Newsbrief No. 47 10th December 2002.

Contents. 1. Annual General Meeting Report. 2. Trustees Boards APS & NAPS . 3. Shift Pay - Changes to Pensionable Pay. 4. Christmas Wishes.

Annual General Meeting. 24th October 2002.

The AGM was held at the Concorde Centre, some 450 Members attended. All the resolutions were approved by an overwhelming majority. The Chairman reported on the events of the last year highlighting the decision of the Court of Appeal, he also reported on discussion with BA on proposed changes to the Trustee boards of APS & NAPS. ( see 2. below)

Referring to the financial state of the funds, he reported that in the 2000 Valuation the market value of APS was £6687M, this had decreased to £5950.9M (2002BA Annual Report & Accounts), and the figure for September 2002 was £5521M. A drop in value of £1Bn.

The 2000 Valuation for NAPS was £3795M, BA 2000Annual Report £3721M,in September 2002 it was £3262M. A drop in value of £533M.

In September 2002 the APS fund was said to be" broadly in surplus". Members were reminded that in the 2000 Valuation NAPS had an "actuarial deficit" of £221M or some £281M at market value. Members should remember that investments in pension funds are calculated over the longer term. Although the market value of the assets had shown a sharp decline under normal circumstances it could be expected that they should recover, however given the volatility of Global Stock Markets this may take more slowly than has been the case in recent years.

Members will recall that ABAP has been pressing the Trustees to adopt a "matching" investment policy composed mainly of "Gilts, with a smaller proportion of equities, rather than the Equity driven policy pursued by the Trustees. BA plc has been the main beneficiary of the Trustees investment policy. Quite simply the beneficiaries were carrying the risk.

ABAP first raised the matter in 1996, not until 2001 was APS moved substantially into Bonds. ABAP welcomes the move, but regrets the loss incurred by the 5year delay in changing the policy. As APS comprises 90% Pensioners & Deferred Pensioners, the Trustees should have realised sooner that an equity based policy was inappropriate for such a mature scheme. A number of questions on this and BA had been received from Members unable to attend and these would be addressed after the completion of formal business.

In giving a short report on Roy Hutchings' Complaint on Clause 24,the Chairman referred to the Accounts for the Year and explained the heavy cost in legal fees for the past year, and that there would be additional expenditure in the present year. This Report was approved by Members. The Treasurer's Report on the Accounts was approved. The Committee was re elected unopposed.

The Resolution to approve the present level of subscription raised a debate, Members were concerned that the level of the funds might be insufficient and hamper the Committee. It was proposed and seconded from the floor that the subscriptions should be returned to the level they had been at some 2 years ago. There were some other amendments which proposed leaving the subscriptions at the present level. These were put to the vote and defeated. In response to the demand that the original floor resolution should be put to the vote, the Chairman proposed that subscriptions for next year would be: £1 per œ1000 of pension received. Pensioners receiving a pension of less than £2000 are accorded free membership. Active & Deferred Pensioners pay £5 until they receive a pension. This was put to the meeting and overwhelmingly accepted.

The COPAS Report and subscription to COPAS was approved.

Under Any Other Business various questions were dealt with: i) A number concerned the financial state of the funds and what would happen if BA became insolvent. It was explained that at any time BA could give 6 Months Notice to withdraw from the schemes. In the case of APS the definitive Trust Deed contains a solvency Guarantee, which requires the Employer to restore APS to solvency on termination or wind up. If the Scheme is in surplus, Beneficiaries are entitled to Benefit improvements in so far as the residual surplus will allow. (subject to Inland Revenue limits) Only after that may the Employer receive any surplus left. This is a valuable safeguard which was confirmed by the Appeal Court. However it must be said the guarantee is dependent on the financial state of the Company.

Fortunately APS is relatively well funded, NAPS does not have a solvency guarantee and is, in our opinion less well funded. This is why additional liabilities should not be imposed on either scheme. If BA were to become insolvent or wind up, pension funds would have to take their place in the list of creditors, but in the winding up procedure Pensioners have priority over Active beneficiaries.

There were further comments & questions on this subject from the floor.

ii) Variable Pensions. In response to questions to the "injustice "of variable pensions, the Committee stated that their objectives remained unchanged. Although we have forced by circumstances to deal with the Merger and the Court cases, two of our objectives , an increase for pre 1989 Pensioners and changes in the variable pension option remained and will be pursued when the opportunity emerges. But there needs to be a disposable surplus to enable the Trustees to deal with these improvements. This is unlikely to occur in the Valuation due next year. These objectives will not be forgotten.

2. Trustee Boards APS & NAPS. The Chairman reported that BA had recently consulted on ABAP's views on separate Trustee Boards. We have said we would welcome such a move, provided the 50/50 arrangement in the Trust Deed remained and that only the beneficiaries of APS could be elected to the APS Board, and similarly for NAPS.

In respect of both we would require pensioners to be elected as Trustees, and in APS given the 90/10 percentage of Pensioners to Actives, that the majority of Trustees should be pensioners. BA have now confirmed that after discussions with all interested parties they are going to propose an "opt out" which will reflect the discussions we have had with them. They would be taking legal advice and when they had finalised their documents they would consult all the parties. We have said we would advise our final views when we have received their written proposals.

3. Shift Pay - Changes to Pensionable Pay. Some of our active Members (Ground Service Staff) reported that an agreement had been made with BA, which meant that the "shift pay" earned by these grades would be a pensionable emolument. They further stated that an element of back-dating was also agreed, and Staff who wished could "buy" this back service. Some Staff were being asked to pay amounts exceeding £5000 to secure the back dating. We wrote to Mr Eddington, BA Chief Executive, and Mr Walker, Chairman of Trustees, asking for details.

Mr Eddington replied that it was to correct an anomaly, but gave no details. Mr. Walker firstly replied that it was not a matter for the Trustees as the Agreement did not take effect until April 2003, and would be considered by the Scheme Actuary when making his Valuation. We advised the Pensioner Trustees of these proposed changes, and as a result of their interest and a further letter, the Trustees are now to be given details of the liabilities will impose on both APS & NAPS. We have now learned that discussions are ongoing with the pilots to make certain allowances pensionable, and a phone call from a Member at Gatwick stated that pensionable shift pay also applied to aircraft dispatchers, although this is unconfirmed at the moment. It seems quite extraordinary, given BA's dire financial difficulties and the current state of the markets, the losses sustained by both APS & NAPS in the past 2 years (both closed schemes) that BA would agree Pension benefit improvements. BA has said " We acknowledge that we will be responsible for providing the necessary Funds to secure the additional liabilities introduced now or at any other time in the future". We shall see ! The evidence of the last 12 years as regards APS is that they do not pay. We await confirmation of payment of the full actuarial cost of the benefits provided. It seems little short of bizarre for the Employer to increase liabilities in the prevailing circumstances. Please remember APS was closed in 1984 because it was TOO COSTLY. NAPS was introduced as a cheaper version which COULD BE AFFORDED. We are trying to establish what exactly has been agreed and for whom. We appeal to any Active Member involved to supply copies of any Agreement proposing changes to Pensionable pay. It looks as if there is another legal battle looming.

4. Christmas Wishes. Finally, the Committee wishes All Members a Happy Christmas and a Peaceful New Year.

The Committee of ABAP 10th December 2002.