Proposed Exemptions From Certain Prohibited Transaction Restrictions, 77594-77623 [2011-31741]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 76, Number 239 (Tuesday, December 13, 2011)]
[Notices]
[Pages 77594-77623]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31741]



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Vol. 76

Tuesday,

No. 239

December 13, 2011

Part II





Department of Labor





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Employee Benefits Security Administration





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Proposed Exemptions From Certain Prohibited Transaction Restrictions; 
Notice

Federal Register / Vol. 76, No. 239 / Tuesday, December 13, 2011 / 
Notices

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DEPARTMENT OF LABOR

Employee Benefits Security Administration


Proposed Exemptions From Certain Prohibited Transaction 
Restrictions

AGENCY: Employee Benefits Security Administration, Labor.

ACTION: Notice of Proposed Exemptions.

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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). This notice includes the 
following proposed exemptions: D-11517, JPMorgan Chase & Co. and its 
Current and Future Affiliates and Subsidiaries (JPMorgan Chase); D-
11579, Delaware Charter Guarantee & Trust Co. d\b\a\ Principle Trust 
Company (Principle Trust); D-11628, Aztec Well Servicing Company and 
Related Companies Medical Plan Trust Fund (the Plan); D-11669, Genzyme 
Corporation 401(k) Plan (the Plan or the Applicant); and Retirement 
Program for Employees of EnPro Industries (the Plan), D-11662 et al.

DATES: 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.

ADDRESSES: 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. 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 email or fax. Any 
such comments or requests should be sent either by email 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.

SUPPLEMENTARY INFORMATION: 

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).
    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.

JPMorgan Chase & Co. and Its Current and Future Affiliates and 
Subsidiaries (JPMorgan Chase), Located in New York, New York

Application Number D-11517

Proposed Exemption

    The Department is considering granting an exemption under the 
authority of section 408(a) of the Employee Retirement Income Security 
Act of 1974 (ERISA or the Act) and section 4975(c)(2) of the Internal 
Revenue Code of 1986, as amended (the Code), and in accordance with the 
procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, 
32847, August 10, 1990).\1\
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    \1\ For purposes of this proposed exemption, references to 
section 406 of ERISA should be read to refer as well to the 
corresponding provisions of section 4975 of the Code.
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Section I. Sales of Auction Rate Securities From Plans to JPMorgan 
Chase: Unrelated to a Settlement Agreement
    If the proposed exemption is granted, the restrictions of section 
406(a)(1)(A) and (D) and section 406(b)(1) and (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), (D), and (E) of the Code, shall not 
apply, effective February 1, 2008, to the sale by a Plan (as defined in 
section V(e)) of an Auction Rate Security (as defined in section V(c)) 
to JPMorgan Chase, where such sale (an Unrelated Sale) is unrelated to, 
and not made in connection with, a Settlement Agreement (as defined in 
section V(f)), provided that the conditions set forth in section II 
have been met.
Section II. Conditions Applicable to Transactions Described in Section 
I
    (a) The Plan acquired the Auction Rate Security in connection with 
brokerage or advisory services provided by JPMorgan Chase;
    (b) The last auction for the Auction Rate Security was 
unsuccessful;
    (c) Except in the case of a Plan sponsored by JPMorgan Chase for 
its own employees (a JPMorgan Chase Plan), the Unrelated Sale is made 
pursuant to a written offer by JPMorgan Chase (the Offer) containing 
all of the material terms of the Unrelated Sale, including, but not 
limited to the most recent rate information for the Auction Rate 
Security (if reliable information is available). Either the Offer or 
other materials available to the Plan provide the identity and par 
value of the Auction Rate Security. Notwithstanding the foregoing, in 
the case of a pooled

[[Page 77595]]

fund maintained or advised by JPMorgan Chase, this condition shall be 
deemed met to the extent each Plan invested in the pooled fund (other 
than a JPMorgan Chase Plan) receives written notice regarding the 
Unrelated Sale, where such notice contains the material terms of the 
Unrelated Sale, including, but not limited to, the material terms 
described in the preceding sentence;
    (d) The Unrelated Sale is for no consideration other than cash 
payment against prompt delivery of the Auction Rate Security;
    (e) The sales price for the Auction Rate Security is equal to the 
par value of the Auction Rate Security, plus any accrued but unpaid 
interest or dividends; \2\
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    \2\ This proposed exemption does not address tax issues. The 
Department has been informed by the Internal Revenue Service and the 
Department of the Treasury that they are considering providing 
limited relief from the requirements of sections 72(t)(4), 
401(a)(9), and 4974 of the Code with respect to retirement plans 
that hold Auction Rate Securities. The Department has also been 
informed by the Internal Revenue Service that if Auction Rate 
Securities are purchased from a Plan in a transaction described in 
sections I and III at a price that exceeds the fair market value of 
those securities, then the excess value would be treated as a 
contribution for purposes of applying applicable contribution and 
deduction limits under sections 219, 404, 408, and 415 of the Code.
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    (f) The Plan does not waive any rights or claims in connection with 
the Unrelated Sale;
    (g) The decision to accept the Offer or retain the Auction Rate 
Security is made by a Plan fiduciary or Plan participant or IRA owner 
who is independent (as defined in section V(d)) of JPMorgan Chase. 
Notwithstanding the foregoing: (1) In the case of an individual 
retirement account (an IRA, as described in section V(e) below) which 
is beneficially owned by an employee, officer, director or partner of 
JPMorgan Chase, or a relative of any such persons, the decision to 
accept the Offer or retain the Auction Rate Security may be made by 
such employee, officer, director, partner, or relative; or (2) in the 
case of a JPMorgan Chase Plan or a pooled fund maintained or advised by 
JPMorgan Chase, the decision to accept the Offer may be made by 
JPMorgan Chase after JPMorgan Chase has determined that such purchase 
is in the best interest of the JPMorgan Chase Plan or pooled fund; \3\
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    \3\ The Department notes that the Act's general standards of 
fiduciary conduct also would apply to the transactions described 
herein. In this regard, section 404 requires, among other things, 
that a fiduciary discharge his duties respecting a plan solely in 
the interest of the plan's participants and beneficiaries and in a 
prudent manner. Accordingly, a plan fiduciary must act prudently 
with respect to, among other things, the decision to sell the 
Auction Rate Security to JPMorgan Chase for the par value of the 
Auction Rate Security, plus any accrued but unpaid interest or 
dividends. The Department further emphasizes that it expects Plan 
fiduciaries, prior to entering into any of the proposed 
transactions, to fully understand the risks associated with this 
type of transaction following disclosure by JPMorgan Chase of all 
relevant information.
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    (h) Except in the case of a JPMorgan Chase Plan or a pooled fund 
maintained or advised by JPMorgan Chase, neither JPMorgan Chase nor any 
affiliate exercises investment discretion or renders investment advice 
within the meaning of 29 CFR 2510.3-21(c) with respect to the decision 
to accept the Offer or retain the Auction Rate Security;
    (i) The Plan does not pay any commissions or transaction costs with 
respect to the Unrelated Sale;
    (j) The Unrelated Sale is not part of an arrangement, agreement or 
understanding designed to benefit a party in interest to the Plan;
    (k) JPMorgan Chase and its affiliates, as applicable, maintain, or 
cause to be maintained, for a period of six (6) years from the date of 
the Unrelated Sale, such records as are necessary to enable the persons 
described below in paragraph (l)(1), to determine whether the 
conditions of this exemption, if granted, have been met, except that--
    (1) No party in interest with respect to a Plan which engages in an 
Unrelated Sale, other than JPMorgan Chase and its affiliates, as 
applicable, shall be subject to a civil penalty under section 502(i) of 
the Act or the taxes imposed by section 4975(a) and (b) of the Code, if 
such records are not maintained, or not available for examination, as 
required, below, by paragraph (l)(1); and
    (2) A separate prohibited transaction shall not be considered to 
have occurred solely because, due to circumstances beyond the control 
of JPMorgan Chase or its affiliates, as applicable, such records are 
lost or destroyed prior to the end of the six-year period;
    (l)(1) Except as provided below in paragraph (l)(2), and 
notwithstanding any provisions of subsections (a)(2) and (b) of section 
504 of the Act, the records referred to above in paragraph (k) are 
unconditionally available at their customary location for examination 
during normal business hours by--
    (A) Any duly authorized employee or representative of the 
Department, the Internal Revenue Service, or the U.S. Securities and 
Exchange Commission; or
    (B) Any fiduciary of any Plan, including any IRA owner, that 
engages in a Sale, or any duly authorized employee or representative of 
such fiduciary; or
    (C) Any employer of participants and beneficiaries and any employee 
organization whose members are covered by a Plan that engages in the 
Unrelated Sale, or any authorized employee or representative of these 
entities;
    (2) None of the persons described above in paragraph (l)(1)(B)-(C) 
shall be authorized to examine trade secrets of JPMorgan Chase, or 
commercial or financial information which is privileged or 
confidential; and
    (3) Should JPMorgan Chase refuse to disclose information on the 
basis that such information is exempt from disclosure, JPMorgan Chase 
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.
Section III. Sales of Auction Rate Securities From Plans to JPMorgan 
Chase: Related to a Settlement Agreement
    If the proposed exemption is granted, the restrictions of section 
406(a)(1)(A) and (D) and section 406(b)(1) and (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), (D), and (E) of the Code, shall not 
apply, effective February 1, 2008, to the sale by a Plan of an Auction 
Rate Security to JPMorgan Chase, where such sale (a Settlement Sale) is 
related to, and made in connection with, a Settlement Agreement, 
provided that the conditions set forth in Section IV have been met.
Section IV. Conditions Applicable to Transactions Described in Section 
III
    (a) The terms and delivery and timing of the Offer are consistent 
with the requirements set forth in the Settlement Agreement;
    (b) The Offer or other documents available to the Plan specifically 
describe, among other things:
    (1) How a Plan may determine: the Auction Rate Securities held by 
the Plan with JPMorgan Chase, the purchase dates for the Auction Rate 
Securities, and (if reliable information is available) the most recent 
rate information for the Auction Rate Securities;
    (2) The number of shares and par value of the Auction Rate 
Securities available for purchase under the Offer;
    (3) The background of the Offer;
    (4) That participating in the Offer will not result in or 
constitute a waiver of any claim of the tendering Plan;
    (5) The methods and timing by which Plans may accept the Offer;
    (6) The purchase dates, or the manner of determining the purchase 
dates, for

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Auction Rate Securities tendered pursuant to the Offer;
    (7) The timing for acceptance by JPMorgan Chase of tendered Auction 
Rate Securities;
    (8) The timing of payment for Auction Rate Securities accepted by 
JPMorgan Chase for payment;
    (9) The methods and timing by which a Plan may elect to withdraw 
tendered Auction Rate Securities from the Offer;
    (10) The expiration date of the Offer;
    (11) The fact that JPMorgan Chase may make purchases of Auction 
Rate Securities outside of the Offer and may otherwise buy, sell, hold 
or seek to restructure, redeem or otherwise dispose of the Auction Rate 
Securities;
    (12) A description of the risk factors relating to the Offer as 
JPMorgan Chase deems appropriate;
    (13) How to obtain additional information concerning the Offer; and
    (14) The manner in which information concerning material amendments 
or changes to the Offer will be communicated to affected Plans;
    (c) The terms of the Settlement Sale are consistent with the 
requirements set forth in the Settlement Agreement; and
    (d) All of the conditions in Section II have been met with respect 
to the Settlement Sale.

Section V. Definitions

    For purposes of this proposed exemption:
    (a) The term ``affiliate'' means: Any person directly or 
indirectly, through one or more intermediaries, controlling, controlled 
by, or under common control with such other person;
    (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 ``Auction Rate Security'' means a security that:
    (1) Is either a debt instrument (generally with a long-term nominal 
maturity) or preferred stock; and
    (2) Has an interest rate or dividend that is reset at specific 
intervals through a Dutch auction process;
    (d) A person is ``independent'' of JPMorgan Chase if the person is:
    (1) Not JPMorgan Chase or an affiliate; and (2) not a relative (as 
defined in ERISA section 3(15)) of the party engaging in the 
transaction;
    (e) The term ``Plan'' means: An individual retirement account or 
similar account described in section 4975(e)(1)(B) through (F) of the 
Code (an IRA); an employee benefit plan as defined in section 3(3) of 
ERISA; or an entity holding plan assets within the meaning of 29 CFR 
2510.3-101, as modified by ERISA section 3(42); and
    (f) The term ``Settlement Agreement'' means: A legal settlement 
involving JPMorgan Chase and a U.S. state or federal authority that 
provides for the purchase of an Auction Rate Security by JPMorgan Chase 
from a Plan.
    Effective Date: If granted, this proposed exemption will be 
effective as of February 1, 2008.
Summary of Facts and Representations
    1. The applicant is JPMorgan Chase & Co. (hereinafter, either 
JPMorgan Chase or the Applicant), a financial holding company 
incorporated under Delaware law in 1968. JPMorgan Chase is a leading 
global financial services firm, with $2.0 trillion in assets, $165.4 
billion in stockholders' equity, and operations in more than 60 
countries as of December 31, 2009.
    2. The Applicant describes Auction Rate Securities (ARS) and the 
arrangement by which ARS are bought and sold as follows. ARS are 
securities (issued as debt or preferred stock) with an interest rate or 
dividend that is reset at periodic intervals pursuant to a process 
called a Dutch Auction. Investors submit orders to buy, hold, or sell a 
specific ARS to a broker-dealer selected by the entity that issued the 
ARS. The broker-dealers, in turn, submit all of these orders to an 
auction agent. The auction agent's functions include collecting orders 
from all participating broker-dealers by the auction deadline, 
determining the amount of securities available for sale, and organizing 
the bids to determine the winning bid. If there are any buy orders 
placed into the auction at a specific rate, the auction agent accepts 
bids with the lowest rate above any applicable minimum rate and then 
successively higher rates up to the maximum applicable rate, until all 
sell orders and orders that are treated as sell orders are filled. Bids 
below any applicable minimum rate or above the applicable maximum rate 
are rejected. After determining the clearing rate for all of the 
securities at auction, the auction agent allocates the ARS available 
for sale to the participating broker-dealers based on the orders they 
submitted. If there are multiple bids at the clearing rate, the auction 
agent will allocate securities among the bidders at such rate on a pro-
rata basis.
    3. The Applicant states that, under a typical Dutch Auction 
process, JPMorgan Chase is permitted, but not obligated, to submit 
orders in auctions for its own account either as a bidder or a seller 
and routinely does so in the auction rate securities market in its sole 
discretion. JPMorgan Chase may place one or more bids in an auction for 
its own account to acquire ARS for its inventory, to prevent: (a) A 
failed auction (i.e., an event where there are insufficient clearing 
bids which would result in the auction rate being set at a specified 
rate, resulting in no ARS being sold through the auction process); or 
(b) an auction from clearing at a rate that JPMorgan Chase believes 
does not reflect the market for the particular ARS being auctioned.
    4. The Applicant states that for many ARS, JPMorgan Chase has been 
appointed by the issuer of the securities to serve as a dealer in the 
auction and is paid by the issuer for its services. JPMorgan Chase is 
typically appointed to serve as a dealer in the auctions pursuant to an 
agreement between the issuer and JPMorgan Chase. That agreement 
provides that JPMorgan Chase will receive from the issuer auction 
dealer fees based on the principal amount of the securities placed 
through JPMorgan Chase.
    5. The Applicant states further that JPMorgan Chase may share a 
portion of the auction rate dealer fees it receives from the issuer 
with other broker-dealers that submit orders through JPMorgan Chase, 
for those orders that JPMorgan Chase successfully places in the 
auctions. Similarly, with respect to ARS for which broker-dealers other 
than JPMorgan Chase act as dealer, such other broker-dealers may share 
auction dealer fees with JPMorgan Chase for orders submitted by 
JPMorgan Chase.
    6. The Applicant represents that since February, 2008, a 
significant majority of auctions have been unsuccessful. According to 
the Applicant, the current state of the ARS market remains illiquid. As 
a result, Plans holding ARS may not have sufficient liquidity to make 
benefit payments, mandatory payments and withdrawals and expense 
payments when due.\4\
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    \4\ The Department notes that Class Exemption 80-26 (45 FR 28545 
(Apr. 29, 1980), as amended at 71 FR 17917 (Apr. 7, 2006)) permits 
interest-free loans or other extensions of credit from a party in 
interest to a plan if, among other things, the proceeds of the loan 
or extension of credit are used only-- (1) For the payment of 
ordinary operating expenses of the plan, including the payment of 
benefits in accordance with the terms of the plan and periodic 
premiums under an insurance or annuity contract, or (2) for a 
purpose incidental to the ordinary operation of the plan.
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    7. The Applicant represents further that, in certain instances, 
JPMorgan Chase may have previously advised or otherwise caused a Plan 
to acquire and hold an ARS.\5\ In connection with JPMorgan Chase's role 
in the acquisition and holding of ARS by various JPMorgan Chase 
clients, including the

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Plans, JPMorgan Chase entered into Settlement Agreements with certain 
U.S. states and federal authorities. Pursuant to these Settlement 
Agreements, among other things, JPMorgan Chase was required to send a 
written offer to certain Plans that held ARS in connection with the 
advice and/or brokerage services provided by JPMorgan Chase. As 
described in further detail below, eligible Plans that accepted the 
written offer were permitted to sell the ARS to JPMorgan Chase for cash 
equal to the par value of such securities, plus any accrued interest 
and/or dividends. According to the Applicant, in connection with an 
offer issued by JPMorgan Chase pursuant to a Settlement Agreement, 
JPMorgan Chase has purchased approximately $2 billion dollars in ARS. 
The Applicant states that, prospectively, additional shares of ARS may 
be tendered by Plans to JPMorgan Chase pursuant to an offer issued by 
JPMorgan Chase pursuant to a Settlement Agreement. Accordingly, the 
Applicant is requesting retroactive and prospective relief for the 
Settlement Sales. With respect to Unrelated Sales, the Applicant states 
that to the best of its knowledge, as of January 1, 2011, no Unrelated 
Sale has occurred. However, the Applicant is requesting retroactive 
relief (and prospective relief) for Unrelated Sales in the event that a 
sale of ARS by a Plan to JPMorgan Chase has occurred outside the 
Settlement process. If granted, the exemption would be effective as of 
February 1, 2008.
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    \5\ The relief contained in this proposed exemption does not 
extend to the fiduciary provisions of section 404 of the Act.
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    8. Specifically, the Applicant is requesting exemptive relief for 
the sale of ARS under two different circumstances: (a) Where JPMorgan 
Chase initiates the sale by sending to a Plan a written offer to 
acquire the ARS, notwithstanding that such offer is not required under 
a Settlement Agreement (i.e., an Unrelated Sale); and (b) where 
JPMorgan Chase is required under a Settlement Agreement to send to 
Plans a written offer to acquire the ARS (i.e., a Settlement Sale). The 
Applicant states that the Unrelated Sales and Settlement Sales 
(hereinafter, either, a Covered Sale) are in the interests of Plans. In 
this regard, the Applicant states that the Covered Sales would permit 
Plans to normalize Plan investments. The Applicant represents that each 
Covered Sale will be for no consideration other than cash payment 
against prompt delivery of the ARS, and such cash will equal the par 
value of the ARS, plus any accrued but unpaid interest or dividends. 
The Applicant represents further that Plans will not pay any 
commissions or transaction costs with respect to any Covered Sale.
    9. The Applicant represents that the proposed exemption is 
protective of the Plans. The Applicant states that, except in the case 
of a Plan sponsored by JPMorgan Chase for its own employees (a JPMorgan 
Chase Plan), each Covered Sale will be made pursuant to a written offer 
(an Offer); and the decision to accept the Offer or retain the ARS will 
be made by a Plan fiduciary or Plan participant or IRA owner who is 
independent of JPMorgan Chase. Additionally, each Offer will be 
delivered in a manner designed to alert a Plan fiduciary that JPMorgan 
Chase intends to purchase ARS from the Plan. In connection with an 
Unrelated Sale, the Offer will describe the material terms of the 
Unrelated Sale, including the most recent rate information for the ARS 
(if reliable information is available). Either the Offer or other 
materials available to the Plan will provide the identity and par value 
of the ARS. Offers made in connection with a Settlement Agreement will 
specifically include, among other things: The background of the Offer; 
the method and timing by which a Plan may accept the Offer; the 
expiration date of the Offer; a description of certain risk factors 
relating to the Offer; how to obtain additional information concerning 
the Offer; and the manner in which information concerning material 
amendments or changes to the Offer will be communicated to affected 
Plans. The Applicant states that, except in the case of a JPMorgan 
Chase Plan or a pooled fund maintained or advised by JPMorgan Chase, 
neither JPMorgan Chase nor any affiliate will exercise investment 
discretion or render investment advice with respect to a Plan's 
decision to accept the Offer or retain the ARS.\6\ In the case of a 
JPMorgan Chase Plan or a pooled fund maintained or advised by JPMorgan 
Chase, the decision to engage in a Covered Sale may be made by JPMorgan 
Chase after JPMorgan Chase has determined that such purchase is in the 
best interest of the JPMorgan Chase Plan or pooled fund. The Applicant 
represents further that Plans will not waive any rights or claims in 
connection with any Covered Sale.
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    \6\ The Applicant states that while there may be communication 
between a Plan and JP Morgan Chase subsequent to an Offer, such 
communication will not involve advice regarding whether the Plan 
should accept the Offer.
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    10. The Applicant represents that the proposed exemption, if 
granted, would be administratively feasible. In this regard, the 
Applicant notes that each Covered Sale will occur at the par value of 
the affected ARS, plus any accrued but unpaid interest or dividends, 
and such value is readily ascertainable. The Applicant represents 
further that JPMorgan Chase will maintain the records necessary to 
enable the Department and Plan fiduciaries, among others, to determine 
whether the conditions of this exemption, if granted, have been met.
    11. In summary, the Applicant represents that the transactions 
described herein satisfy the statutory criteria of section 408(a) of 
the Act because, among other things:
    (a) Except in the case of a JPMorgan Chase Plan, each Covered Sale 
shall be made pursuant to a written Offer;
    (b) Each Covered Sale shall be for no consideration other than cash 
payment against prompt delivery of the ARS;
    (c) The amount of each Covered Sale shall equal the par value of 
the ARS, plus any accrued but unpaid interest or dividends;
    (d) Plans will not waive any rights or claims in connection with 
any Covered Sale;
    (e) Except in the case of a JPMorgan Chase Plan or a pooled fund 
maintained or advised by JPMorgan Chase:
    (1) The decision to accept an Offer or retain the ARS shall be made 
by a Plan fiduciary or Plan participant or IRA owner who is independent 
of JPMorgan Chase; and
    (2) Neither JPMorgan Chase nor any affiliate shall exercise 
investment discretion or render investment advice within the meaning of 
29 CFR 2510.3-21(c) with respect to the decision to accept the Offer or 
retain the ARS;
    (f) Plans shall not pay any commissions or transaction costs with 
respect to any Covered Sale;
    (g) A Covered Sale shall not be part of an arrangement, agreement 
or understanding designed to benefit a party in interest to the 
affected Plan;
    (h) With respect to any Settlement Sale, the terms and delivery and 
timing of the Offer, and the terms of Settlement Sale, shall be 
consistent with the requirements set forth in the Settlement Agreement;
    (i) JPMorgan Chase shall make available in connection with an 
Unrelated Sale the material terms of the Unrelated Sale, including the 
most recent rate information for the ARS (if reliable information is 
available), and the identity and par value of the ARS;
    (j) Each Offer made in connection with a Settlement Agreement shall 
describe the material terms of the Settlement Sale, including the 
following:
    (1) Information regarding how the Plan can determine: The ARS held 
by

[[Page 77598]]

the Plan with JPMorgan Chase, the number of shares and par value of the 
ARS, purchase dates for such ARS, and (if reliable information is 
available) the most recent rate information for the ARS;
    (2) The background of the Offer;
    (3) That participating in the Offer will not result in or 
constitute a waiver of any claim of the tendering Plan;
    (4) The methods and timing by which the Plan may accept the Offer;
    (5) The purchase dates, or the manner of determining the purchase 
dates, for ARS pursuant to the Offer;
    (6) The timing for acceptance by JPMorgan Chase of tendered ARS;
    (7) The timing of payment for ARS accepted by JPMorgan Chase for 
payment;
    (8) The methods and timing by which a Plan may elect to withdraw 
tendered ARS from the Offer;
    (9) The expiration date of the Offer;
    (10) The fact that JPMorgan Chase may make purchases of ARS outside 
of the Offer and may otherwise buy, sell, hold or seek to restructure, 
redeem or otherwise dispose of the ARS;
    (11) A description of the risk factors relating to the Offer as 
JPMorgan Chase deems appropriate;
    (12) How to obtain additional information concerning the Offer; and
    (13) The manner in which information concerning material amendments 
or changes to the Offer will be communicated to affected Plans.
Notice to Interested Persons
    The Applicant represents that the potentially interested 
participants and beneficiaries cannot all be identified and therefore 
the only practical means of notifying such participants and 
beneficiaries of this proposed exemption is by the publication of this 
notice in the Federal Register.
    Comments and requests for a hearing must be received by the 
Department not later than 30 days from the date of publication of this 
notice of proposed exemption in the Federal Register.
    For Further Information Contact: Chris Motta of the Department, 
telephone (202) 693-8544. (This is not a toll-free number.)

Delaware Charter Guarantee & Trust Co. d\b\a\ Principal Trust Company 
(Principal Trust); Principal Life Insurance Company (Principal Life) 
and Any Affiliates, Thereof (Collectively, Principal or the 
Applicants), Located in Wilmington, Delaware and in Des Moines, Iowa

[Application No. D-11579].

Proposed Exemption

    The Department of Labor (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 part 2570, subpart B (55 FR 32836, 32847, August 10, 1990).
Section I--Transactions
    If the exemption is granted, the restrictions of sections 
406(a)(1)(D) and 406(b) of the Act and the taxes resulting from the 
application of section 4975 of the Code, by reason of sections 
4975(c)(1)(D) through (F) of the Code, \7\ shall not apply, as of the 
effective date of this proposed exemption, to:
---------------------------------------------------------------------------

    \7\ For purposes of this proposed exemption reference to 
specific provisions of Title I of the Act, unless otherwise 
specified, refer also to the corresponding provisions of the Code.
---------------------------------------------------------------------------

    (a) The receipt of a fee by Principal, as Principal is defined, 
below, in Section IV(a), from an open-end investment company or open-
end investment companies (Affiliated Fund(s)), as defined, below, in 
Section IV(e), in connection with the direct investment in shares of 
any such Affiliated Fund, by an employee benefit plan or by employee 
benefit plans (Client Plan(s)), as defined, below, in Section IV(b), 
where Principal serves as a fiduciary with respect to such Client Plan, 
and where Principal:
    (1) Provides investment advisory services, or similar services to 
any such Affiliated Fund; and
    (2) Provides to any such Affiliated Fund other services (Secondary 
Service(s)), as defined, below, in Section IV(i); and
    (b) In connection with the indirect investment by a Client Plan in 
shares of an Affiliated Fund through investment in a pooled investment 
vehicle or pooled investment vehicles (Collective Fund(s)),\8\ as 
defined, below, in Section IV(j), where Principal serves as a fiduciary 
with respect to such Client Plan, the receipt of fees by Principal 
from:
---------------------------------------------------------------------------

    \8\ The Department, herein, is expressing no opinion in this 
proposed exemption regarding the reliance of the Applicants on the 
relief provided by section 408(b)(8) of the Act with regard to the 
purchase and with regard to the sale by a Client Plan of an interest 
in a Collective Fund and the receipt by Principal, thereby, of any 
investment management fee, any investment advisory fee, and any 
similar fee (a Collective Fund-Level Management Fee), as defined, 
below, in Section IV(n), where Principal serves as an investment 
manager or investment adviser with respect to such Collective Fund 
and also serves as a fiduciary with respect to such Client Plan, nor 
is the Department offering any view as to whether the Applicants 
satisfy the conditions, as set forth in section 408(b)(8) of the 
Act.
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    (1) An Affiliated Fund for the provision of investment advisory 
services, or similar services by Principal to any such Affiliated Fund; 
and
    (2) an Affiliated Fund for the provision of Secondary Services by 
Principal to any such Affiliated Fund; provided that the conditions, as 
set forth, below, in Section II and Section III, are satisfied, as of 
the effective date of this proposed exemption and thereafter.
Section II--Specific Conditions
    (a)(1) Each Client Plan which is invested directly in shares of an 
Affiliated Fund either:
    (i) Does not pay to Principal for the entire period of such 
investment any investment management fee, or any investment advisory 
fee, or any similar fee at the plan-level (the Plan-Level Management 
Fee), as defined, below, in Section IV(m), with respect to any of the 
assets of such Client Plan which are invested directly in shares of 
such Affiliated Fund; or
    (ii) pays to Principal a Plan-Level Management Fee, based on total 
assets of such Client Plan under management by Principal at the plan-
level, from which a credit has been subtracted from such Plan-Level 
Management Fee, where the amount subtracted represents such Client 
Plan's pro rata share of any investment advisory fee and any similar 
fee (the Affiliated Fund-Level Advisory Fee), as defined, below, in 
Section IV(o), paid by such Affiliated Fund to Principal.
    If, during any fee period, in the case of a Client Plan invested 
directly in shares of an Affiliated Fund, such Client Plan has prepaid 
its Plan-Level Management Fee, and such Client Plan purchases shares of 
an Affiliated Fund directly, the requirement of this Section 
II(a)(1)(ii) shall be deemed met with respect to such prepaid Plan-
Level Management Fee, if, by a method reasonably designed to accomplish 
the same, the amount of the prepaid Plan-Level Management Fee that 
constitutes the fee with respect to the assets of such Client Plan 
invested directly in shares of an Affiliated Fund:
    (A) Is anticipated and subtracted from the prepaid Plan-Level 
Management Fee

[[Page 77599]]

at the time of the payment of such fee; or
    (B) is returned to such Client Plan, no later than during the 
immediately following fee period; or
    (C) is offset against the Plan-Level Management Fee for the 
immediately following fee period or for the fee period immediately 
following thereafter.
    For purposes of Section II(a)(1)(ii), a Plan-Level Management Fee 
shall be deemed to be prepaid for any fee period, if the amount of such 
Plan-Level Management Fee is calculated as of a date not later than the 
first day of such period.
    (2) Each Client Plan invested in a Collective Fund the assets of 
which are not invested in shares of an Affiliated Fund:
    (i) Does not pay to Principal for the entire period of such 
investment any Plan-Level Management Fee with respect to any assets of 
such Client Plan invested in such Collective Fund.
    The requirements of this Section II(a)(2)(i) do not preclude the 
payment of a Collective Fund-Level Management Fee by such Collective 
Fund to Principal, based on the assets of such Client Plan invested in 
such Collective Fund; or
    (ii) does not pay to Principal for the entire period of such 
investment any Collective Fund-Level Management Fee with respect to any 
assets of such Client Plan invested in such Collective Fund.
    The requirements of this Section II(a)(2)(ii) do not preclude the 
payment of a Plan-Level Management Fee by such Client Plan to 
Principal, based on total assets of such Client Plan under management 
by Principal at the plan-level; or
    (iii) such Client Plan pays to Principal a Plan-Level Management 
Fee, based on total assets of such Client Plan under management by 
Principal at the plan-level, from which a credit has been subtracted 
from such Plan-Level Management Fee (the ``Net'' Plan-Level Management 
Fee), where the amount subtracted represents such Client Plan's pro 
rata share of any Collective Fund-Level Management Fee paid by such 
Collective Fund to Principal.
    The requirements of this Section II(a)(2)(iii) do not preclude the 
payment of a Collective Fund-Level Management Fee by such Collective 
Fund to Principal, based on the assets of such Client Plan invested in 
such Collective Fund.
    (3) Each Client Plan invested in a Collective Fund the assets of 
which are invested in shares of an Affiliated Fund:
    (i) Does not pay to Principal for the entire period of such 
investment any a Plan-Level Management Fee (including any ``Net'' Plan-
Level Management Fee, as described, above, in Section II(a)(2)(iii)), 
and does not pay to Principal for the entire period of such investment 
any Collective Fund-Level Management Fee with respect to the assets of 
such Client Plan which are invested in such Affiliated Fund; or
    (ii) pays to Principal a Collective Fund-Level Management Fee, in 
accordance with Section II(a)(2)(i), above, based on the total assets 
of such Client Plan invested in such Collective Fund, from which a 
credit has been subtracted from such Collective Fund-Level Management 
Fee, where the amount subtracted represents such Client Plan's pro rata 
share of any Affiliated Fund-Level Advisory Fee paid to Principal by 
such Affiliated Fund; and does not pay to Principal for the entire 
period of such investment any Plan-Level Management Fee with respect to 
any assets of such Client Plan invested in such Collective Fund; or
    (iii) pays to Principal a Plan-Level Management Fee, in accordance 
with Section II(a)(2)(iii), above, based on the total assets of such 
Client Plan under management by Principal at the plan-level, from which 
a credit has been subtracted from such Plan-Level Management Fee, where 
the amount subtracted represents such Client Plan's pro rata share of 
any Affiliated Fund-Level Advisory Fee paid to Principal by such 
Affiliated Fund; and does not pay to Principal for the entire period of 
such investment any Collective Fund-Level Management Fee with respect 
to any assets of such Client Plan invested in such Collective Fund; or
    (iv) pays to Principal a ``Net'' Plan-Level Management Fee, in 
accordance with Section II(a)(2)(iii), above, from which a further 
credit has been subtracted from such ``Net'' Plan-Level Management Fee, 
where the amount of such further credit which is subtracted represents 
such Client Plan's pro rata share of any Affiliated Fund-Level Advisory 
Fee paid to Principal by such Affiliated Fund.
    Provided that the conditions of this proposed exemption are 
satisfied, the requirements of Section II(a)(1)(i), (ii), and Section 
II(a)(3)(i)-(iv) do not preclude the payment of an Affiliated Fund-
Level Advisory Fee by an Affiliated Fund to Principal under the terms 
of an investment advisory agreement adopted in accordance with section 
15 of the Investment Company Act of 1940 (the Investment Company Act). 
Further, the requirements of Section II(a)(1)(i)-(ii), and Section 
II(a)(3)(i)-(iv) do not preclude the payment of a fee by an Affiliated 
Fund to Principal for the provision by Principal of Secondary Services 
to such Affiliated Fund under the terms of a duly adopted agreement 
between Principal and such Affiliated Fund.
    For the purpose of Section II(a)(1)(ii), and Section II(a)(3)(ii)-
(iv), in calculating a Client Plan's pro rata share of an Affiliated 
Fund-Level Advisory Fee, Principal must use an amount representing the 
``gross'' advisory fee paid to Principal by such Affiliated Fund. For 
purposes of this paragraph, the ``gross'' advisory fee is the amount 
paid to Principal by such Affiliated Fund, including the amount paid by 
such Affiliated Fund to sub-advisers.
    (b) The purchase price paid and the sales price received by a 
Client Plan for shares in an Affiliated Fund purchased or sold 
directly, and the purchase price paid and the sales price received by a 
Client Plan for shares in an Affiliated Fund purchased or sold 
indirectly through a Collective Fund, is the net asset value per share 
(NAV), as defined, below, in Section IV(f), at the time of the 
transaction, and is the same purchase price that would have been paid 
and the same sales price that would have been received for such shares 
by any other shareholder of the same class of shares in such Affiliated 
Fund at that time.\9\
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    \9\ The selection of a particular class of shares of an 
Affiliated Fund as an investment for a Client Plan indirectly 
through a Collective Fund is a fiduciary decision that must be made 
in accordance with the provisions of section 404(a) of the Act. In 
this proposed exemption, the Department is not providing any relief 
for any fiduciary violations, pursuant to section 404 of the Act, or 
violations of the prohibited transaction provisions, as set forth in 
section 406 of the Act that may arise from the selection of one 
class of shares of an Affiliated Fund over another class of shares.
---------------------------------------------------------------------------

    (c) Principal, including any officer and any director of Principal, 
does not purchase any shares of an Affiliated Fund from and does not 
sell any shares of an Affiliated Fund to any Client Plan which invests 
directly in such Affiliated Fund, and Principal, including any officer 
and director of Principal, does not purchase any shares of any 
Affiliated Fund from and does not sell any shares of an Affiliated Fund 
to any Collective Fund in which a Client Plan invests indirectly in 
shares of such Affiliated Fund.
    (d) No sales commissions, no redemption fees, and no other similar 
fees are paid in connection with any purchase and in connection with 
any sale by a Client Plan directly in shares of an Affiliated Fund, and 
no sales commissions, no redemption fees, and no other similar fees are 
paid by a Collective Fund in connection with any purchase and in 
connection with any sale of shares in an Affiliated Fund by a Client 
Plan indirectly through such

[[Page 77600]]

Collective Fund. However, this Section II(d) does not prohibit the 
payment of a redemption fee, if:
    (1) Such redemption fee is paid only to an Affiliated Fund; and
    (2) The existence of such redemption fee is disclosed in the 
summary prospectus for such Affiliated Fund in effect both at the time 
of any purchase of shares in such Affiliated Fund and at the time of 
any sale of such shares.
    (e) The combined total of all fees received by Principal is not in 
excess of reasonable compensation within the meaning of section 
408(b)(2) of the Act, for services provided:
    (1) By Principal to each Client Plan;
    (2) By Principal to each Collective Fund in which a Client Plan 
invests; and
    (3) By Principal to each Affiliated Fund in which a Client Plan 
invests directly in shares of such Affiliated Fund, and
    (4) By Principal to each Affiliated Fund in which a Client Plan 
invests indirectly in shares of such Affiliated Fund through a 
Collective Fund.
    (f) Principal does not receive any fees payable pursuant to Rule 
12b-1 under the Investment Company Act in connection with the 
transactions covered by this proposed exemption;
    (g) No Client Plan is an employee benefit plan sponsored or 
maintained by Principal.
    (h)(1) In the case of a Client Plan investing directly in shares of 
an Affiliated Fund, a second fiduciary (the Second Fiduciary), as 
defined, below, in Section IV(h), acting on behalf of such Client Plan, 
receives, in writing, in advance of any investment by such Client Plan 
directly in shares of such Affiliated Fund, a full and detailed 
disclosure via first class mail or via personal delivery of (or, if the 
Second Fiduciary consents to such means of delivery, through electronic 
email, in accordance with Section II(q), as set forth, below) of 
information concerning such Affiliated Fund, including but not limited 
to the items listed, below:
    (i) A current summary prospectus issued by each such Affiliated 
Fund;
    (ii) A statement describing the fees, including the nature and 
extent of any differential between the rates of such fees for:
    (A) Investment advisory and similar services to be paid to 
Principal by each Affiliated Fund;
    (B) Secondary Services to be paid to Principal by each such 
Affiliated Fund; and
    (C) All other fees to be charged by Principal to such Client Plan 
and to each such Affiliated Fund and all other fees to be paid to 
Principal by each such Client Plan and by each such Affiliated Fund;
    (iii) The reasons why Principal may consider investment directly in 
shares of such Affiliated Fund by such Client Plan to be appropriate 
for such Client Plan;
    (iv) A statement describing whether there are any limitations 
applicable to Principal with respect to which assets of such Client 
Plan may be invested directly in shares of such Affiliated Fund, and if 
so, the nature of such limitations; and
    (v) Upon the request of the Second Fiduciary acting on behalf of 
such Client Plan, a copy of the Notice of Proposed Exemption (the 
Notice), a copy of the final exemption, if granted, and any other 
reasonably available information regarding the transactions which are 
the subject of this proposed exemption.
    (2) In the case of a Client Plan whose assets are proposed to be 
invested in a Collective Fund after such Collective Fund has begun 
investing in shares of an Affiliated Fund, a Second Fiduciary, acting 
on behalf of such Client Plan, receives, in writing, in advance of any 
investment by such Client Plan in such Collective Fund, a full and 
detailed disclosure via first class mail or via personal delivery (or, 
if the Second Fiduciary consents to such means of delivery, through 
electronic email, in accordance with Section II(q), as set forth, 
below) of information concerning such Collective Fund and information 
concerning each such Affiliated Fund in which such Collective Fund is 
invested, including but not limited to the items listed, below:
    (i) A current summary prospectus issued by each such Affiliated 
Fund;
    (ii) A statement describing the fees, including the nature and 
extent of any differential between the rates of such fees for:
    (A) Investment advisory and similar services to be paid to 
Principal by each Affiliated Fund;
    (B) Secondary Services to be paid to Principal by each such 
Affiliated Fund; and
    (C) All other fees to be charged by Principal to such Client Plan, 
to such Collective Fund, and to each such Affiliated Fund and all other 
fees to be paid to Principal by such Client Plan, by such Collective 
Fund, and by each such Affiliated Fund;
    (iii) The reasons why Principal may consider investment by such 
Client Plan in shares of each such Affiliated Fund indirectly through 
such Collective Fund to be appropriate for such Client Plan;
    (iv) A statement describing whether there are any limitations 
applicable to Principal with respect to which assets of such Client 
Plan may be invested indirectly in shares of each such Affiliated Fund 
through such Collective Fund, and if so, the nature of such 
limitations;
    (v) Upon the request of the Second Fiduciary, acting on behalf of 
such Client Plan, a copy of the Notice, a copy of the final exemption, 
if granted, and any other reasonably available information regarding 
the transactions which are the subject of this proposed exemption; and
    (vi) A copy of the organizational documents of such Collective Fund 
which expressly provide for the addition of one or more Affiliated 
Funds to the portfolio of such Collective Fund.
    (3) In the case of a Client Plan whose assets are proposed to be 
invested in a Collective Fund before such Collective Fund has begun 
investing in shares of any Affiliated Fund, a Second Fiduciary, acting 
on behalf of such Client Plan, receives, in writing, in advance of any 
investment by such Client Plan in such Collective Fund, a full and 
detailed disclosure via first class mail or via personal delivery (or, 
if the Second Fiduciary consents to such means of delivery, through 
electronic email, in accordance with Section II(q), as set forth, 
below) of information, concerning such Collective Fund, including but 
not limited to the items listed, below:
    (i) A statement describing the fees, including the nature and 
extent of any differential between the rates of such fees for all fees 
to be charged by Principal to such Client Plan and to such Collective 
Fund and all other fees to be paid to Principal by such Client Plan, 
and by such Collective Fund;
    (ii) Upon the request of the Second Fiduciary, acting on behalf of 
such Client Plan, a copy of the Notice, a copy of the final exemption, 
if granted, and any other reasonably available information regarding 
the transactions which are the subject of this proposed exemption; and
    (iii) A copy of the organizational documents of such Collective 
Fund which expressly provide for the addition of one or more Affiliated 
Funds to the portfolio of such Collective Fund.
    (i) On the basis of the information described, above, in Section 
II(h), a Second Fiduciary, acting on behalf of a Client Plan:
    (1) Authorizes in writing the investment of the assets of such 
Client Plan, as applicable:
    (i) Directly in shares of an Affiliated Fund;
    (ii) Indirectly in shares of an Affiliated Fund through a 
Collective

[[Page 77601]]

Fund where such Collective Fund has already invested in shares of an 
Affiliated Fund; and
    (iii) In a Collective Fund which is not yet invested in shares of 
an Affiliated Fund but whose organizational document expressly provides 
for the addition of one or more Affiliated Funds to the portfolio of 
such Collective Fund; and
    (2) Authorizes in writing; as applicable:
    (i) The Affiliated Fund-Level Advisory Fee received by Principal 
for investment advisory services and similar services provided by 
Principal to such Affiliated Fund;
    (ii) The fee received by Principal for Secondary Services provided 
by Principal to such Affiliated Fund;
    (iii) The Collective Fund-Level Management Fee received by 
Principal for investment management, investment advisory, and similar 
services provided by Principal to such Collective Fund in which such 
Client Plan invests;
    (iv) The Plan-Level Management Fee received by Principal for 
investment management and similar services provided by Principal to 
such Client Plan at the plan-level; and
    (v) The selection by Principal of the applicable fee method, as 
described, above, in Section II(a)(1)-(3).
    All authorizations made by a Second Fiduciary, pursuant to this 
Section II(i), must be consistent with the responsibilities, 
obligations, and duties imposed on fiduciaries by Part 4 of Title I of 
the Act;
    (j)(1) Any authorization, described, above, in Section II(i), and 
any authorization made pursuant to negative consent, as described, 
below, in Section II(k) and in Section II(l), made by a Second 
Fiduciary, acting on behalf of a Client Plan, shall be terminable at 
will by such Second Fiduciary, without penalty to such Client Plan, 
upon receipt by Principal via first class mail, via personal delivery, 
or via electronic email of a written notification of the intent of such 
Second Fiduciary to terminate any such authorization.
    (2) A form (the Termination Form) expressly providing an election 
to terminate any authorization, described, above, in Section II(i), or 
to terminate any authorization made pursuant to negative consent, as 
described, below, in Section II(k) and in Section II(l), with 
instructions on the use of such Termination Form must be provided to 
such Second Fiduciary at least annually, either in writing via first 
class mail or via personal delivery (or if such Second Fiduciary 
consents to such means of delivery, through electronic email, in 
accordance with Section II(q), as set forth, below). However, if a 
Termination Form has been provided to such Second Fiduciary, pursuant 
to Section II(k) or pursuant to Section II(l), below, then a 
Termination Form need not be provided again, pursuant to this Section 
II(j), until at least six (6) months but no more than twelve (12) 
months have elapsed, since a Termination Form was provided;
    (3) The instructions for the Termination Form must include the 
following statements:
    (i) Any authorization, described, above, in Section II(i), and any 
authorization made pursuant to negative consent, as described, below, 
in Section II(k) or in Section II(l), is terminable at will by a Second 
Fiduciary, acting on behalf of a Client Plan, without penalty to such 
Client Plan, upon receipt by Principal via first class mail or via 
personal delivery or via electronic email of the Termination Form, or 
some other written notification of the intent of such Second Fiduciary 
to terminate such authorization;
    (ii) Within 30 days from the date the Termination Form is sent to 
such Second Fiduciary by Principal, the failure by such Second 
Fiduciary to return such Termination Form or the failure by such Second 
Fiduciary to provide some other written notification of the Client 
Plan's intent to terminate any authorization, described in Section 
II(i), or intent to terminate any authorization made pursuant to 
negative consent, as described, below, in Section II(k) or in Section 
II(l), will be deemed to be an approval by such Second Fiduciary;
    (4) In the event that a Second Fiduciary, acting on behalf of a 
Client Plan, at any time returns a Termination Form or returns some 
other written notification of intent to terminate any authorization, as 
described, above, in Section II(i), or intent to terminate any 
authorization made pursuant to negative consent, as described, below, 
in Section II(k) or in Section II(l);
    (i)(A) In the case of a Client Plan which invests directly in 
shares of an Affiliated Fund, the termination will be implemented by 
the withdrawal of all investments made by such Client Plan in the 
affected Affiliated Fund, and such withdrawal will be effected by 
Principal within one (1) Business day of the date that Principal 
receives such Termination Form or receives from the Second Fiduciary, 
acting on behalf of such Client Plan, some other written notification 
of intent to terminate any such authorization;
    (B) From the date a Second Fiduciary, acting on behalf of a Client 
Plan that invests directly in shares of an Affiliated Fund, returns a 
Termination Form or returns some other written notification of intent 
to terminate such Client Plan's investment in such Affiliated Fund, 
such Client Plan will not be subject to pay a pro rata share of any 
Affiliated Fund-Level Advisory Fee and will not be subject to pay any 
fees for Secondary Services paid to Principal by such Affiliated Fund;
    (ii)(A) In the case of a Client Plan which invests in a Collective 
Fund, the termination will be implemented by the withdrawal of such 
Client Plan from all investments in such affected Collective Fund, and 
such withdrawal will be implemented by Principal within such time as 
may be necessary for withdrawal in an orderly manner that is equitable 
to the affected withdrawing Client Plan and to all non-withdrawing 
Client Plans, but in no event shall such withdrawal be implemented by 
Principal more than five business (5) days after the day Principal 
receives from the Second Fiduciary, acting on behalf of such 
withdrawing Client Plan, a Termination Form or receives some other 
written notification of intent to terminate the investment of such 
Client Plan in such Collective Fund; and
    (B) Principal will pay to such withdrawing Client Plan interest on 
the settlement amount calculated at the prevailing Federal funds rate 
plus two percent (2%) for the period from the day Principal receives 
from the Second Fiduciary, acting on behalf of such withdrawing Client 
Plan, a Termination Form or receives some other written notification of 
intent to terminate the investment of such Client Plan in such 
Collective Fund, to the date Principal pays such settlement amount in 
cash, with interest thereon, to such withdrawing Client Plan;
    (C) From the date a Second Fiduciary, acting on behalf of a Client 
Plan that invests in a Collective Fund, returns a Termination Form or 
returns some other written notification of intent to terminate such 
Client Plan's investment in such Collective Fund, such Client Plan will 
not be subject to pay a pro rata share of any Collective Fund-Level 
Management Fee, nor will such Client Plan be subject to any other 
changes to the portfolio of such Collective Fund, including a pro rata 
share of any Affiliated Fund-Level Advisory Fee arising from the 
investment by such Collective Fund in an Affiliated Fund.
    (k)(1) Principal, at least thirty (30) days in advance of the 
implementation of each fee increase (Fee Increase(s)), as defined, 
below, in Section IV(l), must provide, in writing via first class mail 
or via personal delivery (or if the Second Fiduciary consents to such 
means of delivery, through electronic email, in

[[Page 77602]]

accordance with Section II(q), as set forth, below), a notice of change 
in fees (the Notice of Change in Fees) (which may take the form of a 
proxy statement, letter, or similar communication which is separate 
from the summary prospectus of such Affiliated Fund) and which explains 
the nature and the amount of such Fee Increase to the Second Fiduciary 
of each affected Client Plan. Such Notice of Change in Fees shall be 
accompanied by a Termination Form and by instructions on the use of 
such Termination Form, as described, above, in Section II(j)(3);
    (2) For each Client Plan affected by a Fee Increase, Principal may 
implement such Fee Increase without waiting for the expiration of the 
30-day period, described, above, in Section II(k)(1), provided 
Principal does not begin implementation of such Fee Increase before the 
first day of the 30-day period, described, above in Section II(k)(1), 
and provided further that the following conditions are satisfied:
    (i) Principal delivers, in the manner described in Section 
II(k)(1), to the Second Fiduciary for each affected Client Plan, the 
Notice of Change of Fees, as described in Section II(k)(1), accompanied 
by the Termination Form and by instructions on the use of such 
Termination Form, as described, above, in Section II(j)(3);
    (ii) Each affected Client Plan receives from Principal a credit in 
cash equal to each such Client Plan's pro rata share of such Fee 
Increase to be received by Principal for the period from the date of 
the implementation of such Fee Increase to the earlier of:
    (A) The date when an affected Client Plan, pursuant to Section 
II(j), terminates any authorization, as described, above, in Section 
II(i), or, terminates any negative consent authorization, as described, 
in Section II(k) or in Section II(l); or
    (B) The 30th day after the day that Principal delivers to the 
Second Fiduciary of each affected Client Plan the Notice of Change of 
Fees, described in Section II(k)(1), accompanied by the Termination 
Form and by the instructions on the use of such Termination Form, as 
described, above, in Section II(j)(3).
    (iii) Principal pays to each affected Client Plan the cash credit, 
described, above, in Section II(k)(2)(ii), with interest thereon, no 
later than five (5) business days following the earlier of:
    (A) the date such affected Client Plan, pursuant to Section II(j), 
terminates any authorization, as described, above, in Section II(i), or 
terminates, any negative consent authorization, as described, in 
Section II(k) or in Section II(l); or
    (B) the 30th day after the day that Principal delivers to the 
Secon