SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended November 30, 1996
Commission File No. 1-6033
United Air Lines, Inc.
Management and Salaried Employees'
401(k) Retirement Savings Plan
(Full title if the Plan)
United Air Lines, Inc.
(Employer sponsoring the Plan)
UAL Corporation
(Issuer of the shares held pursuant to the Plan)
1200 Algonquin Road, Elk Grove Township, Illinois
Mailing Address:
P.O. Box 66100, Chicago, Illinois 60666
(Address of principal executive offices)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
of United Air Lines, Inc.:
We have audited the accompanying statement of net
assets available for plan benefits of the United
Air Lines, Inc. Management and Salaried
Employees' 401(k) Retirement Savings Plan as of
November 30, 1996 and 1995, and the related
statement of changes in net assets available for
plan benefits for the years then ended. These
financial statements are the responsibility of
the Plan Administrator. Our responsibility is to
express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about
whether the financial statements are free of
material misstatement. An audit includes
examining, on a test basis, evidence supporting
the amounts and disclosures in the financial
statements. An audit also includes assessing the
accounting principles used and significant
estimates made by the Plan Administrator, as well
as evaluating the overall financial statement
presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material
respects, the net assets available for plan
benefits of the United Air Lines, Inc. Management
and Salaried Employees' 401(k) Retirement Savings
Plan as of November 30, 1996 and 1995, and the
changes in its net assets available for plan
benefits for the years then ended in conformity
with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
May 23, 1997
Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, the United Air Lines, Inc. Pension and Welfare Plans
Administration Committee has duly caused this annual report to
be signed on its behalf by the undersigned hereunto duly
authorized.
United Air Lines, Inc.
Management and Salaried
Employees' 401(k)
Retirement Savings Plan
By /s/ Douglas A. Hacker
Douglas A. Hacker
Member, United Air
Lines, Inc. Pension
and Welfare Plans
Administration Committee
Dated May 28, 1997
UNITED AIR LINES, INC.
MANAGEMENT AND SALARIED EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
<TABLE>
<CAPTION>
November 30
1996 1995
INVESTMENT IN MASTER TRUST
<S> <C> <C>
Magellan Fund $ 42,927 $ 29,207
Equity-Income Fund 23,553 6,160
Growth Company Fund 137,108 96,820
Government Securities Fund 1,893 826
OTC Portfolio 22,691 7,798
Overseas Fund 34,398 28,518
Balanced Fund 48,194 49,485
Asset Manager 9,425 5,103
Asset Manager: Growth 12,539 6,840
Asset Manager: Income 2,314 1,597
Retirement Money Market Portfolio 5,489 2,878
U. S. Bond Index Portfolio 2,290 1,204
U. S. Equity Index Portfolio 148,005 112,127
Blended Income Fund 199,006 182,007
Fixed Rate Investment Fund - 66,254
UAL Stock Fund 30,276 10,913
Participant Loan Fund 14,894 14,864
NET ASSETS AVAILABLE FOR PLAN
BENEFITS $735,002 $622,601
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
MANAGEMENT AND SALARIED EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
<TABLE>
<CAPTION>
Year ended November 30
1996
EQUITY- GROWTH GOVERNMENT
MAGELLAN INCOME COMPANY SECURITIES
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $29,207 $ 6,160 $96,820 $ 826
CONTRIBUTIONS 4,103 1,265 8,337 139
TRANSFERS
BETWEEN FUNDS 6,284 13,011 14,713 1,063
TRANSFERS
BETWEEN PLANS 111 90 594 1
RESULTS OF INVESTMENT
ACTIVITY
Dividends 8,403 736 5,028 122
Interest 3 1 2 -
Net appreciation
(depreciation)
in value of
investments (3,257) 3,128 17,095 (53)
5,149 3,865 22,125 69
PAYMENTS TO PLAN
PARTICIPANTS (1,505) (740) (4,349) (196)
PARTICIPANT LOANS (413) (91) (1,108) (8)
ADMINISTRATIVE
EXPENSES (9) (7) (24) (1)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $42,927 $23,553 $137,108 $ 1,893
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
MANAGEMENT AND SALARIED EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
<TABLE>
<CAPTION>
Year ended November 30
1996
OTC OVERSEAS BALANCED ASSET
PORTFOLIO FUND FUND MANAGER
<S> <C> <C> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ 7,798 $28,518 $49,485 $ 5,103
CONTRIBUTIONS 1,453 2,764 3,222 601
TRANSFERS
BETWEEN FUNDS 10,266 (129) (7,261) 2,981
TRANSFERS
BETWEEN PLANS 74 86 107 2
RESULTS OF INVESTMENT
ACTIVITY
Dividends 1,851 681 2,144 263
Interest - - - -
Net appreciation
(depreciation)
in value of
investments 1,964 3,970 3,177 1,021
3,815 4,651 5,321 1,284
PAYMENTS TO PLAN
PARTICIPANTS (590) (1,234) (2,377) (463)
PARTICIPANT LOANS (123) (253) (289) (81)
ADMINISTRATIVE
EXPENSES (2) (5) (14) (2)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $22,691 $34,398 $48,194 $ 9,425
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
MANAGEMENT AND SALARIED EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
<TABLE>
<CAPTION>
Year ended November 30
1996
RETIREMENT US US
ASSET ASSET MONEY BOND EQUITY
MANAGER: MANAGER: MARKET INDEX INDEX
GROWTH INCOME PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ 6,840 $ 1,597 $ 2,878 $ 1,204 $112,127
CONTRIBUTIONS 1,221 145 680 187 5,686
TRANSFERS
BETWEEN FUNDS 2,742 648 2,087 907 3,784
TRANSFERS
BETWEEN PLANS 74 6 (2) 2 158
RESULTS OF INVESTMENT
ACTIVITY
Dividends 109 120 178 132 -
Interest 1 3 6 - 3
Net appreciation
(depreciation)
in value of
investments 1,983 100 - (26) 32,272
2,093 223 184 106 32,275
PAYMENTS TO PLAN
PARTICIPANTS (324) (274) (267) (110) (4,878)
PARTICIPANT LOANS (104) (30) (69) (6) (1,118)
ADMINISTRATIVE
EXPENSES (3) (1) (2) - (29)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $12,539 $ 2,314 $ 5,489 $ 2,290 $148,005
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
MANAGEMENT AND SALARIED EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
<TABLE>
<CAPTION>
Year ended November 30
1996
FIXED
BLENDED RATE UAL PARTICIPANT
INCOME INVESTMENT STOCK LOAN
FUND FUND FUND FUND TOTAL
<S> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $182,007 $66,254 $10,913 $14,864 $622,601
CONTRIBUTIONS 11,123 - 1,261 - 42,187
TRANSFERS
BETWEEN FUNDS 6,876 (66,420) 15,733 (7,285) -
TRANSFERS
BETWEEN PLANS 384 (8) 266 - 1,945
RESULTS OF INVESTMENT
ACTIVITY
Dividends - - - - 19,767
Interest 12,514 520 (5) 1,122 14,170
Net appreciation
(depreciation)
in value of
investments - - 3,143 - 64,517
12,514 520 3,138 1,122 98,454
PAYMENTS TO PLAN
PARTICIPANTS (11,606) (313) (713) - (29,939)
PARTICIPANT LOANS (2,151) (33) (316) 6,193 -
ADMINISTRATIVE
EXPENSES (141) - (6) - (246)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $199,006 $ - $30,276 $14,894 $735,002
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
MANAGEMENT AND SALARIED EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
<TABLE>
<CAPTION>
Year ended November 30
1995
EQUITY- GROWTH GOVERNMENT
MAGELLAN INCOME COMPANY SECURITIES
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ - $ - $59,122 $ -
CONTRIBUTIONS 1,566 387 8,064 75
TRANSFERS
BETWEEN FUNDS 24,443 5,043 5,842 679
TRANSFERS
BETWEEN PLANS 15 - (6) (1)
RESULTS OF INVESTMENT
ACTIVITY
Dividends 43 78 2,169 31
Interest - - 5 -
Net appreciation
in value of
investments 3,392 708 23,901 49
3,435 786 26,075 80
PAYMENTS TO PLAN
PARTICIPANTS (131) (21) (1,583) (2)
PARTICIPANT LOANS (119) (34) (682) (5)
ADMINISTRATIVE
EXPENSES (2) (1) (12) -
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $29,207 $ 6,160 $96,820 $ 826
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
MANAGEMENT AND SALARIED EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
<TABLE>
<CAPTION>
Year ended November 30
1995
OTC OVERSEAS BALANCED ASSET
PORTFOLIO FUND FUND MANAGER
<S> <C> <C> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ - $34,072 $49,601 $ -
CONTRIBUTIONS 511 4,136 4,888 499
TRANSFERS
BETWEEN FUNDS 6,391 (10,096) (8,873) 4,054
TRANSFERS
BETWEEN PLANS (10) 39 3 (6)
RESULTS OF INVESTMENT
ACTIVITY
Dividends 118 577 1,987 84
Interest - (1) - -
Net appreciation
in value of
investments 816 983 4,189 624
934 1,559 6,176 708
PAYMENTS TO PLAN
PARTICIPANTS (7) (853) (1,905) (116)
PARTICIPANT LOANS (21) (334) (397) (35)
ADMINISTRATIVE
EXPENSES - (5) (8) (1)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 7,798 $28,518 $49,485 $ 5,103
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
MANAGEMENT AND SALARIED EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
<TABLE>
<CAPTION>
Year ended November 30
1995
RETIREMENT US US
ASSET ASSET MONEY BOND EQUITY
MANAGER: MANAGER: MARKET INDEX INDEX
GROWTH INCOME PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ - $ - $ - $ - $80,147
CONTRIBUTIONS 1,092 121 670 96 6,329
TRANSFERS
BETWEEN FUNDS 4,791 1,335 2,210 1,033 (513)
TRANSFERS
BETWEEN PLANS (12) - (3) - (190)
RESULTS OF INVESTMENT
ACTIVITY
Dividends - 49 92 36 -
Interest - - - - 1
Net appreciation
in value of
investments 1,056 153 - 47 29,943
1,056 202 92 83 29,944
PAYMENTS TO PLAN
PARTICIPANTS (51) (42) (51) (6) (2,466)
PARTICIPANT LOANS (35) (19) (39) (2) (1,107)
ADMINISTRATIVE
EXPENSES (1) - (1) - (17)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 6,840 $ 1,597 $ 2,878 $ 1,204 $112,127
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
MANAGEMENT AND SALARIED EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
<TABLE>
<CAPTION>
Year ended November 30
1995
FIXED
BLENDED RATE UAL PARTICIPANT
INCOME INVESTMENT STOCK LOAN
FUND FUND FUND FUND TOTAL
<S> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $142,404 $116,481 $ 4,164 $15,069 $501,060
CONTRIBUTIONS 14,891 - 345 - 43,670
TRANSFERS
BETWEEN FUNDS 22,005 (52,966) 1,290 (6,668) -
TRANSFERS
BETWEEN PLANS 171 (96) (7) - (103)
RESULTS OF INVESTMENT
ACTIVITY
Dividends - - - - 5,264
Interest 11,391 6,089 22 1,033 18,540
Net appreciation
in value of
investments - - 5,274 - 71,135
11,391 6,089 5,296 1,033 94,939
PAYMENTS TO PLAN
PARTICIPANTS (6,828) (2,696) (80) - (16,838)
PARTICIPANT LOANS (1,957) (551) (93) 5,430 -
ADMINISTRATIVE
EXPENSES (70) (7) (2) - (127)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $182,007 $66,254 $10,913 $14,864 $622,601
</TABLE>
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
MANAGEMENT AND SALARIED EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
This description is for general information purposes only.
Participants should refer to their summary plan
description and individual employee benefit statement for
detailed benefit information.
a. General and Plan Participants
The United Air Lines, Inc. Management and Salaried
Employees' 401(k) Retirement Savings Plan (the "Plan")
covers management and salaried employees on the first
day of the calendar month following the date of hire
and meteorologist employees of United Air Lines, Inc.
("United") who have completed one year of service and
are at least 21 years of age. The Plan is contributory
and is subject to the Employee Retirement Income
Security Act of 1974, as amended.
b. Contributions and Vesting
Eligible employees may elect to contribute to the Plan,
in multiples of 1%, any percentage of their covered
pretax earnings, up to 15%, subject to a maximum of
$9,500 in 1996 and 1997. Lower limits may apply to
certain highly compensated participants if the Plan
does not pass certain nondiscrimination tests required
by law. Contributions and earnings are credited to
separate accounts maintained for each participant. The
balance in a participant's account is fully vested and
nonforfeitable at all times.
Participants may elect to invest in one or a
combination of the investment funds described in note
(1)(d). Additionally, they may subsequently change
their contribution rate, redesignate the allocation of
contributions or transfer existing balances among
investment funds, subject to the limits set forth in
the Plan.
Contributions include $1,481,719 and $818,355 for 1996
and 1995, respectively, which were transferred from
other qualified plans as rollovers under Internal
Revenue Code Sections 401(a) and 401(k).
Effective December 1, 1995, the Plan was amended to
provide that salaried employees who are hired on or
after February 1, 1994, are eligible to receive a two
percent company contribution after completing two years
of credited service. Eligible employees are one
hundred percent vested in the company contribution at
the time made.
c. Trustee and Recordkeeper
Fidelity Management Trust Company ("Fidelity") is the
Plan Trustee and Fidelity Institutional Retirement
Services Company is the recordkeeper of the Plan.
d. Master Trust Funds
The Fixed Rate Investment Fund was invested under
various group annuity contracts with the following
insurance company as of November 30, 1995:
<TABLE>
<CAPTION>
(In Thousands)
Investment
Balance as of
Annual November 30
Insurance Interest Contract
Company Rate Through 1995
<S> <C> <C> <C>
Prudential 8.89% 1995 $66,254
$66,254
</TABLE>
The Plan's fixed rate investments were stated at fair
value and represented amounts on deposit with the
insurance company plus net investment earnings.
Interest rates on the contracts are guaranteed fixed
rates through the end of the contracts. No further
contributions can be made to this fund.
Fidelity provides each participant with fifteen
investment options: Fidelity Magellan Fund; Fidelity
Equity-Income Fund; Fidelity Growth Company Fund;
Fidelity Government Securities Fund; Fidelity OTC
Portfolio; Fidelity Overseas Fund; Fidelity Balanced
Fund; Fidelity Asset Manager; Fidelity Asset Manager:
Growth; Fidelity Asset Manager: Income; Fidelity
Retirement Money Market Portfolio; Fidelity U.S. Bond
Index Portfolio; Fidelity U.S. Equity Index Portfolio;
Blended Income Fund and the UAL Stock Fund. These
funds are managed by Fidelity or Fidelity Investments
(manager of Fidelity Mutual Funds). The investments
represent the Plan's allocable share of the funds.
The Fidelity U.S. Equity Index Portfolio primarily
invests in the common stocks of the companies that make
up the S&P 500 Index. Assets are valued at market
prices quoted on the New York Stock Exchange ("NYSE").
Assets in the UAL Stock Fund are invested in UAL
Corporation common stock and are valued at market
prices quoted on the NYSE. Participants may invest in
the UAL Stock Fund through direct earnings deferrals.
The Blended Income Fund includes investment contracts
purchased by Fidelity from approved institutions that
meet its stringent credit standards at the time of
purchase. The fund may also include other high
quality, income-oriented investments. The contracts
held by the Blended Income Fund are fully benefit
responsive, and accordingly, have been included in
the financial statements at contract value. There
are no reserves against contract value for credit
risk of the contract issuers or otherwise. The fair
value of the investment contracts at November 30,
1996 was $202,587. The average yield for the year
ending November 30, 1996 was approximately 6.6%.
The crediting interest rate as of November 30, 1996
was approximately 6.3%. At November 30, 1995, the
contract value of the investment contracts approximated
the fair value.
The remaining investment options are public mutual
funds traded on the NYSE. Portfolio securities and
other assets are valued primarily on the basis of
market quotations or, if quotations are not readily
available, by a method which each fund's Board of
Trustees believes accurately reflects fair value.
Foreign securities are valued based on quotations from
the primary market in which they are traded and are
translated from the local currency into U.S. dollars
using current exchange rates.
The Fidelity Magellan Fund invests primarily in
securities of domestic, foreign, and multinational
issuers in the form of common stocks, securities
convertible into common stocks, and, occasionally, debt
securities.
The Fidelity Equity-Income Fund invests primarily in
income-producing equity securities, both domestic and
foreign. It seeks to achieve income greater than that
of the S&P 500.
The Fidelity Growth Company Fund invests in common
stocks, securities convertible into common stocks, and,
occasionally, debt obligations from companies viewed as
having unusual opportunities to grow.
The Fidelity Government Securities Fund invests
primarily in fully guaranteed U.S. government bonds
with any maturity. The average maturity is
approximately two to five years.
The Fidelity OTC Portfolio primarily invests in stocks
traded in the "over-the-counter" market, which involves
the investment in securities of smaller, lesser-known
companies.
The Fidelity Overseas Fund normally invests at least
65% of its total assets in common stock, securities
convertible to common stock and debt instruments of
foreign businesses and governments. Fidelity
Investments expects to invest most of the assets in
developed countries in these general geographic areas;
the Americas (other than the United States), the Far
East and Pacific Basin, and Western Europe.
The Fidelity Balanced Fund maintains a balance of high-
yielding securities, including foreign and domestic
stocks and bonds. At least 25% of the assets are
invested in fixed-income senior securities. All bonds
in the Fund's portfolio are rated BBB or better by
Standard & Poor's Corporation, or Baa or better by
Moody's Investors Service, Inc.
The Fidelity Asset Manager invests in stocks, bonds and
short-term instruments in both domestic and foreign
markets to achieve high total returns in the long run.
The allocation between these three types of investments
is generally 40%, 40%, and 20%, respectively, however
it may vary between the following ranges: stocks - 10%
to 60%; bonds - 20% to 60%; and short-term instruments
- 0% to 70%.
The Fidelity Asset Manager: Growth: invests in stocks,
bonds and short-term instruments in both domestic and
foreign markets to achieve long term maximum total
investment return. The allocation between these three
types of investments is generally 65%, 30%, and 5%,
respectively, however it may vary between the following
ranges: stocks - 0% to 100%; bonds - 0% to 100%; and
short-term instruments - 0% to 100%.
The Fidelity Asset Manager: Income: invests in stocks,
bonds and short-term instruments in both domestic and
foreign markets to achieve a high level of current
income, and capital appreciation. The allocation
between these three types of investments is generally
20%, 30%, and 50%, respectively, however it may vary
between the following ranges: stocks - 0% to 35%; bonds
- 20% to 45%; and short-term instruments - 20% to 80%.
The Fidelity Money Market Trust: Retirement Money
Market Portfolio: invests in high quality, low risk
domestic and foreign money market instruments,
primarily short-term instruments with maturities of
three months or less.
The Fidelity U.S. Bond Index Portfolio primarily
invests in securities included in the Lehman Brothers
Aggregate Bond Index in order to achieve comparable
investment results.
Fidelity is authorized to engage in the lending of
certain Plan assets. Securities lending is an
investment management enhancement that utilizes the
existing securities of the Funds to earn additional
income. It involves the loan of securities to various
approved brokers. In return for loaned securities,
Fidelity receives collateral in the form of cash and
U.S. government securities as a safeguard against
possible default of any borrower on return of the loan.
Each loan is collateralized to the extent of 100
percent of the market value of securities on loan. The
collateral is marked-to-market on a daily basis to
maintain the margin requirement.
On July 12, 1994, UAL Corporation underwent a
recapitalization under Section 368(a)(1)(E) of the
Internal Revenue Code of 1986, pursuant to which the
shareholders engaged in a recapitalization exchange
with UAL Corporation. Each share of Old Common Stock
was exchanged for a package consisting of one half of a
share of New Common Stock and $84.81 in cash. The cash
consideration received by the Trustee on behalf of Plan
participants was used to purchase additional shares of
New Common Stock or, at the direction of Plan
participants, was transferred to other investment
funds. Pursuant to the terms of the recapitalization,
participants' direct earnings deferrals and fund
transfers into the UAL Stock Fund were temporarily
suspended from July 12, 1994 to August 4, 1994 and from
January 12, 1995 to March 15, 1995. On May 20, 1996
(with a May 6, 1996 record date), UAL Common Stock
underwent a 4 for 1 stock split. Shares held in the
UAL Stock Fund were adjusted accordingly.
e. Withdrawals
Withdrawals from the Plan may be made as follows, as
applicable to the participant's eligibility, amount
requested, and existing balances:
Participants who have separated from service (for
reasons other than death) may elect payment in the
form of a lump sum, periodic distributions,
irregular partial distributions, or through the
purchase of an annuity. Distributions may also be
directly rolled over into an IRA or qualified plan.
Participants are able to defer the distribution of
the account until April 1 of the next calendar year
after reaching age 70-1/2.
Distributions of accounts due to the death of a
participant may be taken by the participant's
beneficiary in the form of a lump sum payment or
through the purchase of an annuity, subject to the
limitations of Internal Revenue Code 401(a)(9).
The participant's surviving spouse, if any, is
automatically the beneficiary of the account, unless
the spouse waives this right.
In-service withdrawals for participants who are
actively employed or are absent due to reasons of
illness, layoff (in regards to salaried employees)
or approved leave of absence who maintain an
employer-employee relationship with United Air
Lines, Inc. are permitted as follows:
- Hardship withdrawals from 401(k) account,
subject to restrictions described in the Plan
- After reaching age 59-1/2, subject to certain
requirements specified in the Plan, all or a
portion of the participant's 401(k) account may
be withdrawn
- Upon reaching age 70-1/2, minimum distributions
required under Internal Revenue Code
401(a)(9) must be taken no later than April 1
following the calendar year that the
participant has reached age 70-1/2. Effective
January 1, 1997, active participants that
have reached age 70-1/2 may choose to defer
distribution.
If a participant's account has never exceeded
$3,500, total distribution of the account will be
made in a lump sum payment upon termination of
employment or death.
Generally, withdrawals are allocated pro-rata to the
balances of each of the investment funds in the
participant's account. Alternatively, the
participant may specify which fund(s) that
distribution is made from. Distributions from UAL
Stock Fund, may be made in cash, or in whole shares
of UAL Corporation common stock, with fractional
shares distributed in cash.
f. Plan Termination Provisions
If the Plan is terminated, all amounts credited to a
participant's account at the time of termination shall
be retained in the Trust and will be distributed in
accordance with the normal distribution rules of the
Plan.
2. SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Accounting
The financial statements are presented on the accrual
basis.
b. Investments
Assets of United's 401(k) Plans Master Trust are owned
by all participating United plans consisting of the
Management and Salaried Employees' 401(k) Retirement
Savings Plan, Ground Employees' 401(k) Retirement
Savings Plan, and the Flight Attendant Employees'
401(k) Retirement Savings Plan.
c. Net Appreciation (Depreciation) in Value of Investments
Net appreciation (depreciation) in value of investments
includes realized and unrealized gains and losses.
Realized and unrealized gains and losses are calculated
as the difference between fair value at December 1, or
date of purchase if subsequent to December 1, and fair
value at date of sale or the current year-end. The
unrealized gain or loss on investments represents the
Plan's allocable share of the difference between fair
value at December 1, or date of purchase, and the fair
value at the date of sale or the current year-end plus,
where applicable, the change in the exchange rate
between the U.S. dollar and the foreign currency in
which the assets are denominated from December 1, or
the date of purchase, to the date of sale or the
current year-end.
d. Plan Expenses
Administrative expenses represent administrative and
investment manager fees charged by Fidelity, accountant
fees, recordkeeping fees charged by Fidelity
Institutional Retirement Services Company and some
administrative fees charged by United. Brokerage and
other investment fees are included in the cost of the
related security. United performs certain reporting
and supervisory functions for the Plan without charge.
e. Transfers between Plans
Transfers between plans reflects the change in employee
coverage and transfer of any related balances between
this Plan and other defined contribution plans
sponsored by United, including the United Air Lines,
Inc. Ground Employees' 401(k) Retirement Savings Plan
and the United Air Lines, Inc. Flight Attendant
Employees' 401(k) Retirement Savings Plan.
f. Participant Loans
Participants may borrow up to fifty percent of their
account balance, not to exceed $50,000. The minimum
that may be borrowed is $1,000. Loans are charged
against each investment fund in the ratio of the value
of the employee's interest in each fund to the total
value of the employee's interest in all funds and are
held in the Loan Fund. The loan is repaid through
payroll deductions on an after-tax basis for the term
of the loan, which is a minimum of six months to a
maximum of sixty months and is subject to a reasonable
rate of interest (9.25% as of March 31, 1997). The
amount paid is reinvested in the participant's account
based on the investment allocations at the time of
repayment. Prepayment of the full balance of the loan
is allowed after six months from the date of the loan
without penalty. Participants are able to take out
another loan after twelve months from the date the old
loan is retired. Upon the employee's termination of
employment, a loan not paid in full within 60 days
becomes a taxable distribution. Loans in default may
be declared due and payable in full immediately, and
the Plan administrator may charge the participant's
account balances at any time thereafter for the amount
of the default. An administrative fee of $90 is
charged to each participant taking a loan and is
automatically deducted from the participant's account.
3. TAX STATUS
The Plan obtained its latest determination letter on July
16, 1996. The Internal Revenue Service confirmed that the
Plan, as written, was in compliance with the requirements
of the Internal Revenue Code and that the trust was tax
exempt.
Exhibit 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to
the incorporation of our report included in this Form
11-K for the year ended November 30, 1996, into UAL's
previously filed Form S-8 and Post Effective Amendment
No. 1 to Form S-8 Registration Statement (File No. 33-
38613) for the United Air Lines, Inc. Management and
Salaried Employees' 401(k) Retirement Savings Plan.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Chicago, Illinois
May 23, 1997
