[Federal Register Volume 61, Number 170 (Friday, August 30, 1996)]
[Notices]
[Pages 46004-46006]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22226]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 22172; 812-10304]


Quantitative Group of Funds, et al.; Notice of Application

August 26, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for exemption under the Investment 
Company Act of 1940 (the ``Act'').

-----------------------------------------------------------------------

APPLICANTS: Quantitative Group of Funds (``Quantitative''), The One 
Group (``One Group,'' together with Quantitative, the ``Trusts''), 
Quantitative Advisors Inc. (``Quantitative Advisors''), Banc One 
Investment Advisors Corporation (``Banc One,'' and together with 
Quantitative Advisors, the ``Advisors''), and Boston International 
Advisors, Inc. (``BIA'').

RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act 
for an exemption from section 15(a) of the Act.

SUMMARY OF APPLICATION: The order would permit the implementation, 
without shareholder approval, of new sub-advisory contracts for a 
period of up to 120 days following the date of the change in control of 
BIA, the sub-adviser to the Trusts. The order also would permit BIA to 
receive from the Trusts fees earned under the new sub-advisory 
contracts following approval by the Trusts' shareholders.

FILING DATE: The application was filed on August 15, 1996. Applicants 
have agreed to file an amendment during the notice period, the 
substance of which is included in this notice.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on September 20, 
1996 and should be accompanied by proof of service on applicants, in 
the form of an affidavit, or, for lawyers, a certificate of service. 
Hearing requests should state the nature of the writer's interest, the 
reason for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request notification of a

[[Page 46005]]

hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants: Quantitative and Quantitative Advisors, 55 Old 
Bedford Road, Lincoln, Massachusetts 01773; One Group, 3435 Stelzer 
Road, Columbus, Ohio 43219; Banc One, 774 Park Meadow Road, Columbus, 
Ohio 43271; and BIA, 75 State Street, Boston, Massachusetts 02109.

FOR FURTHER INFORMATION CONTACT: Marianne H. Khawly, Staff Attorney, at 
(202) 942-0562, or Alison E. Baur, Branch Chief, at (202) 942-0564 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application is available for a fee at the 
SEC's Public Reference Branch.

Applicants' Representations

    1. The Trusts are open-end, management investment companies 
registered under the Act. Quantitative International Equity Fund and 
Quantitative Foreign Frontier Fund are series of Quantitative and The 
One Group International Equity Index Fund is a series of One Group (the 
series are referred to collectively as the ``Funds''). Quantitative 
Advisors serves as investment adviser to the Quantitative Funds and 
Banc One serves as investment adviser to the One Group Fund. BIA 
provides sub-advisory services to each Fund pursuant to certain sub-
advisory agreements (the ``Existing Sub-Advisory Agreements'').
    2. Independence Investment Associates, Inc. (``IIA''), pursuant to 
an agreement dated July 31, 1996 (the ``Stock Purchase Agreement'') 
among IIA, BIA, and all of the stockholders of BIA (the 
``Stockholders''), will acquire, subject to the satisfaction or waiver 
of certain conditions, control of BIA by purchasing 100% of BIA's 
outstanding shares of capital stock from the Stockholders (the ``Stock 
Purchase''). Following the consummation of the transactions provided 
for under the Stock Purchase Agreement (the ``Closing''), it is 
anticipated that BIA will change its name to Independence International 
Associates, Inc.
    3. The Closing is subject to the satisfaction or waiver of several 
conditions, including certain conditions relating to the acquisition of 
advisory client consents. The Stock Purchase Agreement provides that 
transfer of ownership of BIA's shares will take place at the Closing. 
BIA reasonably believes that the Closing may take place by October 1, 
1996, although unforeseen circumstances could cause a delay. The Stock 
Purchase will result in a change of control of BIA. Accordingly, the 
change of control will result in the assignment of the Existing Sub-
Advisory Agreements and the termination of each such agreement 
according to its terms.
    4. Applicants seek an exemption to permit the implementation, 
without shareholder approval, of new sub-advisory agreements among the 
Funds, the Advisors, and BIA. The requested exemption would cover an 
interim period of not more than 120 days (the ``Interim Period'') 
beginning on the Closing date and continuing through the date new sub-
advisory agreements are approved or disapproved by the Funds' 
shareholders (but in no event later than March 1, 1997). During the 
Interim Period, hat portion of the advisory fees paid the Advisors to 
BIA for sub-advisory services would be paid into escrow.
    5. The sub-advisory agreements among BIA, the Advisors, and each 
Fund to be entered into upon consummation of the Stock Purchase 
(collectively, the ``New Sub-Advisory Agreements'') are identical to 
the Existing Sub-Advisory Agreements, except for their effective dates, 
escrow provisions, and as described below. For each Fund, except the 
One Group Fund, the fee levels for sub-advisory services will remain 
the same as in the Existing Sub-Advisory Agreement. The New Sub-
Advisory Agreement between BIA and Banc One (the ``New Banc One 
Agreement''), however, will provide for higher fees than those which 
are payable to BIA under its Existing Sub-Advisory Agreement with Banc 
One. These higher fees were separately negotiated from, and are in no 
way connected with, the Stock Purchase. The New Banc One Agreement will 
be submitted for the approval of the One Group Fund's shareholders, and 
the higher fees, if approved, will be payable only to BIA from and 
after the date of such approval. No exemption from the provisions of 
section 15(a) of the Act is being sought with respect to the approval 
of the higher fees.
    6. In accordance with section 15(c) of the Act,\1\ the board of 
trustees (the ``Board'') of Quantitative met on July 9, 1996 and the 
Board of One Group met on May 21, 1996 and determined that the New Sub-
Advisory Agreements would be in the best interests of the respective 
Funds and their shareholders. The Boards, including a majority of the 
disinterested trustees, voted to approve the New Sub-Advisory 
Agreements.
---------------------------------------------------------------------------

    \1\ Section 15(c) provides, in relevant part, that it shall be 
unlawful for any registered investment company to enter into an 
investment advisory contract unless the terms of such contract have 
been approved by the vote of a majority of directors, who are not 
parties to such contract or interested persons of any such party, 
cast in person at a meeting called for the purpose of voting on such 
approval.
---------------------------------------------------------------------------

    7. Applicants propose to enter into an escrow arrangement with an 
unaffiliated financial institution. The arrangement would provide that: 
(a) the portion of the Advisors' fees payable by the Advisors to BIA 
during the Interim Period under the New Sub-Advisory Agreements would 
be paid into an interest-bearing escrow account maintained by the 
escrow agent \2\; (b) the amounts in the escrow account (including 
interest earned on such paid fees) would be paid to BIA only upon 
approval of the respective Fund's shareholders of such Fund's New Sub-
Advisory Agreements or, in the absence of such approval, to the Fund; 
and (c) the escrow agent would release the monies only upon receipt of 
a certificate from an officer of the respective trust (none of whom is 
an interested person of BIA) stating that the monies are to be 
delivered to BIA and that the respective New Sub-Advisory Agreement has 
received the requisite Fund shareholder vote or, if the moneys are to 
be delivered to the respective Fund, that the Interim Period has ended, 
and the respective New Sub-Advisory Agreement has not received the 
requisite Fund shareholder vote. Before any certificate is sent, the 
respective Board will be notified.
---------------------------------------------------------------------------

    \2\ The higher fees that will be applicable under the New Sub-
Advisory Agreement for the One Group Fund will not be deposited in 
an escrow account because they will not begin to accrue until after 
the One Group Fund's shareholders approve the New Sub-Advisory 
Contract.
---------------------------------------------------------------------------

Applicants' Legal Analysis

    1. Applicants request an order pursuant to section 6(c), exempting 
them from section 15(a) of the Act to the extent necessary (i) to 
permit the implementation during the Interim Period, without prior 
shareholder approval, of the New Sub-Advisory Agreements and (ii) to 
permit BIA to receive from the respective Advisor upon approval by the 
respective Fund's shareholders any and all fees earned under the 
applicable New Sub-Advisory Agreement implemented during the Interim 
Period.
    2. Section 15(a) of the Act prohibits an investment adviser from 
providing investment advisory services to an investment company except 
under a written contract that has been approved

[[Page 46006]]

by a majority of the voting securities of the investment company. 
Section 15(a) further requires that the written contract provide for 
automatic termination in the event of its assignment. Section 2(a)(4) 
of the Act defines ``assignment'' to include any direct or indirect 
transfer of a contract by the assignor or of a controlling block of the 
assignor's outstanding voting securities by a security holder of the 
assignor. The Stock Purchase will result in an ``assignment'' within 
the meaning of section 2(a)(4) of the Existing Sub-Advisory Agreements, 
terminating each such agreement according to its terms.
    3. Rule 15a-4 provides, in relevant part, that if an investment 
adviser's investment advisory contract with an investment company is 
terminated by assignment, the adviser may continue to act as such for 
120 days at the previous compensation rate if a new contract is 
approved by the board of directors of the investment company and if 
neither the investment adviser nor a controlling person thereof 
directly or indirectly receives money or other benefit in connection 
with the assignment. In the case of the Quantitative Funds, applicants 
cannot rely on rule 15a-4 because of the benefits to the Stockholders 
arising from the Stock Purchase. In the case of the One Group Fund, the 
applicants cannot rely on rule 15a-4 because of the increase in fees 
payable to BIA under the New Sub-Advisory Agreement.
    4. Applicants state that a proxy solicitation to the shareholders 
of the Funds is a complicated and time-consuming task. The task will 
include the preparation, clearance, and mailing of proxy materials, and 
the solicitation efforts required to obtain the requisite votes. 
Because of the complexity of the proxy solicitation and the fact that 
the Funds have not had sufficient advance notice of the Stock Purchase, 
applicants state that it will not be possible for the Funds to obtain 
shareholder approval of the New Sub-Advisory Agreements in accordance 
with section 15(a) of the Act prior to the Closing.
    5. Applicants submit that to deprive BIA of sub-advisory fees 
during the Interim Period for no reason other than the fact that the 
Closing will result in an assignment of the Existing Sub-Advisory 
Agreements would be an unduly harsh and unreasonable penalty and would 
serve no useful purpose. Applicants represent that the best interests 
of the Funds' shareholders would be served if BIA receives fees for 
services during the Interim Period as provided herein. These fees are 
an important part of BIA's total revenue and are important to 
maintaining its ability to provide services to the Funds.
    6. Section 6(c) of the Act provides that the SEC may exempt any 
person, security, or transaction from any provision of the Act, if and 
to the extent that such exemption is necessary or appropriate in the 
public interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Act. For 
the reasons stated above, applicants believe that the requested relief 
meets this standard.

Applicants' Conditions

    Applicants agree as conditions to the issuance of the exemptive 
order requested by this application that:
    1. The New Sub-Advisory Agreements will have the same terms and 
conditions as the Existing Sub-Advisory Agreements, except in each case 
for the dates of execution and termination, the inclusion of escrow 
arrangements, and the inclusion of BIA's new name, and in the case of 
the New Sub-Advisory Agreement for One Group, the new fee arrangement 
(which will not be effective until shareholder approval).
    2. That portion of each Advisors' fee earned by BIA during the 
Interim Period will be maintained in an interest-bearing escrow 
account, and amounts in the account (including interest earned on such 
amounts) will be paid (a) to BIA in accordance with the New Sub-
Advisory Agreement, only upon approval of the respective Fund's 
shareholders, or (b) in the absence of such approval prior to the 
expiration of the Interim Period, to the respective Fund.
    3. The Funds will hold meetings of shareholders to vote on approval 
of the New Sub-Advisory Agreements on or before the earlier of the 
120th day following the termination of the Existing Sub-Advisory 
Agreements or March 1, 1997.
    4. BIA and IIA will bear the costs of preparing and filing this 
application and the costs relating to the preparation of proxy 
materials for the solicitation of shareholder approval from the 
Quantitative Funds' shareholders of the Quantitative Funds' New Sub-
Advisory Agreements. BIA and IIA also will bear 50% of the costs 
relating to the preparation of proxy materials for the solicitation of 
shareholder approval from the One Group Fund's shareholders of the One 
Group Fund's New Sub-Advisory Agreement. The other 50% of the costs of 
solicitation will be borne by Banc One.
    5. BIA will take all appropriate actions to ensure that the scope 
and quality of sub-advisory and other services provided to the Funds by 
BIA during the Interim Period will be at least equivalent, in the 
judgment of the respective Board, including a majority of the non-
interested Board members, to the scope and quality of services 
previously provided. In the event of any material change in personnel 
providing material services pursuant to the New Sub-Advisory 
Agreements, BIA will apprise and consult with the Board of the affected 
Fund or Funds to assure that they, including a majority of the non-
interested Board members, are satisfied that the services provided will 
not be diminished in scope or quality.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-22226 Filed 8-29-96; 8:45 am]
BILLING CODE 8010-01-M