===============================================================================

                                 FORM 10-Q
                      SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549
(Mark One)
[X]           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended March 31, 1997

                                    OR
[ ]
            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                For the transition period from ________ to ________

                        Commission file number 1-11023
                              E'TOWN CORPORATION
             (Exact name of registrant as specified in its charter)
       New Jersey                                         22-2596330
(State of incorporation)                    (I.R.S. Employer Identification No.)
    600 South Avenue
  Westfield, New Jersey                                     07090
(Address of principal executive offices)                  (Zip Code)

         Registrant's telephone number, including area code:    (908) 654-1234

 Title of each class                  Name of each exchange on which registered
Common Stock, without par value                 New York Stock Exchange

                        Commission file number 0-628
                         ELIZABETHTOWN WATER COMPANY
            (Exact name of registrant as specified in its charter)
   New Jersey                                              22-1683171
(State of incorporation)                    (I.R.S. Employer Identification No.)
  600 South Avenue
 Westfield, New Jersey                                      07090
(Address of principal executive offices)                  (Zip Code)

         Registrant's telephone number, including area code:     (908) 654-1234

Title of each class                   Name of each exchange on which registered
     None                                                 None    

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes __X__ No_____
  
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock as of the latest practicable date
                                              Outstanding at
 Class of Common Stock:                       March 31, 1997
 E'town Corporation (without par value)            7,844,010
 Elizabethtown Water Company (without par value)*  1,974,902

 * All shares are owned by E'town Corporation
===============================================================================
<PAGE>


                    E'TOWN CORPORATION AND SUBSIDIARIES
               ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY

                                  INDEX


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

PART I - FINANCIAL INFORMATION                                       PAGE

Item 1. Financial Statements

 E'TOWN CORPORATION AND SUBSIDIARIES

    - Statements of Consolidated Income                                1
    - Consolidated Balance Sheets                                     2-3
    - Statements of Consolidated Capitalization                        4
    - Statements of Consolidated Shareholders' Equity                  5
    - Statements of Consolidated Cash Flows                            6

 ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY

    - Statements of Consolidated Income                                7
    - Consolidated Balance Sheets                                     8-9
    - Statements of Consolidated Capitalization                        10
    - Statements of Consolidated Shareholder's Equity                  11
    - Statements of Consolidated Cash Flows                            12

  E'TOWN CORPORATION AND SUBSIDIARIES AND
  ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY

    - Notes to Consolidated Financial Statements                       13

      Item 2. Management's Discussion and Analysis of Consolidated
              Financial Condition and Results of Operations            16

PART II - OTHER INFORMATION                                            21

      Items 1 - 5

      Item 6 (a) - Exhibits                                            21
             (b) - Reports on Form 8-K                                 21

      SIGNATURES                                                       22



<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands Except Per Share Amounts)
<CAPTION>

                                                                   Three Months Ended                Twelve Months Ended
                                                                         March 31,                       March 31,
                                                                   1997            1996            1997            1996

---------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>             <C>            <C>             <C>         
Operating Revenues                                             $    30,121     $    25,760    $    114,770    $    108,984
---------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation                                                           11,120          10,967          44,960          44,691
Maintenance                                                          1,475           1,474           5,860           5,914
Depreciation                                                         3,022           2,344          10,571           9,025
Revenue taxes                                                        3,779           3,228          14,371          13,695
Real estate, payroll and other taxes                                   823             837           2,938           2,965
Federal income taxes                                                 1,891           1,342           7,340           7,390
---------------------------------------------------------------------------------------------------------------------------
      Total operating expenses                                      22,110          20,192          86,040          83,680
---------------------------------------------------------------------------------------------------------------------------
Operating Income                                                     8,011           5,568          28,730          25,304
---------------------------------------------------------------------------------------------------------------------------
Other Income (Expense):
Allowance for equity funds used during
 construction                                                           44           1,099           2,670           3,457
Write-down of non-utility property and
  other investments                                                                                                   (243)
Federal income taxes                                                   (41)           (436)         (1,175)         (1,366)
Other - net                                                             74             146             688             794
---------------------------------------------------------------------------------------------------------------------------
      Total other income (expense)                                      77             809           2,183           2,642
---------------------------------------------------------------------------------------------------------------------------
Total Operating and Other Income                                     8,088           6,377          30,913          27,946
---------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt                                           3,447           3,451          13,796          12,252
Other interest expense - net                                           986             413           3,218           2,214
Capitalized interest                                                  (116)           (963)         (2,677)         (3,155)
Amortization of debt discount and expense-net                           98              97             396             365
---------------------------------------------------------------------------------------------------------------------------
                                                                                                
      Total interest charges                                         4,415           2,998          14,733          11,676
---------------------------------------------------------------------------------------------------------------------------
Income Before Preferred Stock Dividends
 of Subsidiary                                                       3,673           3,379          16,180          16,270
Preferred Stock Dividends                                              203             203             813             813
---------------------------------------------------------------------------------------------------------------------------
Net Income                                                     $     3,470   $       3,176   $      15,367   $      15,457
===========================================================================================================================

Earnings Per Share of Common Stock:
---------------------------------------------------------------------------------------------------------------------------
   Primary                                                     $      0.44   $        0.42   $        1.99   $        2.11
   Fully Diluted                                               $      0.44   $        0.42   $        1.98   $        2.10
---------------------------------------------------------------------------------------------------------------------------

Average Number of Shares Outstanding for
   the Calculation of Earnings Per Share:
---------------------------------------------------------------------------------------------------------------------------
      Primary                                                        7,829           7,574           7,737           7,327
      Fully Diluted                                                  8,116           7,868           8,027           7,624
---------------------------------------------------------------------------------------------------------------------------

Dividends Paid Per Common Share                                $       .51   $         .51   $        2.04   $        2.04
===========================================================================================================================


<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
                                                       -1-
<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
                                                                 March 31,                                    December 31,
Assets                                                             1997                                           1996

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


Utility Plant-At Original Cost:
<S>                                                            <C>                                           <C>          
Utility plant in service                                       $   656,555                                   $     654,713
Construction work in progress                                        9,700                                           7,994
---------------------------------------------------------------------------------------------------------------------------
      Total utility plant                                          666,255                                         662,707
 Less accumulated depreciation
  and amortization                                                 105,707                                         102,683
---------------------------------------------------------------------------------------------------------------------------
      Utility plant-net                                            560,548                                         560,024
---------------------------------------------------------------------------------------------------------------------------


Non-utility Property and Other
Investments - Net                                                   14,231                                          14,113
---------------------------------------------------------------------------------------------------------------------------


Current Assets:
Cash and cash equivalents                                            3,495                                           3,228
Short-term investments                                                  31                                              31
Customer and other accounts receivable
  (less reserve: 1997, $644; 1996, $566)                            17,937                                          16,187
 Unbilled revenues                                                   9,221                                           9,356
Materials and supplies-at average cost                               1,934                                           2,045
Prepaid insurance, taxes, other                                      2,765                                           3,918
---------------------------------------------------------------------------------------------------------------------------
      Total current assets                                          35,383                                          34,765
---------------------------------------------------------------------------------------------------------------------------


Deferred Charges:
Waste residual management                                              935                                           1,064
Unamortized debt and preferred stock expenses                        9,395                                           9,508
Taxes recoverable through future rates                              30,435                                          30,435
Postretirement benefit expense                                       3,606                                           3,478
Other unamortized expenses                                           2,248                                           1,820
---------------------------------------------------------------------------------------------------------------------------
      Total deferred charges                                        46,619                                          46,305
---------------------------------------------------------------------------------------------------------------------------
             Total                                             $   656,781                                   $     655,207
===========================================================================================================================


<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                                                           -2-
<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
                                                                 March 31,                                    December 31,
Capitalization and Liabilities                                     1997                                            1996

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


Capitalization (Note 3):
<S>                                                            <C>                                           <C>          
Common shareholders' equity                                    $   184,801                                   $     183,512
Cumulative preferred stock                                          12,000                                          12,000
Long-term debt - net                                               193,375                                         193,481
---------------------------------------------------------------------------------------------------------------------------
       Total capitalization                                        390,176                                         388,993
---------------------------------------------------------------------------------------------------------------------------


Current Liabilities:
Notes payable - banks                                               69,000                                          69,000
Long-term debt - current portion                                        30                                              30
Accounts payable and other liabilities                              11,242                                          16,197
Customers' deposits                                                    300                                             300
Municipal and state taxes accrued                                   17,528                                          13,887
Interest accrued                                                     4,010                                           3,483
Preferred stock dividends accrued                                       59                                              59
---------------------------------------------------------------------------------------------------------------------------
       Total current liabilities                                   102,169                                         102,956
---------------------------------------------------------------------------------------------------------------------------


Deferred Credits:
Customers' advances for construction                                39,738                                          43,636
Federal income taxes                                                76,653                                          75,942
State income taxes                                                     185                                             185
Unamortized investment tax credits                                   8,212                                           8,245
Accumulated postretirement benefits                                  3,916                                           3,651
---------------------------------------------------------------------------------------------------------------------------
       Total deferred credits                                      128,704                                         131,659
---------------------------------------------------------------------------------------------------------------------------


Contributions in Aid of Construction                                35,732                                          31,599
---------------------------------------------------------------------------------------------------------------------------


Commitments and Contingent Liabilities
---------------------------------------------------------------------------------------------------------------------------
                Total                                          $   656,781                                   $     655,207
===========================================================================================================================


<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
                                                           -3-
<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
(In Thousands Except Share Amounts)
<CAPTION>
                                                                 March 31,                                     December 31,
                                                                   1997                                            1996

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

<S>                                                            <C>                                            <C>
E'town Corporation:
 Common Shareholders' Equity:
  Common stock without par value, authorized,
  15,000,000 shares, issued 1997, 7,869,886
  shares; 1996, 7,807,751 shares                               $   147,464                                   $     145,660
  Paid-in capital                                                    1,315                                           1,315
  Capital stock expense                                             (5,160)                                         (5,160)
  Retained earnings                                                 41,919                                          42,434
  Less cost of treasury stock;
  1997 and 1996, 25,876 shares                                        (737)                                           (737)
---------------------------------------------------------------------------------------------------------------------------
         Total common shareholders' equity                         184,801                                         183,512
---------------------------------------------------------------------------------------------------------------------------

Elizabethtown Water Company:
  Cumulative Preferred Stock
   $100 par value, authorized, 200,000 shares; $5.90
    series, issued and outstanding, 120,000 shares                  12,000                                          12,000

  Cumulative Preferred Stock:
   $25 par value, authorized, 500,000 shares;
    none issued
---------------------------------------------------------------------------------------------------------------------------

 Long-Term Debt:
    E'town Corporation:
     6 3/4% Convertible Subordinated
     Debentures, due 2012                                           11,436                                          11,548

    Elizabethtown Water Company:
     7.20% Debentures, due 2019                                     10,000                                          10,000
     7 1/2% Debentures, due 2020                                    15,000                                          15,000
     6.60% Debentures, due 2021                                     10,500                                          10,500
     6.70% Debentures, due 2021                                     15,000                                          15,000
     8 3/4% Debentures, due 2021                                    27,500                                          27,500
     8% Debentures, due 2022                                        15,000                                          15,000
     5.60% Debentures, due 2025                                     40,000                                          40,000
     7 1/4% Debentures, due 2028                                    50,000                                          50,000

    The Mount Holly Water Company:
      Notes Payable (due serially through 2000)                         83                                              87
---------------------------------------------------------------------------------------------------------------------------
             Total long-term debt                                  194,519                                         194,635
       Unamortized discount-net                                     (1,144)                                         (1,154)
---------------------------------------------------------------------------------------------------------------------------
             Total long-term debt-net                              193,375                                         193,481
---------------------------------------------------------------------------------------------------------------------------
                 Total Capitalization                          $   390,176                                   $     388,993
===========================================================================================================================


<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
                                                            -4-
<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(In Thousands Except Share Amounts
<CAPTION>
                                                                          
                                                                                                             Year Ended
                                                                 March 31,                                   December 31,
                                                                   1997                                          1996

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


Common Stock:
<S>                                                            <C>                                           <C>          
 Balance at Beginning of Period                                $   145,661                                   $     138,667
 Common stock issued under Dividend
 Reinvestment and Stock Purchase Plan (1997,
 59,635 shares; 1996, 258,673 shares)                                1,735                                           6,993
 Exercise of stock options (1997, 2,500 shares)                         68
---------------------------------------------------------------------------------------------------------------------------
       Balance at End of Period                                    147,464                                         145,660
---------------------------------------------------------------------------------------------------------------------------

Paid-in Capital:                                                     1,315                                           1,315
---------------------------------------------------------------------------------------------------------------------------


Capital Stock Expense:                                              (5,160)                                         (5,160)
---------------------------------------------------------------------------------------------------------------------------


Retained Earnings:
Balance at Beginning of Period                                      42,434                                          42,995
Net Income                                                           3,470                                          15,073
Dividends on common stock
 (1997, $.51, 1996, $2.04)                                          (3,985)                                        (15,634)
---------------------------------------------------------------------------------------------------------------------------
       Balance at End of Period                                     41,919                                          42,434
---------------------------------------------------------------------------------------------------------------------------

Treasury Stock:                                                       (737)                                           (737)
---------------------------------------------------------------------------------------------------------------------------

          Total Common Shareholders' Equity                    $   184,801                                   $     183,512
===========================================================================================================================


<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>




                                                            -5-
<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Thousands)
<CAPTION>

                                                                   Three Months Ended            Twelve Months Ended
                                                                         March 31,                       March 31,
                                                                   1997            1996            1997            1996

---------------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
<S>                                                            <C>             <C>            <C>             <C>         
Net Income                                                     $     3,470     $     3,176    $     15,367    $     15,457
Adjustments to reconcile net income to net
  cash provided by operating activities:
    Depreciation                                                     3,022           2,344          10,571           9,025
    Write-down of non-utility property and
     other investments                                                                                                 243
    (Increase) decrease in deferred charges                           (299)           (495)           (442)            401
    Deferred income taxes and investment tax
      credits-net                                                      678           1,440           4,155           5,237
    Capitalized interest and AFUDC                                    (160)         (2,062)         (5,347)         (6,612)
    Other operating activities-net                                     148             (63)            516            (201)
Change in current assets and current liabilities
   excluding cash, short-term investments and
   current portion of debt:
      Customer and other accounts receivable                        (1,750)           (399)         (1,554)         (3,365)
      Unbilled revenues                                                135             130          (1,907)             35
      Accounts payable and other liabilities                        (4,955)         (4,254)         (1,335)          1,100
      Accrued/prepaid interest and taxes                             5,321           3,770            (204)           (299)
      Other                                                            111             178            (200)            (38)
---------------------------------------------------------------------------------------------------------------------------
  Net cash provided by operating activities                          5,721           3,765          19,620          20,983
---------------------------------------------------------------------------------------------------------------------------

Cash Flows Provided by Financing Activities:
Proceeds from issuance of common stock                               1,803           1,951           6,845          24,143
Proceed from issuance of debentures                                                                                 40,000
Debt and preferred stock issuance and
 amortization costs                                                    112              75             467            (373)
Repayment of long-term debt                                           (116)            (10)           (339)           (281)
Contributions and advances for construction-net                        235             937           1,819           3,764
Net increase in notes payable - banks                                                5,500          36,500          (2,500)
Dividends paid on common stock                                      (3,985)         (3,857)        (15,762)        (15,216)
---------------------------------------------------------------------------------------------------------------------------
  Net cash (used) provided by financing activities                  (1,951)          4,596          29,530          49,537
---------------------------------------------------------------------------------------------------------------------------

Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
 for funds used during construction)                                (3,466)        (11,547)        (47,044)        (73,887)
Development costs of land (excluding
  capitalized interest)                                                (37)            (37)           (313)           (145)
---------------------------------------------------------------------------------------------------------------------------
  Cash used for investing activities                                (3,503)        (11,584)        (47,357)        (74,032)
---------------------------------------------------------------------------------------------------------------------------
Net (Decrease) Increase in Cash and
Cash Equivalents                                                       267          (3,223)          1,793          (3,512)
Cash and Cash Equivalents at
Beginning of Period                                                  3,228           4,925           1,702           5,214
---------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period                     $     3,495   $       1,702   $       3,495   $       1,702
===========================================================================================================================
Supplemental Disclosures of Cash
  Flow Information:
    Cash paid during the year for:
       Interest (net of amount capitalized)                    $     3,791   $       3,074   $       9,683   $       9,073
       Income taxes                                            $    -0-      $         398   $       5,325   $       5,145
       Preferred stock dividends                               $       177   $         177   $         708   $         708
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
                                                          -6-
<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands)
<CAPTION>

                                                                   Three Months Ended           Twelve Months Ended
                                                                         March 31,                      March 31,
                                                                   1997            1996            1997            1996

---------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>             <C>            <C>             <C>         
Operating Revenues                                             $    30,013     $    25,760    $    114,611    $    108,984
---------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation                                                           10,840          10,789          43,764          43,658
Maintenance                                                          1,475           1,474           5,860           5,914
Depreciation                                                         3,022           2,344          10,571           9,025
Revenue taxes                                                        3,779           3,228          14,371          13,696
Real estate, payroll and other taxes                                   804             819           2,854           2,885
Federal income taxes                                                 2,001           1,455           7,906           7,775
---------------------------------------------------------------------------------------------------------------------------
      Total operating expenses                                      21,921          20,109          85,326          82,953
---------------------------------------------------------------------------------------------------------------------------
Operating Income                                                     8,092           5,651          29,285          26,031
---------------------------------------------------------------------------------------------------------------------------
Other Income (Expense):
Allowance for equity funds used during
 construction                                                           44           1,099           2,670           3,457
Federal income taxes                                                   (46)           (433)         (1,075)         (1,354)
Other - net                                                             88             139             401             413
---------------------------------------------------------------------------------------------------------------------------
      Total other income (expense)                                      86             805           1,996           2,516
---------------------------------------------------------------------------------------------------------------------------
Total Operating and Other Income                                     8,178           6,456          31,281          28,547
---------------------------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt                                           3,253           3,253          13,011          11,451
Other interest expense - net                                           986             408           3,218           2,328
Allowance for funds used during construction                           (35)           (887)         (2,357)         (2,830)
Amortization of debt discount and expense-net                           89              88             363             331
---------------------------------------------------------------------------------------------------------------------------
      Total interest charges                                         4,293           2,862          14,235          11,280
---------------------------------------------------------------------------------------------------------------------------
Income Before Preferred Stock Dividends                              3,885           3,594          17,046          17,267
Preferred Stock Dividends                                              203             203             813             813
---------------------------------------------------------------------------------------------------------------------------
EARNINGS APPLICABLE TO COMMON STOCK                            $     3,682   $       3,391   $      16,233   $      16,454
===========================================================================================================================



<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>










                                                           -7-
<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
                                                                 March 31,                                     December 31,
Assets                                                             1997                                            1996

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


Utility Plant-At Original Cost:
<S>                                                            <C>                                           <C>          
Utility plant in service                                       $   656,555                                   $     654,713
Construction work in progress                                        9,700                                           7,994
---------------------------------------------------------------------------------------------------------------------------
      Total utility plant                                          666,255                                         662,707
Less accumulated depreciation
  and amortization                                                 105,707                                         102,683
---------------------------------------------------------------------------------------------------------------------------
      Utility plant-net                                            560,548                                         560,024
---------------------------------------------------------------------------------------------------------------------------


Non-utility Property                                                    80                                              81
---------------------------------------------------------------------------------------------------------------------------


Current Assets:
Cash and cash equivalents                                            3,306                                           3,122
Customer and other accounts receivable
 (less reserve: 1997, $644; 1996, $566)                             17,025                                          16,725
Unbilled revenues                                                    9,221                                           9,356
Materials and supplies-at average cost                               1,934                                           2,045
Prepaid insurance, taxes, other                                      2,483                                           3,742
---------------------------------------------------------------------------------------------------------------------------
      Total current assets                                          33,969                                          34,990
---------------------------------------------------------------------------------------------------------------------------


Deferred Charges:
Waste residual management                                              935                                           1,064
Unamortized debt and preferred stock expenses                        8,884                                           8,989
Taxes recoverable through future rates                              30,435                                          30,435
Postretirement benefit expense                                       3,606                                           3,564
Other unamortized expenses                                           2,050                                           1,632
---------------------------------------------------------------------------------------------------------------------------
      Total deferred charges                                        45,910                                          45,684
---------------------------------------------------------------------------------------------------------------------------
             Total                                             $   640,507                                   $     640,779
===========================================================================================================================

<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>










                                                           -8-

<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
                                                                 March 31,                                     December 31,
Capitalization and Liabilities                                     1997                                             1996

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


Capitalization (Note 3):
<S>                                                            <C>                                           <C>          
Common shareholder's equity                                    $   182,491                                   $     182,293
Cumulative preferred stock                                          12,000                                          12,000
Long-term debt - net                                               181,939                                         181,933
---------------------------------------------------------------------------------------------------------------------------
      Total capitalization                                         376,430                                         376,226
---------------------------------------------------------------------------------------------------------------------------


Current Liabilities:
Notes payable - banks                                               69,000                                          69,000
Long-term debt - current portion                                        30                                              30
Accounts payable and other liabilities                              11,169                                          17,093
Customers' deposits                                                    300                                             300
Municipal and state taxes accrued                                   17,528                                          13,887
Interest accrued                                                     3,881                                           3,158
Preferred stock dividends accrued                                       59                                              59
---------------------------------------------------------------------------------------------------------------------------
     Total current liabilities                                     101,967                                         103,527
---------------------------------------------------------------------------------------------------------------------------


Deferred Credits:
Customers' advances for construction                                39,738                                          43,636
Federal income taxes                                                74,662                                          73,950
Unamortized investment tax credits                                   8,212                                           8,245
Accumulated postretirement benefits                                  3,766                                           3,596
---------------------------------------------------------------------------------------------------------------------------
      Total deferred credits                                       126,378                                         129,427
---------------------------------------------------------------------------------------------------------------------------


Contributions in Aid of Construction                                35,732                                          31,599
---------------------------------------------------------------------------------------------------------------------------


Commitments and Contingent Liabilities
---------------------------------------------------------------------------------------------------------------------------
                Total                                          $   640,507                                   $     640,779
===========================================================================================================================


<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>








                                                           -9-

<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CAPITALIZATION
(In Thousands Except Share Amounts)
<CAPTION>
                                                                 March 31,                                     December 31,
                                                                   1997                                            1996

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

<S>                                                            <C>                                           <C>
Common Shareholder's Equity:
Common stock without par value, authorized,
 10,000,000 shares, issued 1997 and 1996,
 1,974,902 shares                                              $    15,741                                   $      15,741
Paid-in capital                                                    117,957                                         117,457
Capital stock expense                                                 (485)                                           (485)
Retained earnings                                                   49,278                                          49,580
---------------------------------------------------------------------------------------------------------------------------
      Total common shareholder's equity                            182,491                                         182,293
---------------------------------------------------------------------------------------------------------------------------

Cumulative Preferred Stock
 $100 par value, authorized, 200,000 shares; $5.90 series,
   issued and outstanding, 120,000 shares                           12,000                                          12,000

Cumulative Preferred Stock:
  $25 par value, authorized, 500,000 shares;
   none issued
---------------------------------------------------------------------------------------------------------------------------

Long-Term Debt:
 7.20% Debentures, due 2019                                         10,000                                          10,000
 7 1/2% Debentures, due 2020                                        15,000                                          15,000
 6.60% Debentures, due 2021                                         10,500                                          10,500
 6.70% Debentures, due 2021                                         15,000                                          15,000
 8 3/4% Debentures, due 2021                                        27,500                                          27,500
 8% Debentures, due 2022                                            15,000                                          15,000
 5.60% Debentures, due 2025                                         40,000                                          40,000
 7 1/4% Debentures, due 2028                                        50,000                                          50,000

The Mount Holly Water Company:
   Notes Payable (due serially through 2000)                            83                                              87
---------------------------------------------------------------------------------------------------------------------------
        Total long-term debt                                       183,083                                         183,087
 Unamortized discount-net                                           (1,144)                                         (1,154)
---------------------------------------------------------------------------------------------------------------------------
        Total long-term debt-net                                   181,939                                         181,933
---------------------------------------------------------------------------------------------------------------------------
             Total Capitalization                              $   376,430                                   $     376,226
===========================================================================================================================


<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>






                                                           -10-
<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(In Thousands)                                                                                                
<CAPTION>

                                                                                                               Year Ended       
                                                                 March 31,                                     December 31,
                                                                   1997                                            1996

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


<S>                                                            <C>                                           <C>          
Common Stock:                                                  $    15,741                                   $      15,741
---------------------------------------------------------------------------------------------------------------------------

Paid-in Capital:
 Balance at Beginning of Period                                    117,457                                         112,157
 Capital contributed by parent company                                 500                                           5,300
---------------------------------------------------------------------------------------------------------------------------
 Balance at End of Period                                          117,957                                         117,457
---------------------------------------------------------------------------------------------------------------------------

Capital Stock Expense:                                                (485)                                           (485)
---------------------------------------------------------------------------------------------------------------------------

Retained Earnings:
 Balance at Beginning of Period                                     49,581                                          49,272
 Earnings applicable to common stock                                 3,885                                          16,755
 Dividends on common stock                                          (3,985)                                        (15,634)
 Dividends on preferred stock                                         (203)                                           (813)
---------------------------------------------------------------------------------------------------------------------------
 Balance at End of Period                                           49,278                                          49,580
---------------------------------------------------------------------------------------------------------------------------

     Total Common Shareholder's Equity                         $   182,491                                   $     182,293
===========================================================================================================================


<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>














                                                           -11-

<PAGE>
<TABLE>
LIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Thousands)
<CAPTION>
                                                                   Three Months Ended             Twelve Months Ended
                                                                         March 31,                       March 31,
                                                                   1997            1996            1997            1996

---------------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
<S>                                                            <C>             <C>            <C>             <C>         
Income before preferred stock dividends of subsidiary          $     3,885     $     3,594    $     17,046    $     17,267
Adjustments to reconcile net income to net
 cash provided by operating activities:
  Depreciation                                                       3,022           2,344          10,571           9,025
  (Increase) decrease in deferred charges                             (289)           (510)           (392)            448
  Deferred income taxes and investment tax
   credits-net                                                         679           1,440           4,092           5,293
  Allowance for funds used during construction                         (79)         (1,986)         (5,027)         (6,287)
  Other operating activities-net                                       113             (93)            274            (278)
Change in current assets and current liabilities
  excluding cash, short-term investments and
  current portion of debt:
    Customer and other accounts receivable                            (300)          1,438          (1,520)         (2,104)
    Unbilled revenues                                                  135             130          (1,907)             35
    Accounts payable and other liabilities                          (5,924)         (4,235)         (1,324)          1,058
    Accrued/prepaid interest and taxes                               5,623           4,077            (409)            847
    Other                                                              111             178            (200)            (38)
---------------------------------------------------------------------------------------------------------------------------
      Net cash provided by operating activities                      6,976           6,377          21,204          25,266
---------------------------------------------------------------------------------------------------------------------------

Cash Flows Provided by Financing Activities:
Capital contributed by parent company                                  500             577           5,223          22,503
Proceed from issuance of debentures                                                                                 40,000
Debt and preferred stock issuance and
 amortization costs                                                    105              66             435            (416)
Repayment of long-term debt                                             (4)             (7)            (27)            (36)
Contributions and advances for construction-net                        235             937           1,819           3,764
Net increase in notes payable - banks                                                5,000          37,000          (3,000)
Dividends paid on common and preferred stock                        (4,162)         (4,034)        (16,470)        (15,924)
---------------------------------------------------------------------------------------------------------------------------
      Net cash (used) provided by financing activities              (3,326)          2,539          27,980          46,891
---------------------------------------------------------------------------------------------------------------------------

Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
 for funds used during construction)                                (3,466)        (11,547)        (47,044)        (73,887)
---------------------------------------------------------------------------------------------------------------------------
     Cash used for investing activities                             (3,466)        (11,547)        (47,044)        (73,887)
---------------------------------------------------------------------------------------------------------------------------
Net (Decrease) Increase in Cash and
 Cash Equivalents                                                      184          (2,631)          2,140          (1,730)
Cash and Cash Equivalents at
  Beginning of Period                                                3,122           3,797           1,166           2,896
---------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period                     $     3,306   $       1,166   $       3,306   $       1,166
===========================================================================================================================
Supplemental Disclosures of Cash
  Flow Information:
    Cash paid during the year for:
       Interest (net of amount capitalized)                    $     3,482   $       2,751   $       9,212   $       8,591
       Income taxes                                            $    -0-      $         398   $       5,325   $       4,556
       Preferred stock dividends                               $       177   $         177   $         708   $         708
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                                                           -12-


<PAGE>

                     E'TOWN CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. ORGANIZATION
E'town Corporation (E'town or Corporation), a New Jersey holding
company, is the parent company of Elizabethtown Water Company  (Elizabethtown or
Company) and E'town Properties, Inc. (Properties) and owner of a 65% interest in
Applied  Watershed  Management,  LLC (AWM). The Mount Holly Water Company (Mount
Holly) is a wholly owned subsidiary of Elizabethtown

2. INTERIM FINANCIAL STATEMENTS 
The financial statements reflect all adjustments
which, in the opinion of management, are necessary for a fair presentation.  The
Notes to Consolidated  Financial Statements  accompanying the 1996 Annual Report
to Shareholders  and the 1996 Form 10-K should be read in conjunction  with this
report.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenues and expenses during the reporting period

Certain  prior year  amounts  have been  reclassified  to conform to the current
year's presentation.

3. CAPITALIZATION
E'town routinely makes equity  contributions to Elizabethtown  which represent a
portion  of  the  proceeds  of  common  stock  issued  under  E'town's  Dividend
Reinvestment and Stock Purchase Plan (DRP). E'town contributed $500,000 from the
DRP proceeds of $1,735,000 (59,635 shares) to Elizabethtown for the three months
ended March 31, 1997.

4. LINES OF CREDIT
Elizabethtown  has a committed  revolving credit  agreement  (Agreement) with an
agent bank and five  additional  banks.  The  Agreement  was executed in 1994 to
provide up to $60,000,000 in revolving short-term financing to partially finance
Elizabethtown's  capital program. The Agreemenexpires in July 1997 at which time
the  Company  may  convert  any  outstanding  balances  to  a  five-year,  fully
amortizing  term  loan.  After  July  1997,  the  Company  expects  to meet  its
short-term  financing  needs  with  uncommitted  lines of credit.  These  lines,
together  with  internal  funds and  proceeds  of future  issuances  of debt and
preferred  stock by  Elizabethtown  and  capital  contributions  by E'town,  are
expected to be sufficient to finance  Elizabethtown's  and Mount Holly's capital
needs.  At  March  31,  1997,   Elizabethtown  had  outstanding   borrowings  of
$60,000,000  under the Agreement and $9,000,000 of borrowings under  uncommitted
lines of credit. Of the $60,000,000 outstanding under the Agreement at March 31,
1997,  $50,000,000  is  expected to be repaid  with the  proceeds of  tax-exempt
Variable Rate Demand Notes to be issued in the second quarter of 1997.

E'town has  $20,000,000  of  uncommitted  lines of credit with several  banks in
addition to the lines under the Agreement,  of which $17,000,000 is available to
Elizabethtown.

5. EARNINGS PER SHARE
Primary  earnings per share are  computed on the basis of the  weighted  average
number of shares outstanding,  plus common stock equivalents,  which reflect the
assumption  that all stock options are  exercised.  Fully  diluted  earnings per
share  assume  both  the  conversion  of  the  6 3/4%  Convertible  Subordinated
Debentures and the common stock equivalents. Reference is made to Exhibit 11 for
the computations of earnings per share.

                                   -13-
<PAGE>

6. NON-UTILITY PROPERTY AND OTHER INVESTMENTS
Included in Non-utililty  Property and Other Investments at March 31, 1997 is an
investment of $1,254,715  ($191,764 net of related  deferred taxes) in a limited
partnership  that owns Solar  Electric  Generating  System V (SEGS),  located in
California.

Also included in Non-utility Property and Other Investments at March 31, 1997 is
$12,888,317 of investments in various parcels of undeveloped land in New Jersey.
The  carrying  value of each parcel  includes  the  original  cost plus any real
estate taxes,  interest and, where  applicable,  direct costs  capitalized while
rezoning  or  governmental  approvals  are,  or were  being  sought.  Based upon
independent  appraisals  received at various times prior to 1996,  the estimated
net realizable value of each property  exceeds its respective  carrying value as
of March 31, 1997. No information has come to the attention of management  since
these appraisals were last performed that would indicate the aggregate  carrying
value of these parcels has been impaired.

The Corporation will continue to monitor the  relationship  between the carrying
and net realizable values of its properties  through updated  appraisals and its
investment  in SEGS based  upon  information  provided  by SEGS  management  and
through cash flow analyses.

7. REGULATORY MATTERS
Rates
Elizabethtown On October 25, 1996 Elizabethtown received a rate increase under a
stipulation resulting in an increase in annual revenues of $21,800,000. The rate
increase  reflects a full allowance for the estimated  capital cost as well as a
full allowance for the operating  costs of the Canal Road Water  Treatment Plant
(Plant).  The Plant was  placed in service  on  October  24,  1996 for a cost of
$101,554,469   plus  an  Allowance  for  Funds  Used  During   Construction   of
$13,499,744.

On April  21,  1997  Elizabethtown  and Mount  Holly  filed  petitions  for rate
increases, to be effective January 1, 1998, for the recovery of costs associated
with  Statement of Financial  Accounting  Standards  (SFAS) No. 106  "Employers'
Accounting For Postretirement  Benefits Other Than Pensions." The resulting rate
increases  would  reflect  recovery  over  a  fifteen  year  period  of  amounts
previously  deferred  on the  Consolidated  Balance  Sheets  for  postretirement
benefits  since 1993 and  prospectively,  the  difference  between  the  amounts
currently  recovered  in rates and the full SFAS No.  106  expense on an accrual
basis. The petitions were filed in connection with a generic  stipulation signed
by  several  New Jersey  public  utilities,  as well as the New Jersey  Board of
Public  Utilities  and  the New  Jersey  Division  of  Ratepayer  Advocate.  The
settlement was designed to provide a generic  mechanism for New Jersey utilities
to recover  postretirement  costs that have been deferred  since the adoption of
SFAS 106. The increases in operating revenues resulting from these petitions are
expected  to  be  $581,332  and  $16,417  for  Elizabethtown  and  Mount  Holly,
respectively

Mount Holly
In June 1995,  Mount Holly  petitioned the BPU for an increase in rates, to take
place  in two  phases.  The  first  phase  was  stipulated  for a rate  increase
effective February 1996 of $550,000.  The second phase would recover the cost of
a new water supply,  treatment and transmission system necessary to obtain water
outside a designated portion of an aquifer currently used by Mount Holly, and to
treat and pump the water into the Mount Holly  distribution  system.  Management
believes this project is the most cost-effective  alternative available to Mount
Holly to comply with recent state legislation that restricts the amount of water
that can be withdrawn  from an aquifer in certain  areas of southern New Jersey.
The project,  referred to as the Mansfield  project,  is currently  estimated to

                                   -14-
<PAGE>

cost $16,500,000,  excluding AFUDC.  Mount Holly has expended  $2,863,691 on the
Mansfield Project as of March 31, 1997, excluding AFUDC. The land for the supply
and treatment facilities has been purchased and test wells have been drilled and
can produce the required supply.  On October 5, 1995, the New Jersey  Department
of  Environmental  Protection  (NJDEP)  granted  Mount Holly a water  allocation
permit  for four  wells that are to be the water  supply  for this  project.  On
October  20,  1995,  another  water  purveyor  requested  of the NJDEP,  and was
subsequently  granted,  an  adjudicatory  hearing in  opposition  to the permit.
Hearings  on the  matter  before an  administrative  law judge  are  pending.  A
decision is expected later in 1997. The Company and Mount Holly believe that the
permit in question will be upheld, but cannot predict with certainty the outcome
of the matter.  In the event that the objector is  successful  and the permit is
rescinded,  Mount  Holly  would  meet its  regulatory  obligation  to provide an
alternate source of water by purchasing water from that purveyor

8. NEW ACCOUNTING PRONOUNCEMENTS
The Financial  Accounting Standards Board has issued SFAS No. 128,"Earnings Per
Share" which is effective for financial  statements  issued after  December 15,
1997. The pronouncement simplifies the calculation of earnings per share in that
a  calculation  of "basic"  earnings  per share is  reported  in lieu of primary
earnings per share.  Basic earnings per share includes only the weighted average
number of common  shares  outstanding  for the period and does not  consider the
dilutive effect of the Corporatio's  outstanding stock options.  There would be
no  effect  on the  Corporation's  calculation  of  earnings  per  share  if the
pronouncement were applied currently.

The  Financial  Accounting  Standards  Board  has  also  issued  SFAS  No.  129,
"Disclosure of Information about Capital Structure," which is also effective for
financial  statements  issued  after  December  15, 1997.  The  Corporation  has
historically  disclosed  the  information  required  by  the  pronouncement  and
therefore, the adoption of SFAS No. 129 will have no effect on the Corporation's
financial statements.

9. PRIVATIZATION CONTRACT
Following a competitive  selection  process,  Edison Township chose to negotiate
with  E'town for a 20-year  contract  to operate  the  Township's  water  supply
system. This system serves about 11,000  residential,  commercial and industrial
customers.  The parties  have  completed  negotiations.  The  transaction  still
requires state agency  approvals.  Under the terms of the contract  E'town would
make expenditures of approximately  $25,000,000 over the 20-year period. Of this
total approximately $14,000,000 would be expended in the first three years.

                                   -15-
<PAGE>

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS

E'town Corporation (E'town or Corporation), a New Jersey holding company, is the
parent company of  Elizabethtown  Water Company  (Elizabethtown  or Company) and
E'town  Properties,  Inc.  (Properties)  and owner of a 65%  interest in Applied
Watershed Management,  LLC (AWM). The Mount Holly Water Company (Mount Holly) is
a wholly owned subsidiary of Elizabethtown.  The assets and operating results of
Elizabethtown  constitute  the  predominant  portions  of  E'town's  assets  and
operating  results.  Mount Holly  contributed  3% of the Company's  consolidated
operating  revenues for 1996.  The  following  analysis  sets forth  significant
events  affecting the financial  condition of E'town and  Elizabethtown at March
31, 1997,  and the results of  operations  for the three and twelve months ended
March 31, 1997.

LIQUIDITY AND CAPITAL RESOURCES
Capital Expenditures Program
Capital  expenditures,  primarily for water utility plant, were $3.5 million for
the first quarter of 1997. Capital expenditures for the three-year period ending
December 31, 1999 are estimated to be $126.1 million, of which $125.3 million is
for utility plant ($105.8 million for  Elizabethtown and $19.5 million for Mount
Holly), and $.8 million for non-utility expenditures. Elizabethtown's three-year
capital program  includes $69.3 million for projects of a routine  nature.  This
program also includes $56.0 million of major  projects such as new  transmission
mains,  improvements  to pumping  facilities,  construction  of a new operations
center in the western portion of our service  territory and other  miscellaneous
projects

Mount Holly expects to incur significant capital  expenditures later in 1997 and
1998 to construct new water supply,  treatment  and  transmission  facilities as
discussed below.

To ensure an adequate  supply of quality water from an aquifer  serving parts of
southern New Jersey,  state  legislation  requires Mount Holly, as well as other
suppliers  obtaining water from designated  portions of this aquifer,  to reduce
pumpage from its wells.  Mount Holly has received  approval  from the New Jersey
Department  of  Environmental  Protection  (NJDEP) for its plan to develop a new
water  supply,  treatment  and  transmission  system  necessary  to obtain water
outside the designated  portion of the aquifer,  and to treat the water and pump
it into the Mount Holly system.  This is referred to as the  Mansfield  Project.
The project is currently  estimated to cost $16.5 million,  excluding  AFUDC, of
which $13.6 million is anticipated to be spent over the next three years.  Mount
Holly has expended $2.9 million on the  Mansfield  Project as of March 31, 1997,
excluding  AFUDC.  The land for the supply  and  treatment  facilities  has been
purchased and wells have been drilled and can produce the required supply.

In October 1995,  the NJDEP granted  Mount Holly a water  allocation  permit for
four wells that are to be the water supply for the Mansfield Project. Later that
month,  another  water  purveyor  requested of the NJDEP,  and was  subsequently
granted,  an adjudicatory  hearing in opposition to the permit.  Hearings on the
matter before an  administrative  law judge are pending.  A decision is expected
later in 1997.  The Company and Mount Holly  believe that the permit in question
will be upheld,  but cannot predict with certainty the outcome of the matter. In
the event that the objector is  successful  and the permit is  rescinded,  Mount
Holly would meet its  regulatory  obligation  to provide an alternate  source of
water by purchasing water from that purveyor.  Management believes the Mansfield
Project  is the most  cost-effective  alternative  available  to Mount  Holly to
comply with recent state legislation that restricts the amount of water that can
be withdrawn from the aquifer.

In June 1995,  Mount Holly  petitioned the New Jersey Board of Public  Utilities
(BPU) for an increase in rates, to take place in two phases. The first phase was
stipulated  for a rate  increase  effective  February  1996 of $.6 million.  The
second phase would recover the cost of the Mansfield project.

                                   -16-
<PAGE>

On October 25, 1996  Elizabethtown  received a rate increase under a stipulation
resulting in an increase in annual  revenues of  $21,800,000.  The rate increase
reflects  a full  allowance  for the  estimated  capital  cost as well as a full
allowance  for the  operating  costs of the Canal  Road  Water  Treatment  Plant
(Plant).  The Plant was  placed in service  on  October  24,  1996 for a cost of
$101.6  million plus an Allowance  for Funds Used During  Construction  of $13.5
million.

Capital Resources
For the three-year  period ending  December 31, 1999,  Elizabethtown,  including
Mount Holly,  estimates that 57% of its capital  expenditures are expected to be
financed  with  internally  generated  funds  (after  payment  of  common  stock
dividends). The balance will be financed with a combination of proceeds from the
sale of E'town common stock,  long-term  debentures,  proceeds of tax-exempt New
Jersey Economic Development  Authority (NJEDA) bonds and short-term  borrowings.
The NJEDA has granted  preliminary  approval for the  financing of almost all of
Elizabethtown's  major  projects  during the next three years and the  Mansfield
Project. Elizabethtown expects to pursue tax-exempt financing to the extent that
final  allocations  are  granted  by the NJEDA.  The  Company's  senior  debt is
currently  rated A3 and A by Moody's  Investors  Service  and  Standard & Poor's
Ratings  Group,  respectively.  Standard & Poors has  recently  reaffirmed  the
Company's  A rating and has  upgraded  its rating  outlook  from  "negative"  to
"stable."
In the second quarter of 1997,  Elizabethtown  expects to issue $50.0 million of
tax-exempt  Variable  Rate Demand Notes  through the NJEDA.  The proceeds of the
issue are expected to be used to repay amounts  outstanding  under the revolving
credit agreement discussed below.

Elizabethtown  continues  to obtain a  portion  of the  funds  required  for its
capital  program  through   borrowings   under  a  revolving   credit  agreement
(Agreement)  with an agent bank and five  additional  banks.  The  Agreement was
executed  in 1994  to  provide  up to  $60.0  million  in  revolving  short-term
financing to partially fund  Elizabethtown's  capital  program,  the predominant
portion of which was the Plant , which was placed in service in October 1996. At
March 31, 1997  Elizabethtown had outstanding  borrowings of $60.0 million under
the Agreement and $9.0 million of borrowings under  uncommitted lines of credit.
The Agreement expires in July 1997 and provides that the Company may convert any
outstanding balances to a five-year,  fully amortizing term loan. However,  upon
expiration of the  Agreement  and after the  refinancing  discussed  above,  the
Company expects to meet its short-term financing needs with uncommitted lines of
credit.

RESULTS OF OPERATIONS
Net Income for the three  months  ended March 31, 1997 was $3.5  million or $.44
per share as compared  to $3.2  million or $.42 per share for the same period in
1996. Net income for the twelve months ended March 31, 1997 was $15.4 million or
$1.99 per share as  compared  to $15.5  million  or $2.11 per share for the same
period in 1996.  Net income  increased  $.3 million for the three month  period,
primarily  due to higher  revenues  related to an  increase  in rates  effective
October  1996 offset by the  financing  and  operating  costs of the Plant.  Net
income  decreased  $.1 million for the twelve  month  period,  primarily  due to
increases in financing and operating costs.

Operating Revenues increased $4.4 million or 16.9% for the first quarter of 1997
compared to the same period in 1996. The increase  resulted  primarily from rate
increases of $21.8 million and $.6 million for  Elizabethtown and Mount Holly in
October and January 1996,  respectively.  The combined effect of these increases
in rates accounted for an increase in operating  revenues of $5.0 million.  Fire
service  revenues  increased  $.2  million  as a result of the  installation  of
additional  facilities  upon which  these  revenues  are  billed.  Miscellaneous
revenues  increased $.2 million.  These  increases  were offset by a decrease in
water consumption  primarily in the wholesale and industrial customer classes of
$.7 million and $.3 million, respectively.

                                   -17-
<PAGE>

Operating  revenues  increased  $5.8 million or 5.3% for the twelve months ended
March 31,  1997  compared  to the same  period in 1996.  The  increase  resulted
primarily  from the  effect of the  increases  in  rates,  as  indicated  above,
totaling $9.1 million.  Fire service revenues  increased $.6 million,  primarily
for the  reason  indicated  above.  Miscellaneous  revenues  were  higher by $.2
million.  These increases were offset by a decrease in water consumption of $2.0
million for retail  customers,  $1.6  million for  wholesale  customers  and $.6
million for industrial customers. This reduced consumption was due primarily, to
unusually cool, wet weather during the summer months of 1996.

Operation  Expenses  increased $.2 million or 1.4% for the first quarter of 1997
compared  to the same  period in 1996 and  increased  $.3 million or .6% for the
twelve  months ended March 31, 1997  compared to the same period in 1996.  These
increases  were due  primarily,  to  ongoing  cost  control  efforts  in various
operating areas within the Company.

Maintenance  Expenses changed by insignificant  amounts for the three and twelve
month  periods  ended March 31, 1997,  compared to the same periods in 1996,  as
Elizabethtown  and Mount  Holly  continue  to realize  the  benefits  of various
preventive maintenance programs instituted in recent years.

Depreciation  Expense  increased  $.7 million or 28.9% and $1.5 million or 17.1%
for the three and twelve month  periods  ended March 31,  1997,  compared to the
same  periods in 1996.  The  increases  were due  primarily to a higher level of
depreciable plant in service,  of which the predominant  portion was related the
Plant. The Plant accounted for increases of $.7 million and $1.2 million for the
three and twelve month  periods,  respectively.  Elizabethtown's  rate  increase
reflected a full  allowance for the  depreciation  expense  associated  with the
Plant. In addition,  under the terms of Elizabethtown's rate decision, which was
effective  in  October  1996,  the  Company  is no  longer  required  to  record
depreciation on assets acquired through Customers' Advances for Construction and
Contributions  in  Aid  of   Construction.   This  accounted  for  decreases  in
depreciation  expense of $.2  million  and $.3  million for the three and twelve
month periods, respectively.

Revenue Taxes  increased  $.6 million,  or 17.1% and $.7 million or 4.9% for the
three and twelve  month  periods  ended  March 31,  1997,  compared  to the same
periods in 1996 based upon the  increases  in operating  revenues,  as discussed
above, upon which these taxes are calculated.

Real Estate,  Payroll and Other Taxes Expenses changed by insignificant  amounts
for the three and twelve month  periods  ended March 31,  1997,  compared to the
same periods in 1996.

Federal Income Taxes as a component of operating  expenses increased $.5 million
or 41.0% for the first quarter of 1997 compared to the comparable period in 1996
and  decreased an  insignificant  amount for the twelve month period ended March
31,  1997  compared to the  comparable  period in 1996 due to the changes in the
components of taxable income discussed herein.

Other Income  (Expense)  decreased $.7 million or 90.5% and $.5 million or 17.4%
for the three and twelve month  periods  ended March 31,  1997,  compared to the
same periods in 1996. These decreases are due primarily, to the reduction in the
Allowance for Funds Used During  Construction  (AFUDC),  the largest  portion of
which was recorded while the Plant was under construction.  These decreases were
offset by the associated federal income taxes.

Total  Interest  Charges  increased  $1.4  million  or 47.3%  for the first
quarter of 1997  compared  to the same  period in 1996 due  primarily  to a
reduction  in the debt  component  of AFUDC.  This  reduction  in AFUDC was
related to the  completion of the Plant in October  1996.  This increase in
total  interest  charges was further  affected by an increase in short-term
borrowings  incurred  under the revolving  credit  agreement to finance the
construction of  Elizabethtown's  ongoing capital program,  the predominant
portion of which was the Plant.
                              
Total  Interest  Charges  increased  $3.1  million  or 26.2% for the twelve
months  ended  March 31,  1997  compared  to the same  period in 1996.  The
increase was due  primarily,  to the effect of the  issuance of  additional
borrowings to finance  Elizabethtown's  and Mount Holly's  ongoing  capital
program.
                                   -18-
<PAGE>

     ECONOMIC OUTLOOK
     Forward Looking Information
     Certain  information  included  in this  report  contains  forward  looking
     statements  within the meaning of the Federal  securities laws. Any forward
     looking statements are based upon information  currently  available and are
     subject to risks and  uncertainties  that  could  cause  actual  results to
     differ  materially from those  expressed in the statements.  Such risks and
     uncertainties  include,  without  limitation,  actions of  regulators,  the
     effects of weather on water consumption,  changes in historical patterns of
     water  consumption and demand,  including  changes through increased use of
     water-conserving  devices,  conditions  in capital  markets,  increases  in
     operating expenses due to factors beyond the Corporation's control, changes
     in  environmental  regulation and associated  costs of compliance,  natural
     disasters and other claims or assessments made upon the Corporation.

     E'town Corporation and Subsidiaries
     Consolidated  earnings  for  E'town  for the  next  several  years  will be
     determined by (i) Elizabethtown's  ability to increase sales and to further
     control  operating  expenses  through  improved  productivity,  (ii)  Mount
     Holly's, and later  Elizabethtown's,  ability to obtain adequate and timely
     rate relief in connection  with future  utility plant  additions  and, to a
     lesser  degree,  (iii) the  ability of E'town and  Properties  to  generate
     returns from their  unregulated  businesses.  E'town still expects earnings
     and earnings per share to improve for the year. However,  because our first
     quarter  results are lower than  expected,  our  original  goal to increase
     earnings  per  share by 15% for  1997  may be  difficult  to  attain.  This
     expectation  assumes a return to normal water consumption  patterns for the
     remainder of 1997 as well as the absence of adverse  conditions which could
     occur as noted in the description of forward looking  information  detailed
     above.

     Elizabethtown and Subsidiary - Regulated Utilities
     On October 25, 1996, a rate increase under a stipulation (1996 Stipulation)
     went into  effect for  Elizabethtown.  This will  result in an  increase in
     annual operating revenues of $21.8 million. Elizabethtown,  excluding Mount
     Holly,  earned  a rate  of  return  on  common  equity  of  9.0%  in  1996.
     Elizabethtown's  authorized  rate of return on common  equity is  currently
     11.25%. In 1997, Elizabethtown expects to close this gap between its earned
     return on common equity in 1996 and its authorized  return.  This assumes a
     return to normal water  consumption  patterns in 1997.  Realizing  rates of
     return in 1998  comparable  to  authorized  levels will  require  continued
     customer additions and the success of ongoing cost control efforts, as well
     as rate relief later in that year.

     Mount  Holly  earned a rate of  return  on  common  equity of 3.5% in 1996,
     compared to an authorized rate of return of 11.25%  established in its most
     recent  rate   proceeding.   Mount  Holly   contributed  $.02  to  E'town's
     consolidated  earnings per share in 1996. Management expects Mount Holly to
     increase  its  contribution  to E'town's  earnings  per share by  obtaining
     additional  rate  relief upon the  completion  of Mount  Holly's  Mansfield
     project  for  recovery of the costs of that and other  projects.  Such rate
     relief should also enable Mount Holly to realize rates of return comparable
     to authorized levels.

     E'town and Properties
     The activities of E'town and Properties are not regulated by the BPU.

     E'town
     Following  a  competitive  selection  process,  Edison  Township  chose  to
     negotiate  with E'town for a 20-year  contract  to operate  the  Township's
     water  supply  system.   This  system  serves  about  11,000   residential,
     commercial   and   industrial   customers.   The  parties  have   completed
     negotiations.  The transaction still requires state agency approvals. Under
     the terms of the contract E'town would make  expenditures of  approximately
     $25  million  over the  20-year  period.  Of this total  approximately  $14
     million  would be  expended  in the first three  years.  E'town  expects to
     realize  a return  on its  investment  in the  project  comparable  to that
     realized by E'tow's regulated utility  operations.  The earnings effect is
     expected to be small during the first few years and is expected to increase
     after year five.

                                        -19-                       
<PAGE>

     In order to form AWM, in 1995 the  Corporation  entered  into a  three-year
     joint venture agreement with Applied Wastewater General Partnership (AWG) a
     unit of several privately held and affiliated  companies  providing design,
     engineering,  construction and operating  services for water and wastewater
     facilities.  AWM  has  been  pursuing  opportunities  to  design,  finance,
     engineer,   construct,  own,  operate  and/or  sell  water  and  wastewater
     facilities  for municipal and corporate  clients,  primarily in New Jersey.
     E'town  has  agreed to provide  capital  contributions  to AWM of up to $.5
     million  to  finance  AWM's  working  capital  needs.  E'town  may  provide
     additional financing for particular projects of AWM. AWG has been providing
     the substantial portion of the  operations-related  services required to be
     performed by AWM.  Either party may  terminate  the  agreement at any time.
     E'town  formed AWM to expand its range of services  to include  wastewater,
     particularly to the smaller  communities  that surround the franchise areas
     of Elizabethtown and Mount Holly.

     On January 1, 1997,  AWM  commenced  a  three-year  contract to operate the
     wastewater  collection  and  treatment  facilities  owned by  Environmental
     Disposal Corporation (EDC), which serves portions of Bedminster, Far Hills,
     and Peapack-Gladstone.

     Included in Non-Utility Property and Other Investments at March 31, 1997 is
     an investment of $1.3 million ($.2 million net of related  deferred  taxes)
     in a limited  partnership  that owns  Solar  Electric  Generating  System V
     (SEGS), located in California.

     Properties
     E'town Properties and E'town Corporation own various parcels of undeveloped
     land in New Jersey  carried as  investments of $12.9 million in Non-Utility
     Property and Other Investments - Net in the Consolidated  Balance Sheets of
     E'town at March 31, 1997. During the next few years,  E'town and Properties
     will seek to sell such  properties  and expect to invest the sale  proceeds
     into  water  and  wastewater  utility  investments  that  produce a current
     return.

     The carrying value of each parcel  includes the original cost plus any real
     estate taxes,  interest and,  where  applicable,  direct costs  capitalized
     while  rezoning or  governmental  approvals are or were being sought.  Such
     costs are capitalized  until the property is offered for sale,  after which
     time such costs are expensed.  Based on independent  appraisals received at
     various  times prior to 1996,  management  believes  that the estimated net
     realizable value of each property exceeds its respective  carrying value as
     of March 31, 1997.

     E'town will continue to monitor the  relationship  between the carrying and
     net realizable values of its properties  through updated  appraisals,  when
     appropriate, and of its investment in SEGS based on information provided by
     SEGS management.

     New Accounting Pronouncements
     See  Note  8 of  the  Notes  to  Consolidated  Financial  Statements  for a
     discussion  of two new  accounting  standards  that will be  effective  for
     financial statements issued after December 15, 1997.

                                        -20-                         
<PAGE>
         
PART II - OTHER INFORMATION

Items 1 - 5:

         Nothing to Report.

Item 6(a) - Exhibits

   Exhibits to Part I:

     Exhibit 11- E'town Corporation and Subsidiaries - Statement Regarding
                  Computation of Per Share Earnings

     Exhibit 12- Elizabethtown Water Company - Computation of Ratio of
                 Earnings to Fixed Charges and Preferred Dividends and
                 Computation of Ratio of earnings to Fixed Charges

     Exhibit 27- E'town Corporation and Subsidiaries and Elizabethtown Water
                 Company and Subsidiary - Financial Data Schedules

Item 6(b) - Reports on Form 8-K

                           None















                                   -21-
<PAGE>

                           E'TOWN CORPORATION

                       ELIZABETHTOWN WATER COMPANY

                                SIGNATURES



     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
     registrant  has duly  caused  this report to be signed on its behalf by the
     undersigned thereunto duly authorized.

Date:    May 14, 1997                                E'TOWN CORPORATION
 
 
                                                      /s/ Andrew M. Chapman
                                                      Andrew M. Chapman
                                                      Chief Financial Officer


 

                                                       /s/ Walter M. Braswell
                                                       Walter M. Braswell
                                                       Secretary


 
                                                   ELIZABETHTOWN WATER COMPANY


                                                       /s/ Gail P. Brady
                                                       Gail P. Brady
                                                       Treasurer


 
                                                       /s/ Dennis W. Doll
                                                       Dennis W. Doll
                                                       Controller


                                   -22-