SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ x ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission File No. 1 - 6033
A. United Air Lines, Inc.
Ground Employees' 401(k) Retirement Savings Plan
(Full title of the Plan)
United Air Lines, Inc.
(Employer sponsoring the Plan)
B. 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. Ground Employees'
401(k) Retirement Savings Plan as of November 30, 1997 and 1996,
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. Ground Employees'
401(k) Retirement Savings Plan as of November 30, 1997 and 1996,
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 22, 1998
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.
Ground Employees' 401(k)
Retirement Savings Plan
Dated May 27, 1998 By /s/ Douglas A. Hacker
Douglas A. Hacker
Member, United Air
Lines, Inc. Pension
and Welfare Plans
Administration Committee
UNITED AIR LINES, INC.
GROUND EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
November 30
1997 1996
INVESTMENT IN MASTER TRUST
Magellan Fund $ 39,454 $ 31,771
Equity-Income Fund 25,420 16,271
Growth Company Fund 109,927 109,763
Government Securities Fund 1,303 1,171
OTC Portfolio 21,250 17,973
Overseas Fund 24,530 25,787
Balanced Fund 40,448 35,813
Asset Manager 6,717 6,116
Asset Manager: Growth 9,349 7,269
Asset Manager: Income 1,693 1,663
Retirement Money Market Portfolio 5,072 3,820
U. S. Bond Index Portfolio 1,082 669
U. S. Equity Index Portfolio 137,022 111,567
Blended Income Fund 185,865 201,349
UAL Stock Fund 65,513 38,622
Participant Loan Fund 21,199 20,827
695,844 630,451
Due to Plan Participants (25,554) (50,102)
NET ASSETS AVAILABLE FOR PLAN BENEFITS $670,290 $580,349
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
GROUND EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
Year ended November 30
1997
EQUITY- GROWTH GOVERNMENT
MAGELLAN INCOME COMPANY SECURITIES
FUND FUND FUND FUND
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ 28,290 $ 14,953 $ 99,838 $ 1,093
CONTRIBUTIONS 3,327 1,395 10,763 (74)
TRANSFERS
BETWEEN FUNDS 3,119 5,347 (7,185) 119
TRANSFERS
BETWEEN PLANS (28) 1 (148) (4)
RESULTS OF INVESTMENT
ACTIVITY
Dividends 991 1,085 4,160 89
Interest 9 2 - -
Net appreciation
in value of
investments 5,535 3,623 10,023 2
6,535 4,710 14,183 91
PAYMENTS TO PLAN
PARTICIPANTS (3,324) (751) (9,741) (121)
PARTICIPANT LOANS (510) (205) (1,518) (4)
ADMINISTRATIVE
EXPENSES (9) (7) (22) -
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 37,400 $ 24,586 $106,170 $ 1,100
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
GROUND EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
Year ended November 30
1997
OTC OVERSEAS BALANCED ASSET
PORTFOLIO FUND FUND MANAGER
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ 16,203 $ 23,369 $ 33,216 $ 5,647
CONTRIBUTIONS 1,763 2,685 2,497 455
TRANSFERS
BETWEEN FUNDS 2,188 (2,310) 349 (114)
TRANSFERS
BETWEEN PLANS (8) (22) (62) 5
RESULTS OF INVESTMENT
ACTIVITY
Dividends 1,389 1,575 3,444 468
Interest - - (45) -
Net
appreciation
in value of 579 1,138 3,364 559
investments
1,968 2,668 6,808 1,027
PAYMENTS TO PLAN
PARTICIPANTS (1,675) (2,432) (3,354) (512)
PARTICIPANT LOANS (256) (484) (424) (53)
ADMINISTRATIVE
EXPENSES (3) (6) (10) (1)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 20,180 $ 23,468 $ 39,020 $ 6,454
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
GROUND EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
Year ended November 30
1997
RETIREMENT U.S.
ASSET ASSET MONEY BOND
MANAGER: MANAGER: MARKET INDEX
GROWTH INCOME PORTFOLIO PORTFOLIO
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ 6,474 $ 1,555 $ 3,475 $ 610
CONTRIBUTIONS 961 126 331 65
TRANSFERS
BETWEEN FUNDS 697 43 1,930 362
TRANSFERS
BETWEEN PLANS (1) (2) (47) -
RESULTS OF INVESTMENT
ACTIVITY
Dividends 570 124 282 62
Interest - - - -
Net appreciation
in value of
investments 1,039 44 - 7
1,609 168 282 69
PAYMENTS TO PLAN
PARTICIPANTS (754) (211) (1,085) (63)
PARTICIPANT LOANS (137) (40) (116) (10)
ADMINISTRATIVE
EXPENSES (3) - (2) -
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 8,846 $ 1,639 $ 4,768 $ 1,033
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
GROUND EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
Year ended November 30
1997
U.S.
EQUITY BLENDED UAL PARTICIPANT
INDEX INCOME STOCK LOAN
PORTFOLIO FUND FUND FUND TOTAL
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $103,300 $186,919 $ 34,580 $ 20,827 $580,349
CONTRIBUTIONS 8,804 14,483 2,672 - 50,253
TRANSFERS
BETWEEN FUNDS 3,130 (11,842) 14,279 -
(10,112)
TRANSFERS
BETWEEN PLANS (100) 21 6 - (389)
RESULTS OF INVESTMENT
ACTIVITY
Dividends - - - - 14,239
Interest 2 12,470 9 1,644 14,091
Net appreciation
in value of
investments 30,617 - 15,807 - 72,337
30,619 12,470 15,816 1,644 100,667
PAYMENTS TO PLAN
PARTICIPANTS (10,027) (21,532) (3,928) - (60,367)
PARTICIPANT LOANS (1,659) (2,591) (833) 8,840 -
ADMINISTRATIVE
EXPENSES (25) (87) (48) - (223)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $134,042 $177,841 $ 62,544 $ 21,199 $670,290
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
GROUND EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
Year ended November 30
1996
EQUITY- GROWTH GOVERNMENT
MAGELLAN INCOME COMPANY SECURITIES
FUND FUND FUND FUND
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ 22,021 $ 4,421 $ 81,698 $ 629
CONTRIBUTIONS 982 (300) 215 42
TRANSFERS
BETWEEN FUNDS 5,003 9,188 10,339 506
TRANSFERS
BETWEEN PLANS (140) (109) (747) (8)
RESULTS OF INVESTMENT
ACTIVITY
Dividends 6,380 526 4,264 83
Interest 5 1 8 -
Net appreciation
(depreciation)
in value of (2,569) 2,154 13,848 (51)
investments
3,816 2,681 18,120 32
PAYMENTS TO PLAN
PARTICIPANTS (2,772) (751) (8,181) (99)
PARTICIPANT LOANS (609) (171) (1,575) (9)
ADMINISTRATIVE
EXPENSES (11) (6) (31) -
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 28,290 $ 14,953 $ 99,838 $ 1,093
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
GROUND EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
Year ended November 30
1996
OTC OVERSEAS BALANCED ASSET
PORTFOLIO FUND FUND MANAGER
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ 7,745 $ 23,647 $ 39,137 $ 3,192
CONTRIBUTIONS (148) 628 1,082 48
TRANSFERS
BETWEEN FUNDS 6,882 (1,608) (6,709) 2,058
TRANSFERS
BETWEEN PLANS (80) (120) (147) (19)
RESULTS OF INVESTMENT
ACTIVITY
Dividends 1,552 583 1,658 173
Interest - - (2) -
Net appreciation
(depreciation)
in value of
investments 1,597 3,071 2,298 663
3,149 3,654 3,954 836
PAYMENTS TO PLAN
PARTICIPANTS (1,092) (2,367) (3,744) (435)
PARTICIPANT LOANS (250) (458) (343) (31)
ADMINISTRATIVE
EXPENSES (3) (7) (14) (2)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 16,203 $ 23,369 $ 33,216 $ 5,647
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
GROUND EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
Year ended November 30
1996
RETIREMENT U.S. U.S.
ASSET ASSET MONEY BOND EQUITY
MANAGER: MANAGER: MARKET INDEX INDEX
GROWTH INCOME PORTFOLIO PORTFOLIO PORTFOLIO
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $ 4,128 $ 1,177 $ 1,921 $ 471 $ 87,290
CONTRIBUTIONS 105 42 68 34 (1,143)
TRANSFERS
BETWEEN FUNDS 1,687 330 1,915 152 1,841
TRANSFERS
BETWEEN PLANS (80) (5) 2 (1) (328)
RESULTS OF INVESTMENT
ACTIVITY
Dividends 68 86 132 46 -
Interest 1 - - - 1
Net appreciation
(depreciation)
in value of
investments 1,186 69 - (17) 24,598
1,255 155 132 29 24,599
PAYMENTS TO PLAN
PARTICIPANTS (513) (136) (463) (42) (7,434)
PARTICIPANT LOANS (105) (8) (98) (33) (1,493)
ADMINISTRATIVE
EXPENSES (3) - (2) - (32)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $ 6,474 $ 1,555 $ 3,475 $ 610 $103,300
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
GROUND EMPLOYEES' 401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
(In Thousands)
Year ended November 30
1996
FIXED
BLENDED RATE UAL PARTICIPANT
INCOME INVESTMENT STOCK LOAN
FUND FUND FUND FUND TOTAL
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
beginning of year $188,516 $ 55,160 $ 9,877 $ 19,552 $550,582
CONTRIBUTIONS 3,125 1,244 (2,294) - 3,730
TRANSFERS
BETWEEN FUNDS 7,511 (55,280) 25,574 -
(9,389)
TRANSFERS
BETWEEN PLANS 163 (9) (317) - (1,945)
RESULTS OF INVESTMENT
ACTIVITY
Dividends - - - - 15,551
Interest 12,701 436 13 1,538 14,702
Net appreciation
(depreciation)
in value of
investments - - 4,322 - 51,169
12,701 436 4,335 1,538 81,422
PAYMENTS TO PLAN
PARTICIPANTS (21,744) (1,513) (1,890) - (53,176)
PARTICIPANT LOANS (3,212) (38) (693) 9,126 -
ADMINISTRATIVE
EXPENSES (141) - (12) - (264)
NET ASSETS AVAILABLE
FOR PLAN BENEFITS,
end of year $186,919 $ - $ 34,580 $ 20,827 $580,349
The accompanying notes to financial statements are an integral
part of these statements.
UNITED AIR LINES, INC.
GROUND 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 for detailed benefit
information.
a. General and Plan Participants
The United Air Lines, Inc. Ground Employees' 401(k) Retirement
Savings Plan (the "Plan") covers all employees of United Air Lines,
Inc. ("United") who are members of the International Association of
Machinists and Aerospace Workers ("IAM"), 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. [ See Note 4 - Subsequent Event. ]
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 1997 and $10,000 in 1998. 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 $612,247 and $203,763 for 1997 and 1996,
respectively, which were transferred from other qualified plans as
rollovers under Internal Revenue 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
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 salary
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, 1997 and 1996 were $185,372 and $203,889
(in thousands), respectively. The average yield for the years ending
November 30, 1997 and 1996 was approximately 6.6%. The crediting
interest rates as of November 30, 1997 and 1996 were approximately
6.5% and 6.3%, respectively. At November 30, 1997 and 1996, 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 salary 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 who have terminated
employment 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, 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's 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 Co. 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. Management and Salaried 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 (9.5% as of March
31, 1998). 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.
g. Reconciling Statement Balances
The investment balances on the Statement of Net Assets Available For
Plan Benefits do not all agree with the fund balances on the Statement
of Changes in Net Assets Available for Plan Benefits as of November 30,
1997, due to an accrual for the returns of excess annual additions as
required under Internal Revenue Code Section 415(c). The Statement of
Net Assets Available for Plan Benefits can be reconciled to the
Statement of Changes in Net Assets Available for Plan Benefits as
follows for the years ended November 30, 1997 and 1996:
Year Ended November 30, 1997
(In Thousands)
Per Per
Statement of Statement of
Net Assets Due to Plan Changes in
Available Participants Net Assets
for Plan Available
Benefits for Plan
Benefits
Magellan Fund $ 39,454 $ (2,054) $ 37,400
Equity-Income Fund 25,420 (834) 24,586
Growth Company
Fund 109,927 (3,757) 106,170
Government
Securities Fund 1,303 (203) 1,100
OTC Portfolio 21,250 (1,070) 20,180
Overseas Fund 24,530 (1,062) 23,468
Balanced Fund 40,448 (1,428) 39,020
Asset Manager 6,717 (263) 6,454
Asset Manager:
Growth 9,349 (503) 8,846
Asset Manager:
Income 1,693 (54) 1,639
Retirement Money
Market Portfolio 5,072 (304) 4,768
U. S. Bond Index
Portfolio 1,082 (49) 1,033
U. S. Equity Index
Portfolio 137,022 (2,980) 134,042
Blended Income
Fund 185,865 (8,024) 177,841
UAL Stock Fund 65,513 (2,969) 62,544
Participant Loan Fund 21,199 - 21,199
Total investments $695,844 $(25,554) $670,290
Year Ended November 30, 1996
(In Thousands)
Per Per
Statement of Statement of
Net Assets Due to Plan Changes in
Available Participants Net Assets
for Plan Available
Benefits for Plan
Benefits
Magellan Fund $ 31,771 $ (3,481) $ 28,290
Equity-Income Fund 16,271 (1,318) 14,953
Growth Company
Fund 109,763 (9,925) 99,838
Government
Securities Fund 1,171 (78) 1,093
OTC Portfolio 17,973 (1,770) 16,203
Overseas Fund 25,787 (2,418) 23,369
Balanced Fund 35,813 (2,597) 33,216
Asset Manager 6,116 (469) 5,647
Asset Manager:
Growth 7,269 (795) 6,474
Asset Manager:
Income 1,663 (108) 1,555
Retirement Money
Market Portfolio 3,820 (345) 3,475
U. S. Bond Index
Portfolio 669 (59) 610
U. S. Equity Index
Portfolio 111,567 (8,267) 103,300
Blended Income
Fund 201,349 (14,430) 186,919
UAL Stock Fund 38,622 (4,042) 34,580
Participant Loan Fund 20,827 - 20,827
Total investments $630,451 $(50,102) $580,349
3. TAX STATUS
The Plan obtained its latest determination letter on June 18, 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.
4. SUBSEQUENT EVENT
Effective January 1, 1998, employees who are members of the IAM are
immediately eligible to contribute to the plan upon date of hire
regardless of their age.
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,
1997, into UAL's previously filed Form S-8 and Post Effective Amendment
No. 1 to Form S-8 Registration Statement (File No. 33-44552), Form S-8
Registration Statement (File No. 33-57331) and Form S-8 Registration
Statement (File No. 333-03041) for the United Air Lines, Inc. Ground
Employees' 401(k) Retirement Savings Plan.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Chicago, Illinois
May 27, 1998
