ARS Settlement Information

In September and October 2008, Banc of America Securities LLC and an affiliated securities firm (Affiliated Firm) announced agreements in principle with the Massachusetts Securities Division (MSD), the New York State Attorney General’s Office (NYAG), the Securities and Exchange Commission (SEC), and a coalition of other state regulators represented by the North American Securities Administrators Association related to the settlement of claims arising from sales of auction rate securities (ARS).

As required by the settlements, Blue Ridge Investments, L.L.C. (Blue Ridge), a wholly‑owned subsidiary of Bank of America Corporation, offered to purchase at par amount (plus any accrued and unpaid interest or dividends) eligible ARS from individual investors and certain small businesses and charities. To date, Blue Ridge has purchased substantial amounts of ARS from eligible investors.

In April and June 2009, we entered into an Administrative Consent Order with the MSD settling the MSD’s claims with respect to our sales of ARS, an Assurance of Discontinuance with the NYAG settling the NYAG’s claims with respect to our sales of ARS, and a Consent to the entry of a Judgment settling the SEC’s claims with respect to our sales of ARS.

A copy of the MSD settlement is available here (PDF).
A copy of the NYAG settlement is available here (PDF).
A copy of the SEC settlement is available here (PDF).

The settlements provide that:

Blue Ridge will extend an offer (Offer) to purchase eligible ARS from eligible investors.
Eligible investors are (i) natural persons or trusts for the benefit of natural persons, (ii) small businesses with account values of $15 million or less as of September 9, 2008, and (iii) charities with account values of $25 million or less as of September 9, 2008.
Eligible ARS are ARS that have experienced auction failures purchased from us or from the affiliated broker‑dealer named in the settlements by eligible investors on or before February 13, 2008.
The Offer will remain open until the close of business (Eastern Time) on December 1, 2009.
We will compensate eligible investors who sold eligible ARS at a loss between February 11, 2008, and October 8, 2008.
Eligible investors who have claims for consequential damages with respect to eligible ARS are entitled to invoke a special arbitration process overseen by the Financial Industry Regulatory Authority (FINRA). We will pay any forum and filing fees.
We will compensate eligible investors who took out loans from us or our Affiliated Firm between February 11, 2008, and October 8, 2008, because of liquidity concerns after the failure of eligible ARS auctions and who paid interest in excess of the interest and dividends received on the eligible ARS during the term of such loan.
We will work with issuers and other interested parties, including regulatory authorities and industry participants, to provide liquidity solutions for institutional customers who are not entitled to participate in the Offer.
We and our Affiliated Firm will pay a total penalty of $50 million. We neither admit nor deny allegations of wrongdoing.

Background of the Offer

Blue Ridge has offered to purchase eligible ARS from eligible investors, all as provided in the First Amended Offer to Purchase dated October 21, 2008 (Offer to Purchase), a copy of which is available here (PDF). The Offer to Purchase sets forth the definitive terms of the Offer by Blue Ridge to purchase eligible ARS and, to the extent of any inconsistency between the description of the Offer contained in this text and the Offer to Purchase, the Offer to Purchase governs.

Acceptance of the Offer does not constitute a waiver of any claim (other than for the value of the eligible ARS) that an eligible investor may have against us or any of our affiliates arising from or in connection with the purchase by the eligible investor of eligible ARS.

The Offer will remain open until the close of business (Eastern Time) on December 1, 2009, unless extended by Blue Ridge.

How to Accept the Offer

If you are an eligible investor holding eligible ARS, you may take advantage of the Offer as provided in the Offer to Purchase. We have made efforts to notify all eligible investors of the Offer and the terms of the settlements. If you have any questions about the Offer, including your eligibility to participate in the Offer, please obtain a copy of the Offer to Purchase (available here), call your investment representative, or call the dedicated toll‑free customer assistance line at 866.638.4183.

Withdrawal from the Offer

Any eligible investor holding eligible ARS who has properly accepted the Offer may elect to withdraw tendered eligible ARS before purchase upon notice to Blue Ridge. Blue Ridge will accept the tender and purchase eligible ARS promptly (but in no event more than 7 business days) after acceptance of the Offer and delivery of the eligible ARS. This will provide a very limited time in which an eligible investor who has tendered eligible ARS will be able to withdraw such tendered eligible ARS; therefore eligible investors should carefully consider the decision to tender such securities.

More Detail on Terms of the Settlement

Relief for Eligible Investors Who Sold Below Par. We will compensate eligible investors who sold eligible ARS below par between February 11, 2008, and October 8, 2008. If you are in this situation, we will pay you the difference between par and the price at which you sold the eligible ARS.
Reimbursement for Related Loan Expenses. If you are an eligible investor who took out loans from us or our Affiliated Firm between February 11, 2008, and October 8, 2008, because of liquidity concerns after the failure of eligible ARS auctions, and paid interest associated with the eligible ARS‑based portion of those loans, we will reimburse you for the interest to the extent that it exceeds the total interest and dividends received on the eligible ARS during the duration of the loan.
Consequential Damages Arbitration Process. Eligible investors who have claims for consequential damages arising from their inability to sell eligible ARS are entitled to participate in a special arbitration process overseen by FINRA. We will pay any forum and filing fees associated with the arbitration. The rules applicable to any such proceeding are set forth here.
Refund of Refinancing Fees to Municipal Issuers. We have refunded to municipal issuers refinancing fees we received from municipal ARS issuers that issued such ARS through us in the primary market between August 1, 2007, and February 13, 2008, and refinanced those securities through us after February 11, 2008.
Institutional Investors. We will continue to work with issuers and other interested parties, including regulatory authorities, to provide liquidity solutions for institutional investors who are not entitled to participate in the Offer.