Essential Utilities, Inc. - Regulatory Filings 2006

424B5 1 w21710fe424b5.htm 424B5 AQUA AMERICA e424b5 PAGEBREAK

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Filed Pursuant to Rule 424B5

Registration No. 333-130400

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities	Amount To Be	Maximum Offering	Maximum — Aggregate Offering	Amount of
To Be Registered	Registered (2)	Price Per Share	Price (2)	Registration Fee (3)
Common stock, par
value $0.50 per
share (1)	2,012,500	$ 22.31	$ 44,898,875	$ 4,805

| (1) | Includes associated rights to purchase shares of our Series A Junior Participating
Preferred Stock pursuant to that certain First Amended and Restated Rights Agreement between
us and Equiserve Trust Company, N.A., dated as of February 20, 2004. |
| --- | --- |
| (2) | Includes 262,500 shares of common stock that may be purchased by the underwriters upon the
exercise of the underwriters over-allotment option. |
| (3) | The filing fee for the securities offered hereby has been satisfied by applying, pursuant
to Rule 457(p) promulgated under the Securities Act of 1933, the $6,271 unutilized
registration fee previously paid by us in connection with the Registration Statement we filed
on April 3, 2003 (Registration No. 333-104290), and $1,466 remains available for future
registration fees. No additional fee has been paid with respect to this offering. |

PROSPECTUS SUPPLEMENT (To Prospectus Dated December 16, 2005)

1,750,000 Shares

Aqua America, Inc.

Common Stock

We are offering 1,750,000 shares of our common stock. Our common stock is listed on the New York Stock Exchange and the Philadelphia Stock Exchange under the symbol WTR. The last reported sale price of our common stock on the New York Stock Exchange on June 7, 2006 was $22.31 per share.

Investing in our common stock involves risks. See Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2005 which updates the Risk Factors beginning on page 5 of the accompanying prospectus.

	Per Share	Total
Public offering price	$ 22.310	$ 39,042,500
Underwriting discount	$ 0.814	$ 1,424,500
Proceeds, before expenses, to Aqua America, Inc.	$ 21.496	$ 37,618,000

The underwriters may also purchase up to an additional 262,500 shares of common stock from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus supplement to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares on or about June 12, 2006.

A.G. Edwards Janney Montgomery Scott llc

The date of this prospectus supplement is June 7, 2006.

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TABLE OF CONTENTS


Prospectus Supplement
Forward-Looking Statements	ii
Summary Information	S-1
Use of Proceeds	S-3
Price Range of Common Stock and
Dividends	S-4
Underwriting	S-5
Legal Matters	S-8
Experts	S-8
Prospectus
About this Prospectus	1
Forward-Looking Statements	2
Aqua America, Inc.	4
Risk Factors	5
Use of Proceeds	8
Certain Ratios	8
Description of Capital Stock	9
Description of Depository Shares	12
Description of Debt Securities	12
Description of Common Stock Purchase Contracts and Common Stock
Purchase Units	21
Where You Can Find More Information	22
Legal Matters	23
Experts	23

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IMPORTANT NOTICE ABOUT INFORMATION IN THIS PROSPECTUS SUPPLEMENT

AND THE ACCOMPANYING PROSPECTUS

You should rely only on the information contained in this prospectus supplement, the accompanying prospectus and the documents we have incorporated by reference in the accompanying prospectus. We have not, and the underwriters have not, authorized anyone to provide you with different information. We are not making an offer of the shares of common stock in any jurisdiction where the offer or sale is not permitted. You should not assume that the information provided by this prospectus supplement or the accompanying prospectus or the information we have previously filed with the Securities and Exchange Commission that is incorporated by reference in the accompanying prospectus is accurate as of any date other than their respective dates.

We provide information to you about this offering of shares of our common stock in two parts. The first part is this prospectus supplement, which describes the specific details regarding this offering. The second part is the accompanying prospectus, which provides general information, some of which may not apply to this offering. The accompanying prospectus refers to additional documents we have filed, and may file in the future with the Securities and Exchange Commission, which are incorporated by reference in the accompanying prospectus. For purposes of this offering, references to the accompanying prospectus also refer to the documents incorporated by reference therein, including our Annual Report on Form 10-K for the year ended December 31, 2005 (including portions of our 2005 Annual Report to Shareholders and our definitive Proxy Statement for the 2006 Annual Meeting of Shareholders incorporated by reference therein), our Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, and our Current Reports on Form 8-K filed on March 13, 2006 and May 22, 2006 with the Securities and Exchange Commission prior to the completion of this offering. If information in this prospectus supplement is inconsistent with information in the accompanying prospectus, you should rely on this prospectus supplement.

For purposes of this prospectus supplement and the accompanying prospectus, when we refer to us, we, our, ours, or the Company, we are describing Aqua America, Inc. and its direct and indirect subsidiaries, unless the context suggests otherwise.

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link1 "FORWARD-LOOKING STATEMENTS"

FORWARD-LOOKING STATEMENTS

Certain statements contained, or incorporated by reference, in this prospectus supplement or the accompanying prospectus are 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 made based upon, among other things, our current assumptions, expectations and beliefs concerning future developments and their potential effect on us. These forward-looking statements involve risks, uncertainties and other factors, many of which are outside our control, that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. In some cases you can identify forward-looking statements where statements are preceded by, followed by or include the words believes, expects, anticipates, plans or similar expressions.

Given these uncertainties, you should not place undue reliance on these forward-looking statements. You should read this prospectus supplement, the accompanying prospectus and the documents incorporated by reference in the accompanying prospectus completely and with the understanding that our actual future results may be materially different from what we expect. These forward-looking statements represent our estimates and assumptions only as of the date of the applicable document. Except for our ongoing obligations to disclose material information under the federal securities laws, we may not be obligated to update these forward-looking statements, even though our situation may change in the future. We qualify all of our forward-looking statements by these cautionary statements and those set forth on pages 2 and 3 of the accompanying prospectus.

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link1 "SUMMARY INFORMATION"

SUMMARY INFORMATION

This summary highlights material information contained elsewhere in this prospectus supplement and contained or incorporated by reference in the accompanying prospectus. Because it is a summary, it may not contain all of the information that may be important to you. Before making an investment decision, you should read carefully this entire prospectus supplement, the accompanying prospectus as well as documents incorporated by reference therein. As you read these documents, you should pay particular attention to the information in Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2005 which updates the Risk Factors beginning on page 5 of the accompanying prospectus. Unless otherwise indicated, the information in this prospectus supplement assumes that the underwriters do not exercise their over-allotment option.

Aqua America, Inc.

Aqua America, Inc. is the holding company for regulated utilities providing water or wastewater services to approximately 2.5 million people in Pennsylvania, Ohio, North Carolina, Illinois, Texas, New Jersey, Florida, Indiana, Virginia, Maine, Missouri, New York and South Carolina. Our largest operating subsidiary provides water or wastewater services to approximately one-half of the total number of people we serve, located in the suburban areas north and west of the City of Philadelphia and in 22 other counties in Pennsylvania. Our other subsidiaries provide similar services in 12 other states. In addition, we provide water and wastewater services through operating and maintenance contracts with municipal authorities and other parties close to our operating companies service territories. We are the largest U.S.-based publicly-traded water utility based on number of people served.

Our principal executive office is located at 762 W. Lancaster Avenue, Bryn Mawr, Pennsylvania 19010-3489, and our telephone number is 610-527-8000.

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The Offering

Issuer	Aqua America, Inc.
Securities offered	1,750,000 shares of common stock (and an additional
262,500 shares of common stock if the underwriters exercise
their over-allotment option in full)
Number of shares of common stock to be
outstanding after the
offering	131,383,645 shares (131,646,145 shares if the
underwriters exercise their over-allotment option in full) (1)
Current indicated annual dividend per share	$0.4276 per share
Cash dividends paid since	1944
New York Stock Exchange and Philadelphia
Stock Exchange market
symbol	WTR
Use of proceeds	We intend to use the net proceeds from this offering of
approximately $37.4 million, or $43.1 million if the
underwriters over-allotment option is exercised in full
(after our payment of underwriting discounts and commissions and
offering expenses), to fund our capital expenditure program and
any acquisition opportunities, and for working capital and other
general corporate purposes.
Risk factors	Investing in our common stock involves risks. See the
information in Risk Factors included in our Annual
Report on
Form 10-K for the
year ended December 31, 2005, which updates the Risk
Factors beginning on page 5 of the accompanying
prospectus, for a discussion of factors you should consider
carefully before deciding whether to invest in the shares of
common stock being offered by this prospectus supplement.

(1) The outstanding share information is based upon the number of outstanding shares as of June 2, 2006.

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link1 "USE OF PROCEEDS"

USE OF PROCEEDS

We intend to use the net proceeds from this offering of approximately $37.4 million, or $43.1 million if the underwriters over-allotment option is exercised in full (after our payment of underwriting discounts and commissions and offering expenses), to fund our capital expenditure program and any acquisition opportunities, and for working capital and other general corporate purposes.

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link1 "PRICE RANGE OF COMMON STOCK AND DIVIDENDS"

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

Price Range of Common Stock

The following table shows the high and low intraday sales prices for our common stock as reported on the New York Stock Exchange composite transactions reporting system and the cash dividends per share paid for the periods indicated. Our common stock is listed on the New York Stock Exchange and the Philadelphia Stock Exchange under the symbol WTR.

	Common Stock — High	Low	Dividends
Year Ended December 31, 2004
First Quarter	$ 17.14	$ 15.00	$ .0900
Second Quarter	16.47	14.24	.0900
Third Quarter	16.67	14.18	.0900
Fourth Quarter	18.48	15.58	.0975
Year Ended December 31, 2005
First Quarter	$ 19.37	$ 17.49	$ .0975
Second Quarter	23.24	18.03	.0975
Third Quarter	29.15	21.61	.0975
Fourth Quarter	29.22	22.88	.1069
Year Ended December 31, 2006
First Quarter	$ 29.79	$ 26.50	$ .1069
Second Quarter (through June 7, 2006)	27.82	21.40	.1069

On June 7, 2006, the last reported sale price of our common stock on the New York Stock Exchange was $22.31 per share. As of June 2, 2006, there were approximately 27,825 holders of record of our common stock.

Dividend Policy

On August 2, 2005, our Board of Directors approved a 9.6% increase in our quarterly cash dividend from $0.0975 per share to $0.1069 per share, which increase was effective for our cash dividend paid on December 1, 2005 to shareholders of record on November 17, 2005. This represented an increase in the dividend rate on an annualized basis from $0.3900 per share to $0.4276 per share effective with the December 1, 2005 dividend payment. The increase in the December 1, 2005 dividend was the 15th increase to our dividend payment that the Board approved in the past 14 years. In August 2005, our Board of Directors declared a 4-for-3 common stock split effected in the form of a 33 1 / 3 % stock distribution for all common shares outstanding, to shareholders of record on November 17, 2005. The new shares were distributed on December 1, 2005. The share and per share data, including the dividend, contained in this prospectus supplement have been restated to give effect to the stock split.

We or our predecessor companies have paid dividends each year since 1944. We presently intend to pay quarterly cash dividends in the future on March 1, June 1, September 1 and December 1, subject to our earnings and financial condition, regulatory requirements and such other factors as our Board of Directors may deem relevant.

We offer holders of record of less than 100,000 shares of our common stock the opportunity to reinvest part or all of the dividend payments on their shares of common stock through purchases of original issue common stock without payment of any brokerage commission or service charge through our dividend reinvestment and direct stock purchase plan. The purchase price for original issue shares of common stock purchased through the reinvestment of dividends is 95% of the average of the high and low prices of common stock as reported on the New York Stock Exchange composite transactions reporting system for each of the five trading days immediately preceding the dividend payment date. This plan also permits shareholders and investors to invest up to $250,000 annually in our common stock in the open market through our transfer agent. At June 1, 2006, holders of 16.2% of our outstanding shares of common stock participated in the dividend reinvestment portion of this plan.

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link1 "UNDERWRITING"

UNDERWRITING

We are offering the shares of our common stock described in this prospectus through the underwriters named below. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, each of the underwriters has severally agreed to purchase the number of shares of common stock listed next to its name in the following table:

	Number of
Underwriters	Shares
A.G. Edwards & Sons, Inc.	1,050,000
Janney Montgomery Scott LLC	700,000
Total	1,750,000

The underwriting agreement provides that the underwriters must buy all of the shares if they buy any of them. However, the underwriters are not required to take or pay for the shares covered by the underwriters over-allotment option described below.

Our common stock is offered subject to a number of conditions, including:

| | receipt and acceptance of our common stock by the
underwriters, and |
| --- | --- |
| | the underwriters right to reject orders in whole or in
part. |

In connection with this offering, certain of the underwriters or securities dealers may distribute prospectuses electronically.

Over-allotment Option

We have granted the underwriters an option to buy up to 262,500 additional shares of our common stock. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with this offering. The underwriters have 30 days from the date of this prospectus supplement to exercise this option. If the underwriters exercise this option, they will each purchase additional shares approximately in proportion to the amounts specified in the table above.

Commissions and Discounts

Shares sold by the underwriters to the public will initially be offered at the offering price set forth on the cover of this prospectus supplement. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $0.484 per share from the public offering price. Any of these securities dealers may resell any shares purchased from the underwriters to other brokers or dealers at a discount of up to $0.100 per share from the public offering price. If all the shares are not sold at the public offering price, the representative may change the offering price and the other selling terms. Sales of shares made outside of the United States may be made by affiliates of the underwriters.

The following table shows the per share and total underwriting discounts and commissions we will pay to the underwriters, assuming both no exercise and full exercise of the underwriters option to purchase up to an additional 262,500 shares:

	Per Share	Total — No Exercise	Full Exercise
Underwriting discounts paid by us	$ 0.814	$ 1,424,500	$ 1,638,175

We estimate that the total expenses of this offering payable by us, not including the underwriting discounts and commissions, will be approximately $173,000. In compliance with NASD guidelines, the maximum commission or discount to be received by any NASD member or independent broker-dealer may not exceed 8% of the aggregate amount of the securities offered pursuant to this prospectus and any applicable prospectus supplement.

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Restrictions on Sales of Similar Securities

Each of our executive officers and directors has agreed with the underwriters not to offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or hedge any shares of our common stock or securities convertible into or exchangeable or exercisable for shares of our common stock or publicly disclose the intention to make any such offer, sale, pledge, disposition, or hedge or request the registration for the offer or sale of any of the foregoing (or as to which such person has the right to direct the disposition of), directly or indirectly, except with the prior written consent of A.G. Edwards & Sons, Inc. at its sole discretion, for a period from the date hereof until and including the date that is 90 days after the date of the final prospectus relating to this offering. This consent may be given at any time without public notice. This agreement does not apply to sales by our executive officers and directors of up to 40,000 shares of our common stock in the aggregate that occur more than 30 days after the date of this prospectus supplement, which sales are approved in writing by us, sales to us in connection with the cash-less exercise of options, sales under existing trading plans in accordance with the guidelines specified in Rule 10b5-1 of the Securities Exchange Act of 1934, or entrance into a stock trading plan in accordance with the guidelines specified in Rule 10b5-1 of the Securities Exchange Act of 1934.

We have agreed that we will not issue, offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, hedge or file with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition, hedge or filing, without the prior written consent of A.G. Edwards & Sons, Inc. at its sole discretion, for a period of 60 days after the date of this prospectus supplement. This agreement does not apply to grants of stock options or restricted stock pursuant to the terms of an equity compensation or similar plan in effect on the date of the underwriting agreement, up to 50,000 shares of common stock issued under our acquisition shelf registration statement in connection with acquisitions or the issuance of an unlimited amount of shares of our common stock pursuant to the terms of our dividend reinvestment and direct stock purchase plan and our employee stock purchase plan.

Indemnification and Contribution

We have agreed to indemnify the underwriters and their controlling persons against certain liabilities, including liabilities under the Securities Act of 1933. If we are unable to provide this indemnification, we will contribute to payments the underwriters and their controlling persons may be required to make in respect of those liabilities.

New York Stock Exchange and Philadelphia Stock Exchange Listing

Shares of our common stock are listed on the New York Stock Exchange and Philadelphia Stock Exchange under the symbol WTR.

Other Relationships

The underwriters and their respective affiliates may have from time to time performed and may in the future perform various financial advisory, investment banking and commercial banking services for us and our affiliates, for which they received or will receive reasonable and customary fees and commissions.

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Price Stabilization and Short Positions

In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934.

| | Stabilizing transactions permit the underwriters to purchase the
underlying security so long as the stabilizing bids do not
exceed a specified maximum. |
| --- | --- |
| | Over-allotment involves sales by the underwriters of shares in
excess of the number of shares the underwriters are obligated to
purchase, which creates a syndicate short position. The short
position may be either a covered short position or a naked short
position. In a covered short position, the number of shares
over-allotted by the underwriters is not greater than the number
of shares that they may purchase in the over-allotment option.
In a naked short position, the number of shares involved is
greater than the number of shares in the over-allotment option.
The underwriters may close out any covered short position by
either exercising their over-allotment option and/or purchasing
shares in the open market. |
| | Syndicate covering transactions involve purchases of the common
stock in the open market after the distribution has been
completed in order to cover syndicate short positions. In
determining the source of shares to close out the short
position, the underwriters will consider, among other things,
the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through
the over-allotment option. If the underwriters sell more shares
than could be covered by the over-allotment option, a naked
short position, the position can only be closed out by buying
shares in the open market. A naked short position is more likely
to be created if the underwriters are concerned that there could
be downward pressure on the price of the shares in the open
market after pricing that could adversely affect investors who
purchase in the offering. |
| | Penalty bids permit the representatives to reclaim a selling
concession from a syndicate member when the common stock
originally sold by the syndicate member is purchased in a
stabilizing or syndicate covering transaction to cover syndicate
short positions. |

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result the price of our common stock may be higher than the price that might otherwise exist in the open market. The transactions may be effected on the New York Stock Exchange or otherwise and, if commenced, may be discontinued at any time.

Electronic Distribution

This prospectus supplement and the accompanying prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute this prospectus supplement and the accompanying prospectus electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations. Other than the prospectus supplement and the accompanying prospectus in electronic format, the information on any of these websites and any other information contained on a website maintained by an underwriter or selling group member is not part of this prospectus supplement or the accompanying prospectus.

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link1 "LEGAL MATTERS"

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed upon for us by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania. Certain legal matters in connection with this offering will be passed upon for the underwriters by Davis Polk & Wardwell, New York, New York.

link1 "EXPERTS"

EXPERTS

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PROSPECTUS

AQUA AMERICA, INC.

Common Stock

Preferred Stock

Common Stock Purchase Contracts

Common Stock Purchase Units

Depositary Shares

Debt Securities

This prospectus relates to common stock, preferred stock, common stock purchase contracts, common stock purchase units, depositary shares and debt securities that Aqua America, Inc. may sell from time to time in one or more offerings. This prospectus will allow us to issue securities over time. We will provide a prospectus supplement each time we issue securities, which will inform you about the specific terms of that offering and may also supplement, update or amend information contained in this document. You should read this prospectus and each applicable prospectus supplement carefully before you invest.

Our common stock is listed on the New York Stock Exchange and the Philadelphia Stock Exchange under the symbol WTR. The last reported sale price of our common stock on the New York Stock Exchange on December 15, 2005 was $28.09 per share. We have not yet determined whether any of the other securities that may be offered by this prospectus will be listed on any exchange, inter-dealer quotation system or over-the-counter market. If we decide to seek listing of any such securities upon issuance, the prospectus supplement relating to those securities will disclose the exchange, quotation system or market on which the securities will be listed.

Investing in our securities involves risk. See Risk Factors beginning on page 5 of this prospectus. You should read carefully this document and any applicable prospectus supplement before you invest.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is December 16, 2005.

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TABLE OF CONTENTS

About this prospectus	1
Forward-looking statements	2
Aqua America, Inc.	4
Risk factors	5
Use of proceeds	8
Certain ratios	8
Description of capital stock	9
Description of depository shares	12
Description of debt securities	12
Description of common stock purchase contracts and common stock
purchase units	21
Where you can find more information	22
Legal matters	23
Experts	23

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link1 "About this prospectus"

About this prospectus

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (SEC) using a shelf registration process. Under this shelf process, we may, from time to time, sell common stock, preferred stock, common stock purchase contracts, common stock purchase units, depositary shares and debt securities in one or more offerings. This prospectus provides you with a general description of the securities we may offer. Each time we sell any securities under this prospectus, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement also may add, update or change information contained in this prospectus. You should read this prospectus and the applicable prospectus supplement together with the additional information described below under the heading Where You Can Find More Information before you decide whether to invest in the securities.

The registration statement (including the exhibits) of which this prospectus is a part contains additional information about us and the securities we may offer by this prospectus. Specifically, we have filed certain legal documents that control the terms of the securities offered by this prospectus as exhibits to the registration statement. We will file certain other legal documents that will control the terms of the securities we may offer by this prospectus as exhibits to the registration statement or to reports we file with the SEC. The registration statement and the reports can be read at the SEC Web site or at the SEC offices mentioned under the heading Where You Can Find More Information.

You should rely only upon the information contained in, or incorporated into, this prospectus and the applicable prospectus supplement that contains specific information about the securities we are offering. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this document is accurate only as of the date on the front cover of this document. Our business, financial condition, results of operations and prospects may have changed since that date.

Except as otherwise provided in this prospectus, unless the context otherwise requires, references in this prospectus to we, us and our refer to Aqua America, Inc. and its direct and indirect subsidiaries. In addition, references to Aqua Pennsylvania refer to our wholly-owned subsidiary, Aqua Pennsylvania, Inc., and its subsidiaries. To understand our offering of these securities fully, you should read this entire document carefully, including particularly the Risk Factors section and the documents identified in the section titled Where You Can Find More Information, as well as the applicable prospectus supplement that contains specific information about the securities we are offering.

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Forward-looking statements

Certain statements in this prospectus, or incorporated by reference into this prospectus, are 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 that are made based upon, among other things, our current assumptions, expectations and beliefs concerning future developments and their potential effect on us. These forward-looking statements involve risks, uncertainties and other factors, many of which are outside our control, that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. In some cases you can identify forward-looking statements where statements are preceded by, followed by or include the words believes, expects, anticipates, plans, future, potential or the negative of such terms or similar expressions. Forward-looking statements in this prospectus, or incorporated by reference into this prospectus, include, but are not limited to, statements regarding:

| | projected capital expenditures and
related funding requirements; |
| --- | --- |
| | developments, trends and
consolidation in the water and wastewater utility industries; |
| | dividend payment projections; |
| | opportunities for future
acquisitions, the success of pending acquisitions and the impact
of future acquisitions; |
| | the capacity of our water
supplies, water facilities and wastewater facilities; |
| | the impact of geographic diversity
on our exposure to unusual weather; |
| | our capability to pursue timely
rate increase requests; |
| | our authority to carry on our
business without unduly burdensome restrictions; |
| | our ability to obtain fair market
value for condemned assets; |
| | the impact of fines and penalties; |
| | the development of new services
and technologies by us or our competitors; |
| | the availability of qualified
personnel; |
| | the condition of our assets; |
| | the impact of legal proceedings; |
| | general economic conditions; |
| | acquisition-related costs and
synergies; and |
| | the forward-looking statements
contained under the heading Forward-Looking
Statements in the section entitled Managements
Discussion and Analysis from the portion of our 2004
Annual Report to Shareholders incorporated by reference herein
and made a part hereof. |

Because forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including but not limited to:

| | changes in general economic,
business and financial market conditions; |
| --- | --- |
| | changes in government regulations
and policies, including environmental and public utility
regulations and policies; |

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Forward-looking statements

| | changes in environmental
conditions, including those that result in water use
restrictions; |
| --- | --- |
| | abnormal weather conditions; |
| | changes in capital requirements; |
| | changes in our credit rating; |
| | our ability to integrate
businesses, technologies or services which we may acquire; |
| | our ability to manage the
expansion of our business; |
| | the extent to which we are able to
develop and market new and improved services; |
| | the effect of the loss of major
customers; |
| | our ability to retain the services
of key personnel and to hire qualified personnel as we expand; |
| | unanticipated capital requirements; |
| | increasing difficulties in
obtaining insurance and increased cost of insurance; |
| | cost overruns relating to
improvements or the expansion of our operations; and |
| | civil disturbance or terroristic
threats or acts. |

Given these uncertainties, you should not place undue reliance on these forward-looking statements. You should read this prospectus, the documents that we incorporate by reference into this prospectus and any applicable prospectus supplement completely and with the understanding that our actual future results may be materially different from what we expect. These forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. Except for our ongoing obligations to disclose material information under the federal securities laws, we are not obligated to update these forward-looking statements, even though our situation may change in the future. We qualify all of our forward-looking statements by these cautionary statements.

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Aqua America, Inc.

Aqua America, Inc. (referred to as Aqua America, we or us) is the holding company for regulated utilities providing water or wastewater services to approximately 2.5 million people in Pennsylvania, Ohio, North Carolina, Illinois, Texas, New Jersey, Florida, Indiana, Virginia, Maine, Missouri, New York and South Carolina. Our customer base is diversified among residential, commercial, industrial, other water, wastewater customers and operating contracts and other customers. Residential customers make up the largest component of our customer base, with these customers representing 60% of our total water revenues.

Our largest operating subsidiary, Aqua Pennsylvania, Inc., accounts for approximately 55% of our operating revenues and provides water or wastewater services to approximately one-half of the total number of people we serve, located in the suburban areas north and west of the City of Philadelphia and in 21 other counties in Pennsylvania. Our other subsidiaries provide similar services in 12 other states. In addition, we provide water and wastewater service through operating and maintenance contracts with municipal authorities and other parties close to our operating companies service territories. We are the largest U.S.-based publicly-traded water utility based on number of people served.

We believe that acquisitions will continue to be an important source of growth for us. We have completed 129 acquisitions or other growth ventures during the five years ended November 30, 2005 adding approximately 250,000 customers to our customer base. We are actively exploring other opportunities to expand our utility operations through acquisitions and otherwise.

With more than 50,000 community water systems and approximately 16,000 wastewater systems in the United States, the water industry is the most fragmented of the major utility industries (i.e., the telephone, natural gas, electric and water industries). We believe that there are many potential water and wastewater system acquisition candidates. We believe the factors driving consolidation of these systems are:

	the benefits of economies of scale;
	increasingly stringent
environmental regulations;
	the need for capital
investment; and
	the need for technological and
managerial expertise.

Our principal executive office is located at 762 W. Lancaster Avenue, Bryn Mawr, Pennsylvania 19010-3489, and our telephone number is 610-527-8000. Our Web site may be accessed at www.aquaamerica.com. Neither the contents of our Web site, nor any other Web site that may be accessed from our Web site, is incorporated in or otherwise considered a part of this prospectus.

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link1 "Risk factors"

Risk factors

You should carefully consider the following risk factors and the section entitled Forward-Looking Statements before you decide to buy our securities.

Our business requires significant capital expenditures and the rates we charge our customers are subject to regulation. If we are unable to obtain government approval of our requests for rate increases, or if approved rate increases are untimely or inadequate to cover our investments, our profitability may suffer.

The water utility business is capital intensive. On an annual basis, we spend significant sums for additions to or replacement of property, plant and equipment. Our ability to maintain and meet our financial objectives is dependent upon the rates we charge our customers. These rates are subject to approval by the public utility commissions or similar regulatory bodies in the states in which we operate. We file rate increase requests, from time to time, to recover our investments in utility plant and expenses. Once a rate increase petition is filed with a public utility commission, the ensuing administrative and hearing process may be lengthy and costly. The timing of our rate increase requests are therefore partially dependent upon the estimated cost of the administrative process in relation to the investments and expenses that we hope to recover through the rate increase to the extent approved. We can provide no assurances that any future rate increase request will be approved by the appropriate state public utility commission; and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase.

Our operating costs could be significantly increased in order to comply with new or stricter regulatory standards imposed by federal and state environmental agencies.

Our water and wastewater services are governed by various federal and state environmental protection and health and safety laws and regulations, including the federal Safe Drinking Water Act, the Clean Water Act and similar state laws, and federal and state regulations issued under these laws by the United States Environmental Protection Agency and state environmental regulatory agencies. These laws and regulations establish, among other things, criteria and standards for drinking water and for discharges into the waters of the United States and states. Pursuant to these laws, we are required to obtain various environmental permits from environmental regulatory agencies for our operations. We cannot assure you that we have been or will be at all times in total compliance with these laws, regulations and permits. If we violate or fail to comply with these laws, regulations or permits, we could be fined or otherwise sanctioned by regulators. Environmental laws and regulations are complex and change frequently. These laws, and the enforcement thereof, have tended to become more stringent over time. While we have budgeted for future capital and operating expenditures to maintain compliance with these laws and our permits, it is possible that new or stricter standards could be imposed that will raise our operating costs. Although these costs may be recovered in the form of higher rates, there can be no assurance that the various state public utility commissions or similar regulatory bodies that govern our business would approve rate increases to enable us to recover such costs. In summary, we cannot assure you that our costs of complying with, or discharging liability under, current and future environmental and health and safety laws will not adversely affect our business, results of operations or financial condition.

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Risk factors

Our business is subject to seasonal fluctuations, which could affect demand for our water service and our revenues.

Demand for our water during the warmer months is generally greater than during cooler months due primarily to additional requirements for water in connection with irrigation systems, swimming pools, cooling systems and other outside water use. Throughout the year, and particularly during typically warmer months, demand will vary with temperature and rainfall levels. In the event that temperatures during the typically warmer months are cooler than normal, or if there is more rainfall than normal, the demand for our water may decrease and adversely affect our revenues.

Drought conditions may impact our ability to serve our current and future customers, and may impact our customers use of our water, which may adversely affect our financial condition and results of operations.

We depend on an adequate water supply to meet the present and future demands of our customers. Drought conditions could interfere with our sources of water supply and could adversely affect our ability to supply water in sufficient quantities to our existing and future customers. An interruption in our water supply could have a material adverse effect on our financial condition and results of operations. Moreover, governmental restrictions on water usage during drought conditions may result in a decreased demand for our water, even if our water reserves are sufficient to serve our customers during these drought conditions, which may adversely affect our revenues and earnings.

An important element of our growth strategy is the acquisition of water and wastewater systems. Any pending or future acquisitions we decide to undertake may involve risks.

An important element of our growth strategy is the acquisition and integration of water and wastewater systems in order to broaden our current, and move into new, service areas. We will not be able to acquire other businesses if we cannot identify suitable acquisition opportunities or reach mutually agreeable terms with acquisition candidates. It is our intent, when practical, to integrate any businesses we acquire with our existing operations. The negotiation of potential acquisitions as well as the integration of acquired businesses could require us to incur significant costs and cause diversion of our managements time and resources. Future acquisitions by us could result in:

| | dilutive issuances of our equity
securities; |
| --- | --- |
| | incurrence of debt and contingent
liabilities; |
| | failure to have effective internal
control over financial reporting; |
| | fluctuations in quarterly results;
and |
| | other acquisition-related expenses. |

Some or all of these items could have a material adverse effect on our business and our ability to finance our business and comply with regulatory requirements. The businesses we acquire in the future may not achieve sales and profitability that would justify our investment and any difficulties we encounter in the integration process, including in the integration of controls necessary for internal control and financial reporting, could interfere with our operations, reduce our operating margins and adversely affect our internal controls. In addition, as consolidation becomes more prevalent in the water and wastewater industries, the prices for suitable acquisition candidates may increase to unacceptable levels and limit our ability to grow through acquisitions.

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Risk factors

Contamination to our water supply may result in disruption in our services and litigation which could adversely affect our business, operating results and financial condition.

Our water supplies are subject to contamination, including contamination from the development of naturally-occurring compounds, chemicals in groundwater systems, pollution resulting from man-made sources, such as MtBE, and possible terrorist attacks. In the event that our water supply is contaminated, we may have to interrupt the use of that water supply until we are able to substitute the flow of water from an uncontaminated water source. In addition, we may incur significant costs in order to treat the contaminated source through expansion of our current treatment facilities, or development of new treatment methods. If we are unable to substitute water supply from an uncontaminated water source, or to adequately treat the contaminated water source in a cost-effective manner, there may be an adverse effect on our revenues, operating results and financial condition. The costs we incur to decontaminate a water source or an underground water system could be significant and could adversely affect our business, operating results and financial condition and may not be recoverable in rates. We could also be held liable for consequences arising out of human exposure to hazardous substances in our water supplies or other environmental damage. For example, private plaintiffs have the right to bring personal injury or other toxic tort claims arising from the presence of hazardous substances in our drinking water supplies. Our insurance policies may not be sufficient to cover the costs of these claims.

In addition to the potential pollution of our water supply as described above, in the wake of the September 11, 2001 terrorist attacks and the ensuing threats to the nations health and security, we have taken steps to increase security measures at our facilities and heighten employee awareness of threats to our water supply. We have also tightened our security measures regarding the delivery and handling of certain chemicals used in our business. We have and will continue to bear increased costs for security precautions to protect our facilities, operations and supplies. These costs may be significant. We are currently not aware of any specific threats to our facilities, operations or supplies; however, it is possible that we would not be in a position to control the outcome of terrorist events should they occur.

We depend significantly on the services of the members of our senior management team, and the departure of any of those persons could cause our operating results to suffer.

Our success depends significantly on the continued individual and collective contributions of our management team. The loss of the services of any member of our management team or the inability to hire and retain experienced management personnel could harm our operating results.

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link1 "Use of proceeds"

Use of proceeds

Unless we otherwise specify in the applicable prospectus supplement, we intend to use the net proceeds from the sale of the securities we may offer by this prospectus to fund our capital expenditures, to fund future acquisitions of municipally owned and investor-owned water and wastewater systems, to integrate any businesses that we acquire into our existing business, to purchase and maintain plant equipment, as well as for working capital and other general corporate purposes. Our management will have broad discretion in the allocation of net proceeds from the sale of any securities sold by us.

link1 "Certain ratios"

Certain ratios

Our ratio of earnings to fixed charges and ratio of earnings to combined fixed charges and preferred stock dividends for the periods indicated below were as follows:


September 30,
2005	2004	2003	2002	2001	2000
Ratio of earnings to fixed charges	3.81	3.57	3.46	3.56	3.36	3.02
Ratio of earnings to combined fixed charges and preferred stock
dividends	3.81	3.57	3.46	3.56	3.36	3.02

The ratios of earnings to fixed charges and the ratios of earnings to combined fixed charges and preferred stock dividends were computed by dividing earnings by fixed charges and by combined fixed charges and preferred stock dividends, respectively. For the purpose of these computations, earnings have been calculated by adding fixed charges (excluding capitalized interest) to income before income taxes and minority interest. Fixed charges consist of interest cost, whether expensed or capitalized, amortization of deferred financing costs and the estimated interest portion of rental expense charged to income.

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link1 "Description of capital stock"

Description of capital stock

The following description of our capital stock sets forth material terms and provisions of our common stock and preferred stock. You should read our current amended and restated articles of incorporation for more detailed terms of our capital stock.

As of December 8, 2005, our authorized capital stock was 301,738,619 shares, consisting of:

| | 300,000,000 shares of common
stock, par value $0.50 per share, of which 128,846,270 shares
were outstanding; and |
| --- | --- |
| | 1,738,619 shares of preferred
stock, par value $1.00 per share, of which 100,000 shares have
been designated as Series A Junior Participating Preferred
Stock and reserved for future issuance in connection with our
shareholder rights plan and no shares of preferred stock were
outstanding. |

COMMON STOCK

Voting rights

Holders of our common stock are entitled to one vote for each share held by them at all meetings of the shareholders and are not entitled to cumulate their votes for the election of directors.

Dividend rights and limitations

Holders of our common stock may receive dividends when declared by our board of directors. Because we are a holding company, the funds we use to pay any dividends on our common stock are derived predominantly from the dividends that we receive from our subsidiaries and the dividends they receive from their subsidiaries. Therefore, our ability to pay dividends to holders of our common stock depends upon our subsidiaries earnings, financial condition and ability to pay dividends. Most of our subsidiaries are subject to regulation by state utility commissions and the amounts of their earnings and dividends are affected by the manner in which they are regulated. In addition, they are subject to restrictions on the payment of dividends contained in their various debt agreements. Under our most restrictive debt agreements, the amount available for payment of dividends to us as of September 30, 2005 was approximately $280 million of Aqua Pennsylvanias retained earnings and $66 million of the retained earnings of certain other subsidiaries. Payment of dividends on our common stock is also subject to the preferential rights of the holders of any outstanding preferred stock.

Liquidation rights

In the event that we liquidate, dissolve or wind-up, the holders of our common stock are entitled to share ratably in all of the assets that remain after we pay our liabilities. This right is subject, however, to the prior distribution rights of any outstanding preferred stock.

PREFERRED STOCK

Under our certificate of incorporation, we are authorized to issue up to 1,738,619 shares of preferred stock of which 100,000 shares have been designated and reserved for issuance as Series A Junior Participating Preferred Stock, $1.00 par value per share, in connection with our shareholder rights plan. As of December 8, 2005, no shares of preferred stock were outstanding.

Our board of directors has the authority, from time to time and without further action by our shareholders, to divide our unissued capital stock into one or more classes and one or more series within any class and to make determinations of the designation and number of shares of any class or series and determinations of the voting rights, preferences, limitations and special rights, if any, of the

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shares of any class or series. The rights, preferences, limitations and special rights of different classes of capital stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and other matters. The rights, preferences, privileges and restrictions of each series may be fixed by the designations of that series set forth in either a restated version of the certificate of incorporation or a certificate of designations relating to that series.

The issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control of us without further action by our shareholders. The issuance of preferred stock with voting and conversion rights may also adversely affect the voting power of the holders of our common stock. In certain circumstances, an issuance of preferred stock could have the effect of decreasing the market price of our common stock.

Whenever preferred stock is to be sold pursuant to this prospectus, we will file a prospectus supplement relating to that sale which will specify:

| | the number of shares in the series
of preferred stock; |
| --- | --- |
| | the designation for the series of
preferred stock by number, letter or title that will distinguish
the series from any other series of preferred stock; |
| | the dividend rate, if any, and
whether dividends on that series of preferred stock will be
cumulative, noncumulative or partially cumulative; |
| | the voting rights of that series
of preferred stock, if any; |
| | any conversion provisions
applicable to that series of preferred stock; |
| | any redemption or sinking fund
provisions applicable to that series of preferred stock; |
| | the liquidation preference per
share of that series of preferred stock; and |
| | the terms of any other preferences
or rights, if any, applicable to that series of preferred stock. |

Shareholder rights plan

Pursuant to our shareholders rights plan, current or future holders of our common stock have the right to purchase a fraction of a share of our Series A Junior Participating Preferred Stock for each of outstanding share of common stock held by them. Upon the occurrence of certain events, each right would entitle the holder to purchase from us one one-thousandth of a share of Series A Junior Participating Preferred Stock at an exercise price of $90 per one-thousandth of a share, subject to adjustment. The rights are exercisable in certain circumstances, such as when a person or group acquires 20% or more of our common stock or if the holder of 20% or more of our common stock engages in certain transactions with us. In the latter case, the right to purchase Series A Junior Participating Preferred Stock would be exercisable by each holder, but not the acquiring person, to purchase shares of our common stock at a substantial discount from the market price. Additionally, pursuant to our shareholders rights plan, if, after the date that a person has become the holder of 20% or more of our common stock, any person or group merges with us or engages in certain other transactions with us, each holder of a right, other than the acquirer, will have the right to purchase common stock of the surviving corporation at a substantial discount from the market price. These rights are subject to redemption by us in certain circumstances. These rights have no voting or dividend rights and, until exercisable, cannot trade separately from our common stock and have no dilutive effect on our earnings. This plan expires on March 1, 2008.

Anti-takeover provisions

Pennsylvania State Law Provisions

We are subject to various anti-takeover provisions of the Pennsylvania Business Corporation Law of 1988, as amended. Generally, these provisions are triggered if any person or group acquires, or

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discloses an intent to acquire, 20% or more of a corporations voting power, unless the acquisition is under a registered firm commitment underwriting or, in certain cases, approved by the board of directors. These provisions:

| | provide the other shareholders of
the corporation with certain rights against the acquiring group
or person; |
| --- | --- |
| | prohibit the corporation from
engaging in a broad range of business combinations with the
acquiring group or person; and |
| | restrict the voting and other
rights of the acquiring group or person. |

In addition, as permitted by Pennsylvania law, an amendment to our articles of incorporation or other corporate action that is approved by shareholders may provide mandatory special treatment for specified groups of nonconsenting shareholders of the same class. For example, an amendment to our articles of incorporation or other corporate action may provide that shares of common stock held by designated shareholders of record must be cashed out at a price determined by the corporation, subject to applicable dissenters rights.

Articles of Incorporation and Bylaw Provisions

Certain provisions of our articles of incorporation and bylaws may have the effect of discouraging unilateral tender offers or other attempts to take over and acquire our business. These provisions might discourage some potentially interested purchaser from attempting a unilateral takeover bid for us on terms which some shareholders might favor. Our articles of incorporation require that certain fundamental transactions must be approved by the holders of 75% of the outstanding shares of our capital stock entitled to vote on the matter unless at least 50% of the members of the board of directors has approved the transaction, in which case the required shareholder approval will be the minimum approval required by applicable law. The fundamental transactions that are subject to this provision are those transactions that require approval by shareholders under applicable law or the articles of incorporation. These transactions include certain amendments of our articles of incorporation or bylaws, certain sales or other dispositions of our assets, certain issuances of our capital stock, or certain transactions involving our merger, consolidation, division, reorganization, dissolution, liquidation or winding up. Our articles of incorporation and bylaws provide that:

| | a special meeting of shareholders
may only be called by the chairman, the president, the board of
directors or shareholders entitled to cast a majority of the
votes which all shareholders are entitled to cast at the
particular meeting; |
| --- | --- |
| | nominations for election of
directors may be made by any shareholder entitled to vote for
election of directors if the name of the nominee and certain
information relating to the nominee is filed with our corporate
secretary not less than 14 days nor more than 50 days
before any meeting of shareholders to elect directors; and |
| | certain advance notice procedures
must be met for shareholder proposals to be made at annual
meetings of shareholders. These advance notice procedures
generally require a notice to be delivered not less than
90 days nor more than 120 days before the anniversary
date of the immediately preceding annual meeting of shareholders. |

Transfer agent and registrar

The transfer agent and registrar for our common stock is Computershare, Ltd.

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link1 "Description of depository shares"

Description of depository shares

We may, at our option, offer fractional shares of our preferred stock, rather than whole shares of our preferred stock. In the event we do so, we will issue receipts for depositary shares, each of which will represent a fraction (to be set forth in the prospectus supplement relating to offering of the depositary shares) of a share of the related series of preferred stock.

The shares of our preferred stock represented by depositary shares will be deposited under a deposit agreement between us and a bank or trust company selected by us having its principal office in the United States and having a combined capital and surplus of at least $50,000,000. Subject to the terms of the deposit agreement, each owner of a depositary share will be entitled, in proportion to the applicable fraction of a share of preferred stock, represented by the depositary share to all of the rights and preferences of the preferred stock represented by the depositary shares (including dividend, voting, redemption, conversion and liquidation rights).

The above description of depositary shares is only a summary, is not complete and is subject to, and is qualified in its entirety by the description in the applicable prospectus supplement and the provisions of the deposit agreement, which will contain the form of depository receipt. A copy of the deposit agreement will be filed with the SEC as an exhibit to or incorporated by reference in the registration statement of which this prospectus is a part.

link1 "Description of debt securities"

Description of debt securities

Please note that in this section entitled Description of Debt Securities, references to we, us, ours or our refer only to Aqua America, Inc. and not to its consolidated subsidiaries. Also, in this section, references to holders mean those who own debt securities registered in their own names, on the books that we maintain or the trustee maintains for this purpose, and not those who own beneficial interests in debt securities registered in street name or in debt securities issued in book-entry form through one or more depositaries. Owners of beneficial interests in the debt securities should read the section below entitled Book-Entry Procedures and Settlement.

GENERAL

The debt securities offered by this prospectus will be our unsecured obligations, except as otherwise set forth in an accompanying prospectus supplement, and will be either senior or subordinated debt. We will issue senior debt under a senior debt indenture, and we will issue subordinated debt under a subordinated debt indenture. We sometimes refer to the senior debt indenture and the subordinated debt indenture individually as an indenture and collectively as the indentures. We have filed forms of the indentures with the SEC as exhibits to the registration statement of which this prospectus forms a part. You can obtain copies of the indentures by following the directions outlined in Where You Can Find More Information, or by contacting the applicable indenture trustee.

A form of each debt security, reflecting the particular terms and provisions of a series of offered debt securities, will be filed with the SEC at the time of the offering and incorporated by reference as exhibits to the registration statement of which this prospectus forms a part.

The following briefly summarizes certain material provisions that may be included in the indentures. Other terms, including pricing and related terms, will be disclosed for a particular issuance in an accompanying prospectus supplement. You should read the more detailed provisions of the applicable indenture, including the defined terms, for provisions that may be important to you. You should also read the particular terms of a series of debt securities, which will be described in more detail in an

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accompanying prospectus supplement. So that you may easily locate the more detailed provisions, the numbers in parentheses below refer to sections in the applicable indenture or, if no indenture is specified, to sections in each of the indentures. Wherever particular sections or defined terms of the applicable indenture are referred to, such sections or defined terms are incorporated into this prospectus by reference, and the statement in this prospectus is qualified by that reference.

The trustee under each indenture will be determined at the time of issuance of debt securities, and the name of the trustee will be provided in an accompanying prospectus supplement.

The indentures provide that our senior or subordinated debt securities may be issued in one or more series, with different terms, in each case as we authorize from time to time. We also have the right to reopen a previous issue of a series of debt securities by issuing additional debt securities of such series without the consent of the holders of debt securities of the series being reopened or any other series. Any additional debt securities of the series being reopened will have the same ranking, interest rate, maturity and other terms as the previously issued debt securities of that series. These additional debt securities, together with the previously issued debt securities of that series, will constitute a single series of debt securities under the terms of the applicable indenture.

TYPES OF DEBT SECURITIES

We may issue fixed or floating rate debt securities. Fixed rate debt securities will bear interest at a fixed rate described in the prospectus supplement. This type includes zero coupon debt securities, which bear no interest and are often issued at a price lower than the principal amount. United States federal income tax consequences and other special considerations applicable to any debt securities issued at a discount will be described in the applicable prospectus supplement.

Upon the request of the holder of any floating rate debt security, the calculation agent will provide the interest rate then in effect for that debt security, and, if determined, the interest rate that will become effective on the next interest reset date. The calculation agents determination of any interest rate, and its calculation of the amount of interest for any interest period, will be final and binding in the absence of manifest error.

All percentages resulting from any interest rate calculation relating to a debt security will be rounded upward or downward, as appropriate, to the next higher or lower one hundred-thousandth of a percentage point. All amounts used in or resulting from any calculation relating to a debt security will be rounded upward or downward, as appropriate, to the nearest cent, in the case of U.S. dollars, or to the nearest corresponding hundredth of a unit, in the case of a currency other than U.S. dollars, with one-half cent or one-half of a corresponding hundredth of a unit or more being rounded upward.

In determining the base rate that applies to a floating rate debt security during a particular interest period, the calculation agent may obtain rate quotes from various banks or dealers active in the relevant market, as described in the prospectus supplement. Those reference banks and dealers may include the calculation agent itself and its affiliates, as well as any underwriter, dealer or agent participating in the distribution of the relevant floating rate debt securities and its affiliates.

INFORMATION IN THE PROSPECTUS SUPPLEMENT

The prospectus supplement for any offered series of debt securities will describe the following terms, as applicable:

	the title;
	whether the debt is senior or
subordinated;
	whether the debt securities are
secured or unsecured and, if secured, the collateral securing
the debt;

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	the total principal amount offered;
	the percentage of the principal
amount at which the debt securities will be sold and, if
applicable, the method of determining the price;
	the maturity date or dates;
	whether the debt securities are
fixed rate debt securities or floating rate debt securities;
	if the debt securities are fixed
rate debt securities, the yearly rate at which the debt security
will bear interest, if any, and the interest payment dates;
	if the debt security is an
original issue discount debt security, the yield to maturity;
	if the debt securities are
floating rate debt securities, the interest rate basis; any
applicable index currency or maturity, spread or spread
multiplier or initial, maximum or minimum rate; the interest
reset, determination, calculation and payment dates, and the day
count used to calculate interest payments for any period;
	the date or dates from which any
interest will accrue, or how such date or dates will be
determined, and the interest payment dates and any related
record dates;
	if other than in U.S. dollars, the
currency or currency unit in which payment will be made;
	the denominations in which the
currency or currency unit of the securities will be issuable if
other than denominations of $1,000 and integral multiples
thereof;
	the terms and conditions on which
the debt securities may be redeemed at our option;
	any obligation we may have to
redeem, purchase or repay the debt securities at the option of a
holder upon the happening of any event and the terms and
conditions of redemption, purchase or repayment;
	the names and duties of the
trustee and any co-trustees, depositaries, authenticating
agents, calculation agents, paying agents, transfer agents or
registrars for the debt securities;
	any material provisions of the
applicable indenture described in this prospectus that do not
apply to the debt securities;
	a discussion of United States
federal income tax, accounting and special considerations,
procedures and limitations with respect to the debt securities;
	whether and under what
circumstances we will pay additional amounts to holders in
respect of any tax assessment or government charge, and, if so,
whether we will have the option to redeem the debt securities
rather than pay such additional amounts; and
	any other specific terms of the
debt securities that are consistent with the provisions of the
indenture.

The terms on which a series of debt securities may be convertible into or exchangeable for other of our securities or any other entity will be set forth in the prospectus supplement relating to such series. Such terms will include provisions as to whether conversion or exchange is mandatory, at the option of the holder or at our option. The terms may include provisions pursuant to which the number of other securities to be received by the holders of such series of debt securities may be adjusted.

We will issue the debt securities only in registered form. As currently anticipated, debt securities of a series will trade in book-entry form, and global notes will be issued in physical (paper) form, as described below under Book-Entry Procedures and Settlement. Unless otherwise provided in the

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accompanying prospectus supplement, we will issue debt securities denominated in U.S. dollars and only in denominations of $1,000 and integral multiples thereof.

The prospectus supplement relating to offered debt securities denominated in a foreign or composite currency will specify the denomination of the offered debt securities.

The debt securities may be presented for exchange, and debt securities other than a global security may be presented for registration of transfer, at the principal corporate trust office of the trustee named in the applicable prospectus supplement. Holders will not have to pay any service charge for any registration of transfer or exchange of debt securities, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with such registration of transfer (Section 3.05).

PAYMENT AND PAYING AGENTS

Distributions on the debt securities other than those represented by global notes will be made in the designated currency against surrender of the debt securities at the principal corporate trust office of the trustee named in the applicable prospectus supplement. Payment will be made to the registered holder at the close of business on the record date for such payment. Interest payments will be made at the principal corporate trust office of the trustee named in the applicable prospectus supplement, or by a check mailed to the holder at his registered address. Payments in any other manner will be specified in the applicable prospectus supplement.

CALCULATION AGENTS

Calculations relating to floating rate debt securities and indexed debt securities will be made by the calculation agent, an institution that we appoint as our agent for this purpose. We may appoint one of our affiliates as calculation agent. We may appoint a different institution to serve as calculation agent from time to time after the original issue date of the debt security without your consent and without notifying you of the change. The initial calculation agent will be identified in the applicable prospectus supplement.

SENIOR DEBT

We may issue senior debt securities under the senior debt indenture. Senior debt will rank on a basis equal in priority with all our other debt except our subordinated debt.

SUBORDINATED DEBT

We may issue subordinated debt securities under the subordinated debt indenture. Subordinated debt will rank subordinated and junior in right of payment, to the extent set forth in the subordinated debt indenture, to all our senior debt.

If we default in the payment of any principal of, or premium, if any, or interest on any senior debt when it becomes due and payable after any applicable grace period, then, unless and until the default is cured or waived or ceases to exist, we cannot make a payment on account of or redeem or otherwise acquire the subordinated debt securities.

If there is any insolvency, bankruptcy, liquidation or other similar proceeding relating to us or our property, then all senior debt must be paid in full before any payment may be made to any holders of subordinated debt securities.

Furthermore, if we default in the payment of the principal of and accrued interest on any subordinated debt securities that is declared due and payable upon an event of default under the subordinated debt

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indenture, holders of all our senior debt will first be entitled to receive payment in full in cash before holders of such subordinated debt can receive any payments.

Except as may be otherwise set forth in an accompanying prospectus supplement, senior debt means:

| | the principal, premium, if any,
and interest in respect of indebtedness for money borrowed and
indebtedness evidenced by securities, notes, debentures, bonds
or other similar instruments issued, including, as to us, the
senior debt securities; |
| --- | --- |
| | all capitalized lease obligations; |
| | all obligations representing the
deferred purchase price of property; and |
| | all deferrals, renewals,
extensions and refundings of obligations of the type referred to
above. |

However, senior debt does not include:

	the subordinated debt securities;
	any indebtedness that by its terms
is subordinated to, or ranks in priority on an equal basis with,
subordinated debt securities; and
	items of indebtedness (other than
capitalized lease obligations) that would not appear as
liabilities on a balance sheet prepared in accordance with
accounting principles generally accepted in the United States of
America.

COVENANTS

The accompanying prospectus supplement will contain any covenants applicable to the debt securities.

MODIFICATION OF THE INDENTURES

The indentures will provide that we and the relevant trustee may enter into supplemental indentures to establish the form and terms of any new series of debt securities without obtaining the consent of any holder of debt securities.

We and the trustee may, with the consent of the holders of at least a majority in aggregate outstanding principal amount of the debt securities of a series, modify the applicable indenture or the rights of the holders of the securities of such series.

No such modification may, without the consent of each holder of an affected security:

| | extend the fixed maturity of any
such security; |
| --- | --- |
| | reduce the rate or change the time
of payment of interest on such security; |
| | reduce the principal amount of
such securities or the premium, if any, on such security; |
| | change any obligation of ours to
pay additional amounts with respect to such security; |
| | reduce the amount of the principal
payable on acceleration of such security if issued originally at
a discount; |
| | adversely affect the right of
repayment or repurchase of such security at the option of the
holder; |
| | reduce or postpone any sinking
fund or similar provision with respect to such security; |
| | change the currency or currency
unit in which such security is payable or the right of selection
thereof; |

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Description of debt securities

| | impair the right to sue for the
enforcement of any payment with respect to such security on or
after the maturity of such security; |
| --- | --- |
| | reduce the percentage of the
aggregate outstanding principal amount of debt securities of the
series referred to above whose holders need to consent to the
modification or a waiver without the consent of such holders; or |
| | change any obligation of ours with
respect to such security to maintain an office or agency. |

DEFAULTS

Except as may be otherwise set forth in an accompanying prospectus supplement, each indenture will provide that events of default regarding any series of debt securities will be:

| | our failure to pay for
30 days required interest on any debt security of such
series; |
| --- | --- |
| | our failure to pay principal or
premium, if any, on any debt security of such series when due; |
| | our failure to make any required
scheduled installment payment for 30 days on debt
securities of such series; |
| | our failure to perform for
90 days after notice any other covenant in the relevant
indenture other than a covenant included in the relevant
indenture solely for the benefit of a series of debt securities
other than such series; and |
| | certain events of bankruptcy or
insolvency, whether voluntary or not (Section 5.01). |

Except as may be otherwise set forth in an accompanying prospectus supplement, if an event of default regarding debt securities of any series issued under the indentures should occur and be continuing, either the trustee or the holders of 25% in the principal amount of outstanding debt securities of such series may declare each debt security of that series due and payable (Section 5.02). We may be required to file annually with the trustee a statement of an officer as to the fulfillment by us of our obligations under the indenture during the preceding year.

No event of default regarding one series of debt securities issued under an indenture is necessarily an event of default regarding any other series of debt securities.

Holders of a majority in aggregate principal amount of the outstanding debt securities of any series will be entitled to control certain actions of the trustee under the indentures and to waive past defaults regarding such series (Sections 5.12 and 5.13). The holders of debt securities generally will not be able to require the trustee to take any action, unless one or more of such holders provides to the trustee reasonable security or indemnity (Section 6.02).

If an event of default occurs and is continuing regarding a series of debt securities, the trustee may use any sums that it holds under the relevant indenture for its own reasonable compensation and expenses incurred prior to paying the holders of debt securities of such series (Section 5.06).

Before any holder of any series of debt securities may institute action for any remedy, except payment on such holders debt security when due, the holders of not less than 25% in principal amount of the debt securities of that series outstanding must request the trustee to take action. Holders must also offer and give the satisfactory security and indemnity against liabilities incurred by the trustee for taking such action (Sections 5.07 and 5.08).

DEFEASANCE

Except as may otherwise be set forth in an accompanying prospectus supplement, after we have deposited with the trustee, cash or government securities, in trust for the benefit of the holders

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Description of debt securities

sufficient to pay the principal of, premium, if any, and interest on the debt securities of such series when due, and satisfied certain other conditions, including receipt of an opinion of counsel that holders will not recognize taxable gain or loss for United States federal income tax purposes, then:

| | we will be deemed to have paid and
satisfied our obligations on all outstanding debt securities of
such series, which is known as defeasance and discharge
(Section 14.02); or |
| --- | --- |
| | we will cease to be under any
obligation, other than to pay when due the principal of,
premium, if any, and interest on such debt securities, relating
to the debt securities of such series, which is known as
covenant defeasance (Section 14.03). |

When there is a defeasance and discharge, the applicable indenture will no longer govern the debt securities of such series, we will no longer be liable for payments required by the terms of the debt securities of such series and the holders of such debt securities will be entitled only to the deposited funds. When there is a covenant defeasance, however, we will continue to be obligated to make payments when due if the deposited funds are not sufficient.

GOVERNING LAW

Unless otherwise stated in the prospectus supplement, the debt securities and the indentures will be governed by Pennsylvania law.

CONCERNING THE TRUSTEE UNDER THE INDENTURES

We may have banking and other business relationships with the trustee named in the prospectus supplement, or any subsequent trustee, in the ordinary course of business.

FORM, EXCHANGE AND TRANSFER

We will issue debt securities only in registered form; no debt securities will be issued in bearer form. We will issue each debt security in book-entry form only, unless otherwise specified in the applicable prospectus supplement. We will issue any common stock issuable upon conversion of any debt security being offered in both certificated and book-entry form, unless otherwise specified in the applicable prospectus supplement. Debt securities in book-entry form will be represented by a global security registered in the name of a depositary, which will be the holder of all the debt securities represented by the global security. Those who own beneficial interests in a global security will do so through participants in the depositarys system, and the rights of these indirect owners will be governed solely by the applicable procedures of the depositary and its participants. Only the depositary will be entitled to transfer or exchange a debt security in global form, since it will be the sole holder of the debt security. These book-entry securities are described below under Book-Entry Procedures and Settlement.

If any debt securities are issued in non-global form or cease to be book-entry securities (in the circumstances described in the next section), the following will apply to them:

| | The debt securities will be issued
in fully registered form in denominations stated in the
prospectus supplement. You may exchange debt securities for debt
securities of the same series in smaller denominations or
combined into fewer debt securities of the same series of larger
denominations, as long as the total amount is not changed. |
| --- | --- |
| | You may exchange, transfer,
present for payment or exercise debt securities at the office of
the relevant trustee or agent indicated in the prospectus
supplement. You may also replace lost, stolen, destroyed or
mutilated debt securities at that office. We may appoint another
entity to perform these functions or may perform them. |

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Description of debt securities

| | You will not be required to pay a
service charge to transfer or exchange the debt securities, but
you may be required to pay any tax or other governmental charge
associated with the transfer or exchange. The transfer or
exchange, and any replacement, will be made only if our transfer
agent is satisfied with your proof of legal ownership. The
transfer agent may also require an indemnity before replacing
any debt securities. |
| --- | --- |
| | If we have the right to redeem,
accelerate or settle any debt securities before their maturity
or expiration, and we exercise that right as to less than all
those debt securities, we may block the transfer or exchange of
those debt securities during the period beginning 15 days
before the day we mail the notice of exercise and ending on the
day of that mailing, in order to freeze the list of holders to
prepare the mailing. We may also refuse to register transfers of
or exchange any debt security selected for early settlement,
except that we will continue to permit transfers and exchanges
of the unsettled portion of any debt security being partially
settled. |
| | If fewer than all of the debt
securities represented by a certificate that are payable or
exercisable in part are presented for payment or exercise, a new
certificate will be issued for the remaining amount of
securities. |

BOOK-ENTRY PROCEDURES AND SETTLEMENT

Most offered debt securities will be book-entry (global) securities. Upon issuance, all book-entry securities will be represented by one or more fully registered global securities, without coupons. Each global security will be deposited with, or on behalf of, The Depository Trust Company, or DTC, a securities depository, and will be registered in the name of DTC or a nominee of DTC. DTC will thus be the only registered holder of these debt securities.

Purchasers of debt securities may only hold interests in the global notes through DTC if they are participants in the DTC system. Purchasers may also hold interests through a securities intermediary banks, brokerage houses and other institutions that maintain securities accounts for customers that has an account with DTC or its nominee. DTC will maintain accounts showing the security holdings of its participants, and these participants will in turn maintain accounts showing the security holdings of their customers. Some of these customers may themselves be securities intermediaries holding securities for their customers. Thus, each beneficial owner of a book-entry security will hold that debt security indirectly through a hierarchy of intermediaries, with DTC at the top and the beneficial owners own securities intermediary at the bottom.

The debt securities of each beneficial owner of a book-entry security will be evidenced solely by entries on the books of the beneficial owners securities intermediary. The actual purchaser of the debt securities will generally not be entitled to have the debt securities represented by the global securities registered in its name and will not be considered the owner under the declaration. In most cases, a beneficial owner will also not be able to obtain a paper certificate evidencing the holders ownership of debt securities. The book-entry system for holding securities eliminates the need for physical movement of certificates and is the system through which most publicly traded common stock is held in the United States. However, the laws of some jurisdictions require some purchasers of securities to take physical delivery of their securities in definitive form. These laws may impair the ability to transfer book-entry securities.

A beneficial owner of book-entry securities represented by a global security may exchange the securities for definitive (paper) securities only if:

DTC is unwilling or unable to continue as depositary for such global security and we do not appoint a qualified replacement for DTC within 90 days; or

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Description of debt securities

We in our sole discretion decide to allow some or all book-entry securities to be exchangeable for definitive securities in registered form.

Unless we indicate otherwise, any global security that is exchangeable will be exchangeable in whole for definitive securities in registered form, with the same terms and of an equal aggregate principal amount. Definitive securities will be registered in the name or names of the person or persons specified by DTC in a written instruction to the registrar of the securities. DTC may base its written instruction upon directions that it receives from its participants.

In this prospectus, for book-entry securities, references to actions taken by security holders will mean actions taken by DTC upon instructions from its participants, and references to payments and notices of redemption to security holders will mean payments and notices of redemption to DTC as the registered holder of the securities for distribution to participants in accordance with DTCs procedures.

DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code and a clearing agency registered under section 17A of the Securities Exchange Act of 1934. The rules applicable to DTC and its participants are on file with the SEC.

We will not have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interest in the book-entry securities or for maintaining, supervising or reviewing any records relating to the beneficial ownership interests.

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link1 "Description of common stock purchase contracts and common stock purchase units"

Description of common stock purchase contracts and common stock purchase units

We may issue stock purchase contracts, representing contracts entitling or obligating holders to purchase from us, and us to sell to the holders, a specified number of shares or amount of common stock at a future date or dates. The price per share of common stock may be fixed at the time each contract is issued or may be determined by reference to a specific formula set forth in the contract. Each common stock purchase contract may be issued separately or as a part of a unit, which is referred to in this prospectus as a common stock purchase unit, each consisting of a common stock purchase contract and, as security for the holders obligation to purchase the common stock under the contract, the following:

| | our senior debt securities or
subordinated debt securities described under Description
of Debt Securities; |
| --- | --- |
| | debt obligations of third parties,
including U.S. Treasury securities; |
| | any other asset as security
described in the applicable prospectus supplement; or |
| | any combination of the foregoing. |

Each common stock purchase contract may require us to make periodic payments to the holder of the common stock purchase unit or vice versa, and such payments may be unsecured or prefunded on some basis discussed in the applicable prospectus supplement. Each common stock purchase contract may require holders to secure their obligations thereunder in a specified manner and, in certain circumstances, we may deliver a newly issued prepaid common stock purchase contract, which is referred to as a prepaid security, upon release to a holder of any collateral securing such holders obligations under the original contract.

The applicable prospectus supplement will describe the terms of any common stock purchase contract or common stock purchase unit and, if applicable, prepaid security. The description in the prospectus supplement will not purport to be complete and will be qualified in its entirety by reference to the contracts, units, the collateral arrangements and depositary arrangements, if applicable, relating to such contracts or units and, if applicable, the prepaid securities and the documents pursuant to which such prepaid securities will be issued. The applicable prospectus supplement will also describe the material United States federal income tax considerations applicable to the common stock purchase contracts and common stock purchase units.

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link1 "Where you can find more information"

Where you can find more information

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SECs public reference room at 100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. You may also obtain our SEC filings from the SECs Web site at http://www.sec.gov.

We have filed with the SEC a shelf registration statement on Form S-3 under the Securities Act of 1933 relating to the securities that may be offered by this prospectus. This prospectus is a part of that registration statement, but does not contain all of the information in the registration statement. We have omitted certain parts of the registration statement in accordance with rules and regulations of the SEC. Statements made in this prospectus as to the contents of any contract, agreement or other documents are not necessarily complete, and, in each instance, we refer you to a copy of such document filed as an exhibit to the registration statement, of which this prospectus is a part, or otherwise filed with the SEC. For more detail about us and any securities that may be offered by this prospectus, you may examine the registration statement on Form S-3 and the exhibits filed with it at the locations listed in the previous paragraph.

The SEC allows us to incorporate by reference the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus. When we file information with the SEC in the future, that information will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we sell all of the securities covered by this prospectus; provided, however, that we are not incorporating, in each case, any documents or information deemed to have been furnished and not filed in accordance with SEC rules:

| | Our Annual Report on
Form 10-K for the fiscal year ended December 31, 2004,
including portions of our 2004 Annual Report to Shareholders and
our definitive Proxy Statement for the 2005 Annual Meeting of
Shareholders incorporated therein by reference; |
| --- | --- |
| | Our Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2005,
June 30, 2005 and September 30, 2005; |
| | Our Current Reports on
Form 8-K filed on January 21, 2005, March 7,
2005, May 25, 2005, October 7, 2005, December 12,
2005 and December 16, 2005; and |
| | The description of our common
stock set forth in our Registration Statement on Form 8-A,
including any amendments or reports filed for the purpose of
updating such description. |

You may request a copy of any documents that we incorporate by reference at no cost, by writing or telephoning us at:

Aqua America, Inc.

762 W. Lancaster Avenue

Bryn Mawr, PA 19010-3489

Telephone: 610-527-8000

Attention: Roy H. Stahl, Corporate Secretary

You should rely only on the information contained in or incorporated by reference in this prospectus and any supplements to this prospectus. We have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on

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Where you can find more information

it. You should not assume that the information provided in this prospectus or incorporated by reference in this prospectus is accurate as of any date other than the date on the front of this prospectus or the date of those documents. Our business, financial condition, results of operations and prospects may have changed since those dates.

link1 "Legal matters"

Legal matters

The validity of the securities that may be offered hereby will be passed upon for us by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania.

link1 "Experts"

Experts

The consolidated financial statements and managements assessment of the effectiveness of internal control over financial reporting (which is included in Managements Report on Internal Control over Financial Reporting) incorporated in this prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 2004 have been so incorporated in reliance on the report (which contained an explanatory paragraph indicating that management has excluded from its assessment of and PricewaterhouseCoopers LLP has excluded from its audit of internal control over financial reporting Heater Utilities, Inc. as it was acquired by Aqua America in a purchase business combination during 2004) of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

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1,750,000 Shares

Aqua America, Inc.

Common Stock

A.G. Edwards Janney Montgomery Scott llc

The date of this prospectus supplement is June 7, 2006.

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Essential Utilities, Inc. Regulatory Filings 2006

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Essential Utilities, Inc. — Regulatory Filings 2006

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