Application Numbers and Proposed Exemptions, 3054-3089 [2010-593]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 75, Number 11 (Tuesday, January 19, 2010)]
[Notices]
[Pages 3054-3089]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-593]



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Part III





Department of Labor





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Employee Benefits Security Administration



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Application Numbers and Proposed Exemptions; Notice

Federal Register / Vol. 75 , No. 11 / Tuesday, January 19, 2010 / 
Notices

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DEPARTMENT OF LABOR

Employee Benefits Security Administration

[D-11502, D-11518, D-11521, D-11425, D-11448, D-11495]


Application Numbers and Proposed Exemptions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of Proposed Exemptions.

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[Application Nos. and Proposed Exemptions; Putnam Fiduciary Trust 
Company (PFTC), The PNC Financial Services Group, Inc.; Deutsche 
Asset Management (UK) Limited (the Applicant); UBS Financial 
Services Inc. and Its Affiliates; Deutsche Bank AG and Its 
Affiliates (together, Deutsche Bank of the Applicant); Morgan 
Stanley & Co. Inc. and its current and future affiliates and 
subsidiaries (Morgan Stanley) and Union bank, N.A. and its 
affiliates (Union Bank), et al.]

SUMMARY: This document contains notices of pendency before the 
Department of Labor (the Department) of proposed exemptions from 
certain of the prohibited transaction restrictions of the Employee 
Retirement Income Security Act of 1974 (ERISA or the Act) and/or the 
Internal Revenue Code of 1986 (the Code).

Written Comments and Hearing Requests

    All interested persons are invited to submit written comments or 
requests for a hearing on the pending exemptions, unless otherwise 
stated in the Notice of Proposed Exemption, within 45 days from the 
date of publication of this Federal Register Notice. Comments and 
requests for a hearing should state: (1) The name, address, and 
telephone number of the person making the comment or request, and (2) 
the nature of the person's interest in the exemption and the manner in 
which the person would be adversely affected by the exemption. A 
request for a hearing must also state the issues to be addressed and 
include a general description of the evidence to be presented at the 
hearing.

ADDRESSES: All written comments and requests for a hearing (at least 
three copies) should be sent to the Employee Benefits Security 
Administration (EBSA), Office of Exemption Determinations, Room N-5700, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 
20210. Attention: Application No. ----, stated in each Notice of 
Proposed Exemption. Interested persons are also invited to submit 
comments and/or hearing requests to EBSA via e-mail or Fax. Any such 
comments or requests should be sent either by e-mail to: 
``moffitt.betty@dol.gov'', or by Fax to (202) 219-0204 by the end of 
the scheduled comment period. The applications for exemption and the 
comments received will be available for public inspection in the Public 
Documents Room of the Employee Benefits Security Administration, U.S. 
Department of Labor, Room N-1513, 200 Constitution Avenue, NW., 
Washington, DC 20210.
    Warning: If you submit written comments or hearing requests, do not 
include any personally-identifiable or confidential business 
information that you do not want to be publicly-disclosed. All comments 
and hearing requests are posted on the Internet exactly as they are 
received, and they can be retrieved by most Internet search engines. 
The Department will make no deletions, modifications or redactions to 
the comments or hearing requests received, as they are public records.

Notice to Interested Persons

    Notice of the proposed exemptions will be provided to all 
interested persons in the manner agreed upon by the applicant and the 
Department within 15 days of the date of publication in the Federal 
Register. Such notice shall include a copy of the notice of proposed 
exemption as published in the Federal Register and shall inform 
interested persons of their right to comment and to request a hearing 
(where appropriate).

SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in 
applications filed pursuant to section 408(a) of the Act and/or section 
4975(c)(2) of the Code, and in accordance with procedures set forth in 
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990). 
Effective December 31, 1978, section 102 of Reorganization Plan No. 4 
of 1978, 5 U.S.C. App. 1 (1996), transferred the authority of the 
Secretary of the Treasury to issue exemptions of the type requested to 
the Secretary of Labor. Therefore, these notices of proposed exemption 
are issued solely by the Department.
    The applications contain representations with regard to the 
proposed exemptions which are summarized below. Interested persons are 
referred to the applications on file with the Department for a complete 
statement of the facts and representations.

    Putnam Fiduciary Trust Company (PFTC), Located in Boston, 
Massachusetts, [Application No. D-11425].

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and section 4975(c)(2) of the 
Code and in accordance with the procedures set forth in 29 CFR 2570, 
subpart B (55 FR 32836, 32847, August 10, 1990).

Section I--Proposed Exemption

    Effective as of January 19, 2010, the restrictions of section 
406(a) and (b) of the Act, and the taxes imposed by section 4975(a) and 
(b) of the Code, by reason of section 4975(c)(1)(A) through (F) of the 
Code, shall not apply to either (a) the purchase or sale by a 
Collective Fund (as defined in Section III(b) below) of shares of a 
Mutual Fund (as defined in Section III(d) below) where Putnam Fiduciary 
Trust Company (``PFTC'' or the ``Applicant'') or its affiliate (PFTC 
and its affiliates are referred to herein as ``Putnam'') is the 
investment advisor of the Mutual Fund as well as a fiduciary with 
respect to the Collective Fund (or an affiliate of such fiduciary) or 
(b) the receipt of fees by Putnam from a Mutual Fund for acting as an 
investment advisor for the Mutual Fund and/or for providing other 
services to the Mutual Fund which are Secondary Services (as defined in 
Section III(g) below) in connection with the investment by the 
Collective Fund in shares of the Mutual Fund, provided that the 
following conditions and the general conditions of Section II are met: 
(a) Each Collective Fund satisfies either (but not both) of the 
following:
    (1) The Collective Fund receives a cash credit equal to such 
Collective Fund's proportionate share of all fees charged to the Mutual 
Fund by Putnam for investment advisory services. Such credit shall be 
paid to the Collective Fund no later than the same day on which such 
investment advisory fees are paid to Putnam. The crediting of all such 
fees to the Collective Funds by Putnam is audited by an independent 
accounting firm on at least an annual basis to verify the proper 
crediting of the fees to each Collective Fund. The audit report shall 
be completed not later than six months after the period to which it 
relates; or
    (2) No management fees, investment advisory fees, or similar fees 
are paid to Putnam with respect to any of the assets of such Collective 
Fund that are invested in shares of the Mutual Fund. This condition 
does not preclude the payment of investment advisory or similar fees by 
the Mutual Fund to Putnam under the terms of an investment management 
agreement adopted in accordance with section 15

[[Page 3055]]

of the Investment Company Act of 1940 (the 1940 Act), nor does it 
preclude the payment of fees for Secondary Services to Putnam pursuant 
to a duly adopted agreement between Putnam and the Mutual Fund if the 
conditions of this proposed exemption are otherwise met.
    (b) The price paid or received by a Collective Fund for shares in 
the Mutual Fund is the net asset value (NAV) per share (as defined in 
Section III (h)) and is the same price that would have been paid or 
received for the shares by any other investor in the Mutual Fund at 
that time, and all other dealings between the Collective Funds and the 
Mutual Fund will be on a basis no less favorable to the Collective Fund 
than such dealings will be with the other shareholders of the Mutual 
Fund.
    (c) Putnam, including any officer or director of Putnam, does not 
purchase or sell shares of the Mutual Fund from or to any Collective 
Fund; provided that this condition shall not preclude the purchase or 
redemption of such shares between a Collective Fund and an affiliate of 
PFTC acting solely in its capacity as underwriter for the Mutual Fund, 
if such affiliate acts as a riskless principal, the purchase or 
redemption is at NAV at the time of the transaction, and the affiliate 
does not receive any direct or indirect compensation, spread or other 
consideration in connection with such purchase or redemption.
    (d) No sales commissions, redemption fees, or other similar fees 
are paid by the Collective Funds in connection with the purchase or 
sale of shares of the Mutual Fund.
    (e) For each Collective Fund, the combined total of all fees 
received by Putnam for the provision of services to the Collective 
Fund, and in connection with the provision of services to the Mutual 
Fund in which the Collective Fund may invest, are not in excess of 
``reasonable compensation'' within the meaning of section 408(b)(2) of 
the Act.
    (f) Putnam does not receive any fees payable pursuant to Rule 12b-1 
under the 1940 Act in connection with the transactions covered by this 
proposed exemption.
    (g) The Second Fiduciary (as defined in Section III (f) below) with 
respect to each plan having an interest in a Collective Fund (a 
``Client Plan'') receives in writing, in advance of any investment by 
the Collective Fund in the Mutual Fund, full and detailed disclosure of 
information concerning the Mutual Fund, including but not limited to: 
(1) A current prospectus issued by the Mutual Fund; (2) a statement 
describing the fees for investment advisory or similar services, any 
Secondary Services and all other fees to be charged to or paid by (or 
with respect to) the Collective Fund and by the Mutual Fund, including 
the nature and extent of any differential between the rates of such 
fees; (3) the reasons why PFTC may consider such investment to be 
appropriate for the Collective Fund; (4) a statement describing whether 
there are any limitations applicable to PFTC with respect to which 
Collective Fund assets may be invested in shares of the Mutual Fund 
and, if so, the nature of such limitations; and (5) upon request of the 
Second Fiduciary, a copy of both the notice of proposed exemption and a 
copy of the final exemption once it is published in the Federal 
Register, and any other reasonably available information regarding the 
transactions covered by this proposed exemption.
    (h) On the basis of the information described in paragraph (g) 
above, the Second Fiduciary authorizes in writing the investment of 
assets of the Collective Fund in the Mutual Fund and the fees to be 
paid by the Mutual Fund to Putnam.
    (i) On an annual basis, Putnam will provide to the Second Fiduciary 
of each Client Plan having an interest in the Collective Fund: (1) A 
current prospectus issued by the Mutual Fund in which the Collective 
Fund invests, and, upon the Second Fiduciary's request, a copy of the 
Statement of Additional Information for such Mutual Fund that contains 
a description of all fees paid by the Mutual Fund to Putnam; (2) a copy 
of the annual financial disclosure report prepared by Putnam that 
includes information about the Mutual Fund portfolios, as well as audit 
findings of an independent auditor, within 60 days of the preparation 
of the report; (3) oral or written responses to inquiries of the Second 
Fiduciary as they arise; (4) a statement (i) of the approximate 
percentage (which may be in the form of a range) of the assets of the 
Collective Fund that were invested in the Mutual Fund during the year 
and (ii) that, if the Second Fiduciary objects to the continued 
investment by the Collective Fund in the Mutual Fund, the Client Plan 
should withdraw from the Collective Fund; and (5) a form (Termination 
Form) expressly providing an election to withdraw from the Collective 
Fund, together with instructions on the use of such form. The 
instructions will inform the Second Fiduciary that: (i) The prior 
written authorization is terminable at will by the Plan, without 
penalty to the Plan, upon receipt by Putnam of written notice from the 
Second Fiduciary, and (ii) failure to return the form will result in 
continued authorization of Putnam to engage in the transactions 
described above on behalf of the Plan.
    However, if the Termination Form has been provided to the Second 
Fiduciary pursuant to Section I(j), the Termination Form need not be 
provided again for an annual reauthorization pursuant to this Section 
I(i) unless at least six months has elapsed since the form was 
previously provided.
    (j) Except as provided in Section I(j)(E), paragraph (h) of this 
Section I does not apply if:
    (A) The purchase, holding and sale of Mutual Fund shares by the 
Collective Fund is performed subject to the prior and continuing 
authorization, in the manner described in this paragraph (j), of a 
Second Fiduciary with respect to each Client Plan whose assets are 
invested in the Collective Fund.
    (B)(1) For each Collective Fund using the fee structure described 
in paragraph (a)(2) above with respect to investments in the Mutual 
Fund, in the event of an increase in the rate of fees paid by the 
Mutual Fund to Putnam regarding any investment management services, 
investment advisory services, or similar services that Putnam provides 
to the Mutual Fund over an existing rate for such services that had 
been authorized by a Second Fiduciary in accordance with paragraph (h) 
above or this paragraph (j); or
    (2) For each Collective Fund under this exemption (regardless of 
whether the fee structure described in paragraph (a)(1) or (a)(2) is 
used), in the event an additional Secondary Service is provided by 
Putnam to the Mutual Fund for which a fee is charged, or an increase in 
the rate of any fee paid by the Mutual Fund to Putnam for any Secondary 
Service that results either from an increase in the rate of such fee or 
from a decrease in the number or kind of services performed by Putnam 
for such fee over an existing rate for such Secondary Service that had 
been authorized by a Second Fiduciary in accordance with paragraph (h) 
above or this paragraph (j):
    Putnam will, at least 30 days in advance of the implementation of 
such additional service for which a fee is charged or for which there 
is a fee increase, provide a written notice (which may take the form of 
a letter or similar communication that is separate from the prospectus 
of the Fund and that explains the nature and amount of the additional 
service for which a fee is charged or of the increase in the rate of 
fee) to the Second Fiduciary of each Client Plan having an interest in 
the Collective Fund. Such written notice will include a Termination 
Form

[[Page 3056]]

expressly providing an election to withdraw from the Collective Fund, 
together with instructions on the use of such form.
    (C) In the event a Second Fiduciary submits a notice in writing to 
PFTC objecting to the initial investment by the Collective Fund in the 
Mutual Fund or the implementation of such additional service for which 
a fee is charged or such rate of fee increase, whichever is applicable, 
the Client Plan on whose behalf the objection was intended is given the 
opportunity to terminate its investment in the Collective Fund, without 
penalty to such Client Plan, within such time as may be necessary to 
effect the withdrawal in an orderly manner that is equitable to all 
withdrawing Client Plans and to the non-withdrawing Client Plans. In 
the case of a Client Plan that elects to withdraw under this 
subparagraph (C), the withdrawal shall be effected prior to the initial 
investment by the Collective Fund in the Mutual Fund or the 
implementation of such additional service for which a fee is charged or 
such rate of fee increase, whichever is applicable.
    (D) Notwithstanding the foregoing subparagraphs (B) and (C), Putnam 
may commence providing an additional Secondary Service for a fee or 
implement any increase in the rate of fee paid by the Mutual Fund to 
Putnam prior to providing the notice referred to in subparagraph (B) 
above or prior to the withdrawal of an objecting Client Plan, whichever 
is applicable, provided that, in either such event, the Collective Fund 
receives a cash credit equal to the Collective Fund's proportionate 
share of the fee for the additional Secondary Service or such fee 
increase charged to the Mutual Fund by Putnam, whichever is applicable, 
for the period from the date of such commencement or implementation to 
the later of the date that is 30 days after the notice referred to in 
subparagraph (B) above has been provided or, if applicable, the date on 
which any Client Plan that objects to the provision of such additional 
Secondary Service or to such fee increase has withdrawn from the 
Collective Fund pursuant to subparagraph (C) above. Any such cash 
credits shall be paid to the Collective Fund, with interest thereon at 
the prevailing Federal funds rate plus two percent (2%), no later than 
the fifth business day following the receipt of the increased fee by 
Putnam.\1\ The crediting of all such fees to the Collective Fund by 
Putnam will be audited by an independent accounting firm on at least an 
annual basis to verify the proper crediting of the fees and interest to 
the Collective Fund. The audit report shall be completed not later than 
six months after the period to which it relates.
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    \1\ Putnam will pay interest on any such amounts from the date 
it receives such incremental amounts to the date it makes the rebate 
payment to the Collective Fund.
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    (E) In the case of a Client Plan whose assets are proposed to be 
invested in the Collective Fund subsequent to the implementation of the 
arrangement and that has not authorized the investment of assets of the 
Collective Fund in the Mutual Fund, the Client Plan's investment in the 
Collective Fund is subject to: (1) The receipt by a Second Fiduciary of 
the full and detailed disclosures concerning the Mutual Fund pursuant 
to Section I(g), above, and (2) the prior written authorization of a 
Second Fiduciary pursuant to Section I(h), above (i.e., the 
authorization must be provided by such new Client Plan investor in 
advance of the initial investment).
    (k) For each Collective Fund using the fee structure described in 
paragraph (a)(1) above with respect to investments in the Mutual Fund, 
the Second Fiduciary of the Client Plan receives full written 
disclosure in a Fund prospectus or otherwise of any increases in the 
rates of fees charged by Putnam to the Mutual Fund for investment 
advisory services, or of a decrease in the number or kind of services 
performed by Putnam.

Section II--General Conditions

    (a) PFTC maintains for a period of six years the records necessary 
to enable the persons described in paragraph (b) below to determine 
whether the conditions of this exemption have been met, except that:
    (1) A separate prohibited transaction will not be considered to 
have occurred if, solely because of circumstances beyond the control of 
PFTC, the records are lost or destroyed prior to the end of the six-
year period; and
    (2) No party in interest other than Putnam shall be subject to the 
civil penalty that may be assessed under Section 502(i) of the Act or 
to the taxes imposed by Section 4975(a) and (b) of the Code, if the 
records are not maintained or are not available for examination as 
required by paragraph (b) below.
    (b)(1) Except as provided in paragraph (b)(2) below and 
notwithstanding any provisions of Section 504(a)(2) of the Act, the 
records referred to in paragraph (a) above are unconditionally 
available at their customary location for examination during normal 
business hours by:
    (i) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service, or the Securities & Exchange 
Commission,
    (ii) Any fiduciary of a Client Plan who has authority to acquire or 
dispose of the interest in the Collective Fund owned by such Client 
Plan, or any duly authorized employee or representative of such 
fiduciary, and
    (iii) Any participant or beneficiary of a Client Plan having an 
interest in the Collective Fund or duly authorized employee or 
representative of such participant or beneficiary.
    (2) None of the persons described in paragraph (b)(1)(ii) or (iii) 
above shall be authorized to examine trade secrets of Putnam, or 
commercial or financial information that is privileged or confidential.

Section III--Definitions

    (a) An ``affiliate'' of a person includes:
    (1) Any person directly or indirectly through one or more 
intermediaries, controlling, controlled by, or under common control 
with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (b) The term ``Collective Fund'' means any common or collective 
trust fund maintained by PFTC.
    (c) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (d) The term ``Mutual Fund'' means the Putnam Prime Money Market 
Fund and any other money market fund that is a diversified open-end 
investment company registered under the 1940 Act and operated in 
accordance with Rule 2a-7 under the 1940 Act as to which Putnam serves 
as an investment adviser. Putnam may also serve as a custodian, 
dividend disbursing agent, shareholder servicing agent, transfer agent, 
fund accountant, or provider of some other ``Secondary Service'' (as 
defined below in paragraph (g) below).
    (e) The term ``relative'' means a ``relative'' as that term is 
defined in section 3(15) of the Act (or a ``member of the family'') as 
that term is defined in section 4975(e)(6) of the Code), or a brother, 
a sister, or a spouse of a brother or a sister.
    (f) The term ``Second Fiduciary'' means a fiduciary of a Client 
Plan who is independent of, and unrelated to, Putnam. For purposes of 
this exemption, the Second Fiduciary will

[[Page 3057]]

not be deemed to be independent of an unrelated to Putnam if:
    (1) Such fiduciary directly or indirectly controls, is controlled 
by, or is under common control with Putnam;
    (2) Such fiduciary, or any officer, director, partner, employee, or 
relative of the fiduciary is an officer, director, partner or employee 
of Putnam (or is a relative of such persons); or
    (3) Such fiduciary directly or indirectly receives any compensation 
or other consideration for his or her own personal account in 
connection with any transaction described in this exemption.
    If an officer, director, partner or employee of Putnam (or a 
relative of such a person), is a director of such Second Fiduciary, and 
if he or she abstains from participation in (i) the decision of the 
Client Plan to invest in, and remain invested in, the Collective Fund 
and (ii) the granting of any authorization contemplated by Section I(h) 
or any deemed authorization contemplated by Section I(i) and (j) with 
respect to the Collective Fund, then paragraph (f)(2) above shall not 
apply.
    (g) The term ``Secondary Service'' means a service other than an 
investment management, investment advisory, or similar service, which 
is provided by Putnam to the Mutual Fund, including but not limited to 
custodial, accounting, administrative, or any other service.
    (h) The term ``net asset value (i.e., NAV)'' means the amount for 
purposes of pricing all purchases and sales, calculated by dividing the 
value of all securities, determined by a method as set forth in a 
Fund's prospectus and statement of additional information, and other 
assets belonging to the Fund or portfolio of the Fund, less the 
liabilities charged to each such portfolio or Fund, by the number of 
outstanding shares.

Summary of Facts and Representations

    1. The applicant is Putnam Fiduciary Trust Company (PFTC), a 
Massachusetts trust company subject to supervision by the Massachusetts 
Division of Banks. PFTC is a wholly-owned subsidiary of Putnam, LLC 
(together with PFTC and its other wholly-owned subsidiaries, 
collectively referred to herein as ``Putnam''). Putnam is a majority-
owned subsidiary of Great-West Lifeco U.S. Inc. Putnam is a global 
financial services firm primarily involved in the investment management 
business including the management of registered, open-end investment 
companies (``mutual funds''), other collective investment vehicles and 
single-client separate accounts. As of May 31, 2009, Putnam's total 
assets under management were approximately $102 billion.
    2. PFTC manages assets held in both collective investment vehicles 
(other than mutual funds) and single-client separate accounts. As of 
May 31, 2009, 2006, PFTC managed approximately $9 billion in assets.
    3. In particular, PFTC maintains a number of collective investment 
funds, the assets of which are managed by PFTC on a discretionary basis 
(the ``Collective Funds''). The Collective Funds are common or 
collective trust funds of a bank within the meaning of DOL Regulation 
2510.3-101(h)(1)(ii) and, as such, the assets of the Collective Funds 
are ``plan assets'' subject to Title I of the Act to the extent of the 
interests of ERISA Plans therein.
    4. Each of the Collective Funds generally has some level of cash 
balances and/or other assets to be invested in short-term, money market 
instruments. In the past, PFTC has typically invested such amounts in 
the short-term investment fund (the ``STIF'') made available by the 
custodian of the particular Collective Fund's assets or some other 
similar money market instrument or vehicle unrelated to Putnam.
    5. Putnam acts as the advisor of the Putnam Prime Money Market Fund 
(the ``Mutual Fund''), a money market mutual fund designed to serve as 
a short-term investment vehicle. The Mutual Fund is registered under 
the Investment Company Act of 1940 and is operated in accordance with 
the Securities & Exchange Commission (SEC) rules relating to money 
market funds (see, Rule 2a-7 under the Investment Company Act of 1940, 
as amended). The Applicant represents that since January 2006, the 
yield generated by the Mutual Fund has generally been superior to the 
yield generated by the STIF. Accordingly, PFTC believes it would be 
desirable for the Collective Funds to have the flexibility to invest in 
the Mutual Fund when such investment is prudent and in the best 
interest of the Collective Funds.\2\ Putnam further believes that it 
would be desirable to have the same flexibility to invest the assets of 
the Collective Funds in other money market mutual funds managed by 
Putnam when it is in the interest of the Collective Funds to do so.\3\
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    \2\ In order to achieve the benefits of this higher yield as 
soon as practicable, PFTC requests that the exemption, if granted, 
be retroactive to the date the proposed exemption is published in 
the Federal Register.
    \3\ References to the Mutual Fund in this Summary of Facts and 
Representations should be read to include such other money market 
mutual funds where the context so requires.
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    6. Given that an affiliate of PFTC receives investment management 
or advisory fees from the Mutual Fund, a decision by PFTC to cause 
assets of a Collective Fund to be invested in the Mutual Fund could 
constitute a self-dealing prohibited transaction under Section 
406(b)(1) of ERISA, absent an available exemption. Putnam may also 
receive fees from the Mutual Fund for services provided to the Mutual 
Fund other than investment management, investment advisory or similar 
services (``Secondary Services'') in which event any increase in such 
fees as a result of PFTC's decision to invest assets of the Collective 
Funds in the Mutual Fund or the engagement of Putnam to perform an 
additional Secondary Service for which a fee is charged could 
constitute prohibited self-dealing, absent an exemption. Prohibited 
Transaction Exemption 77-4 (PTE 77-4, 42 FR 18732, April 8, 1977) is 
designed to provide exemptive relief in such situations. However, one 
of the conditions of PTE 77-4 is that an independent plan fiduciary 
approve in writing the investment of plan assets in the affiliated 
mutual fund.
    7. In the case at hand, PFTC has not sought, and the relevant 
independent fiduciaries of existing ERISA Plan investors in the 
Collective Funds have not provided, any such written approval. Since 
the Collective Funds generally have numerous ERISA Plan investors (in 
many cases, a very large number of ERISA Plan investors), PFTC does not 
believe it is feasible, as a practical matter, to obtain the 
affirmative written approval of the relevant independent fiduciary of 
each and every ERISA Plan investor in the Collective Funds. Without 
such unanimous written approval, the exemption provided by PTE 77-4 
will not be available and the Collective Funds will be precluded from 
investing in the Mutual Fund.
    8. Similarly, in the event that Putnam is engaged to render an 
additional Secondary Service or any of the fees paid by the Mutual Fund 
is changed, PTE 77-4 would require PFTC to obtain the affirmative 
written approval of the relevant independent fiduciary of each ERISA 
Plan having an interest in the Collective Funds at the time of such 
engagement or change. Again, given the large number of ERISA Plans 
involved and the practical difficulty of obtaining an affirmative 
written approval from each and every one of them, it is unlikely that 
the requirements of PTE 77-4 would be able to be satisfied in the 
context of such an engagement or change.

[[Page 3058]]

    9. No sales commissions are charged in connection with the purchase 
of any shares of the Mutual Fund. In addition, no 12b-1 fees are 
charged by the Mutual Fund with respect to any class of shares of the 
Mutual Fund to be purchased by the Collective Funds pursuant to the 
exemption transactions, nor will any redemption fees be charged in 
connection with any sale of shares of the Mutual Fund by the Collective 
Funds. Putnam, including any officer or director of Putnam, will not 
purchase or sell shares of the Mutual Fund from or to any Collective 
Fund. However, there may be purchases or redemptions of such shares 
between a Collective Fund and an affiliate of PFTC acting solely in its 
capacity as underwriter for the Mutual Fund, if the sale is at NAV, and 
such affiliate acts as a riskless principal and does not receive any 
compensation, spread or other consideration in connection with such 
purchase or redemption.
    10. The Applicant represents that Putnam will not be providing any 
brokerage services for the acquisition or sale of securities by any 
Mutual Fund involved in this proposed exemption.
    11. Prior to investing the assets of any Collective Fund in shares 
of the Mutual Fund, PFTC will provide advance notice to the relevant 
independent fiduciary of each ERISA Plan then having an interest in 
such Collective Fund. Such notice will include a current prospectus for 
the Fund and a written statement giving full disclosure of the fee 
structure under which either Putnam's investment advisory fees will be 
credited back to the Collective Fund or the investment management fees 
applicable to the Collective Fund with respect to the assets invested 
in the Mutual Fund will be waived. The notice will also describe why 
PFTC believes the investment of the Collective Fund's assets in the 
Mutual Fund may be appropriate. In the case of a Client Plan whose 
assets are proposed to be invested in the Collective Fund subsequent to 
the implementation of the arrangement and that has not authorized the 
investment of assets of the Collective Fund in the Mutual Fund, the 
Client Plan's investment in the Collective Fund is subject to the prior 
written authorization of a Second Fiduciary.
    12. In the event the fee credit approach is utilized, the credit 
will not include any fees received by Putnam for Secondary Services 
rendered to the Mutual Fund because any such Secondary Services will 
not be duplicative of any services being provided by PFTC to the 
Collective Funds.
    13. PFTC represents that, for each ERISA Plan having an interest in 
a Collective Fund that engages in transactions described in this 
proposed exemption, the combined total of all fees that Putnam will 
receive, directly or indirectly, with respect to such ERISA Plan's 
interest in the Collective Fund for the provision of services to the 
Collective Fund and/or to the Mutual Fund will not be in excess of 
``reasonable compensation'' within the meaning of Section 408(b)(2) of 
the Act.
    14. Prior to either the addition of any Secondary Service that will 
result in the payment of a fee by the Mutual Fund to Putnam or any 
increase in the rate of any fee paid to Putnam by the Mutual Fund, PFTC 
will provide advance notice to the relevant independent fiduciary of 
each ERISA Plan then having an interest in a Collective Fund as to 
which the utilization of the Mutual Fund has been approved. Such notice 
will include a description, as applicable, of the (i) additional 
Secondary Service to be provided by Putnam and the resultant fee 
payable to Putnam or (ii) increase in the rate of any such fee payable 
to Putnam by the Mutual Fund or from a decrease in the number or kind 
of services performed by Putnam. Such written notice will also include 
a form (the Termination Form) expressly providing an election to 
withdraw from the Collective Fund, together with instructions on the 
use of such form.
    The advance notice described in this representation 13 need not be 
furnished 30 days in advance of the effective date for a fee increase 
provided an amount equal to the Collective Fund's proportionate share 
of the fee for such additional Secondary Service or the fee increase, 
whichever is applicable, for the period from the date of commencement 
of the additional Secondary Service or implementation of the fee 
increase, whichever is applicable, to the date that is 30 days after 
the delivery of the required notice or the date of the withdrawal of 
any objecting Client Plan, whichever is later, is credited to the 
Collective Fund with interest thereon at the prevailing Federal funds 
rate plus two percent (2%) (``the Applicable Interest Rate'').\4\
---------------------------------------------------------------------------

    \4\ As an example, assume the Mutual Fund fee increase becomes 
effective on June 1, Putnam provides notice of the fee increase on 
May 16 and one (and only one) participating Plan objects to the fee 
increase on June 10, and the sole objecting Plan withdraws from the 
Collective Fund on June 20. In this case, Putnam will pay a rebate 
to the Collective Fund equal to the allocable portion of the fee 
increase for the period from June 1 (i.e., the effective date of the 
fee increase) to June 20 (i.e., the date that one objecting Plan 
withdrew, (with interest at the Applicable Interest Rate) because 
that date is later than the expiration of the 30-day notice period).
---------------------------------------------------------------------------

    15. PFTC will maintain a system of internal accounting controls for 
the crediting or waiving of all relevant fees. In addition, PFTC 
proposes to retain Ernst & Young or another independent accounting firm 
to audit annually the crediting of such fees. Such audits will provide 
independent verification of the proper crediting of such fees. In the 
event an error is identified, it will be promptly corrected. If the 
correction requires a payment by PFTC, such payment shall include 
interest at the money market rate earned by the Mutual Fund. An 
independent accounting firm will also audit the crediting of fees and 
interest at the Applicable Interest Rate for the scenario described in 
paragraph 13, above.
    16. The information described above (including (a) the information 
to be provided prior to the initial utilization of the Mutual Fund and 
(b) the information to be provided in connection with any additional 
Secondary Service or any increase in the rate of any fee payable by the 
Mutual Fund to Putnam (unless an amount equal to the Collective Fund's 
proportionate share of the fee for such additional Secondary Service or 
fee increase, whichever is applicable, is credited to the Collective 
Fund with interest at the Applicable Interest Rate thereon)), will be 
furnished to the relevant independent fiduciary of each ERISA Plan then 
investing in the Collective Fund not less than 30 days prior to the 
initiation of investment in the Mutual Fund by such Collective Fund or 
the implementation of the additional Secondary Service or the increase 
in the rate of any such fee payable to Putnam.\5\
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    \5\ The requested exemption would not apply to any plans 
maintained by Putnam or any of its affiliates for their own 
employees. The Applicant represents that to the extent any such 
plans have an interest in a Collective Fund, the investment of such 
Collective Fund's assets attributable to such plans in the Mutual 
Fund would be covered by Prohibited Transaction Exemption 77-3 (42 
FR 18734, April 8, 1977). The Department expresses no opinion herein 
on whether such transactions would qualify for exemptive relief 
under PTE 77-3.
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    17. In the event any such independent fiduciary submits a notice in 
writing to PFTC objecting to the initial utilization, additional 
Secondary Service or increased rate of fee, including a decrease in the 
number or kind of services performed by Putnam (unless an amount equal 
to the Collective Fund's share of the fee for such additional service 
or fee increase, whichever is applicable, is credited to the Collective 
Fund with interest at the Applicable Interest Rate thereon), the

[[Page 3059]]

ERISA Plan on whose behalf the objection was tendered will be given the 
opportunity to withdraw its investment in the Collective Fund, without 
penalty to such ERISA Plan, within such time as may be necessary to 
effect such withdrawal in an orderly manner that is equitable to all 
withdrawing ERISA Plans and all non-withdrawing ERISA Plans. In the 
case of an ERISA Plan that elects to withdraw pursuant to the preceding 
sentence, such withdrawal shall be effected prior to (a) the initial 
utilization of the Mutual Fund, or (b) the implementation of the 
additional Secondary Service or the increase in the rate of fee (unless 
an amount equal to the fee for such additional Secondary Service or fee 
increase, whichever is applicable, for the period from the date of such 
implementation to the date on which the objecting Client Plan has 
withdrawn from the Collective Fund is credited to the Collective Fund 
with interest at the Applicable Interest Rate thereon); provided, 
however, that the Collective Fund's existing investment in the Mutual 
Fund need not be discontinued by reason of an ERISA Plan electing to 
withdraw. Putnam confirms that it will not receive any ``float'' with 
respect to its receipt of incremental fees for Secondary Services that 
become effective before the requisite negative consent has been 
obtained and that, as a result, must be credited to the Collective 
Fund. This is because Putnam will credit interest on any such amounts 
from the date it receives such incremental amounts to the date they are 
actually credited to the Collective Fund. Putnam emphasizes that the 
amount credited to the Collective Fund would not be limited to the 
portion of the fee increase that is allocable to the objecting Client 
Plan(s), but rather will be equal to the portion of the fee increase 
that is allocable to the Collective Fund's entire position in the 
Mutual Fund. Putnam represents that any such cash credits will be paid 
to the Collective Fund, with interest thereon at the Applicable 
Interest Rate, no later than the fifth business day following the 
receipt of the increased fee by Putnam.\6\ Putnam further confirms that 
if a Client Plan objects to a Mutual Fund fee increase at a time when, 
due to extraordinary circumstances, withdrawals from the Collective 
Fund are suspended, then Putnam would continue to credit the allocable 
amount of the fee increase to the Collective Fund, with interest, until 
the objecting Client Plan is able to withdraw. To summarize, if Putnam 
were to implement an additional Secondary Service or increase the rate 
of fee for any Secondary Service before the expiration of the 30-day 
period after notice has been given to Plans, and a Plan objects and 
wishes to withdraw from the Collective Fund, Putnam will pay a rebate 
to the Collective Fund, with interest at the Applicable Interest Rate 
thereon, from the effective date of the fee increase to the later of 
the expiration of the 30-day period or the date on which the objecting 
Plan withdraws from the Collective Fund. Such rebate will be paid by 
Putnam within five business days of the date that Putnam actually 
receives the increased fee from the Mutual Fund.
---------------------------------------------------------------------------

    \6\ As an example, assume the mutual fund fee increase is 
effective on June 1, Putnam provides notice of the fee increase to 
the participating Plans on May 31, one (and only one) participating 
Plan objects to the fee increase on June 25, and the sole objecting 
Plan withdraws from the Collective Fund on July 10. In this case, 
the aggregate rebate amount would be equal to the allocable portion 
of the fee increase for the period from June 1 (i.e., the effective 
date of the fee increase) to July 10 (i.e., the date that the sole 
objecting Plan withdraws, given that it is later than the expiration 
of the 30-day notice period). Further, assuming that Putnam receives 
payments of the increased fee from the Mutual Fund on the fifth day 
of each month, Putnam would receive a payment that includes the fee 
increase for the month of June on July 5 and would rebate the entire 
allocable portion of that fee increase to the Collective Fund within 
5 business days of July 5, with interest at the Applicable Interest 
Rate. Moreover, on August 5, Putnam would receive another payment 
from the Mutual Fund that includes the fee increase for the month of 
July. The allocable portion of the fee increase for the period from 
July 1 to July 10 (i.e., the date that the sole objecting Plan 
withdrew) would be rebated to the Collective Fund within 5 business 
days of August 5, with interest at the Applicable Interest Rate.
---------------------------------------------------------------------------

    18. On an annual basis, Putnam will provide notice to the relevant 
independent fiduciary of each ERISA Plan having an interest in the 
Collective Fund, which notice will include: (a) The approximate 
percentage (which may be in the form of a range) of the Collective 
Fund's assets that were invested in the Mutual Fund during the year; 
and (b) a statement that, if the fiduciary objects to the continued 
investment by the Collective Fund in the Mutual Fund, the ERISA Plan 
should withdraw from the Collective Fund, and (c) a Termination Form 
\7\ expressly providing an election to withdraw from the Collective 
Fund, together with instructions on the use of such form. Specifically, 
the instructions will explain that the Client Plan has the opportunity 
to withdraw from the Collective Fund by submitting the completed 
Termination Form to PFTC. Further, the instructions will provide the 
PFTC address to which the form must be submitted. The form will further 
provide that upon receipt thereof, the Client Plan's interest in the 
Collective Fund that is the subject of such withdrawal election will be 
redeemed as of the next regularly scheduled withdrawal date of the 
Collective Fund, following whatever advance notice period is applicable 
to the particular Collective Fund (assuming, of course, that such 
Collective Fund is not subject to a suspension of withdrawals due to 
extraordinary events). PFTC represents that, consistent with standard 
practice in the industry with respect to collective funds, the 
governing documents of Putnam's Collective Funds contain provisions 
that allow for the suspension of withdrawals in extraordinary and 
unusual circumstances, such as market shutdowns, etc.
---------------------------------------------------------------------------

    \7\ However, if the Termination Form has been provided to the 
Second Fiduciary pursuant to Section I(j), the Termination Form need 
not be provided again for an annual reauthorization pursuant to this 
Section I(i) unless at least six months has elapsed since the form 
was previously provided.
---------------------------------------------------------------------------

    19. All other dealings between the Collective Funds and the Mutual 
Fund will be on a basis no less favorable to the Collective Fund than 
such dealings will be with the other shareholders of the Mutual Fund.
    20. In summary, PFTC represents that the exemption transactions 
described herein will satisfy the statutory criteria of Section 408(a) 
of the Act because (a) the ability to invest in the Mutual Fund will 
provide the Collective Funds the opportunity to enhance the yield on 
their cash balances and other short-term investments; (b) PFTC will 
require annual audits by an independent accounting firm to verify the 
proper crediting of the relevant fees and interest due, if applicable; 
(c) PFTC will provide written notice to the relevant independent 
fiduciary of each affected ERISA Plan in advance of (i) the initial 
utilization by the Collective Fund of the Mutual Fund, (ii) the 
commencement of an additional Secondary Service by Putnam (unless an 
amount equal to the Collective Fund's proportionate share of the fee 
for such additional Secondary Service is credited to the Collective 
Fund with interest at the Applicable Interest Rate thereon) or (iii) 
the effective date of any increase in the rate of any fee payable to 
Putnam by the Mutual Fund (unless an amount equal to the Collective 
Fund's proportionate share of the fee increase is credited to the 
Collective Fund with interest at the Applicable Interest Rate thereon); 
(d) prior to any such initial utilization, commencement or increase, 
such independent fiduciary will have an opportunity to express an 
objection and to cause the Client Plan to withdraw from the Collective 
Fund, provided that Putnam may commence providing an

[[Page 3060]]

additional Secondary Service for a fee or implement an increase in the 
rate of fee paid by the Mutual Fund to Putnam prior to the withdrawal 
of the objecting Client Plan as long as the amount described in (c) 
above is credited to the Collective Fund; (e) no commissions or 
redemption fees will be paid by an ERISA Plan in connection with either 
the purchase or sale of shares of the Mutual Fund; (f) Putnam will not 
receive any 12b-1 fees as a result of the Collective Fund's purchase or 
holding of shares of the Mutual Fund; and (g) all dealings between the 
Collective Funds and the Mutual Fund will be on a basis that is at 
least as favorable to the ERISA Plans as such dealings are with other 
shareholders of the Mutual Fund.

FOR FURTHER INFORMATION CONTACT: Mr. Gary H. Lefkowitz of the 
Department, telephone (202) 693-8546. (This is not a toll-free number.)

    The PNC Financial Services Group, Inc., Located in Pittsburgh, 
Pennsylvania, [Application No. D-11448].

Proposed Exemption

Section I--Exemption for In-Kind Redemption of Assets

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Act and 4975(c)(2) of the Code, and 
in accordance with the procedures set forth in 29 CFR Part 2570 Subpart 
B (55 FR 32836, 32847, August 10, 1990). If the proposed exemption is 
granted, the restrictions in sections 406(a)(1)(A) through (D) and 
406(b)(1) and (b)(2) of the Act, and the sanctions resulting from the 
application of section 4975 of the Code, by reason of section 
4975(c)(1)(A) through (E) of the Code, shall not apply \8\ to certain 
in-kind redemptions (the Redemption(s)) by The Employees' Thrift Plan 
of Mercantile Bankshares Corporation and Participating Affiliates (the 
Mercantile Plan) that occurred overnight on October 31, 2007, of shares 
(the Shares) of proprietary mutual funds (the Funds) for which The PNC 
Financial Services Group, Inc. (PNC) or an affiliate thereof provides 
investment advisory and other services, provided that the following 
conditions were satisfied:
---------------------------------------------------------------------------

    \8\ For purposes of this proposed exemption, references to 
specific provisions of Title I of the Act, unless otherwise 
specified, refer also to the corresponding provisions of the Code.
---------------------------------------------------------------------------

    (A) No sales commissions, redemption fees, or other similar fees 
were paid in connection with the Redemptions (other than customary 
transfer charges paid to parties other than PNC and any affiliates of 
PNC (PNC Affiliates));
    (B) The assets transferred to the Mercantile Plan pursuant to the 
Redemptions consisted entirely of cash and Transferable Securities, as 
such term is defined in Section II, below;
    (C) In each Redemption, the Mercantile Plan received its pro rata 
portion of the securities with respect to the Capital Opportunities 
Fund, and certain securities, selected pursuant to a verifiable 
methodology, that were approved by an independent fiduciary 
(Independent Fiduciary, as such term is defined in Section II) with 
respect to the other four Funds covered by this proposed exemption, 
such that the securities received were equal in value to that of the 
number of Shares redeemed, as determined in a single valuation (using 
sources independent of PNC and PNC Affiliates) performed in the same 
manner and as of the close of business on the same day, in accordance 
with Rule 2a-4 under the Investment Company Act of 1940, as amended 
(the 1940 Act) and the then-existing procedures adopted by the Board of 
Directors of PNC Funds, Inc., which were in compliance with all 
applicable securities laws;
    (D) Neither PNC nor any PNC Affiliate received any direct or 
indirect compensation or any fees, including any fees payable pursuant 
to Rule 12b-1 under the 1940 Act, in connection with any Redemption of 
the Shares;
    (E) Prior to a Redemption, the Independent Fiduciary received a 
full written disclosure of information regarding the Redemption;
    (F) Prior to a Redemption, the Independent Fiduciary communicated 
its approval for such Redemption to PNC;
    (G) Prior to a Redemption, based on the disclosures provided to the 
Independent Fiduciary, the Independent Fiduciary determined that the 
terms of the Redemption were fair to the Mercantile Plan, and 
comparable to and no less favorable than terms obtainable at arm's 
length between unaffiliated parties, and that the Redemption was in the 
best interests of the Mercantile Plan and its participants and 
beneficiaries;
    (H) Not later than thirty (30) business days after the completion 
of a Redemption, the Independent Fiduciary received a written 
confirmation regarding such Redemption containing:
    (i) The number of Shares held by the Mercantile Plan immediately 
before the Redemption (and the related per Share net asset value and 
the total dollar value of the Shares held) for each Fund;
    (ii) The identity (and related aggregate dollar value) of each 
security provided to the Mercantile Plan pursuant to the Redemption, 
including each security valued in accordance with Rule 2a-4 under the 
1940 Act and procedures adopted by the Board of Directors of PNC Funds, 
Inc. (using sources independent of PNC and PNC Affiliates);
    (iii) The current market price of each security received by the 
Mercantile Plan pursuant to the Redemption; and
    (iv) If applicable, the identity of each pricing service or market 
maker consulted in determining the value of such securities;
    (I) The value of the securities received by the Mercantile Plan for 
each redeemed Share equaled the net asset value of such Share at the 
time of the transaction, and such value equaled the value that would 
have been received by any other investor for shares of the same class 
of the Fund at that time;
    (J) Subsequent to a Redemption, the Independent Fiduciary performed 
a post-transaction review that included, among other things, a random 
sampling of the pricing information it received;
    (K) Each of the Mercantile Plan's dealings with the Funds, the 
investment advisors to the Funds, the principal underwriter for the 
Funds, or any affiliated person thereof, were on a basis no less 
favorable to the Mercantile Plan than dealings between the Funds and 
other shareholders holding shares of the same class as the Shares;
    (L) Within sixty (60) days of the date of publication of this 
notice of proposed exemption, PNC reimburses The PNC Financial Services 
Group, Inc. Incentive Savings Plan (the PNC Plan), into which the 
Mercantile Plan was merged on November 1, 2007, for all brokerage costs 
incurred by the Mercantile Plan on November 1, 2007 to liquidate the 
securities that the Mercantile Plan received in kind pursuant to a 
Redemption;
    (M) PNC maintains, or causes to be maintained, for a period of six 
years from the date of any covered transaction such records as are 
necessary to enable the persons described in paragraph (N) below to 
determine whether the conditions of this exemption have been met, 
except that (i) a separate prohibited transaction will not be 
considered to have occurred if, due to circumstances beyond the control 
of PNC, the records are lost or destroyed prior to the end of the six-
year period and (ii) no party in interest with respect to the 
Mercantile Plan other than PNC shall be subject to the civil penalty 
that may be assessed under section 502(i) of the Act or to the taxes 
imposed by section 4975(a) and (b) of the Code if such records are not 
maintained or are not available for examination as required by 
paragraph (N) below;

[[Page 3061]]

    (N)(1) Except as provided in subparagraph (2) of this paragraph 
(N), and notwithstanding any provisions of section 504(a)(2) and (b) of 
the Act, the records referred to in paragraph (M) above are 
unconditionally available at their customary locations for examination 
during normal business hours by (i) any duly authorized employee or 
representative of the Department, the Internal Revenue Service, or the 
Securities and Exchange Commission (SEC), (ii) any fiduciary of the PNC 
Plan as the successor to the Mercantile Plan or any duly authorized 
representative of such fiduciary, (iii) any participant or beneficiary 
of the PNC Plan as the successor to the Mercantile Plan or duly 
authorized representative of such participant or beneficiary, and (iv) 
any employer whose employees are covered by the PNC Plan as the 
successor to the Mercantile Plan and any employee organization whose 
members are covered by such plan;
    (2) None of the persons described in paragraphs (N)(1)(ii), (iii) 
and (iv) shall be authorized to examine trade secrets of PNC or the 
Funds, or commercial or financial information which is privileged or 
confidential;
    (3) Should PNC or the Funds refuse to disclose information on the 
basis that such information is exempt from disclosure pursuant to 
paragraph (N)(2) above, PNC or the Funds shall, by the close of the 
thirtieth (30th) day following the request, provide a written notice 
advising that person of the reasons for the refusal and that the 
Department may request such information.

Section II--Definitions

    For purposes of this exemption--
    (A) The term ``affiliate'' means:
    (1) Any person (including corporation or partnership) directly or 
indirectly through one or more intermediaries, controlling, controlled 
by, or under common control with the person;
    (2) Any officer, director, employee, relative, or partner in any 
such person; and
    (3) Any corporation or partnership of which such person is an 
officer, director, partner, or employee.
    (B) The term ``control'' means the power to exercise a controlling 
influence over the management or policies of a person other than an 
individual.
    (C) The term ``net asset value'' means the amount for purposes of 
pricing all purchases and sales calculated by dividing the value of all 
securities, determined by a method as set forth in the Fund's 
prospectus and statement of additional information, and other assets 
belonging to the Fund, less the liabilities charged to each such Fund, 
by the number of outstanding shares.
    (D) The term ``Independent Fiduciary'' means a fiduciary who is: 
(i) Independent of and unrelated to PNC and its affiliates, and (ii) 
appointed to act on behalf of the Mercantile Plan with respect to the 
in-kind transfer of assets from one or more Funds to, or for the 
benefit of, the Mercantile Plan. For purposes of this exemption, a 
fiduciary will not be deemed to be independent of and unrelated to PNC 
if: (i) Such fiduciary directly or indirectly controls, is controlled 
by, or is under common control with, PNC; (ii) such fiduciary directly 
or indirectly receives any compensation or other consideration in 
connection with any transaction described in this exemption (except 
that an independent fiduciary may receive compensation from PNC in 
connection with the transactions contemplated herein if the amount or 
payment of such compensation is not contingent upon, or in any way 
affected by, the independent fiduciary's decision); and (iii) an amount 
equal to more than one percent (1%) of such fiduciary's gross income 
(for federal income tax purposes, in its prior tax year), is paid by 
PNC and its affiliates to the fiduciary in 2007, the tax year at issue.
    (E) The term ``Transferable Securities'' means securities (1) for 
which market quotations are readily available (as determined under Rule 
2a-4 of the 1940 Act) from persons independent of PNC and (2) which are 
not:
    (i) Securities that, if publicly offered or sold, would require 
registration under the Securities Act of 1933;
    (ii) Securities issued by entities in countries which (a) restrict 
or prohibit the holding of securities by non-nationals other than 
through qualified investment vehicles, such as the Funds, or (b) permit 
transfers of ownership of securities to be effected only by 
transactions conducted on a local stock exchange;
    (iii) Certain portfolio positions (such as forward foreign currency 
contracts, futures and options contracts, swap transactions, 
certificates of deposit, and repurchase agreements) that, although 
liquid and marketable, involve the assumption of contractual 
obligations, require special trading facilities, or can only be traded 
with the counter-party to the transaction to effect a change in 
beneficial ownership;
    (iv) Cash equivalents (such as certificates of deposit, commercial 
paper, and repurchase agreements);
    (v) Other assets that are not readily distributable (including 
receivables and prepaid expenses), net of all liabilities (including 
accounts payable); and
    (vi) Securities subject to ``stop transfer'' instructions or 
similar contractual restrictions on transfer.
    (F) The term ``relative'' means a ``relative'' as that term is 
defined in section 3(15) of the Act (or a ``member of the family'' as 
that term is defined in section 4975(e)(6) of the Code), or a brother, 
sister, or a spouse of a brother or a sister.
    Effective Date: The exemption, if granted, will be effective as of 
October 31, 2007.\9\
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    \9\ As a general matter, it is the Department's view that the 
model practice to effect an in-kind redemption by a mutual fund to a 
shareholder-pension plan, subject to Title I of ERISA, is through a 
pro rata distribution because the adoption of such a method ensures 
that the individual stocks selected for the in-kind redemption are 
objectively determined. The Department recognizes that the in-kind 
redemption described in this notice of proposed exemption involves 
unique circumstances because, among other things, it facilitated the 
transfer of plan assets and the merger of The Employees' Thrift Plan 
of Mercantile Bankshares Corporation and Participating Affiliates 
(the Mercantile Plan) with The PNC Financial Services Group, Inc. 
Incentive Savings Plan (the PNC Plan). See also Facts and 
Representations 12, which summarizes the basis for 
satisfying the section 408(a) statutory criteria for providing 
exemptive relief. In this regard, an important condition contained 
in this notice of proposed exemption is that PNC will pay all 
brokerage commissions associated with the Mercantile Plan's sale of 
the securities received in the Redemptions. Further, the Department 
encourages applicants, their advisers and counsel to confer, in 
advance, with EBSA's Office of Exemption Determinations as to 
whether a contemplated non-pro rata in-kind redemption involving 
plan assets may qualify for prohibited transaction exemptive relief. 
Although the applicant requested both retroactive and prospective 
exemptive relief, the Department is proposing only retroactive 
exemptive relief relating to the October 31, 2007 Redemptions.
---------------------------------------------------------------------------

Summary of Facts and Representations

    1. The PNC Financial Services Group, Inc. (PNC) is a bank holding 
company that owns or controls two principal banks, (i) PNC Bank, 
National Association (PNC Bank, N.A.) and (ii) PNC Bank, Delaware, as 
well as a number of non-bank subsidiaries. In addition, on March 2, 
2007, PNC acquired Mercantile Bankshares Corporation (Mercantile), the 
parent company of eleven subsidiary banks. PNC merged the Mercantile 
subsidiary banks with, and into, PNC Bank, N.A. on September 14, 2007, 
pursuant to an application filed with, and approved by, the Office of 
the Comptroller of the Currency. Immediately after consummation of that 
merger, PNC Bank, N.A. transferred to PNC Bank, Delaware nine Delaware 
branches previously held by two of the Mercantile subsidiary banks, 
pursuant to a Bank Merger Act application filed

[[Page 3062]]

with, and approved by, the Federal Reserve Bank of Cleveland.
    PNC provides, through its subsidiaries, a wide variety of trust and 
banking services to individuals, corporations, and institutions. 
Through its banking subsidiaries, PNC provides investment management, 
fiduciary, and trustee services to employee benefit plans and 
charitable and endowment assets, as well as non-discretionary services 
and investment options for defined contribution plans. PNC also 
provides a range of tailored investment, trust, and private banking 
products to affluent individuals and families.
    PNC, through its affiliates, also provides various types of 
administrative services to mutual funds, including acting as transfer 
and disbursing agent and providing custodial and accounting services.
    2. In connection with PNC's acquisition of Mercantile, PNC assumed 
sponsorship of The Employees' Thrift Plan of Mercantile Bankshares 
Corporation and Participating Affiliates (the Mercantile Plan), a 
qualified defined contribution retirement plan, and PNC Bank, N.A. 
became the Mercantile Plan's trustee. PN