UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
11-K
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[X]
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ANNUAL
REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF
1934
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For
the
fiscal year ended December 31, 2006
OR
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[_]
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TRANSITION
REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF
1934
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For
the
transition period from _________________ to
________________________
Commission
file number: 001-06033
A.
Full
title of the plan and the address of the plan, if different from that of
the
issuer named below:
United
Airlines Ground Employee 401(k) Plan
Benefits
Administration Department – WHQHR
United
Air Lines, Inc.
P.O.
Box
66100
Chicago,
IL 60666
B.
Name
of issuer of the securities held pursuant to the plan and the address of
its
principal executive office:
UAL
Corporation
77
W.
Wacker Drive
Chicago,
Illinois 60601
(312)
997-8000
UNITED
AIRLINES GROUND EMPLOYEE 401(k) PLAN
TABLE
OF CONTENTS
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Page
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| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
1
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FINANCIAL
STATEMENTS:
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Statements
of Net Assets Available for Benefits as of December 31, 2006 and
2005
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2
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Statement
of Changes in Net Assets Available for Benefits for the Year
Ended
December 31, 2006
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3
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| Notes to Financial Statements as of December 31, 2006 and 2005, and for the Year Ended December 31, 2006 |
4
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SUPPLEMENTAL
SCHEDULE:
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Form
5500, Schedule H, Part IV, Line 4i-Schedule of Assets (Held at
End of
Year) as of December 31, 2006
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16
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SIGNATURE
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EXHIBIT
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The
following exhibit is filed herewith:
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Exhibit
23(a) Consent of Independent Registered Public Accounting
Firm
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NOTE:
All other schedules required by Section 2520.103-10 of the Department
of
Labor's Rules and Regulations for Reporting
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and
Disclosure under the Employee Retirement Income Security Act
of 1974 have
been omitted because they are not applicable.
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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Trustees and Participants of the
United
Airlines Ground Employee 401(k) Plan
We
have
audited the accompanying statements of net assets available for benefits of
the
United Airlines Ground Employee 401(k) Plan (the “Plan”) as of December 31, 2006
and 2005, and the related statement of changes in net assets available for
benefits for the year ended December 31, 2006. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
the
financial statements are free of material misstatement. The Plan is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of
expressing an opinion on the effectiveness of the Plan's internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In
our
opinion, such financial statements present fairly, in all material respects,
the
net assets available for benefits of the Plan as of December 31, 2006 and 2005,
and the changes in net assets available for benefits for the year ended December
31, 2006 in conformity with accounting principles generally accepted in the
United States of America.
Our
audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets
(held at end of year) as of December 31, 2006 is presented for the purpose
of
additional analysis and is not a required part of the basic financial
statements, but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This schedule is the
responsibility of the Plan's management. Such schedule has been subjected
to the auditing procedures applied in our audit of the basic 2006 financial
statements and, in our opinion, is fairly stated in all material respects when
considered in relation to the basic financial statements taken as a
whole.
As
further described in Note 2, the Plan has adopted FSP AAG INV-1 and SOP 94-4-1
for the years ended December 31, 2006 and 2005.
/s/
Deloitte & Touche LLP
Chicago,
Illinois
June
29,
2007
1
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STATEMENTS
OF NET ASSETS AVAILABLE FOR BENEFITS
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AS
OF DECEMBER 31, 2006 AND 2005
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(In
thousands)
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2006
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2005
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ASSETS:
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Plan
interest in Master Trust, at fair value
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$
1,597,050
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$
1,059,430
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Participant
contributions receivable
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-
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2,982
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Employer
contributions receivable
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10,422
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9,418
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Total
assets
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1,607,472
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1,071,830
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LIABILITIES:
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Accrued
expenses
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(44)
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(30)
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Excess
contributions payable
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(248)
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(517)
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Total
liabilities
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(292)
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(547)
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Net
assets available for benefits, at fair value
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1,607,180
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1,071,283
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Adjustment
from fair value to contract value for
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fully
benefit-responsive investment contracts
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2,865
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2,886
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NET
ASSETS AVAILABLE FOR BENEFITS
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$
1,610,045
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$
1,074,169
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See
notes to financial statements.
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2
| UNITED AIRLINES GROUND EMPLOYEE 401(k) PLAN | |
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STATEMENT
OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
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FOR
THE YEAR ENDED DECEMBER 31, 2006
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(In
thousands)
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ADDITIONS:
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Participant
contributions
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$ 57,314
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Rollover
contributions
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483
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Employer
contributions
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448,420
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Total
contributions
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506,217
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Plan's
interest in Master Trust's investment income:
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Net
appreciation in value of investments
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84,765
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Dividends
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51,947
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Interest
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16,119
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Net
investment income
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152,831
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Total
additions
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659,048
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DEDUCTIONS:
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Net
transfers to other plans
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(1,516)
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Benefits
paid to participants
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(121,284)
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Administrative
expenses
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(641)
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Excess
contributions payable
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269
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Total
deductions
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(123,172)
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INCREASE
IN NET ASSETS
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535,876
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NET
ASSETS AVAILABLE FOR BENEFITS:
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Beginning
of year
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1,074,169
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End
of year
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$
1,610,045
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See
notes to financial statements.
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3
UNITED
AIRLINES GROUND EMPLOYEE 401(k) PLAN
NOTES
TO FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2006 AND 2005, AND FOR THE YEAR ENDED DECEMBER 31,
2006
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1.
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DESCRIPTION
OF PLAN
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The
following description of the United Airlines Ground Employee 401(k) Plan
(the “Plan”) is for general information purposes only. Participants should
refer to the Plan document for more complete information.
General
and Plan Participants—The Plan is a defined contribution plan
covering all employees of United Air Lines, Inc. (“United” or
the “Company”) who are represented by Aircraft Mechanics Fraternal
Association (“AMFA”) and the International Association of Machinists and
Aerospace Workers (“IAM”) except Mileage Plus, Inc. employees who participate in
the Mileage Plus, Inc. Investment Plus Plan and Maintenance Instructors who
participate in the United Airlines Management and Administrative 401(k)
Plan. Employees are eligible to become participants on their date of hire.
The
Plan is subject to the provisions of the Employee Retirement Income Security
Act
of 1974 (“ERISA”).
Trustee
and Record Keeper—Fidelity Management Trust Company (“Fidelity”)
is the Plan trustee and Fidelity Investments Institutional Operations Company,
Inc. (“FIIOC”) is the transfer agent and record keeper of the Plan.
Bankruptcy
of Plan Sponsor—On December 9, 2002, the Company filed a
voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the Northern District of
Illinois, Eastern Division. On February 1, 2006, the Company and its parent
UAL Corporation (“UAL”) emerged from bankruptcy protection. Pursuant to the Plan
of Reorganization, Company contributions of shares of UAL common stock and
cash
contributions resulting from the sale of UAL convertible notes were made to
certain Plan participants, as discussed below.
Equity
Distribution—The Bankruptcy Court’s approval of the Plan of
Reorganization provided certain employees with shares of new UAL stock upon
exit
from bankruptcy. These equity distributions directly reflect the economic
contributions that employees made during the restructuring. The distribution
for
employees is in direct proportion to the labor savings each employee group
provided during the bankruptcy reorganization process.
AMFA
shares were distributed in two groups. Approximately 85% of the AMFA shares
were
allocated among eligible AMFA-represented employees based on that employee’s
Considered Earnings, as defined in the Plan, excluding overtime, for the period
from May 1, 2003 through December 31, 2005, in proportion to the total
for all AMFA-represented employees over the period. Approximately 15% of AMFA
shares were distributed according to a similar ratio based on Considered
Earnings, excluding overtime, for the period January 1, 2005 through
December 31, 2005. IAM shares were distributed based on each eligible
employee’s Considered Earnings for the period from May 1, 2003 through
December 31, 2005, in proportion to the total for all IAM-represented
employees for the period.
UAL
shares were deposited directly in the Plan to the extent
possible under section 415(c) of the Internal Revenue Code. Three equity
distributions occurred in 2006 for a value of $384,453,970. An additional
equity distribution, related to the 2006 Plan year, occurred on April 27,
2007,
for a value of $9,325,378, and is included within Employer contributions
receivable in the Statement of Net Assets Available for Benefits at December
31,
2006. Contributions to the Plan resulting from the equity distributions
are included within Employer contributions in the Statement of Changes in
Net
Assets Available for Benefits for the year ended December 31, 2006.
4
UAL
Convertible Notes Distribution—The Bankruptcy Court’s approval of
the Plan of Reorganization provided that UAL convertible notes be issued to
employees to partially offset the retirement benefits that active employees
lost
when United’s defined benefit pension plans were terminated. IAM elected to
sell the allotted notes to the general financial community and distribute the
cash proceeds into the Plan for eligible employees. AMFA decided to sell the
allotted notes to the general financial community and distribute the proceeds
in
the form of cash to eligible employees.
Eligible
IAM employees include those who retired after May 1, 2003 and before
December 31, 2005, and also included employees not yet retired as of
December 31, 2005, but who would have been retirement eligible under
the terms of the terminated defined benefit pension plan. The IAM provided
distribution amounts by employee to the Company. This distribution occurred on
August 14, 2006, for $35,031,053. The second and final distribution
proceeds of $1,096,716 from the sale of UAL convertible notes as part of the
bankruptcy reorganization occurred on March 8, 2007, and are included within
Employer contributions receivable in the Statement of Net Assets Available
for
Benefits at December 31, 2006. Contributions to the Plan resulting from the
notes distributions are included within Employer contributions in the Statement
of Changes in Net Assets Available for Benefits for the year ended December
31,
2006. The remainder of the net proceeds was paid directly to current or
former IAM members who were eligible for distribution, but were not eligible
401(k) plan participants.
Contributions—There
are several types of contributions that may be made to the Plan on participants’
behalf:
·Voluntary
pre-tax contributions: Eligible employees may elect to make voluntary
pre-tax contributions in any whole percentage from 1% to 30% of eligible
earnings for each pay period. Eligible employees may also make a supplemental
election to contribute additional contributions of 1% to 90% of their net
after-tax pay. Section 402(g) of the Internal Revenue Code limits the amount
of
pretax 401(k) contributions to a maximum of $15,000 in 2006. Lower limits may
apply to certain highly compensated participants if the Plan does not pass
certain nondiscrimination tests required by law. Section 415(c) of the
Internal Revenue Code limits the total amount of contributions from all
qualified defined contribution retirement plans to the lesser of 100% of annual
compensation or $44,000.
·Company
Contributions: For employees represented by AMFA, beginning July 1,
2005, the Company began accruing Company contributions to participants’
accounts. This Company contribution to the Plan equals 4% of each eligible
participant’s eligible earnings. In addition, the Company began making an
additional contribution for all participants who were employed on May 15,
2005 according to a schedule based on the sum of the employees’ age and credited
service and their classification of Mechanic or Related employee. Contributions
accrued without interest from July 1, 2005, to the Company’s exit from
bankruptcy on February 1, 2006. This amount was contributed in February
2006. In the event the total amount of the Company’s regular and additional
contributions is less than 5% of all participants’ eligible earnings for the
Plan year, the Company will make a supplemental Company contribution in the
amount necessary to cause total Company contributions to equal 5% of all
eligible participants’ earnings for the Plan year. The Company does not make
contributions on behalf of IAM employees to the Plan. Company cash
contributions made in 2006, in addition to the Notes and Equity distributions
discussed above, were $27,930,663.
5
·Voluntary
pre-tax catch-up contributions: Participants age 50 or older, at any time
during the Plan year, can make additional pretax catch-up contributions to
the
Plan. This catch-up contribution is available only to the extent the participant
has contributed the maximum amount of 401(k) contributions permitted under
the
Plan and the participant has not exceeded the annual catch-up contribution
limit. For calendar year 2006, the maximum catch-up amount is $5,000. This
amount is scheduled to be adjusted for cost of living increases (in multiples
of
$500) as set forth in Internal Revenue Code Section 414 (v)(2)(C).
·Rollover
contributions: Participants may elect to roll over money into the Plan from
certain other qualified employer plans or qualified IRA. The Plan will not
accept a rollover of after-tax contributions. For the year ended
December 31, 2006, $483,000 were transferred from other qualified plans as
rollovers under the Internal Revenue Code Sections 402(c) and
408(d).
The
Plan
is required to return contributions received during the year in excess of the
Internal Revenue Code limits. Such amounts have been recorded as Excess
contributions payable in the Statement of Net Assets Available for Benefits
at
December 31, 2006 and in the Statement of Changes in Net Assets Available for
Benefits for the year ended December 31, 2006.
Participant
Accounts—Individual accounts are maintained for each Plan
participant. Each participant’s account is credited with contributions and Plan
earnings, and charged with withdrawals, an allocation of Plan losses and
administrative expenses. Allocations are based on account balances, as defined.
The benefit to which a participant is entitled is the benefit that can be
provided from the participant’s vested account.
Investments—Participants
elect to invest in one or a combination of the investment funds offered by
the
Plan. 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. Investment
options offered by the Plan during the year were:
·Fidelity
Magellan Fund
·Fidelity
Equity-Income Fund
·Fidelity
Growth Company Fund
·Fidelity
Government Income 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 Fund
·U.S.
Equity Index Commingled Pool
·Blended
Income Fund
·Stated
Return Fund (closed to new investments in 1992)
·Spartan
International Index Fund
·Vanguard
Target Retirement Income
·Vanguard
Target Retirement 2005
·Vanguard
Target Retirement 2015
·Vanguard
Target Retirement 2025
6
·Vanguard
Target Retirement 2035
·Vanguard
Target Retirement 2045
·Individual
Brokerage Account (Fidelity BrokerageLink)
·UAL
Stock
Fund (started March 1, 2006).
Vesting—Participants
are vested immediately in their pre-tax contributions, catch-up contributions,
rollover contributions, and their related earnings thereon. All employees
employed as of May 15, 2005, are 100% vested in the Company's regular,
additional and supplemental contributions and related earnings. For employees
hired after May 15, 2005, a five-year vesting schedule was implemented
beginning with 20% vested after the first year of service and increasing in
20%
increments thereafter. Employees will be 100% vested in Company contributions
upon death or attainment of age 65 while employed by the Company or an
affiliate.
Forfeitures—
Upon termination of employment, participants will forfeit the nonvested portion
of their account balance and such balance will be held in a separate subaccount
until the participant incurs a break in service of five full years, at which
time the subaccount balance will be forfeited. If the participant
resumes employment with the Company or an Affiliate prior to incurring a break
in service of five full years, such subaccount will be disregarded and the
balance will be included in the participant’s account. Forfeitures occurring in
a plan year will first be applied to restore the accounts of participants and
any remaining forfeitures will be used to reduce the Company’s contributions for
the plan year in which the forfeiture occurs. Forfeited nonvested accounts
totaled $2,891 and $1,100 at December 31, 2006 and 2005, respectively. For
the year ended December 31, 2006, no forfeitures were applied to reduce the
Company’s contributions under the Plan.
Participant
Loans— Active employees who are receiving regular pay from the
Company may borrow from their Plan accounts. A loan may not exceed $50,000
minus
their highest outstanding loan balance over the last 12 months or one-half
of
their total vested Plan account balance, whichever is less. The minimum that
may
be borrowed is $1,000. Loans are funded from the participant’s account by a pro
rata transfer from each investment fund in which the account is invested.
Amounts invested in the UAL Stock Fund or Fidelity BrokerageLink must be
transferred to another investment fund to be available to fund a loan. The
loan
is repaid through payroll deductions on an after-tax basis for the term of
the
loan, a maximum of 60 months and is subject to an annual interest rate at one
percent above the prime rate listed in the Wall Street Journal on the business
day preceding the effective date of the participant request (interest rates
ranged from 8% to 9.25% at December 31, 2006). If the participant takes out
a
loan for the purchase of the participant’s primary residence, the maximum term
of the loan is 15 years. The amount repaid is reinvested in the
participant’s account based on the investment allocations at the time of
repayment. Participants may have up to two loans outstanding at one time. Upon
the employee’s termination of employment, a loan not paid in full within 60 days
becomes a taxable distribution. Loans not paid on the last day of the calendar
quarter following the calendar quarter in which the loan installment payment
was
due, the loan will be in default and the outstanding balance of the defaulted
loan plus accrued interest will be considered a taxable distribution. An initial
fee of $35 is deducted from loan proceeds. In addition a quarterly maintenance
fee of $2.50 is deducted from the participant’s account.
Payment
of Benefits—Withdrawals from the Plan may be made as follows, as
applicable to the participant’s eligibility, amount requested, and existing
balances:
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·
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Participants
who have separated from service (for reasons other than death) may
elect
payment in the form of a lump-sum, equal periodic installments, or
in the
form of an immediate fixed or variable annuity. All or a portion
of the
amount of the distribution may be deferred from the participants'
current taxable income by a direct roll over into an Individual Retirement
Account, qualified participant’s plan, an annuity contract or annuity plan
uder Section 403, and certain governamental plans under Section 457.
Participants with account balances exceeding $1,000 may elect to
defer
receipt of their benefits until minimum distributions are required
to
start no later than April 1st
of the year following the year in which they reach age 70 ½.
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7
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·
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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 the Internal Revenue Code
401(a)(9)
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·
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In-service
withdrawals for participants who are actively employed or are absent
due
to reasons of illness, or approved leave of absence that maintain
an
employer-employee relationship with United are permitted as
follows:
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–
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Hardship withdrawals from 401(k) account, subject to restrictions
described in the plan agreements.
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–
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After reaching age 59-1/2, pre-tax contributions, including catch-up
contributions, rollover contributions, and the special Company
contribuitons of proceeds of convertible notes and UAL stock (as
adjusted
for earnings) may be withdrawn at any
time.
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–
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Active participants that have reached age 70-1/2 may choose to
defer distribution until termination of
employment.
|
Generally,
withdrawals are allocated pro rata to the balances of each of the investment
funds in the participant’s account.
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2.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
Basis
of Accounting—The accompanying financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America.
Use
of Estimates—The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of net assets available for benefits and changes therein. Actual results
could differ from those estimates. The Plan utilizes various investment
instruments, including mutual funds and investment contracts. Investment
securities, in general, are exposed to various risks, such as interest rate,
credit, and overall market volatility. Due to the level of risk associated
with
certain investment securities, it is reasonably possible that changes in the
values of investment securities will occur in the near term and such changes
could materially affect the amounts reported in the financial
statements.
New
Accounting Pronouncement—As described in Financial Accounting
Standards Board Staff Position, FSP AAG INV-1 and SOP 94-4-1, Reporting of
Fully Benefit-Responsive Investment Contracts Held by Certain Investment
Companies Subject to the AICPA Investment Company Guide and Defined-Contribution
Health and Welfare and Pension Plans (the "FSP"), investment contracts held
by a defined-contribution plan are required to be reported at fair value.
However, contract value is the relevant measurement attribute for that portion
of the net assets available for benefits of a defined-contribution plan
attributable to fully benefit-responsive investment contracts because contract
value is the amount participants would receive if they were to initiate
permitted transactions under the terms of the Plan. As required by the FSP,
the
Statement of Net Assets Available for Benefits reconciles from fair value to
contract value for these investment contracts. Prior year balances have been
reclassified accordingly.
The Statement of Changes in Net Assets Available for Benefits is prepared on
a
contract value basis.
8
Investment
Valuation and Income Recognition—The Plan’s investments are held
in the United Air Lines, Inc. 401(k) Plans Master Trust (the “Trust”),
which was established for the investment of assets of the Plan and several
other
plans sponsored by United and administered by the Trustee. Except for the
investment contracts discussed in Note 4, the Trustee determines fair value
of
the underlying Trust assets using quoted market prices on U.S. securities
exchanges or other reliable sources. Shares of mutual funds are valued at the
net asset value of shares held by the Trust at year-end.
Purchases
and sales of securities are recorded on a trade-date basis. Interest income
is
recorded on the accrual basis. Dividends are recorded on the ex-dividend
date.
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 January 1, or date of
purchase if subsequent to January 1, and fair value at date of sale or the
current year-end.
Administrative
Expenses—Administrative expenses, which are paid by the Plan,
represent administrative and investment manager fees charged by Fidelity,
accountant fees, and recordkeeping fees charged by FIIOC. Brokerage and other
investment fees are included as a reduction of the investment return for such
investments. United performs certain reporting and supervisory functions for
the
Plan without charge.
Payment
of Benefits—Benefit payments to participants are recorded upon
distribution. There were no amounts allocated to accounts of persons who had
elected to withdraw from the Plan but have not yet been paid at
December 31, 2006 and 2005.
Transfers
Between Plans—Transfers between plans reflect 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
Airlines Management and Administrative Employee 401(k) Plan and the United
Airlines Flight Attendant 401(k) Plan.
9
3. INVESTMENT
IN MASTER TRUST
Assets
of
the Plan are commingled with the assets of the other participating United plans
consisting of the Management and Administrative 401(k) Plan, the Flight
Attendant
401(k)
Plan, and the Mileage Plus Inc. Investment Plus Plan (for the Blended Income
Fund). Although assets of the plans are commingled in the Trust, the Trustee
maintains
separate
records for each of the plans. Assets of the Trust are reported at fair value
and are allocated to the following plans at December 31, 2006 and 2005, as
follows (in thousands):
|
December
31, 2006
|
December
31, 2005
|
||||||||
|
Amount
|
Percent
|
Amount
|
Percent
|
||||||
|
Ground
Employee 401(k) Plan
|
$
1,597,050
|
40.25
|
%
|
$
1,059,430
|
37.43
|
%
|
|||
|
Management
and Administrative 401(k) Plan
|
1,013,323
|
25.54
|
|
703,701
|
24.87
|
||||
|
Flight
Attendant 401(k) Plan
|
1,356,221
|
34.18
|
|
1,065,524
|
37.65
|
|
|||
|
Mileage Plus, Inc. Investment Plus Plan
|
1,272
|
0.03
|
1,409
|
0.05
|
|||||
|
Total
|
$
3,967,866
|
100.00
|
%
|
$
2,830,064
|
100.00
|
%
|
|||
10
Investments
of the Trust as of December 31, 2006 and 2005 are as follows (in
thousands):
|
2006
|
2005
|
|||
|
Fidelity
Mutual Funds:
|
||||
|
Magellan
Fund
|
$ 223,701
|
*
|
$ 211,915
|
*
|
|
Equity-Income
Fund
|
181,009
|
128,141
|
||
|
Growth
Company Fund
|
611,851
|
*
|
567,703
|
*
|
|
Government
Income Fund
|
27,777
|
31,449
|
||
|
OTC
Portfolio
|
153,858
|
146,599
|
*
|
|
|
Overseas
Fund
|
309,001
|
*
|
187,690
|
*
|
|
Balanced
Fund
|
346,152
|
*
|
265,535
|
*
|
|
Asset
Manager 50%
|
34,677
|
33,833
|
||
|
Asset
Manager 70%
|
52,993
|
50,800
|
||
|
Asset
Manager 20%
|
17,033
|
14,809
|
||
|
Spartan
International Growth
|
67,533
|
2,206
|
||
|
Retirement
Money Market Portfolio
|
100,018
|
77,868
|
||
|
U.S.
Bond Index Fund
|
44,578
|
43,737
|
||
|
U.S.
EQ Index Class 2
|
365,754
|
*
|
353,137
|
*
|
|
Other
Receivables
|
886
|
-
|
||
|
BrokerageLink
|
24,711
|
-
|
||
|
Stated
Return Fund
|
96,983
|
103,720
|
||
|
Blended
Income Fund
|
556,228
|
*
|
549,074
|
*
|
|
UAL
Stock Fund
|
384,655
|
*
|
-
|
|
|
UAL
Stock Purchase Acct
|
6
|
-
|
||
|
Vanguard
Target Retirement Income
|
2,201
|
276
|
||
|
Vanguard
Target Retirement 2005
|
15,900
|
1,010
|
||
|
Vanguard
Target Retirement 2015
|
102,941
|
1,858
|
||
|
Vanguard
Target Retirement 2025
|
84,747
|
1,396
|
||
|
Vanguard
Target Retirement 2035
|
42,556
|
713
|
||
|
Vanguard
Target Retirement 2045
|
14,668
|
967
|
||
|
Participant
Loan Fund
|
105,449
|
55,628
|
||
|
|
||||
|
Total
investments, at fair value
|
$ 3,967,866
|
$ 2,830,064
|
||
|
Adjustment
from fair value to contract value for fully benefit-responsive investment
contracts
|
6,773
|
6,729
|
||
|
|
||||
|
Total
investments
|
$ 3,974,639
|
$ 2,836,793
|
||
|
*Represents
an investment greater than 5% of Trust net assets.
|
11
The
Trust’s investment gain (loss) for the year ended December 31, 2006, is as
follows (in thousands):
|
Magellan
Fund
|
$ (40,113)
|
|
Equity-Income
Fund
|
14,796
|
|
Growth
Company Fund
|
52,782
|
|
Government
Income Fund
|
(260)
|
|
OTC
Portfolio
|
12,928
|
|
Overseas
Fund
|
15,116
|
|
Balanced
Fund
|
10,389
|
|
Asset
Manager 50%
|
146
|
|
Asset
Manager 70%
|
3,837
|
|
Asset
Manager 20%
|
(235)
|
|
Spartan
International Growth
|
6,525
|
|
U.S.
Bond Index Fund
|
87
|
|
U.S.
EQ Index Class 2
|
51,711
|
|
BrokerageLink
|
692
|
|
UAL
Stock Fund
|
64,407
|
|
Vanguard
Target Retirement Income
|
43
|
|
Vanguard
Target Retirement 2005
|
546
|
|
Vanguard
Target Retirement 2015
|
5,629
|
|
Vanguard
Target Retirement 2025
|
5,886
|
|
Vanguard
Target Retirement 2035
|
3,311
|
|
Vanguard
Target Retirement 2045
|
1,039
|
|
|
|
|
Net
appreciation
|
209,262
|
|
Dividends
|
143,175
|
|
Interest
|
29,835
|
|
Trust
investment gain
|
$ 382,272
|
|
|
4.
|
GUARANTEED
INVESTMENT CONTRACT (“GIC”) AND SYNTHETIC
GIC
|
The
Master Trust holds investments in two types of stable value investment
contracts: a traditional GIC as part of the Stated Return Fund and synthetic
GICs held by the Blended Income Fund. The contracts are fully benefit
responsive and, as such, reported at fair value and reconciled to contract
value
in the Statements of Net Assets Available for Benefits for the year ended
December 31, 2006 and 2005.
Guaranteed
Investment Contract
The
Stated Return Fund contains an annuity insurance contract with Prudential
Retirement Insurance and Annuity Company (“Prudential”). Participants
that elect this option may direct permitted withdrawal or transfers of all
or a
portion of their account balance at contract value. Contract value
represents contributions made under the contracts, plus earnings, less
participant withdrawals and administrative expenses.
Interest
is credited on contract balances using a single “portfolio rate”
approach. Under this method, a single crediting rate is applied to
all contributions made to this fund regardless of the timing of those
contributions. Interest crediting rates are determined according to a
specific formula. Factors that impact the formula include the fund’s
cash flow activity as well as the expected and actual investment experience
of
securities held in a commingled portfolio within Prudential’s general
account. The minimum crediting rate under the annuity contract is
1.50%. The average yield credited to participants at
December 31, 2006 and 2005 was 4.55% and 4.48%,
respectively. Crediting rates are reviewed on an annual basis for
resetting.
12
The
fair
value of the investment contract in the Stated Return Fund held by the Trust
at
December 31, 2006 and 2005 was $96,982,780 and $103,719,572,
respectively. The average yield for the Stated Return Fund was 4.67%
and 4.58% for the years ended December 31, 2006 and 2005,
respectively.
The
Plan’s ability to transact at contract value could be limited in the event the
Company initiated contract termination. There are no instances in
which the issuer could terminate the contract and settle for an amount different
than contract value.
Synthetic
GICs
The
Blended Income Fund holds investments in synthetic GICs comprised of a portfolio
of U.S. Government and other high quality (rated A- or above) debt securities
and “wrap” contracts with four counterparties. The wrap contracts provide
additional assurance that participants will be able to withdraw funds at
contract value in the event that market value declines below contract value
followed by significant participant withdrawals. The fair value of the
Blended Income Fund equals to the sum of the market value of the underlying
investments plus the fair value of the wrap rebid, which is calculated by
discounting the difference between the contractual wrap rebid fee and the market
value of the rebid fee over the remaining duration of the contract. The
fair value of the wrap rebid was $(7,287) and $0 at December 31, 2006 and 2005,
respectively.
Interest
crediting rates are determined by comparing contract value and the estimated
future market value, which is determined by compounding the portfolio’s current
yield to maturity over the remaining duration of the fund. The crediting
rate is equal to the discount rate that equates market value and contract value
over the remaining duration of the fund. The minimum crediting rate under
the Blended Income Fund is 0%. The average yield credited to participants
at December 31, 2006 and 2005, were 4.53% and 4.21%,
respectively. Crediting rates are reviewed quarterly for
resetting.
The
fair
value of the investment contracts in the Blended Income Fund held by the Trust
at December 31, 2006 and 2005 was $556,228,173 and $549,074,327,
respectively. The average yield for the Blended Income Fund for the year ended
December 31, 2006 and 2005, was 4.57% and 4.42%, respectively.
The
wrap
contracts limit the ability of the Plan to transact at contract value upon
the
occurrence of certain events. These events include: (i) the Plan’s failure to
qualify under Section 401(a) or 401(k) of the Internal Revenue Code;
(ii) the establishment of a defined contribution plan that competes with the
Plan for employee contributions; (iii) any substantive modification of the
Plan
or the administration of the Plan that is not consented to by the contract
issuer; (iv) complete or partial termination of the Plan; (v) any change in
law,
regulation or administrative ruling applicable to the Plan that could have
a
material adverse effect on the fund's cash flow; (vi) merger or consolidation
of
the Plan with another plan, the transfer of Plan assets to another plan, or
the
sale, spin-off or merger of a subsidiary or division of the Plan sponsor; (vii)
any communication given to participants by the Plan sponsor or any other Plan
fiduciary that is designed to induce or influence participants not to invest
in
the Funds or to transfer assets out of the Blended Income Fund; (viii) exclusion
of a group of previously eligible employees from eligibility in the Plan; (ix)
any early retirement program, group termination, group layoff, facility closing,
or similar program; and (x) any transfer of assets from the Blended Income
Fund
directly to a competing option.
13
5. EXEMPT
PARTY-IN-INTEREST TRANSACTIONS
Certain
Trust investments are shares of mutual funds managed by Fidelity. Fidelity
is
the trustee as defined by the Plan and, therefore, these transactions qualify
as
exempt party-in-interest transactions. Fees paid by the Plan for investment
management services were included as a reduction of the return earned on each
fund. The administrative fees paid by the Plan to Fidelity for 2006 were
$626,517.
The
Plan
invested in shares of UAL common stock starting March 1, 2006. UAL is the parent
company of United and, as such, investment activity related to the UAL common
stock qualifies as exempt party-in-interest transactions.
|
|
6.
|
PLAN
TERMINATION
|
The
Company expects to continue the Plan indefinitely, but reserves the right to
terminate the Plan, in whole or in part, provided that Plan termination is
effected by a written resolution adopted by a majority of the Board of Directors
of the Company subject to the provisions set forth in 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 and ERISA.
|
|
7.
|
FEDERAL
INCOME TAX STATUS
|
The
IRS
has determined and informed the Company by a letter dated September 5,
2003, that the Plan and related Trust were designed in accordance with
applicable regulations of the Internal Revenue Code. The Plan has been amended
since receiving the determination letter. However, the Plan administrator
believes that the Plan is currently designed and operated in compliance with
the
applicable requirements of the Internal Revenue Code and the Plan and related
Trust continue to be tax-exempt. Therefore, no provision for income taxes has
been included in the Plan’s financial statements.
14
8. RECONCILIATION
TO FORM 5500
At
December 31, 2006 and 2005, investment contracts that are fully
benefit-responsive are reported at contract value in the Plan financial
statements. However, these investment contracts are reported at fair
value in the Form 5500. The reconciliation between the financial statements
and
the Form 5500 is as follows (in thousands):
|
2006
|
2005
|
|||||
|
Net
assets available for plan benefits per financial
statements
|
$ 1,610,045
|
$ 1,074,169
|
||||
|
Adjustment
from contract value to fair value for fully benefit-responsive investment
contracts
|
(2,865)
|
(2,886)
|
||||
|
|
|
|
||||
|
Net
assets available for plan benefits per Form 5500
|
$
1,607,180
|
$
1,071,283
|
||||
|
Year
Ended
|
||||||
|
December
31, 2006
|
||||||
|
Net
investment income per financial statements
|
$ 152,831
|
|||||
|
Change
in adjustment from contract value to fair value for fully
benefit-responsive investment contracts
|
21
|
|||||
|
Net
investment income per Form 5500
|
$ 152,852
|
|||||
9. PLAN
AMENDMENT
During
2006, the Plan was amended twice, primarily to maximize the amount the Company
could contribute to the Plan due to the Equity Distribution and the UAL
Convertible Notes Distribution (Note 1) and to specify that contributions
of
Equity and Convertible Notes proceeds are available for hardship withdrawal
and
age 59-1/2 in-service withdrawal. The amendments also clarified the accelerated
vesting provisions upon termination or partial termination of the Plan,
indicating that upon termination or partial termination of the Plan, the
accounts of affected participants will vest in full. Finally, the amendments
changed the default investment option from a specified fund to a fund selected
from time to time by the Plan Administrator.
******
15
SUPPLEMENTAL
SCHEDULE
|
FORM
5500, SCHEDULE H, PART IV, LINE 4i—
|
|||||||||||||||
|
SCHEDULE
OF ASSETS (HELD AT END OF YEAR)
|
|||||||||||||||
|
AS
OF DECEMBER 31, 2006
|
|||||||||||||||
|
(In
thousands)
|
|
|
|||||||||||||
|
Identity
of Issue, Borrower,
|
|||||||||||||||
|
or
Similar Party
|
Description
of Investment
|
Current
Value
|
|||||||||||||
|
Investments
Held in the Trust, at fair value*
|
$ 1,537,391
|
||||||||||||||
|
Participants’
loan balance*
|
Participant
loans earning interest
|
||||||||||||||
|
from
8% to 9.25% maturing from
|
|||||||||||||||
|
2006
through 2021
|
59,659
|
||||||||||||||
| Adjustment from fair value to contract value for | |||||||||||||||
| fully benefit-responsive investment contracts |
2,865
|
||||||||||||||
|
|
|||||||||||||||
|
TOTAL
|
$ 1,599,915
|
||||||||||||||
|
*Denotes
party-in-interest investment.
|
|||||||||||||||
16
SIGNATURES
The
Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Plan Administrator has duly caused this annual report to be signed on
its
behalf by the undersigned hereunto duly authorized.
|
United
Airlines Ground Employee 401(k) Plan
|
|
|
Date:
June 29, 2007
|
/s/
M. Lynn Hughitt________________________________________
M.
Lynn Hughitt
Member
Retirement
and Welfare Administration Committee, the Plan Administrator
|
EXHIBIT
INDEX
|
Exhibit
|
Description
|
|
23
|
Consent
of Independent Registered Public Accounting
Firm
|
Exhibit
23
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
consent to the incorporation by reference in Registration Statement No.
333-132111 on Form S-8 of our report dated June 29, 2007, relating to the
financial statements and financial statement schedule of the United Airlines
Ground Employee 401(k) Plan (which report expresses an unqualified opinion
and
contains an explanatory paragraph related to the adoption of FASB Staff Position
AAG INV-1 and SOP 94-4-1) appearing in this Annual Report on Form 11-K of the
United Airlines Ground Employee 401(k) Plan for the year ended December 31,
2006.
/s/
Deloitte & Touche LLP
Chicago,
Illinois
June
29,
2007