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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002

                         Commission file number 1-11071

                                 UGI CORPORATION

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

            Pennsylvania                    23-2668356
  (STATE OR OTHER JURISDICTION OF           (I.R.S. EMPLOYER IDENTIFICATION NO.)
   INCORPORATION OR ORGANIZATION)

                 460 North Gulph Road, King of Prussia, PA 19406
                    (ADDRESS OF PRINCIPAL OFFICES) (ZIP CODE)

                                 (610) 337-1000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

     TITLE OF CLASS                               NAME OF EACH EXCHANGE
                                                   ON WHICH REGISTERED

Common Stock, without par value            New York Stock Exchange, Inc.
                                           Philadelphia Stock Exchange, Inc.

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:      None

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES |X| NO | |.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. | |

The aggregate market value of UGI Corporation Common Stock held by nonaffiliates
of the registrant on November 29, 2002 was $999,593,248.

At November 29, 2002 there were 27,723,257 shares of UGI Corporation Common
Stock issued and outstanding.

Documents Incorporated By Reference: Portions of the Annual Report to
Shareholders for the year ended September 30, 2002 are incorporated by reference
into Parts I and II of this Form 10-K. Portions of the Proxy Statement for the
Annual Meeting of Shareholders to be held on February 25, 2003 are incorporated
by reference into Part III of this Form 10-K.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |X| No | |
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                                TABLE OF CONTENTS

                                                                                                               PAGE
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PART I:                     BUSINESS.......................................................................      2

           Items 1 And 2.   Business and Properties........................................................      2

                            AmeriGas Propane Business......................................................      3

                            Utility and Electric Operations................................................     11

                            UGI Enterprises, Inc...........................................................     20

                                -    Domestic Businesses ..................................................     20

                                -    International Businesses .............................................     21

           Item 3.          Legal Proceedings..............................................................     24

           Item 4.          Submission of Matters to a Vote of Security Holders............................     26

PART II:                    SECURITIES AND FINANCIAL INFORMATION...........................................     26

           Item 5.          Market for Registrant's Common Equity and Related Stockholder Matters..........     26

           Item 6.          Selected Financial Data........................................................     28

           Item 7.          Management's Discussion and Analysis of Financial Condition and Results of
                            Operations.....................................................................     29

           Item 7a.         Quantitative and Qualitative Disclosures About Market Risk.....................     29

           Item 8.          Financial Statements and Supplementary Data....................................     29

           Item 9.          Changes in and Disagreements with Accountants on Accounting and
                            Financial Disclosure ..........................................................     29

PART III:                   UGI MANAGEMENT AND SECURITY HOLDERS............................................     30

           Item 10.         Directors and Executive Officers of Registrant.................................     31

           Item 11.         Executive Compensation.........................................................     31

                                       (i)

                                                                                                               PAGE
                                                                                                               ----
                                                                                                            
           Item 12.         Security Ownership of Certain Beneficial Owners and Management and Related
                            Stockholder Matters............................................................     31

           Item 13.         Certain Relationships and Related Transactions.................................     31

           Item 14.         Controls and Procedures........................................................     34

PART IV:                    ADDITIONAL EXHIBITS, SCHEDULES AND REPORTS.....................................     34

           Item 15.         Exhibits, Financial Statement Schedules, and Reports on Form 8-K...............     34

                            Signatures.....................................................................     44

                            Certifications.................................................................     46

                            Index to Financial Statements and Financial Statement Schedules................    F-2

                                      (ii)

PART I:  BUSINESS

ITEMS 1 AND 2. BUSINESS AND PROPERTIES

      UGI Corporation is a distributor and marketer of energy products and
services. We have two primary business lines: we are a domestic and
international distributor of propane, and we are also a provider of natural gas,
electricity and related services through regulated distribution utilities as
well as through unregulated electric generation, commodity marketing and heating
and cooling installation and service businesses.

      We conduct our domestic propane distribution business through AmeriGas
Partners, L.P., ("AmeriGas Partners" or the "Partnership"), which is the
nation's largest retail propane distributor. AmeriGas Partners conducts its
business through its direct and indirect subsidiaries, AmeriGas Propane, L.P.
("AmeriGas OLP") and AmeriGas Eagle Propane, L.P. ("Eagle OLP," and together
with AmeriGas OLP, the "Operating Partnership"). Eagle OLP has a less-than-one
percent minority limited partner. The Partnership's sole general partner is our
subsidiary, AmeriGas Propane, Inc. ("AmeriGas Propane" or the "General
Partner"). The common units of AmeriGas Partners represent limited partner
interests in a Delaware limited partnership. Common Units trade on the New York
Stock Exchange under the symbol "APU." We have a majority ownership interest in
the Partnership; the remaining interest is publicly held. See Note 1 to the
Company's Consolidated Financial Statements.

      Our subsidiary UGI Utilities, Inc. ("UGI Utilities," or "Utilities") owns
and operates a natural gas distribution utility ("Gas Utility") and an electric
distribution utility ("Electric Utility") in eastern Pennsylvania. Utilities is
the successor to a business founded in 1882. It serves approximately 286,000
natural gas customers and approximately 61,500 electric customers. In response
to state deregulation legislation, effective October 1, 1999, Utilities'
transferred its electric generation assets to a non-utility subsidiary, UGI
Development Company ("UGID"). UGID contributed certain electric generation
assets to a non-utility generation joint venture with a subsidiary of Allegheny
Energy, Inc. in December 2000. Utilities' interests in electricity generating
facilities, together with Electric Utility, are referred to herein as "Electric
Operations."

      UGI Enterprises, Inc. ("Enterprises") conducts domestic and international
energy-related businesses through subsidiaries. UGI Energy Services, Inc.
markets natural gas, oil and electricity in the Mid-Atlantic region under the
trade name GASMARK(R). UGI HVAC Enterprises, Inc. operates a heating and cooling
installation and service business in the Mid-Atlantic region. Enterprises
conducts its international propane distribution business through wholly-owned
subsidiaries and joint ventures. It owns FLAGA GmbH, the largest retail propane
distributor in Austria and one of the largest suppliers in the Czech Republic
and Slovakia. In March 2001, Enterprises acquired an approximate 20% interest in
Elf Antargaz, S.A. ("Antargaz"), one of the largest distributors of propane in
France. Enterprises also participates in a propane distribution joint venture in
China. We expect Enterprises to continue to evaluate and develop new related and
complementary business opportunities for us.

                                      -2-

      UGI was incorporated in Pennsylvania in 1991. UGI Corporation is not
subject to regulation by the Pennsylvania Public Utility Commission ("PUC"). It
is also exempt from registration as a holding company and not otherwise subject
to the Public Utility Holding Company Act of 1935, except for Section 9(a)(2),
which regulates the acquisition of voting securities of an electric or gas
utility company. Our executive offices are located at 460 North Gulph Road, King
of Prussia, Pennsylvania 19406, and our telephone number is (610) 337-1000. In
this report, the terms "Company" and "UGI," as well as the terms "our," "we,"
and "its," are sometimes used as abbreviated references to UGI Corporation or,
collectively, UGI Corporation and its consolidated subsidiaries. Similarly, the
terms "AmeriGas Partners" and the "Partnership" are sometimes used as
abbreviated references to AmeriGas Partners, L.P. or, collectively, AmeriGas
Partners, L.P. and its subsidiaries, including the Operating Partnership.

BUSINESS STRATEGY

      In July 1999, following a comprehensive study, we announced our intention
to refocus our strategic direction on growing our existing natural gas, electric
and propane businesses while seeking additional related and complementary growth
opportunities. We are employing our core competencies from our existing
businesses, as well as using our national scope, extensive asset base and access
to customers, to accelerate growth in related and complementary businesses, both
domestic and international.

                            AMERIGAS PROPANE BUSINESS

      Our domestic propane distribution business is conducted through AmeriGas
Partners. Upon completion of the Columbia Propane acquisition described below,
we became the largest retail propane distributor in the United States, based on
retail volume. The Partnership operates from approximately 650 district
locations in 46 states. AmeriGas Propane manages the Partnership. Although our
consolidated financial statements include 100% of the Partnership's revenues,
assets and liabilities, our net income reflects only our majority interest in
the income or loss of the Partnership, due to the publicly-owned limited partner
interest. See Note 1 to the Company's Consolidated Financial Statements.

      On August 21, 2001, AmeriGas OLP acquired the propane distribution
businesses of Columbia Energy Group. These businesses were conducted through
Columbia Propane Corporation and its approximate 99% owned subsidiary, Columbia
Propane, L.P. Prior to the acquisition, Columbia Propane, based in Richmond,
Virginia, was the seventh largest retail propane marketer in the United States,
selling approximately 308 million gallons annually from 186 locations in 29
states. Following the acquisition, Columbia Propane, L.P. changed its name to
AmeriGas Eagle Propane, L.P. and Columbia Propane Corporation changed its name
to AmeriGas Eagle Propane, Inc. Both entities do business under the trade name
AmeriGas(R). During fiscal year 2002, the Partnership completed the integration
of the Columbia district locations, which included consolidating 90 Columbia
locations with AmeriGas districts. AmeriGas OLP and the General Partner own more
than 99% of Eagle OLP and an unaffiliated third party retains the remaining
interest. See Note 2 to the Company's Consolidated Financial Statements.

                                      -3-

GENERAL INDUSTRY INFORMATION

      Propane is separated from crude oil during the refining process and also
extracted from natural gas or oil wellhead gas at processing plants. Propane is
normally transported and stored in a liquid state under moderate pressure or
refrigeration for economy and ease of handling in shipping and distribution.
When the pressure is released or the temperature is increased, it is usable as a
flammable gas. Propane is colorless and odorless; an odorant is added to allow
its detection. Propane is clean burning, producing negligible amounts of
pollutants when properly consumed.

      The primary customers for propane are residential, commercial,
agricultural, motor fuel and industrial users to whom natural gas is not readily
available. Propane is typically more expensive than natural gas, competitive
with fuel oil when operating efficiencies are taken into account and, in most
areas, cheaper than electricity on an equivalent energy basis.

PRODUCTS, SERVICES AND MARKETING

      As of September 30, 2002, the Partnership distributed propane to
approximately 1.2 million customers from approximately 650 district locations in
46 states. The Partnership also sells, installs and services propane appliances,
including heating systems. In certain markets, the Partnership also installs and
services propane fuel systems for motor vehicles. Typically, district locations
are found in suburban and rural areas where natural gas is not available.
Districts generally consist of an office, appliance showroom, warehouse and
service facilities, with one or more 18,000 to 30,000 gallon storage tanks on
the premises. As part of its overall transportation and distribution
infrastructure, the Partnership operates as an interstate carrier in 48 states
throughout the United States. It is also licensed as a carrier in Canada.

      The Partnership sells propane primarily to five markets: residential,
commercial/industrial, motor fuel, agricultural and wholesale. Approximately 79%
of the Partnership's fiscal year 2002 sales (based on gallons sold) were to
retail accounts and approximately 21% were to wholesale customers. Sales to
residential customers in fiscal 2002 represented approximately 41% of retail
gallons sold; industrial/commercial customers 38%; motor fuel customers 13%; and
agricultural customers 8%. Residential customers represented 52% of the
Partnership's total propane margin. No single customer accounts for 5% or more
of the Partnership's consolidated revenues.

      In the residential market, which includes both conventional and
manufactured housing, propane is used primarily for home heating, water heating
and cooking purposes. Commercial users, which include motels, hotels,
restaurants and retail stores, generally use propane for the same purposes as
residential customers. The Partnership continues to expand its PPX(R) program.
At September 30, 2002, PPX(R) was available at approximately 15,600 retail
locations throughout the country. Industrial customers use propane to fire
furnaces, as a cutting gas and in other process applications. Other industrial
customers are large-scale heating accounts and local gas utility customers who
use propane as a supplemental fuel to meet peak load deliverability
requirements. As a motor fuel, propane is burned in internal combustion engines
that power

                                      -4-

over-the-road vehicles, forklifts and stationary engines. Agricultural uses
include tobacco curing, chicken brooding and crop drying. In its wholesale
operations, the Partnership principally sells propane to large industrial
end-users and other propane distributors.

      The PPX Prefilled Propane Xchange program ("PPX(R)") enables consumers to
exchange their empty 20-pound propane grill cylinders for filled cylinders at
various retail locations such as home centers and grocery and convenience
stores. During fiscal year 2002, the Partnership introduced PPX(R) Plus. PPX(R)
Plus cylinders are equipped with a special overfill protection device ("OPD")
required by the National Fire Protection Association ("NFPA"). Sales of our
PPX(R) Plus grill cylinders to retailers are included in the
commercial/industrial market.

      Retail deliveries of propane are usually made to customers by means of
bobtail and rack trucks. Propane is pumped from the bobtail truck, which
generally holds 2,400 to 3,000 gallons of propane, into a stationary storage
tank on the customer's premises. The Partnership owns most of these storage
tanks and leases them to its customers. The capacity of these tanks ranges from
approximately 100 gallons to approximately 1,200 gallons.

      The Partnership also delivers propane to retail customers in portable
cylinders with capacities of 4 to 24 gallons. Some of these deliveries are made
to the customer's location, where empty cylinders are either picked up for
replenishment or filled in place.

PROPANE SUPPLY AND STORAGE

      The Partnership has over 200 domestic and international sources of supply,
including the spot market. Supplies of propane from the Partnership's sources
historically have been readily available. During the year ended September 30,
2002, over 90% of the Partnership's propane supply was purchased under supply
agreements with terms of 1 to 3 years. Approximately 80% of the volume purchased
under those agreements was from 10 suppliers, including Dynegy Midstream
Services (approximately 21%); Enterprise Products Operating LP and its affiliate
Canadian Enterprises Gas Products Ltd. (approximately 20%); and BP Products
North America Inc. and its affiliate BP Marketing Inc. (approximately 15%). The
availability of propane supply is dependent upon, among other things, the
severity of winter weather and the price and availability of competing fuels
such as natural gas and crude oil. Although no assurance can be given that
supplies of propane will be readily available in the future, management
currently expects to be able to secure adequate supplies during fiscal year
2003. If supply from major sources were interrupted, however, the cost of
procuring replacement supplies and transporting those supplies from alternative
locations might be materially higher and, at least on a short-term basis,
margins could be affected. Aside from Dynegy, Enterprise Products and BP, no
single supplier provided more than 10% of the Partnership's total propane supply
in fiscal year 2002. In certain market areas, however, some suppliers provide
70% to 80% of the Partnership's requirements. Disruptions in supply in these
areas could also have an adverse impact on the Partnership's margins.

      The Partnership's supply contracts are generally made under one- or
two-year agreements subject to annual review. During fiscal year 2002, 90% of
those contracts provided for pricing

                                      -5-

based upon posted prices at the time of delivery or index formulas based on the
the current prices established at major storage points such as Mont Belvieu,
Texas, or Conway, Kansas. In addition, some agreements provided maximum and
minimum seasonal purchase volume guidelines. The percentage of contract
purchases, and the amount of supply contracted for at fixed prices, will vary
from year to year as determined by the General Partner. The Partnership uses a
number of interstate pipelines, as well as railroad tank cars, delivery trucks
and barges, to transport propane from suppliers to storage and distribution
facilities. The Partnership stores propane at facilities in Arizona,
Pennsylvania, Virginia and several other states.

      Because the Partnership's profitability is sensitive to changes in
wholesale propane costs, the Partnership generally seeks to pass on increases in
the cost of propane to customers. There is no assurance, however, that the
Partnership will always be able to pass on product cost increases fully,
particularly when product costs rise rapidly. Product cost increases can be
triggered by periods of severe cold weather, supply interruptions, or other
unforeseen events. The General Partner has adopted supply acquisition and
product price risk management practices to reduce the effect of price volatility
on product costs. These practices currently include the use of summer storage,
forward purchases and derivative commodity instruments such as options and
propane price swaps. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Market Risk Disclosures."

      The following graph shows the average prices of propane on the propane
spot market during the last six fiscal years at Mont Belvieu, Texas and Conway,
Kansas, two major storage areas.

                       AVERAGE PROPANE SPOT MARKET PRICES

                Mont Belvieu    Conway
                          
       Oct-96       51.57       51.53
       Dec-96       61.04       84.29
       Feb-97       38.71       39.02
       Apr-97       34.88       35.26
       Jun-97       34.43       35.86
       Aug-97       37.03       36.53
       Oct-97       39.83       37.32
       Dec-97       33.57       31.36
       Feb-98       29.79       28.32
       Apr-98       29.06       29.47
       Jun-98       24.42       24.84
       Aug-98       24.12       23.87
       Oct-98       25.72       24.57
       Dec-98       20.89       18.72
       Feb-99       22.43       20.58
       Apr-99       28.26       27.58
       Jun-99       30.95       28.68
       Aug-99       40.51       37.56
       Oct-99       45.46       43.39
       Dec-99       42.83       35.10
       Feb-00       59.72       47.26
       Apr-00       46.88       43.64
       Jun-00       55.47       56.22
       Aug-00       58.54       63.52
       Oct-00       61.82       64.05
       Dec-00       77.63       79.75
       Feb-01       59.39       63.03
       Apr-01       54.37       60.26
       Jun-01       43.17       47.70
       Aug-01       41.54       45.71
       Oct-01       39.48       44.19
       Dec-01       30.43       30.34
       Feb-02       31.20       27.92
       Apr-02       41.52       40.07
       Jun-02       37.51       35.25
       Aug-02       41.49       41.53

                                      -6-

COMPETITION

      Propane competes with other sources of energy, some of which are less
costly for equivalent energy value. Propane distributors compete for customers
against suppliers of electricity, fuel oil and natural gas, principally on the
basis of price, service, availability and portability. Electricity is a major
competitor of propane, but propane generally enjoys a competitive price
advantage over electricity for space heating, water heating and cooking. Fuel
oil is also a major competitor of propane and is generally less expensive than
propane. Operating efficiencies and other factors such as air quality and
environmental advantages, however, generally make propane competitive with fuel
oil as a heating source. Furnaces and appliances that burn propane will not
operate on fuel oil, and vice versa, and, therefore, a conversion from one fuel
to the other requires the installation of new equipment. Propane serves as an
alternative to natural gas in rural and suburban areas where natural gas is
unavailable or portability of product is required. Natural gas is generally a
less expensive source of energy than propane, although in areas where natural
gas is available, propane is used for certain industrial and commercial
applications and as a standby fuel during interruptions in natural gas service.
The gradual expansion of the nation's natural gas distribution systems has
resulted in the availability of natural gas in some areas that previously
depended upon propane. However, natural gas pipelines are not present in many
regions of the country where propane is sold for heating and cooking purposes.

      The retail propane industry is mature, with only modest growth in total
demand for the product foreseen. Given this limited growth, we expect that
year-to-year industry volumes will be principally affected by weather patterns.
Therefore, the Partnership's ability to grow within the industry is dependent on
its ability to acquire other retail distributors and to achieve internal growth,
which includes expansion of the PPX(R) program (through which consumers can
exchange an empty propane grill cylinder for a filled one) and national accounts
program (through which the Partnership encourages large, multi-location propane
users to enter into a supply agreement with it rather than with many small
suppliers), as well as the success of its sales and marketing programs designed
to attract and retain customers. The failure of the Partnership to retain and
grow its customer base would have an adverse effect on its results.

      The domestic propane retail distribution business is highly competitive.
The Partnership competes in this business with other large propane marketers,
including other full-service marketers, and thousands of small independent
operators. In recent years, some rural electric cooperatives and fuel oil
distributors have expanded their businesses to include propane distribution and
the Partnership competes with them as well. The ability to compete effectively
depends on providing customer service, maintaining competitive retail prices and
controlling operating expenses.

      Based on the most recent annual survey by the American Petroleum
Institute, the 2001 domestic retail market for propane (annual sales for other
than chemical uses) was approximately 11.4 billion gallons and, based on LP-GAS
magazine rankings, 2001 sales volume of the ten largest propane companies
(including AmeriGas Partners) represented approximately 38% of

                                      -7-

domestic retail sales. Management believes the Partnership's 2002 retail volume
represents approximately 10% of the domestic retail market.

      In the motor fuel market, propane competes with gasoline and diesel fuel.
When gasoline prices are high relative to propane, propane competes effectively.
Wholesale propane distribution is a highly competitive, low margin business.
Propane sales to other retail distributors and large-volume, direct-shipment
industrial end users are price sensitive and frequently involve a competitive
bidding process.

PROPERTIES

      As of September 30, 2002, the Partnership owned approximately 84% of its
district locations. In addition, the Partnership subleases three one-million
barrel underground storage caverns in Arizona to store propane and butane for
itself and third parties. The Partnership also owns a 600,000 barrel
refrigerated, above-ground storage facility located on leased property in
California, which could be used in connection with waterborne imports or exports
of propane or butane. The California facility, which the Partnership operates,
is currently leased to several refiners for the storage of butane. In Virginia,
the Partnership has a 50% indirect equity interest in a 476,000 barrel
refrigerated, above-ground import terminal.

      The transportation of propane requires specialized equipment. The trucks
and railroad tank cars utilized for this purpose carry specialized steel tanks
that maintain the propane in a liquefied state. As of September 30, 2002, the
Partnership operated a transportation fleet with the following assets:

        QUANTITY & EQUIPMENT TYPE                     % OWNED       % LEASED
                                                              
            478      Trailers                           70             30
            162      Tractors                           42             58
            160      Railroad tank cars                  0            100
          3,192      Bobtail trucks                     32             68
            555      Rack trucks                        33             67
          2,505      Service and delivery trucks        34             66

Other assets owned at September 30, 2002 included approximately 1.3 million
stationary storage tanks with typical capacities of 100 to 1,000 gallons and
approximately 1.8 million portable propane cylinders with typical capacities of
4 to 100 gallons. The Partnership also owned approximately 8,800 large volume
tanks which are used for its own storage requirements. AmeriGas OLP has debt
secured by liens and mortgages on its real and personal property. AmeriGas OLP
owns approximately 67% of the Partnership's property, plant and equipment.

                                      -8-

TRADE NAMES, TRADE AND SERVICE MARKS

      The Partnership markets propane principally under the "AmeriGas(R),"
"America's Propane Company(R)" and "PPX Prefilled Propane Xchange(R)" trade
names and related service marks. UGI owns, directly or indirectly, all the
right, title and interest in the "AmeriGas" and related trade and service marks.
The General Partner owns all right, title and interest in the "America's Propane
Company" and "PPX Prefilled Propane Xchange" trade names and related service
marks. The Partnership has an exclusive (except for use by UGI, AmeriGas, Inc.
and the General Partner), royalty-free license to use these names and trade and
service marks. UGI and the General Partner each have the option to terminate its
respective license agreement (on 12 months prior notice in the case of UGI),
without penalty, if the General Partner is removed as general partner of the
Partnership other than for cause. If the General Partner ceases to serve as the
general partner of the Partnership for cause, the General Partner has the option
to terminate its license agreement upon payment of a fee equal to the fair
market value of the licensed trade names. UGI has a similar termination option,
however, UGI must provide 12 months prior notice in addition to paying the fee.

SEASONALITY

      Because many customers use propane for heating purposes, the Partnership's
retail sales volume is seasonal, with approximately 57% of the Partnership's
fiscal year 2002 retail sales volume and approximately 78% of its earnings
before interest expense, income taxes, depreciation and amortization occurring
during the five-month peak heating season from November through March. As a
result of this seasonality, sales are concentrated in the Partnership's first
and second fiscal quarters (October 1 through March 31). Cash receipts are
greatest during the second and third fiscal quarters when customers pay for
propane purchased during the winter heating season.

      Sales volume for the Partnership traditionally fluctuates from
year-to-year in response to variations in weather, prices, competition, customer
mix and other factors, such as conservation efforts and general economic
conditions. For historical information on national weather statistics, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

GOVERNMENT REGULATION

      The Partnership is subject to various federal, state and local
environmental, safety and transportation laws and regulations governing the
storage, distribution and transportation of propane. These laws include, among
others, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA" or, the
"Superfund Law"), the Clean Air Act, the Occupational Safety and Health Act, the
Emergency Planning and Community Right to Know Act, the Clean Water Act and
comparable state statutes. CERCLA imposes joint and several liability on certain
classes of persons considered to have contributed to the release or threatened
release of a "hazardous substance" into the environment without regard to fault
or the legality of the original conduct. Propane is not a hazardous substance
within the meaning of federal and state environmental laws. However, the

                                      -9-

Partnership owns and operates real property where such hazardous substances may
exist. See Notes 1 and 13 to the Company's Consolidated Financial Statements.

      All states in which the Partnership operates have adopted fire safety
codes that regulate the storage and distribution of propane. In some states
these laws are administered by state agencies, and in others they are
administered on a municipal level. The Partnership conducts training programs to
help ensure that its operations are in compliance with applicable governmental
regulations. With respect to general operations, NFPA Pamphlets No. 54 and No.
58, which establish a set of rules and procedures governing the safe handling of
propane, or comparable regulations, have been adopted as the industry standard
in a majority of the states in which the Partnership operates. Effective April
1, 2002, NFPA Pamphlet No. 58 requires portable propane cylinders to be equipped
with OPD. Although NFPA 58 has not yet been adopted in all states, the
Partnership complies with the OPD requirements throughout the United States. The
Partnership maintains various permits under environmental laws that are
necessary to operate certain of its facilities, some of which may be material to
the operations of the Partnership. Management believes that the procedures
currently in effect at all of its facilities for the handling, storage and
distribution of propane are consistent with industry standards and are in
compliance in all material respects with applicable environmental, health and
safety laws.

      With respect to the transportation of propane by truck, the Partnership is
subject to regulations promulgated under the Federal Motor Carrier Safety Act.
These regulations cover the transportation of hazardous materials and are
administered by the United States Department of Transportation ("DOT"). The
Natural Gas Safety Act of 1968 required the DOT to develop and enforce minimum
safety regulations for the transportation of gases by pipeline. The DOT's
pipeline safety code applies to, among other things, a propane gas system which
supplies 10 or more customers from a single source and a propane gas system any
portion of which is located in a public place. The code requires operators of
all gas systems to provide training and written instructions for employees,
establish written procedures to minimize the hazards resulting from gas pipeline
emergencies, and keep records of inspections and testing.

EMPLOYEES

      The Partnership does not directly employ any persons responsible for
managing or operating the Partnership. The General Partner provides these
services and is reimbursed for its direct and indirect costs and expenses,
including all compensation and benefit costs. At September 30, 2002, the General
Partner had approximately 6,300 employees, including approximately 300 temporary
and part-time employees, working on behalf of the Partnership. UGI also performs
certain financial and administrative services for the General Partner on behalf
of the Partnership and is reimbursed by the Partnership for its direct and
indirect costs and expenses.

                                      -10-

                         UTILITY AND ELECTRIC OPERATIONS

      Our utility business is conducted by UGI Utilities, Inc., a wholly owned
subsidiary. Utilities operates its business through two divisions, the gas
division ("Gas Utility") and the electric division ("Electric Utility").
Utilities also owns interests in electricity generating facilities in
Pennsylvania, which, together with Electric Utility, are referred to herein as
"Electric Operations." All of these businesses are described below.

GAS UTILITY

NATURAL GAS CHOICE AND COMPETITION ACT

      On June 22, 1999, Pennsylvania's Natural Gas Choice and Competition Act
("Gas Competition Act") was signed into law. The purpose of the Gas Competition
Act was to provide all natural gas consumers in Pennsylvania with the ability to
purchase their gas supplies from the supplier of their choice. Under the Gas
Competition Act, local distribution companies ("LDCs") like Gas Utility may
continue to sell gas to customers, and such sales of gas, as well as
distribution services provided by LDCs, continue to be subject to price
regulation by the PUC.

      Generally, Pennsylvania LDCs will serve as the supplier of last resort for
all residential and small commercial and industrial customers unless the PUC
approves another supplier of last resort. The Gas Competition Act requires
energy marketers seeking to serve customers of LDCs to accept assignment of a
portion of the LDC's interstate pipeline capacity and storage contracts at
contract rates, thus avoiding the creation of stranded costs.

      On October 1, 1999, Gas Utility filed its restructuring plan with the PUC
pursuant to the Gas Competition Act. On June 29, 2000, the PUC entered its order
("Gas Restructuring Order") approving Gas Utility's restructuring plan
substantially as filed. Gas Utility designed its restructuring plan to ensure
reliability of gas supply deliveries to Gas Utility on behalf of residential and
small commercial and industrial customers. In addition, the plan changed Gas
Utility's base rates for firm customers. It also changed the calculation of
purchased gas cost rates. See "Utility Regulation and Rates."

      Since October 1, 2000, all of Gas Utility's customers have had the option
to purchase their gas supplies from an alternative gas supplier. Large
commercial and industrial customers of Gas Utility have been able to purchase
their gas from other suppliers since 1982. During fiscal year 2002, two
third-party suppliers qualified to serve residential or small commercial and
industrial customers in Gas Utility's service territory. Together, they are
serving approximately 2,400 customers. Management believes none of the Gas
Competition Act, the Gas Restructuring Order, or commodity sales to core-market
customers by third party suppliers will have a material adverse impact on the
Company's financial condition or results of operations.

                                      -11-

SERVICE AREA; REVENUE ANALYSIS

      Gas Utility distributes natural gas to approximately 286,000 customers in
portions of 14 eastern and southeastern Pennsylvania counties through its
distribution system of approximately 4,700 miles of gas mains. The service area
consists of approximately 3,000 square miles and includes the cities of
Allentown, Bethlehem, Easton, Harrisburg, Hazleton, Lancaster, Lebanon and
Reading, Pennsylvania. Located in Gas Utility's service area are major
production centers for basic industries such as specialty metals, aluminum and
glass.

      System throughput (the total volume of gas sold to or transported for
customers within Gas Utility's distribution system) for the 2002 fiscal year was
approximately 70.5 billion cubic feet ("bcf"). System sales of gas accounted for
approximately 41% of system throughput, while gas transported for residential,
commercial and industrial customers (who bought their gas from others) accounted
for approximately 59% of system throughput. Based on industry data for 2000,
residential customers account for approximately 31% of total system throughput
by LDCs in the United States. By contrast, for the 2002 fiscal year, Gas
Utility's residential customers represented 24% of its total system throughput.

SOURCES OF SUPPLY AND PIPELINE CAPACITY

      Gas Utility meets its service requirements by utilizing a diverse mix of
natural gas purchase contracts with producers and marketers, and storage and
transportation service contracts. These arrangements enable Gas Utility to
purchase gas from Gulf Coast, Mid-Continent, Appalachian and Canadian sources.
For the transportation and storage function, Utilities has agreements with a
number of pipeline companies, including Texas Eastern Transmission Corporation,
Columbia Gas Transmission Corporation and Transcontinental Gas Pipeline
Corporation.

GAS SUPPLY CONTRACTS

      During fiscal year 2002, Gas Utility purchased approximately 28 bcf of
natural gas for sale to customers. Approximately 90% of the volumes purchased
were supplied under agreements with six major suppliers. The remaining 10% of
gas purchased was supplied by over 30 producers and marketers. Gas supply
contracts are generally no longer than one year.

      In fiscal year 2002, as a result of changing market conditions following
the bankruptcy of Enron Corp., a number of suppliers that Utilities formerly did
business with exited the wholesale trading market. This development did not
significantly impact Utilities' ability to secure gas supplies.

SEASONAL VARIATION

      Because many of its customers use gas for heating purposes, Gas Utility's
sales are seasonal. Approximately 57% of fiscal year 2002 throughput and
approximately 68% of earnings before interest expense, income taxes,
depreciation and amortization occurred during the winter season from November
through March.

                                      -12-

COMPETITION

      Natural gas is a fuel that competes with electricity and oil, and to a
lesser extent, with propane and coal. Competition among these fuels is primarily
a function of their comparative price and the relative cost and efficiency of
fuel utilization equipment. Electric utilities in Gas Utility's service area are
seeking new load, primarily in the new construction market. Fuel oil dealers
compete for customers in all categories, including industrial customers. Gas
Utility responds to this competition with marketing efforts designed to retain
and grow its customer base.

      In substantially all of its service territory, Gas Utility is the only
regulated gas distribution utility having the right, granted by the PUC or by
law, to provide gas distribution services. Under the Gas Competition Act, retail
customers may purchase their natural gas from a supplier other than Gas Utility.
Commercial and industrial customers in Gas Utility's service territory have been
able to do this since 1982. As of October 2002, two marketers have qualified to
serve residential and small commercial and industrial customers. Together they
serve approximately 2,400 customers. Gas Utility provides transportation
services for residential and small commercial and industrial customers who
purchase natural gas from others.

      Many of Gas Utility's commercial and industrial customers have the ability
to switch to an alternate fuel at any time and, therefore, are served on an
interruptible basis under rates which are competitively priced with respect to
their alternate fuel. Gas Utility's profitability from these customers,
therefore, is affected by the difference, or "spread," between the customers'
delivered cost of gas and the customers' delivered alternate fuel cost. See
"Utility Regulation and Rates - Gas Utility Rates." Commercial and industrial
customers representing 17% of total system throughput have locations which
afford them the option, although none has exercised it, of seeking
transportation service directly from interstate pipelines, thereby bypassing Gas
Utility. The majority of customers in this group are served under transportation
contracts having three- to twenty-year terms. Included in these two groups are
Utilities' ten largest customers in terms of annual volume. All of these
customers have contracts with Utilities, eight of which extend into fiscal year
2004. No single customer represents, or is anticipated to represent, more than
5% of the total revenues of Gas Utility.

OUTLOOK FOR GAS SERVICE AND SUPPLY

      Gas Utility anticipates having adequate pipeline capacity and sources of
supply available to it to meet the full requirements of all firm customers on
its system through fiscal year 2003. Supply mix is diversified, market priced,
and delivered pursuant to a number of long- and short-term firm transportation
and storage arrangements, including transportation contracts held by some of
Utilities' larger customers.

      During fiscal year 2002, Gas Utility supplied transportation service to
two major cogeneration installations and three electric generation facilities.
Gas Utility continues to pursue opportunities to supply natural gas to electric
generation projects located in its service territory. Gas Utility also continues
to seek new residential, commercial and industrial customers for both

                                      -13-

firm and interruptible service. In the residential market sector, Gas Utility
connected approximately 9,200 residential heating customers during fiscal year
2002, which represented a record annual increase. Of those new customers, new
home construction accounted for over 7,100 heating customers. Customers
converting from other energy sources, primarily oil and electric, and existing
non-heating gas customers who have added gas heating systems to replace other
energy sources, accounted for the balance of the additions. The number of new
commercial and industrial customers was over 1,100.

      Utilities continues to monitor and participate extensively in rulemaking
and individual rate and tariff proceedings before the Federal Energy Regulatory
Commission ("FERC") affecting the rates and the terms and conditions under which
Gas Utility transports and stores natural gas. Among these proceedings are those
arising out of certain FERC orders and/or pipeline filings which relate to (i)
the pricing of pipeline services in a competitive energy marketplace; (ii) the
flexibility of the terms and conditions of pipeline service tariffs and
contracts; and (iii) pipelines' requests to increase their base rates, or change
the terms and conditions of their storage and transportation services.

      Gas Utility's objective in negotiations with interstate pipeline and
natural gas suppliers, and in litigation before regulatory agencies, is to
assure availability of supply, transportation and storage alternatives to serve
market requirements at the lowest cost possible, taking into account the need
for security of supply. Consistent with that objective, Gas Utility negotiates
the terms of firm transportation capacity on all pipelines serving Gas Utility,
arranges for appropriate storage and peak-shaving resources, negotiates with
producers for competitively priced gas purchases and aggressively participates
in regulatory proceedings related to transportation rights and costs of service.

ELECTRIC OPERATIONS

ELECTRICITY GENERATION CUSTOMER CHOICE AND COMPETITION ACT

      On January 1, 1997, Pennsylvania's Electricity Generation Customer Choice
and Competition Act ("ECC Act") became effective. The ECC Act permits all
Pennsylvania retail electric customers to choose their electric generation
supplier. Pursuant to the Act, all electric utilities were required to file
restructuring plans with the PUC which, among other things, included unbundled
prices for electric generation, transmission and distribution and a competitive
transition charge (CTC) for the recovery of "stranded costs" which would be paid
by all customers receiving distribution service. Stranded costs generally are
electric generation-related costs that traditionally would be recoverable in a
regulated environment but may not be recoverable in a competitive electric
generation market. Under the ECC Act, Electric Utility generally may not
increase prices for electric generation as long as stranded costs are being
recovered through the CTC. In accordance with the restructuring proceedings
discussed below, Utilities collected a CTC from commercial and industrial
customers until September 2002 and expects to collect from all other
distribution customers until May 2003. Under the ECC Act,

                                      -14-

Electric Utility is obligated to provide energy at the capped rates to customers
who do not choose alternate suppliers. Electric Utility will continue to be the
only regulated electric utility having the right, granted by the PUC or by law,
to distribute electric energy in its service territory.

      On June 19, 1998, the PUC entered its Opinion and Order (the
"Restructuring Order") in Electric Utility's restructuring proceeding under the
ECC Act. The Electric Restructuring Order authorized Electric Utility to recover
from its customers approximately $32.5 million in stranded costs (on a full
revenue requirements basis, which includes all income and gross receipts taxes)
over a four-year period which commenced January 1, 1999 through a CTC, together
with carrying charges on unrecovered balances of 7.94%.

      The PUC approved a settlement establishing rules for Electric Utility
Provider of Last Resort ("POLR") service on March 28, 2002, and a separate
settlement that modified these rules on June 13, 2002 (collectively, the "POLR
Settlement") under which Electric Utility terminated stranded cost recovery
through its CTC from commercial and industrial ("C&I") customers on July 31,
2002, and from residential customers on October 31, 2002, and is no longer
subject to the statutory rate caps as of August 1, 2002 for C&I customers and as
of November 1, 2002 for residential customers. Charges for generation service
will (1) initially be set at a level equal to the rates paid by Electric Utility
customers for POLR service under the statutory rate caps; (2) may be raised at
certain designated times up to certain specified caps through December 2004; and
(3) may be set at market rates thereafter. Electric Utility may also offer
multiple year POLR contracts to its customers. The POLR Settlement provides for
annual shopping periods during which customers may elect to remain on POLR
service or choose an alternate supplier. Customers who do not select an
alternate supplier will be obligated to remain on POLR service until the next
shopping period. Residential customers who return to POLR service at a time
other than during the annual shopping period must remain on POLR service until
the date of the second open shopping period after returning. C&I customers who
return to POLR service at a time other than during the annual shopping period
must remain on POLR service until the next open shopping period, and may, in
certain circumstances, be subject to generation rate surcharges.

SERVICE AREA; SALES ANALYSIS

      Electric Utility supplies electric service to approximately 61,500
customers in portions of Luzerne and Wyoming Counties in northeastern
Pennsylvania through a system consisting of approximately 2,100 miles of
transmission and distribution lines and 14 transmission substations. For fiscal
year 2002, about 52% of sales volume came from residential customers, 36% from
commercial customers and 12% from industrial customers. Electricity transported
for customers who purchased their power from others pursuant to the ECC Act
represented approximately 1% of fiscal year 2002 sales volume.

SOURCES OF SUPPLY

      Effective October 1, 1999, Utilities transferred its electric generation
assets to its non-utility subsidiary, UGI Development Company ("UGID"). These
generation assets consisted

                                      -15-

principally of Utilities' Hunlock generating station ("Hunlock Station"),
located near Kingston, Pennsylvania and its 1.11% interest in the Conemaugh
generating station ("Conemaugh Station"), located near Johnstown, Pennsylvania.
Effective December 8, 2000, UGID entered into a partnership ("Energy Ventures")
with a subsidiary of Allegheny Energy, Inc. for the purpose of owning and
operating electric generation facilities. UGID contributed Hunlock Station, coal
inventory and $6 million to the partnership and Allegheny contributed a 44
megawatt gas combustion electric generator. UGID has the right to purchase half
the output of Energy Ventures' generation at cost. During fiscal year 2002,
Electric Utility purchased approximately 28% of its energy requirements from
UGID. Effective October 1, 2002, Electric Utility has generation supply
contracts in place for substantially all of its expected on-peak energy
requirements through fiscal year 2004. UGID plans to market the electric
generation it controls to third parties.

      Electric Utility distributes both electricity that it purchases from
others (including UGID) and electricity that customers purchase from other
suppliers. At September 30, 2002, alternate suppliers served customers
representing less than 1% of system load. Electric Utility expects to continue
to provide energy to the great majority of its distribution customers for the
foreseeable future.

ENVIRONMENTAL FACTORS

      Energy Ventures' operation of Hunlock Station complies with the air
quality standards of the Pennsylvania Department of Environmental Resources
("DER") with respect to stack emissions. Under the Federal Water Pollution
Control Act, UGID has a permit from the DER to discharge water from Hunlock
Station into the North Branch of the Susquehanna River. The Federal Clean Air
Act Amendments of 1990 (the "Clean Air Act Amendments") impose emissions
limitations for certain compounds, including sulfur dioxide and nitrous oxides.
Both the Conemaugh Station and the Hunlock Station are in material compliance
with these emission standards.

SEASONALITY

      Sales and distribution of electricity for residential heating purposes
accounted for approximately 19% of the total sales of Electric Utility during
fiscal year 2002. Electricity competes with natural gas, oil, propane and other
heating fuels in this use. Approximately 51% of volume occurred during the six
coldest months of fiscal year 2002 (November through April), demonstrating
modest seasonality favoring winter due to the use of electricity for residential
heating purposes.

                                      -16-

UTILITY REGULATION AND RATES

PENNSYLVANIA PUBLIC UTILITY COMMISSION JURISDICTION

      Utilities' gas and electric utility operations, which exclude electric
generation, are subject to regulation by the PUC as to rates, terms and
conditions of service, accounting matters, issuance of securities, contracts and
other arrangements with affiliated entities, and various other matters. As noted
earlier, effective October 1, 1999, Utilities contributed its electric
generation assets to UGID. UGID has FERC authority to sell power at market-based
rates. Generally, UGID is not subject to regulation by the PUC.

FERC ORDERS 888 AND 889

      In April 1996, FERC issued Orders No. 888 and 889, which established rules
for the use of electric transmission facilities for wholesale transactions. FERC
has also asserted jurisdiction over the transmission component of electric
retail choice transactions. In compliance with these orders, the PJM
Interconnection, LLC ("PJM"), of which Utilities is a member, has filed an open
access transmission tariff with the FERC establishing transmission rates and
procedures for transmission within the PJM control area. Under the PJM tariff
and associated agreements, Electric Utility is entitled to receive certain
revenues when its transmission facilities are used by third parties.

GAS UTILITY RATES

      The Gas Restructuring Order included an increase in firm, core-market base
rates, effective October 1, 2000. The increase, calculated in accordance with
the Gas Competition Act, was designed to generate approximately $16.7 million in
additional annual revenues. The Order also provided that Gas Utility reduce its
purchased gas cost rates by an annualized amount of $16.7 million for the first
14 months following the base rate increase.

      Effective December 1, 2001, Gas Utility was required to reduce its
purchased gas cost rates to core market customers by an amount equal to the
margin it receives from customers served under interruptible rates to the extent
they use capacity contracted for by Gas Utility for core-market customers. As a
result of these changes in its regulated rates, since December 1, 2001, Gas
Utility's operating results have been more sensitive to heating season weather
and less sensitive to the market prices of alternative fuel than in the past.

      BASE RATES

      As stated above, Gas Utility's current base rates went into effect October
1, 2000 pursuant to The Gas Restructuring Order. See Note 4 to the Company's
Consolidated Financial Statements.

                                      -17-

      PURCHASED GAS COST RATES

      Gas Utility's gas service tariff contains Purchased Gas Cost ("PGC") rates
which provide for annual increases or decreases in the rate per thousand cubic
feet ("mcf") which Gas Utility charges for natural gas sold by it, to reflect
Utilities' projected cost of purchased gas. PGC rates may also be adjusted
quarterly, or monthly, to reflect purchased gas costs. Each proposed annual PGC
rate is required to be filed with the PUC six months prior to its effective
date. During this period the PUC holds hearings to determine whether the
proposed rate reflects a least-cost fuel procurement policy consistent with the
obligation to provide safe, adequate and reliable service. After completion of
these hearings, the PUC issues an order permitting the collection of gas costs
at levels which meet that standard. The PGC mechanism also provides for an
annual reconciliation. Utilities has two PGC rates. PGC (1) is applicable to
small, firm, core-market customers consisting of the residential and small
commercial and industrial classes; PGC (2) is applicable to firm, contractual,
high-load factor customers served on three separate rates. In addition,
residential customers maintaining a high load factor may qualify for the PGC (2)
rate. As described above, the Gas Restructuring Order provided for ongoing
adjustments to Gas Utilities' PGC rates, commencing December 1, 2001, to reflect
margins, if any, from interruptible rate customers who do not obtain their own
pipeline capacity.

ELECTRIC UTILITY RATES

      Electric Utility's rates for electric generation are frozen through
approximately July 2003 for commercial and industrial customers and
approximately May 2004 for residential customers. After these dates and through
December 2004, Electric Utility can increase generation rates by up to 5% of the
total rate for distribution, transmission and generation. See "Electricity
Generation Customer Choice and Competition Act." The ECC Act obligates Electric
Utility to act as "provider of last resort" to customers who do not choose
alternate generation suppliers.

STATE TAX SURCHARGE CLAUSES

      Utilities' gas and electric service tariffs contain state tax surcharge
clauses. The surcharges are recomputed whenever any of the tax rates included in
their calculation are changed. These clauses protect Utilities from the effect
of increases in most of the Pennsylvania taxes to which it is subject.

UTILITY FRANCHISES

      Utilities holds certificates of public convenience issued by the PUC and
certain "grandfather rights" predating the adoption of the Pennsylvania Public
Utility Code and its predecessor statutes which it believes are adequate to
authorize it to carry on its business in substantially all the territory to
which it now renders gas and electric service. Under applicable Pennsylvania
law, Utilities also has certain rights of eminent domain as well as the right to
maintain its facilities in streets and highways in its territories.

                                      -18-

OTHER GOVERNMENT REGULATION

      In addition to regulation by the PUC, the gas and electric utility
operations of Utilities are subject to various federal, state and local laws
governing environmental matters, occupational health and safety, pipeline safety
and other matters. Certain of Utilities' activities involving the interstate
movement of natural gas, the transmission of electricity, transactions with
non-utility generators of electricity, like UGID, and other matters, are also
subject to the jurisdiction of FERC.

      Utilities is subject to the requirements of the federal Resource
Conservation and Recovery Act, CERCLA and comparable state statutes with respect
to the release of hazardous substances on property owned or operated by
Utilities. See ITEM 3. "LEGAL PROCEEDINGS - Environmental Matters-Manufactured
Gas Plants." The electric generation activities of Utilities are also subject to
the Clean Air Act Amendments, the Federal Water Pollution Control Act and
comparable state statutes and regulations. See "UTILITY OPERATIONS - Electric
Operations - Environmental Factors."

EMPLOYEES

      At September 30, 2002, Utilities and its subsidiaries had approximately
1,100 employees.

                                      -19-

                              UGI ENTERPRISES, INC.

      UGI Enterprises, Inc. is a wholly owned subsidiary of UGI that was formed
in 1994. Through its subsidiaries, Enterprises develops energy-related
businesses for us in the United States and abroad as described below.

DOMESTIC BUSINESSES

      NATURAL GAS AND ELECTRICITY MARKETING

      UGI Energy Services, Inc. ("Energy Services"), conducts a non-utility
energy marketing business under the trade names GASMARK(R) and POWERMARK(R)
("GASMARK"). GASMARK(R) sells natural gas directly to approximately 3,600
commercial and industrial customers in Pennsylvania, New Jersey, Delaware,
Maryland, Virginia, Ohio and the District of Columbia through the transportation
systems of 20 utility systems. Energy Services also sells fuel oil and has the
ability to sell electricity to commercial and industrial customers in
Pennsylvania. During fiscal year 2001, GASMARK(R) significantly increased its
size by acquiring the gas marketing operations of PG Energy, a unit of Southern
Union Corp., and Conectiv Energy. These acquisitions added approximately 900
customers to GASMARK(R)'s customer base and increased its natural gas sales
volume over 50%.

      The gas marketing business is a high revenue, low margin business. A
majority of GASMARK's commodity sales are made under fixed price agreements. We
manage supply cost volatility related to these agreements by entering into
exchange-traded natural gas futures contracts and fixed-price supply
arrangements. Exchange-traded natural gas futures contracts are guaranteed by
the New York Mercantile Exchange ("NYMEX") and have nominal credit risk. GASMARK
also bears the risk for balancing and delivering natural gas to its customers
under various pipelines and LDC tariffs. Failure to meet these guidelines can
result in additional expense in the form of penalties, which can be substantial
in relation to GASMARK's results of operations.

      Credit is another risk factor in the commodity marketing business. GASMARK
bears the risks of customer defaults and supplier non-performance on commodity
and pipeline capacity contracts. GASMARK seeks to mitigate risk of supplier
defaults by diversifying its supply and pipeline transportation purchases across
a number of suppliers. GASMARK also requires credit support from customers in
higher-risk transactions. This credit support can take the form of prepayments,
bonds and letters of credit. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Market Risk Disclosures."

      In fiscal year 2002, Energy Services acquired a liquefied natural gas
liquefaction, storage and vaporization facility in Temple, Pennsylvania and
propane storage and propane-air mixing stations in Bethlehem, Reading and
Steelton, Pennsylvania. These plants were formerly owned by Utilities. Utilities
has a call on a majority of the winter capacity of these facilities through

                                      -20-

March 2004 at a PUC-approved formula price. Energy Services is able to make
opportunistic off-peak sales of LNG from these facilities at market prices.

      HVAC SERVICE

      UGI HVAC Enterprises, Inc. ("HVAC") was acquired by Enterprises in
September 2000. Together with its subsidiary, McHugh Service Company, HVAC
conducts a heating, ventilation and air-conditioning service business serving
portions of Utilities' gas service area and adjacent market areas, including the
City of Philadelphia and portions of northern Delaware. It serves more than
70,000 customers in residential, commercial and new construction markets. During
fiscal year 2002, HVAC generated approximately $36 million in revenues and
employed over 300 people.

      RETAIL HEARTH PRODUCTS

      Enterprises opened its first Hearth USA(TM) retail store in September
1999. The store was the nation's first large-scale retailer of hearth, grill and
spa products together with installation services. In September 2001, after
evaluating prospects for Hearth USA(TM) in light of the weak retail environment
and the amount of capital required to expand beyond the pilot phrase, we
committed to close the two Hearth USA(TM) stores and cease all operations by the
end of October 2001. See Note 16 to the Company's Consolidated Financial
Statements.

INTERNATIONAL BUSINESSES

      FLAGA GMBH

      In September 1999, subsidiaries of Enterprises acquired all of the stock
of Flaga GmbH, a privately-held company founded in 1947. FLAGA distributes
propane, butane and propane/butane mix ("LPG") in Austria, the Czech Republic
and Slovakia for residential, commercial, industrial and autogas applications.
During fiscal year 2002, FLAGA distributed approximately 36 million gallons of
LPG. FLAGA operates from 6 distribution locations in Austria, 1 in the Czech
Republic and 2 in Slovakia. In addition, FLAGA has 7 sales offices in the Czech
Republic. As of September 30, 2002, FLAGA had a total of 350 employees of which
165 were located in Austria, 152 in the Czech Republic and 33 in Slovakia.

      FLAGA has the largest propane distribution market position in Austria with
an estimated 35% market share, serving residential, commercial and industrial
customers. The retail propane industry in Austria is mature, with only modest
growth in propane demand foreseen. Historically, residential customers generally
commit to prepaid long-term tank rental agreements. Competition for new customer
installations is based on the terms and conditions of tank leases as well as on
product prices. Much of FLAGA's Austrian cylinder business is conducted through
approximately 600 neighborhood resellers with whom FLAGA has long business
relationships. FLAGA competes with other propane marketers and with other
sources of energy, principally natural gas and wood.

                                      -21-

      The Czech market for LPG, which currently represents about 32% of FLAGA's
total volume, is growing approximately 4% to 6% per year. FLAGA entered the
Czech market in 1994 when it purchased a portion of the formerly state-run LPG
company from the Czech government as part of its privatization plan. FLAGA's
main facility in the Czech Republic is its bulk storage and cylinder filling and
repair plant in Hustopece, located in the southeast quadrant of the Czech
Republic. FLAGA estimates its market share in the Czech Republic at
approximately 15%, ranking it third in the country.

      The Slovak market for LPG has been growing significantly in the area of
autogas sales volume in the last two years. FLAGA estimates that its share of
the LPG market in Slovakia ranks it third in the country.

      CHINAGAS PARTNERS

      During 1998, Enterprises formed ChinaGas Partners, L.P. ("ChinaGas") with
affiliates of Energy Transportation Group, Inc. to develop, build and operate
LPG projects in the People's Republic of China. On October 28, 1998, ChinaGas
and its wholly owned subsidiary together acquired 50% of the shares of an
existing Chinese company known as the Nantong Huayang LPG Port Co., Ltd. ("Port
Company") which operated an integrated LPG business, including an import
terminal and distribution business, serving the provinces along the lower and
middle reaches of the Yangtze River. By acquiring local distributors and
integrating them with existing operations we are adding retail sales to the Port
Company's operations. The other shareholders in the Port Company are China
National Chemical Supply & Sales Corporation and two of its affiliates. Our
effective ownership interest in the Port Company is 25%. On August 1, 2002,
shareholders of the Port Company agreed to split the company into two separate
companies, subject to government approval: a terminal company owned completely
by China National Chemical Supply & Sales Corporation and a retail distribution
company owned by ChinaGas. Upon receipt of government approval, Enterprises'
ownership interest in the distribution business will be 50%.

      ANTARGAZ

      In March 2001, UGI France, Inc., together with Paribas Affaires
Industrielles ("PAI") and Medit Mediterranea GPL, S.r.l. ("Medit"), acquired the
stock and certain related assets of Antargaz, one of the largest distributors of
LPG in France. We acquired an approximate 20% interest, PAI an approximate 68%
interest, Medit an approximate 10% interest and certain members of Antargaz
management, the remaining interest. PAI is a leading private equity fund manager
in Europe with strong management and financial skills and Medit is a supplier of
logistics services to the LPG industry in Europe, primarily Italy. During fiscal
year 2002, Antargaz sold approximately 358 million gallons of LPG. Due, in part,
to our membership on the Board of Directors of Antargaz, we believe we have
significant influence over the company's operating and financial policies.

      Antargaz has an approximate 25% market share in France. The French LPG
market is characterized by modest growth, about 1% per year, and stable market
conditions. Antargaz

                                      -22-

serves nearly one million customers using a logistical system that includes ten
major import/storage facilities, 30 bulk storage depots and 16 cylinder filling
plants. Antargaz's customer base consists of residential, commercial,
agricultural and motor fuel accounts which use LPG for space heating, cooking,
water heating, process heat and transportation.

                          BUSINESS SEGMENT INFORMATION

      The table stating the amounts of revenues, operating income (loss) and
identifiable assets attributable to each of UGI's business segments for the
2002, 2001 and 2000 fiscal years appears in Note 21 to the Consolidated
Financial Statements contained in our 2002 Annual Report to Shareholders and is
incorporated in this Report by reference.

                                    EMPLOYEES

      At September 30, 2002, UGI and its subsidiaries had approximately 8,200
employees.

                                      -23-

ITEM 3.  LEGAL PROCEEDINGS

      With the exception of the matters set forth below, no material legal
proceedings are pending involving UGI, any of its subsidiaries, or any of their
properties, and no such proceedings are known to be contemplated by governmental
authorities.

ENVIRONMENTAL MATTERS - MANUFACTURED GAS PLANTS

      In the late 1800s through the mid-1900s, UGI Utilities and its former
subsidiaries owned and operated a number of manufactured gas plants ("MGPs")
prior to the general availability of natural gas. Some constituents of coal tars
and other residues of the manufactured gas process are today considered
hazardous substances under the Superfund Law and may be present on the sites of
former MGPs. Between 1882 and 1953, UGI Utilities owned the stock of subsidiary
gas companies in Pennsylvania and elsewhere and also operated the business of
some gas companies under agreement. Pursuant to the requirements of the Public
Utility Holding Company Act of 1935, by 1953, UGI Utilities had divested all of
its utility operations other than those which now constitute Gas Utility and
Electric Utility.

      UGI Utilities does not expect its costs for investigation and remediation
of hazardous substances at Pennsylvania MGP sites to be material to its results
of operations because UGI Utilities is currently permitted to include in rates,
through future base rate proceedings, prudently incurred remediation costs
associated with such sites. UGI Utilities has been notified of several sites
outside Pennsylvania on which (1) MGPs were formerly operated by it or owned or
operated by its former subsidiaries and (2) either environmental agencies or
private parties are investigating the extent of environmental contamination or
performing environmental remediation. UGI Utilities is currently litigating two
claims against it relating to out-of-state sites.

      Fishbein Family Partnership v. PPG Industries, Inc., et al. In July 1993,
Public Service Electric and Gas Company ("PSE&G") joined Utilities as a
third-party defendant in a civil action in the United States District Court for
the District of New Jersey, seeking damages as a result of contamination
relating to the former manufactured gas plant operations at Halladay Street in
Jersey City, New Jersey. The case principally involved claims by the Fishbein
Family Partnership against PPG Industries, Inc. for damages associated with
chemical contamination unrelated to gas plant operations. In November 2001, the
parties agreed voluntarily to dismiss all claims by and against PSE&G without
prejudice. All claims against Utilities have been dismissed, although they could
be re-instituted in the future.

      Consolidated Edison Company of New York v. UGI Utilities, Inc. On
September 20, 2001, Consolidated Edison Company of New York ("ConEd") filed suit
against UGI Utilities, Inc. in the United States District Court for the Southern
District of New York, seeking contribution from Utilities for an allocated share
of response costs associated with investigating and assessing gas plant related
contamination at former manufactured gas plant sites in eleven

                                      -24-

communities in Westchester County, New York. The complaint alleges that
Utilities "owned and operated" the plants prior to 1904. The complaint also
seeks a declaration that Utilities is responsible for an allocated percentage of
future investigative and remedial costs at the sites. ConEd has stated that the
cost of remediation at two of the sites, Tarrytown and White Plains, could
exceed $20 million and $10 million respectively. ConEd has not provided specific
estimates of costs at the remainder of the sites and Utilities has no other
information on which to base estimates. Utilities continues to investigate its
involvement at these sites and is defending the claim.

      EnergyNorth Natural Gas, Inc. v. UGI Utilities, Inc. By letter dated
October 26, 2000, EnergyNorth Natural Gas, Inc. ("EnergyNorth") notified
Utilities that it had filed suit in the United States District Court for the
District of New Hampshire, seeking contribution from Utilities for response and
remediation costs associated with contamination on the site of a former MGP
allegedly operated by former subsidiaries of Utilities. EnergyNorth has not
stated the amount of the costs and has provided no information on which
Utilities could make an estimate. Utilities is actively defending the suit.

      Management believes that under applicable law UGI Utilities should not be
liable in those instances in which a former subsidiary operated a MGP. There
could be, however, significant future costs of an uncertain amount associated
with environmental damage caused by MGPs outside Pennsylvania that UGI Utilities
directly operated, or that were owned or operated by former subsidiaries of UGI
Utilities, if a court were to conclude that the subsidiary's separate corporate
form should be disregarded.

RELATED MATTER

      UGI Utilities, Inc. v. Insurance Co. of North America, et. al. On February
11, 1999, UGI Utilities, Inc. filed suit in the Court of Common Pleas of
Montgomery County, Pennsylvania against more than fifty insurance companies,
including Associated Electric and Gas Insurance Services, Ltd. (AEGIS). The
complaint alleges that the defendants breached contracts of insurance by failing
to indemnify Utilities for certain environmental costs. To date, Utilities has
recovered a significant portion of its claims through settlements with most of
the defendants, including AEGIS. The court has not yet set a date for trial of
the claims against the remaining defendants.

                                      -25-

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matter was submitted to a vote of security holders during the last
fiscal quarter of fiscal year 2002.

                               EXECUTIVE OFFICERS

      Information regarding our executive officers is included in Part III of
this Report and is incorporated in Part I by reference.

PART II: SECURITIES AND FINANCIAL INFORMATION

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

      Our Common Stock is traded on the New York and Philadelphia stock
exchanges under the symbol "UGI." The following table sets forth the high and
low sales prices for the Common Stock on the New York Stock Exchange Composite
Transactions tape as reported in The Wall Street Journal for each full quarterly
period within the two most recent fiscal years:

         2002 FISCAL YEAR                HIGH                     LOW
                                                        
         4th Quarter                  $36.760                 $25.670
         3rd Quarter                   33.210                  29.400
         2nd Quarter                   31.490                  27.090
         1st Quarter                   31.530                  26.690

         2001 FISCAL YEAR                HIGH                     LOW

         4th Quarter                  $29.480                 $25.120
         3rd Quarter                   27.900                  24.200
         2nd Quarter                   25.375                  22.500
         1st Quarter                   26.312                  21.375

                                      -26-

DIVIDENDS

      Quarterly dividends on our Common Stock were paid in the 2002 and 2001
fiscal years as follows:

         2002 FISCAL YEAR                          AMOUNT
                                               
         4th Quarter                              $0.4125
         3rd Quarter                               0.4000
         2nd Quarter                               0.4000
         1st Quarter                               0.4000

         2001 FISCAL YEAR                          AMOUNT

         4th Quarter                              $0.4000
         3rd Quarter                               0.3875
         2nd Quarter                               0.3875
         1st Quarter                               0.3875

HOLDERS

      On December 13, 2002, UGI had 10,054 holders of record of Common Stock.

                                      -27-

ITEM 6. SELECTED FINANCIAL DATA (a)

                                                                                       Year Ended
                                                                                      September 30,
                                                             --------------------------------------------------------------
                                                                2002         2001         2000         1999         1998
                                                             ----------   ---------    ----------   ----------   ----------
                                                                     (Millions of dollars, except per share amounts)
                                                                                                  
FOR THE PERIOD:
INCOME STATEMENT DATA:
         Revenues                                            $  2,213.7   $  2,468.1   $  1,761.7   $  1,383.6   $  1,439.7
                                                             ==========   ==========   ==========   ==========   ==========
         Income before accounting changes                    $     75.5   $     52.0   $     44.7   $     55.7   $     40.3
         Cumulative effect of accounting changes (b)                  -          4.5            -            -            -
                                                             ----------   ---------    ----------   ----------   ----------
         Net income (c)                                      $     75.5   $     56.5   $     44.7   $     55.7   $     40.3
                                                             ==========   ==========   ==========   ==========   ==========
         Earnings per common share - basic
              Income before accounting changes               $     2.74   $     1.91   $     1.64   $     1.74   $     1.22
              Cumulative effect of accouting changes, net             -         0.17            -            -            -
                                                             ----------   ---------    ----------   ----------   ----------
              Net income - basic                             $     2.74   $     2.08   $     1.64   $     1.74   $     1.22
                                                             ==========   ==========   ==========   ==========   ==========
         Earnings per common share - diluted
              Income before accounting changes               $     2.70   $     1.90   $     1.64   $     1.74   $     1.22
              Cumulative effect of accouting changes, net             -         0.16            -            -            -
                                                             ----------   ---------    ----------   ----------   ----------
              Net income - diluted (c) (d)                   $     2.70   $     2.06   $     1.64   $     1.74   $     1.22
                                                             ==========   ==========   ==========   ==========   ==========
         Cash dividends declared per common share            $    1.625   $    1.575   $    1.525   $     1.47   $     1.45
                                                             ==========   ==========   ==========   ==========   ==========
AT PERIOD END:
BALANCE SHEET DATA:
         Total assets                                        $  2,614.4   $  2,550.2   $  2,275.8   $  2,140.5   $  2,074.6
                                                             ==========   ==========   ==========   ==========   ==========
         Capitalization:
             Debt:
               Bank loans - AmeriGas Propane                 $     10.0   $        -   $     30.0   $     22.0   $     10.0
               Bank loans - UGI Utilities                          37.2         57.8        100.4         87.4         68.4
               Bank loans - other                                   8.6         10.0          4.3         11.6            -
               Long-term debt (including current maturities):
                    AmeriGas Propane                              945.8      1,005.9        857.2        744.7        709.0
                    UGI Utilities                                 248.4        208.4        172.9        180.0        187.2
                    Other                                          81.5         80.9         85.5         91.6          8.2
                                                             ----------   ----------   ----------   ----------   ----------
              Total debt                                        1,331.5      1,363.0      1,250.3      1,137.3        982.8
                                                             ----------   ----------   ----------   ----------   ----------
              Minority interests in AmeriGas Partners             276.0        246.2        177.1        209.9        236.5
              UGI Utilities preferred stock subject
                  to mandatory redemption                          20.0         20.0         20.0         20.0         20.0
              Common stockholders' equity                         317.3        255.6        247.2        249.2        367.1
                                                             ----------   ----------   ----------   ----------   ----------
         Total capitalization                                $  1,944.8   $  1,884.8   $  1,694.6   $  1,616.4   $  1,606.4
                                                             ==========   ==========   ==========   ==========   ==========
RATIO OF CAPITALIZATION:
         Total debt                                                68.5%        72.3%        73.8%        70.4%        61.2%
         Minority interest                                         14.2%        13.1%        10.5%        13.0%        14.7%
         UGI Utilities preferred stock                              1.0%         1.1%         1.2%         1.2%         1.2%
         Common stockholders' equity                               16.3%        13.5%        14.5%        15.4%        22.9%
                                                             ----------   ----------   ----------   ----------   ----------
                                                                  100.0%       100.0%       100.0%       100.0%       100.0%
                                                             ==========   ==========   ==========   ==========   ==========

(a)  Arthur Andersen LLP audited our consolidated financial statements for 2001,
     2000, 1999 and 1998. See Item 15 - Notice Regarding Arthur Andersen LLP.

(b)  Includes cumulative effect of accounting changes associated with (1) the
     Partnership's changes in accounting for tank fee revenue and tank
     installation costs and (2) the Company's adoption of Statement of Financial
     Accounting Standards No. 133, "Accounting for Derivative Instruments and
     Hedging Activities" (see Notes 1 and 3 to Consolidated Financial
     Statements).

(c)  Pro forma net income and diluted earnings per share after applying
     retroactively the Partnership's changes in accounting for tank
     installation costs and tank fee revenue are as follows: 2000-$44.6 and
     $1.64; 1999-$55.9 and $1.75; 1998-$39.7 and $1.20, respectively.

(d)  SFAS No. 142, "Goodwill and Other Intangible Assets," was adopted effective
     October 1, 2001. Net income and net income per diluted share adjusted to
     reflect the impact of SFAS No. 142 as if it had been adopted at the
     beginning of the periods presented are as follows: 2001-$70.5 and
     $2.58; 2000-$59.4 and $2.18; 1999-$68.9 and $2.15; 1998-$53.9 and $1.63,
     respectively.

                                      -28-

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      Management's Discussion and Analysis of Financial Condition and Results of
Operations, entitled "Financial Review" and contained on pages 13 through 25 of
UGI's 2002 Annual Report to Shareholders, is incorporated in this report by
reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      "Quantitative and Qualitative Disclosures About Market Risk" are contained
in Management's Discussion and Analysis of Financial Condition and Results of
Operations under the caption "Market Risk Disclosures" on pages 22 and 23 of the
UGI 2002 Annual Report to Shareholders and are incorporated in this Report by
reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The Financial Statements and Financial Statement Schedules referred to in
the Index contained on pages F-2 and F-3 of this Report are incorporated in this
Report by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

      During fiscal year 2002, UGI engaged a new independent auditor,
PricewaterhouseCoopers LLP. The information required by Item 9 is incorporated
in this Report by reference to UGI's Current Report on Form 8-K dated May 21,
2002.

                                      -29-

PART III: UGI MANAGEMENT AND SECURITY HOLDERS

ITEMS 10 THROUGH 13.

      In accordance with General Instruction G(3), and except as set forth
below, the information required by Items 10, 11, 12 and 13 is incorporated in
this Report by reference to the following portions of UGI's Proxy Statement,
which will be filed with the Securities and Exchange Commission by January 28,
2003:

                                      -30-

                                                    CAPTIONS OF PROXY STATEMENT
          INFORMATION                               INCORPORATED BY REFERENCE
                                                 
Item 10.  Directors and Executive                   Election of Directors - Nominees
          Officers of Registrant

Item 11.  Executive Compensation.                   Compensation of Executive Officers
          Compensation of Directors                 Compensation of Directors

Item 12.  Security Ownership of                     Securities Ownership of
          Certain Beneficial                          Certain Beneficial Owners
          Owners and Management                     Securities Ownership of Management
          and Related Stockholder Matters

EQUITY COMPENSATION PLANS

      The following table sets forth information as of the end of the Company's
2002 fiscal year with respect to compensation plans under which equity
securities of the Company are authorized for issuance.

                                                                                             NUMBER OF SECURITIES
                                                                                             REMAINING AVAILABLE
                              NUMBER OF SECURITIES TO BE        WEIGHTED AVERAGE             FOR FUTURE ISSUANCE
                                 ISSUED UPON EXERCISE           EXERCISE PRICE OF         UNDER EQUITY COMPENSATION
                               OF OUTSTANDING OPTIONS,         OUTSTANDING OPTIONS,      PLANS (EXCLUDING SECURITIES
                                 WARRANTS AND RIGHTS           WARRANTS AND RIGHTS         REFLECTED IN COLUMN (A))
       PLAN CATEGORY                     (A)                           (B)                            (C)
       -------------          --------------------------       --------------------      ---------------------------
                                                                                
Equity compensation plans             1,662,290    (1)               $   23.57                        491,836
approved by security                    512,650    (2)               $       0                         34,810    (3)
holders

Equity compensation plans
not approved by security                224,220    (4)               $   24.96                        463,000
holders                                   2,800    (5)               $       0                              0
                                      ---------                      ---------                        -------
Total                                 2,401,960                      $   23.74                        989,646
                                      =========                      =========                        =======

      (1)   These plans include the 1992 and 1997 Stock Option and Dividend
            Equivalent Plans; the 1992 Directors' Stock Plan; the 2000
            Directors' Stock Option Plan; and the 2000 Stock Incentive Plan.

      (2)   Includes units under the 1997 Directors' Equity Plan and phantom
            shares of performance-contingent restricted stock under the 2000
            Stock Incentive Plan.

      (3)   Units under the 1997 Directors' Equity Plan.

      (4)   Includes the 1992 and 2002 Non-Qualified Stock Option Plans.

      (5)   Individual one-time bonus awards of phantom restricted stock.

                                      -31-

Item 13.  Certain Relationships             Compensation of Executive Officers -
          and Related Transactions.         Stock Ownership Policy and
          Indebtedness of Management        Indebtedness of Management

      The information concerning the Company's executive officers required by
Item 10 is set forth below.

                               EXECUTIVE OFFICERS

                NAME                  AGE                 POSITION
                ----                  ---                 --------
                                            
         Lon R. Greenberg             52          Chairman, Director, President
                                                  and Chief Executive Officer

         Eugene V.N. Bissell          49          President and Chief Executive
                                                  Officer, AmeriGas Propane, Inc.

         Robert J. Chaney             60          President and Chief Executive
                                                  Officer, UGI Utilities, Inc.

         Brendan P. Bovaird           54          Vice President and General Counsel

         Bradley C. Hall              49          Vice President - New Business Development

         Anthony J. Mendicino         54          Senior Vice President - Finance
                                                  and Chief Financial Officer

      All officers are elected for a one-year term at the organizational
meetings of the respective Boards of Directors held each year.

      There are no family relationships between any of the officers or between
any of the officers and any of the directors.

Lon R. Greenberg

      Mr. Greenberg was elected Chairman of UGI effective August 1, 1996, having
been elected Chief Executive Officer effective August 1, 1995. He was elected
Director and President of UGI and a Director of UGI Utilities in July 1994. He
was elected a Director of AmeriGas Propane, Inc. in 1994 and has been Chairman
since 1996. He also served as President and Chief Executive Officer of AmeriGas
Propane (1996 to 2000). Mr. Greenberg was Senior Vice President - Legal and
Corporate Development (1989 to 1994), and also served as Vice President - Legal
and Corporate Development (1987 to 1989). Previously, he was Vice President -
Legal

                                      -32-

(1984 to 1987), General Counsel (1983 to 1994) and Secretary (1982 to 1988). He
joined the Company in 1980 as Corporate Development Counsel.

Eugene V.N. Bissell

      Mr. Bissell is President and Chief Executive Officer of AmeriGas Propane,
Inc. (since July 2000), having served as Senior Vice President - Sales and
Marketing (1999 to 2000) and Vice President - Sales and Operations (1995 to
1999). Previously, he was Vice President - Distributors and Fabrication, BOC
Gases (industrial gases) (1995), having been Vice President - National Sales
(1993 to 1995) and Regional Vice President Southern Region for Distributor and
Cylinder Gases Division, BOC Gases (1989 to 1993). From 1981 to 1987, Mr.
Bissell held various positions with the Company and its subsidiaries, including
Director, Corporate Development. Mr. Bissell is currently Chairman and a member
of the Board of Directors of the National Propane Gas Association, the national
trade association of the propane industry.

Robert J. Chaney

      Mr. Chaney is President and Chief Executive Officer of UGI Utilities,
Inc., (since March 1999). He previously served as Executive Vice President (1998
to 1999), Vice President and General Manager - Gas Utility Division (1991 to
1998) and Vice President - Rates and Energy Utilization - Gas Utility Division
(1981 to 1991) of UGI Utilities, Inc..

Brendan P. Bovaird

      Mr. Bovaird is Vice President and General Counsel of UGI (since April
1995). He is also Vice President and General Counsel of UGI Utilities, Inc., and
AmeriGas Propane, Inc. (since April 1995). Mr. Bovaird previously served as
Division Counsel and Member of the Executive and Operations Committees of
Wyeth-Ayerst International Inc. (1992 to 1995) and Senior Vice President,
General Counsel and Secretary of Orion Pictures Corporation (1990 to 1991).

Bradley C. Hall

      Mr. Hall was elected Vice President - New Business Development on October
25, 1994, having been Vice President - Marketing and Rates, UGI Utilities, Inc.
Gas Division. He also serves as President of UGI Enterprises, Inc. (since 1994).
He joined the Company in 1982 and held various positions in UGI Utilities, Inc.

Anthony J. Mendicino

      Mr. Mendicino was promoted to Senior Vice President - Finance and Chief
Financial Officer effective December 2002. He previously served as Vice
President - Finance and Chief Financial Officer (September 1998 to December
2002). Mr. Mendicino served as President and Chief Operating Officer (July 1997
to June 1998) and as Senior Vice President (January 1997 to June 1997) of
Eastwind Group, Inc., a holding company formed to acquire and consolidate
middle-market manufacturing businesses. Mr. Mendicino was Senior Vice President
and Chief Financial Officer and a director (1987 to 1996) of UTI Energy Corp., a
diversified oil field

                                      -33-

service company. From 1981 to 1987 Mr. Mendicino held various positions with
UGI, including Treasurer from 1984 to 1987.

ITEM 14. CONTROLS AND PROCEDURES

      An evaluation of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of December 20, 2002 was carried
out by the Company under the supervision and with the participation of the
Company's management, including the Chief Executive Officer and Chief Financial
Officer. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures have been designed and are being operated in a manner that provides
reasonable assurance that the information required to be disclosed by the
Company in reports filed under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms. A controls system, no matter how well designed and
operated, cannot provide absolute assurance that the objectives of the controls
system are met, and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have
been detected. Subsequent to the date of the most recent evaluation of the
Company's internal controls, there were no significant changes in the Company's
internal controls or in other factors that could significantly affect the
internal controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

PART IV: ADDITIONAL EXHIBITS, SCHEDULES AND REPORTS

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

      (a) DOCUMENTS FILED AS PART OF THIS REPORT:

            (1) and (2) The financial statements and financial statement
            schedules incorporated by reference or included in this report are
            listed in the accompanying Index to Financial Statements and
            Financial Statement Schedules set forth on pages F-2 through F-3 of
            this report, which is incorporated herein by reference.

          NOTICE REGARDING ARTHUR ANDERSEN LLP

            Arthur Andersen LLP audited our consolidated financial statements
            for the three years in the period ended September 30, 2001 and
            issued a report thereon dated November 16, 2001. Arthur Andersen LLP
            has not reissued

                                      -34-

            their report or consented to the incorporation by reference of such
            report into the Company's prospectuses for the offer and sale of
            common stock. On June 15, 2002, Arthur Andersen LLP was convicted of
            obstruction of justice by a federal jury in Houston, Texas in
            connection with Arthur Andersen LLP's work for Enron Corp. On
            September 15, 2002, a federal judge upheld this conviction. Arthur
            Andersen LLP ceased its audit practice before the SEC on August 31,
            2002. Effective May 21, 2002, we terminated the engagement of Arthur
            Andersen LLP as our independent accountants and engaged
            PricewaterhouseCoopers LLP to serve as our independent accountants
            for the fiscal year ending September 30, 2002. Because of the
            circumstances currently affecting Arthur Andersen LLP, as a
            practical matter it may not be able to satisfy any claims arising
            from the provision of auditing services to us, including claims
            available to security holders under federal and state securities
            laws.

            (3) LIST OF EXHIBITS:

            The exhibits filed as part of this report are as follows (exhibits
            incorporated by reference are set forth with the name of the
            registrant, the type of report and registration number or last date
            of the period for which it was filed, and the exhibit number in such
            filing):

                                                   INCORPORATION BY REFERENCE
                                                   --------------------------
    EXHIBIT NO.       EXHIBIT                                              REGISTRANT             FILING             EXHIBIT
    -----------       -------                                              ----------             ------             -------
                                                                                                        
        3.1           (Second) Amended and Restated Articles of               UGI           Amendment No. 1 on      3.(3)(a)
                      Incorporation of the Company                                          Form 8 to Form 8-B
                                                                                                (4/10/92)

        *3.2          Bylaws of UGI as in effect since September 24,
                      2002

         4            Instruments defining the rights of security
                      holders, including indentures. (The Company
                      agrees to furnish to the Commission upon
                      request a copy of any instrument defining the
                      rights of holders of long-term debt not
                      required to be filed pursuant to Item
                      601(b)(4) of Regulation S-K)

        4.1           Rights Agreement, as amended as of August 18,           UGI              Registration            4.3
                      2000, between the Company and Mellon Bank,                              Statement No.
                      N.A., successor to Mellon Bank (East) N.A., as
                      Rights Agent, and Assumption Agreement dated                              333-49080
                      April 7, 1992

                                      -35-

                                                   INCORPORATION BY REFERENCE
                                                   --------------------------
    EXHIBIT NO.       EXHIBIT                                              REGISTRANT             FILING             EXHIBIT
    -----------       -------                                              ----------             ------             -------
                                                                                                         
        4.2           The description of the Company's Common Stock           UGI          Form 8-B/A (4/17/96)       3.(4)
                      contained in the Company's registration
                      statement filed under the Securities Exchange
                      Act of 1934, as amended

        4.3           UGI's (Second) Amended and Restated Articles
                      of Incorporation and Bylaws referred to in 3.1
                      and 3.2 above

        4.4           Note Agreement dated as of April 12, 1995             AmeriGas       Form 10-Q (3/31/95)        10.8
                      among The Prudential Insurance Company of          Partners, L.P.
                      America, Metropolitan Life Insurance Company,
                      and certain other institutional investors and
                      AmeriGas Propane, L.P., New AmeriGas Propane,
                      Inc. and Petrolane Incorporated

        4.5           First Amendment dated as of September 12, 1997        AmeriGas       Form 10-K (9/30/97)         4.5
                      to Note Agreement dated as of April 12, 1995       Partners, L.P.
                      ("1995 Note Agreement")

        4.6           Second Amendment dated as of September 15,            AmeriGas       Form 10-K (9/30/98)         4.6
                      1998 to 1995 Note Agreement                        Partners, L.P.

        4.7           Third Amendment dated as of March 23, 1999 to         AmeriGas       Form 10-Q (3/31/99)        10.2
                      1995 Note Agreement                                Partners, L.P.

        4.8           Fourth Amendment dated as of March 16, 2000 to        AmeriGas       Form 10-Q (6/30/00)        10.2
                      1995 Note Agreement                                Partners, L.P.

        4.9           Fifth Amendment dated as of August 1, 2001 to         AmeriGas       Form 10-K (9/30/01)         4.8
                      1995 Note Agreement                                Partners, L.P.

       4.9(a)         Second Amended and Restated Agreement of              AmeriGas        Form 8-K (9/30/00)          1
                      Limited Partnership of AmeriGas Partners, L.P.     Partners, L.P.

        4.10          Amended and Restated Agreement of Limited             AmeriGas       Form 10-K (9/30/01)         3.8
                      Partnership of AmeriGas Eagle Propane, L.P.        Partners, L.P.
                      dated July 19, 1999

        10.1          Service Agreement (Rate FSS) dated as of                UGI          Form 10-K (9/30/95)        10.5
                      November 1, 1989 between Utilities and
                      Columbia, as modified pursuant to the orders
                      of the Federal Energy Regulatory Commission at
                      Docket No. RS92-5-000 reported at Columbia Gas
                      Transmission Corp., 64 FERC Paragraph 61,060 (1993),
                      order on rehearing, 64 FERC Paragraph 61,365 (1993)

                                      -36-

                                                   INCORPORATION BY REFERENCE
                                                   --------------------------
    EXHIBIT NO.       EXHIBIT                                              REGISTRANT             FILING             EXHIBIT
    -----------       -------                                              ----------             ------             -------
                                                                                                         
        10.2          Service Agreement (Rate FTS) dated June 1,           Utilities       Form 10-K (12/31/90)      (10)o.
                      1987 between Utilities and Columbia, as
                      modified by Supplement No. 1 dated October 1,
                      1988; Supplement No. 2 dated November 1, 1989;
                      Supplement No. 3 dated November 1, 1990;
                      Supplement No. 4 dated November 1, 1990; and
                      Supplement No. 5 dated January 1, 1991, as
                      further modified pursuant to the orders of the
                      Federal Energy Regulatory Commission at Docket
                      No. RS92-5-000 reported at Columbia Gas
                      Transmission Corp., 64 FERC Paragraph 61,060 (1993),
                      order on rehearing, 64 FERC Paragraph 61,365 (1993)

        10.3          Transportation Service Agreement (Rate FTS-1)        Utilities       Form 10-K (12/31/90)      (10)p.
                      dated November 1, 1989 between Utilities and
                      Columbia Gulf Transmission Company, as
                      modified pursuant to the orders of the Federal
                      Energy Regulatory Commission in Docket No.
                      RP93-6-000 reported at Columbia Gulf
                      Transmission Co., 64 FERC Paragraph 61,060 (1993),
                      order on rehearing, 64 FERC Paragraph 61,365 (1993)

        10.4          Amended and Restated Sublease Agreement dated           UGI          Form 10-K (9/30/94)        10.35
                      April 1, 1988 between Southwest Salt Co. and
                      AP Propane, Inc. (the "Southwest Salt Co.
                      Agreement")

        10.5          Letter dated July 8, 1998 pursuant to Article           UGI          Form 10-K (9/30/99)        10.5
                      1, Section 1.2 of the Southwest Salt Co.
                      Agreement re: option to renew for period of
                      June 1, 2000 to May 31, 2005 and related
                      extension notice

       10.6**         UGI Corporation Directors Deferred                      UGI          Form 10-K (9/30/00)        10.6
                      Compensation Plan Amended and Restated as of
                      January 1, 2000

       10.7**         UGI Corporation 1992 Stock Option and Dividend          UGI          Form 10-Q (6/30/92)       (10)ee
                      Equivalent Plan, as amended May 19, 1992

       10.8**         UGI Corporation Annual Bonus Plan dated March           UGI          Form 10-Q (6/30/96)        10.4
                      8, 1996

       10.9**         UGI Corporation Directors' Equity Compensation          UGI          Form 10-K (9/30/00)        10.9
                      Plan Amended and Restated as of January 1, 2000

      10.10**         UGI Corporation 1997 Stock Option and Dividend          UGI          Form 10-Q (3/31/97)        10.2
                      Equivalent Plan

                                      -37-

                                                   INCORPORATION BY REFERENCE
                                                   --------------------------
    EXHIBIT NO.       EXHIBIT                                              REGISTRANT             FILING             EXHIBIT
    -----------       -------                                              ----------             ------             -------
                                                                                                         
      10.11**         UGI Corporation 1992 Directors' Stock Plan              UGI          Form 10-Q (6/30/92)       (10)ff

      10.12**         UGI Corporation Senior Executive Employee               UGI          Form 10-K (9/30/97)        10.12
                      Severance Pay Plan effective January 1, 1997

      10.13**         UGI Corporation 2000 Directors' Stock Option            UGI          Form 10-K (9/30/99)        10.13
                      Plan

      10.14**         UGI Corporation 2000 Stock Incentive Plan               UGI          Form 10-Q (6/30/00)        10.1

      10.15**         1997 Stock Purchase Loan Plan                           UGI          Form 10-K (9/30/97)        10.16

      10.16**         UGI Corporation Supplemental Executive                  UGI          Form 10-Q (6/30/98)         10
                      Retirement Plan Amended and Restated effective
                      October 1, 1996

      10.17**         [Intentionally omitted]

       10.18          Second Amended and Restated Credit Agreement          AmeriGas            Form 10-K             10.1
                      dated as of August 21, 2002 among AmeriGas         Partners, L.P.         (9/30/02)
                      Propane, L.P., AmeriGas Propane, Inc.,
                      Petrolane Incorporated, Bank of America, N.A.,
                      as Agent, Issuing Bank and Swing Line Bank,
                      and certain banks.

       10.19          Power Sales Agreement between UGI Utilities,         Utilities            Form 10-K             10.23
                      Inc. and UGI Development Company dated as of                              (9/30/01)
                      November 30, 2001

       10.20          [Intentionally omitted]

       10.21          [Intentionally omitted]

       10.22          [Intentionally omitted]

       10.23          Intercreditor and Agency Agreement dated as of        AmeriGas       Form 10-Q (3/31/95)        10.2
                      April 19, 1995 among AmeriGas Propane, Inc.,       Partners, L.P.
                      Petrolane Incorporated, AmeriGas Propane,
                      L.P., Bank of America National Trust and
                      Savings Association ("Bank of America") as
                      Agent, Mellon Bank, N.A. as Cash Collateral
                      Sub-Agent, Bank of America as Collateral Agent
                      and certain creditors of AmeriGas Propane, L.P.

      10.23(a)        First Amendment dated as of July 31, 2001 to          AmeriGas       Form 10-K (9/30/01)        10.8
                      Intercreditor and Agency Agreement dated as of     Partners, L.P.
                      April 19, 1995

       10.24          General Security Agreement dated as of April          AmeriGas       Form 10-Q (3/31/95)        10.3
                      19, 1995 among AmeriGas Propane, L.P., Bank of     Partners, L.P.
                      America National Trust and Savings Association
                      and Mellon Bank, N.A.

                                      -38-

                                                   INCORPORATION BY REFERENCE
                                                   --------------------------
    EXHIBIT NO.       EXHIBIT                                              REGISTRANT             FILING             EXHIBIT
    -----------       -------                                              ----------             ------             -------
                                                                                                         
      10.24(a)        First Amendment dated as of July 31, 2001 to          AmeriGas       Form 10-K (9/30/01)        10.10
                      General Security Agreement dated as of April       Partners, L.P.
                      19, 1995

       10.25          Subsidiary Security Agreement dated as of             AmeriGas       Form 10-Q (3/31/95)        10.4
                      April 19, 1995 among AmeriGas Propane, L.P.,       Partners, L.P.
                      Bank of America National Trust and Savings
                      Association as Collateral Agent and Mellon
                      Bank, N.A. as Cash Collateral Agent

      10.25(a)        First Amendment dated as of July 31, 2001 to          AmeriGas       Form 10-K (9/30/01)        10.12
                      Subsidiary Security Agreement dated as of          Partners, L.P.
                      April 19, 1995

       10.26          Restricted Subsidiary Guarantee dated as of           AmeriGas       Form 10-Q (3/31/95)        10.5
                      April 19, 1995 by AmeriGas Propane, L.P. for       Partners, L.P.
                      the benefit of Bank of America National Trust
                      and Savings Association, as Collateral Agent

       10.27          Trademark License Agreement dated April 19,           AmeriGas       Form 10-Q (3/31/95)        10.6
                      1995 among UGI Corporation, AmeriGas, Inc.,        Partners, L.P.
                      AmeriGas Propane, Inc., AmeriGas Partners,
                      L.P. and AmeriGas Propane, L.P.

       10.28          Trademark License Agreement, dated April 19,          AmeriGas       Form 10-Q (3/31/95)        10.7
                      1995 among AmeriGas Propane, Inc., AmeriGas        Partners, L.P.
                      Partners, L.P. and AmeriGas Propane, L.P.

       10.29          Stock Purchase Agreement dated May 27, 1989,         Petrolane           Registration          10.16(a)
                      as amended and restated July 31, 1989, between     Incorporated/        Statement No.
                      Texas Eastern Corporation and QFB Partners         AmeriGas, Inc.          33-69450

       10.30          Pledge Agreement dated September 1999 between           UGI          Form 10-K (9/30/99)        10.28
                      Eastfield International Holdings, Inc. and
                      Reiffeisen Zentralbank Osterreich
                      Aktiengesellschaft ("RZB")

       10.31          Pledge Agreement dated September 1999 between           UGI          Form 10-K (9/30/99)        10.29
                      EuroGas Holdings, Inc. and RZB

       10.32          Form of Guarantee Agreement dated September             UGI          Form 10-K (9/30/99)        10.30
                      1999 between UGI Corporation and RZB relating
                      to loan amount of EURO 74 million

       10.33          Form of Guarantee Agreement dated September             UGI          Form 10-K (9/30/00)        10.33
                      2000 between UGI Corporation and RZB relating
                      to loan amount of EURO 14.9 million

                                      -39-

                                                   INCORPORATION BY REFERENCE
                                                   --------------------------
    EXHIBIT NO.       EXHIBIT                                              REGISTRANT             FILING             EXHIBIT
    -----------       -------                                              ----------             ------             -------
                                                                                                         
       10.34          Form of Guarantee Agreement dated September             UGI          Form 10-K (9/30/00)        10.34
                      2000 between UGI Corporation and RZB relating
                      to loan amount of EURO 9 million

      10.34(a)        Amendments dated October 11, 2001 to September          UGI               Form 10-K            10.34(a)
                      1999 Guarantee Agreements between UGI                                     (9/30/02)
                      Corporation and RZB

      10.35**         Description of Change of Control arrangements           UGI          Form 10-K (9/30/99)        10.33
                      for Messrs. Greenberg, Bovaird and Mendicino

      10.36**         Description of Change of Control arrangement            UGI          Form 10-K (9/30/99)        10.34
                      for Mr. Chaney

      10.37**         Description of Change of Control arrangement          AmeriGas       Form 10-K (9/30/99)        10.31
                      for Mr. Bissell                                    Partners, L.P.

      *10.38**        2002 Non-Qualified Stock Option Plan

      10.39**         1992 Non-Qualified Stock Option Plan, as                UGI          Form 10-K (9/30/00)        10.39
                      amended

       10.40          Service Agreement for comprehensive delivery            UGI          Form 10-K (9/30/00)        10.40
                      service (Rate CDS) dated February 23, 1998
                      between UGI Utilities, Inc. and Texas Eastern
                      Transmission Corporation

       10.41          Service Agreement for comprehensive delivery            UGI          Form 10-K (9/30/00)        10.41
                      service (Rate CDS) dated February 23, 1999
                      between UGI Utilities, Inc. and Texas Eastern
                      Transmission Corporation

       10.42          Purchase Agreement dated January 30, 2001 and         AmeriGas             Form 8-K             10.1
                      Amended and Restated on August 7, 2001 by and      Partners, L.P.
                      among Columbia Energy Group, Columbia Propane                              (8/8/01)
                      Corporation, Columbia Propane, L.P., CP
                      Holdings, Inc., AmeriGas Propane, L.P.,
                      AmeriGas Partners, L.P., and AmeriGas Propane,
                      Inc.

       10.43          Partnership Agreement of Hunlock Creek Energy        Utilities       Form 10-K (9/30/01)        10.24
                      Ventures dated December 8, 2001 by and between
                      UGI Hunlock Development Company and Allegheny
                      Energy Supply Hunlock Creek LLC

                                      -40-

                                                   INCORPORATION BY REFERENCE
                                                   --------------------------
    EXHIBIT NO.       EXHIBIT                                              REGISTRANT             FILING             EXHIBIT
    -----------       -------                                              ----------             ------             -------
                                                                                                         
       10.44          Agreement by Petrolane Incorporated and              Petrolane       Form 10-K (9/23/94)        10.13
                      certain of its subsidiaries party thereto           Incorporated
                      ("Subsidiaries") for the Sale of the
                      Subsidiaries' Inventory and Assets to the
                      Goodyear Tire & Rubber Company and D.C.H.,
                      Inc., as Purchaser, dated as of December 18,
                      1985

       10.45          Purchase Agreement by and among Columbia          National Propane   Form 8-K (4/19/99)        10.5
                      Propane, L.P., CP Holdings, Inc., Columbia         Partners, L.P.
                      Propane Corporation, National Propane
                      Partners, L.P., National Propane Corporation,
                      National Propane SPG, Inc., and Triarc
                      Companies, Inc. dated as of April 5, 1999

       10.46          Capital Contribution Agreement dated as of            AmeriGas        Form 8-K (8/21/01)        10.2
                      August 21, 2001 by and between Columbia            Partners, L.P.
                      Propane, L.P. and AmeriGas Propane, L.P.
                      acknowledged and agreed to by CP Holdings, Inc.

       10.47          Promissory Note by National Propane L.P., a           AmeriGas       Form 10-K (9/30/01)        10.39
                      Delaware limited partnership in favor of           Partners, L.P.
                      Columbia Propane Corporation dated July 19,
                      1999

       10.48          Loan Agreement dated July 19, 1999, between           AmeriGas       Form 10-K (9/30/01)        10.40
                      National Propane, L.P. and Columbia Propane        Partners, L.P.
                      Corporation

       10.49          First Amendment dated August 21, 2001 to Loan         AmeriGas       Form 10-K (9/30/01)        10.41
                      Agreement dated July 19, 1999 between National     Partners, L.P.
                      Propane, L.P. and Columbia Propane Corporation

       10.50          Columbia Energy Group Payment Guaranty dated          AmeriGas       Form 10-K (9/30/01)        10.42
                      April 5, 1999                                      Partners, L.P.

       10.51          Keep Well Agreement by and between AmeriGas           AmeriGas       Form 10-K (9/30/01)        10.46
                      Propane, L.P. and Columbia Propane Corporation     Partners, L.P.
                      dated August 21, 2001

       10.52          Management Services Agreement effective as of         AmeriGas       Form 10-K (9/30/01)        10.47
                      August 21, 2001 between AmeriGas Propane, Inc.     Partners, L.P.
                      and AmeriGas Eagle Holdings, Inc., the general
                      partner of AmeriGas Eagle Propane, L.P.

       10.53          Storage  Transportation Service Agreement (Rate      Utilities            Form 10-K             10.25
                      Schedule  SST) between  Utilities  and Columbia                           (9/30/02)
                      dated  November 1, 1993,  as modified  pursuant
                      to  orders  of the  Federal  Energy  Regulatory
                      Commission

                                      -41-

                                                   INCORPORATION BY REFERENCE
                                                   --------------------------
    EXHIBIT NO.       EXHIBIT                                              REGISTRANT             FILING             EXHIBIT
    -----------       -------                                              ----------             ------             -------
                                                                                                         
       10.54          No-Notice   Transportation   Service  Agreement      Utilities            Form 10-K             10.26
                      (Rate  Schedule  NTS)  between   Utilities  and                           (9/30/02)
                      Columbia  dated  November 1, 1993,  as modified
                      pursuant  to  orders  of  the  Federal   Energy
                      Regulatory Commission

       10.55          No-Notice   Transportation   Service  Agreement      Utilities            Form 10-K
                      (Rate  Schedule  CDS)  between   Utilities  and                           (9/30/02)             10.27
                      Texas Eastern  Transmission  dated February 23,
                      1999,  as modified  pursuant to various  orders
                      of the Federal Energy Regulatory Commission

       10.56          No-Notice   Transportation   Service  Agreement      Utilities            Form 10-K             10.28
                      (Rate  Schedule  CDS)  between   Utilities  and                           (9/30/02)
                      Texas  Eastern  Transmission  dated October 31,
                      2000,  as modified  pursuant to various  orders
                      of the Federal Energy Regulatory Commission

       10.57          Firm  Transportation  Service  Agreement  (Rate      Utilities            Form 10-K             10.29
                      Schedule  FT-1)  between  Utilities  and  Texas                           (9/30/02)
                      Eastern  Transmission  dated June 15, 1999,  as
                      modified  pursuant  to  various  orders  of the
                      Federal Energy Regulatory Commission

       10.58          Firm  Transportation  Service  Agreement  (Rate      Utilities            Form 10-K             10.30
                      Schedule  FT-1)  between  Utilities  and  Texas                           (9/30/02)
                      Eastern  Transmission  dated  October 31, 2000,
                      as modified  pursuant to various  orders of the
                      Federal Energy Regulatory Commission

       10.59          Firm  Transportation  Service  Agreement  (Rate      Utilities            Form 10-K             10.31
                      Schedule    FT)    between     Utilities    and                           (9/30/02)
                      Transcontinental  Gas Pipe Line  dated  October
                      1,  1996,  as  modified   pursuant  to  various
                      orders  of  the   Federal   Energy   Regulatory
                      Commission

        *13           Pages 13 through 51 of the 2002 Annual Report
                      to Shareholders

         18           Letter of Arthur Andersen LLP regarding change        AmeriGas            Form 10-Q              18
                      in accounting principles                           Partners, L.P.         (12/31/00)

        *21           Subsidiaries of the Registrant

        *23           Consent of PricewaterhouseCoopers  LLP

        *99           Certification by the Chief Executive Officer
                      and the Chief Financial Officer relating to
                      the Registrant's Report on Form 10-K for the
                      fiscal year ended September 30, 2002.

      *     Filed herewith.

                                      -42-

      **    As required by Item 14(a)(3), this exhibit is identified as a
            compensatory plan or arrangement.

(B) REPORTS ON FORM 8-K:

      The Company filed the following Current Reports on Form 8-K during the
fourth quarter of fiscal year 2002:

        Date            Item Number(s)                                 Content
        ----            --------------                                 -------
                                        
      08/14/02                9               Regulation FD - Officers' Sworn  Statements
                                              Pursuant to Section 21(a)(1) of the Securities
                                              Exchange Act of 1934

                                      -43-

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          UGI CORPORATION

Date:  December 17, 2002                  By:    Anthony J. Mendicino
                                                 -----------------------------
                                                 Anthony J. Mendicino
                                                 Senior Vice President - Finance
                                                 and Chief Financial Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below on December 17, 2002, by the following persons on
behalf of the Registrant in the capacities indicated.

SIGNATURE                                   TITLE
- ---------                                   -----
                                         
Lon R. Greenberg                            Chairman, President
- ---------------------------                 and Chief Executive Officer
Lon R. Greenberg                            (Principal Executive Officer)
                                            and Director

Anthony J. Mendicino                        Senior Vice President - Finance
- ---------------------------                 and Chief Financial Officer
Anthony J. Mendicino                        (Principal Financial Officer
                                            and Principal Accounting Officer)

Stephen D. Ban                              Director
- ---------------------------
Stephen D. Ban

Thomas F. Donovan                           Director
- ---------------------------
Thomas F. Donovan

                                      -44-

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below on December 17, 2002, by the following persons on
behalf of the Registrant in the capacities indicated.

SIGNATURE                                   TITLE
- ---------                                   -----
                                         
Richard C. Gozon                            Director
- ---------------------------
Richard C. Gozon

Ernest E. Jones                             Director
- ---------------------------
Ernest E. Jones

Anne Pol                                    Director
- ---------------------------
Anne Pol

Marvin O. Schlanger                         Director
- ---------------------------
Marvin O. Schlanger

James W. Stratton                           Director
- ---------------------------
James W. Stratton

                                      -45-

                                 CERTIFICATIONS

I, Lon R. Greenberg, certify that:

1.    I have reviewed this annual report on Form 10-K of UGI Corporation;

2.    Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this annual
      report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      (a)   designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

      (b)   evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

      (c)   presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors:

      (a)   all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      (b)   any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

                                      -46-

6.    The registrant's other certifying officer and I have indicated in this
      annual report whether there were significant changes in internal controls
      or in other factors that could significantly affect internal controls
      subsequent to the date of our most recent evaluation, including any
      corrective actions with regard to significant deficiencies and material
      weaknesses.

Date:  December 20, 2002

                                                     /s/ Lon R. Greenberg
                                                     ---------------------------
                                                     Lon R. Greenberg
                                                     Chairman, President and
                                                     Chief Executive Officer of
                                                     UGI Corporation

                                      -47-

I, Anthony J. Mendicino, certify that:

1.    I have reviewed this annual report on Form 10-K of UGI Corporation;

2.    Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this annual
      report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      (a)   designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

      (b)   evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

      (c)   presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors:

      (a)   all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      (b)   any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

                                      -48-

6.    The registrant's other certifying officer and I have indicated in this
      annual report whether there were significant changes in internal controls
      or in other factors that could significantly affect internal controls
      subsequent to the date of our most recent evaluation, including any
      corrective actions with regard to significant deficiencies and material
      weaknesses.

Date:  December 20, 2002

                                                 /s/ Anthony J. Mendicino
                                                 ---------------------------
                                                 Anthony J. Mendicino
                                                 Senior Vice President - Finance
                                                 and Chief Financial Officer of
                                                 UGI Corporation

                                      -49-

                        UGI CORPORATION AND SUBSIDIARIES

                              FINANCIAL INFORMATION

                   FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K

                         YEAR ENDED SEPTEMBER 30, 2002

                                      F-1

                        UGI CORPORATION AND SUBSIDIARIES

         INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

The consolidated financial statements and supplementary data of UGI Corporation
and subsidiaries, together with the report thereon of PricewaterhouseCoopers LLP
dated November 15, 2002 (except for Note 18 as to which the date is December 16,
2002) and Arthur Andersen LLP dated November 16, 2001, listed in the following
index, are included in UGI's 2002 Annual Report to Shareholders and are
incorporated in this Form 10-K Annual Report by reference. With the exception of
the pages listed in this index and information incorporated in Items 1, 2, 5, 7
and 8, the 2002 Annual Report to Shareholders is not to be deemed filed as part
of this Report.

                                                                                       Reference
                                                                           --------------------------------
                                                                                                  Annual
                                                                                                 Report to
                                                                           Form 10-K           Shareholders
                                                                             (page)               (page)
                                                                           ----------          ------------
                                                                                         
Reports of Independent Accountants:

      On Consolidated Financial Statements                                 Exhibit 13              26

      On Financial Statement Schedules                                     F-4 to F-5

Financial Statements:

      Consolidated Balance Sheets, September 30,
            2002 and 2001                                                  Exhibit 13           28 to 29

      For the years ended September 30, 2002,
            2001 and 2000:

            Consolidated Statements of Income                              Exhibit 13              27

            Consolidated Statements of Cash Flows                          Exhibit 13              30

            Consolidated Statements of Stockholders'
                 Equity                                                    Exhibit 13              31

Index                                 F-2

                        UGI CORPORATION AND SUBSIDIARIES

   INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (CONTINUED)

                                                                                       Reference
                                                                           -------------------------------
                                                                                                 Annual
                                                                                                Report to
                                                                           Form 10-K          Shareholders
                                                                             (page)              (page)
                                                                           ----------         ------------
                                                                                        
            Notes to Consolidated Financial
                 Statements                                                Exhibit 13           32 to 51

Supplementary Data (unaudited):

       Quarterly Data for the years ended
            September 30, 2002 and 2001                                    Exhibit 13              50

Financial Statement Schedules:

       For the years ended September 30, 2002,
            2001 and 2000:

             I       -   Condensed Financial
                               Information of Registrant
                               (Parent Company)                            S-1 to S-3

             II      -   Valuation and Qualifying
                               Accounts                                    S-4 to S-5

Annual Reports on Form 10-K/A

         Annual Reports on Form 10-K/A for the UGI Utilities, Inc. and AmeriGas
         Propane, Inc. savings plans will be filed by amendment within the time
         period specified by Rule 15d-21(b).

We have omitted all other financial statement schedules because the required
information is either (1) not present; (2) not present in amounts sufficient to
require submission of the schedule; or (3) the information required is included
elsewhere in the financial statements or related notes.

                                      F-3

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
UGI Corporation:

In our opinion, the consolidated financial statements, as of and for the year
ended September 30, 2002, listed in the index appearing under Item 15a(1) and
(2) present fairly, in all material respects, the financial position of UGI
Corporation and its subsidiaries at September 30, 2002, and the results of their
operations and their cash flows for the year ended September 30, 2002 in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedules listed,
as of and for the year ended September 30, 2002, in the index appearing under
Item 15a(1) and (2) present fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedules are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedules based on our audit. We conducted our audit of these statements in
accordance with auditing standards generally accepted in the United States of
America, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion. The consolidated financial
statements of UGI Corporation and its subsidiaries as of September 30, 2001, and
for each of the two years in the period ended September 30, 2001, were audited
by other independent accountants who have ceased operations. Those independent
accountants expressed an unqualified opinion on those financial statements in
their report dated November 16, 2001.

As discussed in Note 1 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets, in fiscal 2002.

PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 15, 2002, except for Note 18 as to which the date is December 16, 2002

                                      F-4

  THIS REPORT IS A COPY OF THE PREVIOUSLY ISSUED ACCOUNTANT'S REPORT OF ARTHUR
         ANDERSEN LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP.

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of UGI Corporation:

We have audited, in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements included in UGI
Corporation's annual report to shareholders for the year ended September 30,
2001, incorporated by reference in this Form 10-K, and have issued our report
thereon dated November 16, 2001. Our report on the financial statements includes
an explanatory paragraph with respect to the changes in the method of accounting
for tank installation costs and nonrefundable tank fees and the adoption of SFAS
No. 133 as discussed in Notes 1 and 3 to the financial statements. Our audits
were made for the purpose of forming an opinion on those basic consolidated
financial statements taken as a whole. The schedules listed in the Index on
pages F-2 and F-3 are the responsibility of UGI Corporation's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Philadelphia, Pennsylvania
November 16, 2001

                                      F-5

                        UGI CORPORATION AND SUBSIDIARIES
   SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)

                                 BALANCE SHEETS
                              (Millions of dollars)

                                                                                        September 30,
                                                                                 2002                2001
                                                                             ------------         -----------
                                                                                            
ASSETS

Current assets:
     Cash and cash equivalents                                               $        0.2         $       0.6
     Accounts and notes receivable                                                    2.2                14.4
     Deferred income taxes                                                            0.2                 0.2
     Prepaid expenses and other current assets                                        0.3                 0.4
                                                                             ------------         -----------
        Total current assets                                                          2.9                15.6
Investments in subsidiaries                                                         388.4               300.8
Other assets                                                                          4.5                 2.6
                                                                             ------------         -----------
        Total assets                                                         $      395.8         $     319.0
                                                                             ============         ===========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts and notes payable                                              $       10.2         $      10.3
     Accrued liabilities                                                              3.8                 1.2
                                                                             ------------         -----------
        Total current liabilities                                                    14.0                11.5
Noncurrent liabilities                                                               64.0                51.4
Commitments and contingencies
Common stockholders' equity:
     Common Stock, without par value (authorized - 100,000,000 shares;
        issued - 33,198,731 shares)                                                 396.6               395.0
     Retained earnings                                                               39.7                 9.0
     Accumulated other comprehensive income (loss)                                    6.6               (13.5)
                                                                             ------------         -----------
                                                                                    442.9               390.5
        Less treasury stock, at cost                                               (125.1)             (134.4)
                                                                             ------------         -----------
          Total common stockholders' equity                                         317.8               256.1
                                                                             ------------         -----------
          Total liabilities and common stockholders' equity                  $      395.8         $     319.0
                                                                             ============         ===========

Commitments and Contingencies:

         In addition to the guarantees of FLAGA debt described in Note 5 to
Consolidated Financial Statements, UGI Corporation has agreed to indemnify the
issuer of $25.7 of surety bonds issued on behalf of certain UGI subsidiaries.
UGI Corporation is also authorized to guarantee up to $100 of supplier
obligations of UGI Energy Services, Inc., of which $26.9 of such obligations
were outstanding as of September 30, 2002.

                                      S-1

                        UGI CORPORATION AND SUBSIDIARIES
   SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)

                              STATEMENTS OF INCOME
                 (Millions of dollars, except per share amounts)

                                                                                     Year Ended
                                                                                   September 30,
                                                                       --------------------------------------
                                                                         2002           2001          2000
                                                                       ---------      ---------     ---------
                                                                                           
Revenues                                                               $       -      $       -     $       -
Costs and expenses:
    Operating and administrative expenses                                   13.6           10.8           8.1
    Other income, net                                                      (12.4)          (9.7)         (8.4)
                                                                       ---------      ---------     ---------
                                                                             1.2            1.1          (0.3)
                                                                       ---------      ---------     ---------
Operating income (loss)                                                     (1.2)          (1.1)          0.3
Interest expense on intercompany debt                                       (1.3)          (2.4)         (2.0)
                                                                       ---------      ---------     ---------
Loss before income taxes                                                    (2.5)          (3.5)         (1.7)
Income tax benefit                                                          (0.9)          (0.7)         (1.1)
                                                                       ---------      ---------     ---------
Loss before equity in income
    of unconsolidated subsidiaries                                          (1.6)          (2.8)         (0.6)
Equity in income before accounting changes
    of unconsolidated subsidiaries                                          77.1           54.8          45.3
                                                                       ---------      ---------     ---------
Income before equity in accounting changes
   of unconsolidated subsidiaries                                           75.5           52.0          44.7
Equity in accounting changes
   of unconsolidated subsidiaries                                              -            4.5             -
                                                                       ---------      ---------     ---------
Net income                                                             $    75.5      $    56.5     $    44.7
                                                                       =========      =========     =========
Earnings per common share:
    Basic:
       Income before accounting changes                                $    2.74      $    1.91     $    1.64
       Cumulative effect of accounting changes, net                            -           0.17             -
                                                                       ---------      ---------     ---------
       Net income                                                      $    2.74      $    2.08     $    1.64
                                                                       =========      =========     =========
    Diluted:
       Income before accounting changes                                $    2.70      $    1.90     $    1.64
       Cumulative effect of accounting changes, net                            -           0.16             -
                                                                       ---------      ---------     ---------
       Net income                                                      $    2.70      $    2.06     $    1.64
                                                                       =========      =========     =========
Average common shares outstanding (millions):
    Basic                                                                 27.550         27.163        27.219
                                                                       =========      =========     =========
    Diluted                                                               27.938         27.373        27.255
                                                                       =========      =========     =========

                                      S-2

                        UGI CORPORATION AND SUBSIDIARIES
   SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)

                            STATEMENTS OF CASH FLOWS
                              (Millions of dollars)

                                                                                        Year Ended
                                                                                       September 30,
                                                                       ---------------------------------------------
                                                                          2002             2001             2000
                                                                       -----------      -----------      -----------
                                                                                                
NET CASH PROVIDED BY OPERATING
     ACTIVITIES (a)                                                    $     113.9      $     108.3      $      95.5

CASH FLOWS FROM INVESTING ACTIVITIES:

     Investments in unconsolidated subsidiaries                             (101.5)           (49.2)           (95.8)
     Net repayments (advances) to unconsolidated subsidiary                   13.0            (13.0)               -
                                                                       -----------      -----------      -----------
        Net cash used by investing activities                                (88.5)           (62.2)           (95.8)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Payment of dividends on Common Stock                                    (44.8)           (53.2)           (41.2)
     Issuance of intercompany long-term debt                                   8.0                -             47.5
     Issuance of Common Stock                                                 11.0              7.6              3.8
     Repurchases of Common Stock                                                 -             (1.0)            (9.1)
                                                                       -----------      -----------      -----------
        Net cash used by financing activities                                (25.8)           (46.6)             1.0
                                                                       -----------      -----------      -----------
Cash and cash equivalents increase (decrease)                          $      (0.4)     $      (0.5)     $       0.7
                                                                       ===========      ===========      ===========
Cash and cash equivalents:
     End of period                                                     $       0.2      $       0.6      $       1.1
     Beginning of period                                                       0.6              1.1              0.4
                                                                       -----------      -----------      -----------
         Increase (decrease)                                           $      (0.4)     $      (0.5)     $       0.7
                                                                       ===========      ===========      ===========

(a)  Includes dividends received from unconsolidated subsidiaries of
     $111.7, $110.4 and $96.2, respectively, for the years ended
     September 30, 2002, 2001 and 2000.

                                      S-3

                        UGI CORPORATION AND SUBSIDIARIES
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                              (Millions of dollars)

                                                                         Charged
                                                         Balance at     (credited)                        Balance at
                                                         beginning     to costs and                         end of
                                                          of year        expenses          Other             year
                                                         ----------    ------------     -------------    -----------
                                                                                             
YEAR ENDED SEPTEMBER 30, 2002
Reserves deducted from assets in
  the consolidated balance sheet:

      Allowance for doubtful accounts                    $     15.6      $    14.2      $   (18.0)(1)     $     11.8
                                                         ==========                                       ==========
      Allowance for amortization of deferred
         financing costs - AmeriGas Propane              $     10.9      $     2.7      $       -         $     13.6
                                                         ==========                                       ==========
      Allowance for amortization of
        other deferred costs - AmeriGas Propane          $      1.1      $       -      $    (1.1)(2)     $        -
                                                         ==========                                       ==========
Other reserves:

      Self-insured property and casualty liability       $     37.4      $    19.0      $   (15.6)(3)     $     42.7
                                                         ==========                                       ==========
                                                                                              1.9 (2)
      Insured property and casualty liability            $      1.5      $       -      $     2.0 (2)     $      3.5
                                                         ==========                                       ==========
      Environmental, litigation and other                $     11.7      $     3.7      $    (2.6)(3)     $     13.9
                                                         ==========                                       ==========
                                                                                              1.1 (2)
YEAR ENDED SEPTEMBER 30, 2001
Reserves deducted from assets in
  the consolidated balance sheet:

      Allowance for doubtful accounts                    $      9.3      $    18.3      $   (11.7)(1)     $     15.6
                                                         ==========                                       ==========
                                                                                             (0.3)(2)
      Allowance for amortization of deferred
         financing costs - AmeriGas Propane              $      8.8      $     2.1      $       -        $      10.9
                                                         ==========                                      ===========
      Allowance for amortization of
         other deferred costs - AmeriGas Propane         $      1.0      $     0.1      $       -        $       1.1
                                                         ==========                                      ===========
Other reserves:

      Self-insured property and casualty liability       $     36.3      $    15.8      $   (15.2)(3)    $      37.4
                                                         ==========                                      ===========
                                                                                              0.5 (2)
      Insured property and casualty liability            $      2.1      $    (0.6)     $       -        $       1.5
                                                         ==========                                      ===========
      Environmental, litigation and other                $     12.0      $     1.9      $    (2.6)(3)    $      11.7
                                                         ==========                                      ===========
                                                                                              0.4 (2)

                                      S-4

                        UGI CORPORATION AND SUBSIDIARIES
           SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (CONTINUED)
                              (Millions of dollars)

                                                                                                
YEAR ENDED SEPTEMBER 30, 2000
Reserves deducted from assets in
  the consolidated balance sheet:

      Allowance for doubtful accounts                    $      8.0      $    10.0      $      (8.9)(1)     $       9.3
                                                         ==========                                         ===========
                                                                                                0.2 (2)
      Allowance for amortization of deferred
         financing costs - AmeriGas Propane              $      7.1      $     1.7      $         -         $       8.8
                                                         ==========                                         ===========
      Allowance for amortization of
        other deferred costs - AmeriGas Propane          $      2.1      $     0.4      $      (1.5)(2)     $       1.0
                                                         ==========                                         ===========
Other reserves:
      Self-insured property and casualty liability       $     37.5      $    13.4      $     (14.7)(3)     $      36.3
                                                         ==========                                         ===========
                                                                                                0.1 (2)
      Insured property and casualty liability            $      5.1      $    (3.0)                         $       2.1
                                                         ==========                                         ===========
      Environmental, litigation and other                $     13.7            0.7       $     (2.4)(3)     $      12.0
                                                         ==========                                         ===========

(1)  Uncollectible accounts written off, net of recoveries.

(2)  Other adjustments.

(3)  Payments, net.

                                      S-5

                                  EXHIBIT INDEX

EXHIBIT NO.          DESCRIPTION
- -----------          -----------
                  
     3.2             Bylaws of UGI as in effect since September 24, 2002.

     10.38           2002 Non-Qualified Stock Option Plan

     13              Pages 13 to 51 of the 2002 Annual Report to Shareholders

     21              Subsidiaries of the Registrant

     23              Consent of PricewaterhouseCoopers LLP

     99              Certification by the Chief Executive Officer and Chief
                     Financial Officer

                                      -50-

                                                                     Exhibit 3.2

                                     BYLAWS
                                       OF
                                 UGI CORPORATION
                     (A PENNSYLVANIA REGISTERED CORPORATION)

                                    ARTICLE I

                             OFFICES AND FISCAL YEAR

         SECTION 1.01. REGISTERED OFFICE. The registered office of the
corporation in the Commonwealth of Pennsylvania shall be at 460 North Gulph
Road, King of Prussia, Montgomery County, Pennsylvania 19406, until otherwise
established by an amendment of the articles of incorporation (the "articles") or
by the board of directors and a record of such change is filed with the
Department of State in the manner provided by law.

         SECTION 1.02. OTHER OFFICES. The corporation may also have offices at
such other places within or without the Commonwealth of Pennsylvania as the
board of directors may from time to time appoint or the business of the
corporation may require.

         SECTION 1.03. FISCAL YEAR. The fiscal year of the corporation shall
begin on the first day of October in each year.

                                   ARTICLE II

                        NOTICE-WAIVERS-MEETINGS GENERALLY

         SECTION 2.01. MANNER OF GIVING NOTICE.

         (a) General Rule. Any notice required to be given to any person under
the provisions of the Business Corporation Law or by the articles or these
bylaws, shall be given to the person either personally or by sending a copy
thereof:

                  (1) By first class or express mail, postage prepaid, or
         courier service, charges prepaid, to his or her postal address
         appearing on the books of the corporation or, in the case of directors,
         supplied by the director to the corporation for the purpose of notice.
         Notice pursuant to this clause (1) shall be deemed to have been given
         to the person entitled thereto when deposited in the United States mail
         or with a courier service for delivery to that person. A notice of
         meeting shall specify the place, day and hour of the meeting and any
         other information required by any other provision of the Business
         Corporation Law, the articles or these bylaws.

                  (2) By facsimile transmission, e-mail or other electronic
         communication to his or her facsimile number or address for e-mail or
         other electronic communications supplied by him or her to the
         corporation for the purpose of notice. Notice pursuant to this clause
         (2) shall be deemed to have been given to the person entitled thereto
         when sent.

         (b) Bulk Mail. If the corporation has more than 30 shareholders, notice
of any regular or special meeting of the shareholders, or any other notice
required by the Business Corporation Law or by the articles or these bylaws to
be given to all shareholders or to all holders of a class or series of shares,
may be given by any class of postpaid mail if the notice is deposited in the
United States mail at least 20 days prior to the day named for the meeting or
any corporate or shareholder action specified in the notice.

         (c) Adjourned Shareholder Meetings. When a meeting of shareholders is
adjourned, it shall not be necessary to give any notice of the adjourned meeting
or of the business to be transacted at an adjourned meeting, other than by
announcement at the meeting at which the adjournment is taken, unless the board
fixes a new record date for the adjourned meeting in which event notice shall be
given in accordance with Section 2.03.

         SECTION 2.02. NOTICE OF MEETINGS OF BOARD OF DIRECTORS. Notice of a
regular meeting of the board of directors need not be given. Notice of every
special meeting of the board of directors shall be given to each director by
telephone or in writing at least 24 hours (in the case of notice by telephone,
facsimile transmission, e-mail or other electronic communication) or 48 hours
(in the case of notice by telegraph, courier service or express mail) or five
days (in the case of notice by first class mail) before the time at which the
meeting is to be held. Every such notice shall state the time and place of the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board need be specified in a notice of the
meeting.

         SECTION 2.03. NOTICE OF MEETINGS OF SHAREHOLDERS.

              (a) General Rule. Except as otherwise provided in Section 2.01(b)
or in the articles, written notice of every meeting of the shareholders shall be
given by, or at the direction of, the secretary or other authorized person to
each shareholder of record entitled to vote at the meeting at least (1) ten days
prior to the day named for a meeting (and, in case of a meeting called to
consider a merger, consolidation, share exchange or division, to each
shareholder of record not entitled to vote at the meeting) called to consider a
fundamental change under 15 Pa.C.S. Chapter 19 or (2) five days prior to the day
named for the meeting in any other case. If the secretary neglects or refuses to
give notice of a meeting, the person or persons calling the meeting may do so.
In the case of a special meeting of shareholders, the notice shall specify the
general nature of the business to be transacted.

              (b) Notice of Action by Shareholders on Bylaws. In the case of a
meeting of shareholders that has as one of its purposes action on the bylaws,
written notice shall be given to each shareholder that the purpose, or one of
the purposes, of the meeting is to consider the adoption, amendment or repeal of
the bylaws. There shall be included in, or enclosed with, the notice a copy of
the proposed amendment or a summary of the changes to be effected thereby.

              (c) Notice of Action by Shareholders on Fundamental Change. In the
case of a meeting of the shareholders that has as one of its purposes action
with respect to any fundamental change under 15 Pa.C.S. Chapter 19, each
shareholder shall be given, together with written notice of the meeting, a copy
or summary of the amendment or plan to be considered at the meeting in
compliance with the provisions of Chapter 19.

              (d) Notice of Action by Shareholders Giving Rise to Dissenters'
Rights. In the case of a meeting of the shareholders that has as one of its
purposes action that would give rise to dissenters'

                                      -2-

rights under the provisions of 15 Pa.C.S. Subchapter 15D, each shareholder, to
the extent entitled thereto under the Business Corporation Law, shall be given,
together with written notice of the meeting:

                  (1) a statement that the shareholders have a right to dissent
and obtain payment of the fair value of their shares by complying with the
provisions of Subchapter 15D (relating to dissenters' rights); and

                  (2) a copy of Subchapter 15D.

         SECTION 2.04. WAIVER OF NOTICE.

              (a) Written Waiver. Whenever any written notice is required to be
given under the provisions of the Business Corporation Law, the articles or
these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of the notice. Neither the business to be
transacted at, nor the purpose of, a meeting need be specified in the waiver of
notice of the meeting.

              (b) Waiver by Attendance. Attendance of a person at any meeting
shall constitute a waiver of notice of the meeting except where a person attends
a meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting was not lawfully called
or convened.

         SECTION 2.05. MODIFICATION OF PROPOSAL CONTAINED IN NOTICE. Whenever
the language of a proposed resolution is included in a written notice of a
meeting required to be given under the provisions of the Business Corporation
Law or the articles or these bylaws, the meeting considering the resolution may
without further notice adopt it with such clarifying or other amendments as do
not enlarge its original purpose.

         SECTION 2.06. EXCEPTION TO REQUIREMENT OF NOTICE.

              (a) General Rule. Whenever any notice or communication is required
to be given to any person under the provisions of the Business Corporation Law
or by the articles or these bylaws or by the terms of any agreement or other
instrument or as a condition precedent to taking any corporate action and
communication with that person is then unlawful, the giving of the notice or
communication to that person shall not be required.

              (b) Shareholders Without Forwarding Addresses. Notice or other
communications need not be sent to any shareholder with whom the corporation has
been unable to communicate for more than 24 consecutive months because
communications to the shareholder are returned unclaimed or the shareholder has
otherwise failed to provide the corporation with a current address. Whenever the
shareholder provides the corporation with a current address, the corporation
shall commence sending notices and other communications to the shareholder in
the same manner as to other shareholders.

         SECTION 2.07. USE OF CONFERENCE TELEPHONE AND OTHER TECHNOLOGY. Any
director may participate in any meeting of the board of directors, and the board
of directors may provide by resolution with respect to a specific meeting or
with respect to a class of meetings that one or more persons may participate in
a meeting of the shareholders of the corporation, by means of conference
telephone or other electronic technology by means of which all persons
participating in the meeting

                                      -3-

can hear each other. Participation in a meeting pursuant to this section shall
constitute presence in person at the meeting.

                                   ARTICLE III

                                  SHAREHOLDERS

         SECTION 3.01. PLACE OF MEETING. All meetings of the shareholders of the
corporation shall be held at the registered office of the corporation unless
another place is designated by the board of directors in the notice of a
meeting. If a meeting of shareholders is held by means of the Internet or other
electronic technology pursuant to which the shareholders have an opportunity to
read or hear the proceedings substantially concurrently with their occurrence,
vote on matters submitted to the shareholders and pose questions to the
directors, the meeting need not be held at a particular geographic location.

         SECTION 3.02. ANNUAL MEETING. The board of directors may fix and
designate the date and time of the annual meeting of the shareholders, but if no
such date and time is fixed and designated by the board, the meeting for any
calendar year shall be held on the first Tuesday in March in such year, if not a
legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on
the next succeeding business day, not a Saturday, at 10:00 o'clock A.M., and at
said meeting the shareholders then entitled to vote shall elect directors and
shall transact such other business as may properly be brought before the
meeting. If the annual meeting shall not have been called and held within six
months after the designated time, any shareholder may call the meeting at any
time thereafter.

         SECTION 3.03. SPECIAL MEETINGS. Special meetings of the shareholders
may be called at any time by the chief executive officer or by resolution of the
board of directors, who may fix the date, time and place of the meeting. If the
chief executive officer or the board does not fix the date, time or place of the
meeting, it shall be the duty of the secretary to do so. A date fixed by the
secretary shall not be more than 60 days after the date of the receipt of the
request from the chief executive officer or adoption of the resolution of the
board calling the special meeting.

         SECTION 3.04. QUORUM AND ADJOURNMENT.

              (a) General Rule. A meeting of shareholders of the corporation
duly called shall not be organized for the transaction of business unless a
quorum is present. The presence of shareholders entitled to cast at least a
majority of the votes that all shareholders are entitled to cast on a particular
matter to be acted upon at the meeting shall constitute a quorum for the
purposes of consideration and action on the matter. Shares of the corporation
owned, directly or indirectly, by it and controlled, directly or indirectly, by
the board of directors of this corporation, as such, shall not be counted in
determining the total number of outstanding shares for quorum purposes at any
given time.

              (b) Withdrawal of a Quorum. The shareholders present at a duly
organized meeting can continue to do business until adjournment notwithstanding
the withdrawal of enough shareholders to leave less than a quorum.

              (c) Adjournments Generally. Any regular or special meeting of the
shareholders, including one at which directors are to be elected and one which
cannot be organized because a

                                      -4-

quorum has not attended, may be adjourned for such period and to such place as
the shareholders present and entitled to vote shall direct.

              (d) Electing Directors at Adjourned Meeting. Those shareholders
entitled to vote who attend a meeting called for the election of directors that
has been previously adjourned for lack of a quorum, although less than a quorum
as fixed in this section, shall nevertheless constitute a quorum for the purpose
of electing directors.

              (e) Other Action in Absence of Quorum. Those shareholders entitled
to vote who attend a meeting of shareholders that has been previously adjourned
for one or more periods aggregating at least 15 days because of an absence of a
quorum, although less than a quorum as fixed in this section, shall nevertheless
constitute a quorum for the purpose of acting upon any matter set forth in the
notice of the meeting if the notice states that those shareholders who attend
the adjourned meeting shall nevertheless constitute a quorum for the purpose of
acting upon the matter.

              (f) Effect of Proxy on Quorum. - If a proxy casts a vote on behalf
of a shareholder on any issue other than a procedural motion considered at a
meeting of shareholders, the shareholder shall be deemed to be present during
the entire meeting for purposes of determining whether a quorum is present for
consideration of any other issue.

         SECTION 3.05. ACTION BY SHAREHOLDERS. Except as otherwise provided in
the Business Corporation Law or the articles or these bylaws, whenever any
corporate action is to be taken by vote of the shareholders of the corporation,
it shall be authorized upon receiving the affirmative vote of a majority of the
votes cast by all shareholders entitled to vote thereon and, if any shareholders
are entitled to vote thereon as a class, upon receiving the affirmative vote of
a majority of the votes cast by the shareholders entitled to vote as a class.
Except when acting by unanimous consent to remove a director or directors, the
shareholders of the corporation may act only at a duly organized meeting.

                  SECTION 3.06. CONDUCT OF SHAREHOLDERS MEETING.. At every
meeting of the shareholders, the chairman of the board, if there be one, or, in
the case of vacancy in office or absence of the chairman of the board, one of
the following persons present in the order stated: the vice chairman of the
board, if there be one, the president, the vice presidents in their order of
rank and seniority, or a person chosen by vote of the shareholders present,
shall act as the presiding officer of the meeting. The secretary or, in the
absence of the secretary, an assistant secretary, or, in the absence of both the
secretary and assistant secretaries, a person appointed by the chairman of the
meeting, shall act as secretary of the meeting. Except as otherwise provided by
prior action of the board of directors, the presiding officer of the meeting
shall determine the order of business and shall have the authority to establish
rules for the conduct of the meeting.

         SECTION 3.07. VOTING RIGHTS OF SHAREHOLDERS. Unless otherwise provided
in the articles, every shareholder of the corporation shall be entitled to one
vote for every share standing in the name of the shareholder on the books of the
corporation.

         SECTION 3.08. VOTING AND OTHER ACTION BY PROXY.

              (a) General Rule.

                                      -5-

                  (1) Every shareholder entitled to vote at a meeting of
shareholders may authorize another person to act for the shareholder by proxy.

                  (2) The presence of, or vote or other action at a meeting of
shareholders by a proxy of a shareholder shall constitute the presence of, or
vote or action by the shareholder.

                  (3) Where two or more proxies of a shareholder are present,
the corporation shall, unless otherwise expressly provided in the proxy, accept
as the vote of all shares represented thereby the vote cast by a majority of
them and, if a majority of the proxies cannot agree whether the shares
represented shall be voted or upon the manner of voting the shares, the voting
of the shares shall be divided equally among those persons.

              (b) Execution and Filing. Every proxy shall be executed or
authenticated by the shareholder or by the duly authorized attorney-in-fact of
the shareholder and filed with or transmitted to the secretary of the
corporation or its designated agent. A shareholder or his or her duly authorized
attorney-in fact may execute or authenticate a writing or transmit an electronic
message authorizing another person to act for such shareholder by proxy. A
telegram, telex, cablegram, datagram, email, Internet communication or other
means of electronic transmission from a shareholder or attorney-in-fact, or a
photographic, facsimile or similar reproduction of a writing executed by a
shareholder or attorney-in-fact:

                  (1) may be treated as properly executed or authenticated for
purposes of this subsection; and

                  (2) shall be so treated if it sets forth or utilizes a
confidential and unique identification number or other mark furnished by the
corporation to the shareholder for the purposes of a particular meeting or
transaction.

         (c) Revocation. A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any provision in the
proxy to the contrary, but the revocation of a proxy shall not be effective
until written notice thereof has been given to the secretary of the corporation
or its designated agent in writing or by electronic transmission. An unrevoked
proxy shall not be valid after three years from the date of its execution,
authentication or transmission unless a longer time is expressly provided
therein. A proxy shall not be revoked by the death or incapacity of the maker
unless, before the vote is counted or the authority is exercised, written notice
of the death or incapacity is given to the secretary of the corporation or its
designated agent.

              (d) Expenses. The corporation shall pay the reasonable expenses of
solicitation of votes, proxies or consents of shareholders by or on behalf of
the board of directors or its nominees for election to the board, including
solicitation by professional proxy solicitors and otherwise.

         SECTION 3.09. VOTING BY FIDUCIARIES AND PLEDGEES. Shares of the
corporation standing in the name of a trustee or other fiduciary and shares held
by an assignee for the benefit of creditors or by a receiver may be voted by the
trustee, fiduciary, assignee or receiver. A shareholder whose shares are pledged
shall be entitled to vote the shares until the shares have been transferred into
the name of the pledgee, or a nominee of the pledgee, but nothing in this
section shall affect the validity of a proxy given to a pledgee or nominee.

                                      -6-

         SECTION 3.10. VOTING BY JOINT HOLDERS OF SHARES.

              (a) General Rule. Where shares of the corporation are held jointly
or as tenants in common by two or more persons, as fiduciaries or otherwise:

                  (1) if only one or more of such persons is present in person
or by proxy, all of the shares standing in the names of such persons shall be
deemed to be represented for the purpose of determining a quorum and the
corporation shall accept as the vote of all the shares the vote cast by a joint
owner or a majority of them; and

                  (2) if the persons are equally divided upon whether the shares
held by them shall be voted or upon the manner of voting the shares, the voting
of the shares shall be divided equally among the persons without prejudice to
the rights of the joint owners or the beneficial owners thereof among
themselves.

              (b) Exception. If there has been filed with the secretary of the
corporation a copy, certified by an attorney at law to be correct, of the
relevant portions of the agreement under which the shares are held or the
instrument by which the trust or estate was created or the order of court
appointing them or of an order of court directing the voting of the shares, the
persons specified as having such voting power in the document latest in date of
operative effect so filed, and only those persons, shall be entitled to vote the
shares but only in accordance therewith.

         SECTION 3.11. VOTING BY CORPORATIONS.

              (a) Voting by Corporate Shareholders. Any corporation that is a
shareholder of this corporation may vote at meetings of shareholders of this
corporation by any of its officers or agents, or by proxy appointed by any
officer or agent, unless some other person, by resolution of the board of
directors of the other corporation or a provision of its articles or bylaws, a
copy of which resolution or provision certified to be correct by one of its
officers has been filed with the secretary of this corporation, is appointed its
general or special proxy in which case that person shall be entitled to vote the
shares.

              (b) Controlled Shares. Shares of this corporation owned, directly
or indirectly, by it and controlled, directly or indirectly, by the board of
directors of this corporation, as such, shall not be voted at any meeting and
shall not be counted in determining the total number of outstanding shares for
voting purposes at any given time.

         SECTION 3.12. DETERMINATION OF SHAREHOLDERS OF RECORD.

              (a) Fixing Record Date. The board of directors may fix a time
prior to the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall be not
more than 90 days prior to the date of the meeting of shareholders. Only
shareholders of record on the date fixed shall be so entitled notwithstanding
any transfer of shares on the books of the corporation after any record date
fixed as provided in this subsection. The board of directors may similarly fix a
record date for the determination of shareholders of record for any other
purpose. When a determination of shareholders of record has been made as
provided in this section for purposes of a meeting, the determination shall
apply to any adjournment thereof unless the board fixes a new record date for
the adjourned meeting.

                                      -7-

              (b) Determination When a Record Date is Not Fixed. If a record
date is not fixed:

                  (1) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the day next preceding the day on which notice is given.

                  (2) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.

              (c) Certification by Nominee. The board of directors may adopt a
procedure whereby a shareholder of the corporation may certify in writing to the
corporation that all or a portion of the shares registered in the name of the
shareholder are held for the account of a specified person or persons. Upon
receipt by the corporation of a certification complying with the procedure, the
persons specified in the certification shall be deemed, for the purposes set
forth in the certification, to be the holders of record of the number of shares
specified in place of the shareholder making the certification.

         SECTION 3.13. VOTING LISTS.

              (a) General Rule. The officer or agent having charge of the
transfer books for shares of the corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each.
The list shall be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting for the purposes thereof except that, if the corporation has
5,000 or more shareholders, in lieu of the making of the list the corporation
may make the information therein available at the meeting by any other means.

              (b) Effect of List. Failure to comply with the requirements of
this section shall not affect the validity of any action taken at a meeting
prior to a demand at the meeting by any shareholder entitled to vote thereat to
examine the list. The original share register or transfer book, or a duplicate
thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence
as to who are the shareholders entitled to examine the list or share register or
transfer book or to vote at any meeting of shareholders.

         SECTION 3.14. JUDGES OF ELECTION.

              (a) Appointment. In advance of any meeting of shareholders of the
corporation, the board of directors may appoint judges of election, who need not
be shareholders, to act at the meeting or any adjournment thereof. If judges of
election are not so appointed, the presiding officer of the meeting may, and on
the request of any shareholder shall, appoint judges of election at the meeting.
The number of judges shall be one or three. A person who is a candidate for an
office to be filled at the meeting shall not act as a judge.

              (b) Vacancies. In case any person appointed as a judge fails to
appear or fails or refuses to act, the vacancy may be filled by appointment made
by the board of directors in advance of the convening of the meeting or at the
meeting by the presiding officer thereof.

              (c) Duties. The judges of election shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, and the

                                      -8-

authenticity, validity and effect of proxies, receive votes or ballots, hear and
determine all challenges and questions in any way arising in connection with
nominations by shareholders or the right to vote, count and tabulate all votes,
determine the result and do such acts as may be proper to conduct the election
or vote with fairness to all shareholders. The judges of election shall perform
their duties impartially, in good faith, to the best of their ability and as
expeditiously as is practical. If there are three judges of election, the
decision, act or certificate of a majority shall be effective in all respects as
the decision, act or certificate of all.

              (d) Report. On request of the presiding officer of the meeting or
of any shareholder, the judges shall make a report in writing of any challenge
or question or matter determined by them, and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated therein.

         SECTION 3.15. MINORS AS SECURITY HOLDERS. The corporation may treat a
minor who holds shares or obligations of the corporation as having capacity to
receive and to empower others to receive dividends, interest, principal and
other payments or distributions, to vote or express consent or dissent and to
make elections and exercise rights relating to such shares or obligations
unless, in the case of payments or distributions on shares, the corporate
officer responsible for maintaining the list of shareholders or the transfer
agent of the corporation or, in the case of payments or distributions on
obligations, the treasurer or paying officer or agent has received written
notice that the holder is a minor.

         SECTION 3.16 USE OF CONFERENCE TELEPHONE OR OTHER TECHNOLOGY. The
presence or participation, including voting and taking other action, at a
meeting of shareholders, or the expression of consent or dissent to corporate
action, by a shareholder by conference telephone or other electronic means,
including the Internet, shall constitute the presence of, or vote or action by,
or consent or dissent of the shareholder for purposes of the Business
Corporation Law, the articles and these bylaws.

                                   ARTICLE IV

                               BOARD OF DIRECTORS

         SECTION 4.01. POWERS; PERSONAL LIABILITY.

              (a) General Rule. Unless otherwise provided by statute, all powers
vested by law in the corporation shall be exercised by or under the authority
of, and the business and affairs of the corporation shall be managed under the
direction of, the board of directors.

              (b) Personal Liability of Directors.

                  (1) A director shall not be personally liable, as such, for
monetary damages (including, without limitation, any judgment, amount paid in
settlement, penalty, punitive damages or expense of any nature (including,
without limitation, attorneys' fees and disbursements)) for any action taken, or
any failure to take any action, unless:

                      (i) the director has breached or failed to perform the
duties of his or her office under Subchapter 17B of the Business Corporation Law
or any successor provision; and

                                      -9-

                      (ii) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness.

                  (2) The provisions of paragraph (1) shall not apply to the
responsibility or liability of a director pursuant to any criminal statute, or
the liability of a director for the payment of taxes pursuant to local, state or
federal law.

              (The provisions of this subsection (b) were first adopted by the
shareholders of the corporation on December 20, 1991.)

              (c) Notation of Dissent. A director of the corporation who is
present at a meeting of the board of directors, or of a committee of the board,
at which action on any corporate matter is taken on which the director is
generally competent to act, shall be presumed to have assented to the action
taken unless his or her dissent is entered in the minutes of the meeting or
unless the director files his or her written dissent to the action with the
secretary of the meeting before the adjournment thereof or transmits the dissent
in writing to the secretary of the corporation immediately after the adjournment
of the meeting. The right to dissent shall not apply to a director who voted in
favor of the action. Nothing in this section shall bar a director from asserting
that minutes of the meeting incorrectly omitted his or her dissent if, promptly
upon receipt of a copy of such minutes, the director notifies the secretary, in
writing, of the asserted omission or inaccuracy.

         SECTION 4.02. QUALIFICATIONS AND SELECTION OF DIRECTORS.

              (a) Qualifications. Each director of the corporation shall be a
natural person of full age, provided that no person of age 70 years or more
shall be eligible for election as a director. Directors need not be residents of
the Commonwealth of Pennsylvania or shareholders of the corporation.

              (b) Notice of Certain Nominations Required. Nominations for
election of directors may be made by any shareholder entitled to vote for the
election of directors if written notice (the "Notice") of the shareholder's
intent to nominate a director at the meeting is given by the shareholder and
received by the secretary of the corporation in the manner and within the time
specified in this section. The initial Notice shall be delivered to the
secretary of the corporation not less than 45 days prior to the anniversary of
the mailing date of the corporation's proxy statement for its previous meeting
of the shareholders called for the election of directors. In lieu of delivery to
the secretary, the Notice may be mailed to the secretary by certified mail,
return receipt requested, but shall be deemed to have been given only upon
actual receipt by the secretary. The requirements of this subsection shall not
apply to a nomination for directors made to the shareholders by the board of
directors.

              (c) Contents of Notice. The Notice shall be in writing and shall
contain or be accompanied by:

                  (1) the name and residence address of the nominating
shareholder;

                  (2) a representation that the shareholder is a holder of
record of voting stock of the corporation and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the Notice;

                  (3) such information regarding each nominee as would have been
required to be included in a proxy statement filed pursuant to Regulation 14A of
the rules and regulations

                                      -10-

established by the Securities and Exchange Commission under the Securities
Exchange Act of 1934 (or pursuant to any successor act or regulation) had
proxies been solicited with respect to such nominee by the management or board
of directors of the corporation;

                  (4) a description of all arrangements or understandings among
the shareholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the shareholder; and

                  (5) the consent of each nominee to serve as a director of the
corporation if so elected.

              (d) Determination of Compliance. If a judge or judges of election
shall not have been appointed pursuant to these bylaws, the presiding officer of
the meeting may, if the facts warrant, determine and declare to the meeting that
any nomination made at the meeting was not made in accordance with the
procedures of this section and, in such event, the nomination shall be
disregarded. Any decision by the presiding officer of the meeting made in good
faith shall be conclusive and binding upon all shareholders of the corporation
for any purpose.

              (e) Election of Directors. In elections for directors, voting need
not be by ballot, unless required by vote of the shareholders before the voting
for the election of directors begins. The candidates receiving the highest
number of votes from each class or group of classes, if any, entitled to elect
directors separately up to the number of directors to be elected by the class or
group of classes shall be elected. If at any meeting of shareholders, directors
of more than one class are to be elected, each class of directors shall be
elected in a separate election.

         SECTION 4.03. NUMBER AND TERM OF OFFICE.

              (a) Number. The board of directors shall consist of such number of
directors, as may be determined from time to time by resolution of the board of
directors.

              (b) Term of Office. Each director shall hold office until the
expiration of the term for which he or she was selected and until a successor
has been selected and qualified or until his or her earlier death, resignation
or removal. A decrease in the number of directors shall not have the effect of
shortening the term of any incumbent director.

              (c) Resignation. Any director may resign at any time upon written
notice to the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as shall be specified in
the notice of resignation.

         SECTION 4.04. VACANCIES.

              (a) General Rule. Vacancies in the board of directors, including
vacancies resulting from an increase in the number of directors, may be filled
by a majority vote of the remaining members of the board though less than a
quorum, or by a sole remaining director, and each person so selected shall be a
director to serve until the next selection of the class for which such director
has been chosen, and until a successor has been selected and qualified or until
his or her earlier death, resignation or removal.

              (b) Action by Resigned Directors. When one or more directors
resign from the board effective at a future date, the directors then in office,
including those who have so resigned, shall

                                      -11-

have power by the applicable vote to fill the vacancies, the vote thereon to
take effect when the resignations become effective.

         SECTION 4.05. REMOVAL OF DIRECTORS.

              (a) Removal by the Shareholders. The entire board of directors, or
any class of the board, or any individual director may be removed from office by
vote of the shareholders entitled to vote thereon only for cause. In case the
board or a class of the board or any one or more directors are so removed, new
directors may be elected at the same meeting. The repeal of a provision of the
articles or bylaws prohibiting, or the addition of a provision to the articles
or bylaws permitting, the removal by the shareholders of the board, a class of
the board or a director without assigning any cause shall not apply to any
incumbent director during the balance of the term for which the director was
selected.

              (b) Removal by the Board. The board of directors may declare
vacant the office of a director who has been judicially declared of unsound mind
or who has been convicted of an offense punishable by imprisonment for a term of
more than one year or if, within 60 days after notice of his or her selection,
the director does not accept the office either in writing or by attending a
meeting of the board of directors.

         SECTION 4.06. PLACE OF MEETINGS. Meetings of the board of directors may
be held at such place within or without the Commonwealth of Pennsylvania as the
board of directors may from time to time appoint or as may be designated in the
notice of the meeting.

         SECTION 4.07. ORGANIZATION OF MEETINGS. At every meeting of the board
of directors, the chairman of the board, if there be one, or, in the case of a
vacancy in the office or absence of the chairman of the board, one of the
following officers present in the order stated: the vice chairman of the board,
if there be one, the president, the vice presidents in their order of rank and
seniority, or a person chosen by a majority of the directors present, shall act
as chairman of the meeting. The secretary or, in the absence of the secretary,
an assistant secretary, or, in the absence of the secretary and the assistant
secretaries, any person appointed by the chairman of the meeting, shall act as
secretary of the meeting.

         SECTION 4.08. REGULAR MEETINGS. Regular meetings of the board of
directors shall be held at such time and place as shall be designated from time
to time by resolution of the board of directors.

         SECTION 4.09. SPECIAL MEETINGS. Special meetings of the board of
directors shall be held whenever called by the chief executive officer or by two
or more of the directors.

         SECTION 4.10. QUORUM OF AND ACTION BY DIRECTORS.

              (a) General Rule. A majority of the directors in office of the
corporation shall be necessary to constitute a quorum for the transaction of
business and the acts of a majority of the directors present and voting at a
meeting at which a quorum is present shall be the acts of the board of
directors.

              (b) Action by Written Consent. Any action required or permitted to
be taken at a meeting of the directors may be taken without a meeting if, prior
or subsequent to the action, a consent or consents thereto by all of the
directors in office is filed with the secretary of the corporation.

                                      -12-

              (c) Notation of Dissent. A director who is present at a meeting of
the board of directors, or of a committee of the board, at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his or her dissent is entered in the minutes of the meeting or unless the
director files a written dissent to the action with the secretary of the meeting
before the adjournment thereof or transmits the dissent in writing to the
secretary of the corporation immediately after the adjournment of the meeting.
The right to dissent shall not apply to a director who voted in favor of the
action. Nothing in this section shall bar a director from asserting that minutes
of the meeting incorrectly omitted his or her dissent if, promptly upon receipt
of a copy of such minutes, the director notifies the secretary, in writing, of
the asserted omission or inaccuracy.

         SECTION 4.11. EXECUTIVE AND OTHER COMMITTEES.

              (a) Establishment and Powers. The board of directors may, by
resolution adopted by a majority of the directors in office, establish one or
more committees to consist of one or more directors of the corporation. Any
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise all of the powers and authority of the board of
directors except that a committee shall not have any power or authority as to
the following:

                  (1) The submission to shareholders of any action requiring
approval of shareholders under the Business Corporation Law.

                  (2) The creation or filling of vacancies in the board of
directors.

                  (3) The adoption, amendment or repeal of these bylaws.

                  (4) The amendment or repeal of any resolution of the board
that by its terms is amendable or repealable only by the board.

                  (5) Action on matters committed by a resolution of the board
of directors to another committee of the board.

              (b) Alternate Committee Members. The board may designate one or
more directors as alternate members of any committee who may replace any absent
or disqualified member at any meeting of the committee or for the purposes of
any written action by the committee. In the absence or disqualification of a
member and alternate member or members of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another director to act at the
meeting in the place of the absent or disqualified member.

              (c) Term. Each committee of the board shall serve at the pleasure
of the board.

              (d) Committee Procedures. The term "board of directors" or
"board," when used in any provision of these bylaws relating to the organization
or procedures of or the manner of taking action by the board of directors, shall
be construed to include and refer to any executive or other committee of the
board.

         SECTION 4.12. COMPENSATION. The board of directors shall have the
authority to fix the compensation of directors for their services as directors
and a director may be a salaried officer of the corporation.

                                      -13-

                                    ARTICLE V

                                    OFFICERS

         SECTION 5.01. OFFICERS GENERALLY.

              (a) Number, Qualifications and Designation. The officers of the
corporation shall be a president, one or more vice presidents, a secretary, a
treasurer, and such other officers as may be elected in accordance with the
provisions of Section 5.03. Officers may but need not be directors or
shareholders of the corporation. The president and secretary shall be natural
persons of full age. The treasurer may be a corporation, but if a natural person
shall be of full age. The board of directors may elect from among the members of
the board a chairman of the board and a vice chairman of the board who may be
officers of the corporation. Any number of offices may be held by the same
person.

              (b) Bonding. The corporation may secure the fidelity of any or all
of its officers by bond or otherwise.

              (c) Standard of Care. In lieu of the standards of conduct
otherwise provided by law, officers of the corporation shall be subject to the
same standards of conduct, including standards of care and loyalty and rights of
justifiable reliance, as shall at the time be applicable to directors of the
corporation. An officer of the corporation shall not be personally liable, as
such, to the corporation or its shareholders for monetary damages (including,
without limitation, any judgment, amount paid in settlement, penalty, punitive
damages or expense of any nature (including, without limitation, attorneys' fees
and disbursements)) for any action taken, or any failure to take any action,
unless the officer has breached or failed to perform the duties of his or her
office under the articles of incorporation, these bylaws, or the applicable
provisions of law and the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness. The provisions of this subsection shall not
apply to the responsibility or liability of an officer pursuant to any criminal
statute or for the payment of taxes pursuant to local, state or federal law.

         SECTION 5.02. ELECTION, TERM OF OFFICE AND RESIGNATIONS.

              (a) Election and Term of Office. The officers of the corporation
(except those elected by delegated authority pursuant to Section 5.03 or filled
pursuant to Section 5.05) shall be elected annually by the board of directors,
and each such officer shall hold office for a term of one year and until a
successor has been selected and qualified or until his or her earlier death,
resignation or removal.

              (b) Resignations. Any officer may resign at any time upon written
notice to the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as may be specified in the
notice of resignation.

         SECTION 5.03. SUBORDINATE OFFICERS, COMMITTEES AND AGENTS. The board of
directors may from time to time elect such other officers and appoint such
committees, employees or other agents as the business of the corporation may
require, including one or more assistant secretaries, and one or more assistant
treasurers, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these bylaws, or as the board of
directors may from time to time determine. The board of directors may delegate
to any officer or committee the power to elect subordinate officers and to
retain or appoint employees or other agents, or committees thereof,

                                      -14-

and to prescribe the authority and duties of such subordinate officers,
committees, employees or other agents.

         SECTION 5.04. REMOVAL OF OFFICERS AND AGENTS. Any officer or agent of
the corporation may be removed by the board of directors with or without cause.
The removal shall be without prejudice to the contract rights, if any, of any
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.

         SECTION 5.05. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause, may be filled by the
board of directors or the board of directors may delegate to any officer or
committee the power to fill a vacancy in such office or to create a new such
office, subject to ratification by the board of directors, and if the office is
one for which these bylaws prescribe a term, shall be filled for the unexpired
portion of the term.

         SECTION 5.06. AUTHORITY.

              (a) General Rule. All officers of the corporation, as between
themselves and the corporation, shall have such authority and perform such
duties in the management of the corporation as may be provided by or pursuant to
resolutions or orders of the board of directors or, in the absence of
controlling provisions in the resolutions or orders of the board of directors,
as may be determined by or pursuant to these bylaws.

              (b) Chief Executive Officer. The chairman of the board or the
president, as designated from time to time by the board of directors, shall be
the chief executive officer of the corporation.

         SECTION 5.07. THE CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The chairman
of the board or in the absence of the chairman, the vice chairman of the board,
shall preside at all meetings of the shareholders and of the board of directors,
and shall perform such other duties as may from time to time be requested by the
board of directors.

         SECTION 5.08. THE CHIEF EXECUTIVE OFFICER. The chief executive officer
shall be the chief executive officer of the corporation and shall have general
supervision over the business of the corporation. The chief executive officer
shall have the general powers and shall perform the duties which by law and
general usage appertain to the office, subject, however, to the control of the
board of directors. The chief executive officer shall sign, execute and
acknowledge, in the name of the corporation, deeds, mortgages, bonds, contracts
and other instruments authorized by the board of directors, except in cases
where the signing and execution thereof shall be expressly delegated by the
board of directors, or by these bylaws, to some other officer or agent of the
corporation.

         SECTION 5.09. THE PRESIDENT. The president shall perform such duties as
from time to time may be assigned by the board of directors or the chief
executive officer (unless the president shall be the chief executive officer, in
which case the president's duties shall be those specified in Section 5.08).

         SECTION 5.10. THE VICE PRESIDENTS. The vice presidents shall perform
the duties of the president in the absence of the president and such other
duties as may from time to time be assigned to them by the board of directors or
the president.

         SECTION 5.11. THE SECRETARY. The secretary or an assistant secretary
shall attend all meetings of the shareholders and of the board of directors and
all committees thereof and shall

                                      -15-

record all the votes of the shareholders and of the directors and the minutes of
the meetings of the shareholders and of the board of directors and of committees
of the board in a book or books to be kept for that purpose; shall see that
notices are given and records and reports properly kept and filed by the
corporation as required by law; shall be the custodian of the seal of the
corporation and see that it is affixed to all documents to be executed on behalf
of the corporation under its seal; and, in general, shall perform all duties
incident to the office of secretary, and such other duties as may from time to
time be assigned by the board of directors or the president.

         SECTION 5.12. THE TREASURER. The treasurer or an assistant treasurer
shall have or provide for the custody of the funds or other property of the
corporation; shall collect and receive or provide for the collection and receipt
of monies earned by or in any manner due to or received by the corporation;
shall deposit all funds in his or her custody as treasurer in such banks or
other places of deposit as the board of directors may from time to time
designate; shall, whenever so required by the board of directors, render an
account showing all transactions as treasurer, and the financial condition of
the corporation; and, in general, shall discharge such other duties as may from
time to time be assigned by the board of directors or the president.

         SECTION 5.13. SALARIES. The salaries of the officers elected by the
board of directors shall be fixed from time to time by the board of directors or
by such officer as may be designated by resolution of the board. The salaries or
other compensation of any other officers, employees and other agents shall be
fixed from time to time by the officer or committee to which the power to elect
such officers or to retain or appoint such employees or other agents has been
delegated pursuant to Section 5.03. No officer shall be prevented from receiving
such salary or other compensation by reason of the fact that the officer is also
a director of the corporation.

                                   ARTICLE VI

                      CERTIFICATES OF STOCK, TRANSFER, ETC.

         SECTION 6.01. SHARE CERTIFICATES.

              (a) Form of Certificates. Certificates for shares of the
corporation shall be in such form as approved by the board of directors, and
shall state that the corporation is incorporated under the laws of the
Commonwealth of Pennsylvania, the name of the person to whom issued, and the
number and class of shares and the designation of the series (if any) that the
certificate represents. If the corporation is authorized to issue shares of more
than one class or series, certificates for shares of the corporation shall set
forth upon the face or back of the certificate (or shall state on the face or
back of the certificate that the corporation will furnish to any shareholder
upon request and without charge), a full or summary statement of the
designations, voting rights, preferences, limitations and special rights of the
shares of each class or series authorized to be issued so far as they have been
fixed and determined and the authority of the board of directors to fix and
determine the designations, voting rights, preferences, limitations and special
rights of the classes and series of shares of the corporation.

              (b) Share Register. The share register or transfer books and blank
share certificates shall be kept by the secretary or by any transfer agent or
registrar designated by the board of directors for that purpose.

         SECTION 6.02. ISSUANCE. The share certificates of the corporation shall
be numbered and registered in the share register or transfer books of the
corporation as they are issued. They shall be

                                      -16-

executed in such manner as the board of directors shall determine. Where a
certificate is signed by a transfer agent or a registrar, the signature of any
corporate officer upon the certificate may be a facsimile, engraved or printed.
In case any officer who has signed, or whose facsimile signature has been placed
upon, any share certificate shall have ceased to be such officer because of
death, resignation or otherwise, before the certificate is issued, it may be
issued with the same effect as if the officer had not ceased to be such at the
date of its issue. The provisions of this Section 6.02 shall be subject to any
inconsistent or contrary agreement in effect at the time between the corporation
and any transfer agent or registrar.

         SECTION 6.03. TRANSFER. Transfers of shares shall be made on the share
register or transfer books of the corporation upon surrender of the certificate
therefor, endorsed by the person named in the certificate or by an attorney
lawfully constituted in writing. No transfer shall be made inconsistent with the
provisions of the Uniform Commercial Code, 13 Pa.C.S. (S)(S)8101 et seq., and
its amendments and supplements.

         SECTION 6.04. RECORD HOLDER OF SHARES. The corporation shall be
entitled to treat the person in whose name any share or shares of the
corporation stand on the books of the corporation as the absolute owner thereof,
and shall not be bound to recognize any equitable or other claim to, or interest
in, such share or shares on the part of any other person.

         SECTION 6.05. LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder of
any shares of the corporation shall immediately notify the corporation of any
loss, destruction or mutilation of the certificate therefor, and the board of
directors may, in its discretion, cause a new certificate or certificates to be
issued to such holder, in case of mutilation of the certificate, upon the
surrender of the mutilated certificate or, in case of loss or destruction of the
certificate, upon satisfactory proof of such loss or destruction and, if the
board of directors shall so determine, the deposit of a bond in such form and in
such sum, and with such surety or sureties, as it may direct.

                                      -17-

                                   ARTICLE VII

                   INDEMNIFICATION OF DIRECTORS, OFFICERS AND
                        OTHER AUTHORIZED REPRESENTATIVES

         (The provisions of this Article VII were first adopted by the
shareholders of the corporation on December 20, 1991.)

         SECTION 7.01. SCOPE OF INDEMNIFICATION.

              (a) General Rule. The corporation shall indemnify an indemnified
representative against any liability incurred in connection with any proceeding
in which the indemnified representative may be involved as a party or otherwise
by reason of the fact that such person is or was serving in an indemnified
capacity, including, without limitation, liabilities resulting from any actual
or alleged breach or neglect of duty, error, misstatement or misleading
statement, negligence, gross negligence or act giving rise to strict or products
liability, except:

                  (1) where such indemnification is expressly prohibited by
applicable law;

                  (2) where the conduct of the indemnified representative has
been finally determined pursuant to Section 7.06 or otherwise:

                      (i) to constitute willful misconduct or recklessness
within the meaning of 15 Pa.C.S. (S)1746(b) or any superseding provision of law
sufficient in the circumstances to bar indemnification against liabilities
arising from the conduct; or

                      (ii) to be based upon or attributable to the receipt by
the indemnified representative from the corporation of a personal benefit to
which the indemnified representative is not legally

entitled; or

                  (3) to the extent such indemnification has been finally
determined in a final adjudication pursuant to Section 7.06 to be otherwise
unlawful.

              (b) Partial Payment. If an indemnified representative is entitled
to indemnification in respect of a portion, but not all, of any liabilities to
which such person may be subject, the corporation shall indemnify such
indemnified representative to the maximum extent for such portion of the
liabilities.

              (c) Presumption. The termination of a proceeding by judgment,
order, settlement or conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the indemnified
representative is not entitled to indemnification.

              (d) Definitions.  For purposes of this Article:

                  (1) "indemnified capacity" means any and all past, present and
future service by an indemnified representative in one or more capacities as a
director, officer, employee or agent of the corporation, or, at the request of
the corporation, as a director, officer, employee, agent, fiduciary or trustee
of another corporation, partnership, joint venture, trust, employee benefit plan
or other entity or enterprise;

                                      -18-

                  (2) "indemnified representative" means any and all directors
and officers of the corporation and any other person designated as an
indemnified representative by the board of directors of the corporation (which
may, but need not, include any person serving at the request of the corporation,
as a director, officer, employee, agent, fiduciary or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or other
entity or enterprise);

                  (3) "liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damages, excise tax assessed with respect to
an employee benefit plan, or cost or expense of any nature (including, without
limitation, attorneys' fees and disbursements); and

                  (4) "proceeding" means any threatened, pending or completed
action, suit, appeal or other proceeding of any nature, whether civil, criminal,
administrative or investigative, whether formal or informal, and whether brought
by or in the right of the corporation, a class of its security holders or
otherwise.

         SECTION 7.02. PROCEEDINGS INITIATED BY INDEMNIFIED REPRESENTATIVES.
Notwithstanding any other provision of this Article, the corporation shall not
indemnify under this Article an indemnified representative for any liability
incurred in a proceeding initiated (which shall not be deemed to include counter
claims or affirmative defenses) or participated in as an intervenor or amicus
curiae by the person seeking indemnification unless such initiation of or
participation in the proceeding is authorized, either before or after its
commencement, by the affirmative vote of a majority of the directors in office.
This section does not apply to reimbursement of expenses incurred in
successfully prosecuting or defending an arbitration under Section 7.06 or
otherwise successfully prosecuting or defending the rights of an indemnified
representative granted by or pursuant to this Article.

         SECTION 7.03. ADVANCING EXPENSES. The corporation shall pay the
expenses (including attorneys' fees and disbursements) incurred in good faith by
an indemnified representative in advance of the final disposition of a
proceeding described in Section 7.01 or the initiation of or participation in
which is authorized pursuant to Section 7.02 upon receipt of an undertaking by
or on behalf of the indemnified representative to repay the amount if it is
ultimately determined pursuant to Section 7.06 that such person is not entitled
to be indemnified by the corporation pursuant to this Article. The financial
ability of an indemnified representative to repay an advance shall not be a
prerequisite to the making of such advance.

         SECTION 7.04. SECURING OF INDEMNIFICATION OBLIGATIONS. To further
effect, satisfy or secure the indemnification obligations provided herein or
otherwise, the corporation may maintain insurance, obtain a letter of credit,
act as self-insurer, create a reserve, trust, escrow, cash collateral or other
fund or account, enter into indemnification agreements, pledge or grant a
security interest in any assets or properties of the corporation, or use any
other mechanism or arrangement whatsoever in such amounts, at such costs, and
upon such other terms and conditions as the board of directors shall deem
appropriate. Absent fraud, the determination of the board of directors with
respect to such amounts, costs, terms and conditions shall be conclusive against
all security holders, officers and directors and shall not be subject to
voidability.

         SECTION 7.05. PAYMENT OF INDEMNIFICATION. An indemnified representative
shall be entitled to indemnification within 30 days after a written request for
indemnification has been delivered to the secretary of the corporation.

         SECTION 7.06. ARBITRATION.

                                      -19-

              (a) General Rule. Any dispute related to the right to
indemnification, contribution or advancement of expenses as provided under this
Article, except with respect to indemnification for liabilities arising under
the Securities Act of 1933 that the corporation has undertaken to submit to a
court for adjudication, shall be decided only by arbitration in the county in
which the principal executive offices of the corporation are located at the
time, in accordance with the commercial arbitration rules then in effect of the
American Arbitration Association, before a panel of three arbitrators, one of
whom shall be selected by the corporation, the second of whom shall be selected
by the indemnified representative and the third of whom shall be selected by the
other two arbitrators. In the absence of the American Arbitration Association,
or if for any reason arbitration under the arbitration rules of the American
Arbitration Association cannot be initiated, and if one of the parties fails or
refuses to select an arbitrator or the arbitrators selected by the corporation
and the indemnified representative cannot agree on the selection of the third
arbitrator within 30 days after such time as the corporation and the indemnified
representative have each been notified of the selection of the other's
arbitrator, the necessary arbitrator or arbitrators shall be selected by the
presiding judge of the court of general jurisdiction in such county.

              (b) Qualifications of Arbitrators. Each arbitrator selected as
provided herein is required to be or have been a director or executive officer
of a corporation whose shares of common stock were listed during at least one
year of such service on the New York Stock Exchange or the American Stock
Exchange or quoted on the National Association of Securities Dealers Automated
Quotations System.

              (c) Burden of Proof. The party or parties challenging the right of
an indemnified representative to the benefits of this Article shall have the
burden of proof.

              (d) Expenses. The corporation shall reimburse an indemnified
representative for the expenses (including attorneys' fees and disbursements)
incurred in successfully prosecuting or defending such arbitration.

              (e) Effect. Any award entered by the arbitrators shall be final,
binding and nonappealable and judgment may be entered thereon by any party in
accordance with applicable law in any court of competent jurisdiction, except
that the corporation shall be entitled to interpose as a defense in any such
judicial enforcement proceeding any prior final judicial determination adverse
to the indemnified representative under Section 7.01(a)(2) in a proceeding not
directly involving indemnification under this Article. This arbitration
provision shall be specifically enforceable.

         SECTION 7.07. CONTRIBUTION. If the indemnification provided for in this
Article or otherwise is unavailable for any reason in respect of any liability
or portion thereof, the corporation shall contribute to the liabilities to which
the indemnified representative may be subject in such proportion as is
appropriate to reflect the intent of this Article or otherwise.

         SECTION 7.08. MANDATORY INDEMNIFICATION OF DIRECTORS, OFFICERS, ETC. To
the extent that an authorized representative of the corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1741 or 1742 of the Business Corporation Law
or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees and disbursements)
actually and reasonably incurred by such person in connection therewith.

                                      -20-

         SECTION 7.09. CONTRACT RIGHTS; AMENDMENT OR REPEAL. All rights under
this Article shall be deemed a contract between the corporation and the
indemnified representative pursuant to which the corporation and each
indemnified representative intend to be legally bound. Any repeal, amendment or
modification hereof shall be prospective only and shall not affect any rights or
obligations then existing.

         SECTION 7.10. SCOPE OF ARTICLE. The rights granted by this Article
shall not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advancement of expenses may be entitled under
any statute, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an indemnified capacity and as to action in any
other capacity. The indemnification, contribution and advancement of expenses
provided by or granted pursuant to this Article shall continue as to a person
who has ceased to be an indemnified representative in respect of matters arising
prior to such time, and shall inure to the benefit of the heirs, executors,
administrators and personal representatives of such a person.

         SECTION 7.11. RELIANCE ON PROVISIONS. Each person who shall act as an
indemnified representative of the corporation shall be deemed to be doing so in
reliance upon the rights of indemnification, contribution and advancement of
expenses provided by this Article.

         SECTION 7.12. INTERPRETATION. The provisions of this Article are
intended to constitute bylaws authorized by 15 Pa.C.S. (S)1746.

                                  ARTICLE VIII

                                  MISCELLANEOUS

         SECTION 8.01. CORPORATE SEAL. The corporation shall have a corporate
seal in the form of a circle containing the name of the corporation, the year of
incorporation and such other details as may be approved by the board of
directors. The affixation of the corporate seal shall not be necessary to the
valid execution, assignment or endorsement by the corporation of any instrument
or other document.

         SECTION 8.02. CHECKS. All checks, notes, bills of exchange or other
similar orders in writing shall be signed by such one or more officers or
employees of the corporation as the board of directors may from time to time
designate.

         SECTION 8.03. CONTRACTS. Except as otherwise provided in the Business
Corporation Law in the case of transactions that require action by the
shareholders, the board of directors may authorize any officer or agent to enter
into any contract or to execute or deliver any instrument on behalf of the
corporation, and such authority may be general or confined to specific
instances.

         SECTION 8.04. INTERESTED DIRECTORS OR OFFICERS; QUORUM.

              (a) General Rule. A contract or transaction between the
corporation and one or more of its directors or officers or between the
corporation and another corporation, partnership, joint venture, trust or other
enterprise in which one or more of its directors or officers are directors or
officers or have a financial or other interest, shall not be void or voidable
solely for that reason, or solely because the director or officer is present at
or participates in the meeting of the board of directors that authorizes the
contract or transaction, or solely because his, her or their votes are counted
for that purpose, if:

                                      -21-

                  (1) the material facts as to the relationship or interest and
as to the contract or transaction are disclosed or are known to the board of
directors and the board authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors even though the
disinterested directors are less than a quorum;

                  (2) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to the
shareholders entitled to vote thereon and the contract or transaction is
specifically approved in good faith by vote of those shareholders; or

                  (3) the contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified by the board of directors
or the shareholders.

              (b) Quorum. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board which authorizes
a contract or transaction specified in subsection (a).

         SECTION 8.05. DEPOSITS. All funds of the corporation shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositaries as the board of directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by such
one or more officers or employees of the corporation as the board of directors
shall from time to time designate.

         SECTION 8.06. CORPORATE RECORDS.

              (a) Required Records. The corporation shall keep complete and
accurate books and records of account, minutes of the proceedings of the
incorporators, shareholders and directors and a share register giving the names
and addresses of all shareholders and the number and class of shares held by
each. The share register shall be kept at either the registered office of the
corporation in the Commonwealth of Pennsylvania or at its principal place of
business wherever situated or at the office of its registrar or transfer agent.
Any books, minutes or other records may be in written form or any other form
capable of being converted into written form within a reasonable time.

                           (b) Right of Inspection. Every shareholder shall,
upon written verified demand stating the purpose thereof, have a right to
examine, in person or by agent or attorney, during the usual hours for business
for any proper purpose, the share register, books and records of account, and
records of the proceedings of the incorporators, shareholders and directors and
to make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to the interest of the person as a shareholder. In every
instance where an attorney or other agent is the person who seeks the right of
inspection, the demand shall be accompanied by a verified power of attorney or
other writing that authorizes the attorney or other agent to so act on behalf of
the shareholder. The demand shall be directed to the corporation at its
registered office in the Commonwealth of Pennsylvania or at its principal place
of business wherever situated.

         SECTION 8.07. AMENDMENT OF BYLAWS. Except as otherwise provided in the
express terms of any series of the shares of the corporation:

              (a) The shareholders shall have the power to amend or repeal these
bylaws, or to adopt new bylaws, only with the approval of the board of
directors. A direction by the board that a shareholder proposal with respect to
the bylaws shall be submitted to the shareholders for action

                                      -22-

thereon, or the sufferance by the board that such a proposal shall be so
submitted, shall not constitute approval by the board of directors of the
amendment, repeal or new bylaws.

              (b) These bylaws may be amended or repealed, or new bylaws may be
adopted, by vote of a majority of the board of directors of the corporation in
office at any regular or special meeting of directors, including in
circumstances otherwise reserved by statute exclusively to the shareholders, the
board of directors of the corporation having under the articles of incorporation
the full authority conferred by law upon the shareholders of the corporation to
adopt, amend or repeal these bylaws. Any bylaw adopted by the board of directors
under this paragraph shall be consistent with the articles of incorporation.

As amended through September 24, 2002.

                                      -23-

                                                                   Exhibit 10.38

                                 UGI CORPORATION

                      2002 NON-QUALIFIED STOCK OPTION PLAN

                                TABLE OF CONTENTS

Section Number                                                                                               Page
                                                                                                       
1.       Purpose and Design............................................................................        1
2.       Definitions...................................................................................        1
3.       Maximum Number of Shares Available for Options................................................        2
4.       Duration of the Plan..........................................................................        3
5.       Administration................................................................................        3
6.       Eligibility...................................................................................        3
7.       Options.......................................................................................        3
8.       Non-Transferability...........................................................................        6
9.       Consequences of a Change of Control...........................................................        6
10.      Adjustment of Number and Price of Shares, Etc.................................................        7
11.      Limitation of Rights..........................................................................        7
12.      Amendment or Termination of Plan..............................................................        7
13.      Tax Withholding...............................................................................        8
14.      Governmental Approval.........................................................................        8
15.      Effective Date of Plan........................................................................        8
16.      Successors....................................................................................        8
17.      Headings and Captions.........................................................................        8
18.      Governing Law.................................................................................        8

                                      (i)

                                 UGI CORPORATION

                      2002 NON-QUALIFIED STOCK OPTION PLAN

1.    PURPOSE AND DESIGN

      The purpose of this Plan is to assist the Company in securing, motivating
and retaining managerial talent by affording managers and other key Employees an
opportunity to purchase the Company's Stock under options.

2.    DEFINITIONS

      Whenever used in this Plan, the following terms will have the respective
meanings set forth below:

            2.01"Board" means UGI's Board of Directors as constituted from time
to time.

            2.02"Change of Control" means a change of control as defined in a
change of control agreement between a Participant's respective employer and
certain of its employees.

            2.03"Committee" means the Compensation and Management Development
Committee of the Board or its successor.

            2.04"Company" means UGI Corporation, a Pennsylvania corporation, any
successor thereto and any Subsidiary.

            2.05"Date of Grant" means the effective date of an Option or
Restricted Stock grant; provided, however, that no retroactive grants will be
made.

            2.06"Employee" means a regular full-time salaried employee
(including officers and directors who are also employees) of the Company.

            2.07"Fair Market Value" of Stock means the average, rounded to the
next highest cent ($0.01), of the highest and lowest sales prices thereof on the
New York Stock Exchange on the day on which Fair Market Value is being
determined, as reported on the Composite Tape for transactions on the New York
Stock Exchange. Notwithstanding the foregoing, in the case of a cashless
exercise pursuant to Section 7.4, the Fair Market Value will be the actual sale
price of the shares issued upon exercise of the Option. In the event that there
are no Stock transactions on the New York Stock Exchange on such day, the Fair
Market Value will be determined as of the immediately preceding day on which
there were Stock transactions on that exchange.

                                       1

            2.08"Option" means the right to purchase Stock pursuant to the
relevant provisions of this Plan at the Option Price for a specified period of
time, not to exceed ten years from the Date of Grant, which period of time will
be subject to earlier termination prior to exercise in accordance with Section
7.3(b) of this Plan.

            2.09"Option Price" means an amount per share of Stock purchasable
under an Option designated by the Committee on the Date of Grant of an Option to
be payable upon exercise of such Option. The Option Price will not be less than
100% of the Fair Market Value of the Stock determined on the Date of Grant.

            2.10"Participant" means an Employee designated by the Committee to
participate in the Plan.

            2.11"Plan" means this 2002 Non-Qualified Stock Option Plan.

            2.12"Stock" means the Common Stock of UGI or such other securities
of UGI as may be substituted for Stock or such other securities pursuant to
Section 13.

            2.13"Subsidiary" means any corporation or partnership, at least 20%
of the outstanding voting stock, voting power or partnership interest of which
is owned respectively, directly or indirectly, by the Company.

            2.14"Termination without Cause" means termination for the
convenience of the Company for any reason other than (i) misappropriation of
funds, (ii) habitual insobriety or substance abuse, (iii) conviction of a crime
involving moral turpitude, or (iv) gross negligence in the performance of
duties, which gross negligence has had a material adverse effect on the
business, operations, assets, properties or financial condition of the Company.
The Committee will have the sole discretion to determine whether a significant
reduction in the duties and responsibilities of a Participant will constitute a
Termination without Cause.

            2.15"UGI" means UGI Corporation, a Pennsylvania corporation or any
successor thereto.

3.    MAXIMUM NUMBER OF SHARES AVAILABLE FOR OPTIONS

      The number of shares of Stock which may be made the subject of Options
under this Plan may not exceed 500,000 in the aggregate, subject, however, to
the adjustment provisions of Section 13. If any Option expires or terminates for
any reason without having been exercised in full, the unpurchased shares subject
to the Option will again be available for the purposes of the Plan. Shares which
are the subject of Options may be previously issued and outstanding shares of
Stock reacquired by the Company and held in its treasury, or may be authorized
but unissued shares of Stock, or may be a combination of both.

                                       2

4.    DURATION OF THE PLAN

      The Plan will remain in effect until all Stock subject to it has been
transferred to Participants or all Options have terminated or been exercised.
Notwithstanding the foregoing, no Option may be granted after December 31, 2011.

5.    ADMINISTRATION

      The Plan will be administered by the Committee. Subject to the express
provisions of the Plan, the Committee will have authority, in its complete
discretion, to determine the Employees to whom, and the time or times at which
grants will be made. In making such determinations, the Committee may take into
account the nature of the services rendered by an Employee, the present and
potential contributions of the Employee to the Company's success and such other
factors as the Committee in its discretion deems relevant. Awards under a
particular Section of the Plan need not be uniform as among Participants.
Subject to the express provisions of the Plan, the Committee will also have
authority to construe and interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, to determine the terms and provisions of
the respective stock option agreements required by Section 7.2 of the Plan, and
to make all other determinations (including factual determinations) necessary or
advisable for the orderly administration of the Plan. All ministerial functions,
in addition to those specifically delegated elsewhere in the Plan, shall be
performed by a committee comprised of Company employees ("Administrative
Committee") appointed by the Committee. A stock option agreement, as discussed
below, shall be executed by each Participant receiving a grant under the Plan
and shall constitute that Participant's acknowledgement and acceptance of the
terms of the Plan and the Committee's authority and discretion.

6.    ELIGIBILITY

      Grants hereunder may be made only to managers and key Employees, other
than executive officers, as defined in the Securities Exchange Act of 1934, as
amended, of UGI Corporation, who are selected by the Committee, in its sole
discretion, to participate in the Plan.

7.    OPTIONS

      7.1 Grant of Options. Subject to the provisions of Sections 2.9 and 3: (i)
Options may be granted to Participants at any time and from time to time as may
be determined by the Committee; and (ii) the Committee will have complete
discretion in determining the Options to be granted, the number of shares of
Stock to be subject to each Option, the Option Price to be paid for the shares
upon the exercise of each Option, the period within which each Option may be
exercised, and the vesting schedule associated with the Option.

      7.2 Option Agreement. As determined by the Committee on the Date of Grant,
each Option will be evidenced by a stock option agreement that will, among other
things, specify the Date of Grant, the Option Price, the duration of the Option,
the number of shares of Stock to which the Option pertains and the Option's
vesting schedule.

                                       3

7.3   Exercise and Vesting.

            (a) Except as otherwise specified by the Committee in the stock
option agreement, the Option shall become exercisable in equal one-third (1/3)
installments on the first, second and third anniversaries of the Date of Grant.
Notwithstanding the foregoing, in the event that any such Options are not by
their terms immediately exercisable, the Committee may accelerate the
exercisability of any or all outstanding Options at any time for any reason. No
Option will be exercisable on or after the tenth anniversary of the Date of
Grant.

            (b) Except as otherwise specified by the Committee, in the event
that a Participant holding an Option ceases to be an Employee, the Options held
by such Participant will terminate on the date such Participant ceases to be an
Employee. The Committee will have authority to determine whether an authorized
leave of absence or absence on military or governmental service will constitute
a termination of employment for the purposes of this Plan. However, if a
Participant holding an Option ceases to be an Employee by reason of (i)
Termination without Cause, (ii) retirement, (iii) disability, or (iv) death, the
Option held by any such Participant will thereafter become exercisable pursuant
to the following:

            (i) Termination Without Cause. If a Participant terminates
employment on account of a Termination without Cause, the Option held by such
Participant will thereafter be exercisable only with respect to that number of
shares of Stock with respect to which it is already exercisable on the date such
Participant ceases to be an Employee; and such Option will terminate upon the
earlier of the expiration date of the Option or the expiration of the 13 month
period commencing on the date such Participant ceases to be an Employee.

            (ii) Retirement. If a Participant terminates employment on account
of a retirement under the Company's retirement plan applicable to that
Participant, the Option held by such Participant will thereafter become
exercisable as if such Participant had remained employed by the Company for 36
months after the date of such retirement; and such Option will terminate upon
the earlier of the expiration date of the Option or the expiration of such 36
month period. Retirement for Employees of AmeriGas Propane, Inc. ("API") means
termination of employment with API after attaining age 55 with ten or more years
of service with API and its affiliates.

            (iii) Disability. If a Participant is determined to be "disabled"
(as defined under the Company's long-term disability plan), the Option held by
such Participant will thereafter become exercisable as if such Participant had
remained employed by the Company for 36 months after the date of such
disability; and such Option will terminate upon the earlier of the expiration
date of the Option or the expiration of such 36 month period.

            (iv) Death. In the event of the death of a Participant while
employed by the Company, the Option theretofore granted to such Participant will
be fully and immediately exercisable (to the extent not otherwise exercisable by
its terms) at any time prior to the earlier of the expiration date of the Option
or the expiration of the 12 month period following the Participant's death.
Death of a Participant after such Participant has ceased to be employed by the

                                       4

Company will not affect the otherwise applicable period for exercise of the
Option determined pursuant to Sections 7.3(b)(i), 7.3(b)(ii) or 7.3(b)(iii).
Such Option may be exercised by the estate of the Participant, by any person to
whom the Participant may have bequeathed the Option, any person the Participant
may have designated to exercise the same under the Participant's last will, or
by the Participant's personal representatives if the Participant has died
intestate.

            (c) Notwithstanding anything contained in this Section 7.3, with
respect to the number of shares of Stock subject to an Option with respect to
which such Option is or is to become exercisable, no Option, to the extent that
it has not previously been exercised, will be exercisable after it has
terminated, including without limitation, after any termination of such Option
pursuant to Section 7.3(b) hereof.

      7.4 Payment. The Option Price of any Option will be payable to the Company
in full (i) in cash or its equivalent, (ii) by tendering shares of previously
acquired Stock already beneficially owned by the Participant for more than one
year and having a Fair Market Value at the time of exercise equal to the Option
Price being paid thereby, (iii) by payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board, (iv) by such
other method as the Committee may approve, or (v) by a combination of (i), (ii),
(iii) and/or (iv). The cash proceeds from such payment will be added to the
general funds of the Company and will be used for its general corporate
purposes.

      7.5 Written Notice. A Participant wishing to irrevocably exercise an
Option must give irrevocable written notice to the Company in the form and
manner prescribed by the Administrative Committee, indicating the date of award,
the number of shares as to which the Option is being exercised, and such other
information as may be required by the Administrative Committee. Full payment for
the shares pursuant to the option must be received by the time specified by the
Committee depending on the type of payment being made but, in all cases, prior
to the issuance of the shares. Except as provided in Section 7.3(b), no Option
may be exercised at any time unless the Participant is then an Employee of the
Company.

      7.6 Issuance of Stock. As soon as practicable after the receipt of
irrevocable written notice and payment, the Company will, without stock transfer
taxes to the Participant or to any other person entitled to exercise an Option
pursuant to this Plan, deliver to, or credit electronically on behalf of, the
Participant, the Participant's designee or such other person the requisite
number of shares of Stock.

      7.7 Privileges of a Shareholder. A Participant or any other person
entitled to exercise an Option under this Plan will have no rights as a
shareholder with respect to any Stock covered by the Option until the due
exercise of the Option and issuance of such Stock.

      7.8 Partial Exercise. An Option granted under this Plan may be exercised
as to any lesser number of shares than the full amount for which it could be
exercised. Such a partial exercise of an Option will not affect the right to
exercise the Option from time to time in accordance with this Plan as to the
remaining shares subject to the Option.

                                       5

8.    NON-TRANSFERABILITY

      No Option granted under the Plan will be transferable otherwise than by
will or the laws of descent and distribution, and an Option may be exercised,
during the lifetime of the Participant, only by the Participant.

9.    CONSEQUENCES OF A CHANGE OF CONTROL

      9.1 Notice and Acceleration. Upon a Change of Control, unless the
Committee determines otherwise, (i) the Company will provide each Participant
with outstanding grants written notice of such Change of Control, and (ii) all
outstanding Options will automatically accelerate and become fully exercisable.

      9.2 Assumption of Grants. Upon a Change of Control where the Company is
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
that are not exercised will be assumed by, or replaced with comparable options
or rights by, the surviving corporation (or a parent of the surviving
corporation).

      9.3 Other Alternatives. Notwithstanding the foregoing, subject to Section
9.4 below, in the event of a Change of Control, the Committee may take any of
the following actions with respect to any or all outstanding Options: the
Committee may (i) require that Participants surrender their outstanding Options
in exchange for a payment by the Company, in cash or Stock as determined by the
Committee, in an amount equal to the amount by which the then Fair Market Value
of the shares of Stock subject to the Participant's unexercised Options exceeds
the Option Price of the Options, as applicable, or (ii) after giving
Participants an opportunity to exercise their outstanding Options, terminate any
or all unexercised Options at such time as the Committee deems appropriate. Such
surrender, termination or settlement will take place as of the date of the
Change of Control or such other date as the Committee may specify.

      9.4 Committee. The Committee making the determinations under this Section
9 following a Change of Control must be comprised of the same members as those
on the Committee immediately before the Change of Control. If the Committee
members do not meet this requirement, the automatic provisions of Sections 9.1
and 9.2 will apply, and the Committee will not have discretion to vary them.

      9.5 Limitations. Notwithstanding anything in the Plan to the contrary, in
the event of a Change of Control, the Committee will not have the right to take
any actions described in the Plan (including without limitation actions
described in this Section 9) that would make the Change of Control ineligible
for pooling of interests accounting treatment or that would make the Change of
Control ineligible for desired accounting treatment if, in the absence of such
right, the Change of Control would qualify for such treatment and the Company
intends to use such treatment with respect to the Change of Control.

                                       6

10.   ADJUSTMENT OF NUMBER AND PRICE OF SHARES, ETC.

      Notwithstanding anything to the contrary in this Plan, in the event any
recapitalization, reorganization, merger, consolidation, spin-off, combination,
repurchase, exchange of shares or other securities of UGI, stock split or
reverse split, extraordinary dividend, liquidation, dissolution, significant
corporate transaction (whether relating to assets or stock) involving UGI, or
other extraordinary transaction or event affects Stock such that an adjustment
is determined by the Committee to be appropriate in order to prevent dilution or
enlargement of Participants' rights under the Plan, then the Committee may, in a
manner that is equitable, adjust (i) any or all of the number or kind of shares
of Stock reserved for issuance under the Plan, (ii) the maximum number of shares
of Stock which may be the subject of grants to any one individual in any
calendar year, (iii) the number or kind of shares of Stock to be subject to
grants of Options thereafter granted under the Plan, (iv) the number and kind of
shares of Stock issuable upon exercise of outstanding Options, and (v) the
Option Price per share thereof, provided that the number of shares subject to
any Option will always be a whole number. Any such determination of adjustments
by the Committee will be conclusive for all purposes of the Plan and of each
Option, whether a stock option agreement with respect to a particular Option has
been theretofore or is thereafter executed.

11.   LIMITATION OF RIGHTS

      Nothing contained in this Plan shall be construed to give an Employee any
right to be granted an Option hereunder except as may be authorized in the
discretion of the Committee. The granting of an Option under this Plan shall not
constitute or be evidence of any agreement or understanding, expressed or
implied, that the Company will employ a Participant for any specified period of
time, in any specific position or at any particular rate of remuneration.

12.   AMENDMENT OR TERMINATION OF PLAN

      Subject to Board approval, the Committee may at any time, and from time to
time, alter, amend, suspend or terminate this Plan without the consent of the
Company's shareholders or Participants, except that any such alteration,
amendment, suspension or termination will be subject to the approval of the
Company's shareholders within one year after such Committee and Board action if
such shareholder approval is required by any federal or state law or regulation
or the rules of any stock exchange or automated quotation system on which the
Stock is then listed or quoted, or if the Committee in its discretion determines
that obtaining such shareholder approval is for any reason advisable. No
termination or amendment of this Plan may, without the consent of the
Participant to whom any Option has previously been granted, adversely affect the
rights of such Participant under such Option. Notwithstanding the foregoing, the
Administrative Committee may make minor amendments to this Plan which do not
materially affect the rights of Participants or significantly increase the cost
to the Company.

                                       7

13.   TAX WITHHOLDING

      Upon exercise of any Option under this Plan, the Company will require the
recipient of the Stock to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements. However, to the extent
authorized by rules and regulations of the Administrative Committee, the Company
may withhold or receive Stock and make cash payments in respect thereof in
satisfaction of a recipient's tax obligations in an amount that does not exceed
the recipient's minimum applicable withholding tax obligations. In the event the
Company receives Stock in satisfaction of a recipient's minimum applicable
withholding tax obligations, the Stock must have been held by the recipient for
more than six months.

14.   GOVERNMENTAL APPROVAL

            Each Option will be subject to the requirement that if at any time
the listing, registration or qualification of the shares covered thereby upon
any securities exchange, or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of or in connection with the granting of such Option or the purchase
of shares thereunder, no such Option may be exercised in whole or in part unless
and until such listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions not acceptable to the Board.

15.   EFFECTIVE DATE OF PLAN

      This Plan will become effective as of January 1, 2002.

16.   SUCCESSORS

      This Plan will be binding upon and inure to the benefit of the Company,
its successors and assigns and the Participant and his heirs, executors,
administrators and legal representatives.

17.   HEADINGS AND CAPTIONS

            The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.

18.   GOVERNING LAW

      The validity, construction, interpretation and effect of the Plan and
option agreements issued under the Plan will be governed exclusively by and
determined in accordance with the law of the Commonwealth of Pennsylvania.

                                       8

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------
FINANCIAL REVIEW

BUSINESS OVERVIEW

UGI Corporation ("UGI") is a holding company that, through subsidiaries and
joint-venture affiliates, distributes and markets energy products and related
services. We are a domestic and international distributor of propane; a provider
of natural gas and electricity service through regulated local distribution
utilities; a generator of electricity through our ownership interests in
electric generation facilities; a regional marketer of energy commodities; and a
provider of heating and cooling services.

      We conduct a national propane distribution business through AmeriGas
Partners, L.P. ("AmeriGas Partners") and its principal operating subsidiaries
AmeriGas Propane, L.P. ("AmeriGas OLP") and AmeriGas Eagle Propane, L.P. ("Eagle
OLP"). At September 30, 2002, UGI, through its wholly owned second-tier
subsidiary AmeriGas Propane, Inc. (the "General Partner"), held an approximate
51% effective interest in the Partnership. We refer to AmeriGas Partners and its
subsidiaries together as "the Partnership" and the General Partner and its
subsidiaries, including the Partnership, as "AmeriGas Propane."

      Our natural gas and electric distribution utilities and electric
generation businesses are conducted through UGI Utilities, Inc. and its
subsidiaries ("UGI Utilities"). UGI Utilities owns and operates a natural gas
distribution utility ("Gas Utility") in parts of eastern and southeastern
Pennsylvania and an electricity distribution utility ("Electric Utility") in
northeastern Pennsylvania. UGI Utilities also owns interests in electricity
generating facilities in Pennsylvania which, together with Electric Utility, are
referred to herein as "Electric Operations."

      Our wholly owned subsidiary UGI Enterprises, Inc. ("Enterprises") conducts
an energy marketing business primarily in the Middle Atlantic region of the
United States through its wholly owned subsidiary, UGI Energy Services, Inc.
("Energy Services"). Through other subsidiaries, Enterprises (1) owns and
operates a propane distribution business in Austria, the Czech Republic and
Slovakia ("FLAGA"); (2) owns and operates a heating, ventilation and
air-conditioning service business in the Middle Atlantic states ("HVAC"); and
(3) participates in propane joint-venture businesses in France ("Antargaz") and
in the Nantong region of China.

   This Financial Review should be read in conjunction with our Consolidated
Financial Statements and Notes to Consolidated Financial Statements including
the business segment information included in Note 21.

RESULTS OF OPERATIONS

2002 COMPARED WITH 2001
CONSOLIDATED RESULTS

                                                                           Variance-
                                                                           Favorable
                                      2002               2001           (Unfavorable)
                              -------------------  ------------------  ------------------
                                                             Diluted
                                                             Earnings           Diluted
                                         DILUTED    Net      (Loss)    Net      Earnings
                                NET      EARNINGS  Income     Per     Income    (Loss)
                               INCOME   PER SHARE  (Loss)     Share   (Loss)    Per Share
=========================================================================================
                                                              
(Millions of dollars,
except per share)
AmeriGas Propane               $ 17.4   $ 0.62    $ 13.5     $ 0.49   $  3.9      $ 0.13
UGI Utilities                    42.5     1.52      46.6       1.70     (4.1)      (0.18)
Energy Services                   6.5     0.23       4.0       0.15      2.5        0.08
International Propane             7.5     0.27      (4.4)     (0.16)    11.9        0.43
Corporate & Other (a)             1.6     0.06      (7.7)     (0.28)     9.3        0.34
Changes in accounting (b)         --       --        4.5       0.16     (4.5)      (0.16)
- -----------------------------------------------------------------------------------------
Total (c)                      $ 75.5   $ 2.70    $ 56.5     $ 2.06   $ 19.0      $ 0.64
- -----------------------------------------------------------------------------------------

(a) Consists principally of UGI, HVAC, UGI Enterprises' corporate and general
expenses and in Fiscal 2001, Hearth USA(TM). Hearth USA(TM) ceased operations in
October 2001. Net loss in Fiscal 2001 includes after-tax shut-down costs of $5.5
million or $0.20 per share associated with Hearth USA(TM) (see Note 16 to
Consolidated Financial Statements).

(b) Fiscal 2001 amounts include cumulative effect of accounting changes
associated with (1) the Partnership's changes in accounting for tank fee revenue
and tank installation costs and (2) the Company's adoption of SFAS 133 (see Note
3 to Consolidated Financial Statements).

(c) Results for Fiscal 2002 reflect the elimination of goodwill amortization
resulting from the adoption of Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets." Pro Forma net income
and diluted earnings per share for Fiscal 2001 as if the adoption of SFAS 142
had occurred as of October 1, 2000 is $70.5 million and $2.58, respectively. For
a detailed discussion of SFAS 142 and its impact on the Company's results, see
Note 1 to Consolidated Financial Statements.

      Although significantly warmer than normal weather negatively affected UGI
Utilities' and AmeriGas Propane's Fiscal 2002 operating results, our Fiscal 2002
net income and earnings per share increased more than 30%. The increase in net
income reflects the elimination of goodwill amortization as a result of the
adoption of SFAS 142, a significant increase in income from our International
Propane businesses, and the benefit of higher growth-related earnings from our
Energy Services business. In addition, results in Fiscal 2001 were negatively
impacted by operating losses and shut-down costs associated with Hearth USA(TM).

                                                                              13

- --------------------------------------------------------------------------------
FINANCIAL REVIEW (continued)

      The following table presents certain financial and statistical information
by reportable segment for Fiscal 2002 and Fiscal 2001:

                                                                          Increase
                                               2002         2001          (Decrease)
========================================================================================
                                                                      
(Millions of dollars)
AMERIGAS PROPANE:

Revenues                                    $  1,307.9   $  1,418.4    $ (110.5)   (7.8)%
Total margin (a)                            $    675.8   $    582.4    $   93.4    16.0%
EBITDA (b)                                  $    210.7   $    209.3    $    1.4     0.7%
Operating income                            $    144.3   $    133.8    $   10.5     7.8%
Retail gallons sold (millions)                   932.8        820.8       112.0    13.6%
Degree days - % colder (warmer)
  than normal (c)                                (10.0)%        2.6%         --      --

GAS UTILITY:

Revenues                                    $    404.5   $    500.8    $  (96.3)  (19.2)%
Total margin (a)                            $    162.9   $    177.9    $  (15.0)   (8.4)%
Operating income                            $     77.1   $     87.8    $  (10.7)  (12.2)%
System throughput -
billions of cubic feet ("bcf")                    70.5         77.3        (6.8)   (8.8)%

Degree days - % colder (warmer)
  than normal                                    (17.4)%        2.0%         --      --

ELECTRIC OPERATIONS:

Revenues                                    $     86.0   $     83.9    $    2.1     2.5%
Total margin (a)                            $     32.8   $     28.6    $    4.2    14.7%
Operating income                            $     13.2   $     10.7    $    2.5    23.4%
Distribution sales - millions of
  kilowatt hours ("gwh")                         933.6        945.5       (11.9)   (1.3)%

ENERGY SERVICES:

Revenues                                    $    332.3   $    370.7    $  (38.4)  (10.4)%
Total margin (a)                            $     21.4   $     13.4    $    8.0    59.7%
Operating income                            $     11.1   $      7.3    $    3.8    52.1%

INTERNATIONAL PROPANE:

Revenues                                    $     46.7   $     50.9    $   (4.2)   (8.3)%
Total margin (a)                            $     24.1   $     22.5    $    1.6     7.1%
EBITDA (b)                                  $      7.1   $      5.1    $    2.0    39.2%
Operating income                            $      3.9   $      0.8    $    3.1   387.5%
Income (loss) from equity investees         $      8.3   $     (1.5)   $    9.8     N.M.
- ----------------------------------------------------------------------------------------

N.M. - Not meaningful.

(a) Total margin represents total revenues less cost of sales and, with respect
to Electric Operations, revenue-related taxes, i.e. Electric Utility gross
receipts taxes. For financial statement purposes, revenue-related taxes are
included in "taxes other than income taxes" on the Consolidated Statements of
Income.

b) EBITDA (earnings before interest expense, income taxes, depreciation and
amortization, minority interests, income (loss) from equity investees, and the
cumulative effect of accounting changes) should not be considered as an
alternative to net income (as an indicator of operating performance) or as an
alternative to cash flow (as a measure of liquidity or ability to service debt
obligations) and is not a measure of performance or financial condition under
accounting principles generally accepted in the United States. The Company's
definition of EBITDA may be different from that used by other companies.

(c) Deviation from average heating degree days during the 30-year period from
1961 to 1990, based upon national weather statistics provided by the National
Oceanic and Atmospheric Administration ("NOAA") for 335 airports in the
continental United States.

AMERIGAS PROPANE. The Partnership's Fiscal 2002 operating results were
negatively impacted by significantly warmer than normal heating-season weather.
Fiscal 2002 temperatures based upon heating degree day data provided by NOAA
were approximately 10.0% warmer than normal and 12.3% warmer than Fiscal 2001.
Notwithstanding the impact of the warmer weather on heating-related sales and
the effects of a sluggish U.S. economy on commercial sales, retail gallons sold
increased 112.0 million gallons principally as a result of the full-year effect
of the Partnership's August 21, 2001, acquisition of Columbia Propane (see Note
2 to Consolidated Financial Statements) and, to a much lesser extent, greater
volumes from our PPX(R) grill cylinder exchange business. The increase in PPX(R)
sales principally reflects the effect on Fiscal 2002 grill cylinder exchanges
resulting from recently enacted National Fire Protection Association ("NFPA")
guidelines and, to a lesser extent, the full-year effects of Fiscal 2001
increases in the number of PPX(R) distribution outlets. The NFPA guidelines
require that propane grill cylinders refilled after April 1, 2002, be fitted
with overfill protection devices ("OPDs").

      Retail propane revenues were $1,070.6 million in Fiscal 2002, a decrease
of $37.8 million from Fiscal 2001, reflecting a $189.0 million decrease as a
result of lower average selling prices partially offset by a $151.2 million
increase as a result of the greater retail volumes sold. Wholesale propane
revenues were $121.1 million in Fiscal 2002, a decrease of $93.5 million,
reflecting a $62.0 million decrease due to lower average selling prices and a
$31.5 million decrease as a result of lower wholesale volumes sold. The lower
Fiscal 2002 retail and wholesale selling prices resulted from lower Fiscal 2002
propane product costs. Revenues from other sales and services increased $20.8
million primarily due to the full-year impact of Columbia Propane. Total cost of
sales declined $203.9 million in Fiscal 2002 reflecting lower average propane
product costs and the lower wholesale sales partially offset by the higher
retail gallons sold.

      Total margin increased $93.4 million reflecting the full-year volume
impact of the Columbia Propane acquisition and a $35.5 million increase in total
margin from PPX(R) reflecting higher volumes and unit margins. PPX(R) propane
unit margins in Fiscal 2002 were higher than in Fiscal 2001 reflecting increases
in sales prices to fund OPD valve replacement capital expenditures on
out-of-compliance grill cylinders. The extent to which this greater level of
PPX(R) margin is sustainable in the future will depend upon a number of factors,
including the continuing rate of OPD valve replacement and competitive market
conditions.

      EBITDA (earnings before interest expense, income taxes, depreciation and
amortization, minority interests, income from equity investees, and the
cumulative effect of accounting changes) increased $1.4 million in Fiscal 2002
as the significant increase in total margin was substantially offset by an $88.8
million increase in Partnership operating and administrative expenses and a
decrease in other income. EBITDA of PPX(R) increased approximately $21 million
in Fiscal 2002 partially offsetting the effects of the significantly warmer
winter weather on our heating-related volumes. Although EBITDA is not a measure
of performance or financial condition under accounting principles generally
accepted

14

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------

in the United States, it is included in this analysis to provide additional
information for evaluating the Partnership's ability to pay and declare the
Minimum Quarterly Distribution of $0.55 ("MQD") and for evaluating the
Partnership's performance. The Partnership's definition of EBITDA may be
different from the definition of EBITDA used by other companies. The greater
operating and administrative expenses in Fiscal 2002 resulted primarily from the
full-year impact of the Columbia Propane acquisition and higher volume-driven
PPX(R) expenses. During Fiscal 2002, the Partnership completed its planned
blending of 90 Columbia Propane distribution locations with existing AmeriGas
Propane locations. As a result of these district consolidations and other cost
reduction activities, management believes that by September 30, 2002 it achieved
its anticipated $24 million reduction in annualized operating cost savings
subsequent to the acquisition of Columbia Propane. Operating income increased
$10.5 million, significantly more than the increase in EBITDA, principally due
to the cessation of goodwill amortization in Fiscal 2002 as a result of the
adoption of SFAS 142 (see Note 1 to Consolidated Financial Statements) partially
offset by higher depreciation and intangible asset amortization associated with
Columbia Propane and higher PPX(R) depreciation. Fiscal 2001 operating income
includes $23.8 million of goodwill amortization.

GAS UTILITY. Weather in Gas Utility's service territory during Fiscal 2002 based
upon heating degree days was 17.4% warmer than normal compared to weather that
was 2.0% colder than normal in Fiscal 2001. As a result of the significantly
warmer weather and the effects of a weak economy on commercial and industrial
natural gas usage, distribution system throughput declined 8.8%.

      The $96.3 million decrease in Fiscal 2002 Gas Utility revenue reflects the
impact of lower purchased gas cost ("PGC") rates, resulting from the pass
through of lower natural gas costs to firm-residential, commercial and
industrial (collectively, "core-market") customers, and the lower distribution
system throughput. Gas Utility cost of gas was $241.7 million in Fiscal 2002
compared to $322.9 million in Fiscal 2001 reflecting lower natural gas costs and
the decline in core-market throughput in Fiscal 2002.

      The decline in Gas Utility margin principally reflects a $6.0 million
decline in core-market margin due to the lower sales; a $6.6 million decline in
interruptible margin due principally to the flowback of certain interruptible
customer margin to core-market customers beginning December 1, 2001 pursuant to
the Gas Restructuring Order; and lower firm delivery service total margin due to
lower sales. Interruptible customers are those who have the ability to switch to
alternate fuels.

      Gas Utility operating income declined $10.7 million in Fiscal 2002
reflecting the previously mentioned decline in total margin and a decrease in
pension income partially offset by lower operating expenses. Operating expenses
declined $4.1 million primarily as a result of lower charges for uncollectible
accounts and lower distribution system expenses. Depreciation expense declined
$1.2 million due to a change effective April 1, 2002 in the estimated useful
lives of Gas Utility's natural gas distribution assets resulting from an asset
life study required by the PUC.

ELECTRIC OPERATIONS. The decline in Electric Utility kilowatt-hour sales in
Fiscal 2002 reflects the effects on heating-related sales of significantly
warmer winter weather partially offset by the beneficial effect on air
conditioning sales of warmer summer weather. Notwithstanding the decrease in
total kilowatt-hour sales, revenues increased $2.1 million principally due to an
increase in state tax surcharge revenue and greater third-party sales of
electricity produced by our Pennsylvania-based electric generation facilities.
Electric Operations cost of sales was $48.6 million in Fiscal 2002 compared to
$51.9 million in Fiscal 2001 principally reflecting the impact of the lower
sales and lower purchased power unit costs partially offset by the full-period
increase to cost of sales resulting from the transfer of our Hunlock Creek
electricity generation assets to Hunlock Creek Energy Ventures ("Energy
Ventures") in December 2000. Energy Ventures is an electricity generation
joint venture with a subsidiary of Allegheny Energy, Inc. Subsequent to the
formation of Energy Ventures, our electric generating business purchases its
share of the power produced by Energy Ventures rather than producing this
electricity itself. As a result, the cost of this power is reflected in cost of
sales whereas prior to the formation of Energy Ventures such costs were
reflected as operating and administrative expenses.

      Electric Operations total margin increased $4.2 million in Fiscal 2002 as
a result of lower purchased power unit costs partially offset by the winter
weather-driven decline in sales. Operating income increased $2.5 million
reflecting the greater total margin and lower operating costs subsequent to the
formation of Energy Ventures partially offset by a decline in other income.

ENERGY SERVICES. Revenues from Energy Services declined $38.4 million,
notwithstanding a 27% increase in natural gas volumes sold, reflecting
significantly lower natural gas prices. Total margin increased principally as a
result of the acquisition of the energy marketing businesses of PG Energy in
July 2001, income from providing winter storage services and higher average unit
margins. The increase in total margin was partially offset by higher operating
expenses subsequent to the PG Energy acquisition.

INTERNATIONAL PROPANE. FLAGA's revenues in Fiscal 2002 were lower than in the
prior year as a result of lower average selling prices reflecting lower average
propane product costs. Weather based upon heating degree days was approximately
10% warmer than normal in Fiscal 2002 compared to weather that was 12% warmer
than normal in Fiscal 2001. The increase in FLAGA's total margin reflects higher
average unit margins principally as a result of declining propane product costs.
FLAGA's operating results also benefited from lower operating expenses,
principally reduced payroll costs, and a $1.2 million decrease in goodwill
amortization resulting from the adoption of SFAS 142.

      The significant increase in income from our international propane joint
ventures in Fiscal 2002 principally reflects the full-year benefits from our
debt and equity investments in AGZ Holdings ("AGZ"), the parent company of
Antargaz, acquired on March 27, 2001. Operating results of Antargaz in Fiscal
2002 benefited from higher than normal unit margins, principally as a

                                                                              15

- --------------------------------------------------------------------------------

FINANCIAL REVIEW (continued)

result of lower propane product costs, and the elimination of goodwill
amortization effective April 1, 2002. In addition, income from our debt
investments in AGZ in Fiscal 2002 includes $0.9 million of interest income and a
currency transaction gain of $1.6 million resulting from AGZ's early redemption
of this euro-denominated debt in July 2002. As a result of the redemption of AGZ
debt during Fiscal 2002 and an expected decrease in Antargaz unit margins to
more normal levels, we anticipate income from our investment in AGZ in Fiscal
2003 to decline significantly from Fiscal 2002. Loss from International Propane
joint ventures in Fiscal 2001 includes a loss of $1.1 million from the write-off
of our propane joint-venture investment located in Romania.

CORPORATE & OTHER. Corporate & Other operating income was $3.0 million in Fiscal
2002 compared to a loss of $11.0 million in Fiscal 2001. The prior-year results
include operating losses, and $8.5 million of shut-down costs, associated with
Hearth USA(TM), and a $2.0 million loss from the write-down of an investment in
a business-to-business e-commerce company.

INTEREST EXPENSE AND INCOME TAXES. The increase in interest expense principally
reflects higher Partnership long-term debt outstanding resulting from the
Columbia Propane acquisition partially offset by lower levels of UGI Utilities
and Partnership bank loans outstanding and lower short-term interest rates. The
lower effective income tax rate in Fiscal 2002 principally reflects the
elimination of nondeductible goodwill amortization resulting from the adoption
of SFAS 142 and greater equity income from Antargaz.

2001 COMPARED WITH 2000
CONSOLIDATED RESULTS

                                                                                           Variance-
                                                                                           Favorable
                                                 2001                   2000              (Unfavorable)
                                          -------------------   ---------------------     -------------
                                                      Diluted                 Diluted              Diluted
                                             Net      Earnings    Net        Earnings     Net     Earnings
                                           Income       (Loss)  Income          (Loss)   Income     (Loss)
                                           (Loss)    Per Share  (Loss)      Per Share    (Loss)   Per Share
===========================================================================================================
                                                                                
(Millions of dollars, except per share)
AmeriGas Propane                          $  13.5    $   0.49   $    --      $     --   $   13.5  $   0.49
UGI Utilities                                46.6        1.70      48.9          1.79       (2.3)    (0.09)
Energy Services                               4.0        0.15       1.6          0.06        2.4      0.09
International Propane                        (4.4)      (0.16)     (5.6)        (0.20)       1.2      0.04
Corporate & Other                            (7.7)      (0.28)     (0.2)        (0.01)      (7.5)    (0.27)
Changes in accounting                         4.5        0.16        --            --        4.5      0.16
- ----------------------------------------------------------------------------------------------------------
Total                                     $  56.5    $   2.06   $  44.7      $   1.64   $   11.8  $   0.42
- ----------------------------------------------------------------------------------------------------------

The higher Fiscal 2001 net income and earnings per share reflect a significant
increase in the Partnership's and Energy Services' results. Excluding the
cumulative effect of accounting changes and one-time costs to close the Hearth
USA(TM) retail stores, diluted earnings per share increased 28% to $2.10 in
Fiscal 2001.

The following table presents certain financial and statistical information by
business segment for Fiscal 2001 and Fiscal 2000:

                                                                     Increase
                                      2001         2000             (Decrease)
=================================================================================
                                                               
(Millions of dollars)
AMERIGAS PROPANE:
Revenues                           $  1,418.4   $  1,120.1     $  298.3     26.6%
Total margin                       $    582.4   $    491.8     $   90.6     18.4%
EBITDA                             $    209.3   $    158.6     $   50.7     32.0%
Operating income                   $    133.8   $     90.2     $   43.6     48.3%
Retail gallons sold (millions)          820.8        771.2         49.6      6.4%
Degree days - % colder (warmer)
  than normal                             2.6%       (13.7)%         --       --

GAS UTILITY:

Revenues                           $    500.8   $    359.0     $  141.8     39.5%
Total margin                       $    177.9   $    170.8     $    7.1      4.2%
Operating income                   $     87.8   $     86.2     $    1.6      1.9%
System throughput -
  billions of cubic feet ("bcf")         77.3         79.7         (2.4)    (3.0)%

Degree days - % colder (warmer)
  than normal                             2.0%        (9.9)%         --       --

ELECTRIC OPERATIONS:

Revenues                           $     83.9   $     77.9     $    6.0      7.7%
Total margin                       $     28.6   $     40.8     $  (12.2)   (29.9)%
Operating income                   $     10.7   $     15.1     $   (4.4)   (29.1)%
Distribution sales - millions of
  kilowatt hours ("gwh")                945.5        907.2         38.3      4.2%

ENERGY SERVICES:

Revenues                           $    370.7   $    146.9     $  223.8    152.3%
Total margin                       $     13.4   $      6.2     $    7.2    116.1%
Operating income                   $      7.3   $      2.8     $    4.5    160.7%

INTERNATIONAL PROPANE:

Revenues                           $     50.9   $     50.5     $    0.4      0.8%
Total margin                       $     22.5   $     20.8     $    1.7      8.2%
EBITDA                             $      5.1   $      2.8     $    2.3     82.1%
Operating income (loss)            $      0.8   $     (1.8)    $    2.6    144.4%
Loss from equity investees         $     (1.5)  $     (0.9)    $    0.6     66.7%
- ---------------------------------------------------------------------------------

AMERIGAS PROPANE. Retail propane gallons sold increased 49.6 million gallons
(6.4%) primarily due to the effects of colder weather and the impact of
acquisitions, including the August 21, 2001 acquisition of Columbia Propane.
Temperatures based upon heating degree days were 2.6% colder than normal in
Fiscal 2001 compared to temperatures that were 13.7% warmer than normal in
Fiscal 2000. The greater acquisition and weather-related sales were reduced by
customer conservation resulting from higher product costs and a slowing U.S.
economy. The wholesale price of propane at Mont Belvieu, Texas, a major U.S.
supply point, reached a high of 95 cents per gallon in Fiscal 2001 compared to a
high of 74 cents per gallon during Fiscal 2000.

      Total revenues from retail propane sales increased $238.1 million
reflecting a $182.1 million increase as a result of higher average selling
prices and a $56.0 million increase as a result of the higher

16

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------

retail volumes sold. Wholesale propane revenues increased $61.9 million
principally reflecting higher average prices and greater sales associated with
product cost management activities. Cost of sales increased $207.7 million as a
result of higher per unit propane product costs and the greater retail and
wholesale volumes sold.

      Total margin increased $90.6 million due to the impact of
higher-than-normal average retail unit margins and, to a lesser extent, the
greater retail propane volumes sold. Retail propane unit margins in Fiscal 2001
benefited from gains on derivative hedge instruments and favorably priced supply
arrangements.

      The significant increase in EBITDA in Fiscal 2001 resulted from the
increase in margin partially offset by a $37.3 million increase in Partnership
operating and administrative expenses. Operating and administrative expenses of
the Partnership were $380.0 million in Fiscal 2001 compared to $342.7 million in
Fiscal 2000. Adjusting Fiscal 2000 expenses for the impact of the Partnership's
change in accounting for tank installation costs, operating and administrative
expenses of the Partnership increased $44.3 million. The higher Fiscal 2001
expenses reflect (1) higher employee-related costs, including greater overtime
and incentive compensation costs; (2) growth-related expenses, including the
impact of Columbia Propane and other acquisitions, and expenses associated with
our PPX(R) grill cylinder exchange business; and (3) higher distribution costs,
including vehicle fuel and lease expense. Depreciation and amortization expense
of the Partnership increased $7.4 million reflecting greater depreciation
associated with acquisitions and $4.4 million of depreciation expense resulting
from the change in accounting for tank installation costs.

GAS UTILITY. Although temperatures based upon heating degree days were colder in
Fiscal 2001, total system throughput declined 3.0% as the impact of the colder
weather was more than offset by lower interruptible and firm delivery service
volumes, the impact of price-induced customer conservation, and the effects of a
slowing economy. Natural gas prices were significantly higher in Fiscal 2001
than in the prior year. The higher prices resulted in fuel switching by many of
our interruptible customers, who have the ability to switch to alternate fuels,
and encouraged price-induced conservation by many of our firm customers.
Throughput to our core-market customers increased 3.3 bcf (10.6%) reflecting the
impact of the colder Fiscal 2001 weather.

      The significant increase in Gas Utility revenues is primarily a result of
higher core-market revenues reflecting greater PGC rates and higher revenues
from sales to customers not on our distribution system ("off-system sales"). Gas
Utility's tariffs permit it to pass through prudently incurred gas costs to its
core-market customers through higher PGC rates.

      Gas Utility cost of gas totaled $322.9 million in Fiscal 2001 compared
with $184.2 million in Fiscal 2000 principally reflecting the higher average PGC
rates and, to a lesser extent, higher core-market and off-system sales.

      Gas Utility total margin increased $7.1 million reflecting a $12.1 million
increase in core-market margin partially offset by lower total margin from
interruptible customers. The decline in interruptible margin reflects lower
average interruptible unit margins due to a decline in the spread between oil
and natural gas prices and the lower interruptible throughput.

      Gas Utility operating income increased $1.6 million as the previously
mentioned increase in total margin and an increase in pension income was
partially offset by higher operating and administrative expenses. The increase
in operating and administrative expenses includes, among other things, greater
allowances for uncollectible accounts, reflecting significantly higher Fiscal
2001 customer bills, and lower income from environmental insurance litigation
settlements. Such settlements totaled $0.9 million in Fiscal 2001 compared with
$4.5 million in Fiscal 2000. Depreciation expense increased $1.1 million
reflecting greater depreciation associated with distribution system capital
expenditures.

ELECTRIC OPERATIONS. Electric Utility distribution system sales in Fiscal 2001
increased 4.2% on favorable weather. Revenues increased as a result of the
higher distribution system sales as well as off-system sales of electricity
generated by Energy Ventures. Cost of sales totaled $51.9 million in Fiscal 2001
compared to $34.2 million in the prior year. The increase reflects higher
per-unit purchased power costs, the impact on cost of sales resulting from the
formation of Energy Ventures, and the higher Fiscal 2001 sales.

      Electric Operations total margin decreased $12.2 million as a result of
the higher purchased power costs. Operating income declined less than the
decline in total margin reflecting lower power production and depreciation
expenses subsequent to the formation of Energy Ventures and lower utility realty
taxes.

ENERGY SERVICES. Revenues from Energy Services increased significantly
reflecting higher natural gas prices and acquisition-related volume growth.
Energy Services acquired the energy marketing businesses of Conectiv in October
2000 and PG Energy in July 2001. Total margin and operating income were also
substantially higher in Fiscal 2001 reflecting the greater acquisition-driven
sales volumes and higher average unit margins.

INTERNATIONAL PROPANE. FLAGA's results in Fiscal 2001 were adversely impacted by
weather that was approximately 12% warmer than normal. Propane volumes sold were
8.5% lower than in Fiscal 2000 reflecting the impact of the warm weather and
price-induced conservation. The increase in total margin, notwithstanding the
decline in sales volumes, reflects higher unit margins partially offset by the
impact of a weaker euro in Fiscal 2001. International Propane EBITDA increased
in Fiscal 2001 reflecting the greater total margin and a decline in FLAGA
operating expenses. International Propane loss from equity investees in Fiscal
2001 includes (1) a loss of $1.1 million from the write-off of our propane
joint-venture investment in Romania and (2) $0.5 million of income associated
with our investments in AGZ.

CORPORATE & OTHER. The increase in Corporate & Other revenues is principally a
result of HVAC, which was acquired in late Fiscal 2000. Corporate & Other
operating income in Fiscal 2001 declined $10.6 million principally reflecting an
$8.5 million provision for shut-down costs of Hearth USA(TM). Corporate & Other
operating loss in Fiscal 2001 also includes a $2.0 million loss resulting from
the write-down of an investment in a business-to-business e-commerce company,
lower interest and investment income, and greater incentive compensation costs.

                                                                              17

- --------------------------------------------------------------------------------
FINANCIAL REVIEW (continued)

INTEREST EXPENSE AND INCOME TAXES. Interest expense increased $6.3 million in
Fiscal 2001 primarily as a result of greater amounts of Partnership long-term
debt outstanding. The effective income tax rate was 45.9% in Fiscal 2001
compared to a rate of 46.4% in Fiscal 2000.

FINANCIAL CONDITION AND LIQUIDITY

CAPITALIZATION AND LIQUIDITY

Our cash and cash equivalents totaled $194.3 million at September 30, 2002
compared with $87.5 million at September 30, 2001. These amounts include $114.0
million and $31.9 million, respectively, of cash and short-term investments held
by UGI.

      The primary sources of UGI's cash and short-term investments are the cash
dividends it receives from its principal operating subsidiaries AmeriGas, Inc.
and UGI Utilities. AmeriGas, Inc.'s ability to pay dividends to UGI is largely
dependent upon distributions on AmeriGas Partners' limited partner units. During
Fiscal 2002, 2001 and 2000, AmeriGas, Inc. and UGI Utilities paid cash dividends
to UGI as follows:

Year Ended September 30,         2002          2001        2000
                                                  
================================================================================
(Millions of dollars)
AmeriGas, Inc.                   $49.4         $41.0       $51.6
UGI Utilities                     37.9          35.3        44.0
- --------------------------------------------------------------------------------
Total dividends to UGI           $87.3         $76.3       $95.6
- --------------------------------------------------------------------------------

      Dividends received by UGI from AmeriGas, Inc. and UGI Utilities, in
addition to dividends from UGI's other operating subsidiaries, are available to
pay dividends on UGI Common Stock and for investment purposes.

AMERIGAS PARTNERS. The Partnership's debt outstanding at September 30, 2002
totaled $955.8 million. Included in this amount is $10 million outstanding under
AmeriGas OLP's Revolving Credit Facility.

      In December 2001, AmeriGas Partners issued 1,843,047 Common Units to the
public through an underwritten public offering. In January 2002, the
underwriters exercised a portion of their overallotment option in the amount of
585,000 shares. The net proceeds from these Common Unit offerings of $49.7
million, $6.9 million of proceeds from an October 2001 sale of 350,000 Common
Units to the General Partner, and related capital contributions by the General
Partner in order to maintain its general partner interests, were contributed to
AmeriGas OLP and used to reduce Bank Credit Agreement borrowings and for working
capital.

      The Partnership also completed a number of debt transactions during Fiscal
2002. In November 2001, AmeriGas Partners prepaid $15 million of 10.125% Senior
Notes at a redemption price of 103.375%. In April 2002, AmeriGas OLP repaid $60
million of maturing First Mortgage Notes from then-existing cash balances and
Revolving Credit Facility borrowings. In May 2002, AmeriGas Partners issued $40
million of Senior Notes due 2011 at an effective interest rate of 8.25%. The
proceeds were contributed to AmeriGas OLP and, along with related General
Partner capital contributions, used to reduce Revolving Credit Facility
borrowings and for working capital and general business purposes. On December 3,
2002, after the end of Fiscal 2002, AmeriGas Partners issued $88 million
principal amount of 8.875% Senior Notes due 2011 at an effective interest rate
of 8.30%. The net proceeds will be used to redeem in January 2003 the remaining
$85 million of 10.125% Senior Notes of AmeriGas Partners at a redemption price
of 102.25%.

      In August 2002, AmeriGas OLP amended and restated its Bank Credit
Agreement. AmeriGas OLP's Bank Credit Agreement expires October 1, 2003 and
consists of (1) a $100 million Revolving Credit Facility and (2) a $75 million
Acquisition Facility. The Revolving Credit Facility may be used for working
capital and general purposes of AmeriGas OLP. There was $10 million outstanding
under this facility at September 30, 2002. Issued and outstanding letters of
credit under the Revolving Credit Facility, which reduce the amount available
for borrowings, totaled $19.8 million at September 30, 2002. AmeriGas OLP's
short-term borrowing needs are seasonal and are typically greatest during the
fall and winter heating-season months due to the need to fund higher levels of
working capital. AmeriGas OLP may borrow under its Acquisition Facility to
finance the purchase of propane businesses or propane business assets. In
addition to the $100 million available under the Revolving Credit Facility, the
Bank Credit Agreement allows up to $30 million of the Acquisition Facility to be
used for working capital purposes. There were no loans outstanding under the
Acquisition Facility at September 30, 2002. AmeriGas OLP could borrow up to
$67.7 million under the Acquisition Facility based upon eligible capital
expenditures made through September 30, 2002.

     AmeriGas OLP also has a credit agreement with the General Partner to borrow
up to $20 million on an unsecured, subordinated basis, for working capital and
general purposes. UGI has agreed to contribute up to $20 million to the General
Partner to fund such borrowings.

      AmeriGas Partners also has debt and equity shelf registration statements
with the U.S. Securities and Exchange Commission ("SEC").

     The Partnership must maintain certain financial ratios in order to borrow
under the Bank Credit Agreement including a minimum interest coverage ratio and
a maximum debt to EBITDA ratio. The Partnership's ratios calculated as of
September 30, 2002 permit it to borrow up to the maximum amount available. For a
more detailed discussion of the Partnership's credit facilities, see Note 5 to
Consolidated Financial Statements. Based upon existing cash balances, cash
expected to be generated from operations, borrowings available under its Bank
Credit Agreement, and the expected refinancing of its maturing long-term debt,
the Partnership's management believes that the Partnership will be able to meet
its anticipated contractual commitments and projected cash needs in Fiscal 2003.

UGI UTILITIES. UGI Utilities' debt outstanding totaled $285.6 million at
September 30, 2002. Included in this amount is $37.2 million under revolving
credit agreements.

                                       18

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------

      UGI Utilities may borrow up to a total of $97 million under its revolving
credit agreements. The revolving credit agreements contain financial covenants
including interest coverage ratios, debt service, and minimum tangible net
worth. In September 2002, UGI Utilities issued $40 million face value of Series
C Medium-Term notes under a shelf registration statement with the SEC. The
proceeds of the issuance were used after the end of Fiscal 2002 principally to
repay debt maturing in October 2002. UGI Utilities may issue up to an additional
$85 million of debt securities under the shelf registration statement.

      Based upon cash expected to be generated from operations, the expected
ability to refinance all or a portion of long-term debt maturing in Fiscal 2003,
and borrowings available under revolving credit agreements, management believes
that UGI Utilities will be able to meet its anticipated contractual and
projected cash commitments in Fiscal 2003. For a more detailed discussion of UGI
Utilities' debt and credit facilities, see Note 5 to Consolidated Financial
Statements.

ENERGY SERVICES. Energy Services has a receivables purchase facility
("Receivables Facility") with an issuer of receivables-backed commercial paper
expiring November 30, 2004. Under the Receivables Facility, Energy Services
transfers, on an ongoing basis and without recourse, its trade accounts
receivable to its wholly owned, special purpose, bankruptcy-remote subsidiary,
Energy Services Funding Corporation ("ESFC") which is consolidated for financial
statement purposes. ESFC pays Energy Services for the receivables it purchases
as these receivables are collected from customers. In addition, from time to
time ESFC may sell an undivided interest in these receivables for up to $50
million in proceeds to a commercial paper conduit of a major bank. The proceeds
of these sales are less than the face amount of the accounts receivable sold by
an amount that approximates the purchaser's financing cost of issuing its own
receivables-backed commercial paper. ESFC was created and has been structured to
isolate its assets from creditors of Energy Services and its affiliates,
including UGI. In accordance with a servicing arrangement, Energy Services
continues to service, administer and collect trade receivables on behalf of the
commercial paper issuer and ESFC. This two-step transaction is accounted for as
a sale of receivables following the provisions of SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."

      At September 30, 2002, no receivables had been sold to the commercial
paper conduit and removed from the balance sheet. During Fiscal 2002, ESFC sold
a total of $34 million of receivables to the commercial paper conduit. Losses on
sales of receivables that occurred during Fiscal 2002 were not material.

FLAGA. FLAGA has a 15 million euro working capital loan commitment from a
European bank. Borrowings under the working capital facility totaled 8.7 million
euro ($8.6 million U.S. dollar equivalent) at September 30, 2002. Debt issued
under this agreement, as well as $75.1 million of acquisition and special
purpose debt of FLAGA, are subject to guarantees of UGI. For a more detailed
discussion of FLAGA's debt, see Note 5 to Consolidated Financial Statements.
FLAGA's management expects to repay long-term debt maturing in Fiscal 2003
principally through cash generated from operations as well as short-term
borrowings and capital contributions from UGI.

CASH FLOWS

OPERATING ACTIVITIES. Cash flow from operating activities was $247.5 million in
Fiscal 2002 compared to $203.5 million in Fiscal 2001. Cash flow from operating
activities before considering changes in working capital was $233.7 million in
Fiscal 2002 compared to $179.8 million in Fiscal 2001 principally reflecting
significantly higher noncash charges for income taxes and the impact of
settlement payments in Fiscal 2001 associated with the Energy Services'
exchange-traded natural gas derivative hedge contracts. In Fiscal 2002, changes
in operating working capital provided $13.8 million of operating cash flow
compared to $23.7 million of such cash flow in Fiscal 2001.

INVESTING ACTIVITIES. Cash spent for property, plant and equipment totaled $94.7
million in Fiscal 2002, an increase of $15.7 million from Fiscal 2001,
reflecting a $15.6 million increase in Partnership capital expenditures
principally for PPX(R), including expenditures for grill cylinder OPDs to comply
with NFPA guidelines, and to a much lesser extent the full-year effect of
capital expenditures associated with the Columbia Propane businesses. Cash flows
from investing activities in Fiscal 2002 also include $17.7 million of cash
proceeds from the early redemption of AGZ bonds in July 2002.

FINANCING ACTIVITIES. During Fiscal 2002, we paid cash dividends on UGI Common
Stock of $44.8 million compared to $53.2 million in Fiscal 2001. The higher
dividends paid in the prior year reflect the one-time impact of a change in the
timing of funding the quarterly dividend from the first day of the quarter to
the last day of the previous quarter. During Fiscal 2002, AmeriGas Partners
received net proceeds of $49.7 million from its public offering of 2.4 million
Common Units. During Fiscal 2002, AmeriGas OLP repaid $20 million of Acquisition
Facility borrowings and $60 million of maturing First Mortgage Notes, and
AmeriGas Partners redeemed prior to maturity $15 million of its 10.125% Senior
Notes. In addition, AmeriGas Partners issued $40 million face amount of 8.875%
Senior Notes and contributed the proceeds to AmeriGas OLP to reduce indebtedness
under its Revolving Credit Facility and for working capital and general business
purposes. In September 2002, UGI Utilities issued $40 million face amount of

                                                                              19

- --------------------------------------------------------------------------------
FINANCIAL REVIEW (continued)

Medium-Term Notes and used the proceeds, after the end of Fiscal 2002,
principally to repay maturing long-term debt.

DIVIDENDS AND DISTRIBUTIONS

In April 2002, our board of directors increased the annual dividend rate on UGI
Common Stock to $1.65 a share from $1.60. Dividends declared on our Common Stock
in Fiscal 2002 totaled $44.8 million.

      At September 30, 2002, our approximate 51% effective ownership interest in
the Partnership consisted of (1) 14.6 million Common Units; (2) 9.9 million
Subordinated Units; and (3) a 2% general partner interest. The remaining
approximate 49% effective interest consisted of 24.9 million publicly held
Common Units. Approximately 45 days after the end of each fiscal quarter, the
Partnership distributes all of its Available Cash (as defined in the Amended and
Restated Agreement of Limited Partnership of AmeriGas Partners, the "Partnership
Agreement") relating to such fiscal quarter. Common Unitholders receive the MQD,
plus any arrearages, before a distribution of Available Cash could be made on
the Subordinated Units. Because certain cash-based performance and distribution
requirements were met in respect of the quarter ended September 30, 2002,
effective November 18, 2002 the remaining 9.9 million Subordinated Units held by
the General Partner were converted to Common Units (see "Conversion of
Subordinated Units" below).

      Since its formation in 1995, the Partnership has paid the MQD on all
limited partner units outstanding. The amount of Available Cash needed annually
to pay the MQD on all units and the general partner interests in Fiscal 2002,
2001 and 2000 was approximately $109 million, $99 million and $94 million,
respectively. Based upon the number of Partnership units outstanding on
September 30, 2002, the amount of Available Cash needed annually to pay the MQD
on all units and the general partner interests is approximately $111 million. A
reasonable proxy for the amount of cash available for distribution that is
generated by the Partnership can be calculated by subtracting from the
Partnership's EBITDA (1) cash interest expense and (2) capital expenditures
needed to maintain operating capacity. Partnership distributable cash flow as
calculated under this method for Fiscal 2002, 2001 and 2000 is as follows:

Year Ended September 30,           2002        2001        2000
================================================================================
                                                  
(Millions of dollars)
EBITDA                             $210.4      $208.6      $157.6
Cash interest expense (a)           (88.5)      (82.0)      (76.7)
Maintenance capital expenditures    (20.7)      (17.8)      (11.6)
- --------------------------------------------------------------------------------
Distributable cash flow            $101.2      $108.8      $ 69.3
- --------------------------------------------------------------------------------

(a)  Interest expense adjusted for noncash items.

      Although distributable cash flow is a reasonable estimate of the amount of
cash generated by the Partnership, it does not reflect, among other things, the
impact of changes in working capital, which can significantly affect cash
available for distribution, and is not a measure of performance or financial
condition under accounting principles generally accepted in the United States
but provides additional information for evaluating the Partnership's ability to
declare and pay the MQD. The Partnership's definition of distributable cash flow
may be different from the definition used by other companies. Although the
levels of distributable cash flow in Fiscal 2002 and 2000 were less than the
full MQD, other sources of cash, including cash from equity offerings and
borrowings, was more than sufficient to permit the Partnership to pay the full
MQD. The ability of the Partnership to pay the MQD on all units depends upon a
number of factors. These factors include (1) the level of Partnership earnings;
(2) the cash needs of the Partnership's operations (including cash needed for
maintaining and increasing operating capacity); (3) changes in operating working
capital; and (4) the Partnership's ability to borrow under its Bank Credit
Agreement, to refinance maturing debt and to increase its long-term debt. Some
of these factors are affected by conditions beyond our control including
weather, competition in markets we serve, the cost of propane and changes in
capital market conditions.

CONVERSION OF AMERIGAS PARTNERS SUBORDINATED UNITS

Pursuant to the Agreement of Limited Partnership of AmeriGas Partners, the 9.9
million AmeriGas Partners Subordinated Units held by the General Partner as of
September 30, 2002 were eligible to convert to Common Units on the first day
after the record date for any quarter ending on or after March 31, 2000 in
respect of which certain cash-based performance and distribution requirements
were met.

      In December 2002, the General Partner determined that the cash-based
performance and distribution requirements in respect of the quarter ended
September 30, 2002 had been met and, as a result, the remaining 9.9 million
Subordinated Units held by the Company were converted to Common Units effective
November 18, 2002. Concurrent with the Subordinated Unit conversion, the Company
recorded an increase in common stockholders' equity and a decrease in minority
interest of approximately $160 million associated with gains from sales of
Common Units by AmeriGas Partners in conjunction with, and subsequent to, its
April 19, 1995 initial public offering in accordance with the accounting
guidance in SEC Staff Accounting Bulletin No. 51, "Accounting for Sales of
Common Stock by a Subsidiary." The gains result because the public offering
prices of the AmeriGas Partners Common Units at the dates of their sales
exceeded the associated carrying amount of our investment in the Partnership. No
deferred taxes were recorded related to the gains due to the Company's intent to
hold its investment in the Partnership indefinitely. The changes to the
Company's balance sheet resulting from the Subordinated Unit conversion had no
effect on the Company's net income or cash flow. The conversion of the
Subordinated Units did not result in an increase in the number of AmeriGas
Partners limited partner units outstanding.

REDEMPTION OF AGZ BONDS

In July 2002, the Company received $19.3 million in cash from AGZ representing
repayment of 18 million euro face value (90%), $17.7 million U.S. dollar
equivalent, of redeemable bonds of AGZ ("AGZ Bonds") held by the Company, plus
accrued interest. This repayment was funded from the proceeds of an AGZ
placement of high-yield debt. The Company purchased the AGZ Bonds on March 27,
2001 in conjunction with its joint-venture investment, through AGZ, in Antargaz,
a leading distributor of propane and related gases in France. Concurrent with
the repayment, the remaining 2.0 million

20

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------

euro (10%) investment in AGZ Bonds was converted to additional shares of AGZ.
The Company recorded a pretax currency transaction gain of $1.6 million as a
result of the repayment of the AGZ Bonds. After these transactions, the Company
continues to hold an approximate 19.5% equity investment in AGZ.

UGI UTILITIES PENSION PLAN

UGI Utilities sponsors a defined benefit pension plan ("Pension Plan") for
employees of UGI, UGI Utilities, and certain of UGI's other subsidiaries. During
Fiscal 2002 and 2001, the market value of plan assets was negatively affected by
persistent declines in the equity markets. Notwithstanding the significant
decline in the market value of plan assets during these years, at September 30,
2002 the Pension Plan's assets exceeded its accumulated benefit obligations by
approximately $7.2 million. The Company is in full compliance with regulations
governing defined benefit pension plans, including ERISA rules and regulations,
and does not anticipate it will be required to make a contribution to the
Pension Plan in Fiscal 2003. Pretax pension income reflected in Fiscal 2002,
2001 and 2000 was $4.0 million, $5.9 million, and $3.0 million, respectively.
Pension income in Fiscal 2003 is expected to decline to approximately $1.0
million principally as a result of the impact of declines through September 2002
in the market value of Pension Plan assets.

CAPITAL EXPENDITURES

In the following table, we present capital expenditures (which include
expenditures for capital leases but exclude acquisitions) by business segment
for Fiscal 2002, 2001 and 2000. We also provide amounts we expect to spend in
Fiscal 2003. We expect to finance Fiscal 2003 capital expenditures principally
from cash generated by operations and borrowings under our credit facilities.

Year Ended September 30,      2003         2002    2001     2000
================================================================================
                                               
(Millions of dollars)         (estimate)
AmeriGas Propane              $  52.2     $ 53.5  $ 39.2   $ 30.4
UGI Utilities                    44.9       35.9    36.8     36.4
International Propane             5.9        4.0     2.7      1.8
Other                             1.8        1.3     0.6      2.4
- --------------------------------------------------------------------------------
Total                         $ 104.8     $ 94.7  $ 79.3   $ 71.0
- --------------------------------------------------------------------------------

CONTRACTUAL CASH OBLIGATIONS AND COMMITMENTS

The following table presents significant contractual cash obligations under
agreements existing as of September 30, 2002 (in millions).

                             Fiscal      Fiscal
                          2003 & 2004  2005 & 2006   Thereafter    Total
================================================================================
                                                     
Long-term debt               $207.0     $ 296.8     $771.9       $1,275.7
UGI Utilities preferred           -         2.0       18.0           20.0
  stock
Operating leases               71.7        50.8       63.6          186.1
Energy Services
  supply contracts            157.5           -          -          157.5
Gas and Electric
  utility supply contracts    202.9        80.2      107.3          390.4
- --------------------------------------------------------------------------------
Total                        $639.1     $ 429.8     $960.8       $2,029.7
- --------------------------------------------------------------------------------

UTILITY REGULATORY MATTERS

The Pennsylvania Public Utility Commission ("PUC") approved a settlement
establishing rules for Electric Utility Provider of Last Resort ("POLR") service
on March 28, 2002, and a separate settlement that modified these rules on June
13, 2002 (collectively the "POLR Settlement"). Under the terms of the POLR
Settlement, Electric Utility terminated stranded cost recovery through its
Competitive Transition Charge ("CTC") from commercial and industrial ("C&I")
customers on July 31, 2002, and from residential customers on October 31, 2002,
and is no longer subject to the statutory rate caps as of August 1, 2002 for C&I
customers and as of November 1, 2002 for residential customers. Stranded costs
are electric generation-related costs that traditionally would be recoverable in
a regulated environment but may not be recoverable in a competitive electric
generation market. Charges for generation service will (1) initially be set at a
level equal to the rates paid by Electric Utility customers for POLR service
under the statutory rate caps; (2) may be raised at certain designated times up
to certain specified caps through December 2004; and (3) may be set at market
rates thereafter. Electric Utility may also offer multiple year POLR contracts
to its customers. The POLR Settlement provides for annual shopping periods
during which customers may elect to remain on POLR service or choose an
alternate supplier. Customers who do not select an alternate supplier will be
obligated to remain on POLR service until the next shopping period. Residential
customers who return to POLR service at a time other than during the annual
shopping period must remain on POLR service until the date of the second open
shopping period after returning. C&I customers who return to POLR service at a
time other than during the annual shopping period must remain on POLR service
until the next open shopping period, and may, in certain circumstances, be
subject to generation rate surcharges.

On June 29, 2000, the PUC issued its order ("Gas Restructuring Order") approving
Gas Utility's restructuring plan filed by Gas Utility pursuant to Pennsylvania's
Natural Gas Choice and Competition Act. Among other things, the implementation
of the Gas Restructuring Order resulted in an increase in Gas Utility's
core-market base rates effective October 1, 2000. This base rate increase was
designed to generate approximately $16.7 million in additional net annual
revenues. In accordance with the Gas Restructuring Order, Gas Utility reduced
its core-market PGC rates by an annualized amount of $16.7 million in the first
14 months following the October 1, 2000 base rate increase.

     Effective December 1, 2001, Gas Utility was required to reduce its PGC
rates by amounts equal to the margin it receives from interruptible customers
using pipeline capacity contracted by Gas Utility for core-market customers. As
a result, Gas Utility operating results are more sensitive to the effects of
heating-season weather and less sensitive to the market prices of alternative
fuels.

MANUFACTURED GAS PLANTS

From the late 1800s through the mid-1900s, UGI Utilities and its former
subsidiaries owned and operated a number of manufactured gas plants ("MGPs")
prior to the general availability of natural gas. Some constituents of coal tars
and other residues of the manufactured gas process are today considered
hazardous substances under the Superfund Law and may be present on the sites of
former MGPs. Between 1882 and 1953, UGI Utilities owned the stock of subsidiary
gas companies in Pennsylvania and elsewhere and also operated the businesses of
some gas companies under agreement. Pursuant to the requirements of the Public
Utility Holding Company Act of 1935, UGI Utilities divested all of its utility
operations other than those which now constitute Gas Utility and Electric
Utility.

   UGI Utilities does not expect its costs for investigation and remediation of
hazardous substances at Pennsylvania MGP sites to be material to its results of
operations because Gas Utility is currently permitted to include in rates,
through future base rate proceedings, prudently incurred remediation costs
associated with such sites. UGI Utilities has been notified of several sites
outside

                                                                              21

- --------------------------------------------------------------------------------
FINANCIAL REVIEW (continued)

Pennsylvania on which (1) MGPs were formerly operated by it or owned or operated
by its former subsidiaries and (2) either environmental agencies or private
parties are investigating the extent of environmental contamination or
performing environmental remediation. UGI Utilities is currently litigating two
claims against it relating to out-of-state sites.

     Management believes that under applicable law UGI Utilities should not be
liable in those instances in which a former subsidiary operated an MGP. There
could be, however, significant future costs of an uncertain amount associated
with environmental damage caused by MGPs outside Pennsylvania that UGI Utilities
directly operated, or that were owned or operated by former subsidiaries of UGI
Utilities if a court were to conclude that the subsidiary's separate corporate
form should be disregarded.

     UGI Utilities has filed suit against more than fifty insurance companies
alleging that the defendants breached contracts of insurance by failing to
indemnify UGI Utilities for certain environmental costs. The suit seeks to
recover more than $11 million in such costs. During Fiscal 2002, 2001 and 2000,
UGI Utilities entered into settlement agreements with several of the insurers
and recorded pretax income of $0.4 million, $0.9 million and $4.5 million,
respectively, which amounts are included in operating and administrative
expenses in the Consolidated Statements of Income.

MARKET RISK DISCLOSURES

Our primary market risk exposures are (1) market prices for propane, natural gas
and electricity; (2) changes in interest rates; and (3) foreign currency
exchange rates.

      The risk associated with fluctuations in the prices the Partnership and
our International Propane operations pay for propane is principally a result of
market forces reflecting changes in supply and demand for propane and other
energy commodities. The Partnership's profitability is sensitive to changes in
propane supply costs, and the Partnership generally attempts to pass on
increases in such costs to customers. The Partnership may not, however, always
be able to pass through product cost increases fully, particularly when product
costs rise rapidly. In order to reduce the volatility of the Partnership's
propane market price risk, it uses contracts for the forward purchase or sale of
propane, propane fixed-price supply agreements, and over-the-counter derivative
commodity instruments including price swap and option contracts. International
Propane's profitability is also sensitive to changes in propane supply costs. On
occasion, FLAGA uses derivative commodity instruments to reduce market risk
associated with a portion of its propane purchases. Over-the-counter derivative
commodity instruments utilized by the Partnership and FLAGA to hedge forecasted
purchases of propane are generally settled at expiration of the contract. In
order to minimize credit risk associated with its derivative commodity
contracts, the Partnership monitors established credit limits with the contract
counterparties. Although we use derivative financial and commodity instruments
to reduce market price risk associated with forecasted transactions, we do not
use derivative financial and commodity instruments for speculative or trading
purposes.

      Gas Utility's tariffs contain clauses that permit recovery of
substantially all of the prudently incurred cost of natural gas it sells to its
customers. The recovery clauses provide for a periodic adjustment for the
difference between the total amount actually collected from customers and the
recoverable costs incurred. Because of this ratemaking mechanism, there is
limited commodity price risk associated with our Gas Utility operations.

      During Fiscal 2002, 2001 and 2000, Electric Utility purchased all of its
electric power needs, in excess of the electric power it obtained from its
interests in electric generating facilities, under power supply arrangements of
various lengths and on the spot market. Beginning September 2002, Electric
Utility began purchasing its power needs from electricity suppliers under
fixed-price energy and capacity contracts and, to a much lesser extent, on the
spot market, and our electricity generation businesses began selling on the spot
market electric power produced from its interests in electricity generating
facilities to third parties. Prices for electricity can be volatile especially
during periods of high demand or tight supply. Although the generation component
of Electric Utility's rates is subject to various rate cap provisions as a
result of the Electricity Restructuring Order and the POLR Settlement, Electric
Utility's fixed-price contracts with electricity suppliers mitigate most risks
associated with offering customers a fixed price during the contract periods.
However, should any of the suppliers under these contracts fail to provide
electric power under the terms of the power and capacity contracts, increases,
if any, in the cost of replacement power or capacity would negatively impact
Electric Utility results. In order to reduce this non-performance risk, Electric
Utility has diversified its purchases across several suppliers and entered into
bilateral collateral arrangements with certain of them.

      In order to manage market price risk relating to substantially all of
Energy Services' forecasted fixed-price sales of natural gas, we purchase
exchange-traded natural gas futures contracts or enter into fixed-price supply
arrangements. Exchange-traded natural gas futures contracts are guaranteed by
the New York Mercantile Exchange ("NYMEX") and have nominal credit risk. The
change in market value of these contracts generally requires daily cash deposits
in margin accounts with brokers. Although Energy Services' fixed-price supply
arrangements mitigate most risks associated with its fixed-price sales
contracts, should any of the natural gas suppliers under these arrangements fail
to perform, increases, if any, in the cost of replacement natural gas would
adversely impact Energy Services' results. In order to reduce this risk of
supplier nonperformance, Energy Services has diversified its purchases across a
number of suppliers.

      We have both fixed-rate and variable-rate debt. Changes in interest rates
impact the cash flows of variable-rate debt but generally do not impact its fair
value. Conversely, changes in interest rates impact the fair value of fixed-rate
debt but do not impact their cash flows.

                                       22

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------

      Our variable-rate debt includes borrowings under AmeriGas OLP's Bank
Credit Agreement, borrowings under UGI Utilities' revolving credit agreements,
and a substantial portion of FLAGA's debt. These debt agreements have interest
rates that are generally indexed to short-term market interest rates. At
September 30, 2002 and 2001, combined borrowings outstanding under these
agreements totaled $131.0 million and $162.3 million, respectively. Based upon
weighted average borrowings outstanding under these agreements during Fiscal
2002 and Fiscal 2001, an increase in short-term interest rates of 100 basis
points (1%) would have increased our interest expense by $1.4 million and $2.4
million, respectively.

      The remainder of our debt outstanding is subject to fixed rates of
interest. A 100 basis point increase in market interest rates would result in
decreases in the fair value of this fixed-rate debt of $52.5 million and $57.9
million at September 30, 2002 and 2001, respectively. A 100 basis point decrease
in market interest rates would result in increases in the fair value of this
fixed-rate debt of $56.4 million and $58.8 million at September 30, 2002 and
2001, respectively.

      Our long-term debt is typically issued at fixed rates of interest based
upon market rates for debt having similar terms and credit ratings. As these
long-term debt issues mature, we may refinance such debt with new debt having
interest rates reflecting then-current market conditions. This debt may have an
interest rate that is more or less than the refinanced debt. In order to reduce
interest rate risk associated with near-term forecasted issuances of fixed-rate
debt, from time to time we enter into interest rate protection agreements.

      The primary currency for which the Company has exchange rate risk is the
U.S. dollar versus the euro. We do not currently use derivative instruments to
hedge foreign currency exposure associated with our international propane
businesses, principally FLAGA and Antargaz. As a result, the U.S. dollar value
of our foreign-denominated assets and liabilities will fluctuate with changes in
the associated foreign currency exchange rates. With respect to FLAGA, the net
effect of changes in foreign currency exchange rates on assets and liabilities
has been significantly limited because FLAGA's U.S. dollar denominated financial
instrument assets and liabilities are substantially equal in amount. With
respect to our equity investment in Antargaz, a 10% decline in the value of the
euro versus the U.S. dollar would reduce the book value of this investment by
approximately $2.0 million, which amount would be reflected in other
comprehensive income.

      The following table summarizes the fair values of unsettled market risk
sensitive derivative instruments held at September 30, 2002 and 2001. It also
includes the changes in fair value that would result if there were an adverse
change in (1) the market price of propane of 10 cents a gallon; (2) the market
price of natural gas of 50 cents a dekatherm; and (3) interest rates on ten-year
U.S. treasury notes of 100 basis points.

                                                                      Change in
                                                Fair Value            Fair Value
================================================================================
                                                                
(Millions of dollars)
September 30, 2002:
  Propane commodity price risk                    $  9.8                $(11.1)
  Natural gas commodity price risk                   5.1                  (6.0)
  Interest rate risk                                (4.0)                 (6.6)

September 30, 2001:
  Propane commodity price risk                    $(10.5)               $(19.3)
  Natural gas commodity price risk                  (1.5)                 (2.2)
  Interest rate risk                                (3.0)                 (4.2)
- --------------------------------------------------------------------------------

      Because the Company's derivative instruments generally qualify as hedges
under SFAS 133, we expect that changes in the fair value of derivative
instruments used to manage commodity or interest rate market risk would be
substantially offset by gains or losses on the associated anticipated
transactions.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In response to the SEC's Release No. 33-8040, "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies," the Company has identified the
following critical accounting policies that are most important to the portrayal
of the Company's financial condition and results of operations. The following
policies require management's most subjective or complex judgments, as a result
of the need to make estimates regarding matters that are inherently uncertain.

LITIGATION ACCRUALS AND ENVIRONMENTAL REMEDIATION LIABILITIES. We are involved
in litigation regarding pending claims and legal actions that arise in the
normal course of our businesses. In addition, UGI Utilities and its former
subsidiaries owned and operated a number of MGPs in Pennsylvania and elsewhere
at which hazardous substances may be present. In accordance with accounting
principles generally accepted in the United States, the Company establishes
reserves for pending claims and legal actions or environmental remediation
obligations when it is probable that a liability exists and the amount or range
of amounts can be reasonably estimated. Reasonable estimates involve management
judgments based on a broad range of information and prior experience. These
judgments are reviewed quarterly as more information is received and the amounts
reserved are updated as necessary. Such estimated reserves may differ materially
from the actual liability, and such reserves may change materially as more
information becomes available and estimated reserves are adjusted.

REGULATORY ASSETS AND LIABILITIES. Gas Utility and Electric Utility are subject
to regulation by the Pennsylvania Public Utility Commission ("PUC"). In
accordance with SFAS No. 71, "Accounting for the Effects of Certain Types of
Regulation," we record the effects of rate regulation in our financial
statements as regulatory assets or regulatory liabilities. We continually assess
whether the regulatory assets are probable of future recovery by evaluating the
regulatory environment, recent rate orders and

                                                                              23

- --------------------------------------------------------------------------------
FINANCIAL REVIEW (continued)

public statements issued by the PUC and the status of any pending deregulation
legislation. If future recovery of regulatory assets ceases to be probable, the
elimination of those regulatory assets would adversely impact our results of
operations.

DEPRECIATION AND AMORTIZATION OF LONG-LIVED ASSETS. We compute depreciation on
UGI Utilities property, plant and equipment on a straight-line basis over the
average remaining lives of its various classes of depreciable property and on
other property, plant and equipment on a straight-line basis over estimated
useful lives generally ranging from two to 40 years. We also use amortization
methods and determine asset values of intangible assets other than goodwill
using reasonable assumptions and projections. Changes in the estimated useful
lives of property, plant and equipment and changes in intangible asset
amortization methods or values could have a material effect on our results of
operations. As of September 30, 2002, our regulatory assets totaled $62.0
million.

IMPAIRMENT OF GOODWILL. Certain of the Company's business units have goodwill
resulting from purchase business combinations. In accordance with SFAS 142, each
of our reporting units with goodwill is required to perform impairment tests
annually or whenever events or circumstances indicate that the value of goodwill
may be impaired. In order to perform these impairment tests, management must
determine the reporting unit's fair value using quoted market prices or, in the
absence of quoted market prices, valuation techniques which use discounted
estimates of future cash flows to be generated by the reporting unit. These cash
flow estimates involve management judgments based on a broad range of
information and historical results. To the extent estimated cash flows are
revised downward, the reporting unit may be required to write down all or a
portion of its goodwill which would adversely impact our results of operations.
As of September 30, 2002, our goodwill totaled $644.9 million.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

      The Financial Accounting Standards Board ("FASB") recently issued SFAS No.
143, "Accounting for Asset Retirement Obligations" ("SFAS 143"); SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144");
SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections" ("SFAS 145"); and SFAS No.
146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS
146").

SFAS 143 addresses financial accounting and reporting for legal obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. SFAS 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred with a corresponding increase in the carrying value of the related
asset. Entities shall subsequently charge the retirement cost to expense using a
systematic and rational method over the related asset's useful life and adjust
the fair value of the liability resulting from the passage of time through
charges to operating expense. We adopted SFAS 143 effective October 1, 2002. The
adoption of SFAS 143 did not have a material effect on our financial position or
results of operations. Our joint venture, AGZ Holdings, is required to adopt
SFAS 143 effective April 1, 2003. We are currently in the process of evaluating
the impact of SFAS 143 on AGZ Holdings.

SFAS 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," as it relates to the disposal of a segment of a business. SFAS
144 establishes a single accounting model for long-lived assets to be disposed
of based upon the framework of SFAS 121, and resolves significant implementation
issues of SFAS 121. We adopted SFAS 144 effective October 1, 2002. The adoption
of SFAS 144 did not affect our financial position or results of operations.

      SFAS 145 rescinded SFAS No. 4, "Reporting Gains and Losses from
Extinguishment of Debt" (an amendment of APB Opinion No. 30) ("SFAS 4"),
effective May 15, 2002. SFAS 4 had required that material gains and losses on
extinguishment of debt be classified as an extraordinary item. Under SFAS 145,
it is less likely that a gain or loss on extinguishment of debt would be
classified as an extraordinary item in our Consolidated Statement of Income.
Among other things, SFAS 145 also amends SFAS 13, "Accounting for Leases," to
require that certain lease modifications that have economic effects similar to
sale-leaseback transactions be accounted for in the same manner as
sale-leaseback transactions. The provisions of SFAS 145 relating to leases
became effective for transactions occurring after May 15, 2002. The adoption of
SFAS 145 did not affect our financial position or results of operations.

      SFAS 146 addresses accounting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force ("EITF") No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity." Generally, SFAS 146 requires that a liability for costs
associated with an exit or disposal activity, including contract termination
costs, employee termination benefits and other associated costs, be recognized
when the liability is incurred. Under EITF No. 94-3, a liability was recognized
at the date of an entity's commitment to an exit plan. SFAS 146 will be
effective for disposal activities initiated after December 31, 2002.

FORWARD-LOOKING STATEMENTS

Information contained in this Financial Review and elsewhere in this Annual
Report may contain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Such statements use forward-looking words such as "believe," "plan,"
"anticipate," "continue," "estimate," "expect," "may," "will," or other similar
words. These statements discuss plans, strategies, events or developments that
we expect or anticipate will or may occur in the future.

      A forward-looking statement may include a statement of the assumptions or
bases underlying the forward-looking statement. We believe that we have chosen
these assumptions or bases in good faith and that they are reasonable. However,
we caution you that

24

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------

actual results almost always vary from assumed facts or bases, and the
differences between actual results and assumed facts or bases can be material,
depending on the circumstances. When considering forward-looking statements, you
should keep in mind the following important factors which could affect our
future results and could cause those results to differ materially from those
expressed in our forward-looking statements: (1) adverse weather conditions
resulting in reduced demand; (2) price volatility and availability of propane,
oil, electricity, and natural gas and the capacity to transport to market areas;
(3) changes in laws and regulations, including safety, tax and accounting
matters; (4) competitive pressures from the same and alternative energy sources;
(5) failure to acquire new customers thereby reducing or limiting any increase
in revenues; (6) liability for environmental claims; (7) customer conservation
measures and improvements in energy efficiency and technology resulting in
reduced demand; (8) adverse labor relations; (9) large customer, counterparty or
supplier defaults; (10) liability for personal injury and property damage
arising from explosions and other catastrophic events, including acts of
terrorism, resulting from operating hazards and risks incidental to generating
and distributing electricity and transporting, storing and distributing natural
gas and propane including liability in excess of insurance coverage; (11)
political, regulatory and economic conditions in the United States and in
foreign countries; (12) interest rate fluctuations and other capital market
conditions, including foreign currency rate fluctuations; (13) reduced
distributions from subsidiaries; and (14) the timing and success of the
Company's efforts to develop new business opportunities.

   These factors are not necessarily all of the important factors that could
cause actual results to differ materially from those expressed in any of our
forward-looking statements. Other unknown or unpredictable factors could also
have material adverse effects on future results. We undertake no obligation to
update publicly any forward-looking statement whether as a result of new
information or future events.

- --------------------------------------------------------------------------------
REPORT OF MANAGEMENT

The Company's consolidated financial statements and other financial information
contained in this Annual Report are prepared by management, which is responsible
for their fairness, integrity and objectivity. The consolidated financial
statements and related information were prepared in accordance with accounting
principles generally accepted in the United States of America and include
amounts that are based on management's best judgments and estimates.

      The Company maintains a system of internal controls. Management believes
the system provides reasonable, but not absolute, assurance that assets are
safeguarded and that transactions are executed in accordance with management's
authorization and are properly recorded to permit the preparation of reliable
financial information. There are limits in all systems of internal control,
based on the recognition that the cost of the system should not exceed the
benefits to be derived. We believe that the Company's internal control system is
cost effective and provides reasonable assurance that material errors or
irregularities will be prevented or detected within a timely period. The
internal control system and compliance therewith are monitored by the Company's
internal audit staff.

      The Audit Committee of the Board of Directors is composed of three
members, none of whom is an employee of the Company. This Committee is
responsible for overseeing the financial reporting process and the adequacy of
controls, and for monitoring the independence of the Company's independent
accountants and the performance of the independent accountants and internal
audit staff. The Committee recommends to the Board of Directors the engagement
of the independent accountants to conduct the annual audit of the Company's
consolidated financial statements. The Committee is also responsible for
maintaining direct channels of communication between the Board of Directors and
both the independent accountants and internal auditors.

      The independent accountants, who are appointed by the Board of Directors
and ratified by the shareholders, perform certain procedures, including an
evaluation of internal controls to the extent required by auditing standards
generally accepted in the United States of America, in order to express an
opinion on the consolidated financial statements and to obtain reasonable
assurance that such financial statements are free of material misstatement.

/S/ Lon R. Greenberg

Lon R. Greenberg
Chief Executive Officer

/S/ Anthony J. Mendicino

Anthony J. Mendicino
Chief Financial Officer

                                                                              25

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF UGI CORPORATION:

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of UGI Corporation and
its subsidiaries at September 30, 2002 and the results of their operations and
their cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion. The consolidated financial statements of UGI
Corporation and its subsidiaries as of September 30, 2001, and for each of the
two years in the period ended September 30, 2001, were audited by other
independent accountants who have ceased operations. Those independent
accountants expressed an unqualified opinion on those financial statements in
their report dated November 16, 2001.

      As discussed in Note 1 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets, in fiscal 2002.

/S/ PRICEWATERHOUSECOOPERS LLP

Philadelphia, Pennsylvania
November 15, 2002,
  except for Note 18 as to which
  the date is December 16, 2002

- --------------------------------------------------------------------------------
      THIS REPORT IS A COPY OF THE PREVIOUSLY ISSUED ACCOUNTANT'S REPORT OF
     ARTHUR ANDERSEN LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF UGI CORPORATION:

We have audited the accompanying consolidated balance sheets of UGI Corporation
and subsidiaries as of September 30, 2001 and 2000, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended September 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
UGI Corporation and subsidiaries as of September 30, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 2001, in conformity with accounting principles
generally accepted in the United States.

      As explained in Notes 1 and 3 to the financial statements, effective
October 1, 2000, the Partnership changed its methods of accounting for tank
installation costs and nonrefundable tank fees and the Company adopted the
provisions of SFAS No. 133.

/S/ ARTHUR ANDERSEN LLP

Philadelphia, Pennsylvania
November 16, 2001

26

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
(Millions of dollars, except per share amounts)

                                                                                           Year Ended September 30,
                                                                           ---------------------------------------------------------
                                                                              2002                  2001                  2000
====================================================================================================================================
                                                                                                              
REVENUES
AmeriGas Propane                                                           $  1,307.9            $  1,418.4            $  1,120.1
UGI Utilities                                                                   490.5                 584.7                 436.9
International Propane                                                            46.7                  50.9                  50.5
Energy Services and other                                                       368.6                 414.1                 154.2
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                              2,213.7               2,468.1               1,761.7
- ------------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
AmeriGas Propane cost of sales                                                  632.1                 836.0                 628.3
UGI Utilities - gas, fuel and purchased power                                   290.3                 374.8                 218.1
International Propane cost of sales                                              22.6                  28.4                  29.7
Energy Services and other cost of sales                                         330.6                 382.2                 145.5
Operating and administrative expenses                                           597.5                 517.8                 461.2
Utility taxes other than income taxes                                            11.9                   9.2                  17.1
Depreciation and amortization                                                    93.5                 105.2                  97.5
Provision for shut-down costs - Hearth USA(TM)                                   --                     8.5                  --
Other income, net                                                               (17.4)                (23.0)                (27.8)
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                              1,961.1               2,239.1               1,569.6
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME                                                                252.6                 229.0                 192.1
Income (loss) from equity investees                                               8.5                  (1.6)                 (0.9)
Interest expense                                                               (109.1)               (104.8)                (98.5)
Minority interests in AmeriGas Partners                                         (28.0)                (23.6)                 (6.3)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES, SUBSIDIARY PREFERRED STOCK DIVIDENDS
  AND ACCOUNTING CHANGES                                                        124.0                  99.0                  86.4
Income taxes                                                                    (46.9)                (45.4)                (40.1)
Dividends on UGI Utilities Series Preferred Stock                                (1.6)                 (1.6)                 (1.6)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before accounting changes                                                 75.5                  52.0                  44.7
Cumulative effect of accounting changes, net                                     --                     4.5                  --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                                 $     75.5            $     56.5            $     44.7
====================================================================================================================================

EARNINGS PER COMMON SHARE
Basic:
  Income before accounting changes                                         $     2.74            $     1.91            $     1.64
  Cumulative effect of accounting changes, net                                   --                    0.17                  --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income                                                                 $     2.74            $     2.08            $     1.64
====================================================================================================================================
Diluted:
  Income before accounting changes                                         $     2.70            $     1.90            $     1.64
  Cumulative effect of accounting changes, net                                   --                    0.16                  --
- ------------------------------------------------------------------------------------------------------------------------------------
  Net income                                                               $     2.70            $     2.06            $     1.64
====================================================================================================================================

AVERAGE COMMON SHARES OUTSTANDING (MILLIONS)
Basic                                                                          27.550                27.163                27.219
====================================================================================================================================
Diluted                                                                        27.938                27.373                27.255
====================================================================================================================================

See accompanying notes to consolidated financial statements.

                                                                              27

- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
(Millions of dollars)

                                                                                                               September 30,
                                                                                                       ----------------------------
ASSETS                                                                                                   2002                2001
====================================================================================================================================
                                                                                                                     
CURRENT ASSETS
Cash and cash equivalents                                                                              $  194.3            $   87.5
Accounts receivable (less allowances for doubtful accounts of $11.8 and $15.6, respectively)              157.7               180.8
Accrued utility revenues                                                                                    8.1                11.1
Inventories                                                                                               109.2               128.6
Deferred income taxes                                                                                      10.4                25.2
Income taxes recoverable                                                                                    1.7                --
Utility deferred fuel costs                                                                                 4.3                --
Prepaid expenses and other current assets                                                                  44.3                25.7
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets                                                                                      530.0               458.9
- ------------------------------------------------------------------------------------------------------------------------------------

PROPERTY, PLANT AND EQUIPMENT
AmeriGas Propane                                                                                        1,028.6               984.0
UGI Utilities                                                                                             883.3               855.2
Other                                                                                                      80.5                74.3
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        1,992.4             1,913.5
Accumulated depreciation and amortization                                                                (720.5)             (645.5)
- ------------------------------------------------------------------------------------------------------------------------------------
Net property, plant, and equipment                                                                      1,271.9             1,268.0
- ------------------------------------------------------------------------------------------------------------------------------------

OTHER ASSETS
Goodwill and excess reorganization value                                                                  644.9               641.1
Intangible assets (less accumulated amortization of $10.3 and $5.8, respectively)                          25.8                31.3
Utility regulatory assets                                                                                  57.7                56.2
Other assets                                                                                               84.1                94.7
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets                                                                                           $2,614.4            $2,550.2
====================================================================================================================================

See accompanying notes to consolidated financial statements.

28

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------

                                                                                                    September 30,
                                                                                       -------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY                                                     2002                         2001
=============================================================================================================================
                                                                                                              
CURRENT LIABILITIES
Current maturities of long-term debt                                                   $  148.7                     $   98.3
AmeriGas Propane bank loans                                                                10.0                         --
UGI Utilities bank loans                                                                   37.2                         57.8
Other bank loans                                                                            8.6                         10.0
Accounts payable                                                                          166.1                        167.0
Employee compensation and benefits accrued                                                 35.4                         39.4
Dividends and interest accrued                                                             41.5                         38.4
Income taxes accrued                                                                       --                           11.6
Deposits and advances                                                                      63.0                         55.6
Other current liabilities                                                                  75.9                         89.4
- -----------------------------------------------------------------------------------------------------------------------------
  Total current liabilities                                                               586.4                        567.5
- -----------------------------------------------------------------------------------------------------------------------------

DEBT AND OTHER LIABILITIES
Long-term debt                                                                          1,127.0                      1,196.9
Deferred income taxes                                                                     200.2                        182.4
Deferred investment tax credits                                                             8.4                          8.8
Other noncurrent liabilities                                                               79.1                         72.8

Commitments and contingencies (note 13)

MINORITY INTERESTS
Minority interests in AmeriGas Partners                                                   276.0                        246.2

PREFERRED AND PREFERENCE STOCK
UGI Utilities Series Preferred Stock Subject to Mandatory
  Redemption, without par value                                                            20.0                         20.0
Preference Stock, without par value (authorized - 5,000,000 shares)                        --                           --

COMMON STOCKHOLDERS' EQUITY
Common Stock, without par value
  (authorized - 100,000,000 shares; issued - 33,198,731 shares)                           396.6                        395.0
Retained earnings                                                                          39.7                          9.0
Accumulated other comprehensive income (loss)                                               6.6                        (13.5)
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                          442.9                        390.5
Treasury stock, at cost                                                                  (125.6)                      (134.9)
- -----------------------------------------------------------------------------------------------------------------------------
  Total common stockholders' equity                                                       317.3                        255.6
- -----------------------------------------------------------------------------------------------------------------------------
  Total liabilities and stockholders' equity                                           $2,614.4                     $2,550.2
=============================================================================================================================

                                                                              29

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)

                                                                                            Year Ended September 30,
                                                                              ----------------------------------------------------
                                                                               2002                   2001                   2000
====================================================================================================================================
                                                                                                                   
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                    $ 75.5                 $ 56.5                 $ 44.7
Reconcile to net cash provided by operating activities:
  Depreciation and amortization                                                 93.5                  105.2                   97.5
  Cumulative effect of accounting changes, net                                  --                     (4.5)                  --
  Minority interests in AmeriGas Partners                                       28.0                   23.6                    6.3
  Deferred income taxes, net                                                    11.0                   (5.5)                   3.2
  Net change in settled accumulated other comprehensive income                  13.3                  (16.9)                  --
  Other, net                                                                    12.4                   21.4                   15.8
  Net change in:
        Accounts receivable and accrued utility revenues                        12.6                  (13.6)                 (63.4)
        Inventories                                                             19.7                   (4.2)                 (26.1)
        Deferred fuel costs                                                     (7.1)                   9.9                   (3.8)
        Accounts payable                                                        (0.4)                   5.8                   52.0
        Other current assets and liabilities                                   (11.0)                  25.8                    6.5
- ------------------------------------------------------------------------------------------------------------------------------------
  Net cash provided by operating activities                                    247.5                  203.5                  132.7
- ------------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment                                 (94.7)                 (78.0)                 (71.0)
Acquisitions of businesses, net of cash acquired                                (0.7)                (209.1)                 (65.3)
Proceeds from redemption of AGZ Bonds                                           17.7                   --                     --
Net proceeds from disposals of assets                                            9.7                    4.2                    8.4
Investments in equity investees                                                 (0.3)                 (32.6)                  --
Other, net                                                                       1.9                    2.2                    6.4
- ------------------------------------------------------------------------------------------------------------------------------------
  Net cash used by investing activities                                        (66.4)                (313.3)                (121.5)
- ------------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Dividends on UGI Common Stock                                                  (44.8)                 (53.2)                 (41.2)
Distributions on AmeriGas Partners publicly held Common Units                  (53.5)                 (44.3)                 (39.1)
Issuance of long-term debt                                                      81.1                  308.2                  209.7
Repayment of long-term debt                                                   (105.0)                (137.0)                 (95.4)
AmeriGas Propane bank loans increase (decrease)                                 10.0                  (30.0)                   8.0
UGI Utilities bank loans increase (decrease)                                   (20.6)                 (42.6)                  13.0
Other bank loans increase (decrease)                                            (2.2)                   6.2                   (6.8)
Issuance of AmeriGas Partners Common Units                                      49.7                   39.8                   --
Proceeds from sale of AmeriGas OLP interest                                     --                     50.0                   --
Issuance of UGI Common Stock                                                    11.0                    7.6                    3.8
Repurchases of UGI Common Stock                                                 --                     (1.0)                  (9.6)
- ------------------------------------------------------------------------------------------------------------------------------------
  Net cash provided (used) by financing activities                             (74.3)                 103.7                   42.4
- ------------------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                                         --                     (0.3)                  (0.2)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents increase (decrease)                                 $106.8                 $ (6.4)                $ 53.4
====================================================================================================================================

CASH AND CASH EQUIVALENTS:
End of year                                                                   $194.3                 $ 87.5                 $ 93.9
Beginning of year                                                               87.5                   93.9                   40.5
- ------------------------------------------------------------------------------------------------------------------------------------
  Increase (decrease)                                                         $106.8                 $ (6.4)                $ 53.4
====================================================================================================================================

See accompanying notes to consolidated financial statements.

30

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Millions of dollars, except per share amounts)

                                                            Retained    Accumulated       Unearned
                                                            Earnings          Other  Compensation-
                                               Common   (Accumulated  Comprehensive     Restricted       Treasury
                                                Stock       Deficit)  Income (Loss)          Stock          Stock           Total
=================================================================================================================================
                                                                                                      
BALANCE SEPTEMBER 30, 1999                  $   394.8      $    (8.2)     $     0.5      $    (1.7)     $  (136.2)      $   249.2
Net income                                                      44.7                                                         44.7
Reclassification of unrealized gains
  on available for sale securities                                             (0.5)                                         (0.5)
                                                           ---------      ---------                                     ---------
Comprehensive income                                            44.7           (0.5)                                         44.2
Cash dividends on Common Stock
  ($1.525 per share)                                           (41.4)                                                       (41.4)
Common Stock issued:
  Employee and director plans                    (0.1)                                                        1.5             1.4
  Dividend reinvestment plan                     (0.2)                                                        2.6             2.4
Common Stock reacquired                                                                                      (9.6)           (9.6)
Amortization of unearned compensation-
  restricted stock awards                                                                      1.0                            1.0
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 2000                      394.5           (4.9)          --             (0.7)        (141.7)          247.2
Net income                                                      56.5                                                         56.5
Cumulative effect of change in
  accounting principle - SFAS No. 133
  (net of tax of $4.8)                                                          7.1                                           7.1
Net loss on derivative instruments
  (net of tax of $7.9)                                                        (10.5)                                        (10.5)
Reclassification of net gains on
  derivative instruments
  (net of tax of $6.5)                                                        (10.3)                                        (10.3)
Foreign currency translation
  adjustments (net of tax of $0.1)                                              0.2                                           0.2
                                                           ---------      ---------                                     ---------
Comprehensive income                                            56.5          (13.5)                                         43.0
Cash dividends on Common Stock
  ($1.575 per share)                                           (42.6)                                                       (42.6)
Common Stock issued:
  Employee and director plans                     0.3                                                         5.5             5.8
  Dividend reinvestment plan                      0.2                                                         2.3             2.5
Common Stock reacquired                                                                                      (1.0)           (1.0)
Amortization of unearned compensation-
  restricted stock awards                                                                      0.7                            0.7
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 2001                      395.0            9.0          (13.5)          --           (134.9)          255.6
Net income                                                      75.5                                                         75.5
Net loss on derivative instruments
  (net of tax of $0.4)                                                         (1.5)                                         (1.5)
Reclassification of net losses on
  derivative instruments
  (net of tax of $11.6)                                                        18.3                                          18.3
Foreign currency translation
  adjustments (net of tax of $2.2)                                              4.4                                           4.4
Reclassification of foreign currency
  translation gain
  (net of tax of $0.5)                                                         (1.1)                                         (1.1)
                                                           ---------      ---------                                     ---------
Comprehensive income                                            75.5           20.1                                          95.6
Cash dividends on Common Stock
  ($1.625 per share)                                           (44.8)                                                       (44.8)
Common Stock issued:
  Employee and director plans                     1.0                                                         7.4             8.4
  Dividend reinvestment plan                      0.6                                                         2.0             2.6
Common Stock reacquired                                                                                      (0.1)           (0.1)
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 2002                  $   396.6      $    39.7      $     6.6      $    --        $  (125.6)      $   317.3
=================================================================================================================================

See accompanying notes to consolidated financial statements.

                                                                              31

- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION. UGI Corporation ("UGI") is a holding company that owns and
operates natural gas and electric utility, electricity generation, propane
distribution, energy marketing and related businesses in the United States.
Through foreign subsidiaries and joint-venture affiliates, UGI also distributes
propane in Austria, the Czech Republic, Slovakia, France and China. We refer to
UGI and its consolidated subsidiaries collectively as "the Company" or "we."

      Our utility business is conducted through our wholly owned subsidiary, UGI
Utilities, Inc. ("UGI Utilities"). UGI Utilities owns and operates (1) a natural
gas distribution utility ("Gas Utility") in parts of eastern and southeastern
Pennsylvania and (2) an electricity distribution utility ("Electric Utility")
and electricity generation business (which together with Electric Utility are
referred to herein as "Electric Operations") in northeastern Pennsylvania.

      We conduct a national propane distribution business through AmeriGas
Partners, L.P. ("AmeriGas Partners") and its principal operating subsidiaries
AmeriGas Propane, L.P. ("AmeriGas OLP") and AmeriGas Eagle Propane, L.P. ("Eagle
OLP"). AmeriGas Partners, AmeriGas OLP and Eagle OLP are Delaware limited
partnerships. UGI's wholly owned second-tier subsidiary AmeriGas Propane, Inc.
(the "General Partner") serves as the general partner of AmeriGas Partners and
AmeriGas OLP. AmeriGas OLP and Eagle OLP (collectively referred to as "the
Operating Partnerships") comprise the largest retail propane distribution
business in the United States serving residential, commercial, industrial, motor
fuel and agricultural customers from locations in 46 states. We refer to
AmeriGas Partners and its subsidiaries together as "the Partnership" and the
General Partner and its subsidiaries, including the Partnership, as "AmeriGas
Propane."

      At September 30, 2002, the General Partner and its wholly owned subsidiary
Petrolane Incorporated ("Petrolane," a predecessor company of AmeriGas OLP)
collectively held a 1% general partner interest and a 49.1% limited partner
interest in AmeriGas Partners, and effective 50.6% and 50.5% ownership interests
in AmeriGas OLP and Eagle OLP, respectively. Our limited partnership interest in
AmeriGas Partners comprised 14,633,932 Common Units and 9,891,072 Subordinated
Units. The remaining 49.9% interest in AmeriGas Partners comprises 24,907,354
publicly held Common Units representing limited partner interests. Effective
November 18, 2002, the remaining 9,891,072 Subordinated Units held by us were
converted to Common Units (see Note 18).

      The Partnership has no employees. Employees of the General Partner
conduct, direct and manage the activities of AmeriGas Partners and AmeriGas OLP.
The General Partner also provides management and administrative services to
AmeriGas Eagle Holdings, Inc., the general partner of Eagle OLP, under a
management services agreement. The General Partner is reimbursed monthly for all
direct and indirect expenses it incurs on behalf of the Partnership including
all General Partner employee compensation costs and a portion of UGI employee
compensation and administrative costs. Although the Partnership's operating
income represents a significant portion of our consolidated operating income,
the Partnership's impact on our consolidated net income is considerably less due
to the Partnership's significant minority interest; higher relative interest
charges; and, prior to 2002, higher effective income taxes associated with the
Partnership's pretax income resulting from nondeductible goodwill amortization.

      Our wholly owned subsidiary UGI Enterprises, Inc. ("Enterprises") conducts
an energy marketing business primarily in the Middle Atlantic region of the
United States through its wholly owned subsidiary, UGI Energy Services, Inc.
("Energy Services"). Through other subsidiaries, Enterprises (1) owns and
operates a propane distribution business in Austria, the Czech Republic and
Slovakia ("FLAGA"); (2) owns and operates a heating, ventilation and
air-conditioning service business in the Middle Atlantic states ("HVAC"); and
(3) participates in propane joint-venture businesses in France and China.

      UGI is exempt from registration as a holding company because it files an
annual exemption statement with the U.S. Securities and Exchange Commission
("SEC") and is not otherwise subject to regulation under the Public Utility
Holding Company Act of 1935 except for acquisitions under Section 9(a)(2). UGI
is not subject to regulation by the Pennsylvania Public Utility Commission
("PUC").

CONSOLIDATION PRINCIPLES. The consolidated financial statements include the
accounts of UGI and its majority-owned subsidiaries. We eliminate all
significant intercompany accounts and transactions when we consolidate. We
report the public's limited partner interests in the Partnership as minority
interests. Entities in which we own 50 percent or less and in which we exercise
significant influence over operating and financial policies are accounted for by
the equity method (see Note 19). Investments in equity investees are included in
other assets in the Consolidated Balance Sheets.

RECLASSIFICATIONS. We have reclassified certain prior-period balances to conform
with the current period presentation.

USE OF ESTIMATES. We make estimates and assumptions when preparing financial
statements in conformity with accounting principles generally accepted in the
United States. These estimates and assumptions affect the reported amounts of
assets and liabilities, revenues and expenses, as well as the disclosure of
contingent assets and liabilities. Actual results could differ from these
estimates.

REGULATED UTILITY OPERATIONS. Gas Utility and Electric Utility (collectively,
"Utilities") are subject to regulation by the PUC. We account for Gas Utility
and Electric Utility in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 71, "Accounting for the Effects of Certain Types of
Regulation" ("SFAS 71"). SFAS 71 requires us to record the effects of rate
regulation in the financial statements. If a separable portion of Gas Utility or
Electric Utility no longer meets the provisions of SFAS 71, we are required to
eliminate the financial statement effects of regulation for that portion of our
operations.

      On June 29, 2000, the PUC entered its order ("Gas Restructuring Order") in
Gas Utility's restructuring plan filed by Gas Utility pursuant to Pennsylvania's
Natural Gas Choice and Competition Act ("Gas Competition Act"). Based upon the
provisions of the Gas Restructuring Order and the Gas Competition Act, we
believe Gas Utility's regulatory assets continue to satisfy the criteria of SFAS
71. For further information on the impact of

32

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------

the Gas Competition Act and Pennsylvania's Electricity Customer Choice and
Competition Act ("Electricity Choice Act"), see Note 4.

DERIVATIVE INSTRUMENTS. Effective October 1, 2000, we adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133, as amended, establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that all
derivative instruments be recognized as either assets or liabilities and
measured at fair value. The accounting for changes in fair value depends upon
the purpose of the derivative instrument and whether it is designated and
qualifies for hedge accounting. To the extent a derivative instrument qualifies
and is designated as a hedge of the variability of cash flows associated with a
forecasted transaction ("cash flow hedge"), the effective portion of the gain or
loss on such derivative instrument is generally reported in other comprehensive
income and the ineffective portion, if any, is reported in net income. Such
amounts reported in other comprehensive income are reclassified into net income
when the forecasted transaction affects earnings. If a cash flow hedge is
discontinued because it is probable that the forecasted transaction will not
occur, the net gain or loss is immediately reclassified into net income. To the
extent derivative instruments qualify and are designated as hedges of changes in
the fair value of an existing asset, liability or firm commitment ("fair value
hedge"), the gain or loss on the hedging instrument is recognized in earnings
along with changes in the fair value of the hedged asset, liability or firm
commitment attributable to the hedged risk.

      The adoption of SFAS 133 resulted in an after-tax cumulative effect charge
to net income of $0.3 million and an after-tax cumulative effect increase to
accumulated other comprehensive income of $7.1 million. The increase in
accumulated other comprehensive income is attributable to net gains on
derivative instruments designated and qualifying as cash flow hedges on October
1, 2000. Prior to the adoption of SFAS 133, gains or losses on derivative
instruments associated with forecasted transactions generally were recorded in
net income when the forecasted transactions affected earnings. If it became
probable that the original forecasted transactions would not occur, we
immediately recognized in net income any gains or losses on the derivative
instruments.

      For a detailed description of the derivative instruments we use, our
objectives for using them, and related supplemental information required by SFAS
133, see Note 14.

CONSOLIDATED STATEMENTS OF CASH FLOWS. We define cash equivalents as all highly
liquid investments with maturities of three months or less when purchased. We
record cash equivalents at cost plus accrued interest, which approximates market
value. We paid interest totaling $106.2 million in 2002, $103.9 million in 2001,
and $96.9 million in 2000. We paid income taxes totaling $48.0 million in 2002,
$43.0 million in 2001, and $26.6 million in 2000.

REVENUE RECOGNITION. We recognize revenues from the sale of propane principally
as product is delivered to customers. Revenue from the sale of appliances and
equipment is recognized at the time of sale or installation. We record
Utilities' regulated revenues for service provided to the end of each month
which includes an accrual for certain unbilled amounts based upon estimated
usage.

We reflect the impact of Utilities' rate increases or decreases at the time they
become effective. Energy Services records revenues when energy products are
delivered to customers.

      Effective October 1, 2000, the Partnership applied the guidance of SEC
Staff Accounting Bulletin No. 101 entitled "Revenue Recognition" ("SAB 101")
with respect to its annually billed non-refundable tank fees. Under the new
accounting method, revenues from such fees are recorded on a straight-line basis
over one year. Prior to the change in accounting, such revenues were recorded
when billed. For a detailed description of this change in accounting and its
impact on our results, see Note 3.

INVENTORIES. Our inventories are stated at the lower of cost or market. We
determine cost principally on an average or first-in, first-out ("FIFO") method
except for appliances for which we use the specific identification method.

EARNINGS PER COMMON SHARE. Basic earnings per share reflect the weighted-average
number of common shares outstanding. Diluted earnings per share include the
effects of dilutive stock options and common stock awards. In the following
table, we present the shares used in computing basic and diluted earnings per
share for 2002, 2001 and 2000:

                                                2002         2001         2000
==============================================================================
                                                               
Denominator (millions of shares):
  Average common shares
    outstanding for basic computation         27.550       27.163       27.219
  Incremental shares issuable for stock
    options and awards                         0.388        0.210        0.036
- ------------------------------------------------------------------------------
Average common shares outstanding for
  diluted computation                         27.938       27.373       27.255
- --------------------------------------------------------------------------------

INCOME TAXES. AmeriGas Partners and the Operating Partnerships are not directly
subject to federal income taxes. Instead, their taxable income or loss is
allocated to the individual partners. We record income taxes on our share of (1)
the Partnership's current taxable income or loss and (2) the differences between
the book and tax bases of the Partnership's assets and liabilities. The
Operating Partnerships have subsidiaries which operate in corporate form and are
directly subject to federal income taxes.

      Gas Utility and Electric Utility record deferred income taxes in the
Consolidated Statements of Income resulting from the use of accelerated
depreciation methods based upon amounts recognized for ratemaking purposes. They
also record a deferred tax liability for tax benefits that are flowed through to
ratepayers when temporary differences originate and record a regulatory income
tax asset for the probable increase in future revenues that will result when the
temporary differences reverse.

      We are amortizing deferred investment tax credits related to Utilities'
plant additions over the service lives of the related property. Utilities
reduces its deferred income tax liability for the future tax benefits that will
occur when investment tax credits, which are not taxable, are amortized. We also
reduce the regulatory income tax asset for the probable reduction in future
revenues that will result when such deferred investment tax credits amortize.

                                                                              33

- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 1 continued

PROPERTY, PLANT AND EQUIPMENT AND RELATED DEPRECIATION. The amounts we assign to
property, plant and equipment of businesses we acquire are based upon estimated
fair value at date of acquisition. When we retire Utilities' plant and
equipment, we charge its original cost and the net cost of its removal to
accumulated depreciation for financial accounting purposes. We record
depreciation expense for Utilities' plant and equipment on a straight-line
method over the estimated average remaining lives of the various classes of its
depreciable property. Depreciation expense as a percentage of the related
average depreciable base for Gas Utility was 2.5% in 2002 and 2.6% in each of
2001 and 2000. Depreciation expense as a percentage of the related average
depreciable base for Electric Operations was 3.0% in each of 2002 and 2001, and
3.5% in 2000. We compute depreciation expense on plant and equipment associated
with our propane operations using the straight-line method over estimated
service lives generally ranging from 15 to 40 years for buildings and
improvements; 7 to 30 years for storage and customer tanks and cylinders; and 2
to 10 years for vehicles, equipment, and office furniture and fixtures.
Depreciation expense was $88.2 million in 2002, $75.7 million in 2001, and $69.3
million in 2000.

         Effective October 1, 2000, the Partnership changed its method of
accounting for costs to install Partnership-owned tanks at customer locations.
Under the new accounting method, all costs to install such tanks, net of amounts
billed to customers, are capitalized and amortized over the estimated period of
benefit not exceeding ten years. For a detailed description of this change in
accounting and its impact on our results, see Note 3.

INTANGIBLE ASSETS. Intangible assets comprise the following at September 30:

                                               2002         2001
=================================================================
                                                    
Subject to amortization:
   Customer relationships, noncompete
     agreements and other                       $ 36.1    $ 37.1
   Accumulated amortization                      (10.3)     (5.8)
- -----------------------------------------------------------------
                                                $ 25.8    $ 31.3
- -----------------------------------------------------------------
Not subject to amortization:
   Goodwill (a)                                 $551.6    $547.8
   Excess reorganization value                    93.3      93.3
- -----------------------------------------------------------------
                                                $644.9    $641.1
- -----------------------------------------------------------------

(a) The change in the carrying amount of goodwill from September 30, 2001 to
September 30, 2002 is principally the result of foreign currency translation.

         Effective October 1, 2001, we early adopted the provisions of SFAS No.
142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 addresses the
financial accounting and reporting for acquired goodwill and other intangible
assets and supersedes Accounting Principles Board ("APB") Opinion No. 17,
"Intangible Assets." SFAS 142 addresses the financial accounting and reporting
for intangible assets acquired individually or with a group of other assets
(excluding those acquired in a business combination) at acquisition and also
addresses the financial accounting and reporting for goodwill and other
intangible assets subsequent to their acquisition. Under SFAS 142, an intangible
asset is amortized over its useful life unless that life is determined to be
indefinite. Goodwill, including excess reorganization value, and other
intangible assets with indefinite lives are not amortized but are subject to
tests for impairment at least annually. In accordance with the provisions of
SFAS 142, we ceased the amortization of goodwill and excess reorganization value
effective October 1, 2001.

         We amortize customer relationship and noncompete agreement intangibles
over their estimated periods of benefit which do not exceed 15 years. Prior to
the adoption of SFAS 142, we amortized goodwill resulting from purchase business
combinations over 40 years, and excess reorganization value (resulting from
Petrolane's July 1993 reorganization under Chapter 11 of the U.S. Bankruptcy
Code) on a straight-line basis over 20 years. Amortization expense of intangible
assets was $4.6 million in 2002 including amortization expense associated with
customer contracts recorded in cost of sales. Amortization expense of intangible
assets in 2001 and 2000, which includes amortization of goodwill and excess
reorganization value prior to the adoption of SFAS 142, was $27.7 million and
$26.5 million, respectively. Estimated amortization expense of intangible assets
during the next five fiscal years is as follows: Fiscal 2003 - $3.8 million;
Fiscal 2004 - $3.4 million; Fiscal 2005 - $2.9 million; Fiscal 2006 - $2.4
million; Fiscal 2007 - $1.8 million.

         The following table provides reconciliations of reported and adjusted
net income and diluted earnings per share as if SFAS 142 had been adopted as of
October 1, 2000. Basic earnings per share is not materially different from
diluted earnings per share and, therefore, is not presented:

                                                   Year Ended September 30,
                                                  2002      2001      2000
================================================================================
                                                             
NET INCOME:
Reported income before
   accounting changes                             $75.5    $ 52.0     $ 44.7
Add back goodwill and excess
   reorganization value amortization                  -      25.2       24.7
Adjust minority interests in AmeriGas
   Partners                                           -     (10.5)      (9.7)
Adjust income tax expense                             -      (0.7)      (0.3)
- --------------------------------------------------------------------------------
Adjusted income before accounting changes          75.5      66.0       59.4
Cumulative effect of accounting changes               -       4.5          -
- --------------------------------------------------------------------------------
Adjusted net income                               $75.5    $ 70.5     $ 59.4
- --------------------------------------------------------------------------------

DILUTED EARNINGS PER SHARE:
Reported income before accounting changes          $2.70   $ 1.90     $ 1.64
Add back goodwill and excess
   reorganization value amortization                  -      0.92       0.91
Adjust minority interests in AmeriGas
   Partners                                           -     (0.38)     (0.36)
Adjust income tax expense                             -     (0.03)     (0.01)
- --------------------------------------------------------------------------------
Adjusted income per share before
   accounting changes                              2.70      2.41       2.18
Cumulative effect of accounting changes               -      0.17          -
- --------------------------------------------------------------------------------
Adjusted net income per share                     $2.70    $ 2.58     $ 2.18
- --------------------------------------------------------------------------------

34

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------

         In accordance with the provisions of SFAS 142, we were required to
perform transitional goodwill impairment tests for each of our reporting units
having goodwill by March 31, 2002. In addition, SFAS 142 requires that we
perform impairment tests annually or more frequently if events or circumstances
indicate that the value of goodwill might be impaired. No goodwill impairments
were recorded as a result of our SFAS 142 transitional impairment tests or our
annual impairment tests completed during the fourth quarter of fiscal 2002.

STOCK-BASED COMPENSATION. As permitted by SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), we apply the provisions of APB Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), in recording
compensation expense for grants of stock, stock options, and other equity
instruments to employees. For a description of stock-based compensation and
related disclosures, see Note 10.

OTHER ASSETS. Included in other assets are net deferred debt issuance costs of
$14.8 million at September 30, 2002 and $15.9 million at September 30, 2001. We
are amortizing these costs over the term of the related debt.

COMPUTER SOFTWARE COSTS. We include in property, plant and equipment costs
associated with computer software we develop or obtain for use in our
businesses. We amortize computer software costs on a straight-line basis over
expected periods of benefit not exceeding ten years once the installed software
is ready for its intended use.

DEFERRED FUEL COSTS. Gas Utility's tariffs contain clauses which permit recovery
of certain purchased gas costs through the application of purchased gas cost
("PGC") rates. The clauses provide for periodic adjustments to PGC rates for the
difference between the total amount of purchased gas costs collected from
customers and the recoverable costs incurred. In accordance with SFAS 71, we
defer the difference between amounts recognized in revenues and the applicable
gas costs incurred until they are subsequently billed or refunded to customers.

ENVIRONMENTAL LIABILITIES. We accrue environmental investigation and cleanup
costs when it is probable that a liability exists and the amount or range of
amounts can be reasonably estimated. Our estimated liability for environmental
contamination is reduced to reflect anticipated participation of other
responsible parties but is not reduced for possible recovery from insurance
carriers. We do not discount to present value the costs of future expenditures
for environmental liabilities. We intend to pursue recovery of any incurred
costs through all appropriate means, including regulatory relief. Gas Utility is
permitted to amortize as removal costs site-specific environmental investigation
and remediation costs, net of related third-party payments, associated with
Pennsylvania sites. Gas Utility is currently permitted to include in rates,
through future base rate proceedings, a five-year average of such prudently
incurred removal costs.

FOREIGN CURRENCY TRANSLATION. Balance sheets of international subsidiaries and
investments in international propane joint ventures are translated into U.S.
dollars using the exchange rate at the balance sheet date. Income statements and
equity method results are translated into U.S. dollars using a weighted-average
exchange rate for each reporting period. Where the local currency is the
functional currency, translation adjustments are recorded in other comprehensive
income. Where the local currency is not the functional currency, translation
adjustments are recorded in net income.

COMPREHENSIVE INCOME (LOSS). Comprehensive income (loss) comprises net income
and other comprehensive income (loss). Other comprehensive income (loss)
principally results from gains and losses on derivative instruments qualifying
as cash flow hedges and foreign currency translation adjustments. The components
of accumulated other comprehensive income (loss) at September 30, 2001 and 2002
follows:

                                           Derivative         Foreign
                                           Instruments        Currency
                                           Gains              Translation
                                           (Losses)           Adjustments       Total
=======================================================================================
                                                                       
Balance - September 30, 2001               $(13.7)            $0.2              $(13.5)
Balance - September 30, 2002               $ 3.1              $3.5              $  6.6
- ---------------------------------------------------------------------------------------

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS. The Financial Accounting Standards
Board ("FASB") recently issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS 143"); SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS 144"); SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections" ("SFAS 145"); and SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS 146").

SFAS 143 addresses financial accounting and reporting for legal obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. SFAS 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred with a corresponding increase in the carrying value of the related
asset. Entities shall subsequently charge the retirement cost to expense using a
systematic and rational method over the related asset's useful life and adjust
the fair value of the liability resulting from the passage of time through
charges to operating expense. We adopted SFAS 143 effective October 1, 2002. The
adoption of SFAS 143 did not have a material effect on our financial position or
results of operations. Our joint venture, AGZ Holdings, is required to adopt
SFAS 143 effective April 1, 2003. We are currently in the process of evaluating
the impact of SFAS 143 on AGZ Holdings.

SFAS 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," as it relates to the disposal of a segment

                                                                              35

- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 1 continued

of a business. SFAS 144 establishes a single accounting model for long-lived
assets to be disposed of based upon the framework of SFAS 121, and resolves
significant implementation issues of SFAS 121. We adopted SFAS 144 effective
October 1, 2002. The adoption of SFAS 144 did not affect our financial position
or results of operations.

         SFAS 145 rescinded SFAS No. 4, "Reporting Gains and Losses from
Extinguishment of Debt" (an amendment of APB Opinion No. 30) ("SFAS 4"),
effective for fiscal years beginning after May 15, 2002. SFAS 4 had required
that material gains and losses on extinguishment of debt be classified as an
extraordinary item. Under SFAS 145, it is less likely that a gain or loss on
extinguishment of debt would be classified as an extraordinary item in the
Consolidated Statement of Income. Among other things, SFAS 145 also amends SFAS
No. 13, "Accounting for Leases," to require that certain lease modifications
that have economic effects similar to sale-leaseback transactions be accounted
for in the same manner as sale-leaseback transactions. The provisions of SFAS
145 relating to leases were effective for transactions occurring after May 15,
2002. The application of SFAS 145 did not affect our financial position or
results of operations during 2002.

         SFAS 146 addresses accounting for costs associated with exit or
disposal activities and replaces the guidance in Emerging Issues Task Force
("EITF") No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity." Generally, SFAS 146 requires that
a liability for costs associated with an exit or disposal activity, including
contract termination costs, employee termination benefits and other associated
costs, be recognized when the liability is incurred. Under EITF No. 94-3, a
liability was recognized at the date an entity committed to an exit plan. SFAS
146 will be effective for disposal activities initiated after December 31, 2002.

NOTE 2 - ACQUISITIONS

On August 21, 2001, AmeriGas Partners, through AmeriGas OLP, acquired the
propane distribution businesses of Columbia Energy Group ("Columbia Propane
Businesses") in a series of equity and asset purchases pursuant to the terms of
the Purchase Agreement dated January 30, 2001, and Amended and Restated August
7, 2001 ("Columbia Purchase Agreement") by and among Columbia Energy Group
("CEG"), Columbia Propane Corporation ("Columbia Propane"), Columbia Propane,
L.P. ("CPLP"), CP Holdings, Inc. ("CPH"), AmeriGas Partners, AmeriGas OLP, and
the General Partner. The acquired businesses comprised the seventh largest
retail marketer of propane in the United States with annual sales of over 300
million gallons from locations in 29 states. The acquired businesses were
principally conducted through Columbia Propane and its approximate 99% owned
subsidiary, CPLP (referred to after the acquisition as "Eagle OLP"). AmeriGas
OLP acquired substantially all of the assets of Columbia Propane, including an
indirect 1% general partner interest and an approximate 99% limited partnership
interest in Eagle OLP.

         The purchase price of the Columbia Propane Businesses consisted of
$201.8 million in cash. In addition, AmeriGas OLP agreed to pay CEG for the
amount of working capital, as defined, in excess of $23 million. In April 2002,
the Partnership's management and CEG agreed upon the amount of working capital
acquired by AmeriGas OLP and AmeriGas OLP made an additional payment for working
capital and other adjustments totaling $0.7 million. The Columbia Purchase
Agreement also provided for the purchase by CEG of limited partnership interests
in AmeriGas OLP valued at $50 million for $50 million in cash, which interests
were exchanged for 2,356,953 Common Units of AmeriGas Partners having an
estimated fair value of $54.4 million. Concurrently with the acquisition,
AmeriGas Partners issued $200 million of 8.875% Senior Notes due May 2011, the
net proceeds of which were contributed to AmeriGas OLP to finance the
acquisition of the Columbia Propane Businesses, to fund related fees and
expenses, and to repay debt outstanding under AmeriGas OLP's Bank Credit
Agreement. The operating results of the Columbia Propane Businesses are included
in our consolidated results from August 21, 2001.

         The following table identifies the components of the purchase price:

================================================================================

Cash paid                                                           $ 202.5
Cash received from sale of AmeriGas OLP limited partner interests     (50.0)
Fair value of AmeriGas Partners' Common Units issued in exchange
   for the AmeriGas OLP limited partner interests                      54.4
Transaction costs and expenses                                          8.2
Involuntary employee termination benefits and relocation costs          2.6
Other liabilities and obligations incurred                              1.0
- --------------------------------------------------------------------------------
Total                                                               $ 218.7
- --------------------------------------------------------------------------------

         As of September 30, 2002, substantially all involuntary employee
termination benefits and relocation costs had been paid.

         The purchase price of the Columbia Propane Businesses has been
allocated to the assets and liabilities acquired as follows:

================================================================================

Net current assets                                               $    16.7
Property, plant and equipment                                        182.8
Customer relationships and noncompete agreement
   (estimated useful life of 15 and 5 years, respectively)            19.9
Other assets and liabilities                                          (0.7)
- --------------------------------------------------------------------------------
Total                                                            $   218.7
- --------------------------------------------------------------------------------

         The following table presents unaudited pro forma income statement and
diluted per share data for 2001 and 2000 as if the acquisition of the Columbia
Propane Businesses had occurred as of the beginning of those years:

                                                   2001              2000
================================================================================
                                                           
Revenues                                       $2,838.3          $2,069.8
Income before accounting changes                   50.8              39.5
Net income                                         55.3              39.5
Diluted earnings per share:
   Income before accounting changes                1.86              1.45
   Net income                                      2.02              1.45
- --------------------------------------------------------------------------------

36

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------

         The pro forma results of operations reflect the Columbia Propane
Businesses' historical operating results after giving effect to adjustments
directly attributable to the transaction that are expected to have a continuing
impact. They are not adjusted for, among other things, the impact of normal
weather conditions, operating synergies and anticipated cost savings. In our
opinion, the unaudited pro forma results are not necessarily indicative of the
actual results that would have occurred had the acquisition of the Columbia
Propane Businesses occurred as of the beginning of the years presented or of
future operating results under our management.

         During 2001, Energy Services acquired two energy marketing businesses
and the Partnership acquired several small propane distribution businesses for
total cash consideration of $5.4 million. During 2000, the Partnership acquired
several propane distribution businesses, and Enterprises acquired an HVAC
business, for net cash consideration of $65.3 million. The excess of the
purchase price over the amount allocated to the net assets acquired for the 2000
acquisitions was approximately $42 million. The operating results of these
businesses have been included in the consolidated results from their respective
dates of acquisition. The pro forma effect of these transactions was not
material to our 2001 and 2000 results of operations.

NOTE 3 - CHANGES IN ACCOUNTING

TANK FEE REVENUE RECOGNITION. In order to apply the guidance of SAB 101,
effective October 1, 2000, the Partnership changed its method of accounting for
annually billed nonrefundable tank fees. Prior to the change in accounting,
nonrefundable tank fees for installed Partnership-owned tanks were recorded as
revenue when billed. Under the new accounting method, revenues from such fees
are being recorded on a straight-line basis over one year. As a result of this
change in accounting, on October 1, 2000, we recorded an after-tax charge of
$2.1 million representing the cumulative effect of the change in accounting on
prior years. The change in accounting for nonrefundable tank fees did not have a
material impact on reported revenues in 2002 and 2001, and would not have had a
material impact on reported revenues in 2000. At September 30, 2002 and 2001,
deferred revenues relating to nonrefundable tank fees were $6.8 million and $6.2
million, respectively.

ACCOUNTING FOR TANK INSTALLATION COSTS. Effective October 1, 2000, the
Partnership changed its method of accounting for tank installation costs which
are not billed to customers. Prior to the change in accounting, costs to install
Partnership-owned tanks at a customer location were expensed as incurred. Under
the new accounting method, all such costs, net of amounts billed to customers,
are capitalized in property, plant and equipment and amortized over the
estimated period of benefit not exceeding ten years. The Partnership believes
that the new accounting method better matches the costs of installing
Partnership-owned tanks with the periods benefited. As a result of this change
in accounting, on October 1, 2000, we recorded after-tax income of $6.9 million
representing the cumulative effect of the change in accounting on prior years.
The change in accounting for tank installation costs did not have a material
effect on 2001 net income.

CUMULATIVE EFFECT OF ACCOUNTING CHANGES AND PRO FORMA DISCLOSURE. The cumulative
effect reflected on the 2001 Consolidated Statement of Income and related
diluted per share amounts resulting from the above changes in accounting
principles, as well as the cumulative effect resulting from the adoption of SFAS
133 (see Note 1), comprise the following:

                                                                       Diluted
                                Pre-Tax      Income Tax  After-Tax    Earnings
                                Income       (Expense)    Income       (Loss)
                                (Loss)        Benefit     (Loss)      Per Share
================================================================================
                                                        
Tank fees                        $(3.5)      $ 1.4       $(2.1)     $(0.08)
Tank installation costs           11.3        (4.4)        6.9        0.25
SFAS 133                          (0.4)        0.1        (0.3)      (0.01)
- --------------------------------------------------------------------------------
Total                            $ 7.4       $(2.9)      $ 4.5      $ 0.16
- --------------------------------------------------------------------------------

         The pro forma impact on 2000 net income and net income per share after
applying retroactively the changes in accounting for tank installation costs and
nonrefundable tank fees was not materially different from reported amounts.

NOTE 4 - UTILITY REGULATORY MATTERS

GAS UTILITY

GAS COMPETITION ACT. On June 22, 1999, the Gas Competition Act was signed into
law. The purpose of the Gas Competition Act is to provide all natural gas
consumers in Pennsylvania with the ability to purchase their gas supplies from
the supplier of their choice. Under the Gas Competition Act, local gas
distribution companies ("LDCs") like Gas Utility may continue to sell gas to
customers, and such sales of gas, as well as distribution services provided by
LDCs, continue to be subject to price regulation by the PUC. LDCs serve as the
supplier of last resort for all residential and small commercial and industrial
("core-market") customers unless the PUC approves another supplier of last
resort. The Gas Competition Act requires energy marketers seeking to serve
customers of LDCs to accept assignment of a portion of the LDC's pipeline
capacity and storage contracts at contract rates, thus avoiding the creation of
stranded costs. After July 1, 2002, a natural gas supplier may petition the PUC
to avoid such contract release or assignment. However, such petition may be
granted only if the LDC fully recovers the cost of contracts. The Gas
Competition Act, in conjunction with a companion bill, eliminated the gross
receipts tax on sales of gas effective January 1, 2000.

         On June 29, 2000, the PUC issued the Gas Restructuring Order approving
Gas Utility's restructuring plan filed by Gas Utility pursuant to the Gas
Competition Act. Among other things, the implementation of the Gas Restructuring
Order resulted in an increase in Gas Utility's core-market base rates effective
October 1, 2000. This base rate increase was designed to generate approximately
$16.7 million in additional net annual revenues. In accordance with the Gas
Restructuring Order, Gas Utility reduced its core-market PGC rates by an
annualized amount of $16.7 million in the first 14 months following the October
1, 2000 base rate increase.

                                                                              37

- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 4 continued

         Effective December 1, 2001, Gas Utility was required to reduce its
core-market PGC rates by amounts equal to the margin it receives from
interruptible customers using pipeline capacity contracted by Gas Utility for
core-market customers. As a result, Gas Utility operating results are more
sensitive to the effects of heating-season weather and less sensitive to the
market prices of alternative fuels.

ELECTRIC UTILITY

ELECTRIC UTILITY RESTRUCTURING ORDER. On June 19, 1998, the PUC entered its
Opinion and Order ("Electricity Restructuring Order") in Electric Utility's
restructuring proceeding pursuant to the Electricity Choice Act. Under the terms
of the Electricity Restructuring Order, Electric Utility was authorized to
recover $32.5 million in stranded costs (on a full revenue requirements basis
which includes all income and gross receipts taxes) over a four-year period
beginning January 1, 1999 through a Competitive Transition Charge ("CTC")
(together with carrying charges on unrecovered balances of 7.94%) and to charge
unbundled rates for generation, transmission and distribution services. Stranded
costs are electric generation-related costs that traditionally would be
recoverable in a regulated environment but may not be recoverable in a
competitive electric generation market. Electric Utility's recoverable stranded
costs included $8.7 million for the buy-out of a 1993 power purchase agreement
with an independent power producer. Under the terms of the Electricity
Restructuring Order and in accordance with the Electricity Choice Act, Electric
Utility generally could not increase the generation component of prices during
the period that stranded costs were being recovered through the CTC. Since
January 1, 1999, all of Electric Utility's customers have been permitted to
choose an alternative generation supplier. Customers choosing an alternative
supplier during the stranded cost recovery period received a "shopping credit."

         The PUC approved a settlement establishing rules for Electric Utility
Provider of Last Resort ("POLR") service on March 28, 2002, and a separate
settlement that modified these rules on June 13, 2002 (collectively the "POLR
Settlement") under which Electric Utility terminated stranded cost recovery
through its CTC from commercial and industrial ("C&I") customers on July 31,
2002, and from residential customers on October 31, 2002, and is no longer
subject to the statutory rate caps as of August 1, 2002 for C&I customers and as
of November 1, 2002 for residential customers. Charges for generation service
will (1) initially be set at a level equal to the rates paid by Electric Utility
customers for POLR service under the statutory rate caps; (2) may be raised at
certain designated times up to certain specified caps through December 2004; and
(3) may be set at market rates thereafter. Electric Utility may also offer
multiple-year POLR contracts to its customers. The POLR Settlement provides for
annual shopping periods during which customers may elect to remain on POLR
service or choose an alternate supplier. Customers who do not select an
alternate supplier will be obligated to remain on POLR service until the next
shopping period. Residential customers who return to POLR service at a time
other than during the annual shopping period must remain on POLR service until
the date of the second open shopping period after returning. C&I customers who
return to POLR service at a time other than during the annual shopping period
must remain on POLR service until the next open shopping period, and may, in
certain circumstances, be subject to generation rate surcharges.

FORMATION OF HUNLOCK CREEK ENERGY VENTURES. On December 8, 2000, a subsidiary of
UGI Utilities contributed its coal-fired Hunlock Creek generating station
("Hunlock") and certain related assets having a net book value of approximately
$4.2 million, and $6 million in cash, to Hunlock Creek Energy Ventures ("Energy
Ventures"), a general partnership jointly owned by us and a subsidiary of
Allegheny Energy, Inc. ("Allegheny"). The contribution was recorded at carrying
value and no gain was recognized by the Company. Also on December 8, 2000,
Allegheny contributed a newly constructed, gas-fired combustion turbine
generator to be operated at the Hunlock site. Under the terms of our arrangement
with Allegheny, each partner is entitled to purchase 50% of the output of the
joint venture at cost. Total purchases from Energy Ventures in 2002 and 2001
were $9.8 million and $8.0 million, respectively.

REGULATORY ASSETS AND LIABILITIES

The following regulatory assets and liabilities are included in our accompanying
balance sheets at September 30:

                                                 2002          2001
====================================================================
                                                         
Regulatory assets:
   Income taxes recoverable                     $54.7          $51.8
   Power agreement buy-out                        -              1.3
   Other postretirement benefits                  2.4            2.6
   Deferred fuel costs                            4.3              -
   Other                                          0.6            0.5
- --------------------------------------------------------------------
Total regulatory assets                         $62.0          $56.2
- --------------------------------------------------------------------
Regulatory liabilities:
   Other postretirement benefits                $ 4.3          $ 4.3
   Deferred fuel costs                              -            2.8
- --------------------------------------------------------------------
Total regulatory liabilities                    $ 4.3          $ 7.1
- --------------------------------------------------------------------

         Utilities' regulatory liabilities are included in "other current
liabilities" and "other noncurrent liabilities" on the Consolidated Balance
Sheets. The Company's regulatory assets do not earn a return.

38

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------

NOTE 5 - DEBT

Long-term debt comprises the following at September 30:

                                                                      2002            2001
===========================================================================================
                                                                           
AMERIGAS PROPANE:
AmeriGas Partners Senior Notes:
   8.875%, due May 2011 (of which $40 in 2002
     includes unamortized premium of $1.5,
     effective rate - 8.25%)                                        $ 241.6      $    200.0
   10%, due April 2006 (less unamortized discount of $0.2
     and $0.3, respectively, effective rate - 10.125%)                 59.8            59.7
   10.125%, due April 2007                                             85.0           100.0
AmeriGas OLP First Mortgage Notes:
   Series A, 9.34% - 11.71%, due April 2001 through
     April 2009 (including unamortized premium of
     $7.9 and $9.2, respectively, effective rate - 8.91%)             167.9           189.2
   Series B, 10.07%, due April 2001 through April 2005
     (including unamortized premium of $2.3 and $3.9,
     respectively, effective rate - 8.74%)                            122.3           163.9
   Series C, 8.83%, due April 2003 through April 2010                 110.0           110.0
   Series D, 7.11%, due March 2009 (including
     unamortized premium of $2.2 and $2.4,
     respectively, effective rate - 6.52%)                             72.2            72.4
   Series E, 8.50%, due July 2010 (including unamortized
     premium of $0.1 and $0.2, respectively, effective
     rate - 8.47%)                                                     80.1            80.2
AmeriGas OLP Acquisition Facility                                         -            20.0
Other                                                                   6.9            10.5
- -------------------------------------------------------------------------------------------
Total AmeriGas Propane                                                945.8         1,005.9
- -------------------------------------------------------------------------------------------

UGI UTILITIES:
Medium-Term Notes:
   7.25% Notes, due November 2017                                      20.0            20.0
   7.17% Notes, due June 2007                                          20.0            20.0
   7.37% Notes, due October 2015                                       22.0            22.0
   6.73% Notes, due October 2002                                       26.0            26.0
   6.62% Notes, due May 2005                                           20.0            20.0
   7.14% Notes, due December 2005 (including
     unamortized premium of $0.4 and $0.5,
     respectively, effective rate - 6.64%)                             30.4            30.5
   7.14% Notes, due December 2005                                      20.0            20.0
   5.53% Notes, due September 2012                                     40.0               -
6.50% Senior Notes, due August 2003 (less unamortized
   discount of $0.1 in 2001)                                           50.0            49.9
- -------------------------------------------------------------------------------------------
Total UGI Utilities                                                   248.4           208.4
- -------------------------------------------------------------------------------------------

OTHER:

FLAGA Acquisition Note, due September 2002
   through September 2006                                              64.3            62.7
FLAGA euro special purpose facility                                    10.8            10.7
Other                                                                   6.4             7.5
- -------------------------------------------------------------------------------------------
Total long-term debt                                                1,275.7         1,295.2
Less current maturities (including net unamortized
   premiums of $2.9 and $3.3, respectively)                          (148.7)         (98.3)
- -------------------------------------------------------------------------------------------
Total long-term debt due after one year                           $ 1,127.0       $1,196.9
- -------------------------------------------------------------------------------------------

    Scheduled principal repayments of long-term debt due in fiscal years 2003 to
2007 follows:

                            2003     2004       2005        2006        2007
=============================================================================
                                                        
AmeriGas Propane          $ 57.5     $55.1      $54.9      $113.2      $138.7
UGI Utilities               76.0         -       20.0        50.0        20.0
Other                       12.3       6.1       11.1        47.6         1.4
- -----------------------------------------------------------------------------
Total                     $145.8     $61.2      $86.0      $210.8      $160.1
- -----------------------------------------------------------------------------

AMERIGAS PROPANE

AMERIGAS PARTNERS SENIOR NOTES. The 8.875% Senior Notes generally cannot be
redeemed at our option prior to May 20, 2006. A redemption premium applies
thereafter through May 19, 2009. However, prior to May 20, 2004, AmeriGas
Partners may use the proceeds of a public offering of Common Units to redeem up
to 33% of the 8.875% Senior Notes at 108.875% plus accrued and unpaid interest.
The 10% Senior Notes generally cannot be redeemed at our option prior to their
maturity. The 10.125% Senior Notes are redeemable prior to their maturity date.
A redemption premium applies until April 15, 2004. In November 2001, AmeriGas
Partners prepaid $15 million of 10.125% Senior Notes at a redemption price of
103.375%. AmeriGas Partners may, under certain circumstances following the
disposition of assets or a change of control, be required to offer to prepay the
Senior Notes.

AMERIGAS OLP FIRST MORTGAGE NOTES. AmeriGas OLP's First Mortgage Notes are
collateralized by substantially all of its assets. The General Partner and
Petrolane are co-obligors of the Series A, B, and C First Mortgage Notes, and
the General Partner is co-obligor of the Series D and E First Mortgage Notes.
AmeriGas OLP may prepay the First Mortgage Notes, in whole or in part. These
prepayments include a make whole premium. Following the disposition of assets or
a change of control, AmeriGas OLP may be required to offer to prepay the First
Mortgage Notes, in whole or in part.

AMERIGAS OLP BANK CREDIT AGREEMENT. AmeriGas OLP's Second Amended and Restated
Credit Agreement ("Bank Credit Agreement") consists of (1) a Revolving Credit
Facility and (2) an Acquisition Facility. AmeriGas OLP's obligations under the
Bank Credit Agreement are collateralized by substantially all of its assets. The
General Partner and Petrolane are co-obligors of amounts outstanding under the
Bank Credit Agreement.

         Under the Revolving Credit Facility, AmeriGas OLP may borrow up to $100
million (including a $35 million sublimit for letters of credit) subject to
restrictions in the AmeriGas Partners Senior Notes indentures (see "Restrictive
Covenants" below). The Revolving Credit Facility may be used for working capital
and general purposes of AmeriGas OLP. The Revolving Credit Facility expires
October 1, 2003, but may be extended for additional one-year periods with the
consent of the participating banks representing at least 80% of the commitments
thereunder. AmeriGas OLP had borrowings under the Revolving Credit Facility
totaling $10 million at September 30, 2002, which we classify as bank loans.
There were no borrowings outstanding under the Revolving Credit Facility at
September 30, 2001. Issued and outstanding letters of

                                                                              39

- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 5 continued

credit, which reduce available borrowings under the Revolving Credit Facility,
totaled $19.8 million and $9.5 million at September 30, 2002 and 2001,
respectively.

         The Acquisition Facility provides AmeriGas OLP with the ability to
borrow up to $75 million to finance the purchase of propane businesses or
propane business assets. In addition, up to $30 million of the Acquisition
Facility may be used for working capital purposes. The Acquisition Facility
operates as a revolving facility through October 1, 2003, at which time amounts
then outstanding will be immediately due and payable.

         The Revolving Credit Facility and the Acquisition Facility permit
AmeriGas OLP to borrow at prevailing interest rates, including the base rate,
defined as the higher of the Federal Funds rate plus 0.50% or the agent bank's
prime rate (4.75% at September 30, 2002), or at two-week, one-, two-, three-, or
six-month Eurodollar Rate, as defined in the Bank Credit Agreement, plus a
margin. The margin on Eurodollar Rate borrowings (which ranges from 1.00% to
2.25%), and the Bank Credit Agreement commitment fee rate (which ranges from
0.25% to 0.50%) are dependent upon AmeriGas OLP's ratio of funded debt to
earnings before interest expense, income taxes, depreciation and amortization
("EBITDA"), each as defined in the Bank Credit Agreement. The weighted-average
interest rate on Revolving Credit Facility borrowings at September 30, 2002 was
4.75%. The weighted-average interest rate on Acquisition Facility loans
outstanding at September 30, 2001 was 4.08%. AmeriGas OLP had the ability to
borrow an additional $67.7 million under the Acquisition Facility based upon
eligible propane business and asset expenditures made through September 30,
2002.

GENERAL PARTNER FACILITY. AmeriGas OLP also has a revolving credit agreement
with the General Partner under which it may borrow up to $20 million for working
capital and general purposes. This agreement is coterminous with, and generally
comparable to, AmeriGas OLP's Revolving Credit Facility except that borrowings
under the General Partner Facility are unsecured and subordinated to all senior
debt of AmeriGas OLP. Interest rates on borrowings are based upon one-month
offshore interbank offering rates. Commitment fees are determined in the same
manner as fees under the Revolving Credit Facility. UGI has agreed to contribute
up to $20 million to the General Partner to fund such borrowings.

RESTRICTIVE COVENANTS. The Senior Notes of AmeriGas Partners restrict the
ability of the Partnership to, among other things, incur additional
indebtedness, make investments, incur liens, issue preferred interests, prepay
subordinated indebtedness, and effect mergers, consolidations and sales of
assets. Under the Senior Notes indentures, AmeriGas Partners is generally
permitted to make cash distributions equal to available cash, as defined, as of
the end of the immediately preceding quarter, if certain conditions are met.
These conditions include:

         1.       no event of default exists or would exist upon making such
                  distributions and

         2.       the Partnership's consolidated fixed charge coverage ratio, as
                  defined, is greater than 1.75-to-1.

         If the ratio in item 2 above is less than or equal to 1.75-to-1, the
Partnership may make cash distributions in a total amount not to exceed $24
million less the total amount of distributions made during the immediately
preceding 16 fiscal quarters. At September 30, 2002, such ratio was 2.41-to-1.

         The Bank Credit Agreement and the First Mortgage Notes restrict the
incurrence of additional indebtedness and also restrict certain liens,
guarantees, investments, loans and advances, payments, mergers, consolidations,
asset transfers, transactions with affiliates, sales of assets, acquisitions and
other transactions. The Bank Credit Agreement and First Mortgage Notes require
the ratio of total indebtedness, as defined, to EBITDA, as defined (calculated
on a rolling four-quarter basis or eight-quarter basis divided by two), to be
less than or equal to 4.75-to-1 with respect to the Bank Credit Agreement and
5.25-to-1 with respect to the First Mortgage Notes. In addition, the Bank Credit
Agreement requires that AmeriGas OLP maintain a ratio of EBITDA to interest
expense, as defined, of at least 2.25-to-1 on a rolling four-quarter basis.
Generally, as long as no default exists or would result, AmeriGas OLP is
permitted to make cash distributions not more frequently than quarterly in an
amount not to exceed available cash, as defined, for the immediately preceding
calendar quarter. At September 30, 2002, the Partnership was in compliance with
its financial covenants.

UGI UTILITIES

REVOLVING CREDIT AGREEMENTS. At September 30, 2002, UGI Utilities had revolving
credit agreements with four banks providing for borrowings of up to $97 million.
These agreements expire at various dates through September 2005. UGI Utilities
may borrow at various prevailing interest rates, including LIBOR. UGI Utilities
pays quarterly commitment fees on these credit lines. UGI Utilities had
borrowings under these agreements totaling $37.2 million at September 30, 2002
and $57.8 million at September 30, 2001, which we classify as bank loans. The
weighted-average interest rates on UGI Utilities bank loans were 2.35% at
September 30, 2002 and 3.75% at September 30, 2001.

RESTRICTIVE COVENANTS. UGI Utilities' credit agreements have restrictions on
such items as total debt, debt service, and payments for investments. They also
require consolidated tangible net worth of at least $125 million. At September
30, 2002, UGI Utilities was in compliance with its financial covenants.

OTHER

At September 30, 2002, FLAGA's multi-currency acquisition note ("Acquisition
Note") consisted of a $14.5 million U.S. dollar denominated obligation and a
50.5 million euro-denominated obligation. During 2002, a portion of the
euro-denominated acquisition note was converted to a $16.7 million U.S. dollar
denominated obligation. The Acquisition Note bears interest at a rate of 1.25%
over one- to twelve-month euribor rates (as chosen by FLAGA from time to time).
The effective interest rates on the Acquisition Note at September 30, 2002 and
September 30, 2001 were 4.86% and 5.42%, respectively. On or after September 10,
2003, FLAGA may prepay the Acquisition Note, in whole or in part. Prior to March
11, 2005, such prepayments shall be at a premium.

40

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------

         At September 30, 2002, FLAGA has a 15 million euro working capital loan
commitment from a European bank. The working capital facility expires in
September 2003, but may be extended with the bank's consent. Loans under the
working capital facility, as well as borrowings under FLAGA's special purpose
facility, bear interest at market rates. The weighted-average interest rate on
FLAGA's working capital facility at September 30, 2002 was 4.40%. Borrowings
under the euro working capital facility at September 30, 2002 and 2001 totaled
$8.6 million and $10.0 million, respectively, and are classified as bank loans.

         The FLAGA Acquisition Note, special purpose facility and the working
capital facility are subject to guarantees of UGI. In addition, under certain
conditions regarding changes in the credit rating of UGI Utilities' long-term
debt, the lending bank may require UGI to grant additional security or may
accelerate repayment of the debt.

NOTE 6 - INCOME TAXES

Income before income taxes comprises the following:

                                          2002          2001         2000
===========================================================================
                                                           
Domestic                                  $117.2       $103.0       $ 93.4
Foreign                                      6.8         (4.0)        (7.0)
- ---------------------------------------------------------------------------
Total income before income taxes          $124.0       $ 99.0       $ 86.4
- ---------------------------------------------------------------------------

The provisions for income taxes consist of the following:

                                                2002        2001        2000
=============================================================================
                                                               
Current expense:
   Federal                                      $26.5        $39.2      $28.6
   State                                          9.3         11.7        8.3
   Foreign                                        0.1            -          -
- ------------------------------------------------------------------------------
   Total current expense                         35.9        50.9        36.9
Deferred (benefit) expense:
   Federal                                       11.8        (2.9)       5.7
   State                                         (0.4)       (1.2)       (0.2)
   Foreign                                          -        (1.0)       (1.9)
   Investment tax credit amortization            (0.4)       (0.4)       (0.4)
- ------------------------------------------------------------------------------
   Total deferred (benefit) expense              11.0        (5.5)        3.2
- ------------------------------------------------------------------------------
Total income tax expense                        $46.9       $45.4       $40.1
- ------------------------------------------------------------------------------

    A reconciliation from the statutory federal tax rate to our effective tax
rate is as follows:

                                         2002           2001            2000
=============================================================================
                                                               
Statutory federal tax rate               35.0%          35.0%           35.0%
Difference in tax rate due to:
   State income taxes, net of federal     5.3            7.3             7.5
   Goodwill amortization                    -            4.4             5.8
Other, net                               (2.5)          (0.8)           (1.9)
- ------------------------------------------------------------------------------
Effective tax rate                       37.8%          45.9%           46.4%
- ------------------------------------------------------------------------------

    Deferred tax liabilities (assets) comprise the following at September 30:

                                                             2002         2001
================================================================================
                                                                   
Excess book basis over tax basis of property, plant
   and equipment                                            $199.2       $180.3
Regulatory assets                                             23.7         23.3
Pension plan asset                                            10.5          8.9
Other                                                         17.0         12.6
- ------------------------------------------------------------------------------
Gross deferred tax liabilities                               250.4        225.1
- ------------------------------------------------------------------------------
Self-insured property and casualty liability                  (9.0)        (8.2)
Employee-related benefits                                    (16.2)       (14.5)
Premium on long-term debt                                     (2.5)        (3.2)
Deferred investment tax credits                               (3.5)        (3.6)
Hearth USA(TM)shut-down costs                                    -         (3.3)
Accumulated other comprehensive loss                             -         (9.7)
Operating loss carryforwards                                 (13.3)        (8.9)
Allowance for doubtful accounts                               (2.4)        (3.2)
Other                                                        (15.6)       (15.1)
- ------------------------------------------------------------------------------
Gross deferred tax assets                                    (62.5)       (69.7)
- ------------------------------------------------------------------------------
Deferred tax assets valuation allowance                        1.9          1.8
- ------------------------------------------------------------------------------
Net deferred tax liabilities                                $189.8       $157.2
- ------------------------------------------------------------------------------

         Deferred income taxes of approximately $1.9 million have not been
provided on the excess of book basis over tax basis of our equity investment in
AGZ Holdings because the Company has no present intent to dispose of this
investment.

         UGI Utilities had recorded deferred tax liabilities of approximately
$35.5 million as of September 30, 2002 and $33.9 million as of September 30,
2001, pertaining to utility temporary differences, principally a result of
accelerated tax depreciation, the tax benefits of which previously were or will
be flowed through to ratepayers. These deferred tax liabilities have been
reduced by deferred tax assets of $3.5 million at September 30, 2002 and $3.6
million at September 30, 2001, pertaining to utility deferred investment tax
credits. UGI Utilities had recorded regulatory income tax assets related to
these net deferred taxes of $54.7 million as of September 30, 2002 and $51.8
million as of September 30, 2001. These regulatory income tax assets represent
future revenues expected to be recovered through the ratemaking process. We will
recognize this regulatory income tax asset in deferred tax expense as the
corresponding temporary differences reverse and additional income taxes are
incurred.

         Foreign net operating loss carryforwards of FLAGA totaled approximately
$33.0 million, $5.1 million of which expires through 2007 and $27.9 million of
which has no expiration date. At September 30, 2002, deferred tax assets
relating to operating loss carryforwards include those of FLAGA and $2.3 million
of deferred tax assets associated with state net operating loss carryforwards
expiring through 2022. Substantially all of our deferred tax valuation
allowances relate to state operating loss carryforwards.

NOTE 7 - EMPLOYEE RETIREMENT PLANS

DEFINED BENEFIT PENSION AND OTHER POSTRETIREMENT PLANS. We sponsor a defined
benefit pension plan ("UGI Utilities Pension Plan") for employees of UGI, UGI
Utilities, and certain of UGI's other wholly

41

- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 7 continued

owned subsidiaries. In addition, we provide postretirement health care benefits
to certain retirees and a limited number of active employees meeting certain age
and service requirements, and postretirement life insurance benefits to nearly
all domestic active and retired employees.

         The following provides a reconciliation of benefit obligations, plan
assets, and funded status of these plans as of September 30:

                                                       Pension            Other Postretirement
                                                      Benefits                   Benefits
                                                  -----------------       --------------------
                                                  2002        2001         2002       2001
==============================================================================================
                                                                         
CHANGE IN BENEFIT OBLIGATIONS:

   Benefit obligations - beginning of year        $165.2      $150.9     $   21.3    $  19.7
   Service cost                                      3.6         3.1          0.1        0.1
   Interest cost                                    12.5        12.1          1.7        1.6
   Plan amendments                                   0.4           -            -          -
   Actuarial loss                                   18.6         7.9          5.8        1.8
   Benefits paid                                    (9.4)       (8.8)        (1.6)      (1.9)
- ----------------------------------------------------------------------------------------------
  Benefit obligations - end of year               $190.9      $165.2      $   27.3    $ 21.3
- ----------------------------------------------------------------------------------------------

CHANGE IN PLAN ASSETS:
   Fair value of plan assets -
     beginning of year                            $183.7      $223.5      $    7.0    $  6.4
   Actual return on plan assets                     (8.3)      (31.0)          0.1       0.2
   Employer contributions                              -           -           2.3       2.2
   Benefits paid                                    (9.3)       (8.8)         (1.6)     (1.8)
- ----------------------------------------------------------------------------------------------
   Fair value of plan assets - end of year        $166.1      $183.7      $    7.8    $  7.0
- ----------------------------------------------------------------------------------------------
Funded status of the plans                        $(24.8)     $ 18.5      $  (19.5)   $(14.3)
Unrecognized net actuarial (gain) loss              50.2         4.2           4.7      (1.4)
Unrecognized prior service cost                      3.0         3.3             -         -
Unrecognized net transition (asset)
   obligation                                       (3.0)       (4.6)          8.7       9.5
- ----------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost - end of year      $ 25.4      $ 21.4      $   (6.1)   $ (6.2)
- ----------------------------------------------------------------------------------------------

ASSUMPTIONS AS OF SEPTEMBER 30:

Discount rate                                        6.8%        7.7%          6.8%      7.7%
Expected return on plan assets                       9.5%        9.5%          6.0%      6.0%
Rate of increase in salary levels                    4.5%        4.5%          4.5%      4.5%
- ----------------------------------------------------------------------------------------------

         Net periodic pension income and other postretirement benefit costs
include the following components:

                                           Pension                    Other Postretirement
                                           Benefits                       Benefits
                                  -----------------------------     --------------------------
                                    2002         2001      2000      2002      2001      2000
==============================================================================================
                                                                      
Service cost                      $  3.6       $  3.1    $  3.2     $ 0.1     $ 0.1     $ 0.1
Interest cost                       12.5         12.1      11.8       1.7       1.6       1.4
Expected return on assets          (19.1)       (18.9)    (17.0)     (0.3)     (0.3)     (0.3)
Amortization of:
   Transition (asset)
     obligation                     (1.6)        (1.6)     (1.6)      0.9       0.9       0.9
   Prior service cost                0.6          0.6       0.6        -         -         -
   Actuarial gain                      -         (1.2)        -      (0.1)     (0.1)     (0.2)
- ----------------------------------------------------------------------------------------------
Net benefit cost (income)           (4.0)        (5.9)     (3.0)      2.3       2.2       1.9
Change in regulatory
   assets and liabilities              -            -         -       1.2       1.4       1.4
- ----------------------------------------------------------------------------------------------
Net expense (income)              $ (4.0)     $  (5.9)   $ (3.0)    $ 3.5     $ 3.6     $ 3.3
- ----------------------------------------------------------------------------------------------

         UGI Utilities Pension Plan assets are held in trust and consist
principally of equity and fixed income mutual funds and a commingled bond fund.
UGI Common Stock comprised approximately 6% of trust assets at September 30,
2002. Although the UGI Utilities Pension Plan projected benefit obligation
exceeded plan assets at September 30, 2002, plan assets exceeded accumulated
benefit obligations by approximately $7.2 million.

         Pursuant to orders issued by the PUC, UGI Utilities has established a
Voluntary Employees' Beneficiary Association ("VEBA") trust to pay retiree
health care and life insurance benefits and to fund the UGI Utilities'
postretirement benefit liability. UGI Utilities is required to fund its
postretirement benefit obligations by depositing into the VEBA the annual amount
of postretirement benefits costs determined under SFAS No. 106, "Employers
Accounting for Postretirement Benefits Other than Pensions." The difference
between such amounts and amounts included in UGI Utilities' rates is deferred
for future recovery from, or refund to, ratepayers. VEBA investments consist
principally of money market funds.

         The assumed health care cost trend rates are 12.0% for fiscal 2003,
decreasing to 5.5% in fiscal 2010. A one percentage point change in the assumed
health care cost trend rate would change the 2002 postretirement benefit cost
and obligation as follows:

                                                      1% Increase        1% Decrease
====================================================================================
                                                                   
Effect on total service and interest costs               $0.1               $(0.1)
Effect on postretirement benefit obligation              $1.5               $(1.3)
- ------------------------------------------------------------------------------------

         We also sponsor unfunded retirement benefit plans for certain key
employees. At September 30, 2002 and 2001, the projected benefit obligations of
these plans were not material. We recorded expense for these plans of $1.4
million in 2002, $1.2 million in 2001, and $0.9 million in 2000.

DEFINED CONTRIBUTION PLANS. We sponsor 401(k) savings plans for eligible
employees of UGI, UGI Utilities, AmeriGas Propane, HVAC and certain of UGI's
other wholly owned domestic subsidiaries. Generally, participants in these plans
may contribute a portion of their compensation on either a before-tax basis, or
on both a before-tax and after-tax basis. These plans also provide for either
mandatory or discretionary employer matching contributions at various rates. The
cost of benefits under the savings plans totaled $4.5 million in 2002, $6.2
million in 2001, and $5.9 million in 2000.

NOTE 8 - INVENTORIES

Inventories comprise the following at September 30:

                                                      2002      2001
=====================================================================
                                                         
Propane gas                                          $ 40.4    $ 54.8
Utility fuel and gases                                 36.6      45.6
Materials, supplies and other                          32.2      28.2
- ---------------------------------------------------------------------
Total inventories                                    $109.2    $128.6
- ---------------------------------------------------------------------

NOTE 9 - SERIES PREFERRED STOCK

The UGI Series Preferred Stock, including both series subject to and series not
subject to mandatory redemption, has 5,000,000

42

                                              UGI Corporation 2002 Annual Report
- --------------------------------------------------------------------------------

shares authorized for issuance. We had no shares of UGI Series Preferred Stock
outstanding at September 30, 2002 or 2001.

         UGI Utilities Series Preferred Stock, including both series subject to
and series not subject to mandatory redemption, has 2,000,000 shares authorized
for issuance. The holders of shares of UGI Utilities Series Preferred Stock have
the right to elect a majority of UGI Utilities' Board of Directors (without
cumulative voting) if dividend payments on any series are in arrears in an
amount equal to four quarterly dividends. This election right continues until
the arrearage has been cured. We have paid cash dividends at the specified
annual rates on all outstanding UGI Utilities Series Preferred Stock.

         At September 30, 2002 and 2001, UGI Utilities had outstanding 200,000
shares of $7.75 Series cumulative preferred stock. UGI Utilities is required to
establish a sinking fund to redeem on October 1 in each year, commencing October
1, 2004, 10,000 shares of its $7.75 Series at a price of $100 per share. The
$7.75 Series is redeemable, in whole or in part, at the option of UGI Utilities
on or after October 1, 2004, at a price of $100 per share. All outstanding
shares of $7.75 Series are subject to mandatory redemption on October 1, 2009,
at a price of $100 per share.

NOTE 10 - COMMON STOCK AND INCENTIVE STOCK AWARD PLANS

Common Stock share activity for 2000, 2001 and 2002 follows:

                                            Issued            Treasury       Outstanding
========================================================================================
                                                                    
Balance at September 30, 1999               33,198,731        (5,928,338)    27,270,393
Issued:
   Employee and director plans                       -            62,525         62,525
   Dividend reinvestment plan                        -           114,430        114,430
Reacquired                                           -          (453,639)      (453,639)
- ----------------------------------------------------------------------------------------
Balance September 30, 2000                  33,198,731        (6,205,022)    26,993,709
Issued:
   Employee and director plans                       -           241,039        241,039
   Dividend reinvestment plan                        -            98,812         98,812
Reacquired                                           -           (37,163)       (37,163)
- ----------------------------------------------------------------------------------------
Balance September 30, 2001                  33,198,731        (5,902,334)    27,296,397
Issued:
   Employee and director plans                       -           321,863        321,863
   Dividend reinvestment plan                        -            87,062         87,062
Reacquired                                           -            (3,592)        (3,592)
- ----------------------------------------------------------------------------------------
Balance September 30, 2002                  33,198,731        (5,497,001)    27,701,730
- ----------------------------------------------------------------------------------------

STOCK OPTION AND INCENTIVE PLANS. Under UGI's current employee stock option and
incentive plans, we may grant options to acquire shares of Common Stock, or
issue awards of restricted stock, to key employees. The exercise price for
options granted under these plans may not be less than the fair market value on
the grant date. Grants of stock options or awards of restricted stock under
these plans may vest immediately or ratably over a period of years, and stock
options generally can be exercised no later than ten years from the grant date.

         Under the 2000 Stock Incentive Plan ("2000 Incentive Plan"), awards
representing up to 1,100,000 shares of Common Stock may be granted in connection
with stock options and awards of restricted stock. However, awards representing
no more than 500,000 shares of restricted stock may be issued. In addition, the
2000 Incentive Plan provides that both option grants and restricted stock awards
may provide for the crediting of Common Stock dividend equivalents to
participants' accounts. Dividend equivalents will be paid in cash, and such
payments may, at the participants' request, be deferred. Awards of restricted
stock may be settled, at the option of the Company, in shares of Common Stock,
cash, or a combination of Common Stock and cash. The actual number of shares (or
their cash equivalent) ultimately issued, and the actual amount of dividend
equivalents paid, is dependent upon the achievement of objective performance
goals. During 2002 and 2001, the Company made restricted stock awards
representing 169,500 and 110,675 shares, respectively. At September 30, 2002,
awards representing 280,175 shares of restricted stock were outstanding.

         At September 30, 2002, there remained available for grant options to
acquire 111,861 shares of Common Stock under the 1997 Stock Option and Dividend
Equivalent Plan ("1997 SODEP Plan"). Certain outstanding option grants under the
1997 SODEP Plan provided for the crediting of dividend equivalents subject to
UGI's total shareholder return relative to a peer group of companies during the
three-year period ended December 31, 1999. Based upon such performance, no
dividend equivalent payments were made.

         In addition to the 2000 Incentive Plan and the 1997 SODEP Plan, we have
non-qualified stock option plans under which we may grant options to acquire
shares of Common Stock to key employees other than executive officers of UGI.

         In addition to these employee incentive plans, UGI may grant options to
acquire up to a total of 200,000 shares of Common Stock to each of UGI's
nonemployee Directors. No Director may be granted options to acquire more than
10,000 shares of Common Stock in any calendar year, and the exercise price may
not be less than the fair market value of the Common Stock on the grant date.
Generally, all options will be fully vested on the grant date.

         Stock option transactions under all of our plans for 2000, 2001, and
2002 follow:

                                                  Shares    Average Option Price
================================================================================
                                                      
Shares under option - September 30, 1999         1,215,561       $21.632
- --------------------------------------------------------------------------------
Granted                                            794,750        20.683
Exercised                                          (30,000)       22.625
Forfeited                                          (96,667)       22.302
- --------------------------------------------------------------------------------
Shares under option - September 30, 2000         1,883,644        21.181
- --------------------------------------------------------------------------------
Granted                                             33,600        25.875
Exercised                                         (202,673)       20.807
Forfeited                                          (12,333)       20.828
- --------------------------------------------------------------------------------
Shares under option - September 30, 2001         1,702,238        21.321
- --------------------------------------------------------------------------------
Granted                                            476,250        30.705
Exercised                                         (291,978)       21.028
- --------------------------------------------------------------------------------
Shares under option - September 30, 2002         1,886,510        23.786
- --------------------------------------------------------------------------------
Options exercisable 2000                           947,144        21.696
Options exercisable 2001                         1,100,904        21.799
Options exercisable 2002                         1,137,926        21.772
- --------------------------------------------------------------------------------

                                                                              43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 10 continued

      The following table presents additional information relating to stock
options outstanding and exercisable at September 30, 2002:

                                               Range of exercise prices
                                               ------------------------
                                                           
                                               $    20.00 -     $  30.60 -
                                               $   25.875       $  31.88

                                                        
Options outstanding at September 30, 2002:
  Number of options                             1,410,260      476,250
  Weighted average remaining
    contractual life (in years)                      6.25         9.29
  Weighted average exercise price              $   21.379     $ 30.705

Options exercisable at September 30, 2002:
  Number of options                             1,109,926       28,000
  Weighted average exercise price              $   21.583     $ 30.600

      At September 30, 2002, 1,124,336 shares of Common Stock were available for
future option grants or restricted stock awards under all of our stock option
and incentive plans.

OTHER STOCK-BASED COMPENSATION PLANS AND AWARDS. Under the AmeriGas Propane,
Inc. 2000 Long-Term Incentive Plan ("2000 Propane Plan"), the General Partner
may grant to key employees the right to receive a total of 500,000 AmeriGas
Partners Common Units, or cash equivalent to the fair market value of such
Common Units, upon the achievement of performance goals. In addition, the 2000
Propane Plan may provide for the crediting of Partnership distribution
equivalents to participants' accounts. Distribution equivalents will be paid
in cash and such payments may, at the participants' request, be deferred. The
actual number of Common Units (or their cash equivalent) ultimately issued, and
the actual amount of distribution equivalents paid, is dependent upon the
achievement of performance goals. Generally, each grant, unless paid, will
terminate when the participant ceases to be employed by the General Partner. We
also have a nonexecutive Common Unit plan under which the General Partner may
grant awards of up to a total of 200,000 Common Units to key employees who do
not participate in the 2000 Propane Plan. Generally, awards under the
nonexecutive plan vest at the end of a three-year period and will be paid in
Common Units and cash. The General Partner made awards under the 2000 Propane
Plan and the nonexecutive plan representing 43,250 and 66,075 Common Units in
2002 and 2001, respectively. At September 30, 2002 and 2001, awards representing
105,825 and 65,325 Common Units, respectively, were outstanding.

      Under the 1997 UGI Corporation Directors' Equity Compensation Plan ("1997
Directors' Plan"), we make annual awards to our nonemployee Directors of (1)
"Units," each representing an interest equivalent to one share of Common
Stock, and (2) Common Stock for a portion of their annual retainer. Through
December 31, 2002, Directors may also elect to receive the cash portion of their
retainer fee and all or a portion of their meeting fees in the form of Units.
The 1997 Directors' Plan also provides for the crediting of dividend equivalents
in the form of additional Units. Units and dividend equivalents are fully vested
when credited to a Director's account and will be converted to shares of
Common Stock and paid upon retirement or termination of service. Units issued
relating to annual awards and deferred compensation totaled 9,449, 11,556, and
12,017 in 2002, 2001 and 2000, respectively. At September 30, 2002 and 2001,
there were 63,185 and 53,736 Units, respectively, outstanding.

FAIR VALUE INFORMATION. The per share weighted-average fair value of stock
options granted under our option plans was $4.91 in 2002, $4.35 in 2001, and
$3.76 in 2000. These amounts were determined using the Black-Scholes option
pricing model, which values options based on the stock price at the grant date,
the expected life of the option, the estimated volatility of the stock, expected
dividend payments, and the risk-free interest rate over the expected life of the
option.

      The assumptions we used for option grants during 2002, 2001 and 2000 are
as follows:

                              2002        2001        2000
                              ----        ----        ----
                                           
Expected life of option     6 YEARS     6 years     6 years
Expected volatility           28.8%       29.1%       26.5%
Expected dividend yield        6.7%        6.6%        6.2%
Risk free interest rate        4.7%        5.0%        6.6%

      We use the intrinsic value method prescribed by APB 25 for our stock-based
employee compensation plans. We recognized total stock-based compensation
expense (income) of $5.7 million in 2002, $2.7 million in 2001, and $(0.8)
million in 2000. Stock-based compensation income in 2000 reflects the reversal
of $2.1 million of accrued dividend equivalent payments relating to the 1997
SODEP Plan. If we had determined compensation expense under the fair value
method prescribed by SFAS 123, net income and diluted earnings per share for
2002, 2001 and 2000 would have been as follows:

                                 2002      2001      2000
                                 ----      ----      ----
                                           
Net income:
  As reported                   $75.5     $56.5     $44.7
  Pro forma                      74.5      55.7      44.2
Diluted earnings per share:
  As reported                   $2.70     $2.06     $1.64
  Pro forma                      2.67      2.03      1.62

STOCK OWNERSHIP POLICY. Under the terms of our Stock Ownership Policy,
executives and certain key employees are required to own UGI Common Stock having
a fair value equal to approximately 40% to 450% of their base salaries. Prior to
the enactment of the Sarbanes-Oxley Act of 2002, we offered full recourse,
interest-bearing loans to employees in order to assist them in meeting the
ownership requirements. Each loan may not exceed ten years and is
collateralized by the Common Stock purchased. At September 30, 2002 and 2001,
loans outstanding totaled $3.5 million and $4.6 million, respectively. The
Company is no longer offering loans under this program.

NOTE 11 - PREFERENCE STOCK PURCHASE RIGHTS

Holders of our Common Stock own one-half of one right (as described below) for
each outstanding share of Common Stock. The rights expire in 2006. Each right
entitles the holder to purchase one one-hundredth of a share of First Series
Preference Stock, without par value, at an exercise price of $120 per one
one-hundredth of a share

44

                                              UGI Corporation 2002 Annual Report

or, under the circumstances summarized below, to purchase the Common Stock
described in the following paragraph. The rights are exercisable only if a
person or group, other than certain underwriters:

      1.    acquires 20% or more of our Common Stock ("Acquiring Person") or

      2.    announces or commences a tender offer for 30% or more of our Common
            Stock.

      We are entitled to redeem the rights at five cents per right at any time
before the earlier of:

      1.    the expiration of the rights in April 2006 or

      2.    ten days after a person or group has acquired 20% of our Common
            Stock if a majority of continuing Directors concur and, in certain
            circumstances, thereafter.

      Each holder of a right, other than an Acquiring Person, is entitled to
purchase, at the exercise price of the right, Common Stock having a market value
of twice the exercise price of the right if:

      1.    an Acquiring Person merges with UGI or engages in certain other
            transactions with us or

      2.    a person acquires 40% or more of our Common Stock.

      In addition, if, after UGI (or an Acquiring Person) publicly announces
that an Acquiring Person has become such, UGI engages in a merger or other
business combination transaction in which:

      1.    we are not the surviving corporation, or

      2.    we are the surviving corporation, but our Common Stock is changed or
            exchanged, or

      3.    50% or more of our assets or earning power is sold or transferred,
            then each holder of a right is entitled to purchase, at the exercise
            price of the right, common stock of the acquiring company having a
            market value of twice the exercise price of the right.

      The rights have no voting or dividend rights and, until exercisable,
have no dilutive effect on our earnings.

NOTE 12 - PARTNERSHIP DISTRIBUTIONS

The Partnership makes distributions to its partners approximately 45 days after
the end of each fiscal quarter in a total amount equal to its Available Cash for
such quarter. Available Cash generally means:

      1.    all cash on hand at the end of such quarter,

      2.    plus all additional cash on hand as of the date of determination
            resulting from borrowings after the end of such quarter,

      3.    less the amount of cash reserves established by the General Partner
            in its reasonable discretion.

      The General Partner may establish reserves for the proper conduct of the
Partnership's business and for distributions during the next four quarters. In
addition, certain of the Partnership's debt agreements require reserves be
established for the payment of debt principal and interest.

      Distributions of Available Cash have generally been made 98% to Common and
Subordinated unitholders and 2% to the General Partner. The Partnership may pay
an incentive distribution if Available Cash exceeds the Minimum Quarterly
Distribution of $0.55 ("MQD") on all units. If there was sufficient Available
Cash, the holders of Common Units had the right to receive the MQD, plus any
arrearages, before the distribution of Available Cash to holders of Subordinated
Units. Common Units will not accrue arrearages for any quarter after all the
remaining Subordinated Units have been converted to Common Units pursuant to the
terms of the Partnership Agreement. Effective November 18, 2002, the remaining
Subordinated Units held by the General Partner as of September 30, 2002 were
converted to Common Units (see Note 18).

NOTE 13 - COMMITMENTS AND CONTINGENCIES

We lease various buildings and transportation, computer, and office equipment
under operating leases. Certain of our leases contain renewal and purchase
options and also contain escalation clauses. Our aggregate rental expense for
such leases was $46.5 million in 2002, $38.4 million in 2001, and $34.1 million
in 2000.

      Minimum future payments under operating leases that have initial or
remaining noncancelable terms in excess of one year are as follows:

                                                                                        After
                             2003        2004        2005        2006        2007        2007
                             ----        ----        ----        ----        ----        ----
                                                                    
AmeriGas Propane          $  35.0     $  29.5     $  25.4     $  20.9     $  16.8     $  41.2
UGI Utilities                 2.8         2.6         2.1         1.8         1.6         4.0
International Propane
  and other                   1.1         0.7         0.4         0.2          --          --
                          -------     -------     -------     -------     -------     -------
Total                     $  38.9     $  32.8     $  27.9     $  22.9     $  18.4     $  45.2

      Gas Utility has gas supply agreements with producers and marketers with
terms of less than one year. Gas Utility also has agreements for firm pipeline
transportation and storage capacity, which Gas Utility may terminate at various
dates through 2015. Gas Utility's costs associated with transportation and
storage capacity agreements are included in its annual PGC filing with the PUC
and are recoverable through PGC rates. In addition, Gas Utility has short-term
gas supply agreements which permit it to purchase certain of its gas supply
needs on a firm or interruptible basis at spot-market prices.

      Electric Utility purchases its capacity requirements and electric energy
needs under contracts with various suppliers and on the spot market. Contracts
with producers for capacity and energy needs expire at various dates through
December 2006.

      Energy Services enters into fixed price contracts with suppliers to
purchase natural gas to meet its sales commitments. Generally, these contracts
have terms of less than two years.

      The following table presents contractual obligations under Gas Utility,
Electric Utility and Energy Services supply contracts existing at September
30, 2002:

                                                                     After
                        2003      2004     2005     2006     2007     2007
                        ----      ----     ----     ----     ----     ----
                                                   
Gas and electric
  supply contracts     $106.4    $ 96.5    $56.9    $23.3    $14.9    $92.4
Energy Services
  supply contracts      145.8      11.7       --       --       --       --
                       ------    ------    -----    -----    -----    -----
Total                  $252.2    $108.2    $56.9    $23.3    $14.9    $92.4

      The Partnership also enters into contracts to purchase propane to meet a
portion of its supply requirements. Generally, these contracts are one- or
two-year agreements subject to annual review

                                                                              45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 13 continued

and call for payment based on either fixed prices or market prices at date of
delivery.

      The Partnership has succeeded to certain lease guarantee obligations of
Petrolane relating to Petrolane's divestiture of non-propane operations before
its 1989 acquisition by QFB Partners. Future lease payments under these leases
total approximately $20 million at September 30, 2002. The leases expire through
2010 and some of them are currently in default. The Partnership has succeeded to
the indemnity agreement of Petrolane by which Texas Eastern Corporation ("Texas
Eastern"), a prior owner of Petrolane, agreed to indemnify Petrolane against any
liabilities arising out of the conduct of businesses that do not relate to, and
are not a part of, the propane business, including lease guarantees. In December
1999, Texas Eastern filed for dissolution under the Delaware General Corporation
Law. In May 2001, Petrolane filed a declaratory judgment action in the Delaware
Chancery Court seeking confirmation of Texas Eastern's indemnification
obligations and judicial supervision of Texas Eastern's dissolution to ensure
that its indemnification obligations to Petrolane are paid or adequately
provided for in accordance with law. Those proceedings are pending. In a
Liquidation and Winding Up Agreement dated September 17, 2002, PanEnergy
Corporation ("PanEnergy"), Texas Eastern's sole stockholder, agreed to assume
all of Texas Eastern's liabilities as of December 20, 2002, to the extent of the
value of Texas Eastern's assets transferred to PanEnergy as of that date (which
is expected to exceed $94 million), and to the extent that such liabilities
arise within ten years from Texas Eastern's date of dissolution. Notwithstanding
the dissolution proceeding, and based on Texas Eastern previously having
satisfied directly defaulted lease obligations without the Partnership's
having to honor its guarantee, we believe that the probability that the
Partnership will be required to directly satisfy the lease obligations subject
to the indemnification agreement is remote.

      Columbia Propane, CPLP, and CPH (collectively, the "Company Parties")
agreed to indemnify the former general partners of National Propane Partners,
L.P. and certain of their affiliates (collectively, "National General
Partners") against certain income tax and other losses that the National General
Partners may sustain as a result of the 1999 acquisition by CPLP of the National
Propane business (the "1999 Acquisition") or its operation of the business
after the 1999 Acquisition.

      CEG has agreed to indemnify AmeriGas Partners, AmeriGas OLP, the General
Partner (collectively, the "Buyer Parties") and the Company Parties against any
losses that they sustain under the 1999 Acquisition Agreement and related
agreements ("Losses"), including claims asserted by the National General
Partners ("National Claims"), to the extent such claims are based on acts or
omissions of CEG or the Company Parties prior to the acquisition of the Columbia
Propane Businesses by AmeriGas OLP on August 21, 2001 (the "2001 Acquisition").
The Buyer Parties have agreed to indemnify CEG against Losses, including
National Claims, to the extent such claims are based on acts or omissions of the
Buyer Parties or the Company Parties after the 2001 Acquisition. The Seller and
Buyer Parties have agreed to apportion certain losses resulting from a National
Claim to the extent such losses result from the 2001 Acquisition itself.

      From the late 1800s through the mid-1900s, UGI Utilities and its former
subsidiaries owned and operated a number of manufactured gas plants ("MGPs")
prior to the general availability of natural gas. Some constituents of coal tars
and other residues of the manufactured gas process are today considered
hazardous substances under the Superfund Law and may be present on the sites of
former MGPs. Between 1882 and 1953, UGI Utilities owned the stock of subsidiary
gas companies in Pennsylvania and elsewhere and also operated the businesses of
some gas companies under agreement. Pursuant to the requirements of the Public
Utility Holding Company Act of 1935, UGI Utilities divested all of its utility
operations other than those which now constitute Gas Utility and Electric
Utility.

      UGI Utilities does not expect its costs for investigation and remediation
of hazardous substances at Pennsylvania MGP sites to be material to its results
of operations because Gas Utility is currently permitted to include in rates,
through future base rate proceedings, prudently incurred remediation costs
associated with such sites. UGI Utilities has been notified of several sites
outside Pennsylvania on which (1) MGPs were formerly operated by it or owned or
operated by its former subsidiaries and (2) either environmental agencies or
private parties are investigating the extent of environmental contamination or
performing environmental remediation. UGI Utilities is currently litigating two
claims against it relating to out-of-state sites.

      Management believes that under applicable law UGI Utilities should not be
liable in those instances in which a former subsidiary operated an MGP. There
could be, however, significant future costs of an uncertain amount associated
with environmental damage caused by MGPs outside Pennsylvania that UGI
Utilities directly operated, or that were owned or operated by former
subsidiaries of UGI Utilities, if a court were to conclude that the subsidiary's
separate corporate form should be disregarded.

      UGI Utilities has filed suit against more than fifty insurance companies
alleging that the defendants breached contracts of insurance by failing to
indemnify UGI Utilities for certain environmental costs. The suit seeks to
recover more than $11 million in such costs. During 2002, 2001 and 2000, UGI
Utilities entered into settlement agreements with several of the insurers and
recorded pretax income of $0.4 million, $0.9 million and $4.5 million,
respectively, which amounts are included in operating and administrative
expenses in the Consolidated Statements of Income.

      In addition to these matters, there are other pending claims and legal
actions arising in the normal course of our businesses. We cannot predict with
certainty the final results of environmental and other matters. However, it is
reasonably possible that some of them could be resolved unfavorably to us. We
believe, after consultation with counsel, that damages or settlements, if any,
recovered by the plaintiffs in such claims or actions will not have a material
adverse effect on our financial position but could be material to our operating
results or cash flows in future periods depending on the nature and timing of
future developments with respect to these matters and the amounts of future
operating results and cash flows.

46

                                              UGI Corporation 2002 Annual Report

NOTE 14 - FINANCIAL INSTRUMENTS

In accordance with its propane price risk management policy, the Partnership
uses derivative instruments, including price swap and option contracts and
contracts for the forward sale of propane, to manage the cost of a portion of
its forecasted purchases of propane and to manage market risk associated with
propane storage inventories. These derivative instruments have been designated
by the Partnership as cash flow or fair value hedges under SFAS 133. The fair
values of these derivative instruments are affected by changes in propane
product prices. In addition to these derivative instruments, the Partnership may
also enter into contracts for the forward purchase of propane as well as
fixed-price supply agreements to manage propane market price risk. These
contracts generally qualify for the normal purchases and normal sales exception
of SFAS 133 and therefore are not adjusted to fair value. FLAGA also uses
derivative instruments, principally price swap contracts, to reduce market risk
associated with purchases of propane. These contracts may or may not qualify for
hedge accounting under SFAS 133.

      Energy Services uses exchange-traded natural gas futures contracts to
manage market risk associated with forecasted purchases of natural gas it sells
under firm commitments. These derivative instruments are designated as cash flow
hedges. The fair values of these futures contracts are affected by changes in
natural gas prices.

      In addition, we have, on occasion, used a managed program of derivative
instruments including natural gas and oil futures contracts, to preserve gross
margin associated with certain of our natural gas customers. These contracts
are generally designated as cash flow hedges.

      Gas Utility and Electric Utility are parties to a number of contracts
that have elements of a derivative instrument. These contracts include, among
others, binding purchase orders, contracts which provide for the delivery of
natural gas, and service contracts that require the counterparty to provide
commodity storage, transportation or capacity service to meet our normal sales
commitments. Although many of these contracts have the requisite elements of
a derivative instrument, these contracts are not subject to the accounting
requirements of SFAS 133 because they provide for the delivery of products or
services in quantities that are expected to be used in the normal course of
operating our business or the value of the contract is directly associated with
the price or value of a service.

      On occasion, we enter into interest rate protection agreements ("IRPAs")
to reduce market interest rate risk associated with forecasted debt issuances.
We designate these IRPAs as cash flow hedges. Gains or losses on IRPAs are
included in other comprehensive income and are reclassified to interest
expense as the interest expense on the associated debt issue affects earnings.

      During the year ended September 30, 2002, the net pre-tax loss recognized
in earnings representing cash flow hedge ineffectiveness was $2.1 million.
During the year ended September 30, 2001, such gain or loss was not material.
The amount of cash flow hedge gains reclassified to net income because it became
probable that the original forecasted transactions would not occur was $1.0
million in 2001. This amount is included in other income.

      Gains and losses included in accumulated other comprehensive income at
September 30, 2002 relating to cash flow hedges will be reclassified into (1)
cost of sales when the forecasted purchase of propane or natural gas subject to
the hedges impacts net income and (2) interest expense when interest on
anticipated issuances of fixed-rate long-term debt is reflected in net income.
Included in accumulated other comprehensive income at September 30, 2002 are net
after-tax losses of approximately $3.8 million from IRPAs associated with
forecasted issuances of debt generally anticipated to occur during the next two
years. The amount of this net loss which is expected to be reclassified into net
income during the next twelve months is not material. Also included in
accumulated other comprehensive income at September 30, 2002 are net after-tax
gains of approximately $7.0 million principally associated with future purchases
of natural gas or propane generally anticipated to occur during the next twelve
months. The actual amount of gains or losses on unsettled derivative instruments
that ultimately is reclassified into net income will depend upon the value of
such derivative contracts when settled. The fair value of derivative instruments
is included in other current assets, other current liabilities and other
noncurrent liabilities in the Consolidated Balance Sheets.

      The carrying amounts of financial instruments included in current assets
and current liabilities (excluding unsettled derivative instruments and current
maturities of long-term debt) approximate their fair values because of their
short-term nature. The carrying amounts and estimated fair values of our
remaining financial instruments (including unsettled derivative instruments)
at September 30 are as follows:

                                             Carrying    Estimated
                                              Amount     Fair Value
                                              ------     ----------
                                                   
2002:
  Natural gas futures contracts              $    5.1    $    5.1
  Propane swap and option contracts               9.8         9.8
  Interest rate protection agreements            (4.0)       (4.0)
  Long-term debt                              1,275.7     1,328.1
  UGI Utilities Series Preferred Stock           20.0        20.4

2001:
  Natural gas futures contracts              $   (1.5)   $   (1.5)
  Propane swap, option and forward sales        (10.5)      (10.5)
    contracts
  Interest rate protection agreements            (3.0)       (3.0)
  Available for sale securities                  18.3        18.3
  Long-term debt                              1,295.2     1,386.5
  UGI Utilities Series Preferred Stock           20.0        21.4

      We estimate the fair value of long-term debt by using current market
prices and by discounting future cash flows using rates available for similar
type debt. The estimated fair value of UGI Utilities Series Preferred Stock is
based on the fair value of redeemable preferred stock with similar credit
ratings and redemption features. Fair values of derivative instruments reflect
the estimated amounts that we would receive or pay to terminate the contracts at
the reporting date based upon quoted market prices of comparable contracts at
September 30, 2002 and 2001.

                                                                              47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

Note 14 continued

      We have financial instruments such as short-term investments and trade
accounts receivable, which could expose us to concentrations of credit risk.
We limit our credit risk from short-term investments by investing only in
investment-grade commercial paper and in U.S. Government securities. The credit
risk from trade accounts receivable is limited because we have a large customer
base, which extends across many different U.S. markets. We attempt to minimize
our credit risk associated with our derivative financial instruments through the
application of credit policies.

NOTE 15 - ENERGY SERVICES ACCOUNTS RECEIVABLE SECURITIZATION FACILITY

Energy Services has a receivables purchase facility ("Receivables Facility")
with an issuer of receivables-backed commercial paper expiring November 30,
2004. Under the Receivables Facility, Energy Services transfers, on an ongoing
basis and without recourse, its trade accounts receivable to its wholly owned,
special purpose, bankruptcy-remote subsidiary, Energy Services Funding
Corporation ("ESFC") which is consolidated for financial statement purposes.
ESFC, in turn, has sold, and subject to certain conditions, may from time to
time sell, an undivided interest in these receivables for up to $50 million in
proceeds to a commercial paper conduit of a major bank. The proceeds of these
sales are less than the face amount of the accounts receivable sold by an amount
that approximates the purchaser's financing cost of issuing its own
receivables-backed commercial paper. ESFC was created and has been structured
to isolate its assets from creditors of Energy Services and its affiliates,
including UGI. In accordance with a servicing arrangement, Energy Services
continues to service, administer and collect trade receivables on behalf of
the commercial paper issuer and ESFC. This two-step transaction is accounted
for as a sale of receivables following the provisions of SFAS No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities."

      During 2002, Energy Services sold $302.4 million of trade receivables to
ESFC of which ESFC sold an aggregate $34.0 million to the commercial paper
conduit. At September 30, 2002, no receivables had been sold to the commercial
paper conduit and removed from the balance sheet. Losses on sales of receivables
to the commercial paper conduit that occurred during the year ended September
30, 2002, which losses are included in other income, net, were $0.1 million.

NOTE 16 - PROVISION FOR SHUT-DOWN COSTS - HEARTH USA(TM)

In September 2001, after evaluating the prospects for Hearth USA(TM) in light of
the weak retail environment and the capital required to expand beyond its
two-store pilot phase, we committed to close both of its stores and cease all
operations by the end of October 2001. Hearth USA(TM) sold, installed and
serviced hearth, grill and spa products and sold related accessories from two
superstores located in Rockville, Maryland and Springfield, Virginia. As a
result of this action, in September 2001 we recorded a pre-tax charge of $8.5
million. The pre-tax charge reflects $3.7 million associated with the impairment
of leasehold improvements; $3.2 million for estimated costs associated with
lease guaranty arrangements and the restoration of the leased facilities; $1.1
million associated with the write-down of inventory to net realizable value; and
$0.5 million associated with vehicle lease, severance and other costs directly
resulting from the decision to close the stores. These charges and accrued costs
have been reflected in the 2001 Consolidated Statement of Income as "Provision
for shut-down costs - Hearth USA(TM)." As of September 30, 2001, the $3.7
million of costs associated with lease guaranty arrangements, the restoration
of the leased facility and the vehicle lease, severance and other costs is
included in other current liabilities in the Consolidated Balance Sheet. At
September 30, 2002, all amounts had been settled.

NOTE 17 - OTHER INCOME, NET

Other income, net, comprises the following:

                                                   2002         2001         2000
                                                   ----         ----         ----
                                                                 
Interest and interest-related income            $  (3.1)     $  (6.7)     $  (9.3)
Utility non-tariff service income                  (5.7)        (5.4)        (3.2)
Gain on sales of fixed assets                      (1.6)        (2.4)        (3.6)
Pension income                                     (3.9)        (5.9)        (3.0)
Other                                              (3.1)        (2.6)        (8.7)
                                                -------      -------      -------
Total other income, net                         $ (17.4)     $ (23.0)     $ (27.8)
                                                -------      -------      -------

NOTE 18 - SUBSEQUENT EVENT

Pursuant to the Partnership Agreement, the 9,891,072 Subordinated Units
outstanding as of September 30, 2002, all of which are held by the General
Partner, were eligible to convert to Common Units on the first day after the
record date for any quarter ending on or after March 31, 2000 in respect of
which:

      1.    distributions of Available Cash from Operating Surplus (as defined
            in the Partnership Agreement) equal or exceed the MQD on each of the
            outstanding Common and Subordinated units for each of the four
            consecutive nonoverlapping four-quarter periods immediately
            preceding such date,

      2.    the Adjusted Operating Surplus (as defined in the Partnership
            Agreement) generated during both (i) each of the two immediately
            preceding nonoverlapping four-quarter periods and (ii) the
            immediately preceding sixteen-quarter period, equals or exceeds the
            MQD on each of the Common and Subordinated units outstanding during
            those periods, and

      3.    there are no arrearages on the Common Units.

      In December 2002, the General Partner determined that the cash-based
performance and distribution requirements had been met in respect of the quarter
ended September 30, 2002. As a result, the remaining 9,891,072 Subordinated
Units held by the Company were converted to Common Units effective November

48

                                              UGI Corporation 2002 Annual Report

18, 2002. Concurrent with the Subordinated Unit conversion, the Company recorded
an increase in common stockholders' equity and a decrease in minority interest
of approximately $160 million associated with gains from sales of Common Units
by AmeriGas Partners in conjunction with, and subsequent to, the Partnership's
April 19, 1995 initial public offering in accordance with the guidance in SEC
Staff Accounting Bulletin No. 51, "Accounting for Sales of Common Stock by a
Subsidiary." The gains result because the public offering prices of the AmeriGas
Partners Common Units at the dates of their sales exceeded the associated
carrying amount of our investment in the Partnership. No deferred taxes were
recorded relating to this gain due to the Company's intent to hold its
investment in the Partnership indefinitely. The changes to the Company's balance
sheet resulting from the Subordinated Unit conversion had no effect on the
Company's net income or cash flow. The conversion of the Subordinated Units did
not result in an increase in the number of AmeriGas Partners limited partner
units outstanding.

NOTE 19 - INVESTMENTS IN EQUITY INVESTEES

Our principal investments accounted for using the equity method and our
approximate ownership interest in each at September 30, 2002 and 2001 are as
follows:

Company                                       Percentage Ownership
- -------                                       --------------------
                                           
Atlantic Energy                                             50.0%
AGZ Holdings                                                19.5%
China Gas Partners                                          50.0%
Hunlock Creek Energy Ventures                               50.0%

      Income (loss) from our equity investees comprises the following:

                                                   2002        2001         2000
                                                   ----        ----         ----
                                                                
Equity in income (loss) of equity investees     $   6.0     $  (2.1)     $  (0.9)
Interest income on AGZ Bonds                        0.9         0.5           --
Currency gain from redemption of AGZ Bonds          1.6          --           --
                                                -------     -------      -------
Total                                           $   8.5     $  (1.6)     $  (0.9)
                                                -------     -------      -------

      Undistributed net earnings (loss) of our equity investees included in
consolidated retained earnings were $3.6 million and $(2.3) million at September
30, 2002 and 2001, respectively.

      On March 27, 2001, UGI France, Inc. ("UGI France"), a wholly owned
indirect subsidiary of Enterprises, together with Paribas Affaires Industrielles
("PAI") and Medit Mediterranea GPL, S.r.L. ("Medit"), acquired, through AGZ
Holdings ("AGZ"), the stock and certain related assets of Elf Antargaz, S.A.,
one of the largest distributors of liquefied petroleum gas in France (referred
to after the transaction and herein as "Antargaz"). Prior to the transaction,
Antargaz was a subsidiary of Total Fina Elf S.A., a French petroleum and
chemical company. Under the terms of the Shareholders' Funding Agreement among
UGI France, PAI and Medit, we acquired an approximate 19.5% equity interest in
Antargaz; PAI an approximate 68.1% interest; Medit an approximate 9.7%
interest; and certain members of management of Antargaz an approximate 2.7%
interest. PAI is a leading private equity fund manager in Europe and an
affiliate of BNP Paribas, one of Europe's largest commercial and investment
banks. Medit is a supplier of logistics services to the liquefied petroleum gas
industry in Europe, primarily Italy.

      Pursuant to the Shareholders' Funding Agreement, on March 27, 2001, UGI
France made a 29.8 million euro ($26.6 million U.S. dollar equivalent)
investment comprising a 9.8 million euro investment in shares of AGZ and a 20.0
million euro investment in redeemable bonds of AGZ ("AGZ Bonds"). In July 2002,
the Company received $19.3 million in cash from AGZ representing repayment of 18
million euro face value (90%), $17.7 million U.S. dollar equivalent, of the AGZ
Bonds held by the Company, plus accrued interest. This repayment was funded from
the proceeds of an AGZ placement of high-yield debt. Concurrent with the
repayment, the remaining 2.0 million euro (10%) investment in AGZ Bonds was
redeemed in the form of additional shares of AGZ. After these transactions, the
Company continues to hold an approximate 19.5% equity investment in shares of
AGZ. As a result of the redemption of AGZ Bonds, we recorded a pretax currency
transaction gain of $1.6 million. Because we believe we have significant
influence over operating and financial policies of Antargaz due, in part, to our
membership on its Board of Directors, our investment in AGZ shares is accounted
for by the equity method.

      Summarized financial information for AGZ follows:

                                            2002           2001(a)
                                            ----           -------
                                                    
STATEMENT OF INCOME DATA:
Revenues                                  $ 550.6         $ 243.8
                                          -------         -------
Operating income                          $  79.4         $  22.5
Interest, net                               (27.9)          (13.9)
                                          -------         -------
Income before income taxes                $  51.5         $   8.6
Income taxes                              $ (20.7)        $  (5.1)
Net income                                $  29.9         $   2.9
                                          -------         -------
BALANCE SHEET DATA (AT SEPTEMBER 30):
Current assets                            $ 171.5         $ 195.1
Property, plant and equipment, net          259.5           233.8
Goodwill                                    378.8           355.7
Other assets                                116.7            93.3
                                          -------         -------
  Total assets                            $ 926.5         $ 877.9
                                          -------         -------
Current liabilities                       $ 106.1         $ 123.4
Long-term debt                              436.2           458.1
Other liabilities                           292.0           248.3
                                          -------         -------
  Total liabilities                       $ 834.3         $ 829.8
                                          -------         -------
Equity                                    $  92.2         $  48.1
                                          -------         -------

(a) Statement of income data is for the period March 27, 2001 to September 30,
2001. Summarized financial information for AGZ as of September 30, 2001 and for
the period March 27, 2001 to September 30, 2001 was not required to be disclosed
previously, but is being presented for comparative purposes only.

      Summarized financial information for our other equity investments are not
presented because they are not material to our Consolidated Balance Sheets or
Consolidated Statements of Income.

                                                                              49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts and where indicated otherwise)

NOTE 20 - QUARTERLY DATA (UNAUDITED)

                                         December 31,             March 31,            June 30,            September 30,
                                        2001      2000        2002        2001      2002       2001      2002(A)    2001(b)
                                      --------   --------   --------   --------   --------   --------   --------   --------
                                                                                           
Revenues                              $  619.4   $  737.1   $  764.0   $  943.8   $  446.3   $  411.9   $  384.0   $  375.3
Operating income (loss)               $   73.8   $   92.2   $  150.5   $  143.9   $   29.0   $    8.4   $   (0.7)  $  (15.5)
Income (loss) from equity investees   $    3.8   $   (0.2)  $    3.7   $   (1.3)  $    0.7   $     --   $    0.3   $   (0.1)
Income (loss) before changes in
  accounting                          $   24.1   $   27.1   $   54.0   $   45.5   $    4.0   $   (4.3)  $   (6.6)  $  (16.3)
Cumulative effect of accounting
  changes, net (c)                          --        4.5         --         --        --          --         --         --
                                      --------   --------   --------   --------   --------   --------   --------   --------
Net income (loss)                     $   24.1   $   31.6   $   54.0   $   45.5   $    4.0   $   (4.3)  $   (6.6)  $  (16.3)
                                      --------   --------   --------   --------   --------   --------   --------   --------
Earnings (loss) per share:
  Basic:
    Income (loss) before accounting
      changes                         $   0.88   $   1.00   $   1.96   $   1.68   $   0.14   $  (0.16)  $  (0.24)  $  (0.60)
    Cumulative effect of accounting
      changes, net (c)                      --        0.17        --         --        --          --         --         --
                                      --------   --------   --------   --------   --------   --------   --------   --------
    Net income (loss)                 $   0.88   $   1.17   $   1.96   $   1.68   $   0.14   $  (0.16)  $  (0.24)  $  (0.60)
                                      --------   --------   --------   --------   --------   --------   --------   --------
  Diluted:
    Income (loss) before accounting
      changes                         $   0.87   $   1.00   $   1.92   $   1.67   $   0.14   $  (0.16)  $  (0.24)  $  (0.60)
    Cumulative effect of accounting
      changes, net (c)                      --       0.16         --         --        --          --         --         --
                                      --------   --------   --------   --------   --------   --------   --------   --------
    Net income (loss)                 $   0.87   $   1.16   $   1.92   $   1.67   $   0.14   $  (0.16)  $  (0.24)  $  (0.60)
                                      --------   --------   --------   --------   --------   --------   --------   --------

The quarterly data above includes all adjustments (consisting only of normal
recurring adjustments with the exception of those indicated below) that we
consider necessary for a fair presentation. Our quarterly results fluctuate
because of the seasonal nature of our businesses.

(a) Includes euro currency transaction gain resulting from the redemption of AGZ
Bonds which increased income from equity investees by $1.6 million and decreased
net loss by $1.1 million or $0.04 per share.

(b) Includes shut-down costs associated with Hearth USA(TM) which increased
operating loss by $8.5 million and net loss by $5.5 million or $0.20 per share.

(c) Includes the impact of changes in accounting associated with (1) the
Partnership's changes in accounting for tank fee revenue and tank installation
costs, and (2) the Company's adoption of SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities."

NOTE 21 - SEGMENT INFORMATION

We have organized our business units into five reportable segments generally
based upon products sold, geographic location (domestic or international) or
regulatory environment. Our reportable segments are: (1) AmeriGas Propane; (2)
Gas Utility; (3) Electric Operations, comprising Electric Utility and our
electricity generation business; (4) Energy Services; and (5) an international
propane segment comprising FLAGA and our international propane equity
investments ("International Propane").

      AmeriGas Propane derives its revenues principally from the sale of propane
and related equipment and supplies to retail customers from locations in 46
states. Gas Utility's revenues are derived principally from the sale and
distribution of natural gas to customers in eastern and southeastern
Pennsylvania. Electric Operations derives its revenues principally from the sale
and distribution of electricity in two northeastern Pennsylvania counties.
Energy Services revenues are derived from the sale of natural gas and, to a
lesser extent, electricity and fuel oil to customers located primarily in the
Middle Atlantic region. Our International Propane segment's revenues are
derived principally from the distribution of propane to retail customers in
Austria, the Czech Republic and Slovakia.

      The accounting policies of our reportable segments are the same as those
described in Note 1. We evaluate our AmeriGas Propane and International Propane
segments' performance principally based upon earnings before interest expense,
income taxes, depreciation and amortization, minority interests, income from
equity investees and cumulative effect of accounting changes ("EBITDA").
Although we use EBITDA to evaluate segment performance, it should not be
considered as an alternative to cash flow (as a measure of liquidity or ability
to service debt obligations) and is not a measure of performance or financial
condition under accounting principles generally accepted in the United States.
The Company's definition of EBITDA may be different from that used by other
companies. We evaluate the performance of our Gas Utility, Electric Operations
and Energy Services segments principally based upon their earnings before income
taxes.

      No single customer represents more than ten percent of our consolidated
revenues and there are no significant intersegment transactions. In addition,
all of our reportable segments' revenues, other than those of our International
Propane segment, are derived from sources within the United States, and all of
our reportable segments' long-lived assets, other than those of our
International Propane segment, are located in the United States.

50

                                              UGI Corporation 2002 Annual Report

Financial information by reportable business segment follows:

                                                                                  Reportable Segments
                                                                 ------------------------------------------------------
                                                                                                            Inter-
                                                         Elimi-  AmeriGas      Gas      Electric    Energy  national    Corporate &
                                               Total    nations  Propane     Utility   Operations Services  Propane        Other
                                             --------  --------  --------    --------  ---------- --------  --------    -----------
                                                                                                
2002
  Revenues                                   $2,213.7  $   (2.0) $1,307.9    $  404.5   $   86.0  $  332.3  $  46.7     $   38.3
  EBITDA                                     $  346.1  $     --  $  210.7    $   96.1   $   16.4  $   11.9  $    7.1    $    3.9
  Depreciation and amortization                 (93.5)       --     (66.4)      (19.0)      (3.2)     (0.8)     (3.2)       (0.9)
                                             --------  --------  --------    --------   --------  --------  --------    --------
  Operating income                              252.6        --     144.3        77.1       13.2      11.1       3.9         3.0
  Income (loss) from equity investees             8.5        --       0.3          --         --        --       8.3(a)     (0.1)
  Interest expense                             (109.1)       --     (87.8)      (14.2)      (2.4)       --      (4.2)       (0.5)
  Minority interest                             (28.0)       --     (28.0)         --         --        --        --          --
                                             --------  --------  --------    --------   --------  --------  --------    --------
  Income before income taxes                 $  124.0  $     --  $   28.8    $   62.9   $   10.8  $   11.1  $    8.0    $    2.4
  Total assets                               $2,614.4  $  (34.1) $1,492.2    $  689.1   $  109.0  $   57.2  $  141.1    $  159.9
  Capital expenditures                       $   94.7  $     --  $   53.5    $   31.0   $    4.9  $    0.9  $    3.9    $    0.5
  Investments in equity investees            $   35.5  $     --  $    3.4    $     --   $   10.0  $     --  $   22.1    $     --
  Goodwill and excess reorganization value   $  644.9  $     --  $  589.1    $     --   $     --  $     --  $   53.1    $    2.7
                                             ========  ========  ========    ========   ========  ========  ========    ========
2001
  Revenues                                   $2,468.1  $   (2.8) $1,418.4    $  500.8   $   83.9  $  370.7  $   50.9    $   46.2
  EBITDA                                     $  334.2  $   (0.4) $  209.3    $  108.0   $   14.3  $    7.6  $    5.1    $   (9.7)(b)
  Depreciation and amortization                (105.2)       --     (75.5)      (20.2)      (3.6)     (0.3)     (4.3)       (1.3)
                                             --------  --------  --------    --------   --------  --------  --------    --------
  Operating income (loss)                       229.0      (0.4)    133.8        87.8       10.7       7.3       0.8       (11.0)
  Loss from equity investees                     (1.6)       --        --          --         --        --     (1.5)(a)     (0.1)
  Interest expense                             (104.8)      0.4     (80.3)      (16.3)      (2.7)     (0.4)     (4.9)       (0.6)
  Minority interest                             (23.6)       --     (23.6)         --         --        --        --          --
                                             --------  --------  --------    --------   --------  --------  --------    --------
  Income (loss) before income taxes          $   99.0  $     --  $   29.9    $   71.5   $    8.0  $    6.9  $   (5.6)   $  (11.7)
  Total assets                               $2,550.2  $  (43.3) $1,522.3    $  678.9   $  105.5  $   44.7  $  141.2    $  100.9
  Capital expenditures                       $   79.3  $     --  $   39.2(c) $   31.8   $    5.0  $    0.2  $    2.7    $    0.4
  Investments in equity investees            $   44.8  $     --  $    3.2    $     --   $   10.8  $     --  $   30.8(d) $     --
  Goodwill and excess reorganization value   $  641.1  $     --  $  589.0    $     --   $     --  $     --  $   48.6    $    3.5
                                             ========  ========  ========    ========   ========  ========  ========    ========
2000
  Revenues                                   $1,761.7  $   (3.1) $1,120.1    $  359.0   $   77.9  $  146.9  $   50.5    $   10.4
  EBITDA                                     $  289.6  $     --  $  158.6    $  105.3   $   19.6  $    3.0  $    2.8    $    0.3
  Depreciation and amortization                 (97.5)       --     (68.4)      (19.1)      (4.5)     (0.2)     (4.6)       (0.7)
                                             --------  --------  --------    --------   --------  --------  --------    --------
  Operating income (loss)                       192.1        --      90.2        86.2       15.1       2.8      (1.8)       (0.4)
  Loss from equity investees                     (0.9)       --        --          --         --        --      (0.9)         --
  Interest expense                              (98.5)       --     (74.7)      (16.2)      (2.2)       --      (4.8)       (0.6)
  Minority interest                              (6.3)       --      (6.3)         --         --        --        --          --
                                             --------  --------  --------    --------   --------  --------  --------    --------
  Income (loss) before income taxes          $   86.4  $     --  $    9.2    $   70.0   $   12.9  $    2.8  $   (7.5)   $   (1.0)
  Total assets                               $2,275.8  $  (19.0) $1,281.7    $  653.7   $   97.4  $   36.2  $  113.7    $  112.1
  Capital expenditures                       $   71.0  $     --  $   30.4    $   31.7   $    4.7  $    0.1  $    1.8    $    2.3
  Investments in equity investees            $    5.5  $     --  $     --    $     --   $     --  $     --  $    5.5    $     --
  Goodwill and excess reorganization value   $  668.1  $     --  $  615.7    $     --   $     --  $     --  $   47.6    $    4.8
                                             ========  ========  ========    ========   ========  ========  ========    ========

(a) In addition to equity income (loss) of international propane equity
investees (1) 2002 amount includes a currency transaction gain of $1.6 million
from the redemption of AGZ Bonds and $0.9 million of interest income on AGZ
Bonds and (2) 2001 amount includes $0.5 million of interest income on AGZ Bonds.

(b) Includes Hearth USA(TM) shut-down costs of $8.5 million.

(c) Includes capital leases of $1.3 million.

(d) Includes investment in AGZ Bonds of $18.2 million.

                                                                              51

                          UGI CORPORATION SUBSIDIARIES

                                   EXHIBIT 21

                                                                                                STATE OF
SUBSIDIARY                                                                       OWNERSHIP      INCORPORATION
- ----------                                                                       ---------      -------------
                                                                                          
AMERIGAS, INC.                                                                     100%          PA
     FOUR FLAGS DRILLING COMPANY, INC.                                             100%          PA
     AMERIGAS PROPANE, INC. *                                                      100%          PA
         AmeriGas Partners, L.P.                                                    (1)          DE
              AmeriGas Finance Corp.                                               100%          DE
              AmeriGas Propane L.P.                                            98.9899%          DE
                  AmeriGas Eagle Propane, L.P.                                      99%          DE
                           AmeriGas Eagle Parts & Service, Inc.                    100%          PA
                  AmeriGas Propane Parts & Service, Inc.                           100%          PA
                  AmeriGas Eagle Propane, Inc.                                     100%          DE
                           AmeriGas Eagle Holdings, Inc. **                        100%          DE
              AmeriGas Eagle Finance Corp.                                         100%          DE
              AP Eagle Finance Corp.                                               100%          DE
         AmeriGas Technology Group, Inc.                                           100%          PA
         Petrolane Incorporated                                                    100%          PA
ASHTOLA PRODUCTION COMPANY                                                         100%          PA
     UGI ETHANOL DEVELOPMENT CORPORATION                                           100%          PA
NORTHFIELD HOLDING COMPANY                                                         100%          DE
UGI ENTERPRISES, INC.                                                              100%          PA
     CFN ENTERPRISES, INC.                                                         100%          DE
         CF Networks LLC                                                            60%          DE
     EASTFIELD INTERNATIONAL HOLDINGS, INC.                                        100%          DE
                  Flaga GmbH                                                       100%          AUSTRIA
                     Flaga Energievorsorgung                                       100%          GERMANY
                     Flaga Plyn, spol. s r.o.                                      100%          CZECH REPUBLIC
                     Flaga Slovplyn, spol. s r.o.                                  100%          SLOVAKIA
                     Flaga Tech Trade GmbH                                         100%          AUSTRIA
                     Osterreichische Flussiggas-Gesellschaft m.b.H.                 40%          AUSTRIA
                     T.S.G.- Transport - und Speditionsgesellschaft m.b.H.          50%          AUSTRIA
                     G.T.P. Gas Trans Praha spol. s r.o.                            60%          CZECH REPUBLIC
                     GTE Gastrans-Erfurt-GmbH                                       90%          GERMANY
     EUROGAS HOLDINGS, INC.                                                        100%          DE
     UGI ENERGY SERVICES, INC.                                                     100%          PA
     UGI POWER SUPPLY, INC.                                                        100%          PA
     UGI INTERNATIONAL ENTERPRISES, INC.                                           100%          PA
         UGI France, Inc.                                                          100%          DE
     UGI BLACK SEA ENTERPRISES, INC.                                               100%          PA
     UGI INTERNATIONAL (ROMANIA), INC.                                             100%          PA
     UGI ROMANIA, INC.                                                             100%          PA
     UGI INTERNATIONAL (CHINA), INC.                                               100%          DE
     UGI CHINA, INC.                                                               100%          DE
     UGI SOUTHWEST CHINA DEVELOPMENT COMPANY, LLC                                  100%          DE
     HEARTH USA, INC.                                                              100%          DE
     UGI HVAC ENTERPRISES, INC.                                                    100%          DE
     MCHUGH SERVICE COMPANY                                                        100%          PA
UGI PROPERTIES, INC.                                                               100%          PA
UGI UTILITIES, INC.                                                                100%          PA
     UGI DEVELOPMENT COMPANY                                                       100%          PA
               UGID Holding Company                                                100%          DE
               UGI Hunlock Development Company                                     100%          PA
UNITED VALLEY INSURANCE COMPANY                                                    100%          VT

(1)   AmeriGas Propane, Inc. and its subsidiary, Petrolane Incorporated, hold a
      combined 50.6% interest in AmeriGas Partners, L.P. *Sole General Partner
      of each of AmeriGas Partners, L.P. and AmeriGas Propane, L.P. ** Sole
      General Partner of AmeriGas Eagle Propane, L.P.

                                   EXHIBIT 23

                       CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-47319, 33-61722, 333-22305, 333-49080) and Form
S-3 (No. 333-42296) of UGI Corporation of our report dated November 15, 2002,
except as to the conversion of subordinated partnership units described in Note
18 which is as of December 16, 2002, relating to the financial statements and
financial statement schedules, which appears in this Form 10-K.

Philadelphia, Pennsylvania
December 23, 2002

                                                                      EXHIBIT 99

    CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
          RELATING TO A PERIODIC REPORT CONTAINING FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------

      I, Lon R. Greenberg, Chief Executive Officer, and I, Anthony J. Mendicino,
Chief Financial Officer, of UGI Corporation, a Pennsylvania corporation (the
"Company"), hereby certify that:

      (1)   The Company's periodic report on Form 10-K for the period ended
            September 30, 2002 (the "Form 10-K") fully complies with the
            requirements of Section 13(a) of the Securities Exchange Act of
            1934, as amended; and

      (2)   The information contained in the Form 10-K fairly presents, in all
            material respects, the financial condition and results of operations
            of the Company.

                                      * * *

CHIEF EXECUTIVE OFFICER                              CHIEF FINANCIAL OFFICER

Lon R. Greenberg                                     Anthony J. Mendicino
- ---------------------------                          ---------------------------
Lon R. Greenberg                                     Anthony J. Mendicino

Date:  December 20, 2002                             Date:  December 20, 2002