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, 1994
Commission File No. 1-6033
United Air Lines, Inc.
Management and Salaried Employees'
401(k) Retirement Savings Plan
(Full title of 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, 1994 and 1993, 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, 1994 and 1993, 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 26, 1995
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
Dated May 26, 1995 By /s/ Douglas A. Hacker
Douglas A. Hacker
Member, United Air
Lines, Inc. Pension
and Welfare Plans
Administration Committee
UNITED AIR LINES, INC.
MANAGEMENT AND SALARIED EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
November 30
1994 1993
INVESTMENT IN MASTER TRUST
Fixed Rate Investment Fund $116,481 $149,850
U.S. Equity Index Commingled Pool 80,147 81,232
UAL Stock Fund 4,164 6,027
Blended Income Fund 142,404 99,887
Growth Company Fund 59,122 40,154
Overseas Fund 34,072 15,597
Balanced Fund 49,601 39,046
Participant Loan Fund 15,069 12,630
NET ASSETS AVAILABLE FOR PLAN BENEFITS $501,060 $444,423
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)
Year ended November 30
1994
U.S. EQUITY
FIXED RATE INDEX UAL BLENDED
INVESTMENT COMMINGLED STOCK INCOME
FUND POOL FUND FUND
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ 149,850 $ 81,232 $ 6,027 $ 99,887
CONTRIBUTIONS - 8,121 1,293 21,028
TRANSFERS BETWEEN FUNDS (36,997) (5,716) (2,198) 20,476
TRANSFERS BETWEEN PLANS (21) (21) (27) 2,043
RESULTS OF INVESTMENT
ACTIVITY
Dividends - - - -
Interest 9,904 - - 7,479
Net appreciation
(depreciation)
in value of
investments - 893 (633) -
9,904 893 (633) 7,479
PAYMENTS TO PLAN
PARTICIPANTS (4,774) (3,032) (182) (6,228)
PARTICIPANT LOANS (1,454) (1,308) (114) (2,167)
ADMINISTRATIVE EXPENSES (27) (22) (2) (114)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 116,481 $ 80,147 $ 4,164 $142,404
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)
Year ended November 30
1994
GROWTH PARTICIPANT
COMPANY OVERSEAS BALANCED LOAN
FUND FUND FUND FUND TOTAL
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ 40,154 $ 15,597 $ 39,046 12,630 $ 444,423
CONTRIBUTIONS 10,637 5,807 8,823 - 55,709
TRANSFERS
BETWEEN FUNDS 10,586 12,989 6,316 (5,456) -
TRANSFERS
BETWEEN PLANS 8 (46) (15) - 1,921
RESULTS OF INVESTMENT
ACTIVITY
Dividends 4,216 268 2,132 - 6,616
Interest 1 - 1 890 18,275
Net appreciation
(depreciation)
in value of
investments (4,095) 1,123 (4,144) - (6,856)
122 1,391 (2,011) 890 18,035
PAYMENTS TO PLAN
PARTICIPANTS (1,538) (1,112) (1,965) - (18,831)
PARTICIPANT LOANS (834) (545) (583) 7,005 -
ADMINISTRATIVE
EXPENSES (13) (9) (10) - (197)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 59,122 $ 34,072 $ 49,601 $ 15,069 $ 501,060
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)
Year ended November 30 1993
U.S. EQUITY
FIXED RATE INDEX UAL BLENDED
INVESTMENT COMMINGLED STOCK INCOME
FUND POOL FUND FUND
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ 224,858 $ 75,774 $ 2,276 $ 42,874
CONTRIBUTIONS - 9,787 1,586 22,281
TRANSFERS BETWEEN FUNDS (77,666) (5,745) 1,619 37,545
TRANSFERS BETWEEN PLANS (261) (232) (11) (191)
RESULTS OF INVESTMENT
ACTIVITY
Dividends - - - -
Interest 13,311 - - 5,437
Net appreciation
in value
of investments - 8,000 986 -
13,311 8,000 986 5,437
PAYMENTS TO PLAN
PARTICIPANTS (5,780) (3,115) (138) (4,591)
PARTICIPANT LOANS (4,544) (3,194) (286) (3,362)
ADMINISTRATIVE EXPENSES (68) (43) (5) (106)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 149,850 $ 81,232 $ 6,027 $ 99,887
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)
Year ended November 30
1993
GROWTH PARTICIPANT
COMPANY OVERSEAS BALANCED LOAN
FUND FUND FUND FUND TOTAL
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ 12,686 $ 3,826 $ 10,327 - $ 372,621
CONTRIBUTIONS 7,601 2,658 6,169 - 50,082
TRANSFERS
BETWEEN FUNDS 18,156 7,613 20,078 (1,600) -
TRANSFERS
BETWEEN PLANS (36) 20 (7) - (718)
RESULTS OF INVESTMENT
ACTIVITY
Dividends 635 436 2,553 - 3,624
Interest - - - 310 19,058
Net appreciation
in value of
investments 3,114 1,709 1,744 - 15,553
3,749 2,145 4,297 310 38,235
PAYMENTS TO PLAN
PARTICIPANTS (795) (227) (895) - (15,541)
PARTICIPANT LOANS (1,192) (432) (910) 13,920 -
ADMINISTRATIVE
EXPENSES (15) (6) (13) - (256)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 40,154 $ 15,597 $ 39,046 $ 12,630 $ 444,423
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.
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 $9,240 in 1994 and
1995. 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 $8,317,608 and $1,307,976 for 1994 and
1993, respectively, which were transferred from other qualified
plans as rollovers under IRS Code Sections 401(a) and 401(k).
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 is invested under various group
annuity contracts with the following insurance companies:
(In Thousands)
Annual Investment Balance as of
Insurance Interest Contract November 30
Company Rate Through 1994 1993
Provident 9.02% 1993 $ - $ 35,291
Massachusetts 8.58% 1994 49,981 49,194
Prudential 8.89% 1995 66,500 65,365
$116,481 $149,850
The Plan's fixed rate investments are stated at contract value
and represent amounts on deposit with the insurance companies
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. In the event of
early termination of the contracts, the contract value may be
reduced to reflect investment losses incurred by the insurance
companies as a result of such early termination.
Fidelity provides each participant with six investment options:
Fidelity U.S. Equity Index Commingled Pool; UAL Stock Fund;
Blended Income Fund; Fidelity Growth Company Fund; Fidelity
Overseas Fund; and the Fidelity Balanced 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 Commingled Pool 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. Transfers into the UAL Stock Fund from
other funds are permitted except from the Blended Income Fund.
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.
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. Assets
are valued at contract 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 funds's Board
of Trustees accurately believes 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 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 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.
Fidelity is authorized to engage in the lending of certain Plan
assets from the Balanced Fund and the U.S. Equity Index
Commingled Pool. 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.
e. Withdrawals
Withdrawals from the Plan may be made as follows:
Termination of employment due to retirement or attainment of
age 59-1/2 allows a participant to elect to withdraw a
portion or all of his account balance. Full distribution
results in either a lump sum payment or the purchase of an
annuity. For the UAL Stock Fund, distribution will be made
in a combination of a certificate for the whole shares with
the remainder paid in cash or all cash. Participants under
age 70-1/2 may also elect to have periodic withdrawals
payable monthly, quarterly, semi-annually or annually.
Periodic withdrawals are made pro rata from all funds and the
UAL Stock Fund portion is paid in cash. In the case of a
retirement, the participant can leave his account balance in
the Plan until April 1 of the year following the year he
reaches age 70-1/2.
Termination of employment due to death results in either a
lump sum payment, the purchase of an annuity, or a
combination of a partial payment in cash and use of the
balance to purchase an annuity.
Termination of employment (for reasons other than retirement
or death) allows a participant to elect a partial, periodic
or lump sum payment. For the UAL Stock Fund, distribution
will be made in a combination of a certificate for the whole
shares with the remainder paid in cash.
Withdrawals are permitted in certain hardship cases as
described in the Plan.
Withdrawal of the balance of a participant must be made by
the April 1 of the calendar year following the year he
reaches age 70-1/2. Any account balance resulting from
contributions or earnings thereafter must be withdrawn at the
end of each subsequent calendar year.
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 until the participant's termination of
employment and will then be distributed by one or a combination
of the following methods:
- by payment in a lump sum; or
- by purchase of a non-transferable annuity providing a
benefit in either a fixed or variable form of payment to
the extent offered by the insurance company.
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 in
the Overseas Fund 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 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. Pilots' Directed Account Retirement
Income Plan, the United Air Lines, Inc. Ground Employees' 401(k)
Retirement Savings Plan or the United Air Lines, Inc. Flight
Attendant Employees' 401(k) Retirement Savings Plan.
f. Participant Loans
Actively employed participants may borrow up to fifty percent of
their fund balance. The maximum loan amount is $50,000 and 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 (10% as of April 30, 1995). 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
participants' 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 August 8,
1986. The Internal Revenue Service stated that the Plan, as
written, was in compliance with the requirements of the Internal
Revenue Code and that the trust was tax exempt. The Plan has been
amended since receiving the determination letter and is currently in
the process of being amended to comply with the Tax Reform Act of 1986
and subsequent legislation and final regulations thereunder. The
Company will timely apply for a determination letter from the Internal
Revenue Service as to the continued tax exemption of the trust and will
make such amendments as reasonably required by the IRS to obtain a
favorable determination letter.
4. SUBSEQUENT EVENT
In January 1995, Fidelity added nine investment options to the
Plan. They are the Fidelity Asset Manager-Income, Fidelity Asset
Manager, Fidelity Asset Manager-Growth, Fidelity Retirement Money
Market Portfolio, Fidelity Government Securities Fund, Fidelity
U.S. Bond Index Portfolio, Fidelity Equity-Income Fund, Fidelity
Magellan Fund, and Fidelity OTC Portfolio.
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, 1994, into the Company's previously
filed 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 26, 1995
