UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
EIN # 51-0375688 PLAN NUMBER 001
FINANCIAL STATEMENTS
for the years ended December 31, 2005 and 2004
UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS
Page(s)
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Report of Independent Registered Public Accounting Firm 2
Financial Statements:
Statements of Net Assets Available for Benefits at
December 31, 2005 and 2004 3
Statements of Changes in Net Assets Available for Benefits for the
years ended December 31, 2005 and 2004 4
Notes to Financial Statements 5 to 18
Item 4(i) - Schedule of Assets (Held at End of Year) 19
All other schedules to be filed with the Department of Labor in accordance with
the Employee Retirement Income Security Act of 1974 are not applicable and have
been omitted.
-1-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Plan Administrator of
UGI HVAC Enterprises, Inc. Savings Plan
We have audited the accompanying statements of net assets available for benefits
of UGI HVAC Enterprises, Inc. Savings Plan as of December 31, 2005 and 2004, and
the related statements of changes in net assets available for benefits for the
years then ended. 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. 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 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, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of UGI HVAC
Enterprises, Inc. Savings Plan as of December 31, 2005 and 2004, and changes in
its net assets available for benefits for the years then ended, in conformity
with accounting principles generally accepted in the United States.
Our audits were performed 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 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
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
Morison Cogen LLP
Bala Cynwyd, Pennsylvania
June 15, 2006
UGI HVAC ENTERPRISES, INC
SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
------------------------
2005 2004
----------- ----------
Investments (Note 3) $10,895,081 $9,372,253
Loans to participants 311,093 273,959
Receivables:
Participants' contributions receivable 128,521 116,009
Employers' contributions receivable 41,347 34,985
----------- ----------
Net assets available for benefits $11,376,042 $9,797,206
=========== ==========
See accompanying notes to finacial statements
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UGI HVAC ENTERPRISES, INC
SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended December 31,
------------------------
2005 2004
----------- ----------
Participants' contributions $ 1,168,221 $1,075,751
Employers' contributions 362,749 325,128
Rollover contributions 156,259 227,926
Transfers of participants' balances 430,610 11,066
Investment income:
Dividends 225,560 223,622
Net appreciation in value of investments 388,127 675,152
Distributions to participants (1,165,750) (640,067)
Loan administration fees (3,433) (2,513)
Other, primarily interest on loans 16,493 11,949
----------- ----------
Net increase 1,578,836 1,908,014
Net assets available for benefits - beginning of year 9,797,206 7,889,192
----------- ----------
Net assets available for benefits - end of year $11,376,042 $9,797,206
=========== ==========
See accompanying notes to finacial statements
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UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
The following brief description of the UGI HVAC Enterprises, Inc. Savings Plan
(the "Plan") provides general information on the provisions of the Plan in
effect on December 31, 2005 and during the periods covered by the financial
statements. More complete information is included in the Plan document.
GENERAL. The Plan is a defined contribution plan, which covers employees of UGI
HVAC Enterprises, Inc. (the "Company") and certain affiliated companies
(collectively, "the Employers"). The Company is a wholly owned subsidiary of UGI
Enterprises, Inc. ("Enterprises"). Enterprises is a wholly owned subsidiary of
UGI Corporation ("UGI"). Employees of the Employers are eligible upon hire to
participate in the Plan. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The Plan is
administered by the UGI Enterprises, Inc. Retirement Committee ("Plan
Administrator") whose members are appointed by the Board of Directors of the
Company.
CONTRIBUTIONS. A participant may elect to contribute to the Plan on a before-tax
basis through payroll reduction an amount equal to from 1% to 50%, in whole
percentages, of eligible compensation. In addition, a participant may elect to
contribute to the Plan on an after-tax basis through payroll deduction an amount
equal to from 1% to 15%, in whole percentages, of eligible compensation,
provided that the combination of before-tax and after-tax contributions does not
exceed 50% of eligible compensation. Calendar year before-tax and after-tax
contribution amounts are subject to limits prescribed by the Internal Revenue
Code ("IRC") and the Plan, respectively. For the 2005 and 2004 Plan Years, the
IRC before-tax contribution limits were $14,000 and $13,000, respectively.
After-tax contributions are subject to limits set by the Plan and Section 402(g)
of the IRC. A participant may increase the rate of, or reduce or suspend, his or
her before-tax or after-tax contributions four times per year by contacting the
Plan's recordkeeper, Fidelity Institutional Retirement Services Company
("FIRSCO").
The plan allows for "catch-up contributions." The catch-up contribution
provision allows certain employees to make before-tax contributions over and
above the IRS and Plan limits. In order to be eligible to make catch-up
contributions, employees must be at least 50 years of age and must be
contributing the IRC or Plan limit. The maximum catch-up contributions for the
2005 and 2004 Plan Years were $4,000 and $3,000, respectively, which amounts
shall increase $1,000 per year through 2006. Catch-up contributions are not
eligible for the Employers' matching contribution (as described below).
The Plan also accepts on behalf of any employee (i) the entire amount of cash
received as a distribution from another qualified trust forming part of a plan
described in section 401(a) of the IRC or from a "rollover" individual
retirement plan described in section 408 of the IRC, but only if the deposit
qualifies as a tax-free rollover as defined in section 402 or (ii) a direct
transfer from
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UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS(Continued)
another plan qualified under Section 401(a) of the IRC. The Plan accepts
after-tax rollover contributions.
For each month during a Plan year, the Employers may, at their discretion, make
a contribution to the Plan equal to 50% of participant before-tax and after-tax
contributions, up to a total of 5% of compensation (as defined in the Plan
document) for each participant who has made before-tax and/or after-tax
contributions during the month. The Employers' contributions for the years ended
December 31, 2005 and 2004 were invested in accordance with participant
investment elections in effect on the dates of the contributions.
A participant is immediately fully vested in the portion of his or her account
attributable to participant contributions as well as matching contributions made
by the Employers.
INVESTMENT FUNDS. A participant may elect to have his or her funds invested in
one or more investment funds. Generally, participants may transfer amounts
between funds at any time with no limit. Participants may change their
investment elections for future contributions at any time. Fidelity Management
Trust Company is the Plan's Trustee for all investment assets of the Plan and
qualifies as a party of interest. References to "Fidelity" below refer to
investment funds managed by Fidelity Management and Research Company ("FMR").
In 2004, the Company performed a review of the Plan's investment strategies,
funds offered, and fund expenses and determined that a simplified core group of
funds combined with a self-directed brokerage option would help participants
achieve their investment objectives at lower costs. As a result of that review,
effective June 1, 2005, 26 of the 31 investment fund options offered at December
31, 2004 were discontinued and, effective February 1, 2005, 11 new fund options
and a self-directed brokerage option were added.
Following are brief descriptions of the investment options available to
participants and the strategies and objectives of each fund. As previously
mentioned, certain fund options were discontinued.
Money Market Fund
- - Vanguard Prime Money Market Fund - Institutional Class
This fund is an unaffiliated registered investment company mutual fund which
primarily invests in high-quality, short-term money market instruments,
including certificates of deposit, banker's acceptances, commercial paper, and
other money market instruments. The fund's objective seeks to provide current
income while maintaining a stable share price of $1.
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UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS(Continued)
- - Fidelity Cash Reserves Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
invests in U.S. dollar-denominated money market securities and repurchase
agreements, and may enter into reverse repurchase agreements. The fund's
objective is to provide as high a level of current income as is consistent with
the preservation of capital and liquidity.
Managed Income/Stable Investment Funds
- - Vanguard Retirement Savings Trust III
This unaffiliated unregistered stable value investment option primarily invests
in high quality fixed income securities with financial backing from insurance
companies and banks that enable it to seek to maintain a constant $1 per share
net asset value. Investments are chosen based on credit quality, yield,
maturity, and contract provisions. The objective is to provide a stable share
price of $1 and current income consistent with bonds of two to three year
average maturity.
- - Fidelity Managed Income Portfolio II Fund (discontinued)
This fund is an unaffiliated commingled pool whose investments principally
comprise investment contracts issued by insurance companies and financial
institutions and certain types of fixed income securities. The fund's objective
is to preserve principal while earning interest income. Although this fund is
not considered a standard option available for participant contributions, it
still carries a fund balance that is expected to be fully transferred to the
Vanguard Retirement Savings Trust III on or before May 31, 2007.
Fixed Income Funds
- - Fidelity Capital & Income Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
invests mainly in equity and debt securities, including defaulted securities,
with an emphasis on lower-quality debt securities. The fund invests in companies
in troubled or uncertain financial condition and in domestic and foreign
issuers. The fund's objective is to provide income and capital growth.
- - Fidelity U.S. Bond Index Fund
This fund is an unaffiliated registered investment company mutual fund that
principally invests in bonds included in the Lehman Brothers Aggregate Bond
Index. The fund's objective is to
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UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS(Continued)
provide investment results that correspond to the total returns of bonds in the
Lehman Brothers Aggregate Bond Index.
- - Fidelity Intermediate Bond Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund which
normally invests in investment-grade debt securities of all types and repurchase
agreements, while normally maintaining a dollar-weighted average maturity
between three and ten years. The fund is managed to have similar overall
interest rate risk to the Lehman Brothers Intermediate Government Credit Bond
Index. The fund's objective is to provide a high level of current income.
Balanced Funds
- - Fidelity Balanced Fund (discontinued)
- - Fidelity Puritan Fund (discontinued)
These funds are unaffiliated registered investment company mutual funds that
invest in stocks and other equity securities and bonds and other debt
securities. The funds seek income and capital growth.
Growth and Income Funds
- - Vanguard Institutional Index Fund
This fund is an unaffiliated registered investment company mutual fund which
primarily invests in common stocks included in the Standard & Poor's 500 Index
("S&P 500"), a widely recognized unmanaged index of 500 U.S. common stocks. The
fund's objective is to seek long-term growth of capital and income from
dividends.
- - Fidelity Equity Income Fund
This fund is an unaffiliated registered investment company mutual fund that
principally invests in income-producing equity securities. The fund's objective
is to provide reasonable income while considering the potential for capital
appreciation.
- - Fidelity Spartan U.S. Equity Index Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks included in the S&P 500, a widely
recognized, unmanaged index of 500 U.S. common stocks. The fund's objective is
to match the total return of the S&P 500.
-8-
UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS(Continued)
- - Fidelity Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks. The fund may also invest a portion of
assets in bonds, including lower-quality debt securities. The fund seeks
long-term capital growth.
- - Fidelity Growth & Income Portfolio (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
normally invests a majority of total assets in common stocks with a focus on
those that pay current dividends and show potential for capital appreciation.
The fund may also invest in bonds, including lower-quality debt securities. The
fund seeks high total return through a combination of current income and capital
appreciation.
- - Fidelity Equity Income II Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in income-producing equity securities. The fund seeks
reasonable income and the potential for capital appreciation.
- - Fidelity Real Estate Investment Portfolio (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in equity securities of companies principally engaged in the
real estate industry both domestic and foreign. The fund seeks above-average
income and long-term capital growth consistent with reasonable risk.
Growth Funds
- - Vanguard Extended Market Index Fund
This fund is an unaffiliated registered investment company mutual fund that
primarily invests in a large sampling of stocks that match certain
characteristics of the S&P 500 Completion Index. The fund seeks to provide the
potential for long-term growth of capital as it matches the performance and risk
of the S&P 500 Completion Index.
- - Fidelity Magellan Fund
This fund is an unaffiliated registered investment company mutual fund that
invests primarily in growth and/or value common stocks of domestic and foreign
issuers. The fund seeks capital appreciation.
-9-
UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS(Continued)
- - Fidelity Growth Company Fund
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of domestic and foreign issuers that are
expected to have above-average growth potential. The fund seeks capital
appreciation.
- - Fidelity OTC Portfolio (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in securities traded on the NASDAQ or another
over-the-counter ("OTC") market. The fund seeks capital appreciation.
- - Fidelity Capital Appreciation Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of domestic and foreign issuers. The fund
seeks capital appreciation.
- - Fidelity Blue Chip Growth Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of well-known and established companies.
The fund invests in securities of domestic and foreign issuers. The fund seeks
growth of capital over the long term.
- - Fidelity Low-Priced Stock Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks that are priced at or below $35 at time of
investment. The fund seeks capital appreciation.
- - Fidelity Small Cap Independence Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of domestic and foreign issuers with small
market capitalizations. The fund seeks capital appreciation.
- - Fidelity Value Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of companies that possess valuable fixed
assets or that are believed to be undervalued in relation to the issuing
company's assets, earnings, or growth potential. The fund seeks capital
appreciation.
-10-
UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS(Continued)
International Funds
- - Fidelity Spartan International Index Fund
This fund is an unaffiliated registered investment company mutual fund which
primarily invests in common stock of developed markets outside the United States
and Canada. Common stocks included are those that are listed with the Morgan
Stanley Capital International Europe, Australasia, Far East Index ("MSCI EAFE
Index"). The fund's objective is to provide investment results that correspond
to the total returns of foreign stock markets.
- - Fidelity Overseas Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in foreign securities. The fund invests primarily in common
stocks and seeks long-term growth of capital.
- - Fidelity Worldwide Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
invests primarily in common stocks issued anywhere in the world. The fund seeks
capital appreciation.
- - Fidelity International Discovery Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in foreign securities including common stocks. The fund
seeks long-term capital appreciation.
Vanguard Target Retirement Funds
- - Vanguard Target Retirement Income
- - Vanguard Target Retirement 2005
- - Vanguard Target Retirement 2015
- - Vanguard Target Retirement 2025
- - Vanguard Target Retirement 2035
- - Vanguard Target Retirement 2045
These funds are unaffiliated registered investment company mutual funds that
invest in a combination of Vanguard mutual funds according to an asset
allocation strategy that becomes increasingly conservative over time as each
fund's target retirement date approaches. Within five to ten years after the
respective fund's targeted retirement date, the fund's asset allocation should
become similar to that of the Vanguard Target Retirement Income Fund. These
funds' investment objectives are to achieve current income and capital
appreciation.
-11-
UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS(Continued)
Fidelity Freedom Funds (discontinued)
- - Fidelity Freedom Income Fund
- - Fidelity Freedom 2000 Fund
- - Fidelity Freedom 2010 Fund
- - Fidelity Freedom 2020 Fund
- - Fidelity Freedom 2030 Fund
- - Fidelity Freedom 2040 Fund
These funds are unaffiliated registered investment company mutual funds that
invest in a combination of underlying Fidelity funds according to an asset
allocation strategy that becomes increasingly conservative over time as each
fund's target retirement date approaches. When each of these target retirement
date funds matches the asset allocation of the Fidelity Freedom Income fund
(approximately ten to fifteen years after the respective fund's target
retirement date), it is expected that each fund will be combined with the
Fidelity Freedom Income Fund. These funds' investment objectives are to achieve
high current income and capital appreciation.
Brokerage Link
- - Fidelity Brokerage Link
This option combines a self-directed brokerage account with the employee's
Savings Plan account. The objective of this investment option is to offer a
broader or expanded menu of mutual funds beyond those offered by the Plan.
Employer Stock Fund
- - UGI Common Stock Fund
This fund invests principally in shares of UGI Corporation Common Stock.
Participants in the fund do not individually own specific shares of UGI
Corporation Common Stock but rather own units in the fund that invests in such
shares and short-term investments. The value of a unit in the UGI Common Stock
Fund was initially set at $10.00 and is recalculated daily by dividing the fair
value of the fund's assets (comprising shares of UGI Corporation Common Stock
and temporary cash investments) by the total number of units outstanding.
Generally, participant requests to redeem units from the UGI Common Stock Fund
are processed on the day received if such request is received by Fidelity before
the close of the New York Stock Exchange and provided that there are sufficient
short-term investments in the fund for liquidity. In such case, the participant
will receive the net asset value, or closing price for the units, calculated
using the closing price for UGI Corporation Common Stock on the New York Stock
Exchange for that day. However, on days of unusually heavy requests for sale,
the UGI Common Stock Fund may not have sufficient short-term investments for
liquidity. In such case, requests to sell units received before the close of the
New York Stock Exchange may not be processed on that day at that date's closing
price but may be suspended until sufficient liquidity is restored. Units will be
redeemed generally on a first-in, first-
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UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS(Continued)
out basis at the closing price for the processing date. Loans, withdrawals and
distributions from the UGI Common Stock Fund will be given priority over
exchanges with other funds.
DISTRIBUTIONS. The Plan benefit of a participant who terminates employment for
any reason other than death shall be equal to the proceeds of liquidation of
100% of the balance of his or her account. Participants may elect to receive
their interest in the UGI Common Stock Fund in the form of shares of UGI
Corporation Common Stock. Where the amount to be distributed exceeds $5,000, no
distribution shall be made to any Plan participant prior to his or her normal
retirement age (as defined in the Plan document) unless the participant elects
to receive such distribution. Where the amount to be distributed does not exceed
$5,000, a Plan participant's benefit will be distributed as soon as practicable
after the participant becomes entitled to receive a distribution.
A participant who continues to work past age 70 1/2 will receive a distribution
upon termination of employment.
DEATH. If a participant dies prior to receiving a distribution of his or her
account, the participant's designated beneficiary shall be entitled to receive a
lump-sum distribution of the proceeds of liquidation of 100% of the balance
credited to the participant's account. Generally, the beneficiary may request a
distribution of the participant's account balance as soon as practicable
following the date of the participant's death. The beneficiary of a participant
who is married at the time of the participant's death will be the participant's
spouse, unless the participant designated another beneficiary and the spouse
consented to such designation in accordance with procedures specified by the
Plan document.
WITHDRAWALS. Generally, a participant may withdraw up to 50% of the balance of
his or her Voluntary Participant Contribution Account, as defined in the Plan
document. However, the withdrawal must be in an amount of at least $500. A
participant may withdraw up to 100% of the balance of his or her Rollover
Account, as defined in the Plan document, at any time. No more than one
withdrawal in any calendar year is permitted from each of the Voluntary
Participant Contribution Account and Rollover Account portions of a
participant's account.
A participant may withdraw before-tax contributions (but not earnings
attributable thereto) only on account of financial hardship resulting from (a)
medical expenses as defined in section 213(d) of the IRC; (b) educational
expenses for the next twelve months of post-secondary education of the
participant, or his or her spouse, children or dependents; (c) foreclosure on a
primary residence; or (d) costs directly related to the purchase of a primary
residence. A hardship withdrawal will be permitted if the Plan Administrator
determines that (i) the withdrawal is on account of an immediate and heavy
financial need of the participant and (ii) the withdrawal is necessary to
satisfy such financial need.
LOAN PROVISION. The Plan includes an employee loan provision. Generally, at the
time a loan is to be made, the amount of all loans to be outstanding may not
exceed the lesser of (a) 50% of a participant's before-tax and rollover account
balances, or (b) $50,000 less the excess of the highest
-13-
UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS(Continued)
balance of all loans during the prior twelve month period. Each loan bears
interest at a rate determined in accordance with generally prevailing market
conditions for similar types of loans. The minimum loan amount is $1,000. The
amount of the loan withdrawn from a participant's account is allocated in
proportion to the value of the participant's salary deferral and rollover
account balances in each investment fund. Repayments, including interest, are
made in equal installments through payroll deductions and are allocated to
participant accounts in accordance with current investment elections. No loan
may have a final maturity in excess of five years except that, if the loan is
used to purchase a principal residence for the participant, the loan may have a
final maturity of up to ten years. No participant shall be permitted to have
more than two loans outstanding at any one time.
ADMINISTRATIVE EXPENSES. Administrative expenses of the Plan are chargeable to
the Plan unless paid for by the Employers. The Employers currently pay such
expenses. Loan administration and withdrawal fees are paid by participants.
Mutual fund expenses are paid to fund managers from mutual fund assets.
PLAN TERMINATION. Although it has not expressed any intent to do so, the Company
has the right to terminate the Plan in whole or in part at any time for any
reason.
PLAN AMENDMENT. The Company may amend the Plan at any time for any reason by
written action of its Board of Directors. Amendments required to comply with the
IRC to maintain compliance with current laws or regulations or to correct errors
or omissions in the Plan document, however, may be made by the Retirement
Committee without Board approval.
VOTING RIGHTS OF UGI COMMON STOCK FUND PARTICIPANTS. A participant has the right
to instruct the trustee of the Plan how to vote, at each meeting of
shareholders, all shares of UGI Corporation Common Stock (including fractional
shares) represented by the value of the participant's interest in the UGI Common
Stock Fund. A participant also has the right to direct the trustee of the Plan
whether or not to tender shares in response to a tender offer.
2. ACCOUNTING POLICIES
The accompanying financial statements are prepared on the accrual basis of
accounting.
The Plan's investments in registered investment company mutual funds are valued
at quoted market prices, which represent the net asset value of shares held by
the Plan. Investment contracts included in the Fidelity Managed Income Portfolio
II Fund, an unaffiliated commingled pool, and Vanguard Retirement Savings Trust
III are carried at contract value, which represents deposits plus accrued
interest. The Plan Administrator believes contract value approximates fair
value. Shares of UGI Corporation Common Stock included in the UGI Common Stock
Fund are reflected at fair value based on quoted market prices.
-14-
UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS(Continued)
Dividend income is recorded on the record date. Interest earned on investments
is recorded on the accrual basis. Purchases and sales of securities are recorded
on a trade date basis.
The Plan presents in the Statement of Changes in Net Assets Available for
Benefits the net appreciation (depreciation) in fair value of investments which
consists of realized gains or losses and unrealized appreciation (depreciation)
in the fair value of those investments.
Distributions are made to Plan participants based upon the fair value of each
participant's investment account (except for investments of the Fidelity Managed
Income Portfolio II Fund and Vanguard Retirement Savings Trust III for which
distributions are based upon contract value and except for distributions from
the UGI Common Stock Fund, to the extent not all shares are sold on the same
date) as of the dates of the distribution. Distributions to participants are
recorded when paid.
Transfers of participant balances represent amounts transferred to or from the
AmeriGas Propane, Inc. Savings Plan and the UGI Utilities, Inc. Savings Plan,
which are affiliated plans.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Plan
Administrator to make estimates and assumptions that affect the reported amounts
of net assets available for benefits and changes therein. Actual results could
differ from these estimates.
In December 2005, the FASB issued FASB Staff Position 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 ("FSP"). This FSP
amends the guidance in AICPA SOP 94-4, Reporting of Investment Contracts Held by
Health and Welfare Benefit Plans and Defined-Contribution Pension Plans, with
respect to the definition of the fully benefit-responsive and the presentation
and disclosure of fully benefit-responsive investment contracts. The financial
statement presentation and disclosure guidance in the FSP requires fully
benefit-responsive investment contracts to be presented at fair value in the
statements of net assets available for benefits with an additional single line
item that adjusts the net assets attributable to the contracts to contract
value. The FSP is effective for financial statements for the plan years ending
after December 15, 2006. The Plan intends to adopt the financial presentation
and disclosure guidance in the FSP in the financial statements for the plan year
ending December 31, 2006.
-15-
UGI HVAC ENTERPRISES, INC
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRUST INVESTMENTS
The components of trust investments by fund at December 31, 2005 and 2004 are as
follows:
December 31,
------------------------
2005 2004
----------- ----------
Fidelity Cash Reserves Fund (shares -- 0 and 303,191,
respectively) $ -- $ 303,191
Fidelity Managed Income Portfolio II Fund (shares --
54,954 and 128,959, respectively) 54,954 128,959
Fidelity Intermediate Bond Fund (shares -- 0 and
10,217, respectively) -- 107,483
Fidelity Capital and Income Fund (shares -- 0 and
16,068, respectively) -- 136,098
Fidelity U.S. Bond Index Fund (shares -- 48,847 and
14,028 respectively) 532,429 156,267
Fidelity Balanced Fund (shares -- 0 and 8,285,
respectively) -- 147,643
Fidelity Puritan Fund (shares -- 0 and 9,800,
respectively) -- 185,709
Fidelity Spartan U.S. Equity Index Fund (shares -- 0
and 5,599, respectively) -- 239,959
Fidelity Equity Income Fund (shares -- 3,244 and
1,337, respectively) 171,215 70,544
Fidelity Fund (shares -- 0 and 3,262, respectively) -- 97,464
Fidelity Growth & Income Portfolio (shares -- 0 and
7,387, respectively) -- 282,267
Fidelity Equity Income II Fund (shares -- 0 and
13,592, respectively) -- 326,351
Fidelity Real Estate Investment Portfolio (shares --
0 and 12,168, respectively) -- 359,441
Fidelity Magellan Fund (shares -- 8,146 and 7,859
respectively) 867,110* 815,720*
Fidelity Growth Company Fund (shares -- 9,932 and
13,213, respectively) 631,951* 740,854*
Fidelity OTC Portfolio (shares -- 0 and 9,555,
respectively) -- 331,448
Fidelity Capital Appreciation Fund (shares -- 0 and
5,000, respectively) -- 130,152
Fidelity Blue Chip Growth Fund (shares -- 0 and
17,955, respectively) -- 748,919*
Fidelity Low-Priced Stock Fund (shares -- 0 and
15,262, respectively) -- 614,280*
Fidelity Small Cap Independence Fund (shares -- 0 and
8,240, respectively) -- 162,493
Fidelity Value Fund (shares -- 0 and 2,791,
respectively) -- 198,960
Fidelity Overseas Fund (shares -- 0 and 1,830,
respectively) -- 64,758
Fidelity Worldwide Fund (shares -- 0 and 7,521,
respectively) -- 137,252
Fidelity International Discovery Fund (shares -- 0
and 6,905, respectively) -- 194,715
Fidelity Freedom Income Fund (shares -- 0 and 711,
respectively) -- 8,018
Fidelity Freedom 2000 Fund (shares -- 0 and 6,510,
respectively) -- 78,639
Fidelity Freedom 2010 Fund (shares -- 0 and 40,583,
respectively) -- 552,738*
Fidelity Freedom 2020 Fund (shares -- 0 and 51,878,
respectively) -- 724,218*
-16-
UGI HVAC ENTERPRISES, INC
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRUST INVESTMENTS (CONTINUED)
December 31,
------------------------
2005 2004
----------- ----------
Fidelity Freedom 2030 Fund (shares -- 0 and 62,234,
respectively) -- 876,261*
Fidelity Freedom 2040 Fund (shares -- 0 and 33,546,
respectively) -- 277,424
Vanguard Institutional Index Fund (shares -- 17,168
and 0, respectively) 1,957,311* --
Vanguard Retirement Savings Trust III (shares --
82,464 and 0, respectively) 82,464 --
Vanguard Prime Money Market Fund (shares -- 267,121
and 0, respectively) 267,121 --
Vanguard Target Retirement Income Fund (shares --
1,762 and 0, respectively) 18,400 --
Vanguard Target Retirement 2005 Fund (shares -- 8,188
and 0, respectively) 89,494 --
Vanguard Target Retirement 2015 Fund (shares --
49,643 and 0, respectively) 568,907* --
Vanguard Target Retirement 2025 Fund (shares --
104,523 and 0, respectively) 1,230,242* --
Vanguard Target Retirement 2035 Fund (shares --
86,701 and 0, respectively) 1,062,958* --
Vanguard Target Retirement 2045 Fund (shares --
23,909 and 0, respectively) 300,538 --
Vanguard Extended Market Index Fund (shares -- 40,517
and 0, respectively) 1,389,335* --
Fidelity Spartan International Index Fund (shares --
18,334 and 0, respectively) 655,085* --
Fidelity Brokerage Link (shares -- 443,096 and 0,
respectively) 443,096 --
UGI Common Stock Fund
UGI Corporation Unitized Stock Fund (units --
35,876 and 10,976, respectively) 567,924 172,765
Dividends receivable 4,547 1,263
----------- ----------
572,471* 174,028
----------- ----------
Total trust investments - fair value, except for
group annuity contracts included in the Fidelity
Managed Income Portfolio II Fund and Vanguard
Retirement Savings Trust III which are carried at
contract value $10,895,081 $9,372,253
=========== ==========
Total trust investments - cost $10,420,518 8,908,465
=========== ==========
* - Investment represents five percent or more of net assets available for
benefits.
The net appreciation (depreciation) in fair value of investments during the
years ended December 31, 2005 and 2004 by major investment category follows:
Year ended
December 31,
-------------------
2005 2004
-------- --------
Investment company mutual funds $461,267 $647,062
UGI Common Stock Fund (73,140) 28,090
-------- --------
Total net appreciation in fair value $388,127 $675,152
======== ========
-17-
UGI HVAC ENTERPRISES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
During the 2005 and 2004 Plan Years, the Plan purchased, at market prices, 6,067
and 4,314 shares (which reflects UGI's 2-for-1 Common Stock split that occurred
in May 2005) of UGI Corporation Common Stock directly from UGI
Corporation for $148,973 and $73,657, respectively.
The investments of the separate investment funds are exposed to various risks
such as interest rate, market and credit risk. The degree and concentration of
these risks vary by fund. Due to the level of risk associated with the separate
investment funds, it is reasonably possible that changes in risk in the near
term could materially affect participants' account balances and the amounts
reported in the Statements of Net Assets Available for Benefits and the
Statements of Changes in Net Assets Available for Benefits.
4. FEDERAL INCOME TAX STATUS
On December 6, 2002, the Internal Revenue Service issued a favorable
determination letter concerning the qualified status of the Plan in effect as of
November 27, 2002 under Section 401(a) of the IRC. The Plan Administrator
believes that the Plan is designed and is currently being operated in compliance
with the applicable requirements of the IRC. No U.S. income taxes are required
to be paid by the trust created under the Plan (the "Trust") and participants
are not taxed on Employers' contributions to the Trust or income earned by the
Trust. When a participant, or his or her beneficiary or estate, receives a
distribution under the Plan, the taxability of the value of such distribution
depends on the form and time of payment.
-18-
UGI HVAC ENTERPRISES, INC
SAVINGS PLAN
Item 4(i) - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2005
-----------------------------------------
Number of
Shares or Fair Value/
Principal Contract
NAME OF ISSUER AND TITLE OF ISSUE Amount Cost Value
- --------------------------------- ------------- ----------- -----------
FIDELITY MANAGED INCOME
PORTFOLIO II FUND (2) 54,954 shrs 54,954 54,954
FIDELITY U.S. BOND INDEX FUND (2) 48,847 shrs 538,822 532,429
FIDELITY GROWTH COMPANY FUND (1) (2) 9,932 shrs 573,638 631,951
FIDELITY EQUITY INCOME FUND (2) 3,244 shrs 166,435 171,215
FIDELITY MAGELLAN FUND (1) (2) 8,146 shrs 855,752 867,110
VANGUARD INSTITUTIONAL INDEX FUND (1) (2) 17,168 shrs 1,878,533 1,957,311
VANGUARD RETIREMENT SAVINGS TRUST III (2) 82,464 shrs 82,464 82,464
VANGUARD PRIME MONEY MARKET FUND (2) 267,121 shrs 267,121 267,121
VANGUARD TARGET RETIREMENT INCOME FUND (2) 1,762 shrs 18,732 18,400
VANGUARD TARGET RETIREMENT 2005 FUND (2) 8,188 shrs 89,860 89,494
VANGUARD TARGET RETIREMENT 2015 FUND (1) (2) 49,643 shrs 557,658 568,907
VANGUARD TARGET RETIREMENT 2025 FUND (1) (2) 104,523 shrs 1,193,388 1,230,242
VANGUARD TARGET RETIREMENT 2035 FUND (1) (2) 86,701 shrs 1,017,433 1,062,958
VANGUARD TARGET RETIREMENT 2045 FUND (2) 23,909 shrs 283,816 300,538
VANGUARD EXTENDED MARKET INDEX FUND (1) (2) 40,517 shrs 1,262,414 1,389,335
SPARTAN INTERNATIONAL INDEX FUND (1) (2) 18,334 shrs 579,340 655,085
FIDELITY BROKERAGE LINK (2) 443,096 shrs 422,337 443,096
UGI COMMON STOCK FUND (1) (2)
UGI Corporation Unitized Stock Fund 35,876 units 573,274 567,924
Dividends receivable $4,547 4,547 4,547
----------- -----------
577,821 572,471
----------- -----------
PARTICIPANT LOANS
Loan principal outstanding (5.0% - 9.5%) (2) (3) -- 311,093
----------- -----------
Total - all funds $10,420,518 $11,206,174
=========== ===========
- ----------
(1) Investment represents 5% or more of the net assets available for benefits.
(2) Party in interest.
(3) Range of interest rates for loans outstanding as of December 31, 2005
-19-
UGI UTILITIES, INC.
SAVINGS PLAN
EIN #23-1174060 PLAN NUMBER 008
FINANCIAL STATEMENTS
for the years ended December 31, 2005 and 2004
UGI UTILITIES, INC.
SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS
Page(s)
-------
Report of Independent Registered Public Accounting Firm 2
Financial Statements:
Statements of Net Assets Available for Benefits at December 31,
2005 and 2004 3
Statements of Changes in Net Assets Available for Benefits for the
years ended December 31, 2005 and 2004 4
Notes to Financial Statements 5 to 18
Item 4(i) - Schedule of Assets (Held at End of Year) 19
All other schedules to be filed with the Department of Labor in accordance with
the Employee Retirement Income Security Act of 1974 are not applicable and have
been omitted.
-1-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Plan Administrator of
UGI Utilities, Inc. Savings Plan
We have audited the accompanying statements of net assets available for benefits
of UGI Utilities, Inc. Savings Plan as of December 31, 2005 and 2004, and the
related statements of changes in net assets available for benefits for the years
then ended. 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. 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 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, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of UGI Utilities,
Inc. Savings Plan as of December 31, 2005 and 2004, and changes in its net
assets available for benefits for the years then ended, in conformity with
accounting principles generally accepted in the United States.
Our audits were performed 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 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
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
Morison Cogen LLP
Bala Cynwyd, Pennsylvania
June 15, 2006
UGI UTILITIES, INC.
SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
-------------------------
2005 2004
----------- -----------
Investments (Note 3) $89,990,630 $82,513,700
Loans to participants 2,152,710 2,090,308
Employers' contributions receivable 1,453,115 1,455,381
----------- -----------
Net assets available for benefits $93,596,455 $86,059,389
=========== ===========
See accompanying notes to financial statements.
-3-
UGI UTILITIES, INC.
SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended December 31,
-------------------------
2005 2004
----------- -----------
Participants' contributions $ 5,170,820 $ 4,864,414
Rollover contributions 88,255 782,759
Employers' contributions 1,453,145 1,443,769
Investment income:
Dividends 2,679,238 2,227,441
Net appreciation in value of investments 1,812,621 5,366,261
Other, primarily interest on loans 89,567 104,622
Net transfers of participants' balances 769,881 404,380
Distributions to participants (4,526,461) (3,991,881)
----------- -----------
Net increase 7,537,066 11,201,765
Net assets available for benefits -
beginning of year 86,059,389 74,857,624
----------- -----------
Net assets available for benefits -
end of year $93,596,455 $86,059,389
=========== ===========
See accompanying notes to financial statements.
-4-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
The following brief description of the UGI Utilities, Inc. Savings Plan (the
"Plan") provides general information on the provisions of the Plan in effect on
December 31, 2005 and during the periods covered by the financial statements.
More complete information is included in the Plan document.
GENERAL. The Plan is a defined contribution plan covering employees of UGI
Utilities, Inc. ("UGI Utilities"), its holding company parent UGI Corporation
("UGI"), and certain affiliated companies (collectively, the "Employers").
Employees of the Employers are eligible upon hire to participate in the Plan.
The Plan is subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). The Plan is administered by the UGI
Utilities, Inc. Retirement Committee ("Plan Administrator") whose members are
appointed by the Board of Directors of UGI Utilities.
CONTRIBUTIONS. A participant may elect to contribute to the Plan on a before-tax
basis through payroll reduction an amount equal to from 1% to 50%, in whole
percentages, of eligible compensation. In addition, a participant may elect to
contribute to the Plan on an after-tax basis through payroll deduction an amount
equal to from 1% to 6%, in whole percentages, of eligible compensation, provided
that the combination of before-tax and after-tax contributions does not exceed
50% of eligible compensation. Calendar year before-tax and after-tax
contribution amounts are subject to limits prescribed by the Internal Revenue
Code ("IRC") and the Plan, respectively. For the 2005 and 2004 Plan Years, the
IRC before-tax contribution limits were $14,000 and $13,000, respectively.
After-tax contributions are subject to limits set by the Plan and Section 402(g)
of the IRC. A participant may increase the rate of, or reduce or suspend his or
her before-tax or after-tax contributions at any time by contacting the Plan's
recordkeeper, Fidelity Institutional Retirement Services Co. ("FIRSCO").
The Plan allows for "catch-up contributions." The catch-up contribution
provision allows certain employees to make before-tax contributions over and
above the IRS and Plan limits. In order to be eligible to make catch-up
contributions, employees must be at least 50 years of age and must be
contributing the IRC or Plan limit. The maximum catch-up contributions for the
2005 and 2004 Plan Years were $4,000 and $3,000, respectively, which amounts
shall increase $1,000 per year through 2006. Catch-up contributions are not
eligible for the Employers' matching contribution (as described below).
A participant will at all times be fully (100%) vested in the portion of his or
her account attributable to participant contributions.
The Plan also accepts on behalf of any employee (i) the entire amount of cash
received as a distribution from another qualified trust forming part of a plan
described in section 401(a) of the IRC or from a "rollover" individual
retirement plan described in section 408 of the IRC, but only if the deposit
qualifies as a tax-free rollover as defined in section 402 or (ii) a direct
transfer from another plan qualified under Section 401(a) of the IRC. The Plan
accepts after-tax rollover contributions.
-5-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
For each Plan year, each of the Employers may, at their discretion, make a
contribution to the Plan equal to a percentage of participant before-tax and
after-tax contributions, up to a total of 6% of compensation (as defined in the
Plan document) for each eligible participant. In order to be entitled to the
Employers' contribution, a participant must either (i) be actively employed by
any of the Employers, or on an excused leave of absence (as defined in the Plan
document) on the last day of the Plan year or (ii) have retired, become disabled
(as defined in the Plan), or died while an employee during the Plan year.
Employers' contributions for the 2005 Plan Year and the 2004 Plan Year, which
were made in January 2006 and January 2005, respectively, were invested in
accordance with participant investment elections in effect on the dates of the
contributions.
A participant is fully vested in the portion of his or her account attributable
to Employers' matching contributions as follows: 25% after two years of service;
50% after three years of service; 75% after four years of service; and 100%
after five years of service. In addition, a participant is fully vested in the
portion of his or her account attributable to Company contributions upon the
attainment of normal retirement age (as defined in the Plan document), total
disability (as defined by the Plan document) or death while in the employ of the
Employers or an affiliated company. For Plan purposes, a participant will attain
normal retirement age on the later of his or her 65th birthday or the fifth
anniversary of his or her date of hire.
A participant who terminates employment before he or she is vested will forfeit
nonvested amounts attributable to the Employers' contributions. These forfeited
amounts remain in the Plan and are available to reduce future Employer
contributions. In the 2005 and 2004 Plan Years, forfeitures of $10,391 and
$13,144, respectively, were used to reduce the Employers' contributions. During
the 2005 and 2004 Plan Years, $10,391 and $15,925, respectively,
were forfeited from participants' accounts. As of December 31, 2005 and 2004,
there were $19,674 and $18,812, respectively, of forfeitures remaining in the
Plan.
INVESTMENT FUNDS. A participant may elect to have his or her funds invested in
one or more investment funds. Generally, participants may transfer amounts
between funds at any time with no limit. Participants may change their
investment elections for future contributions at any time. Fidelity Management
Trust Company is the Plan's trustee for all investment assets of the Plan and
qualifies as a party in interest. References to "Fidelity" below refer to
investment funds managed by Fidelity Management and Research Company ("FMR").
In 2004, UGI Utilities performed a review of the Plan's investment strategies,
funds offered, and fund expenses and determined that a simplified core group of
funds combined with a self-directed brokerage option would help participants
achieve their investment objectives at lower costs. As a result of that review,
effective June 1, 2005, 26 of the 31 investment fund options offered at December
31, 2004 were discontinued and, effective February 1, 2005, 11 new fund options
and a self-directed brokerage option were added.
Following are brief descriptions of the investment options available to
participants and the strategies and objectives of each fund. As previously
mentioned, certain fund options were discontinued.
-6-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
Money Market Fund
- - Vanguard Prime Money Market Fund - Institutional Class
This fund is an unaffiliated registered investment company mutual fund which
primarily invests in high-quality, short-term money market instruments,
including certificates of deposit, banker's acceptances, commercial paper, and
other money market instruments. The fund's objective seeks to provide current
income while maintaining a stable share price of $1.
- - Fidelity Cash Reserves Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
invests in U.S. dollar-denominated money market securities and repurchase
agreements, and may enter into reverse repurchase agreements. The fund's
objective is to provide as high a level of current income as is consistent with
the preservation of capital and liquidity.
Managed Income/Stable Investment Funds
- - Vanguard Retirement Savings Trust III
This unaffiliated unregistered stable value investment option primarily invests
in high quality fixed income securities with financial backing from insurance
companies and banks that enable it to seek to maintain a constant $1 per share
net asset value. Investments are chosen based on credit quality, yield,
maturity, and contract provisions. The objective is to provide a stable share
price of $1 and current income consistent with bonds of two to three year
average maturity.
- - Fidelity Managed Income Portfolio II Fund (discontinued)
This fund is an unaffiliated commingled pool whose investments principally
comprise investment contracts issued by insurance companies and financial
institutions and certain types of fixed income securities. The fund's objective
is to preserve principal while earning interest income. Although this fund is
not considered a standard option available for participant contributions, it
still carries a fund balance that is expected to be fully transferred to the
Vanguard Retirement Savings Trust III on or before May 31, 2007.
Fixed Income Funds
- - Fidelity Capital & Income Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
invests mainly in equity and debt securities, including defaulted securities,
with an emphasis on lower-quality debt
-7-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
securities. The fund invests in companies in troubled or uncertain financial
condition and in domestic and foreign issuers. The fund's objective is to
provide income and capital growth.
- - Fidelity U.S. Bond Index Fund
This fund is an unaffiliated registered investment company mutual fund that
principally invests in bonds included in the Lehman Brothers Aggregate Bond
Index. The fund's objective is to provide investment results that correspond to
the total returns of bonds in the Lehman Brothers Aggregate Bond Index.
- - Fidelity Intermediate Bond Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund which
normally invests in investment-grade debt securities of all types and repurchase
agreements, while normally maintaining a dollar-weighted average maturity
between three and ten years. The fund is managed to have similar overall
interest rate risk to the Lehman Brothers Intermediate Government Credit Bond
Index. The fund's objective is to provide a high level of current income.
Balanced Funds
- - Fidelity Balanced Fund (discontinued)
- - Fidelity Puritan Fund (discontinued)
These funds are unaffiliated registered investment company mutual funds that
invest in stocks and other equity securities and bonds and other debt
securities. The funds seek income and capital growth.
Growth and Income Funds
- - Vanguard Institutional Index Fund
This fund is an unaffiliated registered investment company mutual fund which
primarily invests in common stocks included in the Standard & Poor's 500 Index
("S&P 500"), a widely recognized unmanaged index of 500 U.S. common stocks. The
fund's objective is to seek long-term growth of capital and income from
dividends.
- - Fidelity Equity Income Fund
This fund is an unaffiliated registered investment company mutual fund that
principally invests in income-producing equity securities. The fund's objective
is to provide reasonable income while considering the potential for capital
appreciation.
-8-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
- - Fidelity Spartan U.S. Equity Index Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks included in the S&P 500, a widely
recognized, unmanaged index of 500 U.S. common stocks. The fund's objective is
to match the total return of the S&P 500.
- - Fidelity Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks. The fund may also invest a portion of
assets in bonds, including lower-quality debt securities. The fund seeks
long-term capital growth.
- - Fidelity Growth & Income Portfolio (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
normally invests a majority of total assets in common stocks with a focus on
those that pay current dividends and show potential for capital appreciation.
The fund may also invest in bonds, including lower-quality debt securities. The
fund seeks high total return through a combination of current income and capital
appreciation.
- - Fidelity Equity Income II Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in income-producing equity securities. The fund seeks
reasonable income and the potential for capital appreciation.
- - Fidelity Real Estate Investment Portfolio (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in equity securities of companies principally engaged in the
real estate industry both domestic and foreign. The fund seeks above-average
income and long-term capital growth consistent with reasonable risk.
Growth Funds
- - Vanguard Extended Market Index Fund
This fund is an unaffiliated registered investment company mutual fund that
primarily invests in a large sampling of stocks that match certain
characteristics of the S&P 500 Completion Index.
-9-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
The fund seeks to provide the potential for long-term growth of capital as it
matches the performance and risk of the S&P 500 Completion Index.
- - Fidelity Magellan Fund
This fund is an unaffiliated registered investment company mutual fund that
invests primarily in growth and/or value common stocks of domestic and foreign
issuers. The fund seeks capital appreciation.
- - Fidelity Growth Company Fund
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of domestic and foreign issuers that are
expected to have above-average growth potential. The fund seeks capital
appreciation.
- - Fidelity OTC Portfolio (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in securities traded on the NASDAQ or another
over-the-counter ("OTC") market. The fund seeks capital appreciation.
- - Fidelity Capital Appreciation Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of domestic and foreign issuers. The fund
seeks capital appreciation.
- - Fidelity Blue Chip Growth Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of well-known and established companies.
The fund invests in securities of domestic and foreign issuers. The fund seeks
growth of capital over the long term.
- - Fidelity Low-Priced Stock Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks that are priced at or below $35 at time of
investment. The fund seeks capital appreciation.
- - Fidelity Small Cap Independence Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of domestic and foreign issuers with small
market capitalizations. The fund seeks capital appreciation.
-10-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
- - Fidelity Value Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund mutual
fund that principally invests in common stocks of companies that possess
valuable fixed assets or that are believed to be undervalued in relation to the
issuing company's assets, earnings, or growth potential. The fund seeks capital
appreciation.
International Funds
- - Fidelity Spartan International Index Fund
This fund is an unaffiliated registered investment company mutual fund which
primarily invests in common stock of developed markets outside the United States
and Canada. Common stocks included are those that are listed with the Morgan
Stanley Capital International Europe, Australasia, Far East Index ("MSCI EAFE
Index"). The fund's objective is to provide investment results that correspond
to the total returns of foreign stock markets.
- - Fidelity Overseas Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in foreign securities. The fund invests primarily in common
stocks and seeks long-term growth of capital.
- - Fidelity Worldwide Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
invests primarily in common stocks issued anywhere in the world. The fund seeks
capital appreciation.
- - Fidelity International Discovery Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in foreign securities including common stocks. The fund
seeks long-term capital appreciation.
Vanguard Target Retirement Funds
- - Vanguard Target Retirement Income
- - Vanguard Target Retirement 2005
- - Vanguard Target Retirement 2015
- - Vanguard Target Retirement 2025
- - Vanguard Target Retirement 2035
- - Vanguard Target Retirement 2045
These funds are unaffiliated registered investment company mutual funds that
invest in a combination of Vanguard mutual funds according to an asset
allocation strategy that becomes increasingly conservative over time as each
fund's target retirement date approaches. Within five
-11-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
to ten years after the respective fund's targeted retirement date, the fund's
asset allocation should become similar to that of the Vanguard Target Retirement
Income Fund. These funds' investment objectives are to achieve current income
and capital appreciation.
Fidelity Freedom Funds (discontinued)
- - Fidelity Freedom Income Fund
- - Fidelity Freedom 2000 Fund
- - Fidelity Freedom 2010 Fund
- - Fidelity Freedom 2020 Fund
- - Fidelity Freedom 2030 Fund
- - Fidelity Freedom 2040 Fund
These funds are unaffiliated registered investment company mutual funds that
invest in a combination of underlying Fidelity funds according to an asset
allocation strategy that becomes increasingly conservative over time as each
fund's target retirement date approaches. When each of these target retirement
date funds matches the asset allocation of the Fidelity Freedom Income fund
(approximately ten to fifteen years after the respective fund's target
retirement date), it is expected that each fund will be combined with the
Fidelity Freedom Income Fund. These funds' investment objectives are to achieve
high current income and capital appreciation.
Brokerage Link
- - Fidelity Brokerage Link
This option combines a self-directed brokerage account with the employee's
Savings Plan account. The objective of this investment option is to offer a
broader or expanded menu of mutual funds beyond those offered by the Plan.
Employer Stock Fund
- - UGI Common Stock Fund
This fund invests principally in shares of UGI Corporation Common Stock.
Participants in the fund do not individually own specific shares of UGI
Corporation Common Stock but rather own units in the fund that invests in such
shares and short-term investments. The value of a unit in the UGI Common Stock
Fund was initially set at $10.00 and is recalculated daily by dividing the fair
value of the fund's assets (comprising shares of UGI Corporation Common Stock
and temporary cash investments) by the total number of units outstanding.
Generally, participant requests to redeem units from the UGI Common Stock Fund
are processed on the day received if such request is received by Fidelity before
the close of the New York Stock Exchange and provided that there are sufficient
short-term investments in the fund for liquidity. In such case, the participant
will receive the net asset value, or closing price for the units, calculated
using the closing price for UGI Corporation Common Stock on the New York Stock
Exchange for that day. However, on days of unusually heavy requests for sale,
the UGI Common Stock Fund may not have sufficient short-term investments for
liquidity. In such case, requests to sell units received before the close of the
New York Stock Exchange may not be processed on that day at that date's closing
price but may be
-12-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
suspended until sufficient liquidity is restored. Units will be redeemed
generally on a first-in, first-out basis at the closing price for the processing
date. Loans, withdrawals and distributions from the UGI Common Stock Fund will
be given priority over exchanges with other funds.
DISTRIBUTIONS. The Plan benefit of a participant who terminates employment as a
result of retirement or total disability as defined in the Plan document shall
be equal to the proceeds of liquidation of 100% of the balance of his or her
account. Participants may elect to receive their interest in the UGI Common
Stock Fund in the form of shares of UGI Corporation Common Stock. The Plan
benefit of a participant who terminates employment for reasons other than
retirement or total disability shall be equal to the proceeds of liquidation of
the vested portion of his or her account. Where the amount to be distributed
exceeds $5,000, no distribution shall be made to any Plan participant prior to
his or her normal retirement age (as defined in the Plan document) unless the
participant elects to receive such distribution. Where the amount to be
distributed does not exceed $5,000, a Plan participant's benefit will be
distributed as soon as practicable after the participant becomes entitled to
receive a distribution.
A participant who continues to work past age 70 1/2 will receive a distribution
upon termination of employment.
DEATH. If a participant dies prior to receiving a distribution of his or her
account, the participant's designated beneficiary shall be entitled to receive a
lump-sum distribution of the proceeds of liquidation of 100% of the vested
portion of his or her account. Generally, the beneficiary may request a
distribution of the participant's account balance as soon as practicable
following the date of the participant's death. The beneficiary of a participant
who is married at the time of the participant's death will be the participant's
spouse, unless the participant designated another beneficiary and the spouse
consented to such designation in accordance with procedures specified by the
Plan document.
WITHDRAWALS. Generally, a participant may withdraw up to 50% of the balance of
his or her account attributable to after-tax contributions (including after-tax
contributions that were matched by the Employer) at any time. However, the
withdrawal must be in an amount of at least $250. If any portion of the amount
withdrawn is attributable to contributions that were matched by the Employers,
the participant's participation in the Plan will be suspended for the
three-month period following the withdrawal. No more than one withdrawal in any
calendar year is permitted from each of the matched and unmatched portions of a
participant's after-tax contribution account.
A participant may withdraw before-tax contributions (and earnings attributable
thereto credited as of December 31, 1988) and rollover contributions, only on
account of financial hardship resulting from (i) medical expenses as defined in
section 213(d) of the IRC; (ii) educational expenses for the next twelve months
of post-secondary education of the participant, or his or her spouse, children
or dependents; (iii) foreclosure on a primary residence; or (iv) costs directly
related to the purchase of a primary residence. A hardship withdrawal will be
permitted if the Plan Administrator determines that (i) the withdrawal is on
account of an immediate and heavy financial need of the participant and (ii) the
withdrawal is necessary to satisfy such financial need. A participant's
participation in the Plan is suspended for the six-month period following a
hardship withdrawal.
-13-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
While a participant is still employed by any of the Employers, withdrawals of
amounts attributable to Employer's contributions and post-1988 earnings on
participant before-tax contributions, are not permitted.
LOAN PROVISION. The Plan includes an employee loan provision. Generally, at the
time a loan is to be made, the amount of all loans to be outstanding may not
exceed the lesser of (i) 50% of a participant's before-tax and rollover account
balances, or (ii) $50,000 less the highest balance of any loan during the prior
twelve-month period. Each loan bears interest at a rate determined in accordance
with generally prevailing market conditions for similar types of loans. The
minimum loan amount is $1,000. The amount of the loan withdrawn from a
participant's account is allocated in proportion to the value of the
participant's salary deferral and rollover account balances in each investment
fund. Repayments, including interest, are made in equal installments through
payroll deductions and are allocated to participant accounts in accordance with
current investment elections. No loan may have a final maturity in excess of
five years except that, if the loan is used to purchase a principal residence
for the participant, the loan may have a final maturity of up to ten years. No
participant shall be permitted to have more than two loans outstanding at any
one time.
ADMINISTRATIVE EXPENSES. Administrative expenses of the Plan are chargeable to
the Plan unless paid for by the Employers. The Employers currently pay such
expenses. Loan administration and withdrawal fees are paid by participants.
Mutual fund expenses are paid to fund managers from mutual fund assets.
PLAN TERMINATION. Although it has not expressed any intent to do so, UGI
Utilities has the right to terminate the Plan in whole or in part at any time
for any reason. In the event of a complete or partial termination of the Plan,
the affected participants will become fully vested in their account balances.
PLAN AMENDMENT. UGI Utilities may amend the Plan at any time for any reason by
written action of its Board of Directors. Amendments required to comply with the
IRC to maintain compliance with current laws or regulations or to correct errors
or omissions in the Plan document, however, may be made by the Retirement
Committee without Board approval.
VOTING RIGHTS OF UGI COMMON STOCK FUND PARTICIPANTS. A participant has the right
to instruct the trustee of the Plan how to vote, at each meeting of
shareholders, all shares of UGI Corporation Common Stock (including fractional
shares) represented by the value of the participant's interest in the UGI Common
Stock Fund. A participant also has the right to direct the trustee of the Plan
whether or not to tender shares in response to a tender offer.
2. ACCOUNTING POLICIES
The accompanying financial statements are prepared on the accrual basis of
accounting.
-14-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
The Plan's investments in registered investment company mutual funds are valued
at quoted market prices which represent the net asset value of shares held by
the Plan. Investment contracts included in the Fidelity Managed Income Portfolio
II fund, an unaffiliated commingled pool, and Vanguard Retirement Savings Trust
III are carried at contract value which represents deposits plus accrued
interest. The Plan Administrator believes contract value approximates fair
value. Shares of UGI Common Stock included in the UGI Common Stock Fund are
reflected at fair value based upon quoted market prices.
Dividend income is recorded on the record date. Interest earned on investments
is recorded on the accrual basis. Purchases and sales of securities are recorded
on a trade date basis.
The Plan presents in the Statements of Changes in Net Assets Available for
Benefits the net appreciation or depreciation in fair value of investments which
consists of realized gains or losses and unrealized appreciation or depreciation
in the fair value of those investments.
Distributions are made to Plan participants based upon the fair value of each
participant's investment account (except for investments of the Fidelity Managed
Income Portfolio II Fund and Vanguard Retirement Savings Trust III for which
distributions are based upon contract value and except for distributions from
the UGI Common Stock Fund, to the extent not all shares are sold on the same
date) as of the dates of the distribution. Distributions to participants are
recorded when paid.
Transfers of participant balances represent amounts transferred to or from the
AmeriGas Propane, Inc. Savings Plan and the UGI HVAC Enterprises, Inc. Savings
Plan, which are affiliated plans.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Plan Administrator to make
estimates and assumptions that affect the reported amounts of net assets
available for benefits and changes therein. Actual results could differ from
these estimates.
In December 2005, the FASB issued FASB Staff Position 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 ("FSP"). This FSP
amends the guidance in AICPA SOP 94-4, Reporting of Investment Contracts Held by
Health and Welfare Benefit Plans and Defined-Contribution Pension Plans, with
respect to the definition of the fully benefit-responsive and the presentation
and disclosure of fully benefit-responsive investment contracts. The financial
statement presentation and disclosure guidance in the FSP requires fully
benefit-responsive investment contracts to be presented at fair value in the
statements of net assets available for benefits with an additional single line
item that adjusts the net assets attributable to the contracts to contract
value. The FSP is effective for financial statements for the plan years ending
after December 15, 2006. The Plan intends to adopt the financial presentation
and disclosure guidance in the FSP in the financial statements for the plan year
ending December 31, 2006.
-15-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRUST INVESTMENTS
The components of trust investments by fund at December 31, 2005 and 2004 are as
follows:
December 31,
-------------------------
2005 2004
----------- -----------
Fidelity Cash Reserves Fund (shares -- 0 and 4,034,108, respectively) $ -- $ 4,034,108
Fidelity Managed Income Portfolio II Fund (shares -- 6,236,947 and
11,309,472, respectively) 6,236,947* 11,309,472*
Fidelity Intermediate Bond Fund (shares -- 0 and 132,993, respectively) -- 1,399,090
Fidelity Capital and Income Fund (shares -- 0 and 71,593, respectively) -- 606,388
Fidelity U.S. Bond Index Fund (shares -- 326,064 and 97,245, respectively) 3,554,102 1,083,311
Fidelity Balanced Fund (shares -- 0 and 28,984, respectively) -- 516,488
Fidelity Puritan Fund (shares -- 0 and 33,109, respectively) -- 627,407
Fidelity Spartan U.S. Equity Index Fund (shares -- 0 and 77,875, respectively) -- 3,337,733
Fidelity Equity Income Fund (shares -- 218,966 and 212,690, respectively) 11,557,023* 11,225,752*
Fidelity Fund (shares -- 0 and 62,292, respectively) -- 1,861,291
Fidelity Growth & Income Portfolio (shares -- 0 and 16,871, respectively) -- 644,633
Fidelity Equity Income II Fund (shares -- 0 and 33,945, respectively) -- 815,030
Fidelity Real Estate Investment Portfolio (shares -- 0 and 39,956, respectively) -- 1,180,313
Fidelity Magellan Fund (shares -- 145,402 and 165,408, respectively) 15,476,581* 17,167,665*
Fidelity Growth Company Fund (shares -- 57,243 and 57,023, respectively) 3,642,382 3,197,276
Fidelity OTC Portfolio (shares -- 0 and 31,592, respectively) -- 1,095,938
Fidelity Capital Appreciation Fund (shares -- 0 and 21,438, respectively) -- 558,031
Fidelity Blue Chip Growth Fund (shares -- 0 and 30,057, respectively) -- 1,253,683
Fidelity Low-Priced Stock Fund (shares -- 0 and 65,952, respectively) -- 2,654,578
Fidelity Small Cap Independence Fund (shares -- 0 and 28,667, respectively) -- 565,304
Fidelity Value Fund (shares -- 0 and 20,452, respectively) -- 1,457,991
Fidelity Overseas Fund (shares -- 0 and 33,149, respectively) -- 1,172,806
Fidelity Worldwide Fund (shares -- 0 and 13,389, respectively) -- 244,346
Fidelity International Discovery Fund (shares -- 0 and 16,935, respectively) -- 477,578
Fidelity Freedom Income Fund (shares -- 0 and 10,706, respectively) -- 120,662
Fidelity Freedom 2000 Fund (shares -- 0 and 6,025, respectively) -- 72,784
-16-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRUST INVESTMENTS (CONTINUED)
December 31,
-------------------------
2005 2004
----------- -----------
Fidelity Freedom 2010 Fund (shares -- 0 and 156,434, respectively) -- 2,130,631
Fidelity Freedom 2020 Fund (shares -- 0 and 76,232, respectively) -- 1,064,201
Fidelity Freedom 2030 Fund (shares -- 0 and 21,064, respectively) -- 296,586
Fidelity Freedom 2040 Fund (shares -- 0 and 10,038, respectively) -- 83,018
Vanguard Institutional Index Fund (shares -- 74,059 and 0, respectively) 8,443,510* --
Vanguard Retirement Savings Trust III (shares -- 4,245,123 and 0, respectively) 4,245,123 --
Vanguard Prime Money Market Fund (shares -- 4,372,177 and 0, respectively) 4,372,177 --
Vanguard Target Retirement Income Fund (shares -- 25,293 and 0, respectively) 264,058 --
Vanguard Target Retirement 2005 Fund (shares -- 10,288 and 0, respectively) 112,457 --
Vanguard Target Retirement 2015 Fund (shares -- 321,608 and 0, respectively) 3,685,622 --
Vanguard Target Retirement 2025 Fund (shares -- 244,392 and 0, respectively) 2,876,489 --
Vanguard Target Retirement 2035 Fund (shares -- 47,798 and 0, respectively) 585,998 --
Vanguard Target Retirement 2045 Fund (shares -- 10,496 and 0, respectively) 131,929 --
Vanguard Extended Market Index Fund (shares -- 172,341 and 0, respectively) 5,909,575* --
Fidelity Spartan International Index Fund (shares -- 75,183 and 0, respectively) 2,686,292 --
Fidelity Brokerage Link (shares -- 3,277,842 and 0, respectively) 3,277,842 --
UGI Common Stock Fund
UGI Corporation Unitized Stock Fund (units -- 495,162 and 395,936,
respectively) 12,829,660* 10,183,467*
Dividends receivable 102,863 76,139
----------- -----------
12,932,523 10,259,606
----------- -----------
Total trust investments - fair value, except for group annuity contracts
included in the Fidelity Managed Income Portfolio II Fund and Vanguard
Retirement Savings Trust III are carried at contract value $89,990,630 $82,513,700
=========== ===========
Total trust investments - cost $82,085,780 $73,589,221
=========== ===========
* - Investment represents five percent or more of net assets available for
benefits.
The net appreciation (depreciation) in fair value of investments during the
years ended December 31, 2005 and 2004 by major investment category follows:
Years ended December
31,
-----------------------
2005 2004
---------- ----------
Investment company mutual funds $2,250,812 $3,684,324
UGI Common Stock Fund (438,191) 1,681,937
---------- ----------
Total net appreciation in fair value $1,812,621 $5,366,261
========== ==========
-17-
UGI UTILITIES, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
During the 2005 and 2004 Plan Years, the Plan purchased, at market prices,
33,536 and 32,346 shares (which reflects UGI's 2-for-1 Common Stock split that
occurred in May 2005) of UGI Corporation Common Stock directly from UGI
Corporation for $796,848 and $546,141, respectively.
The investments of the separate investment funds are exposed to various risks
such as interest rate, market and credit risk. The degree and concentration of
these risks vary by fund. Due to the level of risk associated with the separate
investment funds, it is reasonably possible that changes in risk in the near
term could materially affect participants' account balances and the amounts
reported in the Statements of Net Assets Available for Benefits and the
Statements of Changes in Net Assets Available for Benefits.
4. FEDERAL INCOME TAX STATUS
On December 6, 2002, the Internal Revenue Service issued a favorable
determination letter concerning the qualified status of the Plan in effect as of
November 27, 2002 under Section 401(a) of the IRC. The Plan Administrator
believes that the Plan is designed and is currently being operated in compliance
with the applicable requirements of the IRC. No U.S. income taxes are required
to be paid by the trust created under the Plan (the "Trust") and participants
are not taxed on Employers' contributions to the Trust or income earned by the
Trust. When a participant, or his or her beneficiary or estate, receives a
distribution under the Plan, the taxability of the value of such distribution
depends on the form and time of payment.
-18-
UGI UTILITIES, INC.
SAVINGS PLAN
Item 4(i) - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2005
--------------------------------------------
Number of
Shares or Fair Value/
Principal Contract
NAME OF ISSUER AND TITLE OF ISSUE Amount Cost Value
- --------------------------------- ---------------- ----------- -----------
FIDELITY MANAGED INCOME
PORTFOLIO II FUND (1) (2) 6,236,947 shrs 6,236,947 6,236,947
FIDELITY U.S. BOND INDEX FUND (2) 326,064 shrs 3,614,828 3,554,102
FIDELITY EQUITY INCOME FUND (1) (2) 218,966 shrs 10,195,318 11,557,023
FIDELITY MAGELLAN FUND (1) (2) 145,402 shrs 14,223,230 15,476,581
FIDELITY GROWTH COMPANY FUND (2) 57,243 shrs 3,413,765 3,642,382
VANGUARD INSTITUTIONAL INDEX FUND (1) (2) 74,059 shrs 8,108,524 8,443,510
VANGUARD RETIREMENT SAVINGS TRUST III (2) 4,245,123 shrs 4,245,123 4,245,123
VANGUARD PRIME MONEY MARKET FUND (2) 4,372,177 shrs 4,372,177 4,372,177
VANGUARD TARGET RETIREMENT INCOME FUND (2) 25,293 shrs 266,765 264,058
VANGUARD TARGET RETIREMENT 2005 FUND (2) 10,288 shrs 112,495 112,457
VANGUARD TARGET RETIREMENT 2015 FUND (2) 321,608 shrs 3,609,761 3,685,622
VANGUARD TARGET RETIREMENT 2025 FUND (2) 244,392 shrs 2,793,047 2,876,489
VANGUARD TARGET RETIREMENT 2035 FUND (2) 47,798 shrs 560,100 585,998
VANGUARD TARGET RETIREMENT 2045 FUND (2) 10,496 shrs 125,570 131,929
VANGUARD EXTENDED MARKET INDEX FUND (1) (2) 172,341 shrs 5,367,393 5,909,575
FIDELITY SPARTAN INTERNATIONAL INDEX FUND (2) 75,183 shrs 2,379,755 2,686,292
FIDELITY BROKERAGE LINK (2) 3,277,842 shrs 3,122,850 3,277,842
UGI COMMON STOCK FUND (1) (2)
UGI Corporation Unitized Stock Fund 495,162 units 9,235,269 12,829,660
Dividends receivable $ 102,863 102,863 102,863
----------- -----------
9,338,132 12,932,523
----------- -----------
PARTICIPANT LOANS
Loan principal outstanding (5.0% - 10.5%) (2) (3) -- 2,152,710
----------- -----------
Total - all funds $82,085,780 $92,143,340
=========== ===========
- ----------
(1) Investment represents 5% or more of the net assets available for benefits.
(2) Party in interest.
(3) Range of interest rates for loans outstanding as of December 31, 2005
-19-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
EIN #23-2786294 PLAN NUMBER 002
FINANCIAL STATEMENTS
for the years ended December 31, 2005 and 2004
AMERIGAS PROPANE, INC.
SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS
Page(s)
-------
Report of Independent Registered Public Accounting Firm 2
Financial Statements:
Statements of Net Assets Available for Benefits at December 31,
2005 and 2004 3
Statements of Changes in Net Assets Available for Benefits for the
years ended December 31, 2005 and 2004 4
Notes to Financial Statements 5 - 20
Item 4(i) - Schedule of Assets (Held at End of Year) 21
All other schedules to be filed with the Department of Labor in accordance with
the Employee Retirement Income Security Act of 1974 are not applicable and have
been omitted.
-1-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Plan Administrator of
AmeriGas Propane, Inc. Savings Plan
We have audited the accompanying statements of net assets available for benefits
of AmeriGas Propane, Inc. Savings Plan as of December 31, 2005 and 2004, and the
related statements of changes in net assets available for benefits for the years
then ended. 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. 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 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, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of AmeriGas
Propane, Inc. Savings Plan as of December 31, 2005 and 2004, and changes in its
net assets available for benefits for the years then ended, in conformity with
accounting principles generally accepted in the United States.
Our audits were performed 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 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
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
Morison Cogen LLP
Bala Cynwyd, Pennsylvania
June 15, 2006
AMERIGAS PROPANE, INC.
SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
---------------------------
2005 2004
------------ ------------
Investments (Note 3) $187,977,696 $181,382,040
Loans to participants 4,563,331 4,446,501
------------ ------------
Net assets available for benefits $192,541,027 $185,828,541
============ ============
See accompanying notes to financial statements.
-3-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended December 31,
---------------------------
2005 2004
------------ ------------
Participants' contributions $ 10,312,761 $ 10,260,599
Participants' rollover contributions 639,066 811,025
Company contributions 6,433,048 6,586,607
Investment income:
Dividends 5,703,173 4,632,295
Net appreciation in value of investments 4,124,967 10,449,299
Administration fees (46,108) (49,630)
Other, primarily interest on loans 249,392 226,487
Net transfers of participants' balances (1,200,491) (415,447)
Distributions to participants (19,503,322) (17,511,141)
------------ ------------
Net increase 6,712,486 14,990,094
Net assets available for benefits - beginning of year 185,828,541 170,838,447
------------ ------------
Net assets available for benefits - end of year $192,541,027 $185,828,541
============ ============
See accompanying notes to financial statements.
-4-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE PLAN
The following brief description of the AmeriGas Propane, Inc. Savings Plan
("Plan") provides general information on the provisions of the Plan in effect on
December 31, 2005 and during the periods covered by the financial statements.
More complete information is included in the Plan document.
GENERAL. The Plan is a defined contribution plan covering employees of AmeriGas
Propane, Inc. (a Pennsylvania corporation, hereinafter referred to as "the
Company"). Employees are eligible upon hire to participate in the Plan. The Plan
also holds assets of certain defined contribution pension plans that were
terminated in prior years and were merged into the Plan. Such assets include
what is referred to as the "Pension Account" and "Predecessor Pension Rollover
Account" and do not impact the general provisions of the Plan. The Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). The Plan is administered by the AmeriGas Propane,
Inc. Benefits Committee ("Plan Administrator"), whose members are appointed by
the President of the Company and subject to approval by the Compensation/Pension
Committee of the Company's Board of Directors.
CONTRIBUTIONS. A participant may elect to contribute to the Plan on a before-tax
basis through payroll reduction an amount equal to from 1% to 50%, in whole
percentages, of eligible compensation. Calendar year contribution amounts are
subject to limits prescribed by the Internal Revenue Code ("IRC"). For the 2005
and 2004 Plan Years, the IRC before-tax contribution limits were $14,000 and
$13,000, respectively. A participant may increase, reduce or suspend his or her
contributions at any time by contacting Fidelity Institutional Retirement
Services Co. ("FIRSCO").
The Plan allows for "catch-up contributions". The catch-up contribution
provision allows certain employees to make before-tax contributions over and
above the IRS and Plan limits. In order to be eligible to make catch-up
contributions, employees must be at least 50 years of age before the end of the
calendar year and must be contributing the IRC or Plan limit. The maximum
catch-up contribution for the 2005 Plan Year and 2004 Plan Year was $4,000 and
$3,000, respectively, which amount shall increase $1,000 per year through 2006.
Catch-up contributions are not eligible for the Company matching contribution
(as described below).
The Plan also accepts on behalf of any employee (i) the entire amount of cash
received as a distribution from another qualified trust forming part of a plan
described in Section 401(a) of the IRC or from a "rollover" individual
retirement plan described in Section 408 of the IRC, but only if the deposit
qualifies as a tax free rollover as defined in section 402 or (ii) a direct
transfer from another plan qualified under Section 401(a) of the IRC. The Plan
accepts rollovers from after-tax contributions.
Generally the Company shall contribute to the Plan an amount equal to 100% of
contributions made by each eligible participant for each payroll period up to a
total of 5% of the participant's eligible compensation for each such payroll
period. A participant will be eligible to receive matching contributions after
he or she has completed a year of service as defined in the Plan document.
-5-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
The Company may also make profit-sharing contributions for each Plan year, out
of its net profits, as shall be determined by its Board of Directors, in its
sole discretion, to all eligible participants. A participant will be eligible to
receive profit sharing contributions if he or she (i) has completed one year of
service with the Company or an affiliate; (ii) was not eligible to participate
in the AmeriGas Propane, Inc. Supplemental Executive Retirement Plan as of the
last day of a Plan year; and (iii) either (a) remained in the employ of the
Company through the end of the Plan year as of which such contribution is to be
allocated; (b) retired, experienced total disability (as defined in the Plan
document), or died while in service during the Plan year; or (c) was on an
excused absence (as defined in the Plan document) at the end of the Plan year.
Subject to certain limitations, the profit sharing contribution to be credited
to a participant's account shall be allocated as of the last day of the Plan
year by dividing the total amount of such contribution by the number of eligible
Plan participants. No such amounts were contributed to the Plan in respect of
the 2005 Plan Year or the 2004 Plan Year.
Any participant who (i) was a participant in the former Retirement Income Plan
for Employees of AP Propane, Inc. as of December 31, 1988; and (ii) had attained
the age of 50 as of that date, is entitled to an additional contribution as of
the last day of each Plan year as follows:
Age as of Percentage of
December 31, 1988 Eligible Compensation
- ----------------- ---------------------
50 to 54 2%
55 to 59 3%
60 and over 4%
All contributions are invested in accordance with participant investment
elections in effect on the dates of the contributions.
A participant will at all times be fully (100%) vested in the portion of his or
her account attributable to the following sources: (i) Predecessor Account; (ii)
Predecessor Pension Rollover Account; (iii) Rollover/Dollar Builder Account;
(vi) Rollover ESOP Account; (v) Salary Deferral Account; (vi) the Voluntary
Participant Contribution Account; and (vii) the After-Tax Rollover Account, each
as defined in the Plan document. A participant is vested in the portion of his
or her account attributable to Company contributions as follows: 25% after two
years of service; 50% after three years of service; 75% after four years of
service; and 100% after five years of service. In addition, a participant is
fully vested in the portion of his or her account attributable to Company
contributions upon the attainment of normal retirement age (as defined in the
Plan document), the attainment of early retirement age (as defined in the Plan
document), total disability (as defined in the Plan document) or death while in
the employ of the Company or an affiliated company. For Plan purposes, a
participant will attain normal retirement age on the later of his or her 65th
birthday or the fifth anniversary of his or her date of hire with the Company or
an affiliate. A participant will attain early retirement age on or after his
attainment of age 55 and the completion of 10 years of service with the Company
or an affiliate.
-6-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
A participant who terminates employment before he or she is fully vested will
forfeit nonvested amounts attributable to Company contributions. These forfeited
amounts remain in the Plan and are available to reduce future Company
contributions. For the 2005 Plan Year and 2004 Plan Year, forfeitures of
$286,590 and $194,482, respectively, were used to reduce Company contributions.
During the 2005 Plan Year and 2004 Plan Year, $840,848 and $238,222,
respectively, were forfeited from participant accounts. As of December 31, 2005
and 2004, there were $720,399 and $163,349, respectively, of forfeitures
remaining in the Plan.
INVESTMENT FUNDS. A participant may elect to have his or her funds invested in
one or more investment funds. Generally, participants may transfer amounts
between funds at any time with no limit. Participants may change their
investment elections for future contributions at any time. Fidelity Management
Trust Company is the Plan's trustee for all investment assets of the Plan and
qualifies as a party in interest. References to "Fidelity" below refer to
investment funds managed by Fidelity Management and Research Company ("FMR").
In 2004, the Company performed a review of the Plan's investment strategies,
funds offered, and fund expenses and determined that a simplified core group of
funds combined with a self-directed brokerage option would help participants
achieve their investment objectives at lower costs. As a result of that review,
effective June 1, 2005, 26 of the 31 investment fund options offered at December
31, 2004 were discontinued and, effective February 1, 2005, 11 new fund options
and a self-directed brokerage option were added.
Following are brief descriptions of the investment options available to
participants and the strategies and objectives of each fund. As previously
mentioned, certain fund options were discontinued.
Money Market Fund
- - Vanguard Prime Money Market Fund - Institutional Class
This fund is an unaffiliated registered investment company mutual fund which
primarily invests in high-quality, short-term money market instruments,
including certificates of deposit, banker's acceptances, commercial paper, and
other money market instruments. The fund's objective seeks to provide current
income while maintaining a stable share price of $1.
- - Fidelity Cash Reserves Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
invests in U.S. dollar-denominated money market securities and repurchase
agreements, and may enter into reverse repurchase agreements. The fund's
objective is to provide as high a level of current income as is consistent with
the preservation of capital and liquidity.
Managed Income/Stable Investment Funds
-7-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
- - Vanguard Retirement Savings Trust III
This unaffiliated unregistered stable value investment option primarily invests
in high quality fixed income securities with financial backing from insurance
companies and banks that enable it to seek to maintain a constant $1 per share
net asset value. Investments are chosen based on credit quality, yield,
maturity, and contract provisions. The objective is to provide a stable share
price of $1 and current income consistent with bonds of two to three year
average maturity.
- - Fidelity Managed Income Portfolio II Fund (discontinued)
This fund is an unaffiliated commingled pool whose investments principally
comprise investment contracts issued by insurance companies and financial
institutions and certain types of fixed income securities. The fund's objective
is to preserve principal while earning interest income. Although this fund is
not considered a standard option available for participant contributions, it
still carries a fund balance that is expected to be fully transferred to the
Vanguard Retirement Savings Trust III on or before May 31, 2007.
Fixed Income Funds
- - Fidelity Capital & Income Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
invests mainly in equity and debt securities, including defaulted securities,
with an emphasis on lower-quality debt securities. The fund invests in companies
in troubled or uncertain financial condition and in domestic and foreign
issuers. The fund's objective is to provide income and capital growth.
- - Fidelity U.S. Bond Index Fund
This fund is an unaffiliated registered investment company mutual fund that
principally invests in bonds included in the Lehman Brothers Aggregate Bond
Index. The fund is objective is to provide investment results that correspond to
the total returns of bonds in the Lehman Brothers Aggregate Bond Index.
- - Fidelity Intermediate Bond Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund which
normally invests in investment-grade debt securities of all types and repurchase
agreements, while normally maintaining a dollar-weighted average maturity
between three and ten years. The fund is managed to have
-8-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
similar overall interest rate risk to the Lehman Brothers Intermediate
Government Credit Bond Index. The fund's objective is to provide a high level of
current income.
Balanced Funds
- - Fidelity Balanced Fund (discontinued)
- - Fidelity Puritan Fund (discontinued)
These funds are unaffiliated registered investment company mutual funds that
invest in stocks and other equity securities and bonds and other debt
securities. The funds seek income and capital growth.
Growth and Income Funds
- - Vanguard Institutional Index Fund
This fund is an unaffiliated registered investment company mutual fund which
primarily invests in common stocks included in the Standard & Poor's 500 Index
("S&P 500"), a widely recognized unmanaged index of 500 U.S. common stocks. The
fund's objective is to seek long-term growth of capital and income from
dividends.
- - Fidelity Equity Income Fund
This fund is an unaffiliated registered investment company mutual fund that
principally invests in income-producing equity securities. The fund's objective
is to provide reasonable income while considering the potential for capital
appreciation.
- - Fidelity Spartan U.S. Equity Index Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks included in the S&P 500, a widely
recognized, unmanaged index of 500 U.S. common stocks. The fund's objective is
to match the total return of the S&P 500.
- - Fidelity Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks. The fund may also invest a portion of
assets in bonds, including lower-quality debt securities. The fund seeks
long-term capital growth.
-9-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
- - Fidelity Growth & Income Portfolio (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
normally invests a majority of total assets in common stocks with a focus on
those that pay current dividends and show potential for capital appreciation.
The fund may also invest in bonds, including lower-quality debt securities. The
fund seeks high total return through a combination of current income and capital
appreciation.
- - Fidelity Equity Income II Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in income-producing equity securities. The fund seeks
reasonable income and the potential for capital appreciation.
- - Fidelity Real Estate Investment Portfolio (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in equity securities of companies principally engaged in the
real estate industry both domestic and foreign. The fund seeks above-average
income and long-term capital growth consistent with reasonable risk.
Growth Funds
- - Vanguard Extended Market Index Fund
This fund is an unaffiliated registered investment company mutual fund that
primarily invests in a large sampling of stocks that match certain
characteristics of the S&P 500 Completion Index. The fund seeks to provide the
potential for long-term growth of capital as it matches the performance and risk
of the S&P 500 Completion Index.
- - Fidelity Magellan Fund
This fund is an unaffiliated registered investment company mutual fund that
invests primarily in growth and/or value common stocks of domestic and foreign
issuers. The fund seeks capital appreciation.
- - Fidelity Growth Company Fund
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of domestic and foreign issuers that are
expected to have above-average growth potential. The fund seeks capital
appreciation.
-10-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
- - Fidelity OTC Portfolio (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in securities traded on the NASDAQ or another
over-the-counter ("OTC") market. The fund seeks capital appreciation.
- - Fidelity Capital Appreciation Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of domestic and foreign issuers. The fund
seeks capital appreciation.
- - Fidelity Blue Chip Growth Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of well-known and established companies.
The fund invests in securities of domestic and foreign issuers. The fund seeks
growth of capital over the long term.
- - Fidelity Low-Priced Stock Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks that are priced at or below $35 at time of
investment. The fund seeks capital appreciation.
- - Fidelity Small Cap Independence Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of domestic and foreign issuers with small
market capitalizations. The fund seeks capital appreciation.
- - Fidelity Value Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in common stocks of companies that possess valuable fixed
assets or that are believed to be undervalued in relation to the issuing
company's assets, earnings, or growth potential. The fund seeks capital
appreciation.
International Funds
- - Fidelity Spartan International Index Fund
-11-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
This fund is an unaffiliated registered investment company mutual fund which
primarily invests in common stock of developed markets outside the United States
and Canada. Common stocks included are those that are listed with the Morgan
Stanley Capital International Europe, Australasia, Far East Index ("MSCI EAFE
Index"). The fund's objective is to provide investment results that correspond
to the total returns of foreign stock markets.
- - Fidelity Overseas Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in foreign securities. The fund invests primarily in common
stocks and seeks long-term growth of capital.
- - Fidelity Worldwide Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
invests primarily in common stocks issued anywhere in the world. The fund seeks
capital appreciation.
- - Fidelity International Discovery Fund (discontinued)
This fund is an unaffiliated registered investment company mutual fund that
principally invests in foreign securities including common stocks. The fund
seeks long-term capital appreciation.
Vanguard Target Retirement Funds
- - Vanguard Target Retirement Income
- - Vanguard Target Retirement 2005
- - Vanguard Target Retirement 2015
- - Vanguard Target Retirement 2025
- - Vanguard Target Retirement 2035
- - Vanguard Target Retirement 2045
These funds are unaffiliated registered investment company mutual funds that
invest in a combination of Vanguard mutual funds according to an asset
allocation strategy that becomes increasingly conservative over time as each
fund's target retirement date approaches. Within five to ten years after the
respective fund's targeted retirement date, the fund's asset allocation should
become similar to that of the Vanguard Target Retirement Income Fund. These
funds' investment objectives are to achieve current income and capital
appreciation.
Fidelity Freedom Funds (discontinued)
- - Fidelity Freedom Income Fund
-12-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
- - Fidelity Freedom 2000 Fund
- - Fidelity Freedom 2010 Fund
- - Fidelity Freedom 2020 Fund
- - Fidelity Freedom 2030 Fund
- - Fidelity Freedom 2040 Fund
These funds are unaffiliated registered investment company mutual funds that
invest in a combination of underlying Fidelity funds according to an asset
allocation strategy that becomes increasingly conservative over time as each
fund's target retirement date approaches. When each of these target retirement
date funds matches the asset allocation of the Fidelity Freedom Income Fund
(approximately ten to fifteen years after the respective fund's target
retirement date), it is expected that each fund will be combined with the
Fidelity Freedom Income Fund. These funds' investment objectives are to achieve
high current income and capital appreciation.
Brokerage Link
- - Fidelity Brokerage Link
This option combines a self-directed brokerage account with the employee's
Savings Plan account. The objective of this investment option is to offer a
broader or expanded menu of mutual funds beyond those offered by the Plan.
Employer Stock Fund
- - UGI Common Stock Fund
This fund invests principally in shares of UGI Corporation Common Stock.
Participants in the fund do not individually own specific shares of UGI
Corporation Common Stock but rather own units in the fund that invests in such
shares and short-term investments. The value of a unit in the UGI Common Stock
Fund was initially set at $10.00 and is recalculated daily by dividing the fair
value of the fund's assets (comprising shares of UGI Corporation Common Stock
and temporary cash investments) by the total number of units outstanding.
Generally, participant requests to redeem units from the UGI Common Stock Fund
are processed on the day received if such request is received by Fidelity before
the close of the New York Stock Exchange and provided that there are sufficient
short-term investments in the fund for liquidity. In such case, the participant
will receive the net asset value, or closing price for the units calculated
using the closing price for UGI Corporation Common Stock on the New York Stock
Exchange for that day. However, on days of unusually heavy requests for sale,
the UGI Common Stock Fund may not have sufficient short-term investments for
liquidity. In such case, requests to sell units received before the close of the
New York Stock Exchange may not be processed on that day at that date's closing
price but may be suspended until sufficient liquidity is restored. Units will be
redeemed generally on a first-in, first-out basis at the closing price for the
processing date. Loans, withdrawals and distributions from the UGI Common Stock
Fund will be given priority over exchanges with other funds.
-13-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
DISTRIBUTIONS. The Plan benefit of a participant who terminates employment as a
result of retirement, death or total disability, as defined by the Plan
document, shall be equal to the proceeds of liquidation of 100% of the balance
of his or her account. Participants may elect to receive their interest in the
UGI Common Stock Fund in the form of shares of UGI Corporation Common Stock. The
Plan benefit of a participant who terminates employment for reasons other than
retirement, death or total disability shall be equal to the proceeds of
liquidation of the vested portion of his or her account.
Distributions will generally be made in the form of a lump sum. If the value of
a participant's account exceeds $1,000 and the participant is married, the
participant's Pension Account and Predecessor Pension Rollover Account will be
distributed in the form of a joint and survivor annuity. Under a joint and
survivor annuity, the participant will receive a monthly benefit for his or her
lifetime and upon the participant's death, the participant's surviving spouse,
if any, will receive a monthly benefit equal to 50% of the benefit the
participant was receiving. If the value of the participant's account exceeds
$1,000 and the participant is not married, the participant's Pension Account and
Predecessor Pension Rollover Account will be distributed in the form of a single
life annuity. In lieu of a joint and survivor annuity or a single life annuity,
a participant may generally elect to receive his or her Pension Account and
Predecessor Pension Rollover Account in the form of (i) a lump sum; (ii) a
single life annuity; (iii) a joint and survivor annuity with 50% or 100% of the
participant's monthly payments continuing, after the participant's death, for
the life of the participant's beneficiary; or (iv) installments over 5 or 10
years, as elected by the participant. Any such election will be subject to
spousal consent, if applicable.
Where the amount to be distributed exceeds $1,000, no distribution shall be made
to any Plan participant prior to his or her normal retirement age unless the
participant elects to receive such distribution. Where the amount to be
distributed does not exceed $1,000 a Plan participant's benefit will be
distributed as soon as practicable after the participant becomes entitled to
receive a distribution from the Plan.
Distributions must generally be made as soon as practicable after the
participant reaches the normal retirement age as defined in the Plan Document.
DEATH. If a participant dies prior to receiving a distribution of his or her
account, the participant's designated beneficiary shall be entitled to receive a
lump-sum distribution of the proceeds of liquidation of 100% of the vested
portion of his or her account. Generally, the beneficiary may request a
distribution of the participant's account balance as soon as practicable
following the date of the participant's death. The beneficiary of a participant
who is married at the time of the participant's death will be the participant's
spouse, unless the participant designated another beneficiary and the spouse
consented to such designation in accordance with procedures specified by the
Plan document.
Death benefits are generally paid in the form of a lump sum. Death benefits
payable to a spouse from the Pension Account and the Predecessor Pension
Rollover Account are paid in the form of a single life annuity unless the spouse
elects a lump sum distribution.
-14-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
WITHDRAWALS. Generally, a participant may withdraw up to 50% of the balance of
his or her account attributable to previously permitted after-tax contributions
(including after-tax contributions that were matched by the Company) at any
time. However, the withdrawal must be in an amount of at least $250. No more
than one withdrawal is permitted in any calendar year.
A participant may withdraw once per calendar year up to 100% of amounts
attributable to participation in certain "predecessor plans" and rollover
contributions from other 401(a) or individual retirement plan accounts, however
the amount must be at least $500 or, if less, the total value of the applicable
account.
A participant may withdraw before-tax contributions (and earnings attributable
thereto credited as of December 31, 1988) only on account of financial hardship
resulting from (i) medical expenses as defined in section 213(d) of the IRC;
(ii) educational expenses for the next twelve months of post-secondary education
of the participant, or his or her spouse, children or dependents; (iii)
foreclosure on a primary residence; or (iv) costs directly related to the
purchase of a primary residence. A hardship withdrawal will be permitted if the
Plan Administrator determines that (i) the withdrawal is on account of an
immediate and heavy financial need of the participant and (ii) the withdrawal is
necessary to satisfy such financial need.
While a participant is still employed by the Company, withdrawals of amounts
attributable to Company contributions, and post-1988 earnings on participant
before-tax contributions, are not permitted.
LOAN PROVISION. The Plan includes an employee loan provision. Generally, at the
time a loan is to be made, the amount of all loans to be outstanding may not
exceed the lesser of (i) 50% of a participant's Rollover Dollar Builder Account,
After-Tax Rollover account and Salary Deferral Account less the amount of all
loans outstanding at the time a new loan is made, or (ii) $50,000 less the
excess of the highest balance of all loans during the prior twelve month period.
Each loan bears interest at a rate determined in accordance with generally
prevailing market conditions for similar types of loans. The minimum loan amount
is $1,000. The amount of the loan withdrawn from a participant's account is
allocated in proportion to the value of the participant's salary deferral and
rollover account balances in each investment fund. Repayments, including
interest, are made in equal installments through payroll deductions and are
allocated to participant accounts in accordance with current investment
elections. No loan may have a final maturity in excess of five years except
that, if the loan is used to purchase a principal residence for the participant,
the loan may have a final maturity of up to ten years. No participant shall be
permitted to have more than two loans outstanding at any one time.
ADMINISTRATIVE EXPENSES. Administrative expenses of the Plan are chargeable to
the Plan unless paid for by the Company. The Company currently pays such
expenses. Loan administration fees are paid by participants. Mutual fund
expenses are paid to fund managers from mutual fund assets.
-15-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
PLAN TERMINATION. Although it has not expressed any intent to do so, the Company
has the right to terminate the Plan in whole or in part at any time for any
reason. In the event of a complete or partial termination of the Plan, the
affected participants will become fully vested in their account balances.
PLAN AMENDMENT. The Company may amend the Plan at any time for any reason by
written action of its Board of Directors. Amendments required to comply with the
IRC to maintain compliance with current laws or regulations, or to correct
errors or omissions in the Plan document. Plan Amendments are approved by the
AmeriGas Propane, Inc Benefits Committee and reported to the Board of Directors.
VOTING RIGHTS OF UGI COMMON STOCK FUND PARTICIPANTS. A participant has the right
to instruct the trustee of the Plan how to vote, at each meeting of
shareholders, all shares of UGI Corporation Common Stock (including fractional
shares) represented by the value of the participant's interest in the UGI Common
Stock Fund. A participant also has the right to direct the trustee of the Plan
whether or not to tender shares in response to a tender offer.
2. ACCOUNTING POLICIES
The accompanying financial statements are prepared on the accrual basis of
accounting.
The Plan's investments in registered investment company mutual funds are valued
at quoted market prices which represent the net asset value of shares held by
the Plan. Investment contracts included in the Fidelity Managed Income Portfolio
II Fund, an unaffiliated commingled pool, and Vanguard Retirement Savings Trust
III are carried at contract value which represents deposits plus accrued
interest. The Plan Administrator believes contract value approximates fair
value. Shares of UGI Common Stock included in the UGI Common Stock Fund are
reflected at fair value based upon quoted market prices.
Dividend income is recorded on the record date. Interest earned on investments
is recorded on the accrual basis. Purchases and sales of securities are recorded
on a trade date basis.
The Plan presents in the Statements of Changes in Net Assets Available for
Benefits the net appreciation (depreciation) in fair value of investments that
consists of realized gains or losses and unrealized appreciation (depreciation)
in the fair value of those investments.
Distributions are made to Plan participants based upon the fair value of each
participant's investment account (except for investments of the Fidelity Managed
Income Portfolio II Fund and Vanguard Retirement Savings Trust III for which
distributions are based upon contract value and except for distributions from
the UGI Common Stock Fund, to the extent not all shares are sold on the same
date) as of the dates of distribution. Distributions to participants are
recorded when paid.
-16-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
Transfers of participant balances represent amounts transferred to or from the
UGI Utilities, Inc. Savings Plan and the UGI HVAC Enterprises, Inc. Savings
Plan, which are affiliated plans.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Plan Administrator to make
estimates and assumptions that affect the reported amount of net assets
available for benefits and changes therein. Actual results could differ from
these estimates.
In December 2005, the FASB issued FASB Staff Position 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 ("FSP"). This FSP
amends the guidance in AICPA SOP 94-4, Reporting of Investment Contracts Held by
Health and Welfare Benefit Plans and Defined-Contribution Pension Plans, with
respect to the definition of the fully benefit-responsive and the presentation
and disclosure of fully benefit-responsive investment contracts. The financial
statement presentation and disclosure guidance in the FSP requires fully
benefit-responsive investment contracts to be presented at fair value in the
statements of net assets available for benefits with an additional single line
item that adjusts the net assets attributable to the contracts to contract
value. The FSP is effective for financial statements for the plan years ending
after December 15, 2006. The Plan intends to adopt the financial presentation
and disclosure guidance in the FSP in the financial statements for the plan year
ending December 31, 2006.
-17-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRUST INVESTMENTS
The components of trust investments by fund at December 31, 2005 and 2004 are as
follows:
December 31,
-------------------------
2005 2004
----------- -----------
Fidelity Cash Reserves Fund (shares -- 0 and 19,527,941, respectively) $ -- $19,527,941*
Fidelity Managed Income Portfolio II Fund (shares -- 11,837,852 and
22,592,046, respectively) 11,837,852* 22,592,046*
Fidelity Intermediate Bond Fund (shares -- 0 and 553,721, respectively -- 5,825,147
Fidelity Capital and Income Fund (shares -- 0 and 74,661, respectively) -- 632,376
Fidelity U.S. Bond Index Fund (shares -- 787,559 and 128,114, respectively) 8,584,396 1,427,193
Fidelity Balanced Fund (shares -- 0 and 164,817, respectively) -- 2,937,045
Fidelity Puritan Fund (shares -- 0 and 70,698, respectively) -- 1,339,730
Fidelity Spartan U.S. Equity Index Fund (shares -- 0 and 138,041, respectively) -- 5,916,438
Fidelity Equity Income Fund (shares -- 443,988 and 468,504, respectively) 23,433,705* 24,727,665*
Fidelity Fund (shares -- 0 and 151,935, respectively) -- 4,539,833
Fidelity Growth & Income Portfolio (shares -- 0 and 64,840, respectively) -- 2,477,522
Fidelity Equity Income II Fund (shares -- 0 and 33,702, respectively) -- 809,196
Fidelity Real Estate Investment Portfolio (shares -- 0 and 94,019, respectively) -- 2,777,310
Fidelity Magellan Fund (shares -- 304,855 and 337,939, respectively) 32,448,762* 35,074,682*
Fidelity Growth Company Fund (shares -- 171,632 and 179,945, respectively) 10,920,931* 10,089,488*
Fidelity OTC Portfolio (shares -- 0 and 50,865, respectively) -- 1,764,492
Fidelity Capital Appreciation Fund (shares -- 0 and 42,228, respectively) -- 1,099,191
Fidelity Blue Chip Growth Fund (shares -- 0 and 70,889, respectively) -- 2,956,795
Fidelity Low-Priced Stock Fund (shares -- 0 and 89,116, respectively) -- 3,586,904
Fidelity Small Cap Independence Fund (shares -- 0 and 31,566, respectively) -- 622,485
Fidelity Value Fund (shares -- 0 and 31,509, respectively) -- 2,246,251
Fidelity Overseas Fund (shares -- 0 and 64,876, respectively) -- 2,295,298
Fidelity Worldwide Fund (shares -- 0 and 17,920, respectively) -- 327,044
Fidelity International Discovery Fund (shares -- 0 and 44,834, respectively) -- 1,264,318
Fidelity Freedom Income Fund (shares -- 0 and 14,205, respectively) -- 160,089
Fidelity Freedom 2000 Fund (shares -- 0 and 78,569, respectively) -- 949,111
-18-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRUST INVESTMENTS (CONTINUED)
December 31,
---------------------------
2005 2004
------------ ------------
Fidelity Freedom 2010 Fund (shares -- 0 and 252,136, respectively) -- 3,434,088
Fidelity Freedom 2020 Fund (shares -- 0 and 326,768, respectively) -- 4,561,677
Fidelity Freedom 2030 Fund (shares -- 0 and 145,520, respectively) -- 2,048,926
Fidelity Freedom 2040 Fund (shares -- 0 and 22,512, respectively) -- 186,172
Vanguard Institutional Index Fund (shares -- 152,131 and 0, respectively) 17,344,469* --
Vanguard Retirement Savings Trust III (shares -- 10,464,187 and 0, respectively) 10,464,187* --
Vanguard Prime Money Market Fund (shares -- 18,133,238 and 0, respectively) 18,133,238* --
Vanguard Target Retirement Income Fund (shares -- 43,237 and 0, respectively) 451,391 --
Vanguard Target Retirement 2005 Fund (shares --193,636 and 0, respectively) 2,116,444 --
Vanguard Target Retirement 2015 Fund (shares -- 736,779 and 0, respectively) 8,443,490 --
Vanguard Target Retirement 2025 Fund (shares -- 731,251 and 0, respectively) 8,606,824 --
Vanguard Target Retirement 2035 Fund (shares -- 215,104 and 0, respectively) 2,637,178 --
Vanguard Target Retirement 2045 Fund (shares -- 59,729 and 0, respectively) 750,787 --
Vanguard Extended Market Index Fund (shares -- 287,950 and 0, respectively) 9,873,807* --
Fidelity Spartan International Index Fund (shares -- 147,746 and 0,
respectively) 5,278,981 --
Fidelity Brokerage Link (shares -- 1,654,601 and 0, respectively) 1,654,601 --
UGI Common Stock Fund
UGI Corporation Unitized Stock Fund (units -- 574,496 and 509,691,
respectively) 14,879,444* 13,088,867*
Dividends receivable 117,209 96,720
------------ ------------
14,996,653 13,185,587
------------ ------------
Total trust investments - fair value, except for group annuity contracts
included in the Fidelity Managed Income Portfolio II Fund and Vanguard
Retirement Savings Trust III which are carried at contract value $187,977,696 $181,382,040
============ ============
Total trust investments - cost $174,286,064 $165,383,895
============ ============
* - Investment represents five percent or more of net assets available for
benefits.
The net appreciation (depreciation) in fair value of investments during the
years ended December 31, 2005 and 2004 by major investment category follows:
Year ended December 31,
------------------------
2005 2004
---------- -----------
Investment company mutual funds $4,424,284 $ 8,266,964
UGI Common Stock Fund (299,317) 2,182,335
---------- -----------
Total net appreciation in fair value $4,124,967 $10,449,299
========== ===========
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AMERIGAS PROPANE, INC.
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
During the 2005 and 2004 Plan Years, the Plan purchased, at market prices,
69,124 and 69,764 shares (which reflects UGI's 2-for-1 stock split that
occurred in May 2005) of UGI Corporation Common Stock directly from UGI
Corporation for $1,679,736 and $1,199,480, respectively.
The investments of the separate investment funds are exposed to various risks
such as interest rate, market and credit risk. The degree and concentration of
these risks vary by fund. Due to the level of risk associated with the separate
investment funds, it is reasonably possible that changes in risk in the near
term could materially affect participants' account balances in the amounts
reported in the Statements of Net Assets Available for Benefits and the
Statements of Changes in Net Assets Available for Benefits.
4. FEDERAL INCOME TAX STATUS
On December 6, 2002, the Internal Revenue Service issued a favorable
determination letter concerning the qualified status of the Plan in effect as of
November 27, 2002 under Section 401(a) of the IRC. The Plan Administrator
believes that the Plan is designed and is currently being operated in compliance
with the applicable requirements of the IRC. No U.S. income taxes are required
to be paid by the trust created under the Plan (the Trust) and participants are
not taxed on Company contributions to the Trust or income earned by the Trust.
When a participant, or his or her beneficiary or estate, receives a distribution
under the Plan, the taxability of the value of such distribution depends on the
form and time of payment.
-20-
AMERIGAS PROPANE, INC.
SAVINGS PLAN
Item 4(i) - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2005
----------------------------------------------
Number of
Shares or Fair Value/
Principal Contract
NAME OF ISSUER AND TITLE OF ISSUE Amount Cost Value
- --------------------------------- ----------- ------------ ------------
FIDELITY MANAGED INCOME
PORTFOLIO II FUND (1) (2) 11,837,852 shrs 11,837,852 11,837,852
FIDELITY U.S. BOND INDEX FUND (2) 787,559 shrs 8,734,081 8,584,396
FIDELITY EQUITY INCOME FUND (1) (2) 443,988 shrs 20,587,967 23,433,705
FIDELITY MAGELLAN FUND (1) (2) 304,855 shrs 29,312,526 32,448,762
FIDELITY GROWTH COMPANY FUND (1)(2) 171,632 shrs 9,586,866 10,920,931
VANGUARD INSTITUTIONAL INDEX FUND (1) (2) 152,131 shrs 16,660,830 17,344,469
VANGUARD RETIREMENT SAVINGS TRUST III (1) (2) 10,464,187 shrs 10,464,187 10,464,187
VANGUARD PRIME MONEY MARKET FUND (1) (2) 18,133,238 shrs 18,133,238 18,133,238
VANGUARD TARGET RETIREMENT INCOME FUND (2) 43,237 shrs 454,164 451,391
VANGUARD TARGET RETIREMENT 2005 FUND (2) 193,636 shrs 2,115,769 2,116,444
VANGUARD TARGET RETIREMENT 2015 FUND (2) 736,779 shrs 8,263,894 8,443,490
VANGUARD TARGET RETIREMENT 2025 FUND (2) 731,251 shrs 8,355,788 8,606,824
VANGUARD TARGET RETIREMENT 2035 FUND (2) 215,104 shrs 2,526,481 2,637,178
VANGUARD TARGET RETIREMENT 2045 FUND (2) 59,729 shrs 723,857 750,787
VANGUARD EXTENDED MARKET INDEX FUND (1) (2) 287,950 shrs 8,995,160 9,873,807
FIDELITY SPARTAN INTERNATIONAL INDEX FUND (2) 147,746 shrs 4,682,640 5,278,981
FIDELITY BROKERAGE LINK (2) 1,654,600 shrs 1,605,001 1,654,601
UGI COMMON STOCK FUND (1) (2)
UGI Corporation Unitized Stock Fund 574,496 units 11,128,554 14,879,444
Dividends receivable $ 117,209 117,209 117,209
------------ ------------
11,245,763 14,996,653
------------ ------------
PARTICIPANT LOANS
Loan principal outstanding (4.75% - 10.5%) (2) (3) -- 4,563,331
------------ ------------
Total - all funds $174,286,064 $192,541,027
============ ============
- ----------
(1) Investment represents 5% or more of the net assets available for benefits.
(2) Party in interest.
(3) Range of interest rates for loans outstanding as of December 31, 2005
-21-