Federal Register / Vol. 75, No. 83 / Friday, April 30, 2010 / Notices 22853 

1For purposes of this exemption reference to 

specific provisions of Title I of the Act, unless 

otherwise specified, refer also to the corresponding 

provisions of the Code. 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

D–11456, PNC Financial Services 

Group, Inc.; and D–11602, State Street 

Bank and Trust Company, et al. 

AGENCY: Employee Benefits Security 

Administration, Department of Labor. 

ACTION: Notice of Proposed Exemptions. 

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. lll, 

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 publiclydisclosed. 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. 

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 part 2570, subpart B (55 

FR 32836, 32847, August 10, 1990): 

Section I—Exemption for Receipt of 

Fees 

In connection with the investment in 

an open-end investment company (a 

Fund(s)), as defined, below, in Section 

III, by certain employee benefit plans 

(Client Plan(s)) for which PNC (PNC or 

the Applicant), as defined below, serves 

as a fiduciary and is a party in interest 

with respect to such Client Plan, the 

restrictions of section 406(a)(1)(D) and 

406(b) of the Act and the sanctions 

resulting from the application of section 

4975 of the Code, by reason of section 

4975(c)(1)(D) through (F) 1 of the Code, 

shall not apply, effective February 1, 

2008 to: 

(a) The receipt of fees by PNC and its 

affiliate PNC Capital Advisors, Inc. 

(PCA) from the Funds in connection 

with the investment by the Client Plans 

in shares of the Funds where PNC or its 

affiliate PCA acts as an investment 

advisor for such Funds; and 

(b) the receipt of fees by PNC or its 

affiliates from the Funds in connection 

with providing certain secondary 

services, as defined below, (Secondary 

Services) to such Funds in which a 

Client Plan invests; provided that the 

conditions of Section II are met. 

Section II—General Conditions 

(a) PNC, which serves as a fiduciary 

for a Client Plan, satisfies any one (but 

not all) of the following: 

(1) A Client Plan invested in a Fund 

does not pay any plan-level investment 

management fee, investment advisory 

fee, or similar fee (Plan-Level Fee(s)) to 

PNC or its affiliates with respect to any 

of the assets of such Client Plan which 

are invested in shares of such Fund for 

the entire period of such investment 

(the Offset Fee Method). This condition 

does not preclude the payment of 

investment advisory fees by the Funds 

to PNC under the terms of an 

investment management agreement 

adopted in accordance with section 15 

of the Investment Company Act of 1940 

(the ‘‘1940 Act’’); 

(2) A Client Plan invested in the 

Funds pays an investment management 

fee or similar fee based on total Client 

Plan assets from which a credit has been 

subtracted representing such Client 

Plan’s pro rata share of investment 

advisory fees paid by the Funds to PNC 

(the Subtraction Fee Method). If, during 

any fee period for which a Client Plan 

has prepaid its investment management 

or similar fee, the Client Plan purchases 

shares of such Fund, the requirement of 

this Section II(a)(2) shall be deemed to 

have been met with respect to such 

prepaid fee if, by a method reasonably 

designed to accomplish the same, the 

amount of the prepaid fee that 

constitutes the fee with respect to plan 

assets invested in shares of such Fund 


wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
22854 Federal Register / Vol. 75, No. 83 / Friday, April 30, 2010 / Notices 

2PNC represents that it would be accurate to 

describe ‘‘the credit’’ as a ‘‘credited dollar amount’’ 

to cover situations in which the ‘‘credited amount’’ 

is used to acquire additional shares of a Fund, 

rather than being held by a Client Plan in the form 

of cash. It is represented that the standard practice 

is to reinvest the ‘‘credited dollar amount’’ in 

additional shares of the same Fund with respect to 

which the fees were credited. 

(i) is anticipated and subtracted from 

the prepaid fee at the time of payment 

of such fee, (ii) is returned to the Client 

Plan no later than during the 

immediately following fee period, or 

(iii) is offset against the prepaid fee for 

the immediately following fee period or 

for the fee period immediately following 

thereafter. For purposes of this Section 

II(a)(2), a fee shall be deemed to have 

been prepaid for any fee period if the 

amount of such fee is calculated as of a 

date not later than the first day of such 

period; or 

(3) A Client Plan invested in a Fund 

receives a ‘‘credit’’ 2 (the Credit Fee 

Method) of such Plan’s proportionate 

share of all fees charged to the Funds by 

PNC for investment advisory or similar 

services, on a date which is no later 

than one business day after receipt of 

such fees by PNC from the Fund. The 

crediting of all such fees to such Client 

Plan by PNC is audited by an 

independent accountant firm (the 

Auditor) on at least an annual basis to 

verify the proper crediting of such fees 

to such Client Plan. 

(b) The price paid or received by a 

Client Plan for shares in a Fund is the 

net asset value per share at the time the 

transaction, as defined, below in Section 

III, and is the same price which would 

have been paid or received for such 

shares by any other investor in such 

Fund at that time; 

(c) PNC, including any officer or 

director of PNC, does not purchase or 

sell shares of the Funds from or to any 

Client Plan; 

(d) A Client Plan does not pay sales 

commissions in connection with any 

purchase or sale of shares of a Fund, 

and a Client Plan does not pay 

redemption fees in connection with any 

sale of shares to a Fund, unless 

(1) Such redemption fee is paid only 

to a Fund, and 

(2) The existence of such redemption 

fee is disclosed in the prospectus for 

such Fund in effect both at the time of 

the purchase of such shares and at the 

time of such sale; 

(e) The combined total of all fees 

received by PNC for the provision of 

services by PNC to Client Plans and to 

Funds in which a Client Plan invests, is 

not in excess of ‘‘reasonable 

compensation’’ within the meaning of 

section 408(b)(2) of the Act; 

(f) PNC does not receive any fees 

payable pursuant to Rule 12b–1 under 

the 1940 Act in connection with the 

transactions; 

(g) No Client Plan is an employee 

benefit plan sponsored or maintained by 

PNC; 

(h) A second fiduciary (Second 

Fiduciary), as defined below in Section 

III, who is acting on behalf of a Client 

Plan receives, in advance of any initial 

investment by a Plan Client in a Fund, 

full and detailed written disclosure of 

information concerning such Fund 

including but not limited to: 

(1) A current prospectus for each 

Fund in which a Client Plan is 

considering investing; 

(2) A statement describing the fees, 

including the nature and extent of any 

differential between the rates of such 

fees for: 

(i) Any investment advisory or similar 

services to be paid by such Fund, 

(ii) Any Secondary Services to be paid 

by such Fund to PNC, and 

(iii) All other fees to be charged to or 

paid by the Client Plan and by such 

Fund; 

(3) The reason why PNC, acting as a 

fiduciary for such Client Plan, considers 

investment in such Fund to be 

appropriate for such Client Plan; 

(4) A statement describing whether 

there are any limitations applicable to 

PNC with respect to which assets of a 

Client Plan may be invested in such 

Fund, and if so, the nature of such 

limitations; and 

(5) Upon the request of the Second 

Fiduciary, acting on behalf of a Client 

Plan, a copy of the proposed exemption 

and/or copy of the final exemption, if 

granted, once such documents are 

published in the Federal Register. 

(i) On the basis of the information 

described, above, in Section II(h), a 

Second Fiduciary, acting on behalf of a 

Client Plan, authorizes in writing: (1) 

The investment of the assets of such 

Client Plan in shares of each particular 

Fund; and (2) the fees received by PNC 

in connection with services provided by 

PNC to such Fund. Such authorization 

by a Second Fiduciary must be 

consistent with the responsibilities, 

obligations, and duties imposed on 

fiduciaries by Part 4 of Title I of the Act. 

(j)(1) All authorizations described 

above, in Section II(i), made by a 

Second Fiduciary, regarding: 

(i) Investments by a Client Plan in a 

Fund; 

(ii) Fees paid to PNC for investment 

management advisory services or 

similar services; and 

(iii) Fees paid for Secondary Services 

shall be terminable at will by the 

Second Fiduciary, acting on behalf of 

such Client Plan, without penalty to 

such Client Plan, upon receipt by PNC, 

acting as fiduciary on behalf of such 

Client Plan, of a written notice of 

termination. A form (the Termination 

Form), as defined, below, in Section 

III(j), expressly providing an election to 

terminate the authorizations, described, 

above, in Section II(i), with instructions 

on the use of such Termination Form 

must be provided to such Second 

Fiduciary at least annually. However, if 

a Termination Form has been provided 

to such Second Fiduciary, pursuant to 

Section II(k) and (l), below, then a 

Termination Form need not be provided 

again, pursuant to this Section II(j), 

unless at least six (6) months but no 

more than twelve (12) months have 

elapsed, since a Termination Form was 

provided, pursuant to Section II(k) and 

(l), below. 

With respect to j(1)(i), (ii), and (iii) 

above, all such investments and fees 

shall be terminable at will by the 

Second Fiduciary acting on behalf of 

such Client Plan. 

(2) The instructions for the 

Termination Form must include the 

following information: 

(i) The authorization, described above 

in Section II(i), is terminable at will by 

the Second Fiduciary acting on behalf of 

a Client Plan, without penalty to the 

Client Plan, upon receipt by PNC of 

written notice from such Second 

Fiduciary; and 

(ii) Failure by such Second Fiduciary 

to return the Termination Form will be 

deemed to be an approval by the Second 

Fiduciary and will result in the 

continued authorization, as described 

above, in Section II(i) of PNC to engage 

in the transactions described in this 

proposed exemption; 

(k) For a Client Plan invested in a 

Fund which uses one of the fee methods 

described, above, in Section II(a)(1), 

(a)(2), or (a)(3) in the event of a 

proposed change from one of the fee 

methods to another or in the event of a 

proposed increase in the rate of any fee 

paid by such Fund to PNC for any 

investment advisory service or similar 

service that PNC provides to a Fund 

over an existing rate for such service or 

method of determining the fee for such 

service, which had been authorized by 

the Second Fiduciary for such Client 

Plan, in accordance with Section II(i), 

above, PNC, at least thirty (30) days in 

advance of the implementation of such 

change and/or such increase, provides a 

written notice (which may take the form 

of a proxy statement, letter, or similar 

communication that is separate from the 

prospectus of such Fund and which 

explains the nature and amount of such 

change from one of the fee methods to 


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another or increase in fee) to the Second 

Fiduciary of each Client Plan affected by 

such change from one fee method to 

another fee method or increase in fee. 

Such notice shall be accompanied by a 

Termination Form, with instructions on 

the use of such Termination Form, as 

described, above, in Section II(j). 

(l) In the event of: 

(i) A proposed addition of a 

Secondary Service for which an 

additional fee is charged; or 

(ii) A proposed increase in the rate of 

any fee paid by a Fund to PNC for any 

Secondary Service, or 

(iii) A proposed increase in the rate of 

any fee paid for Secondary Services that 

results from the decrease in the number 

or kind of services performed by PNC 

for such fee over an existing rate for 

services which had been authorized, in 

accordance with Section II(i), by the 

Second Fiduciary for a Client Plan 

invested in such Fund, PNC will at least 

thirty (30) days in advance of the 

implementation of such fee increase or 

additional service for which an 

additional fee is charged or a decrease 

in the number or kind of services being 

performed, provide a written notice 

(which may take the form of a proxy 

statement, letter, or similar 

communication that is separate from the 

prospectus of such Fund and which 

explains the nature and amount of the 

additional service for which an 

additional fee is charged or the nature 

and amount of the increase in fees or the 

decrease in the number or kind of 

services) to the Second Fiduciary of 

each Client Plan invested in such Fund 

which is proposing to increase fees or 

add services for which an additional fee 

is charged or decreasing the number or 

kind of services being performed. Such 

notice shall be accompanied by a 

Termination Form, with instructions on 

the use of such Termination Form, as 

described, above in Section II(j); 

(m) On an annual basis, PNC provides 

the Second Fiduciary of such Client 

Plan invested in a Fund with: 

(1) A copy of the current prospectus 

for such Fund in which such Client Plan 

invests, 

(2) Upon the request of such Second 

Fiduciary, a copy of the Statement of 

Additional Information for such Fund 

which contains a description of all fees 

paid by such Fund to PNC; 

(3) A copy of the annual financial 

disclosure report which includes 

information about Fund portfolios, as 

well as the audit findings of an 

independent auditor, within sixty (60) 

days of the preparation of such report; 

and 

(4) Oral or written responses to 

inquiries of the Second Fiduciary of 

such Client Plan, as such inquiries arise. 

(n) All dealings between a Client Plan 

and a Fund are on a basis no less 

favorable to such Client Plan than 

dealings between such Fund and other 

shareholders invested in such Fund. 

(o) PNC maintains for a period of six 

(6) years the records necessary to enable 

the persons described, below, in Section 

II(p) to determine whether the 

conditions of this exemption have been 

met, except that: 

(1) A prohibited transaction will not 

be considered to have occurred, if solely 

because of circumstances beyond the 

control of PNC, the records are lost or 

destroyed prior to the end of the sixyear period, and 

(2) No party in interest 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 the records are not maintained or are 

not available for examination as 

required by Section II(p), below. 

(p)(1) Except as provided in Section 

II(p)(2) and notwithstanding any 

provisions of section 504(a)(2) of the 

Act, the records referred to in Section 

II(o) are unconditionally available at 

their customary location for 

examination during normal business 

hours by— 

(i) Any duly authorized employee or 

representative of the Department or the 

Internal Revenue Service, 

(ii) Any fiduciary of a Client Plan who 

has authority to acquire or dispose of 

shares of a 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 or duly authorized 

employee or representative of such 

participant or beneficiary. 

(2) None of the persons described in 

Section II(p)(1)(ii) and (iii) shall be 

authorized to examine trade secrets of 

PNC, or commercial or financial 

information which is privileged or 

confidential. 

Section III—Definitions 

For purposes of this exemption: 

(a) The term ‘‘PNC’’ means The PNC 

Financial Services Group, Inc., and any 

affiliate thereof as defined below in 

paragraph (b) of this section. 

(b) 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. 

(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 ‘‘Client Plan’’ means any 

employee benefit plan as defined in 

section 3(3) of the Act; as well as Keogh 

plans and individual retirement 

accounts, for which PNC is a fiduciary 

as defined in section 3(21) of the Act 

(excluding any employee benefit plans 

sponsored by PNC or its affiliates). 

(e) The term ‘‘Fund’’ or ‘‘Funds’’ shall 

mean the PNC Funds, Inc. or any other 

diversified open-end investment 

company or companies registered under 

the 1940 Act for which PNC serves as 

an investment advisor, but not subadvisor, and for which PNC may serve 

as a custodian, dividend disbursing 

agent, shareholder servicing agent, 

transfer agent, fund accountant, or 

provide some other ‘‘Secondary 

Service,’’ as defined below in Section III 

which has been approved by such 

Funds. 

(f) The term ‘‘net asset value’’ means 

the amount for purposes of pricing all 

purchases and sales of shares of a Fund 

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 or 

portfolio of the Fund, less the liabilities 

charged to each such portfolio or Fund, 

by the number of outstanding shares. 

(g) 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. 

(h) The term, ‘‘Second Fiduciary(ies),’’ 

means a fiduciary of a Client Plan who 

is independent of and unrelated to PNC. 

For purposes of this exemption, the 

Second Fiduciary will not be deemed to 

be independent of and unrelated to PNC 

if: 

(1) Such fiduciary, directly or 

indirectly controls, through one or more 

intermediaries, is controlled by, or is 

under common control with PNC; 

(2) Such fiduciary, or any officer, 

director, partner, employee, or relative 

of the fiduciary, is an officer, director, 

partner, or employee of PNC (or is a 

relative of such persons); or 

(3) Such fiduciary, directly or 

indirectly, receives any compensation or 

other consideration for his or her 

personal account in connection with 


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22856 Federal Register / Vol. 75, No. 83 / Friday, April 30, 2010 / Notices 

any transaction described in this 

exemption. 

If an officer, director, partner, or 

employee of PNC (or relative of such 

persons) is a director of such Second 

Fiduciary, and if he or she abstains from 

participation in (i) the choice of such 

Client Plan’s investment advisor, (ii) the 

approval of any such purchase or sale 

between such Client Plan and a Fund, 

and (iii) the approval of any change in 

fees charged to or paid by such Client 

Plan in connection with any of the 

transactions described in Section I 

above, then Section III(h)(2), above, 

shall not apply. 

(i) The term, ‘‘Secondary Service(s),’’ 

means a service which is provided by 

PNC to a Fund, including custodial, 

accounting, and/or administrative 

services. The fees for providing 

Secondary Services to a Fund are paid 

to PNC by such Fund. 

(j) The term, ‘‘Termination Form,’’ 

means the form supplied to a Second 

Fiduciary which expressly provides an 

election to such Second Fiduciary to 

terminate on behalf of a Client Plan the 

authorization described, above, in 

Section II(i). 

(k) The term, ‘‘business day,’’ means 

any day that: 

(1) PNC is open for conducting all or 

substantially or substantially all of its 

banking functions, and 

(2) The New York Stock Exchange (or 

any successor exchange) is open for 

trading. 

Effective Dates: If granted, this 

proposed exemption will be effective 

February 1, 2008. 

Summary of Facts and Representations 

1. PNC is a bank holding company 

that owns or controls PNC Bank, 

National Association (PNC Bank, NA), 

PNC Bank, Delaware, and Yardville 

National Bank and a number of nonbank subsidiaries. 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, and 

provides non-discretionary services and 

investment options for defined 

contribution plans. 

On March 2, 2007, PNC acquired 

Mercantile Bankshares Corporation 

(Mercantile), the parent company of 

eleven Mercantile subsidiary banks (the 

Mercantile Subsidiary Banks). PNC 

merged the Mercantile Subsidiary Banks 

with and into PNC Bank, NA 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 the merger, PNC Bank, 

NA 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 with and approved by 

the Federal Reserve Bank of Cleveland. 

2. After October 1, 2007, the 

Mercantile Funds Inc. became the 

Funds or the PNC Funds, Inc. The 

Funds are diversified open-end 

investment company or companies 

registered under the 1940 Act. Each of 

the individual Funds constitutes a 

distinct investment vehicle, which has 

its own prospectus or joint prospectus 

with one or more other Funds. The 

shares of each Fund represent 

proportionate interests in the assets of 

that Fund. The Funds have 14 

individual funds that offer portfolios of 

equity, fixed income and money market 

investments. The Funds that will be 

available for investment in connection 

with the transactions described in this 

proposal include the following: Prime 

Money Market Fund, Government 

Money Market Fund, Limited Maturity 

Bond Fund, Total Return Bond Fund, 

Capital Opportunities Fund, 

International Equity Fund, Growth & 

Income Fund, Diversified Real Estate 

Fund, Equity Income Fund, and Equity 

Growth Fund. 

The overall management of the Funds, 

including the negotiation of investment 

advisory contracts, rests with the Board 

of Directors of the Funds. The Applicant 

represents that all of the Board’s current 

Directors are independent of PNC and 

its affiliates. 

3. PNC, through its affiliate PCA, 

serves as the investment advisor to each 

Fund within the meaning of section 

2(20) of the 1940 Act. Prior to 

September 17, 2007, PCA was called 

Mercantile Capital Advisors, Inc. PCA 

has retained unaffiliated sub-advisors to 

manage certain Funds. PNC represents 

that PCA pays for the fees charged by its 

sub-advisors so that such sub-advisor 

fees are not an additional expense for 

such Funds. PNC receives maximum 

gross investment advisory fees from 

each Fund that vary between .20% and 

1.30% of the Fund’s average net assets 

on a daily basis. These fees are subject 

to waivers and reimbursements and 

currently the maximum advisory fee 

charged is 1.06%. The Funds charge a 

Rule 12b–1 distribution fee of between 

.50% and a 1.00% with respect to their 

Class A and Class C shares. Client Plans 

invest only in Fund institutional shares 

which do not pay 12b–1 fees. 

PCA also serves as administrator for 

the Funds. As administrator, PCA 

maintains the Fund’s office, prepares 

filings with state securities 

commissions, coordinates federal and 

state tax returns and performs other 

administrative functions. In its capacity 

as administrator, PCA is entitled to an 

administrative fee, computed daily and 

paid monthly. On February 1, 2008, the 

Fund began using service providers 

which are PNC affiliates. However, the 

custodian for the Client Plans is not a 

PNC affiliate. 

4. Employee benefit plans, as defined 

in section 3(3) of the Act, and plans, as 

defined in section 4975(e)(1) of the 

Code, as to which PNC serves as 

fiduciary, are the subject plans of the 

proposed transaction. PNC, through its 

subsidiaries and affiliates, serves as 

trustee, investment manager, and in 

other similar fiduciary capacities with 

respect to retirement plans qualified 

under 401(a) of the Code, individual 

retirement accounts (IRA) described in 

section 408 of the Code, and welfare and 

or other employee benefit plans that 

constitute ‘‘employee plans’’ as defined 

in section 3(3) of the Act and/or ‘‘plans’’ 

as defined in section 4975(e)(1) of the 

Code. The specific Client Plans of PNC 

for which this exemption is being 

requested are those to which PNC is a 

fiduciary with investment discretion 

and whose assets either (1) are currently 

invested in the Funds or (2) may in the 

future be invested in the Funds. 

5. As of June 30, 2007, PNC performed 

discretionary management services for 

over 940 employee benefit accounts 

with total assets in excess of $6.2 

billion. These services include 

discretionary investment management 

programs under which PNC invests 

assets of Client Plans in securities, 

including shares of open-end 

investment companies (i.e., mutual 

funds) registered under the 1940 Act, 

the investment advisors to which may 

or may not be affiliated with PNC. 

When PNC is acting as discretionary 

trustee or investment manager, PNC has 

investment discretion over the Client 

Plan’s assets and is responsible for 

implementing the Plan’s investment 

discretion objectives within the 

guidelines established by the Plan 

sponsor or named fiduciary. PNC may 

serve as a Plan custodian, in which 

capacity it is responsible for 

maintaining custody over all or a 

portion of the Client Plan’s assets, for 

providing trust accounting and 

valuation services, for asset and 

transaction reporting, and for execution 

and settlement of transactions. 

The Client Plans pay fees in 

accordance with fee schedules 

established or negotiated with PNC. 

Fees for custodian, trustee, and 


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3 77–4 for PNC’s. It is the view of PNC that the 

Credit Fee Method is covered by PTE 77–4. The 

Department does not concur with PNC’s view that 

the Credit Fee Method is covered under PTE 77– 

4. Accordingly, the Department has determined that 

no relief is available under use of the Credit Fee 

Method. 

investment management services are 

based on a percentage of assets in the 

account, subject to certain minimum fee 

amounts. PNC may also provide other 

services to a Client Plan, as selected by 

other Plan sponsors or named 

fiduciaries. Fees may be paid by the 

Client Plan or the Client Plan sponsor, 

depending on the particular 

circumstances. Where PNC provides 

discretionary investment management 

services for Client Plans, it may invest 

Plan assets in the Funds as a means of 

obtaining more specialized management 

along with enhanced liquidity, 

economies of scale, and greater 

diversification than would be available 

through a separate account investment. 

6. Investments by Client Plans in the 

Funds occur through direct purchases of 

shares of the Funds on an ongoing basis. 

These investments are made in the 

institutional shares classes of the Funds, 

which are not subject to 12b–1 fees. 

There are no sales commissions, loads, 

or transaction fees imposed on the 

Client Plans for buying or selling shares 

of the Funds. The Funds may impose 

redemption fees not to exceed 2% of the 

value of the shares redeemed, provided 

that such fees are imposed only in 

accordance with Rule 22c–2 of the 1940 

Act and the conditions of PTE 77–4, 42 

FR 18732, (April 8, 1977). 

7. Section 406(a)(1)(D) of the Act 

prohibits a fiduciary with respect to a 

plan from causing such plan to engage 

in a transaction, if he knows or should 

know, that such transaction constitutes 

a transfer to, or use by or for the benefit 

of, a party in interest, of any assets of 

such plan. 

Sections 3(14)(A) and (B) of the Act 

define the term, ‘‘party in interest,’’ to 

include, respectively, any fiduciary of a 

plan and any person providing services 

to a plan. Under section 3(21)(A)(i) of 

the Act, a person is a fiduciary with 

respect to a plan to the extent such 

person exercises authority or control 

with respect to the management or 

disposition of a plan’s assets. 

Under section 406(b) of the Act, a 

fiduciary with respect to a plan may not: 

(1) Deal with the assets of a plan in his 

own interest or for his own account, (2) 

in his individual or in any other 

capacity act in any transaction involving 

a plan on behalf of a party (or represent 

a party) whose interests are adverse to 

the interests of such plan or the interests 

of its participants or beneficiaries, or (3) 

receive any consideration for his own 

personal account from any party dealing 

with a plan in connection with a 

transaction involving the assets of such 

plan. 

Reliance on PTE 77–4 

8. PTE 77–4 provides an exemption 

from section 406 of the Act and section 

4975 of the Code for a plan’s purchase 

or sale of mutual fund shares where 

such fund’s investment advisor: (1) Is a 

plan fiduciary or affiliated with a plan 

fiduciary; and (2) is not an employer of 

employees covered by the plan. The 

conditions of PTE 77–4 prohibit the 

payment of commissions by a plan, 

limit the payment of redemption fees by 

such plan, prohibit the payment of 

double investment advisory fees, and 

require prior disclosure to and approval 

by a Second Fiduciary. 

In order to meet the condition of PTE 

77–4 that a Client Plan does not pay 

duplicative fees for investment advisory 

services, PNC has not charged a Client 

Plan any direct fees for investment 

management services for assets that are 

invested in the Funds. With respect to 

such assets, these Client Plans have paid 

fees to PNC solely for non-investment 

trust or custody services. The fees PNC 

has received for investment 

management of a Client Plan’s assets 

that were invested in the Funds have 

come from the Funds in accordance 

with relevant investment advisory and 

sub-advisory agreements with such 

Fund. Where PNC is a fiduciary with 

respect to a Client Plan, the investment 

of that Client Plan’s assets in a Fund 

advised by an affiliate of PNC may 

potentially raise issues under sections 

406(a)(1)(D), 406(b)(1), 406(b)(2) and 

406(b)(3) of the Act, unless an 

exemption is available. 

9. Client Plans have not paid any 

commissions or other sales charges in 

connection with their investments in 

the Funds, as required under PTE 77– 

4. In addition, PNC has satisfied certain 

conditions in PTE 77–4. These 

conditions include advance written 

disclosure of information to a Client 

Plan regarding the fees to be received by 

PNC from each Fund as well as advance 

written authorization from an 

independent and unrelated Second 

Fiduciary of such Client Plan for 

investment in the Fund. The Second 

Fiduciary is generally the Plan’s named 

fiduciary or sponsoring employer, and 

in the case of an IRA, the Second 

Fiduciary is generally the owner of the 

IRA. 

10. PNC is requesting an exemption 

similar to PTE 77–4, with respect to the 

receipt of fees by PNC and related 

entities from the Funds for acting as 

investment advisor, as well as for 

providing non-advisory Secondary 

Services. The requested exemption, 

however, contains two differences from 

PTE 77–4. First, beginning on February 

1, 2008, use of a ‘‘Termination Form’’ 

took the place of the PTE 77–4 

requirement that an independent 

fiduciary approve any change in mutual 

fund fees—substituting a ‘‘negative 

consent’’ requirement for those fee 

changes in place of affirmative approval. 

Second, the requested exemption would 

permit a Credit Fee Method with respect 

to PNC’s receipt of Plan and Fund-Level 

Fees. As a result, the requested 

exemption would allow three ways to 

deal with duplicative fee—a Client Plan 

may use the (a) Offset Fee Method, (b) 

Credit Fee Method, or (c) the 

Subtraction Fee Method. 

Receipt of Fees Pursuant to the Fee 

Methods 

11. PNC will charge investment 

advisory fees to the Funds in 

accordance with the investment 

advisory agreement between PNC and 

the Funds, payable monthly. This 

agreement is approved annually by the 

independent members of the Board of 

Directors of the Funds, in accordance 

with the applicable provisions of the 

1940 Act, and any subsequent changes 

in the gross fees will have to be 

approved by such Directors. These fees 

will not be increased without the 

approval of the shareholders of the 

affected Funds. PNC represents that as 

of February 1, 2008, the following fee 

methods dealing with duplicative fees 

were in place: (a) The Offset Fee 

Method, (b) the Subtraction Fee Method, 

and (c) the Credit Fee Method,3 as 

described in Section II(a)(1), (a)(2), and 

(a)(3) of this proposed exemption. 

Offset Fee Method 

12. With regard to the Offset Fee 

Method, PNC represents that it does not 

charge a Client Plan any direct fees for 

investment management with respect to 

such Client Plan’s assets invested in the 

Funds. Such Client Plan pays fees to 

PNC solely for non-investment trust or 

custody services. The fees a Client Plan 

pays for those assets invested in the 

Funds come solely from the Funds in 

accordance with certain advisory 

agreements. The result is that the PlanLevel Fees are offset, and the Client Plan 

pays only an investment advisory or 

similar Fund-Level Fee with respect to 

those plan assets invested in a Fund. 


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4While fees above a certain limit may be waived 

or rebated by PNC, as a technical matter, the Funds 

may pay the excess fees and then simultaneously 

receive a credit of the excess amount. For purposes 

of the fee structure described in this section, PNC 

intends to credit to Client Plans only the net fees 

that it receives, and not to credit any of the excess 

fees that have been rebated to the Funds. 

Subtraction Fee Method 

13. Under this method, PNC charges 

the Client Plan a direct investment 

management fee, but credits to the 

benefit of such client Plan, as a 

subtraction to such Client Plan’s PlanLevel Fees, its proportionate share of the 

investment advisory fee of Client Plan 

assets invested in the Funds and paid to 

PNC, including the Client Plan’s share 

of any investment advisory fees paid by 

PNC to sub-advisors, as reduced by any 

waiver or rebate by PNC of such fees to 

the Funds, such as a waiver or rebate 

due to state law or other limits on Fund 

expenses.4 The result is that the Client 

Plan pays only one investment 

management fee with respect to those 

assets. The subtraction is solely against 

those Plan-Level Fees charged by PNC 

for serving as investment manager, and 

does not include non-investment 

management trustee fees. 

The credit under this Subtraction Fee 

Method and the Credit Fee Method, 

below, will not include the fees for 

‘‘Secondary Services’’ payable by the 

Funds to PNC, because such services 

rendered at the Fund level will not be 

duplicative of any services provided 

directly to the Client Plan. The services 

to the Client Plan may involve 

maintaining custody over all or a 

portion of the Client Plan’s assets 

(which may include Fund shares, but 

not the assets underlying the Fund 

shares), providing trust accounting, 

asset and transaction reporting, 

execution and settlement of 

transactions, processing benefit 

payments and loans, valuing loan assets, 

and producing statement and reports 

regarding overall plan holdings. PNC 

represents that these Plan-level services 

will be necessary regardless of whether 

such Client Plan’s assets are invested in 

the Funds. 

Credit Fee Method 

14. Under this method, PNC will 

charge standard (or negotiated) fees, as 

applicable to each Client Plan, for 

serving as trustee and/or investment 

manager. At the beginning of each 

month, and in no event later than one 

business day after the payment of 

investment advisory fees by the Funds 

to PNC for the previous month, PNC 

will pay a ‘‘credited dollar amount’’ to a 

Client Plan that constituted its 

proportionate share of all investment 

advisory fees charged by PNC to the 

Funds for the previous month. The 

standard practice will be to reinvest this 

‘‘credited dollar amount’’ in additional 

shares of the same Fund with respect to 

which the fees were credited. The 

additional shares so acquired will be 

valued at the net asset value on the date 

the purchase request is transmitted to 

the Fund, which is the same day the 

‘‘credited dollar amount’’ is made to the 

Client Plan’s account. 

It is represented that a Client Plan 

could request that a rebate be made in 

cash. The cash would be invested in a 

money market account pending 

investment direction from the 

investment officer for the account. PNC 

does not anticipate notifying Client 

Plans in each instance that they have 

the option to request that credits be 

made in cash rather than additional 

shares. 

15. PNC, as a trustee and investment 

manager for Client Plans in connection 

with the decision to invest Client Plan 

assets in the Funds, will monitor all fees 

paid by a Fund to PNC and third parties 

for services provided to the Fund, to 

ensure that there will not be any 

payment of ‘‘double’’ fees for duplicative 

services to the Fund. 

For each Client Plan, the combined 

total of all fees PNC receives directly 

and indirectly from Client Plans for the 

provision of services to the Plans and/ 

or to the Funds will not be in excess of 

‘‘reasonable compensation’’ within the 

meaning of section 408(b)(2) of the Act. 

Audit of the Credit Fee Method 

16. It is represented that there are 

sufficient safeguards to permit 

exemptive relief for the use by PNC of 

the Credit Fee Method. Accordingly, 

PNC will maintain a system of internal 

accounting controls for the rebating of 

investment advisory fees to Client Plans. 

In addition, PNC will retain the services 

of an independent Auditor to audit 

annually the crediting of fees to the 

Client Plans under the Credit Fee 

Method. Such audits will provide 

independent verification of the proper 

crediting to such Client Plans. In the 

annual audit of the Credit Fee Method, 

the Auditor will use procedures 

designed to review and test compliance 

with the specific operational controls 

and procedures established by PNC for 

making the credits. Specifically, the 

Auditor will: (i) Verify on a test basis 

the investment advisory fees paid by the 

Funds to PNC; (ii) verify on a test basis 

the monthly factors used to determine 

the investment advisory fees; (iii) verify 

on a test basis the credits paid in total 

for a one-month period; (iv) re-compute, 

on a test basis, using the monthly factors 

described above, the amount of the 

credit determined for selected Client 

Plans; (v) verify on a test basis the 

proper assignment of identification 

fields for receipt of fee credits to the 

Client Plans; and (vi) verify on a test 

basis that the credits were posted to the 

Client Plans within the required time 

frame. 

In the event either the internal audit 

made by PNC or the independent audit 

made by the Auditor identifies an error 

in the crediting of fees to a Client Plan, 

PNC will correct the error. With respect 

to any shortfall in credited fees to a 

Client Plan, PNC will make a cash 

payment to such Client Plan equal to the 

amount of the error, plus interest paid 

at money market rates offered by PNC 

for the period involved. Any excess 

credits made to a Client Plan will be 

corrected by an appropriate deduction 

from such Client Plan or reallocation of 

cash during the next payment period 

after discovery of the error to reflect 

accurately the amount of total credits 

due to such Client Plan for the period 

involved. 

Receipt of Secondary Services Fees 

As described in Representation 3 

above, on February 1, 2008, the Funds 

used PNC-affiliated service providers for 

secondary services. Accordingly, PNC 

requests an administrative exemption, 

effective as of February 1, 2008 for 

receipt of fees by PNC for the provision 

of Secondary Services to the Funds. 

In the Interest of Client Plans 

17. The applicant represents that the 

proposed exemption is in the interest of 

the Client Plans and their participants 

and beneficiaries. In this regard, the 

Funds provide advantages for Client 

Plans, including professional 

management, the ability to monitor 

performance on a daily basis, and the 

flexibility to purchase and redeem 

shares on a daily basis. It is represented 

that no sales commissions are charged 

to Client Plans in connection with the 

purchase or sale of shares in any of the 

Funds. In addition, these investments in 

the Funds by Client Plans are made in 

certain classes of shares, which are not 

subject to 12b–1 fees. Redemption fees 

are charged only if disclosed in the 

prospectuses in effect at both the time 

of the original investment in the shares 

of a Fund and the time of redemption. 

It is further represented that the 

Funds provide a means for Client Plans 

with limited assets to achieve 

diversification of investment in a 

manner that may not be attainable 

through direct investment. For these 

reasons, the applicant maintains that the 

availability of the Funds as investments 


wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
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enables PNC, as investment manager, to 

better meet the investment goals and 

strategies of a Client Plan. 

Protective of Client Plans 

18. It is represented that the proposed 

exemption contains sufficient 

safeguards for the protection of the 

Client Plans invested in the Funds. In 

this regard, prior to any investment by 

a Client Plan in a Fund, the investment 

must be authorized in writing by the 

Second Fiduciary of such Client Plan, 

based on full and detailed written 

disclosure concerning such Fund. 

In addition to the initial disclosures 

received by the Second Fiduciary of a 

Client Plan invested in a Fund, PNC 

provides to such Second Fiduciary 

ongoing disclosures regarding such 

Fund and the fee methods. Specifically, 

on an annual basis, such Second 

Fiduciary receives copies of the current 

Fund prospectuses, as well as copies of 

the annual financial disclosure reports 

containing information about the Funds 

and audit findings of the Auditor within 

sixty (60) days of the preparation of 

such report. 

It is represented that PNC or an 

appropriate affiliate, thereof, will 

respond to inquiries from a Second 

Fiduciary. In addition, a Second 

Fiduciary, upon request, will receive 

copies of the Statements of Additional 

Information for the Funds and a copy of 

the proposed exemption and a copy of 

the final exemption, if granted, once 

such documents are published in the 

Federal Register. 

Furthermore, each investment of the 

assets of a Client Plan in a Fund will be 

subject to the ongoing ability of the 

Second Fiduciary of such Client Plan to 

terminate the investment in such Fund 

without penalty to such Client Plan at 

any time upon written notice of 

termination to PNC. In this regard, a 

Termination Form, expressly providing 

an election to terminate the 

authorization, with instructions on the 

use of such Termination Form, will be 

supplied to the Second Fiduciary at 

least annually. 

The Termination Form may be used to 

notify PNC, in writing to effect a 

termination by selling the shares of the 

Funds held by a Client Plan. Such sales 

are to occur within one (1) business day, 

as defined in Section III(k) of this 

exemption, following receipt by PNC of 

the Termination Form. If, due to 

circumstances beyond the control of 

PNC, the sale cannot be executed within 

one (1) business day, PNC will be 

obligated to complete the sale within 

the next business day. 

By using the Termination Form that 

PNC provides thirty (30) days in 

advance of any increase in the rate of 

fees and change in services, the Second 

Fiduciary will have sufficient 

opportunity to terminate a Client Plan’s 

investment in a Fund, without penalty 

to the Client Plan, and withdraw the 

Client Plan’s investment from such 

Fund in advance of any such increase in 

fee and change in services. 

Feasibility 

19. PNC represents that the proposed 

exemption is feasible in that compliance 

with the terms of the exemption will be 

monitored by the Second Fiduciary of a 

Client Plan who is independent of PNC. 

Further, PNC provides internal 

accounting safeguards to ensure the 

accuracy of the calculation of the 

‘‘credited dollar amounts’’ under the 

Credit Fee Method, and an independent 

Auditor will provide assurance that the 

Credit Fee Method is properly 

administered. For these reasons, the 

applicant maintains that the Department 

will not have to monitor the 

implementation and enforcement of the 

exemption. 

It is represented that the negative 

consent procedure, as described herein, 

for obtaining the approval from the 

Second Fiduciary of each Client Plan 

invested in a Fund for increases in fees 

and the addition of services for which 

a fee is charged is more efficient, cost 

effective, and administratively feasible 

than written affirmative consent 

approval, as described in PTE 77–4. 

Under PTE 77–4, an increase in fees 

and any change in services may not be 

implemented until written approval of 

such increase or change is obtained 

from every Second Fiduciary of Client 

Plans invested in a Fund. A 

communication failure that results in 

not obtaining an affirmative written 

approval from a Second Fiduciary of a 

Client Plan could force PNC to transfer 

a Client Plan’s investments out of a 

Fund. 

Under the negative consent 

procedure, as set forth herein, the 

difficulties of obtaining written 

affirmative approval from the Second 

Fiduciary of each Client Plan and 

coordinating any fee increases and any 

additional services for which a fee is 

charged will be avoided while such 

Second Fiduciary will still receive the 

necessary disclosures. Specifically, each 

Second Fiduciary of a Client Plan 

invested in a Fund will receive advance 

notice in a statement separate from such 

Fund’s prospectus of any proposed 

change from one fee method to another 

or any proposed increase in a rate of fee 

for investment advisory services, or 

similar services, paid to PCA that was 

previously disclosed in the Fund 

prospectus. In addition, each Second 

Fiduciary will receive advance notice of 

any additional Secondary Service for 

which a fee is charged and any increase 

of any rate of any fee paid for Secondary 

Services to PNC or an increase in a rate 

of any fee that results from a decrease 

in the number or kind of service 

performed by PNC in connection with a 

previously authorized fee for such 

service. With regard to the affected 

Fund, the advance notice will contain 

an explanation of the nature and 

amount of the increase in fees and the 

nature and amount of the addition (or 

elimination) of a service for which an 

additional fee is charged. The Second 

Fiduciary will receive such advance 

notice thirty (30) days prior to the 

effective date of such increase in the 

rate of fees and change in services with 

respect to a Client Plan’s investment in 

a Fund. Such advance notice must be 

accompanied by a Termination Form 

that would allow the Second Fiduciary 

to terminate, without penalty to the 

Client Plan, the authorization to invest 

in the Funds. The notice requirement 

would not apply if an increase is the 

result of the cessation of a voluntary 

temporary waiver of fees by PNC, and 

the full fee level had previously been 

described in writing to and authorized 

by the Second Fiduciary. Failure to 

return the Termination Form by the 

thirtieth (30th) day will result in the 

negative consent of the Second 

Fiduciary to the increase in fees or to 

the increase in the fees that results from 

an addition or elimination in the 

number or kind of service performed by 

PNC in connection with a previously 

authorized fee for such service and to 

the addition of services for which an 

additional fee is charged. 

20. In summary, the proposed 

transactions satisfy or will satisfy the 

statutory criteria of section 408(a) of 

ERISA for the following reasons: 

a. The Funds provide the Client Plans 

with an effective investment vehicle. 

b. Client Plan investments in the 

Funds and the payment of any fees by 

the Funds to PNC in connection with 

such investments will require an 

advance authorization in writing by the 

Second Fiduciary after full written 

disclosure, including current 

prospectuses for the Funds and a 

statement describing the fee method to 

be used. 

c. Any authorization made by the 

Second Fiduciary will be terminable at 

will by that fiduciary, without penalty 

to the Client Plan, within one business 

day following receipt by PNC of written 

notice of termination from the fiduciary 

on a form expressly providing an 

election to terminate the authorization, 


wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
22860 Federal Register / Vol. 75, No. 83 / Friday, April 30, 2010 / Notices 

5For purposes of this proposed exemption, 

references to section 406 of the Act should be read 

to refer as well to the corresponding provisions of 

section 4975 of the Code. 

which will be supplied to the Second 

Fiduciary no less than annually, or in 

any other written notice of termination. 

d. No sales commissions will be paid 

by the Client Plans in connection with 

the acquisition or sale of shares of the 

Funds. Redemption fees not to exceed 

two percent (2%) of the value of the 

shares redeemed may be paid only in 

accordance with Rule 22c–2 of the 1940 

Act and the conditions imposed on such 

fees by PTE 77–4. 

e. All dealings among the Client 

Plans, any of the Funds, PCA, as well as 

PNC and its affiliates will be on a basis 

no less favorable to the Client Plans 

than such dealings with the other 

shareholders of the Funds. 

f. Plans investing in the Funds would 

pay only a single level of investment 

advisory-type fees with respect to their 

assets so invested, either receiving a 

rebate of the Fund investment advisory 

fees or not being charged the Plan-Level 

investment management fees. 

g. PNC will require annual audits by 

an independent accounting firm to 

verify that the Client Plan using the 

Credit Fee Method receives proper 

credits for the fees paid to the Funds. 

For Further Information Contact: Mr. 

Anh-Viet Ly of the Department, 

telephone (202) 693–8648. (This is not 

a toll-free number.) 

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, in 

accordance with the procedures set 

forth in 29 CFR Part 2570, Subpart B (55 

FR 32836, 32847, August 10, 1990).5

If the proposed exemption is granted, 

the restrictions of sections 406(a), 

406(b)(1) and 406(b)(2) of the Act (or 

ERISA) 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 

as of December 22, 2009 to the cash sale 

of certain fixed income securities (the 

Securities) for an aggregate purchase 

price of $113,977,880.15 by the Quality 

D Short-Term Investment Fund (the 

Fund) to State Street, a fiduciary with 

respect to the Fund and a party in 

interest with respect to employee 

benefit plans (the Plans) invested, 

directly or indirectly, in the Fund, 

provided that the following conditions 

are met: 

(a) The sale was a one-time 

transaction for cash; 

(b) The Fund received an amount 

which was equal to the sum of (1) the 

aggregate current amortized cost of the 

Securities as of the date of the 

transaction plus (2) the aggregate 

accrued interest on the Securities 

through the date of the transaction, 

calculated at the applicable contract rate 

for each of the Securities; 

(c) The Fund did not bear any 

commissions, fees, transaction costs, or 

other expenses in connection with the 

sale; 

(d) The amount received by the Fund 

with respect to each of the Securities 

was no less than the fair market value 

of each such Security, based upon the 

closing price obtained from an 

independent pricing service, as of the 

close of business on the date prior to the 

date of the transaction; 

(e) State Street, as trustee of the Fund, 

determined that the sale of the 

Securities was appropriate for and in 

the best interests of the Fund, and the 

Plans invested, directly or indirectly, in 

the Fund, at the time of the transaction; 

(f) State Street took all appropriate 

actions necessary to safeguard the 

interests of the Fund and the Plans 

invested, directly or indirectly, in the 

Fund, in connection with the 

transaction; 

(g) State Street and its affiliates, as 

applicable, maintain, or cause to be 

maintained, for a period of six (6) years 

from the date of any covered transaction 

such records as are necessary to enable 

the person described below in 

paragraph (h)(1), to determine whether 

the conditions of this exemption have 

been met, except that: 

(1) No party in interest with respect 

to a Plan which engages in the covered 

transaction, other than State Street and 

its affiliates, as applicable, shall be 

subject to a civil penalty under section 

502(i) of the Act or the taxes imposed 

by sections 4975(a) and (b) of the Code, 

if such records are not maintained, or 

not available for examination, as 

required, below, by paragraph (h)(1); 

and 

(2) A separate prohibited transaction 

shall not be considered to have occurred 

solely because, due to circumstances 

beyond the control of State Street or its 

affiliates, as applicable, such records are 

lost or destroyed prior to the end of the 

six-year period. 

(h)(1) Except as provided, in 

paragraph (h)(2), and notwithstanding 

any provisions of subsections (a)(2) and 

(b) of section 504 of the Act, the records 

referred to in paragraph (g) 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 

Securities and Exchange Commission; 

(B) Any fiduciary of any Plan that 

engages in the covered transaction, or 

any duly authorized employee or 

representative of such fiduciary; 

(C) Any employer of participants and 

beneficiaries and any employee 

organization whose members are 

covered by a Plan that engages in the 

covered transaction, or any authorized 

employee or representative of these 

entities; or 

(D) Any participant or beneficiary of 

a Plan that engages in the covered 

transaction, or duly authorized 

employee or representative of such 

participant or beneficiary; 

(2) None of the persons described, 

above, in paragraphs (h)(1)(B)–(D) shall 

be authorized to examine trade secrets 

of State Street or its affiliates, or 

commercial or financial information 

which is privileged or confidential; and 

(3) Should State Street refuse to 

disclose information on the basis that 

such information is exempt from 

disclosure, State Street 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. 

Effective Date: If granted, this 

exemption will be effective as of 

December 22, 2009. 

Summary of Facts and Representations 

1. State Street is a Massachusetts 

state-chartered trust company subject to 

regulation by the Massachusetts 

Division of Banks. As of December 31, 

2009, State Street managed assets in 

excess of $1.9 trillion. State Street 

provides a wide range of banking and 

fiduciary services to a broad array of 

clients, including employee benefit 

plans subject to the Act and plans 

subject to Section 4975 of the Code. 

State Street is a subsidiary of State 

Street Corporation, a financial holding 

company organized under the laws of 

Massachusetts. 

2. The Fund is a group trust that is 

exempt from federal income tax 

pursuant to Rev. Rul. 81–100. State 

Street serves as a trustee and investment 

manager for the Fund. The Fund is a 

short-term investment fund that values 

its assets based on their amortized cost, 

and seeks to maintain a constant unit 

value equal to $1.00. The Fund invests 

primarily in fixed income investments, 

including certificates of deposit, assetbacked securities, commercial paper, 

corporate notes, asset-backed 


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6 It is represented that section 408(b)(8) of the Act 

would apply to the investment by the ERISAcovered Plans in the Fund. Section 408(b)(8) of the 

Act provides a statutory exemption for any 

transactions between a plan and a common or 

collective trust fund maintained by a party in 

interest which is a bank or trust company 

supervised by a State or Federal agency if certain 

requirements are met. 

7The Department is expressing no opinion in this 

proposed exemption regarding whether the 

acquisition and holding of the Securities by the 

Fund violated any of the fiduciary responsibility 

provisions of Part 4 of Title I of the Act. In this 

regard, the Department notes that section 404(a) of 

the Act requires, among other things, that a 

fiduciary of a plan act prudently, solely in the 

interest of the plan’s participants and beneficiaries, 

and for the exclusive purpose of providing benefits 

to participants and beneficiaries when making 

investment decisions on behalf of a plan. Section 

404(a) of the Act also states that a plan fiduciary 

should diversify the investments of a plan so as to 

minimize the risk of large losses, unless under the 

circumstances it is clearly prudent not to do so. 

Moreover, the Department is not providing any 

opinion as to whether a particular category of 

investments or investment strategy would be 

considered prudent or in the best interests of a plan 

as required by section 404 of the Act. The 

determination of the prudence of a particular 

investment or investment course of action must be 

made by a plan fiduciary after appropriate 

consideration of those facts and circumstances that, 

given the scope of such fiduciary’s investment 

duties, the fiduciary knows or should know are 

relevant to the particular investment or investment 

course of action involved, including a plan’s 

potential exposure to losses and the role the 

investment or investment course of action plays in 

that portion of the plan’s portfolio with respect to 

which the fiduciary has investment duties (see 29 

CFR 2550.404a–1). The Department also notes that 

in order to act prudently in making investment 

decisions, a plan fiduciary must consider, among 

other factors, the availability, risks and potential 

return of alternative investments for the plan. Thus, 

a particular investment by a plan, which is selected 

in preference to other alternative investments, 

would generally not be prudent if such investment 

involves a greater risk to the security of a plan’s 

assets than other comparable investments offering 

a similar return or result. 

commercial paper, bank notes, time 

deposits and repurchase agreements. 

The Fund is maintained in connection 

with State Street’s securities lending 

program, and it is maintained 

exclusively for the purposes of investing 

cash collateral generated by that 

program. 

3. As of December 21, 2009, the value 

of the Fund’s portfolio was 

approximately $48,594,086,914. As of 

December 21, 2009, there were 

approximately 136 direct investors in 

the Fund, a substantial number of which 

were employee benefit plans or trusts 

subject to the Act, with the remaining 

investors being government-sponsored 

employee benefit plans, churchsponsored employee benefit plans and 

unaffiliated group trusts.6 No in-house 

Plan of State Street invested in the 

Fund. Of the ERISA-covered Plans 

investing in the Fund, none had a 

greater that 20% interest (direct or 

indirect) therein. 

4. On December 22, 2009, the Fund 

held the following asset backed 

securities, which it valued at their 

amortized cost: 

CUSIP No. Issuer Acquisition 

date 

Original 

face value 

Maturity 

date 

78442GPR1 ................................... SLM Student Loan Trust ........................................... 08/19/05 $26,132,000.00 10/25/40 

14041NCR0 ................................... Capital One Multi-Asset Execution ............................ 03/02/06 22,581,000.00 12/16/13 

161571BB9 .................................... Chase Issuance Trust ............................................... 02/21/06 64,371,000.00 04/15/13 

78453VAA7 .................................... Superannuation Members Home .............................. 11/18/03 9,900,000.00 05/09/30 

Total ........................................ .................................................................................... ...................... $122,984,000.00 ......................

The decision to invest in the Securities 

was made by State Street. Prior to each 

investment, State Street conducted an 

investigation of the potential 

investment, examining and considering 

the economic and other terms of the 

Securities. State Street represents that 

each investment in the Securities was 

consistent with the applicable 

investment policies and objectives of 

the Fund, including the Fund’s desire to 

maintain a constant unit value equal to 

$1.00. At the time the Fund acquired 

each of the Securities, each Security was 

rated at least ‘‘A–1+’’ by Standard & 

Poor’s Corporation and ‘‘P–1’’ by 

Moody’s Investor Services, Inc. Based 

on its consideration of the relevant facts 

and circumstances, State Street states 

that it was prudent and appropriate for 

the Fund to acquire the Securities.7

State Street also represents that none of 

the issuers or sellers of the Securities 

were related to State Street. 

5. State Street represents that prior to 

December 22, 2009, the market value of 

the Securities had decreased and the 

Securities had been consistently trading 

below their amortized cost. In addition, 

market conditions with respect to the 

Securities reflected a diminished degree 

of liquidity with respect to the 

Securities. 

6. In view of the foregoing, State 

Street, as trustee of the Fund, 

determined that it would be appropriate 

and in the best interest of the Fund to 

sell each of the Securities to State Street 

at a price equal to the greater of (a) the 

fair market value of such Security 

(determined based on the closing price 

of such Security on the day prior to the 

date of the sale transaction, as obtained 

from an independent pricing service) or 

(b) the sum of (i) the Fund’s current 

amortized cost of the applicable 

Security on the date of the sale 

transaction, plus (ii) accrued interest on 

the applicable Security through the date 

of the sale transaction, calculated at the 

applicable contract rate for such 

Security. State Street determined that 

such a sale would protect the Fund from 

any potential investment loss with 

respect to the Securities, enhance the 

liquidity of the Fund, be consistent with 

the Fund maintaining a constant unit 

value equal to $1.00, and alleviate any 

concerns the investors in the Fund 

might have regarding the foregoing 

matters. Finally, State Street determined 

that the purchase of the Securities 

would be permissible under applicable 

banking law. 

7. On December 21, 2009, prior to 

consummation of the transaction, State 

Street sent written notice to the 

designated representative of each of the 

investors having a direct interest in the 

Fund of State Street’s intent to cause the 

Fund to sell the Securities to State 

Street. While such notice did not 

contemplate or require any response, it 

should be noted that this notice did not 

generate any negative reaction from any 

of the recipients thereof. 

8. State Street represents that on 

December 22, 2009, it purchased the 

Securities from the Fund for an 

aggregate lump sum cash payment of 

$113,977,880.15, which amount 

represented the sum of (a) the aggregate 

current amortized cost of the Securities 

($113,959,596.43) on the date of the sale 

transaction plus (b) the aggregate 

accrued interest on the Securities 

through the date of the sale transaction, 

calculated at the applicable contract rate 

for each of the Securities ($18,283.72). 

Three of the four Securities had a 

current amortized cost equal to their 

face value. The fourth Security had a 

current amortized cost slightly less than 

the purchase price because it was 


wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
22862 Federal Register / Vol. 75, No. 83 / Friday, April 30, 2010 / Notices 

purchased on the secondary market at a 

discount to face value. The purchase 

price of each Security was determined 

as follows: 

CUSIP No. Face value as of 

12/22/09 Amortized cost Accrued interest Net proceeds 

78442GPR1 ............................................................. $26,132,000.00 $26,131,247.84 $12,917.07 $26,144,164.91 

14041NCR0 ............................................................. 22,581,000.00 22,581,000.00 1,999.25 22,582,199.25 

161571BB9 .............................................................. 64,371,000.00 64,371,000.00 3,418.65 64,374,418.65 

78453VAA7 .............................................................. 876,348.59 876,348.59 748.75 877,097.34 

Total .................................................................. 113,960,348.59 113,959,596.43 18,283.72 113,977,880.15 

The contract rate used to calculate the 

applicable accrued interest for each 

Security was a floating rate based on a 

LIBOR-based formula that resets on a 

monthly or quarterly basis. 

9. Prior to its consummation of the 

foregoing transaction, State Street 

represents that it contacted Interactive 

Data Corporation (IDC), an independent 

pricing service, to obtain the closing 

price of each of the Securities on 

December 21, 2009 (the day preceding 

the date of the transaction) and 

determined that such closing price for 

each Security was less than the price 

State Street would pay for each such 

Security. The information provided by 

IDC was as follows: 

CUSIP No. Market price Fair market value 

78442GPR1 ....................................................................................................................................................... 83.5324 $21,828,058.47 

14041NCR0 ....................................................................................................................................................... 99.30296 22,423,601.40 

161571BB9 ........................................................................................................................................................ 99.54217 64,076,290.25 

78453VAA7 ........................................................................................................................................................ 99.7209 873,902.70 

Total ............................................................................................................................................................ .................... 109,201,852.82 

10. State Street, as trustee of the Fund, 

believed that the sale of the Securities 

by the Fund to State Street was in the 

best interests of the Fund and the Plans 

invested, directly or indirectly, in the 

Fund, at the time of the transaction. 

State Street states that any sale of the 

Securities on the open market at that 

time would have produced losses for the 

Fund and for the participating investors 

in the Fund. 

11. State Street represents that the 

sale of the Securities by the Fund to 

State Street benefited the Plan investors 

in the Fund because the purchase price 

paid by State Street for each Security 

exceeded the fair market value of such 

Security. In addition, State Street 

represents that the transaction was a 

one-time sale for cash in connection 

with which the Fund did not bear any 

commissions, fees, transaction costs or 

other expenses. State Street further 

represents that it took all appropriate 

actions necessary to safeguard the 

interests of the Fund and its 

participating investors in connection 

with the sale of the Securities. 

Accordingly, State Street requests an 

administrative exemption from the 

Department with respect to the sale of 

the Securities by the Fund to State 

Street. If granted, the exemption will be 

effective as of December 22, 2009. 

12. In summary, State Street 

represents that the transaction satisfied 

the statutory criteria of section 408(a) of 

the Act and section 4975 of the Code 

because: (a) The sale of the Securities by 

the Fund to State Street was a one-time 

transaction for cash; (b) the Fund 

received an amount equal to the sum of 

(i) the aggregate current amortized cost 

of the Securities as of the date of the 

transaction, plus (ii) the aggregate 

accrued interest on the Securities 

through the date of the transaction, 

calculated at the applicable contract rate 

for each of the Securities, which amount 

was greater than the closing price of 

each of the Securities as of the close of 

business on the date immediately prior 

to the date of the sale transaction, as 

determined based on information 

obtained from IDC, an independent 

pricing service; (c) the Fund did not pay 

any commissions, fees, transaction 

costs, or other expenses with respect to 

the sale; (d) the amount received by the 

Fund with respect to each of the 

Securities was no less than the fair 

market value of each such Security as of 

the close of business on the date prior 

to the date of the transaction; and (e) 

State Street, as trustee of the Fund, 

determined that the sale of the 

Securities by the Fund to State Street 

was in the best interests of the Fund and 

the Plans invested, directly or 

indirectly, in the Fund, at the time of 

the transaction. 

For Further Information Contact: Mr. 

Brian Shiker of the Department, 

telephone (202) 693–8552. (This is not 

a toll-free number.) 

General Information 

The attention of interested persons is 

directed to the following: 

(1) The fact that a transaction is the 

subject of an exemption under section 

408(a) of the Act and/or section 

4975(c)(2) of the Code does not relieve 

a fiduciary or other party in interest or 

disqualified person from certain other 

provisions of the Act and/or the Code, 

including any prohibited transaction 

provisions to which the exemption does 

not apply and the general fiduciary 

responsibility provisions of section 404 

of the Act, which, among other things, 

require a fiduciary to discharge his 

duties respecting the plan solely in the 

interest of the participants and 

beneficiaries of the plan and in a 

prudent fashion in accordance with 

section 404(a)(1)(b) of the Act; nor does 

it affect the requirement of section 

401(a) of the Code that the plan must 

operate for the exclusive benefit of the 

employees of the employer maintaining 

the plan and their beneficiaries; 

(2) Before an exemption may be 

granted under section 408(a) of the Act 

and/or section 4975(c)(2) of the Code, 

the Department must find that the 

exemption is administratively feasible, 

in the interests of the plan and of its 

participants and beneficiaries, and 

protective of the rights of participants 

and beneficiaries of the plan; 

(3) The proposed exemptions, if 

granted, will be supplemental to, and 


wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
Federal Register / Vol. 75, No. 83 / Friday, April 30, 2010 / Notices 22863 

not in derogation of, any other 

provisions of the Act and/or the Code, 

including statutory or administrative 

exemptions and transitional rules. 

Furthermore, the fact that a transaction 

is subject to an administrative or 

statutory exemption is not dispositive of 

whether the transaction is in fact a 

prohibited transaction; and 

(4) The proposed exemptions, if 

granted, will be subject to the express 

condition that the material facts and 

representations contained in each 

application are true and complete, and 

that each application accurately 

describes all material terms of the 

transaction which is the subject of the 

exemption. 

Signed at Washington, DC, this 26th day of 

April 2010. 

Ivan Strasfeld, 

Director of Exemption Determinations, 

Employee Benefits Security Administration. 

[FR Doc. 2010–10065 Filed 4–29–10; 8:45 am] 

BILLING CODE 4510–29–P 

OFFICE OF MANAGEMENT AND 

BUDGET 

Information Collection Activities: 

Proposed Collection; Comment 

Request 

AGENCY: Office of Management and 

Budget, Office of Federal Financial 

Management. 

ACTION: Notice; request for comments. 

SUMMARY: In accordance with the 

Paperwork Reduction Act (44 U.S.C. 

3501 et seq.), the Office of Management 

and Budget (OMB) invites the general 

public and Federal agencies to comment 

on the renewal without change of two 

standard forms: SF–270, Request for 

Advance or Reimbursement and SF– 

271, Outlay and Request for 

Reimbursement for Construction 

Programs. We are particularly interested 

in comments on whether the 

information collected in the forms could 

be more consistent with other 

governmentwide grant-related 

information collections. 

DATES: Comments must be received by 

June 29, 2010. Due to potential delays 

in OMB’s receipt and processing of mail 

sent through the US Postal Service, we 

encourage respondents to submit 

comments electronically to ensure 

timely receipt. We cannot guarantee that 

comments mailed will be received 

before the comment closing date. 

ADDRESSES: Comments may be sent to 

regulations.gov, a Federal E-Government 

Web site that allows the public to find, 

review, and submit comments on 

documents that agencies have published 

in the Federal Register and that are 

open for comment. Simply type ‘‘SF–270 

PRA’’ (in quotes) in the Comment or 

Submission search box, click Go, and 

follow the instructions for submitting 

comments. Comments received by the 

date specified above will be included as 

part of the official record. Marguerite 

Pridgen, Office of Federal Financial 

Management, Office of Management and 

Budget, 725 17th Street, NW., 

Washington, DC 20503; telephone 202– 

395–7844; fax 202–395–3952; e-mail 

mpridgen@omb.eop.gov. 

FOR FURTHER INFORMATION CONTACT: 

Marguerite Pridgen at the addresses 

noted above. 

OMB Control No.: 0348–0004. 

Title: Request for Advance or 

Reimbursement. 

Form No.: SF–270. 

Type of Review: Extension of a 

currently approved collection. 

Respondents: States, Local 

Governments, universities, non-profit 

organizations. 

Number of Responses: 100,000. 

Estimated Time Per Response: 60 

minutes. 

Needs and Uses: The SF–270 is used 

to request funds for all nonconstruction 

grant programs when letters of credit or 

predetermined advance payment 

methods are not used. The Federal 

awarding agencies use information 

reported on this form for the award and 

general management of Federal 

assistance program awards. 

OMB Control No.: 0348–0002. 

Title: Outlay and Request for 

Reimbursement for Construction 

Programs. 

Form No.: SF–271. 

Type of Review: Extension of a 

currently approved collection. 

Respondents: States, Local 

Governments, Universities, Non-Profit 

Organizations. 

Number of Responses: 40,000. 

Estimated Time Per Response: 60 

minutes. 

Needs and Uses: The SF–271 is used 

to request reimbursement for all 

construction grant programs. The 

Federal awarding agencies use 

information reported on this form for 

the award and general management of 

Federal assistance program awards. 

Debra J. Bond, 

Deputy Controller. 

[FR Doc. 2010–10112 Filed 4–29–10; 8:45 am] 

BILLING CODE P 

NATIONAL SCIENCE FOUNDATION 

Astronomy and Astrophysics Advisory 

Committee #13883; Notice of Meeting 

In accordance with the Federal 

Advisory Committee Act (Pub. L. 92– 

463, as amended), the National Science 

Foundation announces the following 

meeting: 

Name: Astronomy and Astrophysics 

Advisory Committee (#13883). 

Date and Time: May 20, 2010, 12 p.m.– 

5 p.m. 

Place: Teleconference National Science 

Foundation, Room 1020, Stafford I Building, 

4201 Wilson Blvd., Arlington, VA 22230. 

Type of Meeting: Open. 

Contact Person: Dr. James S. Ulvestad, 

Director, Division of Astronomical Sciences, 

Suite 1045, National Science Foundation, 

4201 Wilson Blvd., Arlington, VA 22230. 

Telephone: 703–292–4909. 

Purpose of Meeting: To provide advice and 

recommendations to the National Science 

Foundation (NSF), the National Aeronautics 

and Space Administration (NASA) and the 

U.S. Department of Energy (DOE) on issues 

within the field of astronomy and 

astrophysics that are of mutual interest and 

concern to the agencies. 

Agenda: To hear presentations of current 

programming by representatives from NSF, 

NASA, DOE and other agencies relevant to 

astronomy and astrophysics; to discuss 

current and potential areas of cooperation 

between the agencies; to formulate 

recommendations for continued and new 

areas of cooperation and mechanisms for 

achieving them. 

Dated: April 27, 2010. 

Susanne E. Bolton, 

Committee Management Officer. 

[FR Doc. 2010–10083 Filed 4–29–10; 8:45 am] 

BILLING CODE 7555–01–P 

NATIONAL SCIENCE FOUNDATION 

Notice of Permit Applications Received 

Under the Antarctic Conservation Act 

of 1978 (Pub. L. 95–541) 

AGENCY: National Science Foundation. 

ACTION: Notice of permit applications 

received under the Antarctic 

Conservation Act of 1978, Public Law 

95–541. 

SUMMARY: The National Science 

Foundation (NSF) is required to publish 

notice of permit applications received to 

conduct activities regulated under the 

Antarctic Conservation Act of 1978. 

NSF has published regulations under 

the Antarctic Conservation Act at Title 

45 Part 670 of the Code of Federal 

Regulations. This is the required notice 

of permit applications received. 

DATES: Interested parties are invited to 

submit written data, comments, or 

views with respect to this permit 


wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1