This description is for general information purposes only.  Participants should refer to their summary plan description for detailed benefit information.

General and Plan Participants

United Air Lines, Inc. ("United") established the Pilots' Variable Benefit Retirement Income Plan (the "Variable Plan") in 1955 to provide retirement income and other benefits for the pilots of United.  On September 1, 1982, the Variable Plan was amended and restructured, retroactive to February 1, 1981, and for active participants is now known as the United Air Lines, Inc. Pilots' Directed Account Retirement Income Plan (the "Directed Account Plan" or "Plan").  All active participants in the Variable Plan automatically became participants in the Directed Account Plan. The transition from the Variable Plan to the Directed Account Plan did not constitute a termination of the Variable Plan.  The Plan is a defined contribution plan and is subject to the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended.

United pilots are eligible to become participants in the Plan on the date of their hire.

Directed Account Plan Investment Options

Participants are able to individually allocate their account balances among various different investment options.  The investment funds consist of the Money Market Fund, the UAL Stock Fund, the Short-Term Securities Fund, the Diversified Bond Fund,  the Value Equity Fund, the Growth Equity Fund, the Small Cap Equity Fund, the International Equity Fund, the S&P 500 Index Fund, the Individual Brokerage Account Option and five balanced funds.  If a participant does not allocate his account balance among the investment funds, his balance will be invested in the Money Market Fund.  Participants may reallocate their fund balances or change their future contribution allocation daily.  In the five balanced funds that invest in the other investment funds in predetermined portions, automatic daily reallocation is performed.

Participants may invest in the UAL Stock Fund only through transfers from the Money Market Fund.  Existing balances from Company contributions, 401(k) contributions, after-tax contributions, rollover contributions from qualified defined contribution plans and earnings from all money types may be invested in the UAL Stock Fund.

Contributions and Vesting

United makes a contribution in an amount equivalent to 11% of a pilot's earnings to the Plan.  In 2000, United made a contribution in an amount equivalent to 9% which in midyear 2000 increased to 11% (retroactive to April 12, 2000) of a pilot's earnings to the plan.  Prior to April 12, 2000, United contributed an amount equivalent to 1%.  Company contributions on behalf of a participant are allocated directly to each participant's account.  Pilots may also elect to voluntarily contribute, in multiples of 1%, any percentage, up to 50% (subject to the 25% overall limit discussed below) of each paycheck received.  Pilots immediately vest in company and voluntary contributions.

Pilot pretax election deferrals to the Plan can be made, subject to a maximum of $10,500 in 2001 and in 2000, on a pretax basis as permitted by Section 401(k) of the Internal Revenue Code.  Lower limits may apply to certain highly compensated participants if the Plan does not pass certain nondiscrimination tests required by law.  Section 415 of the Internal Revenue Code limits the total amount of contributions from all qualified defined contribution retirement plans to the lesser of 25% of annual taxable earnings or $35,000.

Contributions to the Plan include $4,736,751 and $2,702,865 for 2001 and 2000, respectively, which were transferred from other qualified plans as rollovers under the Internal Revenue Code Sections 402(c) and 408(d).

Withdrawals

Withdrawals from the Plan may be made as follows, as applicable to the participant's eligibility, amount requested, and existing balances:

If a participant's account has never exceeded $5,000, 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, according to a money-type hierarchy.  Distributions from the UAL Stock Fund, may be made in cash.

Plan Termination Provisions

Although it has not expressed any intent to do so, the Company has the right under the Plan to terminate the Plan subject to the provisions of ERISA.  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.

Plan Administration

The Frank Russell Trust Company serves as Plan trustee.  The Northern Trust Company serves as the asset custodian of the Plan.  PFPC Inc. Retirement Services serves as the recordkeeper.

2.  SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The financial statements are presented on the accrual basis.

Investments

In September, 1999, the American Institute of Certified Public Accountants issued Statement of Position 99-3 ("SOP 99-3"), "Accounting for and Reporting of Certain Defined Contribution Plan Investments and Other Disclosure Matters."  SOP 99-3 simplifies the disclosure for certain investments and is effective for plan years ending after December 15, 1999.  The Plan adopted SOP 99-3 during the Plan year ending November 30, 2000.

The Trustee is authorized to engage in the lending of certain Trust assets.  Securities lending is an investment management strategy that utilizes the existing securities (government bonds, corporate bonds or equities) of the Trust to earn additional income.  It involves the loaning of securities to a select group of approved broker-dealers.  In return for the loaned securities, the Trustee simultaneously receives collateral in the form of cash or U.S. Government securities as a safeguard against possible default of any borrower on the return of the loan.  Each loan is collateralized to the extent of 102% for domestic securities and 105% for international securities of the fair value of the loan plus accrued interest.  The collateral is market-to-market on a daily basis to maintain the margin requirement.  For the plan year ended November 30, 2001, the Plan began accounting for its securities lending activities in accordance with Statement of Financial Accounting Standards ("SFAS") No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".

Domestic investments are stated at fair value, generally, as determined by market prices quoted on U.S. securities exchanges.  The fair value of foreign securities and foreign currency deposits is based on market prices quoted on foreign securities exchanges and this value is converted to U.S. dollars using the exchange rate in effect at plan year end.  Assets in the UAL Stock Fund are invested in UAL Corporation common stock and are valued at market prices quoted on the New York Stock Exchange ("NYSE").  Transfers into the UAL Stock Fund are made as of the close of the NYSE on a daily basis.

The pending trade payables are recorded net of related receivables and represent net amounts due from investment managers arising from security trading activities settled subsequent to year end.

The following presents investments that represent 5% or more of the Plan's net assets:

Net appreciation or 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 International Equity Fund represents 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.

The Plan provides for investments that, in general, are exposed to various risks, such as interest rate, credit and overall market volatility risks.  Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the value of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for benefits.

During 2001 and 2000, the Plan investments depreciated in value by $234,729 and $150,275, respectively, as follows (in thousands):

Management fees, which are paid by the Plan, are paid to the trustee based upon investment fund balances.  Brokerage and other investment fees are included in the cost of the related security.  United performs certain administrative functions for the Plan without charge.

Participant Loans

Effective April 1, 1997, the Pilots' Directed Account Retirement Income Plan was amended to allow participants to obtain loans from the total vested balance of their account.  Participants may borrow up to 50% of their total vested account balance, not to exceed $50,000.  The minimum that may be borrowed is $1,000.  Loans will be funded by charging the participant's interest (interest ranged from 6.50% to 10.50% for the year ended November 30, 2001, and 8.75% to 10.50% for the year ended November 30, 2000) in the Money Market Fund.  No loan will be funded from any investment fund other than the Money Market Fund and applications which designate an amount which cannot be fully funded from this fund will be denied.  Generally, loan repayments will be made 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.  The term of the loan may be extended to a period longer than sixty months if the loan is used to acquire a principal residence.  Prepayment of the full balance of the loan is allowed after six months from the date of the loan without penalty.  Participants may only have one loan outstanding at any time and are able to take out another loan after twelve months from the date the old loan is retired.  An administrative fee of $90 is charged to each participant taking a loan and is automatically deducted from the participant's account.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amount of net assets available for plan benefits and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of changes in net assets available for plan benefits during the reporting period.  Actual results could differ from those estimates.

Payment of Benefits

Benefits are recorded when paid.

Reclassifications

Certain prior year balances have been reclassified to conform to the current year presentation.

3.   INVESTMENT ADMINISTRATION

Plan assets are invested by a group of investment managers.  The investment managers buy or sell securities on behalf of the Plan, in accordance with the investment objectives and guidelines established for each of the investment funds.

The Internal Revenue Service has determined and informed the Company by letter dated June 18, 1996, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code. The Plan was amended, restated, and submitted to the IRS on February 28, 2002 for a determination letter. The Plan administrator and the Plan's counsel believe that the Plan is designed and is currently being operated in compliance with the applicable provisions of the Internal Revenue Code.
 
 

5.  RECONCILIATION TO FORM 5500

At November 30, 2001, certain participants had requested distributions from the plan, but were not paid until December.  No liability is recorded in the financial statements for such transactions.  However, these amounts are included as a benefit payable in the Form 5500.  A reconciliation between the financial statements and the Form 5500 is as follows (in thousands):

The Plan holds investments managed by Frank Russell Trust Company.   Frank Russell Trust Company acts as trustee as defined by the Plan.  Transactions in such investments qualify as party-in-interest transactions which are exempt from the prohibited transaction rules.

7.   DERIVATIVES

The Plan allows certain investment managers to reduce the funds' exposure to fluctuations in the value of foreign currency assets and liabilities through foreign currency forwards and options.  The Plan also authorizes other investment managers to earn equity returns on the Funds' cash position through equity index future contracts.  Certain investment managers use interest rate futures and money market futures to replicate government bond positions and manage interest rate exposure.  The Plan prohibits investment managers from being a party to any leveraged derivatives.  All derivative positions are stated at fair value, generally, determined by exchange quoted market prices or through other valuation techniques.

Effective December 1, 2001, the Plan changed the year end from November 30 to December 31.

Effective January 1, 2002, the name of the plan changed to United Airlines Pilot Directed  Account Plan.

Effective April 1, 2002, the contribution limit increased from 50% to 60% of compensation, as  defined.