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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.      )

Filed by the Registrant x   Filed by a Party other than the Registrant ¨

Check the appropriate box:

The PNC Financial Services Group, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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James E. Rohr

Chairman and Chief Executive Officer

March 24, 2006

Dear Fellow Shareholder:

We look forward to discussing the business of your company with you at the 2006 annual meeting. PNC’s Board of Directors and management team remain focused on building shareholder value and enhancing your company’s corporate governance, regulatory relations, and risk management practices. I hope that you’ll be able to attend the annual meeting to hear about our progress during 2005 and our goals for the future.

Enclosed are the notice of meeting, proxy statement, and proxy card for the annual meeting of the shareholders of The PNC Financial Services Group, Inc., which will be held on Tuesday, April 25, 2006 at One PNC Plaza, 15th Floor, 249 Fifth Avenue, in Pittsburgh, Pennsylvania, beginning at 11:00 a.m., Eastern time. Our 2005 Annual Report on Form 10-K and Summary Annual Report to Shareholders accompany these enclosures.

Please review the enclosed materials and complete, sign, date, and return the proxy card regardless of whether or not you plan to attend the annual meeting so that the matters coming before the meeting can be acted upon. Instead of returning a proxy card, you may choose to vote your PNC shares by using the Internet or telephone voting options explained on your proxy card.

If you are unable to attend the annual meeting in person, you can choose to listen to the meeting by webcast or telephone conference options, which are explained on the opposite side of this letter.

Cordially,

/S/    JAMES E. ROHR

James E. Rohr

The PNC Financial Services Group

One PNC Plaza 249 Fifth Avenue Pittsburgh Pennsylvania 15222-2707

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IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS

In order to reduce printing and postage costs, we’ve undertaken an effort to deliver only one set of annual reports and one proxy statement to multiple shareholders sharing an address. We do not use this delivery method, called “householding,” however, if we have received contrary instructions from one or more of the shareholders sharing an address. If your household has received only one set of annual reports and one proxy statement, we will deliver promptly a separate copy of the 2005 Annual Report on Form 10-K, the Summary Annual Report to Shareholders and the proxy statement, without charge, to any shareholder who sends a written request to Computershare Investor Services, LLC, P.O. Box 3504, Chicago, IL 60690-3504 or calls Computershare at 1-800-982-7652. You can also notify us that you would like to receive separate copies of PNC’s annual reports and proxy statement in the future by writing or calling Computershare. Even if your household has received only one set of annual reports and one proxy statement, we have provided a separate proxy card for each shareholder account. Each proxy card should be signed, dated, and returned in the enclosed self-addressed return envelope. Neither the 2005 Annual Report on Form 10-K nor the 2005 Summary Annual Report to Shareholders is part of the proxy solicitation materials.

If your household has received multiple copies of PNC’s annual reports and proxy statement, you can request the delivery of single copies in the future by writing or calling Computershare.

WEBCAST AND TELECONFERENCE DIRECTIONS

You are cordially invited to access the live webcast of PNC’s 2006 annual meeting of shareholders on Tuesday, April 25, 2006, beginning at 11 a.m., Eastern time. Using the webcast will enable you to view the slides shown at the meeting and hear the speakers. The audio portion of the event will also be available in a listen-only mode via telephone conference call. Neither the webcast nor the teleconference will enable you to ask questions or to vote your PNC shares.

To access the meeting, please go to our corporate website at www.pnc.com under “For Investors” or dial 1-800-990-2718 (domestic) or 1-706-643-0187 (international), using the passcode “PNC.” Listeners who wish to access the live webcast should go to the website a sufficient amount of time before the meeting is scheduled to begin to register and to download and install any necessary software.

If you are unable to access the webcast or the teleconference during the meeting, a replay of the webcast will be available on our corporate website for thirty days after the meeting. You will also be able to view or print the slides shown at the meeting from our corporate website. A taped replay of the audio portion of the meeting will also be available for one week after the meeting by telephone at 1-800-642-1687 (domestic) and 1-706-645-9291 (international), entering conference ID number 6442870.

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March 24, 2006

Notice of Annual Meeting of Shareholders

April 25, 2006

TO OUR SHAREHOLDERS:

The annual meeting of the shareholders of The PNC Financial Services Group, Inc. will be held at One PNC Plaza, 15th Floor, 249 Fifth Avenue, Pittsburgh, Pennsylvania on Tuesday, April 25, 2006, beginning at 11:00 a.m., Eastern time, for the purpose of considering and acting upon the following matters:

Shareholders of record at the close of business on February 28, 2006 are entitled to receive notice of, and to vote at, the meeting and any adjournment thereof.

A proxy statement, form of proxy and self-addressed return envelope are enclosed. Please complete, date, and sign the proxy card. Return it promptly in the envelope provided, which requires no postage if mailed in the United States. Alternatively, you may choose to vote your shares using the Internet or telephone voting options explained on the proxy card. If you attend the meeting, you may withdraw your proxy and vote in person if you so choose.

By Order of the Board of Directors,

/S/    GEORGE P. LONG, III

George P. Long, III

Corporate Secretary

The PNC Financial Services Group

One PNC Plaza 249 Fifth Avenue Pittsburgh Pennsylvania 15222-2707

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March 24, 2006

Proxy Statement

FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD

APRIL 25, 2006

Date, Time, And Place Of Annual Meeting

PNC’s annual shareholders meeting will be held on Tuesday, April 25, 2006, beginning at 11:00 a.m. Eastern time. The meeting place will be One PNC Plaza, 15^th Floor, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707.

Proxy Mailing Date

We started mailing our proxy statement and proxy card to our shareholders on or about Friday, March 24, 2006. If you hold your PNC shares in an account at a bank or brokerage firm, we generally can’t mail our proxy materials directly to you. Instead, your bank or brokerage firm will forward our proxy materials to you, and tell you how to give it voting instructions for your PNC shares.

PNC’s Board Is Asking For Your Proxy

Our Board of Directors is asking for your proxy. When you give us your proxy, you authorize us to vote your PNC shares as you direct on your proxy card. Giving a proxy allows your shares to be voted at the annual meeting even if you don’t attend the meeting. Please complete, sign, date, and return your proxy card if you don’t plan to attend the annual meeting. You can also do so if you are planning to attend (or don’t know if you will attend); if you decide to vote at the meeting, you will still be able to do so.

If you sign, date, and return your proxy card without specifying how you want your shares voted, we will vote your shares for each of the Board’s nominees for director, for approval of the 2006 Incentive Award Plan, and for the ratification of the Audit Committee’s selection of Deloitte & Touche LLP as PNC’s independent auditors for 2006.

Your Proxy Is Revocable

You have the right to revoke your proxy. This right allows you to change your mind about how your shares will be voted at the annual meeting. You can revoke your proxy at any time before voting is declared closed at the annual meeting. You may revoke your proxy by sending a signed proxy with a later date in time for us to receive it before voting is declared closed, or by voting in person at the annual meeting. You may also revoke your proxy by using the Internet or telephone voting options explained below and on your proxy card. You cannot, however, revoke your proxy at the annual meeting if you do not attend in person. You will not be able to revoke your proxy at the annual meeting if you listen to it through the webcast or teleconference options.

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If your proxy is not properly revoked, we will vote your shares as indicated by your most recent valid proxy.

How PNC’s Board Solicits Proxies

We may solicit proxies by mail, personal interviews, telephone calls, fax transmissions and by use of the Internet. Officers and employees of PNC may solicit proxies but will receive no special compensation for doing so.

We will ask banks, brokerage houses, and other types of custodians of PNC stock to forward our proxy material to their clients. We will pay for their expenses involved in this process.

We have hired D.F. King & Co., Inc. to help us in soliciting proxies. We will pay D.F. King $15,000, plus its out-of-pocket expenses, for providing information related to the annual meeting to our shareholders and helping to distribute proxy materials.

Shareholders Entitled To Vote

Our Board has set February 28, 2006 as the record date for the annual meeting. This date determines which shareholders are entitled to receive notice of the annual meeting and to vote at the meeting. You must have owned PNC stock of record on February 28, 2006 in order to vote at this year’s annual meeting.

Outstanding Shares On The Record Date

This table shows the number of common and preferred shares issued and outstanding on February 28, 2006, the record date for the annual meeting. The table also shows the number of votes that each share of common and voting preferred stock has. The number of votes shown for each share of voting preferred stock equals the number of full shares of PNC common stock that can be acquired upon the conversion of a share of preferred stock.

Quorum

A quorum is the number of shares that must be present, either in person or by proxy, at the annual meeting in order for voting to be conducted. At our annual meeting, the presence of shareholders or their proxies who are entitled to cast at least a majority of the votes that all shareholders are entitled to cast will constitute a quorum. Votes withheld from director nominees and abstentions will still be counted in determining whether a quorum has been reached. Common stock and preferred stock holders will vote together as a single class at the meeting.

The New York Stock Exchange rules state that the total vote cast on each item required to be voted on by shareholders must represent over 50 percent in interest of the common stock and the

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voting preferred stock, voting together as a single class. As a result, shares not voted, abstentions, and broker non-votes (please see page 4 for an explanation of broker non-votes) will have a negative effect on the satisfaction of that requirement.

How To Vote

If you hold your shares directly, you have four ways to vote, as explained on your proxy card. If your shares are in an account at a bank or broker, you will receive an instruction card and information on how to give voting instructions to your bank or broker.

You may:

OR

OR

OR

Pennsylvania law provides that shareholders voting by means of the Internet or the telephone, as we provide above, will be treated as having transmitted a properly authenticated proxy for voting purposes. Pennsylvania law permits the use of Internet or telephone voting both when a shareholder of record is voting and when a beneficial owner is communicating its vote to a shareholder of record, such as a securities depositary or brokerage firm.

How To Be Admitted To The Meeting

If you have received a proxy card, please detach the admission ticket and bring it to the annual meeting. The ticket will admit you and one other person.

If you hold your PNC shares in an account at a bank or broker, your name will not appear on our shareholder list. Please bring an account statement or a letter from your broker showing your PNC share holdings. Please show this documentation at the meeting registration desk to attend the meeting.

Everyone who attends the annual meeting must abide by the rules for the conduct of the meeting. These rules will be printed on the meeting agenda.

If You Can’t Attend The Meeting

If you can’t attend the annual meeting in person, you can still listen to the meeting by using the webcast or telephone conference options that are explained on the inside cover of this proxy statement.

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Have You Received More Than One Set Of Proxy Materials?

If two or more PNC shareholders live in your household, you may have received more than one set of our proxy materials. This may also happen if you maintain more than one shareholder account on the books of our transfer agent.

We have made a delivery method for proxy materials, called “householding,” available to our shareholders. If you consent to householding, only one set of annual reports and one proxy statement will be delivered to your address. A separate proxy card will be delivered for each account, however, and householding doesn’t affect your right to vote all of your PNC shares.

If you and the other PNC shareholders in your household are interested in householding, details are provided on the inside cover of this proxy statement. Householding reduces the number of proxy packages you receive and saves your company money.

Our householding process does not include accounts that you maintain at a bank or broker. Some brokerage firms now offer householding. Please speak with your broker directly about householding for your brokerage accounts.

What Is A Broker Non-Vote?

If your PNC shares are held in a brokerage account, your broker is obligated to vote your shares as instructed by you. If you don’t give voting instructions to your broker, your broker’s ability to vote your shares depends on whether the item is “routine” or “non-routine.” The New York Stock Exchange decides whether an item is “routine” or “non-routine.”

Under the New York Stock Exchange rules, brokers may vote on “routine” items in their discretion on behalf of any customers who do not furnish voting instructions within 10 days of the annual meeting. With respect to “non-routine” items that come before the annual meeting for a vote, brokers would not be able to vote at all without first receiving voting instructions from their customers.

A broker “non-vote” occurs when the broker does not vote on a proposal because it is a non-routine item and the broker’s customer has not provided voting instructions. These broker “non-votes” would not be considered in the calculation of the majority of the votes cast and therefore would have no effect on the vote with respect to a non-routine item.

What Vote Is Required For A Proposal To Pass?

With regard to Item 1, the 17 nominees for election as directors who receive the greatest number of votes cast at the annual meeting will be elected as directors. This assumes that a quorum is present at the meeting. Although a withheld vote on any nominee will not affect the voting results, any nominee who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election will offer to resign in accordance with the PNC Corporate Governance Guidelines. For additional information on the guidelines, please see page 23.

With regard to Item 2, the proposal to approve The PNC Financial Services Group, Inc. 2006 Incentive Award Plan, the proposal will be approved if a majority of the votes cast are voted in favor of it. Under the New York Stock Exchange rules, a broker may not vote your shares on this proposal without your instructions. If you do not provide instructions, a broker non-vote will occur. Abstentions will not affect the results of the voting.

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With regard to Item 3, the ratification of the Audit Committee’s selection of Deloitte & Touche LLP as PNC’s independent auditors for 2006, the proposal will be approved if a majority of the votes cast are voted in favor of it. Abstentions will not affect the results of the voting.

Under Pennsylvania law, the act of “voting” does not include abstentions or failing to vote for a candidate or for approval or disapproval of a proposal. This is true whether or not the person entitled to vote characterizes the conduct as voting. In other words, only those shareholders who indicate an affirmative or negative decision on a matter are treated as voting, so that ordinarily an abstention or a mere absence or failure to vote is not the same thing as a negative decision, assuming that the New York Stock Exchange requirement explained in the “Quorum” section on page 2 has been satisfied.

ITEM 1

Election of Directors

Information Concerning Nominees

Our By-Laws provide that the number of directors must be at least five but not more than 36, as determined by the Board of Directors. Acting on the recommendation of the Nominating and Governance Committee, our Board has fixed the number of directors to be elected at the annual meeting at 17. The Board has nominated the persons named on pages 6 and 7 for election as directors, to hold office until the next annual meeting of shareholders and until the election and qualification of their successors. Mr. Milton A. Washington will retire from the Board at the annual meeting, in accordance with an established Board retirement policy.

Your proxy, unless you direct otherwise, will be voted FOR all of the nominees named on pages 6 and 7. All of these nominees are currently directors, with the exception of Ms. Kay C. James and Mr. George H. Walls, Jr., who are being nominated for director for the first time. All nominees have consented to being named in this proxy statement and to serve if elected. Our Board of Directors has no reason to believe that any nominee will be unavailable or unable to serve as a director. If for any reason, however, any nominee is not available or able to serve, your proxy will be voted in accordance with the recommendation of our Board.

The table on pages 6 and 7 lists:

Unless we indicate otherwise, all nominees have held the positions indicated or another senior executive position with the same entity or one of its affiliates or a predecessor entity for at least the past five years.

The Board of Directors recommends a vote “FOR” each of the nominees listed on pages 6 and 7.

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ITEM 2

Proposal To Approve The PNC Financial Services Group, Inc. 2006 Incentive Award Plan

On February 15, 2006, our Board adopted, subject to shareholder approval, The PNC Financial Services Group, Inc. 2006 Incentive Award Plan (the “Plan”), and directed that the proposal to approve the Plan be submitted to our shareholders for their approval at the 2006 annual meeting. We are also seeking shareholder approval: (1) so that shares available for issuance under the 1997 Long-Term Incentive Award Plan (the “Prior Plan”) will be transferred to, and issuable under, the Plan; (2) so that the compensation attributable to grants under the Plan may qualify for an exemption from the $1,000,000 deduction limit under Section 162(m) of the Internal Revenue Code (the “Code”) (see discussion of “Section 162(m)” under “Federal Income Tax Consequences” on page 14); (3) in order for incentive stock options granted under the Plan to meet the requirements of the Code; and (4) in order to meet the NYSE corporate governance listing standards.

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The Board believes that approval of the Plan by the shareholders will further PNC’s compensation structure and strategy. PNC’s ability to attract, retain and motivate top quality management, employees, officers and non-employee directors of PNC and its subsidiaries is material to PNC’s success, and the Board has concluded that these objectives would be enhanced by PNC’s ability to make grants under the Plan. In addition, the Board of Directors believes that the interests of PNC and its shareholders will be advanced if PNC can offer its employees, officers and non-employee directors the opportunity to acquire or increase their ownership interests in PNC. Prior to the transfer of shares available for issuance under the Prior Plan, the Prior Plan had 26,746,961 shares of common stock remaining available for issuance as of February 16, 2006 (including 3,099,961 shares reserved for grants through the annual meeting date and for exercise of reload or performance unit rights). If the Plan is approved by the shareholders, 23,647,000 shares available for issuance under the Prior Plan will be transferred to the Plan and no further grants will be made under the Prior Plan (other than grants made in connection with the exercise of reload or performance unit rights). All awards outstanding under the Prior Plan, including any reload or performance unit rights, will continue in full force and effect and no provisions of the awards will be affected or otherwise modified by the Plan.

As noted below, the total number of shares of PNC common stock initially authorized for issuance under the Plan during its term is 40,000,000 shares. However, PNC intends that the Plan’s average “burn rate” for the next three fiscal years will not exceed the average for PNC’s four-digit Global Industry Classification Standard sector code by more than one standard deviation. (The “burn rate” for a year is the ratio of shares subject to awards under the Plan made during the year to the total number of shares of PNC common stock outstanding as of the last day of such year.)

Benefits under the Plan generally will be granted at the discretion of the Board’s Personnel and Compensation Committee and are therefore not currently determinable. The material terms of the Plan are summarized below. This summary of the Plan is not intended to be a complete description of the Plan and is qualified in its entirety by the actual text of the Plan to which reference is made.

Material Features of the Plan

General. The Plan provides that grants may be in any of the following forms: (1) incentive stock options; (2) nonqualified stock options (incentive stock options and nonqualified stock options collectively are referred to as “options”); (3) share awards; (4) restricted shares; (5) incentive shares; (6) share units; (7) share appreciation rights (“SARs”); (8) restricted share units; (9) performance units; (10) other share-based awards; and (11) dollar-denominated awards. We will refer to awards that are based on the value of PNC’s shares of common stock as “share-denominated awards” and awards that are based on a cash amount, and not by reference to the value of PNC common stock, as “dollar-denominated awards.” Dividend equivalents may be granted in connection with other share-denominated awards (other than options and share appreciation rights) or separately. Awards under the Plan may be settled in cash, shares of PNC common stock, or a combination of cash and shares, as provided in the terms of each award agreement.

Subject to adjustment in certain circumstances as described below, the Plan initially authorizes up to 40,000,000 shares of common stock for issuance (which includes 23,647,000 shares of common stock transferred to the Plan from the Prior Plan). No more than 10,000,000 of these shares may be issued in respect of awards other than options and SARs. If and to the extent options and SARs granted under the Plan (or granted under the Prior Plan and outstanding on the approval date of the Plan) terminate, expire or are cancelled, forfeited, exchanged or surrendered after the effective date of the

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Plan without being exercised or if any share awards, share units, dividend equivalents or other share-based awards are forfeited or terminated, or otherwise not paid in full, after the effective date of the Plan (or, in the case of Prior Plan awards, after the approval date of the Plan), the shares subject to such grants will become available again for purposes of the Plan. Any portion of a share-denominated or dollar-denominated award that is payable only in cash pursuant to the terms of the applicable award agreement, and as described in PNC’s Annual Report filed with the SEC on Form 10-K, will be immediately available again for purposes of the Plan.

The Plan provides that the maximum aggregate number of shares of common stock, or its equivalent, that can be the subject of awards made to an individual during any calendar year is 2,000,000 shares, subject to adjustment as described below (the “Individual Limit”). Up to 1,000,000 shares of the Individual Limit may be allocated to share-denominated awards provided that no part of this limit is allocated to share-denominated awards or portions thereof that, by their terms, may only be settled in cash. In addition, up to 1,000,000 shares of the Individual Limit (or the cash equivalent) may be allocated to share-denominated awards or portions thereof that, by their terms, may only be settled in cash or to dollar-denominated awards (with the cash equivalent being determined based on the fair market value of PNC stock at the time each such award is granted).

If the exercise and payment of one award automatically affects the number of shares that may be issued in connection with the exercise or payment of another related award, only the maximum amount that can be issued in connection with both awards in the aggregate will be counted against the number of shares reserved for issuance under the Plan and against the Individual Limit described above.

If approved by the shareholders, the Plan will become effective as of February 15, 2006.

Plan Management. The Plan is managed and interpreted by the committee. For purposes of awards granted to employees, the committee means the Personnel and Compensation Committee or its delegate. For purposes of awards granted to non-employee directors, the committee means the Nominating and Governance Committee, unless otherwise determined by the Board. The committee has the authority to: (1) determine the individuals to whom grants will be made under the Plan; (2) determine the type, size and terms of the grants; (3) determine the time when grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability; (4) amend the terms of any previously issued grant, subject to the limitations described below; (5) adopt guidelines separate from the Plan that set forth the specific terms and conditions for grants under the Plan; and (6) deal with any other matters arising under the Plan. The determinations of a committee are made in its sole discretion and are final, binding and conclusive. The Personnel and Compensation Committee presently consists of Messrs. Strigl (Chairman), Chellgren, Massaro, Usher and Washington, each of whom is a non-employee director of PNC. The Nominating and Governance Committee presently consists of Messrs. Usher (Chair), Clay, Massaro and Wehmeier, and Ms. Pepper. Administrative functions under the Plan will be performed by employees of PNC, as approved by the Chief Executive Officer or the Chief Human Resources Officer of PNC. Moreover, the committee may delegate to officers or managers of PNC the authority to grant awards under the Plan from a preauthorized pool of shares.

Eligibility for Participation. All of the employees and officers of PNC and its subsidiaries are eligible for grants under the Plan. Non-employee directors of PNC are also eligible to receive grants under the Plan. As of March 7, 2006, approximately 23,000 employees and 15 non-employee directors who are standing for re-election will be eligible to receive grants under the Plan. In addition, Ms. James and Mr. Walls will also be eligible to receive grants under the Plan, if they are elected as directors of PNC at the annual meeting.

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Types of Awards.

Stock Options

The committee may grant options intended to qualify as incentive stock options within the meaning of Section 422 of the Code (“ISOs”) or options that are not intended to so qualify (“non-qualified stock options” or “NQSOs”), or any combination of ISOs and NQSOs, provided that ISO grants generally cannot exceed 1,000,000 shares per calendar year. Anyone eligible to participate in the Plan may receive a grant of NQSOs. Only employees of PNC and certain of its subsidiaries may receive a grant of ISOs.

The committee fixes the share exercise price for options on grant. The exercise price of an NQSO will generally be equal to the fair market value of the underlying shares of common stock as of the grant date unless the committee fixes a different exercise price, subject to the limitations of Section 409A of the Code. The exercise price of an ISO granted under the Plan will be equal to the fair market value of the underlying shares of common stock as of the grant date. Also, if a participant who will be granted an ISO is a person who holds more than ten percent of the total combined voting power of all classes of outstanding stock of PNC, the exercise price per share of an ISO granted to such person must be at least 110% of the fair market value of a share of common stock as of the grant date. To the extent that the aggregate fair market value of shares of common stock, determined as of the grant date, with respect to which ISOs become exercisable for the first time by a participant during any calendar year exceeds $100,000, such ISOs will be treated as NQSOs.

The committee determines the term of each option; provided, however, that the term may not exceed ten years from the grant date and, if the recipient of an ISO is a person who holds more than 10% of the combined voting power of all classes of outstanding stock of PNC, the term for such person may not exceed five years from the grant date. The vesting period for options begins on the date of grant and ends on such date as is determined by the committee, in its sole discretion, which is specified in the award agreement; provided, that, an option may not be exercised until the expiration of at least six months from the date of grant (the committee may waive this limitation in the event of death or disability of the participant or, if permitted in the award agreement, a change in control of PNC). Options may be exercised while the participant is employed by or providing service to PNC or within a specified period of time after termination of such employment or service up to the expiration of the option term, as determined by the committee. A participant may exercise an option by delivering notice of exercise to PNC or its designated agent. The participant will pay the exercise price and any withholding taxes for the option: (1) in cash or by check; (2) if provided in the agreement, by delivering shares of common stock already owned by the participant and having a fair market value on the date of exercise equal to the exercise price or through attestation to ownership of such shares; (3) if provided in the agreement, by delivery of a properly executed notice, together with irrevocable instructions to a broker to promptly deliver to PNC the amount of sale or loan proceeds to pay the exercise price and related withholding taxes; or (4) by such other method as the committee may approve, to the extent permitted by applicable law. The committee may provide that an option will be substituted with an SAR that will be subject to the same number of underlying shares as the substituted option.

SARs

The committee may grant SARs to anyone eligible to participate in the Plan. SARs may be granted in connection with, or independent of, other awards. Upon exercise of an SAR, the participant will receive an amount equal to the excess of the fair market value of the common stock as of the

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exercise date over the base amount set forth in the award agreement. The base amount of an SAR will generally be equal to the fair market value of the underlying shares of common stock as of the grant date, unless the committee fixes a different base price, subject to the limitations of Section 409A of the Code. Such payment to the participant will be in cash, in shares of common stock, or in a combination of cash and shares of common stock, as determined by the committee. The committee will determine the period when SARs vest and become exercisable, provided that an SAR may not be exercised until the expiration of at least six months from the grant date (the committee may waive this limitation in the event of death or disability of the participant or, if permitted in the award agreement, a change in control of PNC), the base amount for SARs, and whether SARs will be granted in connection with, or independently of, any options or other awards. SARs may be exercised while the participant is employed by or providing service to PNC or within a specified period of time after termination of such employment or service, as determined by the committee.

Share Units and Restricted Share Units

The committee may grant share units to anyone eligible to participate in the Plan. Share units may be granted in connection with, or independent of, other awards. Each share unit provides the participant with the right to receive a share of common stock or an amount based on the value of a share of common stock at a future date. The committee determines the number of share units that will be granted, whether share units will become payable only if specified performance goals (referred to in the Plan as “performance units”) or other conditions (referred to in the Plan as “restricted share units”) are met, and the other terms and conditions applicable to the share units. Share units may be paid at the end of a specified period or deferred to a date authorized by the committee. If a share unit becomes distributable, it will be paid to the participant in cash, in shares of common stock, or in a combination of cash and shares of common stock, as determined by the committee.

Share Awards and Restricted Shares

The committee may grant share awards to anyone eligible to participate in the Plan. The committee may require that participants pay consideration for the share awards and may impose restrictions on the share awards (referred to in the Plan as “restricted shares”). If restrictions are imposed on share awards, the committee will determine whether they will lapse over a period of time or according to such other criteria as the committee determines appropriate. The committee determines the number of shares of common stock subject to the grant of share awards and the other terms and conditions of the grant. The committee will determine to what extent, and under what conditions, a participant will have the right to vote restricted shares and to receive dividends or other distributions paid on such shares during the restriction period. The committee may determine that a participant’s entitlement to dividends or other distributions with respect to share awards will be subject to the achievement of performance goals or other conditions.

Incentive Shares

The committee may grant incentive shares to anyone eligible to participate in the Plan. Incentive shares may be granted in connection with, or independent of, other awards. Each incentive share provides the participant with the right to receive a share of common stock at such times and subject to such conditions as the committee determines, which may include making receipt of the shares or a percentage of the shares subject to meeting specified performance goals. The committee determines the

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number of incentive shares that will be granted, the performance goals and the target amount that will be paid if performance criteria are part of the grant, and the other terms and conditions applicable to the incentive shares.

Other Share-Based Awards

The committee may grant other types of share-based awards, including dividend equivalents, that would not otherwise constitute options, SARs, share units, share awards and incentive shares. The committee may grant other share-based awards to anyone eligible to participate in the Plan. These grants will be based on or measured by shares of common stock and/or dividends paid thereon, and may be payable in cash, in shares of common stock, or in a combination of cash and shares of common stock. The terms and conditions for these grants will be determined by the committee.

Dollar-Denominated Awards

The committee may grant dollar-denominated awards to eligible participants. These grants will be payable in cash, in shares of common stock, or in a combination of cash and shares of common stock on such terms and conditions as the committee determines. The committee will decide whether a dollar-denominated award will become payable only if specified performance goals or conditions are met.

Qualified Performance-Based Compensation. The Plan permits the committee to impose and specify objective performance goals that must be met with respect to grants of share units, share awards, incentive shares, dividend equivalents, other share-based awards and dollar-denominated awards to employees. The committee will determine the performance periods for the performance goals. Forfeiture of all or part of any such grant will occur if the performance goals are not met, as determined by the committee. Prior to or soon after the beginning of the performance period, the committee will establish in writing the performance goals that must be met, the applicable performance periods, the maximum amounts to be paid if the performance goals are met, and any other conditions.

The performance goals, to the extent designed to meet the requirements of Section 162(m) of the Code, will be based on one or more of the following measures: earnings or earnings growth; return on assets, equity or investment; regulatory compliance; satisfactory internal or external audits; improvement of financial or credit ratings; reduction of nonperforming assets or loans; achievement of balance sheet or income statement objectives; or any other objective goals established by the committee, and may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated. The foregoing measures may be based on individual or business unit performance or the performance of PNC or PNC’s subsidiaries independently or as a whole, or a combination of the foregoing.

Dividend Equivalents. The committee may provide in share-denominated awards other than options or share appreciation rights for dividend equivalents, which permit the grantee to receive equivalent value for shares subject to the award as dividends are paid on PNC common stock. Dividend equivalents are payable in cash or shares of common stock, may be paid currently or deferred, may be accrued as cash obligations or converted into share units, and may accrue interest. The terms and conditions of dividend equivalents are determined by the committee.

Deferrals. The committee may permit or require participants to defer receipt of the payment of cash or the delivery of shares of common stock that would otherwise be due to the participant in

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connection with a grant under the Plan. The committee will establish the rules and procedures applicable to any such deferrals, which must comply with Section 409A of the Code.

Adjustment Provisions. The committee will have discretion under the Plan to make adjustments, where appropriate, in the number and class of shares subject to outstanding share-denominated awards, in the exercise price and base price of options, SARs and any other awards using such a price, in the aggregate number and class of shares for which share-denominated awards may be made or in which awards may be paid, and in the other share-based limits provided in the Plan to reflect any corporate transaction or event, including without limitation, share dividends, share splits, spin-offs, split-ups, recapitalizations, mergers, consolidations or reorganizations of or by PNC.

Foreign Participants. If any individual who receives a grant under the Plan is subject to taxation in countries other than the United States, the Plan provides that the committee may make grants to such individuals on such terms and conditions as the committee determines appropriate to recognize differences in and to comply with the laws of the applicable countries.

Modification or Substitution of Awards. The committee may only modify awards, or grant new awards in substitution, subject to the terms and conditions of Section 409A of the Code and the Plan. No modification of an award granted under the Plan will (i) without the consent of the optionee or grantee, adversely affect the rights or obligations of the optionee or grantee, except as otherwise permitted under the Plan (or as may be necessary for the award to qualify as performance-based compensation or to comply with Section 409A of the Code) or (ii) reduce the exercise price or base price of an award. Substituted awards that specify a lower exercise or base price are otherwise prohibited, unless approved by our shareholders.

Amendment and Termination of the Plan. The Board of Directors or the committee may amend or terminate the Plan at any time, subject to shareholder approval, if such approval is required under any applicable laws or stock exchange requirements. No new awards may be made under the Plan after April 25, 2016 (and no ISOs may be granted after February 14, 2016).

The closing market price of PNC’s common stock on March 10, 2006, was $69.98 per share.

Federal Income Tax Consequences

The Federal income tax consequences arising with respect to awards granted under the Plan will depend on the type of the award. The following provides only a general description of the application of federal income tax laws to certain awards under the Plan. This discussion is intended for the information of shareholders considering how to vote at the meeting and not as tax guidance to participants in the Plan, as the consequences may vary with the types of awards made, the identity of the recipients and the method of payment or settlement. The summary does not address the effects of other federal taxes (including possible “golden parachute” excise taxes) or taxes imposed under state, local, or foreign tax laws.

From the recipients’ standpoint, as a general rule, ordinary income will be recognized at the time of payment of cash, or delivery of actual shares of common stock. Future appreciation on shares of common stock held beyond the ordinary income recognition event will be taxable at capital gains rates when the shares of common stock are sold. PNC, as a general rule, will be entitled to a tax deduction that corresponds in time and amount to the ordinary income recognized by the recipient, and PNC will not be entitled to any tax deduction in respect of capital gain income recognized by the recipient.

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Exceptions to these general rules may arise under the following circumstances: (1) if shares of common stock, when delivered, are subject to a substantial risk of forfeiture by reason of failure to satisfy any employment, service or performance-related condition, ordinary income taxation and PNC’s tax deduction will be delayed until the risk of forfeiture lapses (unless the recipient makes a special election to ignore the risk of forfeiture); (2) if an employee is granted an option that qualifies as an “incentive stock option,” no ordinary income will be recognized, and PNC will not be entitled to any tax deduction, if shares of common stock acquired upon exercise of such option are held more than the longer of one year from the date of exercise and two years from the date of grant; (3) PNC will not be entitled to a tax deduction for compensation attributable to awards granted to one of its named executive officers if and to the extent such compensation does not qualify as “performance-based” compensation under Section 162(m) of the Code, and such compensation, along with any other non-performance-based compensation paid in the same calendar year, exceeds $1 million; and (4) an award may be taxable to the recipient at 20 percentage points above ordinary income tax rates at the time it becomes vested, plus interest, even if that is prior to the delivery of the cash or common stock in settlement of the award, if the award constitutes “deferred compensation” under Section 409A of the Code, and the requirements of Section 409A of the Code are not satisfied.

Section 162(m) of the Code generally disallows a publicly-held corporation’s tax deduction for compensation paid to its chief executive officer, or any of its four other most highly compensated executive officers, in excess of $1,000,000 in any year. Compensation that qualifies as “performance-based compensation” is excluded from the $1,000,000 deductibility cap, and therefore remains fully deductible by the corporation that pays it. PNC intends that options and SARs granted at or above the fair market value of the common stock as of the grant date will qualify as performance-based compensation. Share units, share awards, incentive shares, dividend equivalents, other share-based awards and dollar-denominated awards granted under the Plan will only qualify as “performance-based compensation” when the committee conditions such grants on the achievement of specific performance goals in accordance with the requirements of Section 162(m) of the Code.

The Plan provides that PNC has the right to require the recipient of any award under the Plan to pay to PNC an amount necessary for PNC to satisfy its federal, state or local tax withholding obligations with respect to such grants. PNC may withhold from other amounts payable to such individual an amount necessary to satisfy these obligations. PNC may permit a participant to satisfy PNC’s withholding obligation by having shares acquired pursuant to the grant withheld or may provide that such shares will be withheld, provided that the number of shares withheld does not exceed the individual’s minimum applicable withholding tax rate for federal, state and local tax liabilities. The Plan also provides that PNC may permit a participant to satisfy PNC’s withholding obligation that exceeds the minimum applicable withholding tax rate by transferring to PNC previously acquired shares of common stock.

Availability of Plan Document

The full text of the 2006 Incentive Award Plan is included as Exhibit A to this proxy statement.

The Board of Directors believes that the adoption of the 2006 Incentive Award Plan will enable PNC to provide significant equity-based and other incentives to employees, officers and non-employee directors who are expected to contribute materially to PNC’s future success.

Accordingly, the Board of Directors recommends a vote “FOR” the approval of The PNC Financial Services Group, Inc. 2006 Incentive Award Plan.

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ITEM 3

Ratification Of The Audit Committee’s

Selection Of Deloitte & Touche LLP As

Independent Auditors For 2006

Our Board’s Audit Committee is composed entirely of directors who are independent as defined in the New York Stock Exchange listing standards. Among other things, the Board has also determined that each committee member is financially literate and possesses accounting or related financial management expertise. The Board made these determinations in its business judgment, based on its interpretation of the New York Stock Exchange’s requirements for committee members. The Board has also determined that Mr. Chellgren, the chairman of the Audit Committee, and Mr. Kelson are each an “audit committee financial expert.” The rules of the Securities and Exchange Commission define an “audit committee financial expert” as a person who has acquired certain attributes through education and experience that are particularly relevant to the functions of an audit committee.

Under the Audit Committee’s charter, the committee is responsible for selecting PNC’s independent auditors pursuant to a well-organized process. The committee also evaluates and monitors the auditors’ qualifications, performance, and independence. This evaluation includes a review and evaluation of the lead partner of the independent auditors. The committee also takes into account the opinions of management and PNC’s General Auditor, who has supervisory responsibility for the internal audit function. You can learn more about the committee’s responsibilities with respect to the independent auditors in the committee’s charter, which is attached as Exhibit B to this proxy statement.

The Audit Committee conducted its 2006 evaluation of PNC’s Independent Registered Public Accounting Firm, Deloitte & Touche LLP, at its meeting on February 14, 2006. Following that evaluation, the committee voted unanimously to select Deloitte & Touche LLP as PNC’s independent auditors for 2006, subject to shareholder ratification.

The Audit Committee presented its conclusions regarding the independent auditors to the Board of Directors on February 15, 2006. Following this presentation, the Board voted unanimously to recommend that shareholders vote to ratify the Audit Committee’s selection of Deloitte & Touche LLP as PNC’s independent auditors for 2006. Deloitte & Touche LLP has served as PNC’s independent auditors since 2002.

The Audit Committee has adopted a policy that if a majority of the votes cast at the annual meeting are against ratification, the committee will reconsider its selection of Deloitte & Touche LLP. The committee will be under no obligation, however, to select new independent auditors. If the committee does select new independent auditors for 2006, shareholder ratification of the committee’s new selection will not be sought. The Board approved this policy on November 18, 2004.

The Board of Directors recommends a vote “FOR” the ratification of the Audit Committee’s selection of Deloitte & Touche LLP as independent auditors for 2006.

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CORPORATE GOVERNANCE AT PNC

This portion of the proxy statement contains information about a variety of our corporate governance policies and practices. In particular, you will find information about how we are complying with the New York Stock Exchange’s corporate governance rules. We also discuss the functions of the Board’s Nominating and Governance Committee and communications between shareholders and our Board of Directors.

We encourage you to visit the corporate governance section of the “For Investors” page of our corporate website at www.pnc.com for additional information about our Board and its committees and corporate governance at PNC. Additional information on these topics is also included in other sections of this proxy statement.

If you would like to have printed copies of the PNC Corporate Governance Guidelines, the PNC Code of Business Conduct and Ethics, or the charters of the Board’s Audit, Nominating and Governance, or Personnel and Compensation Committees (all of which are posted on our corporate website), please send your written request to: Corporate Secretary, The PNC Financial Services Group, Inc., One PNC Plaza—21^st Floor, 249 Fifth Avenue, Pittsburgh, PA 15222-2707. We’ll provide the material at no cost to you.

Director Independence

Background. We have a long history of maintaining a board of directors that has a majority of non-management directors. Because we are a company listed on the New York Stock Exchange, our Board of Directors must have a majority of independent directors. Under the Exchange’s corporate governance rules, no director qualifies as independent unless our Board affirmatively determines that the director has no “material relationship” with PNC. A director may have a material relationship with PNC directly or as a partner, shareholder, or officer of an organization that has a relationship with PNC. In particular, the Board may not find directors who have relationships covered by one of five bright-line independence tests established by the Exchange, as discussed below, to be independent.

The Exchange’s corporate governance rules do not define every relationship that will be considered material for purposes of determining a director’s independence from our management. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships, among others. The Exchange does not view the ownership of even a significant amount of PNC stock, by itself, as a bar to an independence finding.

The New York Stock Exchange’s bright-line independence tests. The Exchange has adopted five bright-line independence tests for directors. Each of these tests describes a specific set of circumstances that will cause a director to be not independent from our management. For example, a director who is an employee of PNC, or whose immediate family member is an executive officer of PNC, is not independent until three years after the end of the employment relationship.

The four other bright-line independence tests address circumstances involving:

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For more information about the Exchange’s bright-line director independence tests, including the Exchange’s commentary explaining the application of the tests, please go to the Exchange’s website at www.nyse.com/pdfs/section303A_final_rules.pdf.

Categorical standards of director independence adopted by our Board of Directors. The Exchange’s corporate governance rules permit a listed company’s board of directors to adopt categorical standards of director independence. Categorical standards permit a board of directors to determine in advance that specific categories of relationships between a listed company and a director do not, by themselves, render a director non-independent. Of course, categorical standards of independence can’t override the bright-line independence tests established by the New York Stock Exchange. Categorical standards are intended to assist a board in making determinations of independence. The Exchange recognizes that the adoption and disclosure of categorical standards provide investors with an adequate means of assessing the quality of a board’s independence and its independence determinations while avoiding the excessive disclosure of immaterial relationships.

Our Board, acting on the recommendation of its Nominating and Governance Committee, has adopted four categorical standards of independence. Our Board applied these standards in determining the independence of the persons nominated for election as directors at the annual meeting. The standards describe categories of relationships that our Board has determined are not material to its determinations of director independence.

The categorical standards of independence generally provide, among other things, that ordinary course business relationships do not constitute material relationships. The categorical standards permit the provision of consulting, legal, or accounting services within ordinary course business relationships only as long as two conditions are satisfied. First, the director or an immediate family member can’t personally provide the services to PNC as his or her primary client. Second, the director or immediate family member can’t be a partner, managing member, or principal of, or an executive officer with significant policy-making authority over, the firm providing the services to PNC.

As required by the Exchange’s corporate governance rules, we disclose below if all of a director’s relationships with us meet these categorical standards.

In certain limited cases, a director may have a relationship that is described by a categorical standard and a New York Stock Exchange bright-line independence test. In such a case, the bright-line test will determine whether the director’s relationship is a material relationship that prohibits a determination of independence by our Board.

The categorical standards of independence adopted by the Board may be further amended from time to time. The most current version of the categorical standards is posted on the “Corporate Governance” section of the “For Investors” page of our corporate website at www.pnc.com.

Independence determinations made by our Board. At its meeting on February 15, 2006, the Board made a determination as to the independence of each current director, in accordance with the applicable New York Stock Exchange corporate governance rules. No director participated in the final

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determination of his or her own independence. Fifteen of the 17 nominees for election as directors at the annual meeting are currently directors. The Board made a determination, by written consent dated March 9, 2006, as to the independence of the two directors who are being nominated for the first time, in accordance with the applicable New York Stock Exchange corporate governance rules.

In making these determinations, our Board relied in part on the findings and recommendations made by its Nominating and Governance Committee. The independence determinations shown below were based on the information known to our Board and its Nominating and Governance Committee as of February 14, 2006 for current directors and as of March 9, 2006 for first-time director nominees. Our Board and its Nominating and Governance Committee will consider information relevant to these independence determinations as it is brought to their attention.

Certain charitable contributions. To our knowledge, the aggregate grants and contributions made by us, our subsidiaries, and the PNC Foundation to any nonprofit or charitable organization for which a director served as an executive officer did not exceed the greater of $1 million or two percent of that organization’s consolidated gross revenues in any single fiscal year of the organization during the period 2003 through 2005.

Meetings Of Our Non-Management And Independent Directors

Our non-management directors regularly meet in executive sessions without management present. “Non-management” directors include all directors who are not PNC officers. Currently, Mr. Rohr is the only PNC officer serving on our Board. The non-management directors have designated Mr. Usher as the Board’s Presiding Director. Among other responsibilities, he presides at these sessions.

“Non-management” directors may include directors not employed by PNC whom our Board has determined not to be independent under the Exchange’s corporate governance rules. If our non-management directors include directors who are not independent, our independent directors will meet at least quarterly by themselves in executive session. Our Board has adopted a policy that our independent directors will meet by themselves at least quarterly, rather than the annual session required by the New York Stock Exchange rules. Currently, Mr. O’Brien is the only non-management director whom our Board has determined not to be independent. The Board’s Presiding Director also presides at these executive sessions.

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Communicating With Our Directors

Shareholders or other interested parties wishing to communicate directly with the Presiding Director, our non-management directors as a group, the entire Board of Directors, or with any specific director may do so at any time by writing to the following address: Presiding Director, The PNC Financial Services Group, Inc. Board of Directors, P.O. Box 2705, Pittsburgh, PA 15230-2705. Communications sent to this address will be delivered without being screened by our employees.

Communications to the Board or to one or more specific directors that are sent instead to our offices will be handled in accordance with a collection and organization process approved by the Board’s independent directors. Such communications are subject to a screening process that will determine which communications will be relayed to directors. This screening process is described in the corporate governance section of the “For Investors” page of our corporate website at www.pnc.com.

Shareholders who wish to: (1) make a nomination for the election of a director; (2) submit proposals to be considered for inclusion in our 2007 proxy materials; or (3) make a proposal for action at an annual meeting of shareholders, should follow the instructions given later in this section of the proxy statement.

Our Board, acting on the recommendation of its Nominating and Governance Committee, has adopted a policy that strongly encourages each director to attend the annual meeting in person, if possible, in light of surrounding circumstances. Each director is reminded of this policy in advance of the date of the annual meeting. Thirteen directors attended PNC’s 2005 annual meeting of shareholders.

Our Director Nomination Process

The Board’s Nominating and Governance Committee. Our Board has a standing Nominating and Governance Committee that has a written charter approved by the Board. The committee’s purpose is to assist our Board in promoting the best interests of PNC and its shareholders through the implementation of sound corporate governance principles and practices. A copy of the committee’s current charter, which is reviewed and reassessed by the committee annually, is posted on the “Corporate Governance” section of the “For Investors” page of our corporate website at www.pnc.com and is available in print to any shareholder who requests a copy by writing to our Corporate Secretary at the address given on page 16.

The Board’s current Nominating and Governance Committee is composed entirely of independent directors. When our Board holds its organization meeting following the annual meeting of shareholders, only independent directors will be appointed to the Nominating and Governance Committee. The committee is presently composed of Ms. Pepper and Messrs. Usher (Chairman), Clay, Massaro, and Wehmeier.

The Nominating and Governance Committee’s responsibilities include assisting the Board by identifying individuals qualified to become Board members, consistent with criteria approved by the Board, and recommending to the Board of Directors nominees for election at the next annual meeting of shareholders. The committee may also recommend that our Board appoint qualified individuals as directors between annual meetings of shareholders.

Candidates recommended by a shareholder. The Nominating and Governance Committee has adopted a policy that formalizes its long-standing practice of considering any director candidate recommended by a shareholder in good faith.

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The Nominating and Governance Committee will not consider a candidate recommended by you unless you follow these procedures in submitting the recommendation. Your recommendations with respect to the 2007 annual meeting of shareholders must be submitted in writing no later than November 24, 2006 to: Corporate Secretary, The PNC Financial Services Group, Inc., One PNC Plaza-21^st Floor, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707. Please provide the name, age, citizenship, business and residence addresses, qualifications, including principal occupation or employment, and directorships and other positions held by the proposed nominee in business, charitable, and community organizations. You must also provide information concerning:

The committee will not consider any candidate with an obvious impediment to serving as one of our directors.

How candidates for our Board are identified and evaluated. The Nominating and Governance Committee identifies individuals qualified to become Board members consistent with criteria approved by our Board of Directors, on the recommendation of the Nominating and Governance Committee. These criteria include:

The Nominating and Governance Committee has identified the following specific qualities or skills as being necessary for one or more of our directors to possess:

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When the Nominating and Governance Committee evaluates our current directors for possible nomination for reelection at our annual meeting, the committee considers all of the factors listed above. In addition, the committee considers:

At this time, the Nominating and Governance Committee has decided not to adopt specific, minimum qualifications that must be met by a committee-recommended nominee for the Board, but may do so in the future.

The current practice of the Nominating and Governance Committee is to identify potential director nominees through a variety of sources. The committee considers recommendations made by current or former directors or members of executive management. When appropriate, the committee may retain search firms to identify director candidates. Potential candidates also may be identified through contacts in the business, civic, academic, legal, and non-profit communities. Potential candidates may be informally approached by the chairman of the Board or the chairman of the Nominating and Governance Committee to determine their interest in joining our Board.

Each nominee for director is evaluated initially by the Nominating and Governance Committee at a meeting of the committee. The committee considers all relevant information then available about the candidate in light of the Board’s approved criteria for persons qualified to become directors and the Board’s current and anticipated needs in terms of diversity, specific qualities or skills, experience, or background.

If the committee declines to recommend a candidate for election or appointment to our Board, no further action is taken, but the committee’s decision is reported to the Board by the committee chairman at our Board’s next regular meeting. If the candidate has been recommended by a shareholder, the committee’s secretary will send a letter to the shareholder informing him or her of the committee’s decision and the date of the meeting at which the committee considered the candidate.

If the committee decides to recommend a candidate to our Board as a nominee for election at an annual meeting of shareholders or for appointment by our Board, the committee chairman reports the committee’s decision to our Board at its next meeting. In advance of that meeting, each of the other directors is provided with the same biographical and other background information about the candidate that was considered by the Nominating and Governance Committee.

After discussion and questions, the entire Board votes on whether to nominate the candidate for election or appoint the candidate to the Board. If our Board’s discussion has raised issues that require additional facts or deliberation, the Board’s vote may be postponed until a future meeting.

Successful candidates are informed of the Board’s decision and invited to become a director, or stand for election as a director, by the chairman of the Board and the chairman of the Nominating and Governance Committee, jointly acting on behalf of our entire Board of Directors.

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Under its current practices, there are no differences in how the Nominating and Governance Committee evaluates a nominee for director based on whether the nominee is recommended by the committee or by a shareholder.

Ms. James was initially identified, recommended and evaluated by Spencer Stuart, a third-party executive search firm retained by the Nominating and Governance Committee to conduct a search for new director candidates. Mr. Walls was initially identified and recommended by a non-management director, and evaluated by Spencer Stuart. The Nominating and Governance Committee, at its January 19, 2006 and February 14, 2006 meetings evaluated Ms. James and Mr. Walls in accordance with the Board-approved criteria described above. The committee recommended that each candidate be nominated to the full Board at its meeting on February 15, 2006, subject to a determination of their independence under the standards established by the New York Stock Exchange . By written consent dated March 9, 2006, and based on the results of a review process supervised by the committee, the Board affirmed the independence of both Ms. James and Mr. Walls.

The Personnel And Compensation Committee

Our Board has a standing Personnel and Compensation Committee that has a written charter approved by the Board. This charter is reviewed and reassessed by the committee annually. A copy of the charter is also posted on the “Corporate Governance” section of the “For Investors” page of our corporate website at www.pnc.com, and is also available in print to any shareholder who requests a copy by writing to our Corporate Secretary at the address given on page 16. Our committee meets the requirements of The New York Stock Exchange’s corporate governance rules, which state that the Personnel and Compensation Committee be composed entirely of directors who are independent under the Exchange’s independence standards. The committee’s members also satisfy the independence standards established by applicable federal income tax and securities laws. When our Board holds its organizational meeting following the annual meeting of shareholders, only independent directors will be appointed to the Personnel and Compensation Committee.

The Personnel and Compensation Committee’s purpose is to discharge our Board’s oversight responsibilities relating to the compensation of our executive officers and other specified responsibilities related to personnel and compensation matters affecting PNC. The committee has direct responsibility for evaluating and for approving, or recommending for approval by our Board or our shareholders, executive officer benefit, bonus, incentive compensation, severance, equity-based or other compensation plans, policies and programs. The committee is also responsible for producing an annual report on executive compensation for our proxy statement and for reviewing and evaluating the development of an executive management succession plan. The committee’s report on executive compensation for fiscal year 2005 begins on page 36 of this proxy statement. The committee is currently composed of Messrs. Strigl (Chairman), Chellgren, Massaro, Usher, and Washington.

The Audit Committee

Our Board has a standing Audit Committee that satisfies the requirements of Section 3(a)(58)(A) of the Exchange Act and Securities and Exchange Commission Rule 10A-3. Rule 10A-3 establishes listing standards relating to audit committees in the following areas:

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The Audit Committee is governed by a written charter approved by our Board of Directors. A copy of this charter, as approved and amended by our Board on February 15, 2006, is included as Exhibit B to this proxy statement. A copy of the charter is also posted on the “Corporate Governance” section of the “For Investors” page of our corporate website at www.pnc.com, and is available in print to any shareholder who requests a copy by writing to our Corporate Secretary at the address given on page 16.

The Audit Committee’s primary purposes are to:

The committee is directly responsible for the appointment, compensation and oversight of the work of our independent auditors (including the resolution of disagreements between management and the auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The committee is also responsible for approving all audit engagement fees and terms, as well as all permitted non-audit engagements, with the independent auditors. The committee pre-approves all auditing services and permitted non-audit services to be performed for PNC by the independent auditors and considers whether the provision of non-audit services is compatible with maintaining the auditors’ independence. A description of the Audit Committee’s procedures for the pre-approval of audit and permitted non-audit services begins on page 57. The independent auditors report directly to the committee. Our General Auditor also reports directly to the committee, which is responsible for preparing his performance evaluation and reviewing his compensation.

The Audit Committee is currently composed of Messrs. Chellgren (Chairman), Cooper, Davidson, Kelson, and Lindsay. Each committee member is independent, as defined in the New York Stock Exchange listing standards. When our Board holds its organizational meeting following the annual meeting of shareholders, only independent directors will be appointed to the Audit Committee. Acting on the recommendation of the Nominating and Governance Committee, the Board of Directors has determined that Messrs. Chellgren and Kelson are each “audit committee financial experts,” as that term is defined in the Securities and Exchange Commission’s rules. The committee regularly holds separate sessions with our management, internal auditors and independent auditors.

PNC’s Corporate Governance Guidelines, which are discussed in the next section of this proxy statement, limit the number of public company audit committees on which Audit Committee members can serve to three, including PNC’s Audit Committee. This limitation was adopted in recognition of the committee’s demanding role and responsibilities and the time commitment required of committee members.

Our Corporate Governance Guidelines

Our Board has adopted Corporate Governance Guidelines which address these key corporate governance subjects, among others:

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The Corporate Governance Guidelines also provide that in an uncontested election of directors, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election will promptly tender his or her resignation to the Chairman of our Board. The Nominating and Governance Committee will promptly consider the nominee’s resignation and will recommend to the full Board whether to accept or reject it. The Board will act on the Nominating and Governance Committee’s recommendation no later than 90 days following the date of the shareholders’ meeting when the election occurred. PNC’s Corporate Governance Guidelines are posted on the “Corporate Governance” section of the “For Investors” page of our corporate website at www.pnc.com, and are available in print to any shareholder who requests a copy by writing to our Corporate Secretary at the address given on page 16.

Our Code Of Business Conduct And Ethics

Our Board of Directors, acting on the recommendation of its Audit Committee, has adopted the PNC Code of Business Conduct and Ethics for our directors, officers, and employees. The Board intends that this Code satisfy the requirements of the Securities and Exchange Commission rules for a code of ethics that applies to our chief executive officer and senior financial officers. The Code requires that any exception to any provision of the Code for directors or executive officers must be submitted for approval to the Board’s Audit Committee. Such exceptions will be publicly disclosed as required by law or the rules of the New York Stock Exchange.

The Code also contains compliance standards and procedures that are designed to facilitate the effective operation of the Code.

Our Code of Business Conduct and Ethics addresses these important topics, among others:

A copy of our Code of Business Conduct and Ethics is posted on the “Corporate Governance” section of the “For Investors” page of our corporate website at www.pnc.com, and is available in print to any shareholder who requests a copy by writing to our Corporate Secretary at the address given on page 16.

Shareholder Proposals And Nominations

Eligible shareholders may submit proposals to be considered for inclusion in our 2007 proxy materials for the 2007 annual meeting of shareholders if they do so in accordance with the applicable

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Securities and Exchange Commission rules. Your proposal must be in writing and received by the Corporate Secretary at our principal executive offices no later than November 24, 2006, in order to be considered for inclusion in our 2007 proxy materials. For information on how to submit the name of a person to be considered by the Nominating and Governance Committee for possible nomination as a director, please see the discussion of our director nomination process earlier in this section.

Director nominations and proposals for action at an annual meeting of shareholders may be made otherwise only: (1) pursuant to our notice of such meeting; (2) by the presiding officer; (3) by or at the direction of a majority of the Board of Directors; or (4) by one or more shareholders in accordance with the applicable rules of the Securities and Exchange Commission and the governing provisions of our By-Laws.

A shareholder may make a nomination for election of a director or a proposal for action at an annual meeting only if written notice is received by the Corporate Secretary at our principal executive offices not later than: (1) 90 days prior to the annual meeting (which, for the 2007 annual meeting, would mean no later than January 24, 2007, if the annual meeting is held on April 24, 2007, unless a different date for such notice has been stated in our most recent proxy materials distributed to shareholders); or (2) if the annual meeting is to be held on a date other than the fourth Tuesday in April, the close of business on the tenth day following the first public disclosure of the meeting date. Public disclosure of the date of any annual meeting may be made in a filing with the Securities and Exchange Commission, in any notice we give to the New York Stock Exchange, or in a news release reported by any national news service.

Your notice must include: (1) your name and address and the class and number of shares of PNC stock that are owned of record and beneficially by you and any beneficial owner you are acting for; and (2) a representation that you are a beneficial owner of PNC stock entitled to vote at such meeting and that you intend to be present at the meeting in person or by proxy to make your nomination or proposal.

Your notice of nomination for the election of a director must also include:

Your notice of a proposal for action at an annual meeting must also include a brief description of the proposal, your reasons for making the proposal, and any direct or indirect interest of you, or any person on whose behalf you are acting, in making the proposal.

If our Corporate Secretary receives timely notice of a shareholder proposal that complies with the governing By-Law provisions and if the proposal is properly presented at the 2007 annual meeting of shareholders, the proxies appointed by us may exercise discretionary authority in voting on the proposal. Our proxy statement for the meeting, however, must advise shareholders of the nature of the proposal and how our proxies intend to vote on the proposal. The proxies may not exercise

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discretionary authority in voting on your proposal if you satisfy certain requirements, including the mailing of a separate proxy statement to our shareholders.

The presiding officer of the meeting may refuse to permit any nomination for the election of a director or proposal to be made at an annual meeting if you haven’t complied with all of the governing By-Law procedures, including the required notice to our Corporate Secretary. If we receive a shareholder proposal after the required notice date but the presiding officer of the meeting nevertheless permits such proposal to be made at the 2007 annual meeting of shareholders, our proxies may exercise discretionary authority when voting on the proposal.

You should direct your questions about these requirements, or the notices we require, to: Corporate Secretary, The PNC Financial Services Group, Inc., One PNC Plaza—21^st Floor, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707.

Confidential Voting

Our Board has adopted a policy that all proxies, ballots, voting instructions from employee benefit plan participants, and voting tabulations that identify the particular vote of a shareholder or benefit plan participant be kept permanently confidential and not be disclosed to our directors, officers, or employees except:

Our independent vote tabulator and Judge of Election for the 2006 annual meeting has confirmed that its procedures will be consistent with this policy.

Our Common Stock Purchase Guideline For Non-Management Directors

Our Board has adopted a common stock purchase guideline providing that each non-management director must annually purchase or otherwise acquire PNC common stock or phantom common stock in an amount at least equal to twenty-five percent of the annual retainer fee then in effect. This required purchase amount currently equals $10,000. A director may satisfy this guideline through open market purchases, participation in our Dividend Reinvestment and Stock Purchase Plan, or investments in phantom shares of common stock in the Directors Deferred Compensation Plan. Any non-management director who holds at least 5,000 shares of PNC common stock and/or phantom common stock units as of the last business day of the preceding calendar year is not subject to this guideline. Each non-management director subject to the guideline has complied, or has committed to comply, with it.

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Our Stock Ownership Guidelines For Executive Officers

Our executive officers historically have held a significant portion of their personal wealth in the form of PNC stock and phantom stock units. To reinforce the importance of aligning the financial interests of our executives and shareholders, the Personnel and Compensation Committee has approved minimum stock ownership guidelines for some of PNC’s officers, including all of the executive officers. The guidelines are expressed in terms of the aggregate value of PNC equity interests as a multiple of the officer’s base salary, as follows:

Equity interests that count toward satisfaction of the ownership guidelines include:

Newly hired or promoted executives who are subject to the stock ownership guidelines have up to four years to meet the applicable guideline. An executive who fails to meet the ownership guidelines may have his or her future long-term incentive awards reduced, depending upon circumstances.

The Personnel and Compensation Committee monitors executive officers’ compliance with the stock ownership guidelines. At its meeting held on December 14, 2005, the committee confirmed that all executive officers meet or exceed the applicable guideline.

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BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD

2005 Meetings

In 2005, the Board streamlined its committee structure and consolidated the Credit, Finance and Operations and Technology Committees into a newly constituted Risk Committee. In connection with this restructuring, the composition of our Audit, Executive, and Nominating and Governance Committees also changed.

The chart below sets forth the names of each director, the board-level committees on which he or she served at any time during 2005, and the total number of meetings held. The chart also identifies the directors who chaired the Board and each committee, and which directors were designated by our board as “audit committee financial experts”. In 2005, each director attended at least 75% of the combined total number of meetings of the Board and all committees on which the director served.

Other Board Committees

Our Board of Directors has five standing committees: an Audit Committee (please see discussion at pages 22-23); an Executive Committee; a Nominating and Governance Committee (please see

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discussion at pages 19-22); a Personnel and Compensation Committee (please see discussion at page 22); and a Risk Committee. The Board is authorized under the By-Laws to establish other committees. Each committee operates under a written charter adopted by the Board of Directors that is reviewed and reassessed by the committee annually. Each committee is authorized to form and delegate authority to subcommittees of one or more committee members when appropriate. Under certain circumstances, a subcommittee member’s attendance at a subcommittee meeting will excuse him or her from attending the next regularly scheduled committee meeting. The descriptions in this proxy statement of the functions performed by the committees of our Board are necessarily general in nature. These descriptions are qualified by reference to a committee’s charter or the relevant By-Law provisions.

The Executive Committee’s purpose is to provide an efficient means of considering such matters and taking such actions (including those related to merger and acquisition activities) as may require the attention of the Board or the exercise of the Board’s powers or authority in the intervals between meetings of the Board.

The Risk Committee’s purpose is to provide oversight of our enterprise-wide risk structure and the processes established to identify, measure, monitor, and manage our credit risk, market risk (including liquidity risk), and operating risk (including technology, operational, compliance and fiduciary risk). The Risk Committee assumes responsibility for the risk oversight areas previously assigned to the Credit, Finance, and Operations and Technology Committees.

Compensation Of Directors

Mr. Rohr receives no additional compensation for serving as a PNC director. All other directors are paid under compensation schedules approved by the Nominating and Governance Committee. The committee reviews the directors’ compensation schedules annually, with the help of a nationally recognized compensation consultant. If a director performs extraordinary service, the Nominating and Governance Committee may approve special compensation for the director.

The elements of the current directors’ compensation program are explained below. The Nominating and Governance Committee will conduct its annual compensation review after the annual meeting of shareholders. The committee may decide to revise the schedules shown below at that meeting or at another meeting.

Annual Retainer Schedule

Meeting Fee Schedule

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2005 Equity-Based Grants

Deferred Compensation Plans

Our non-management directors are eligible to participate in the two deferred compensation plans described in this table:

Other Director Benefits

Our directors are generally entitled to the following benefits:

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In addition, Mr. O’Brien receives other benefits and compensation. Mr. O’Brien retired as a PNC employee on April 30, 2000, at which time he relinquished the position of chief executive officer. Mr. O’Brien relinquished the position of chairman on May 1, 2001. As a retired chief executive officer of PNC, certain benefits were made available to Mr. O’Brien during 2005. These benefits included: office space and secretarial services; parking space at PNC’s headquarters building; the payment of net premiums in connection with PNC’s Key Executive Equity Plan, a split-dollar insurance arrangement; and reimbursement for certain tax liabilities. The 2005 net premiums paid by PNC in connection with the Key Executive Equity Plan on behalf of Mr. O’Brien were $208,212. During 2005, Mr. O’Brien received reimbursement for income tax liabilities related to PNC’s payment of these premiums in the amount of $89,234.

For services provided on or after May 1, 2000, as a member of PNC’s Board of Directors, Mr. O’Brien is compensated on the same basis as other non-employee directors. In addition, during 2005 Mr. O’Brien received compensation as a director of BlackRock, Inc., a majority-owned investment management subsidiary of PNC that is listed on the New York Stock Exchange under the symbol “BLK.” Mr. O’Brien received shares of BlackRock class A common stock (and cash in lieu of fractional shares) having an aggregate value of $104,243 in lieu of the cash compensation otherwise payable to him by BlackRock. During 2005, Mr. O’Brien also served on the Investment Committee of PNC Equity Management Corp, a subsidiary of PNC, and received $25,000.

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SECURITY OWNERSHIP OF DIRECTORS, NOMINEES, AND EXECUTIVE OFFICERS

The following table, under the caption “Common Stock Ownership,” sets forth information concerning beneficial ownership of our common stock as of March 7, 2006 by each director and nominee for election as a director, each of the executive officers named in the Summary Compensation Table on page 40, and all directors, nominees and executive officers as a group. Except as otherwise noted, each individual exercises sole voting and investment power over the shares of common stock shown. The column captioned “Common Stock Unit Ownership” shows phantom or deferred common stock units owned by the individual or group through the compensation or benefit plan identified in the corresponding footnote. The information in this column is not required by the rules of the Securities and Exchange Commission because the common stock units can be settled only in cash and carry no voting rights. Nevertheless, we believe that this information provides a more complete picture of the financial stake that our directors and executive officers have in PNC.

The number of shares of common stock shown in the Common Stock Ownership table as beneficially owned by each director and executive officer is determined pursuant to the rules of the Securities and Exchange Commission and the information is not necessarily indicative of beneficial ownership for any other purpose. For purposes of the Common Stock Ownership table, beneficial ownership includes any shares of common stock as to which the individual has sole or shared voting power or investment power. Also included are any shares of common stock that the individual has the right to acquire within 60 days of March 7, 2006, through the exercise of any option, warrant, or right.

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Footnotes To Common Stock Ownership Column

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Footnotes To Common Stock Unit Ownership Column

Security Ownership Of Certain Beneficial Owners

As of March 7, 2006, based solely on Schedules 13D and 13G filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, we are not aware of any person who owns more than five percent of our common stock.

TRANSACTIONS INVOLVING DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS

Certain directors, nominees, executive officers or their associates were customers of and had transactions with us or our subsidiaries during 2005. Transactions that involved loans or commitments by subsidiary banks were made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. These loans did not involve more than the normal risk of collectibility or present other unfavorable features.

Family Relationships

There is no family relationship as defined in the Securities and Exchange Commission’s rules between any executive officer, director or nominee, and any other executive officer, director or nominee. Family relationships exist between certain of PNC’s executive officers or directors and some of the approximately 25,000 employees of PNC and its various subsidiaries. These employees participate in compensation and incentive plans or arrangements on the same basis as other similarly situated employees. Specific information concerning the compensation paid during 2005 to certain of these employees is provided below.

Norma Hajduk, a Senior Vice President and National Sales Manager of PNC Investments LLC, a subsidiary of PNC Bank, National Association, is the sister of Timothy G. Shack, Executive Vice President and Chief Information Officer of PNC. For 2005, Ms. Hajduk received a salary of $176,538 and a bonus of $147,600. In addition, during 2005, she was granted 600 nonstatutory stock options and was awarded 480 restricted shares of PNC common stock.

Cheryl Kraft, a Vice President and program operations manager in Regional Community Banking, is the sister-in-law of Joseph C. Guyaux, President of PNC. In 2005, Ms. Kraft received a salary of $42,751.

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Thomas H. O’Brien, Jr. was a Vice President and senior investment associate of PNC Equity Management Corp, a PNC subsidiary engaged in private equity activities, until June 5, 2004, the effective date of his resignation. Mr. O’Brien, Jr. is the son of Thomas H. O’Brien, a director and retired Chairman of PNC. Although Mr. O’Brien, Jr. is no longer an employee, he continues to be a participant in two plans pursuant to which employees invest indirectly in the general partners of two investment partnerships that PNC Equity Management Corp has established. Participants share in the investment returns, profits and, in one case, fees earned by those general partners, although Mr. O’Brien, Jr. does not receive any fees. These programs were implemented beginning in 1999 and generally contain features found in similar plans at other financial services firms. Mr. O’Brien, Jr. has committed to contribute an aggregate of $117,955 under the investment plans (of which 86% had been invested as of December 31, 2005). Mr. O’Brien, Jr. received aggregate cash distributions of $152,886 during 2005 pursuant to such plans, of which $62,451 is being held in escrow and will be distributed to him if the conditions specified in the escrow agreement are satisfied. In addition, Mr. O’Brien, Jr. is vested in another incentive program whereby he receives incentives based on the net returns of certain investments committed to during his tenure at PNC. Mr. O’Brien, Jr. received aggregate cash distributions of $38,368 during 2005, pursuant to such program.

Adam M. Shack, an Analyst for Compass Capital, Inc., is the son of Timothy G. Shack, Executive Vice President and Chief Information Officer of PNC. Compass Capital is an affiliate of BlackRock, Inc., our majority-owned, publicly-traded investment management subsidiary. For 2005, Mr. Shack received salary and commissions of $197,186 from Compass Capital.

Jeffrey Troutman, a Senior Vice President and a sales manager for PNC’s Treasury Management business, is the son-in-law of Thomas H. O’Brien, a director and retired Chairman of PNC. For 2005, Mr. Troutman received salary of $119,615, bonuses totaling $100,000, and 200 restricted shares of PNC common stock.

Indemnification And Advancement Of Costs

Pursuant to our By-Laws, we provide indemnification to our directors, officers and, in some instances, employees and agents against certain liabilities incurred as a result of their service on our behalf or at our request. We also advance costs incurred in connection with certain claims or proceedings on behalf of covered individuals. These persons must sign written undertakings to repay all these amounts if it is ultimately determined that the individual is not entitled to indemnification. We also have obtained directors and officers insurance providing coverage for them against certain liabilities and other expenses resulting from their service on our behalf or at our request. These By-Law provisions and insurance coverage provide a potentially significant financial benefit to our directors and executive officers. During 2005, PNC advanced costs pursuant to these By-Law provisions on behalf of several of its current and former executive officers and directors in connection with various matters, including certain of the legal proceedings described in Item 3 of our 2005 Annual Report on Form 10-K. A copy of that report is posted on the “For Investors” page of our corporate website at www.pnc.com.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers, and persons who own more than ten percent of a registered class of our equity securities (currently, there are no such shareholders) to file with us, the Securities and Exchange Commission, and the New York Stock Exchange initial reports of ownership and reports of changes in ownership of any PNC equity securities. With respect to 2005, to the best of our knowledge, all required report forms were filed on a timely basis. In making this statement, we have relied in part on the written representations of our current non-employee directors and our current and certain former executive officers, and on copies of the reports provided to us.

COMPENSATION OF EXECUTIVE OFFICERS

Personnel And Compensation Committee Report

This is the Personnel and Compensation Committee’s report to shareholders on our executive compensation policies and practices with respect to compensation reported for fiscal year 2005, as well as some of the Committee’s decisions with respect to compensation for 2006.

Personnel and Compensation Committee Report on Executive Compensation for Fiscal Year 2005

Introduction

The Personnel and Compensation Committee’s report includes separate sections on:

In addition, the report provides information regarding the components of PNC’s executive compensation program and the specific decisions we made regarding the compensation of PNC’s chief executive officer.

Executive Compensation Philosophy

The committee’s executive compensation philosophy is based on these core principles:

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Operating Processes

In order to help us properly discharge our responsibilities, we observe the following general processes:

2005 Committee Actions

During 2005, the committee took a number of actions to discharge its charter responsibilities. In addition to its review of annual compensation for executive officers, among other actions, the committee:

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Comparing PNC’s Executive Compensation to the Marketplace

How does the committee compare the compensation paid to PNC’s executive officers with the compensation paid to executive officers at other financial services firms?

The committee uses comparative compensation data primarily focused on the financial services industry. Nationally recognized compensation consulting firms provide the data, and our independent compensation consultant helps us to interpret and apply it properly. We also use PNC’s internal staff to collect and analyze compensation data.

How does the committee choose the financial services firms that will be used to benchmark PNC’s executive compensation?

We establish a peer group of selected financial services firms using various factors. These factors include: mix and complexity of businesses; markets being served; asset size; and changes to firms occurring through mergers or shifts in strategic direction.

We review the composition of the peer group at least annually to decide whether firms should be added or removed. During 2005, our peer group included: The Bank of New York Company, Inc.; BB&T Corporation; Fifth Third Bancorp; KeyCorp; National City Corporation; PNC; SunTrust Banks, Inc.; U.S. Bancorp; Wachovia Corporation; and Wells Fargo & Company. We have added Regions Financial Corporation effective at the beginning of 2006.

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Is the peer group used just to compare compensation?

No. We use the peer group as our primary tool to compare both compensation and financial and common stock performance. The common stock performance graph on page 56 shows you how PNC performed against its peer group, the S&P 500 Index, and the S&P 500 Banks over the past five years.

PNC’s performance relative to the other members of the peer group during the single or multi-year performance period will affect the size of executive officers’ annual incentive awards, the number of stock options we grant, and the number of incentive shares or performance units that executive officers may receive at the end of a performance period.

Annual Compensation

What are the principal elements of an executive officer’s annual compensation?

The principal elements of annual compensation are base salary and the annual incentive award, or bonus. Perquisites and other personal benefits are a minor part of annual compensation. This three-part division of annual compensation is reflected in the Summary Compensation Table on page 48. The following questions will address each of these elements in turn.

How does the committee determine an executive officer’s base salary?

We generally target base salaries at the middle of the competitive marketplace. Although we review executive salaries at least annually, we do not have a practice of granting routine annual salary increases. We use a number of factors to arrive at the appropriate base salary for an executive officer, including:

In addition to these factors, we consider the chief executive officer’s assessment of the executive’s performance against objectives, ethical leadership, job knowledge, management ability, and risk management skills.

How are the annual incentive awards of executive officers determined?

An annual incentive award depends on PNC’s performance during the year, including the achievement of an annual objective performance goal, as well as the executive’s individual performance. At the beginning of each year, the committee approves, taking into consideration the recommendations of management and the advice of its compensation consultant, target amounts expressed as a percentage of salary. The target amount is principally based on an analysis of relevant pay practices. Generally, payment of the target annual incentive award would result in approximately median total cash compensation relative to comparable executives in a relevant peer group.

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Mr. Rohr and the other executive officers named in the Summary Compensation Table are paid under a separate annual incentive plan from that used to compensate all of the other executive officers. Generally, the determination of the amount of their bonus is made using the same principles and methodology as for the other executive officers; however, the special features of this separate plan are discussed below.

What performance factors can affect the amount of an executive officer’s annual incentive award?

There are a number of factors that can affect the amount of an executive officer’s incentive award payment, including:

Among the factors the committee considered with respect to 2005 were: financial performance during the year; the successful completion of acquisitions, including the acquisition and integration of Riggs National Corporation; the success in planning and implementing to date the One PNC efficiency initiative; the maintenance of effective financial reporting and internal control processes; effective communication and cooperation with PNC’s regulatory agencies; and the continued effective implementation of strengthened corporate governance principles and risk management procedures.

In determining the amount of an executive officer’s 2006 annual incentive award following the end of 2006, the committee will use the same performance factors as those described above with respect to the 2005 annual incentive awards. At its meeting on February 14, 2006, the committee also approved the target 2006 earnings per share goal to be considered when determining the amount of an executive officer’s 2006 annual incentive award.

How does the committee determine the size of the annual incentive award for the executive officers shown in the compensation tables?

Mr. Rohr and the other four executive officers listed in the compensation tables following this report receive their awards under the 1996 Executive Incentive Award Plan. This plan was most recently approved by shareholders at the 2001 annual meeting of shareholders.

The five executive officers who participate in the 1996 plan share in a compensation pool. For 2005, the size of the pool was equal to one-half of one percent of PNC’s 2005 consolidated pre-tax net income. This amount is determined in accordance with generally accepted accounting principles. The size of the compensation pool may be adjusted for unusual, infrequently occurring or extraordinary items or cumulative effects of changes in accounting principles, as defined under generally accepted accounting principles. For 2005, the committee reduced the compensation pool to reflect an adjustment

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to accounting methodology related to loan origination fees and costs, and a partial recovery of an expense for which an adjustment was made in a prior year. These reductions were not, in the aggregate, material.

In the first quarter of 2005, the committee assigned each participant a maximum percentage amount of the compensation pool. No participant can receive more than 40% of the pool, and the sum of all percentages assigned to participants cannot exceed 100%.

Once the year is over and the maximum amount each participant could receive under this plan is determined, the committee uses the amounts these participants would have received under the incentive plan applicable to the other executive officers, as described above, as a basis on which to determine the amount of any downward adjustment. This downward adjustment would take into account the same types of performance factors as are explained above with respect to the bonuses paid to the other executive officers.

Are all annual incentive awards made in cash only?

No. All participants in the 1996 Executive Incentive Award Plan and most other executive officers are now subject to the “25/25 program.” Under the 25/25 program, each annual incentive award consists of two parts. The first part equals 75% of the annual incentive award and is either paid in cash or deferred under PNC’s Deferred Compensation Plan, if the executive officer made a prior deferral election. The remaining 25% consists of an award of restricted PNC stock or, if the executive officer made a prior deferral election, of restricted phantom PNC common stock units under the PNC Deferred Compensation Plan. The restricted stock (or phantom stock units) vests on the third anniversary of issuance so long as the executive officer is still employed by PNC. The restricted stock/phantom stock unit portion of the annual incentive award is increased by 25% to reflect the resulting risk of forfeiture and lack of liquidity during the three-year vesting period.

As a result, the dollar amount shown in the “Bonus ($)” column of the Summary Compensation Table on page 48 equals 75% of that officer’s 2005 annual incentive award, whether or not deferred. The dollar value of the remaining 25% restricted stock/phantom stock unit portion of the award, plus the 25% premium, is included in the column marked “Restricted Stock Award ($)”. That column also includes the dollar value of any other restricted stock awarded to the executive officer during 2005.

What is the committee’s policy regarding perquisites and other personal benefits?

In 2004, the committee determined that the annual incremental cost to PNC of perquisites and other personal benefits should not exceed $50,000 for each named executive officer. We consider a benefit to be a perquisite or personal benefit unless its purpose is clearly and exclusively business related. The principal categories of benefits that may be provided by PNC to some or all of its executive officers that we consider perquisites include: personal country club membership allowances; automobile allowances; personal use of corporate aircraft, regardless of whether the use is dictated by security concerns; the incidental costs of medical examinations not covered by health insurance; the services of outside professionals and financial consultants; and home security devices.

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Long-Term Compensation

What does long-term compensation include?

Long-term compensation makes up the largest part of the total compensation package for PNC’s executive officers. The principal elements of long-term compensation provided under the 1997 Long-Term Incentive Award Plan (most recently approved by shareholders in 2001) are:

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What purposes does long-term compensation serve?

We believe that a mixture of stock options and incentive shares/performance units provides the appropriate balance of risk and reward to PNC’s executive officers’ total compensation. In prior years, we have also used restricted stock on a more widespread basis as a part of executive officers’ compensation, but believe that in most cases the current stock option and incentive share/performance unit programs adequately provide this balance without the restricted stock. We believe that executive officers will be motivated to increase long-term shareholder value, stay with PNC, and identify their best financial interests with those of PNC’s shareholders.

PNC is submitting to its shareholders for their approval at this year’s annual meeting a 2006 Incentive Award Plan under which future long-term compensation will be provided to PNC’s executive officers and other more senior employees. A more complete description begins on page 7.

Chief Executive Officer Compensation

What factors does the committee use to evaluate the chief executive officer’s performance and make decisions about his compensation?

In general, the committee considers PNC’s financial performance and peer group financial performance and compensation data when making decisions about the chief executive officer’s compensation. The committee also considers the chief executive officer’s: leadership; decision-making

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skills; experience; knowledge; communication with the Board, employees, and regulatory agencies; strategic recommendations; customer and employee satisfaction; and progress in promoting diversity, as well as PNC’s positioning for future performance. The chief executive officer’s effectiveness in enhancing the corporate governance and risk management structures of PNC is also considered. The committee does not assign relative weights to these factors.

What specific factors did the committee use to decide on the amount of the chief executive officer’s annual incentive award for 2005?

In deciding upon the size of Mr. Rohr’s 2005 annual incentive award, the committee took into account the performance factors identified on page 40 and its evaluation of Mr. Rohr’s performance during the year. In particular, the committee took into account the continued leadership and communication skills he displayed in instilling a corporate culture based on shared ethical values and a focus on building shareholder value.

The committee also considered these accomplishments, among others:

After considering all of these factors carefully and consulting in executive session with its independent compensation consultant and PNC’s non-management and independent directors, the committee authorized the payment to Mr. Rohr of an annual incentive award of $3,500,000 for 2005. As explained earlier in our report, this bonus is subject to the 25/25 program.

What other principal decisions did the committee make regarding the chief executive officer’s compensation for 2005?

The committee:

Additional information is provided in the executive compensation tables that follow our report.

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Tax Policy

How does the committee take into account the effect of Section 162(m) of the Internal Revenue Code when making compensation decisions?

Section 162(m) of the Internal Revenue Code disallows, with certain exceptions, a federal income tax deduction for compensation over $1 million paid to each of the chief executive officer and any of the executive officers included in the Summary Compensation Table following this report, provided that they are serving in that capacity as of the last day of PNC’s fiscal year.

One exception to Section 162(m)’s disallowance of a federal income tax deduction for compensation over $1 million applies to performance-based compensation paid pursuant to shareholder-approved plans. Awards made under the 1996 Executive Incentive Award Plan and certain awards under the 1997 Long-Term Incentive Award Plan (stock options and incentive shares) can generally be made eligible for the performance-based exception and therefore eligible as a federal income tax deduction for PNC.

Although the committee keeps in mind the desirability of controlling PNC’s non-deductible compensation expense, the committee also believes that it is equally important to maintain the flexibility and competitive effectiveness of PNC’s executive compensation program. Therefore, the committee from time to time decides to make grants and awards that may not be deductible for federal income tax purposes due to the provisions of Section 162(m).

Conclusion

Based on its review of PNC’s executive compensation program and the advice and guidance that the committee has received from its independent consultant, the committee believes that the program’s basic structure is appropriate, competitive and effective to serve the purposes for which it was established and is maintained.

Other

In accordance with the rules of the Securities and Exchange Commission, this report is not being incorporated by reference into any of our future filings made under the Securities Exchange Act of 1934 or under the Securities Act of 1933. The report is not deemed to be soliciting material or to be filed with the Securities and Exchange Commission under the Exchange Act or the Securities Act.

For More Information

If you would like to receive printed copies of the 1996 Executive Incentive Award Plan or the 1997 Long-Term Incentive Award Plan, please send your request to: Corporate Secretary, The PNC Financial Services Group, Inc., One PNC Plaza – 21^st Floor, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707. The copies will be provided at no cost to you. We also encourage you to read PNC’s proxy statement for its 2001 annual meeting of shareholders on the Securities and Exchange Commission website at www.sec.gov for a more detailed explanation of how these plans operate.

MEMBERS OF THE COMMITTEE:

Dennis F. Strigl, Chairman

Paul W. Chellgren

Anthony A. Massaro

Thomas J. Usher

Milton A. Washington

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Compensation Committee Interlocks And Insider Participation

Messrs. Chellgren, Massaro, Strigl, Usher and Washington, none of whom are officers or former officers of PNC or any of its subsidiaries, served as members of the Personnel and Compensation Committee during 2005.

Certain members of the Personnel and Compensation Committee and their associates were customers of and had transactions with us or our subsidiaries during 2005. Transactions that involved loans or commitments by subsidiary banks were made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectibility or present other unfavorable features.

Change In Control And Other Arrangements

We have entered into change in control severance agreements with each of the executive officers named in the Summary Compensation Table on page 48 and with certain other selected executive officers. For each of the named executive officers, if his employment is terminated by us without cause, or by him for good reason, during a period of three years following a change in control of PNC, he will receive severance benefits. These benefits include:

Each agreement requires the executive officer not to use or disclose any of our confidential business or technical information and, if the executive officer receives the above severance benefits, not to employ or solicit any of our officers during the year following his termination. Each agreement terminates when the executive officer reaches age 65 (with a gradual reduction of benefits during the three prior years), and we may, upon one year’s advance notice, simultaneously terminate all of such change in control severance agreements.

We have also entered into change in control severance arrangements with certain other selected executive and other officers under which they will receive severance benefits similar to those described above. In some cases, however, these benefits have a lower level of payment and a shorter coverage period.

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We also typically include provisions in our stock option, restricted stock and incentive share award opportunity grants providing certain protections to our officers, such as accelerated vesting. The Personnel and Compensation Committee has approved a change in the relevant provisions of all outstanding unvested equity-based (or phantom equity-based) employee grants in order to provide for 100% accelerated vesting upon a change in control of PNC, whether or not the employee has a qualifying termination of employment, which was previously required. The committee also approved the addition of a provision to current and future incentive share award opportunity programs that will entitle the officer to receive the higher of the target award or the award earned as of the date of the change in control of PNC. The amount received by the officer will be prorated based on the portion of the performance period that has been completed. Prior to this change, the entire target award would have been paid upon a change in control and the officer’s qualifying termination of employment.

Our displaced employee assistance plans for employees generally provide for an increase in severance benefits following a change in control under certain circumstances. If an employee’s employment is terminated by us within two years following consummation of a change in control, the employee will receive a lump sum payment equal to twice the benefits to which such employee otherwise would be entitled under the applicable plan. In addition to that lump sum payment, selected officers and employees will become eligible for an additional severance benefit under similar circumstances, based on their variable compensation.

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Summary Compensation Table

The Summary Compensation Table shows, for the years 2003 through 2005, the compensation paid or awarded to Mr. Rohr, our Chairman and Chief Executive Officer, and to our next four most highly compensated, policy-making executive officers. The inclusion of those next four executive officers in this group is based on salary and bonus earned during 2005. The amounts shown in the “Salary” column include the dollar amounts attributable to holidays, vacation time, and paid time off. Mr. Rohr and the four executive officers are referred to collectively for purposes of the compensation tables as our “named executive officers.” For a discussion of our executive compensation program, please refer to the Personnel And Compensation Committee Report On Executive Compensation for Fiscal Year 2005 (“Personnel and Compensation Committee Report”) beginning on page 36.