign for the account.

Mail to:

American Beacon Funds
P.O. Box 219643
Kansas City, MO 64121-9643

For Overnight Delivery
American Beacon Funds
c/o BFDS
330 West 9th Street
Kansas City, MO 64105
 
·
Proceeds will be mailed to the account address of record or transmitted to the commercial bank designated on the account application form.
   
·
Minimum redemption amounts are as follows:
 
 
Share Class
Minimum Redemption
Investor Classes
$500 by wire, $50 by check or ACH
   
Institutional Classes
None

 

 
C-12

 

Supporting documents may be required for redemptions by estates, trusts, guardianships, custodians, corporations, and welfare, pension and profit sharing plans.  Call 1-800-658-5811 for instructions.
 
To protect the AB Funds and your account from fraud, a STAMP 2000 Medallion signature guarantee is required for redemption orders:

·
with a request to send the proceeds to an address or commercial bank account other than the address or commercial bank account designated on the account application, or
·
for an account whose address has changed within the last 30 days if proceeds are sent by check.
   
The AB Funds only accept STAMP 2000 Medallion signature guarantees, which may be obtained at most banks, broker-dealers and credit unions. A notary public can not provide a signature guarantee. Call 1-800-658-5811 for instructions and further assistance

 
By Exchange
 
·
Send a written request to the address above.
·
Call 1-800-658-5811 and use the Automated Voice Response System (for Investor Class only) or speak to a representative to exchange shares.
   
·
Visit www.americanbeaconfunds.com and select “My Account.”
·
The minimum requirements to redeem shares by making an exchange is $50.
·
If you purchased shares through a financial intermediary, please contact your broker-dealer or other financial intermediary to exchange your shares.
 
 
Via “My Account” on www.americanbeaconfunds.com
·
If you have established bank instructions for your account, you may request a redemption via ACH or wire by selecting “My Account” on www.americanbeaconfunds.com.
   
·
If bank instructions were not included on the account application form, please call 1-800-658-5811 to establish bank instructions.
·
Minimum wire, ACH and check redemption amounts and policies as to the disposition of the proceeds of redemptions via “My Account” on www.americanbeaconfunds.com are as follows:

 
Share Class
Minimum
Wire Amount
Minimum ACH or
Check Amount
Disposition of
Redemption Proceeds
Investor Class
$500
$50
Check mailed to account address of record;
Wire transmitted to commercial bank designated on the account application form; or
Funds transferred via ACH to bank account designated on application form.
Institutional
None
Not Available
Transmitted to commercial bank designated on the account application

 

 
C-13

 


 
Share Class
Minimum
Wire Amount
Minimum ACH or
Check Amount
Disposition of
Redemption Proceeds
Class
   
form.
 
By Pre-Authorized Automatic Redemption (Investor Class shares only)
 
·
Fill in required information on the account application or establish via www.americanbeaconfunds.com ($50 minimum).
Proceeds will be transferred automatically from your AB Fund account to your bank account via ACH.
 
General Policies
 
If a shareholder’s Investor Class or Institutional Class account balance falls below the following minimum levels, the shareholder may be asked to increase the balance.
 
Share Class
Account Balance
Institutional Class
$75,000
   
Investor Class
$2,500
 
If the account balance remains below the applicable minimum account balance after 45 days, the AB Funds reserve the right to close the account and send the proceeds to the shareholder.  IRA accounts will be charged an annual maintenance fee of $15.00 by the Custodian for maintaining either a Traditional IRA or a Roth IRA.  The AB Funds reserve the authority to modify minimum account balances in its discretion.
 
A Signature Validation Program (“SVP”) stamp may be required in order to change an account’s registration or banking instructions. You may obtain a SVP stamp at banks, broker-dealers and credit unions, but not from a notary public. The SVP stamp is analogous to the STAMP 2000 Medallion guarantee in that it is provided at similar institutions. However, it is used only for non-financial transactions.
 
The following policies apply to instructions you may provide to the AB Funds by telephone:
 
·
The AB Funds, their officers, trustees, employees, or agents are not responsible for the authenticity of instructions provided by telephone, nor for any loss, liability, cost or expense incurred for acting on them.
   
·
The AB Funds employ procedures reasonably designed to confirm that instructions communicated by telephone are genuine.
   
·
Due to the volume of calls or other unusual circumstances, telephone redemptions may be difficult to implement during certain time periods.
   
The AB Funds reserve the right to:
 
·
liquidate a shareholder’s account at the current day’s NAV and remit proceeds via check if the AB Funds or a financial institution are unable to verify the shareholder’s identity within three business days of account opening,
   
·
seek reimbursement from the shareholder for any related loss incurred by an AB Fund if payment for the purchase of AB Fund shares by check does not clear the shareholder’s bank, and

 
C-14

 
 
·
reject a purchase order and seek reimbursement from the shareholder for any related loss incurred by an AB Fund if funds are not received by the applicable wire deadline.
 
Unclaimed accounts may be subject to State escheatment laws, where the holdings in an account may be transferred to the appropriate State if no activity occurs in the account within the time period specified by State law. The AB Funds and the Transfer Agent will not be liable to shareholders or their representatives for good faith compliance with those escheatment laws.
 
Distributions and Taxes
 
The AB Funds distribute most or all of their net earnings in the form of dividends from net investment income and distributions of realized net capital gains and gains from foreign currency transactions. The AB Funds do not have a fixed dividend rate and do not guarantee they will pay any dividends or capital gains distributions in any particular period.  Dividends paid by each AB Fund with respect to each class of shares are calculated in the same manner and at the same time, but dividends on different classes of shares may be different as a result of the service and/or distribution fees applicable to certain classes of shares.  Unless the account application instructs otherwise, distributions will be reinvested in additional AB Fund shares. Distributions are paid as follows:
 
AB Fund
Dividends
Paid
Other
Distributions
Paid
Stephens Small Cap
Growth
Annually
Annually
     
Stephens Mid-Cap
Growth
Annually
Annually

 
Options for Receiving Dividends and Distributions
 
When you open your AB Fund account, you can specify on your application how you want to receive distributions of dividends and capital gains. To change that option, you must notify the Transfer Agent. Unless the account application instructs otherwise, distributions will be reinvested in additional AB Fund shares. There are four payment options available:
 
·
Reinvest All Distributions in the AB Fund. You can elect to reinvest all dividends and capital gains distributions in additional shares of the AB Fund.
   
·
Reinvest Only Dividends or Capital Gains. You can elect to reinvest some types of distributions in the AB Fund while receiving the other types of distributions by check or having them sent to your bank account by ACH. Different treatment is available for distributions of dividends and long-term capital gains.
   
·
Receive All Distributions in Cash. You can elect to receive all dividends and capital gains distributions by check or have them sent to your bank by ACH.
   
·
Reinvest Your Distributions in another American Beacon Fund. You can reinvest all of your dividends and capital gains distributions in another American Beacon Fund that is available for exchanges. You must have an existing account in the same share class in the selected fund.

 

 
C-15

 
 
Usually, any dividends and distributions of net realized gains are taxable events.  However, the portion of an AB Fund’s dividends derived from its investments in certain direct U.S. Government obligations is generally exempt from state and local income taxes.  The following table outlines the typical tax liabilities for transactions in taxable accounts:
 
Type of Transaction
Tax Status
Dividends from net investment income*
Ordinary income**
   
Distributions of excess net short-term capital gain
over net long-term capital loss*
 
Ordinary income
   
Distributions of gains from certain foreign
currency transactions*
 
Ordinary income
   
Distributions of excess net long-term capital gain
over net short-term capital loss*
 
Long-term capital gains
   
Redemptions or exchanges
of shares owned for
more than one year
Long-term capital gains or losses
   
Redemptions or exchanges
of shares owned
for one year or less
 
Net gains are taxed at the same rate as ordinary income; net losses are subject to special rules
_________________
 
*   Whether reinvested or taken in cash.
**  Except for dividends that are attributable to qualified dividend income.
 
To the extent distributions of the excess of net long-term capital gain over net short-term capital loss are attributable to net capital gain that an AB Fund recognizes on sales or exchanges of capital assets through its last taxable year beginning before January 1, 2013, they are subject to a 15% maximum federal income tax rate for individual shareholders.
 
A portion of the dividends paid by the AB Funds may be eligible for the 15% maximum federal income tax rate applicable to dividends that individuals receive through the year 2012.
 
The eligible portion for such an AB Fund may not exceed its qualified dividend income (“QDI”).  QDI is the aggregate of dividends an AB Fund receives from most domestic corporations and certain foreign corporations.  If an AB Fund’s QDI is at least 95% of its gross income (as specially computed) and the AB Fund satisfies certain holding period and other restrictions with respect to the shares on which the dividends are paid (and the shareholder meets similar restrictions with respect to its AB Fund shares), the entire dividend will qualify for the 15% maximum federal income tax rate.  A portion of the dividends paid by these AB Funds may also be eligible for the dividends-received deduction allowed to corporations, subject to similar holding period, debt-financing and other restrictions, but the eligible portion will not exceed the aggregate dividends an AB Fund receives from domestic corporations.  However, dividends that a corporate shareholder receives and deducts pursuant to the dividends-received deduction may be subject indirectly to the federal alternative minimum tax.
 
Shareholders may realize a taxable gain or loss when redeeming or exchanging shares.  That gain or loss generally is treated as a short-term or long-term capital gain or loss, depending on how long the redeemed or exchanged shares were held.  Any capital gain an individual shareholder recognizes through the year 2012 on a redemption or exchange of AB Fund shares that have been held for more than one year will qualify for the 15% maximum federal income tax rate mentioned above.
 
Dividends and distributions of net realized gains from an AB Fund and gains recognized from the redemptions or exchanges of AB Fund shares will be subject to a 3.8% U.S. Federal Medicare
 

 
C-16