August 5, 2009
VIA EDGAR
Christina L. DiAngelo
Mr. James O'Connor
Division of Investment Management
U.S. Securities and Exchange Commission
100 F St., NE
Washington, DC 20549
Re: AIM Growth Series (AGS)
CIK: 0000202032
Accession Number: 0000950123-09-018088
AIM Equity Funds (AEF)
CIK: 0000105377
Accession Number: 0000950123-09-018090
Dear Ms. DiAngelo and Mr. O'Connor:
This letter responds to the Staff's comments on the two above-referenced
Form N-14s filed by AIM Equity Funds (the "Registrant"), which were filed on
June 26, 2009. The purpose of the filing was to seek approval of the
shareholders of the Atlantic Whitehall Mid-Cap Growth Fund, Atlantic Whitehall
Growth Fund and Atlantic Whitehall Equity Income to combine with, respectively,
the AIM Mid Cap Core Equity Fund, AIM Large Cap Growth Fund and AIM Disciplined
Equity Fund. The shareholders of the Atlantic Whitehall Funds were also asked to
approve an amendment to the Trust Instrument of Atlantic Whitehall Funds Trust
that would permit the Board of Trustees to liquidate and terminate the fund
without seeking additional shareholder approval.
I. ACCOUNTING COMMENTS
Staff's Comment:
1. Please confirm that the semi-annual financial statements will be filed for
the Selling Funds on Form N-CSR prior to the effective date of the N-14.
Response:
The semi-annual financial statements were filed on July 31, 2009. We will
include the accession numbers in the space holders provided in the filing upon
going effective.
Staff's Comment:
2. Please explain the differences in valuation methodologies between the Selling
and Buying funds? Please make any necessary adjustments in the capitalization
tables and consider adding disclosure describing the impact, if any.
Response:
The holdings of each of Selling and Buying Fund is valued using
substantially similar valuation techniques and as a result we do not anticipate
any material change in the security values upon the closing of the
reorganization. We do not believe adjustments to the capitalization table are
necessary; however will add disclosure to the Board Consideration Section of
each N-14 indicating that we do not anticipate material changes in security
values upon the closing of the Reorganization.
Staff's Comment:
3. Please confirm whether or not Invesco Aim will incur all expenses relating to
the transaction. Section 5.2 of the Agreement and Plan of Reorganization
indicates it will.
Response:
Section 5.2 of each Agreement and Plan of Reorganization indicates that
Invesco Aim will bear all costs and expenses of Buyer and Buying Fund incurred
in connection with the transactions contemplated by the Agreement and that no
costs or expenses of Seller or Selling Fund incurred in connection with the
transactions contemplated by the Agreement shall be charged to or borne by
Seller, Selling Fund, Buyer or Buying Fund.
The question and answer section of the N-14 clarifies this point:
Q: Will my Fund pay for this proxy solicitation or for the costs of the
Reorganization?
A: No. The Fund will not bear these costs. Invesco Aim and Stein Roe will
bear all costs arising in connection with the Reorganization......
Staff's Comment:
4. Will any Selling or Buying Fund be required to sell securities in light of
the merger to reposition the portfolio? If so, what are the costs to reposition
the portfolio? Will any repositioning costs trigger a capital gain distribution
and if so, please disclose both the aggregate and per share amount.
Response:
We do not anticipate significant portfolio repositioning costs associated
with the Reorganizations. We have estimated any repositioning costs to have less
than a 0.01% impact on each of the AIM Mid Cap Core Equity Fund and the AIM
Large Cap Growth Fund. We therefore consider these costs to be immaterial. We
will add disclosure to the Proxy Statement/Prospectus in each Registration
Statement describing this anticipated impact.
Staff's Comment:
5. After comparing portfolio expenses of each Selling Fund and Buying fund, is
it appropriate to disclose the fee table and pro forma fee table as of the
fiscal year end of each fund?
Response:
We believe a comparison of the fee tables of each of Selling Fund and
Buying Fund as of the fiscal year end of each Selling Fund and Buying Fund and
consistent with the current N-1A of each of Selling Fund and Buying Fund is
appropriate and consistent with Item 3 of Form N-14 and the instructions and SEC
guidance relating to Instruction 3 of Item 3 to Form N-1A. While expenses of the
Selling and Buying funds have each increased, the relative differential in
expenses of each remained consistent.
Staff's Comment:
6. Consider deleting the middle column of the fee table of the AIM Disciplined
Equity Fund and disclose the fee table for the Buying fund and a pro-forma
fee table only.
Response:
We have made the suggested change, which we will incorporate in our
post-effective amendment to the N-14.
Staff's Comment:
7. Will the expense recapture plans and/or any related contingent liabilities of
the Selling Funds be assumed by the Buying Funds?
Response:
No. Pursuant to Section 2.8 of each Agreement and Plan of Reorganization
Buying Fund shall not assume any liability for recoupment of advisory fees
waived or expenses paid pursuant to that certain
Expense Limitation Undertaking by and between Seller and Stein Roe. Furthermore,
Selling Fund has represented that it does not have any contingent liabilities.
Staff's Comment:
8. Because the expense limitation amount of each Selling Fund has been changed
year by year, add disclosure indicating that the fee table has been restated to
clarify that it no longer ties back to the financial highlights.
Response:
We have made this change, which will be reflected in the post-effective
amendment to the N-14. Specifically, we have added disclosure to the footnotes
reflecting the effective date of the fee waiver and to indicate that the fee
waiver in the fee table has been restated to reflect the new waiver agreement.
Staff's Comment:
9. Please add an effective date to the reference in the Board Consideration
section to a lower portfolio turnover rate in the Buying Funds. Please also
disclose the comparative data.
Response:
We looked at portfolio turnover data as of December 31, 2008 and again at
March 30, 2009. In each instance, AIM Large Cap Growth Fund had lower portfolio
turnover than Atlantic Whitehall Growth Fund. We will delete the reference in
the Board Consideration section of the N-14 for AIM Mid Cap Core Equity Fund as
its portfolio turnover is higher than that of Atlantic Whitehall Mid Cap Growth
Fund and the Board of the Atlantic Whitehall Funds did not specifically look at
this data. We will update the disclosure of the Board Consideration section of
the N-14 for AIM Large Cap Growth Fund to reflect the date as of which the
data reviewed by the Atlantic Whitehall Funds Board was reflected.
Staff's Comment:
10. Consider disclosure as a footnote to the capitalization table clarifying the
total net asset amount of the Buying Fund to assist an investor to more easily
determine that the Reorganization is not material to the Buying Fund.
Response:
We have made this change, which will be reflected in the post-effective
amendment to the N-14s.
Staff's Comment:
11. The effective date of the disclosure in the Special SAI explaining that pro
forma financial information has not been prepared is as of 5/31/09. Consider
conforming the as of date with that of the capitalization tables in the body of
the N-14, which is as of 6/10/09.
Response:
We have made this change, which will be reflected in the post-effective
amendment to the N-14s.
Staff's Comment:
12. Update the disclosure in the prospectus for the AIM Disciplined Equity Fund
to reflect that the Fund does not have a 12b-1 fee.
Response:
This change was reflected in the fee table of the 485(b) filing for the
Fund, which was made on July 13, 2009 and the 497 filing, which was made on July
14, 2009.
Staff's Comment:
13. Update the disclosure in the prospectus for the AIM Disciplined Equity Fund
to reflect that the base management fee for the AIM Disciplined Equity Fund is
0.70%.
Response:
This change was reflected in the fee table and in the related placeholders
of the 485(b) filing for the Fund, which was made on July 13, 2009 and the 497
filing, which was made on July 14, 2009.
II. LEGAL COMMENTS
Staff's Comment:
1. In light of the disclosure in the section entitled: "Questions and Answers -
Will the Reorganization take place if it is determined to be taxable?", confirm
that the Registrant expects to obtain a legal opinion that the Reorganization
will be tax-free for Federal income tax purposes based on facts that existed at
the time of filing of the Registration Statements and that the discussion
regarding a Reorganization proceeding if it is determined to be taxable is
related to events that may arise subsequent to the date of filing and confirm
the intention of the following disclosure in the N-14.
Response:
Based on the facts existing at the time of filing the Registration
Statements on June 26, 2009, the Registrants expect to receive an opinion of
Stradley Ronon Stevens & Young, LLP that each Reorganization will
constitute a tax-free reorganization for Federal income tax purposes. The
Registrants confirm that the discussion in the above referenced sections of the
Registration Statements regarding the Registrants' right to proceed with a
Reorganization if it is not tax-free is intended to address events that may
arise subsequent to the date of filing that change the tax analysis.
Staff's Comment:
2. Confirm whether the Registrants anticipate a significant restructuring of the
portfolios as a result of the Reorganizations and, if so, describe the effect of
that restructuring on shareholders.
Response:
We do not anticipate significant portfolio repositioning costs associated
with the Reorganizations. We have estimated any repositioning costs to have less
than a 0.01% impact on each of AIM Mid Cap Core Equity Fund and the AIM Large
Cap Growth Fund. We therefore consider these costs to be immaterial. We will add
disclosure to the Proxy Statement/Prospectus in each Registration Statement
describing this anticipated impact.
Staff's Comment:
3. Restate footnote #6 to the fee table in the Registration Statements to
describe in more plain English the Buying Fund's arrangement to waive its
advisory fee with respect to investments in affiliated money market funds.
Response: The Registrants will restate footnote #6 to the AIM Mid Cap Core
Equity Fund fee table in the AGS Registration Statement to read as follows:
Buying Fund's adviser has agreed to waive its advisory fee in an amount
equal to the amount of the net advisory fee that the adviser receives as a
result of Buying Fund investing in affiliated money market funds (excluding
Buying Fund's investment of cash collateral from securities lending in
affiliated money market funds). This contractual waiver, which runs through
June 30, 2010, resulted in an aggregate reduction of Buying Fund's advisory
fees of 0.03% for the year ended December 31, 2008.
The contractual fee waiver for investments in affiliated money market funds
has not been triggered by either Buying Fund in the AEF Registration Statement.
Therefore, we have not made this disclosure in the AEF Registration Statement.
Staff's Comment:
4. Please clarify whether the Atlantic Whitehall Funds board of trustees
considered consummating the Reorganizations as taxable transactions in light of
the embedded losses in the Atlantic Whitehall Funds.
Response:
The Atlantic Whitehall Board of Trustees considered the consequences of
each Reorganization for Federal income tax purposes, including the treatment of
any unrealized appreciation (depreciation) of portfolio securities and capital
loss carryforwards available to offset future capital gains of the Fund and
Buying Fund. In addition, the Registrants considered various structuring
alternatives that would provide certainty to the tax status of each
Reorganization. The Registrants and Atlantic Whitehall concluded, however, that
the structures necessary to force the Reorganizations to be taxable transactions
under the Internal Revenue Code, such as distributing 21% of the reorganization
proceeds in cash to the Atlantic Whitehall Funds shareholders, were not typical
structures for mutual fund reorganizations and may ultimately impede Atlantic
Whitehall's ability to obtain shareholder approval of the Reorganizations. As a
result, it was determined to proceed with the Reorganizations as tax-free
transactions for Federal income tax (based on the facts at the time of filing
the Registration Statements) but reserve the right to consummate the
Reorganizations if, due to subsequent events, the Reorganizations were
determined to be taxable transactions.
III. TANDY REPRESENTATION
Staff's Comment:
We urge all persons who are responsible for the accuracy and adequacy of
the disclosure in the filings reviewed by the staff to be certain that they have
provided all information investors require. Since the fund and its management
are in possession of all facts relating to the fund's disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made. In
connection with responding to our comments, please provide, in writing, a
statement from the company acknowledging that: the fund is responsible for the
adequacy and accuracy of the disclosure in the filings; Staff comments or
changes to disclosure in response to staff comments in the filings reviewed by
the staff do not foreclose the Commission from taking any action with respect to
the filing; and the fund may not assert this action as defense in any proceeding
initiated by the Commission or any person under the federal securities laws of
the United States.
Response:
In connection with the responses to the comments above, the Registrant
acknowledges the following:
- that the Registrant is responsible for the adequacy and accuracy of
the disclosure in their filings;
- that Staff comments or changes to disclosure in response to Staff
comments in the filings reviewed by the Staff do not foreclose the
Securities and Exchange Commission ("Commission") from taking any
action with respect to the filing; and
- that the Registrant may not assert Staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
Please do not hesitate to contact me at 713.214.5770 if you have any further
questions.
Very truly yours,
/s/ Melanie Ringold
Melanie Ringold