Bank of America 2007 Annual Report Download - page 152

The IRS is conducting an audit of the 1998 and 1999 tax returns of
The Bank of America Pension Plan and The Bank of America 401(k) Plan.
This audit includes a review of voluntary transfers by participants of 401(k)
Plan assets to The Bank of America Pension Plan and whether such trans-
fers were in accordance with applicable law. The Corporation has received
Technical Advice Memoranda from the National Office of the IRS that
(i) concluded that the voluntary transfers violated the anti-cutback rule of
Section 411(d)(6) of the Internal Revenue Code and (ii) denied the Corpo-
ration’s request that the conclusion reached be applied prospectively only.
The Corporation continues to participate in administrative proceedings with
the IRS regarding issues raised in the audit.
On September 29, 2004, a class action, now entitled Donna C.
Richards v. FleetBoston Financial Corp., the FleetBoston Financial Pension
Plan and Bank of America Corporation, was filed in the U.S. District Court
for the District of Connecticut on behalf of certain former and current Fleet
employees. Plaintiffs allege that FleetBoston or its predecessor violated
ERISA by amending the Fleet Financial Group, Inc. Pension Plan (a prede-
cessor to the FleetBoston Financial Pension Plan) to add a cash balance
benefit formula without notifying participants that the amendment reduced
their plan benefits, by reducing the rate of benefit accruals on account of
age, and by failing to inform participants of the correct amount of their
pensions and related claims. In September 2007, the Corporation and the
other named defendants agreed in principle with class counsel to settle all
claims brought on behalf of the class. The agreement is subject to the
execution of a definitive settlement agreement and court approval.
Note 14 – Shareholders’ Equity and Earnings
Per Common Share
Common Stock
The Corporation repurchased approximately 73.7 million shares of common
stock in 2007 which more than offset the 53.5 million shares issued under
employee stock plans. The Corporation may repurchase shares, from time
to time, in the open market or in private transactions through the Corpo-
ration’s approved repurchase program. The Corporation expects to continue
to repurchase a number of shares of common stock comparable to any
shares issued under the Corporation’s employee stock plans.
Effective for the third quarter dividend, the Board increased the quar-
terly cash dividend on common stock 14 percent from $0.56 to $0.64 per
share. In October 2007, the Board declared a fourth quarter cash divi-
dend, which was paid on December 28, 2007 to common shareholders of
record on December 7, 2007.
Preferred Stock
In January 2008, the Corporation issued 240 thousand shares of Bank of
America Corporation Fixed-to-Floating Rate Non-Cumulative Preferred
Stock, Series K (Series K Preferred Stock) with a par value of $0.01 per
share for $6.0 billion. The fixed rate is 8.00 percent through January 29,
2018 and then adjusts to three-month LIBOR plus 363 bps thereafter.
Ownership is held in the form of depositary shares, each representing a
1/25
th
interest in a share of Series K Preferred Stock, paying a semi-
annual cash dividend through January 29, 2018 then adjusts to a quarterly
cash dividend, on the liquidation preference of $25,000 per share of Ser-
ies K Preferred Stock.
Also in January 2008, the Corporation issued 6.9 million shares of
Bank of America Corporation 7.25% Non-Cumulative Perpetual Convertible
Preferred Stock, Series L (Series L Preferred Stock) with a par value of
$0.01 per share for $6.9 billion, paying a quarterly cash dividend on the
liquidation preference of $1,000 per share of Series L Preferred Stock at
an annual rate of 7.25 percent. Each share of the Series L Preferred Stock
may be converted at any time, at the option of the holder, into 20 shares
of the Corporation’s common stock plus cash in lieu of fractional shares.
On or after January 30, 2013, the Corporation may cause some or all of
the Series L Preferred Stock, at its option, at any time or from time to
time, to be converted into shares of common stock at the then-applicable
conversion rate if, for 20 trading days during any period of 30 consecutive
trading days, the closing price of common stock exceeds 130 percent of
the then-applicable conversion price of the Series L Preferred Stock. If the
Corporation exercises its right to cause the automatic conversion of Series
L Preferred Stock on January 30, 2013, it will still pay any accrued divi-
dends payable on January 30, 2013 to the applicable holders of record.
In November and December 2007, the Corporation issued
41 thousand shares of Bank of America Corporation 7.25% Non-
Cumulative Preferred Stock, Series J (Series J Preferred Stock) with a par
value of $0.01 per share for $1.0 billion. Ownership is held in the form of
depositary shares, each representing a 1/1,000
th
interest in a share of
Series J Preferred Stock, paying a quarterly cash dividend on the liqui-
dation preference of $25,000 per share of Series J Preferred Stock at an
annual rate of 7.25 percent. On any dividend date on or after November 1,
2012, the Corporation may redeem Series J Preferred Stock, in whole or in
part, at its option, at $25,000 per share, plus accrued and unpaid divi-
dends.
In September 2007, the Corporation issued 22 thousand shares of
Bank of America Corporation 6.625% Non-Cumulative Preferred Stock,
Series I (Series I Preferred Stock) with a par value of $0.01 per share for
$550 million. Ownership is held in the form of depositary shares, each
representing a 1/1,000
th
interest in a share of Series I Preferred Stock,
paying a quarterly cash dividend on the liquidation preference of $25,000
per share of Series I Preferred Stock at an annual rate of 6.625 percent.
On any dividend date on or after October 1, 2017, the Corporation may
redeem Series I Preferred Stock, in whole or in part, at its option, at
$25,000 per share, plus accrued and unpaid dividends.
In November 2006, the Corporation issued 81 thousand shares, or
$2.0 billion, of Bank of America Corporation Floating Rate Non-Cumulative
Preferred Stock, Series E (Series E Preferred Stock) with a par value of
$0.01 per share. Ownership is held in the form of depositary shares, each
representing a 1/1,000
th
interest in a share of Series E Preferred Stock,
paying a quarterly cash dividend on the liquidation preference of $25,000
per share of Series E Preferred Stock at an annual rate equal to the
greater of (a) three-month LIBOR plus 0.35 percent and (b) 4.00 percent,
payable quarterly in arrears. On any dividend date on or after
November 15, 2011, the Corporation may redeem Series E Preferred
Stock, in whole or in part, at its option, at $25,000 per share, plus
accrued and unpaid dividends.
In September 2006, the Corporation issued 33 thousand shares, or
$825 million, of Bank of America Corporation 6.204% Non-Cumulative
Preferred Stock, Series D (Series D Preferred Stock) with a par value of
$0.01 per share. Ownership is held in the form of depositary shares, each
representing a 1/1,000
th
interest in a share of Series D Preferred Stock,
paying a quarterly cash dividend on the liquidation preference of $25,000
per share of Series D Preferred Stock at an annual rate of 6.204 percent.
On any dividend date on or after September 14, 2011, the Corporation
may redeem Series D Preferred Stock, in whole or in part, at its option, at
$25,000 per share, plus accrued and unpaid dividends.
The shares of the series of preferred stock discussed above are not
subject to the operations of a sinking fund and have no participation
rights. With the exception of the Series L Preferred Stock, the shares of
the series of preferred stock discussed above are not convertible. The
150 Bank of America 2007