>However, AMR determines the share value.
Nope. AMR has no control over share value.
>There is no market value becuase the shares aren't traded anywhere and can't be sold.
There is a defined formula to calculate the share value based upon the underlying assets' market value.
>AMR dictates what the share value is based on some formula.
AMR has no control over the share value, the formula or the calculations made. All that is performed by the Trust Manager.
>Could you give me the section and page in the Green Book--I looked at the contract and
>the supplements and couldn't find the formula by which the shares are valued.
It is not in the Green Book (the AA/APA contract). Details of exactly how the Trust Manager is supposed to manage the trust is all contained in the Trust Documents (the legally binding contract which initiated the trust as well as spelling out in detail exactly how the trust will operate).
A-ha! The light just went on! I suspect your confusion is with the names and roles of AMR and ARM Investment Services (AMRIS). AMR is the holding company for a number of airline related companies including American Airlines, Inc., American Eagle, Inc. and AMR Investment Services, Inc. Its name is commonly used in place of AA, AE or any other AMR owned company. AMRIS is the B-fund Trust Manager. Ok, here's the short lesson in organizational structure.
Way back when (1960's) AA signs a contract with APA (representing pilots employed by AA) to include the formation & operation of a retirement trust fund. That fund (B-fund) is to be a defined contribution fund out of reach of the control of either party --i.e. neither company nor union may control this trust fund. The parties agree on a Trustee to control the fund on their behalf (that is what a Trust is... giving up control to someone you trust. AA assumes the role of "Fiduciary." As such, AA is financially responsible for any losses in the trust caused by a failure of the Trustee to properly perform its job. AA pilots are the beneficiaries --those who will receive the benefits of the trust upon their retirement. The Trustee (First Republic Bank last I looked) was the Trustee selected by the Fiduciary (AA) and approved by APA (representative for the beneficiaries). [note: since AA is financially responsible, AA gets to name the Trustee who will manage the trust while APA represents the beneficiaries and therefore gets to accept or reject who AA names as Trustee].
The Trustee's job is to manage the trust in accordance with the Trust Documents --which spells out objectives and procedures AA & APA have agreed upon as to how the trust will operate. Naturally, the Trustee specializes in the legalities of being a Trustee and not in investment decisions. For this role the Trustee hires one or more professional fund managers In our case First Republic Bank has hired AMRIS to manage all of the Trust's financial investments. First Republic provides AMRIS with investment guidance (what it can/can not do) as described in the Trust Documents and AMRIS invests the trust assets (money) in various financial tools. Neither AA, APA nor AMR are permitted to influence First Republic's choice of Trust Manager(s). In fact, none of the parties may contact the Trust Manager directly. Instead, all contact concerning the Trust is required to be to/thru the Trustee only.
That's the basics. The obvious question is why the Trustee would hire AMRIS [a company owned/controlled by AMR]. The answer is three-fold.
A) Simplicity. AMRIS does not make the actual investments. It is a manager of managers. AMRIS decides what sectors of "the market" it wants funds invested in and what percentage of the total funds to invest in each sector. A single company who's expertise is selecting the best money managers in each market segment. IOW, only a single Trust Manager is needed greatly simplifying the Trustee's job as well as Fiduciary and Beneficiary oversight roles.
B) AMRIS charges the B-Fund Trust less than 1/2 the open market rate for its services. It's long-term performance has been consistantly well above the market average and when combined with its very low cost structure it has provided the Trust with exceptional return on investments (usually in top 5%).
C) To preclude the appearance of interferrence in Trust management by AMR (who owns the managing company), the Trust Documents preclude the Trust from investing in the airline industry or airline related companies. IOW, B-fund assets can not be invested in AA, AMR, AE, Boeing, Airbus, etc., etc., etc.
The worst thing that can happen to a retirement fund is for it to be controlled by a union. The second worst thing that can happen is for the retirement fund to be controlled by the company. The B-fund Trust is designed to avoid both of those problems by placing control in the hands of an outside third party. Both company and union have to agree on who the third parties are, but neither can select any third party without the consent and agreement of the other. Even with all these procedural precautions, the B-fund assets are prohibited from being invested in airline or airline related industries (never put all your eggs in one basket). All this legally enforcable in court if necessary.
That's the simple version. If you need more details, contact me directly.
ex-APA committe member (multiple)
*NO CARRIER* -- A Naval Aviator's worst nightmare!