BOARO OF' GOVERNORS

OF THE

FEDERAL RESERVE SYSTEM

WASHINGTON. D. C. 20551

SCOTT G. ALVAREZ

GENERAL. COUNSEL.

December 19,2007

Thomas M. Mistele, Esq.

Chief Operating Officer and General Counsel

Dodge & Cox

555 California Street, 40th Floor

San Francisco, California 94104

Dear Mr. Mistele:

This is in response to your request for a determination that Dodge &

Cox, San Francisco, California, may acquire up to 15 percent of any class of voting

securities of a bank holding company or bank without being deemed to have

acquired control ofthat institution under the Bank Holding Company Act ("BHC

Act") or the Change in Bank Control Act ("CIBC Act") when the acquisition

complies with certain conditions described in this letter and related

correspondence.

Dodge & Cox proposes to acquire bank holding company and bank

shares through a variety of customer accounts (the "Accounts") and investment

funds ("Funds"), including open-end management investment companies

registered under the Investment Company Act of 1940, that are advised by Dodge

& Cox. For purposes ofthe BHC Act, a company controls a bank holding

company or bank ifthe first company (i) directly or indirectly or acting through

one or more other persons owns, controls, or has power to vote 25 percent or more

of any class ofvoting securities ofthe bank holding company or bank; (ii) controls

in any manner the election of a majority ofthe directors ofthe bank holding

company or bank; or (iii) directly or indirectly exercises a controlling influence

over the management or policies ofthe bank holding company or bank. I The

I 12 U.S.C. § 1841(a)(2); 12 C.F.R. 225.2(e).
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Board's Regulation Y also sets forth a set ofrebuttable presumptions of control for

BHC Act purposes.

2 Under the proposal, Dodge & Cox would not own, control, or

hold with power to vote 25 percent or more of a class of voting securities of, or

control the election of a majority ofthe directors of, a bank holding company or

bank. In addition, Dodge & Cox would not trigger any ofthe BHC Act rebuttable

presumptions of control under Regulation Y with respect to any bank holding

company or bank. Dodge & Cox would only be deemed to control a bank holding

company or bank under the BHC Act ifthe Board were to find that Dodge & Cox

exercises a controlling influence over the management or policies of a bank

holding company or bank.

For purposes ofthe CIBC Act, Dodge & Cox is presumed by

Regulation Y to control a bank holding company or state member bank if

"immediately after the transaction ... [it] will own, control, or hold with power to

vote 10 percent or more of any class ofvoting securities ofthe institution" and the

institution has registered securities or no other person owns or controls a greater

percentage ofthe same class ofvoting securities.3 Dodge & Cox proposes at times

to acquire in excess of 10 percent of a class of voting securities of a bank holding

company or state member bank through the Funds and the Accounts, without

regard to whether any such institution has registered securities or whether Dodge

& Cox is the largest shareholder in the institution.

Dodge & Cox seeks to establish that it would not exercise a

controlling influence over a bank holding company or bank for purposes ofthe

BHC Act and to rebut the regulatory presumption of control for purposes ofthe

CIBC Act in specific circumstances. In particular, Dodge & Cox, the Funds, and

the Accounts collectively would not own or control more than 15 percent of any

class of voting securities of a bank holding company or bank; and none ofDodge

& Cox, any Fund, or any Account would individually own or control more than

10 percent of any class of voting securities of a bank holding company or bank. In

addition, Dodge & Cox has committed to use its best efforts to vote shares owned

2 12 C.F.R. § 225.31(d).

3 12 C.F.R. § 22S.41(c).
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or controlled by Dodge & Cox, any Fund, or any Account in excess of 10 percent

("excess shares") in the same proportion as all other shares that are not excess

shares are voted. In the event that Dodge & Cox's best efforts are unsuccessful,

Dodge & Cox would not vote any excess shares.

Moreover, Dodge & Cox has made a number of commitments

designed to mitigate the ability ofDodge & Cox to control a bank holding

company or bank. Among these commitments, Dodge & Cox has committed that,

whenever Dodge & Cox, the Funds, and the Accounts own or control, in the

aggregate, 10 percent or more of any class of voting securities of a bank holding

company or bank, Dodge & Cox, the Funds, and the Accounts will not,

individually or collectively:

1) take any action to control the bank holding company or bank

within the meaning ofthe BHC Act;

2) have any director, officer, or employee interlocks with the bank

holding company or bank;

3) except in the context of a tender offer or in certain other

transactions, dispose of voting shares ofthe bank holding company

or bank. (i) to any person seeking control over the institution or

(ii) in block transactions exceeding 5 percent of any class of voting

shares ofthe institution; or

4) threaten to dispose of voting shares in any manner as a condition of

specific action or non-action by the bank. holding company or

bank.s

In addition to considering these commitments, Board staff has

considered the nature ofDodge & Cox and its proposed investments. Dodge &

Cox operates and provides investment advice to the Funds and the Accounts, and

S For a complete list ofthe commitments that Dodge & Cox has made to the

Board, see the Appendix.
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the proposed acquisitions would not be proprietary investments by Dodge & Cox.

Rather, they would be investments made by the Funds and on behalf ofthe

beneficial owners ofthe Accounts. The Funds and the Accounts are not operating

companies, and Dodge & Cox does not lend to the Funds or Accounts that it

advises or to the portfolio companies ofthe Funds. Moreover, Dodge & Cox is not

in the business of operating or controlling banks, bank holding companies, or other

companies, and the proposed acquisitions will be made for investment purposes

with the expectation ofresale and not for the purpose of exercising a controlling

influence over the management or policies of a bank holding company or bank.

In view ofthe commitments made by Dodge & Cox and the facts

described in this letter, Board staffwould not recommend that the Board fmd that

acquisitions made within the parameters set forth in this letter would cause Dodge

& Cox, any Account, or any Fund to control a bank holding company or bank for

purposes ofthe BHC Act. Similarly, staffwould not recommend that the Board

find that acquisitions made within the parameters set forth in this letter would

cause Dodge & Cox, any Account, or any Fund to control a bank holding company

or state member bank for purposes ofthe CIBC Act.

The preceding opinions are based expressly on the facts and

circumstances ofthis case as they have been described to Board staff, and any

change in these facts or circumstances may result in a different opinion. In

addition, this letter expresses no opinion as to whether a crnc Act notice would be

required for transactions involving direct investments in national banks or state

non-member banks. If you have any questions about this matter, please contact

Brian P. Knestout, Attorney (202-452-2249), ofthe Board's Legal Division.

Sincerely,
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Commitments of Dodge & Cox to the Board

Investments by the Funds and Accounts in 10 percent or more of any class

of voting securities ofU.S. bank holding companies and banks (each, a "Bank")

will be conducted in accordance with the commitments and restrictions listed

below.

1. Dodge & Cox, the Funds, and the Accounts in the aggregate:

(a) will not acquire more than fifteen percent of any class or series of

voting securities of any Bank; and

(b) will use best efforts to provide that shares in excess of 10 percent

of any class or series of voting securities of a Bank ("excess shares")

will be voted in proportion to the vote taken on all shares that are not

excess shares or, in the event that such efforts to provide for mirror

voting are not successful, will not vote any excess shares.

2. None ofDodge & Cox, the Funds, or the Accounts will, directly or

indirectly, individually or in the aggregate:

(a) take any action to cause a Bank or any ofits subsidiaries to

become a subsidiary ofDodge & Cox, a Fund or an Account for

purposes ofthe BHC Act;

(b) unless agreed to by the Federal Reserve Board or its staff, and

pennitted by applicable law, seek or accept representation on the

board of directors of any Bank or its subsidiaries;

(c) have or seek to have any representative of Dodge & Cox or the

Funds serve as an officer, agent or employee of any Bank or its

subsidiaries;

(d) propose a director or a slate of directors in opposition to any

nominee or slate of nominees proposed by the management or board

of directors of any Bank;

(e) exercise or attempt to exercise a controlling influence over the

management or policies of any Bank or any ofits subsidiaries; or
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(f) attempt to influence the dividend policies; loan, credit, or

investment decisions or policies; pricing ofservices; personnel

decisions; operations activities (including the location of any offices

or branches or their hours of operation, etc.); or any similar activities

or decisions of any Bank or any ofits subsidiaries.

3. None ofDodge & Cox, the Funds, or the Accounts will dispose of voting

securities of a Bank:

(a) to any person ifDodge & Cox knows that such person seeks to

change the control ofthe Bank in any manner; or

(b) to any person whom Dodge & Cox knows (i) has made a filing

with the SEC or other federal agency with respect to the ownership of

more than five percent ofthe Bank's voting securities, or (ii) would be

required to do so as a result ofthe purchase from Dodge & Cox, a

Fund, or an Account; or

(c) in an amount of more than 5 percent ofthe Bank's voting securities

in any single transaction;

provided that notwithstanding paragraphs (a) through (c) above, the

Funds and Accounts may dispose oftheir stock in a Bank in the

following circumstances:

(i) in a cross trade between two or more Funds or Accounts in

compliance with the rules governing such cross trades under the

1940 Act;

(ii) in the case of paragraph (c) above, in a bunched trade

effected for two or more Funds or Accounts in compliance with

the rules governing bunched trades under the 1940 Act;

(iii) in a sale by a Fund or Account to the Bank or one ofits

subsidiaries;

(iv) in a tender or exchange offer for voting stock ofthe Bank;

or

(v) in one or more open market transactions effected on a stock

exchange or in the over-the-counter market (which may include
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a sale to one or more broker-dealers acting as market makers or

otherwise intending to resell the shares sold to it or them in

accordance with its or their normal business practices).

4. None ofDodge & Cox, the Funds, or the Accounts will threaten to dispose

of voting securities in any manner as a condition ofspecific action or nonaction by the Ban1e

5. None of Dodge & Cox, any Fund, or any Account will individually own,

control, or hold with power to vote more than 10 percent of any class of

voting securities of a Banle