<PAGE>
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-K

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

                  For the fiscal year ended December 31, 2003

 Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange
                                  Act of 1934

                         Commission file number 0-18516

                         ARTESIAN RESOURCES CORPORATION
                       _________________________________

             (exact name of registrant as specified in its charter)


              Delaware                              51-0002090
  ________________________________      _______________________________________
  (State or other jurisdiction of       (I.R.S. Employer Identification Number)
   incorporation or organization)


                  664 Churchmans Road, Newark, Delaware 19702
                 _____________________________________________

                     Address of principal executive offices

                               (302) 453 -- 6900
                         _____________________________

               Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

                        Class A Non-Voting Common Stock
                                (Title of class)

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.

|X| Yes            |_| No

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2)

|X| Yes            |_| No

The aggregate market value of the Class A Non-Voting Common Stock and Class B
Common Stock held by non-affiliates of the registrant at June 30, 2003 was
$75,250,000 and $3,930,000, respectively. The aggregate market value of Class
A Non-Voting Common Stock was computed by reference to the closing price of
such class as reported on the Nasdaq National Market on June 30, 2003. The
aggregate market value of Class B Common Stock was computed by reference to
the last reported trade of such class as reported on the OTC Bulletin Board as
of June 30, 2003, which trade date was May 21, 2003.

As of March 1, 2004, 3,330,648 shares of Class A Non-Voting Common Stock and
587,680 shares of Class B Common Stock were outstanding.


                                       1

<PAGE>
                                     PART I


Item 1. -- Business.

Artesian Resources Corporation ("Artesian Resources" or the "Company")
operates as the parent holding company of Artesian Water Company, Inc.
("Artesian Water"), our principal subsidiary, Artesian Water Pennsylvania,
Inc. and two non-regulated subsidiaries. Artesian Water Company was organized
in 1927 as the successor to the Richardson Park Water Company, founded in
1905. In 1984, the name of Artesian Water Company was changed to Artesian
Resources Corporation and the utility assets were contributed to the newly
formed subsidiary, Artesian Water. In this Annual Report on Form 10-K, we
frequently use the terms "we," "our" and the "Company" to refer to Artesian
Resources and its subsidiaries, including Artesian Water.

We distribute and sell water to residential, commercial, industrial,
governmental, municipal and utility customers throughout the State of
Delaware. As of December 31, 2003, we had approximately 70,000 metered
customers and served a population of approximately 230,000 (including contract
services), representing approximately 29% of Delaware's total population. We
also provide water for public and private fire protection to customers in our
service territories. Our gross water sales revenue for 2003 was approximately
$35.2 million, and our percentages of gross water sales revenue by major
customer classifications were 62% for residential, 32% for commercial,
industrial, governmental, municipal and utility, and 6% for fire protection
and other. These percentages have remained fairly constant for the past three
years. We received recognition of Artesian Water Pennsylvania, Inc. as a
regulated public water utility by the Pennsylvania Public Utility Commission
in 2002. We are now serving a community in Pennsylvania consisting of 41
homes.

Demand for water during the warmer months is generally greater than during
cooler months due primarily to additional requirements for water in connection
with cooling systems, swimming pools, irrigation systems and other outside
water use. Throughout the year, and particularly during typically warmer
months, demand for water will vary with temperature and rainfall. In the event
that temperatures during the typically warmer months are cooler than expected,
or as in 2003 there is more rainfall than expected, the demand for water may
decrease and our revenues may be adversely affected.

Our primary current market area is the State of Delaware, which had a
population of approximately 800,000 at December 31, 2003. According to the US
Census Bureau, Delaware's population has increased 17.6% over the last 10
years, the 14th largest percentage increase among the states. Although New
Castle is the most populous of Delaware's three counties, Sussex County, in
southern Delaware, has experienced the most significant growth with a
population increase of approximately 38.3% over the last ten years.
Substantial portions of Delaware, particularly outside of New Castle County,
are not served by a public water system and represent potential opportunities
for Artesian Water to obtain new exclusive franchised service areas. We
continue to focus resources on developing and serving existing service
territories and obtaining new territories throughout the State.

In Delaware, a Certificate of Public Convenience and Necessity ("CPCN") grants
a water company the exclusive right to serve all existing and new customers
within a designated area. Effective July 1, 2001, the authority to issue
CPCN's was transferred to the Delaware Public Service Commission ("PSC") from
the Delaware Department of Natural Resources and Environmental Control
("DNREC"). In this Annual Report on Form 10-K, we refer to these Certificates
as "CPCN's", "franchises" or "service territories." Currently the PSC grants a
CPCN under circumstances where there has been a determination that the water
in the proposed service area does not meet the regulations governing drinking
water standards of the State Division of Public Health for human consumption,
where the supply is insufficient to meet the projected demand, or where the
applicant is in possession of one of the following: (i) a signed service
agreement with the developer of a proposed subdivision or development, which
subdivision or development has been duly approved by the respective county
government; (ii) a petition requesting such service signed by a majority of
the landowners of the proposed territory to be served; or (iii) a duly
certified copy of a resolution from the governing body of a county or
municipality requesting the applicant to provide service to the proposed
territory to be served. CPCN's are not transferable, and a water utility must
obtain the approval of the PSC to abandon a service territory once granted.
Once a CPCN to a water utility is granted, it may not be suspended or
terminated unless the Delaware PSC determines in accordance with its rules and
regulations that good cause exists for any such suspension or termination.

We hold CPCN's for approximately 140 square miles of exclusive service
territory, which is segmented into a number of service areas. Our largest
connected regional water system, consisting of approximately 98.6 square miles
and 65,000 customers, is located in northern Delaware. A significant portion
of our exclusive service territory remains undeveloped, and if and when
development occurs and there is population growth in these areas, we will
increase our customer base by providing water service to the newly developed
areas and new customers. The total number of customers we serve has grown at
an average annual rate of approximately 2.7% since 1993, when we began
expansion of our service territory. Within our existing service territory, we
hold


                                       2

<PAGE>
CPCN's for nearly 5,000 vacant acres zoned for industrial and manufacturing
development.

In 1993, we initiated efforts to expand our service territory in Delaware
beyond northern New Castle County. This expansion, which has occurred in
southern New Castle, Kent and Sussex Counties, has increased our exclusive
service area in Delaware by approximately 39% since 1993. The pursuit of new
service territory in the State of Delaware by water companies is competitive.
Our strategy is to continue our efforts to acquire additional exclusive
service areas, although the future rate of increase will depend upon interest
rates, land use rules, and our ability to enter into agreements with
landowners, developers or municipalities.

Beginning in 1992, we undertook steps to increase our sources of groundwater
supply, recognizing that such sources provided improved reliability while also
being more cost effective. We have identified sufficient sources of
groundwater supply to serve our expanding customer base for the foreseeable
future. Our self-supply has increased from 63% of our total water supply in
1992 to approximately 82% in 2003. Since 1992, we have increased our sources
of groundwater supply from our own wells by 51%, or nearly nine million
gallons per day. We plan to continue development of new sources of groundwater
supplies as demand warrants.

Our primary sources of water are our wells that pump groundwater from aquifers
and other formations. To supplement our groundwater supply, we purchase
surface water through interconnections only in the northern service area of
our New Castle County system. The purchased surface water is blended with our
groundwater supply for distribution to our customers. Nearly 82% of the
overall 7.2 billion gallons of water we distributed in all our systems during
2003 came from our groundwater wells, while the remaining 18% came from
interconnections with other utilities and municipalities. During 2003, our
average rate of water pumped was approximately 16.2 million gallons per day
("mgd") from our groundwater wells and approximately 3.6 mgd was supplied from
interconnections. Our peak water supply capacity currently is approximately
50.0 mgd. Our peak water demand in 2003 was approximately 25.8 mgd. We believe
that we have in place sufficient capacity to provide water service for the
foreseeable future to all existing and new customers in all of our service
territories.

Under state laws and regulations, we are required to file applications with
the DNREC for water allocation permits for each of our operating wells pumping
quantities of water above certain levels. We have 98 operating and 58
monitoring wells in our systems. Presently, we have permits for 74 wells,
permit applications pending for 13 wells and 11 wells not requiring a permit.
Our access to aquifers within our service territory is not exclusive. Water
allocation permits control the amount of water that can be drawn from water
resources and are granted with specific restrictions on water level draw down
limits, annual, monthly and daily pumpage limits, and well field allocation
pumpage limits. We are also subject to water allocation regulations that
control the amount of water that we can draw from water sources. As a result,
if new or more restrictive water allocation regulations are imposed, they
could have an adverse effect on our ability to supply the demands of our
customers, and in turn, our water supply revenues and results of operations.
Our ability to supply the demands of our customers historically has not been
affected by private usage of the aquifers by landowners or the limits imposed
by the State. Because of the extensive regulatory requirements relating to the
withdrawal of any significant amounts of water from the aquifers, we believe
that third party usage of the aquifers within our service territory will not
interfere with our ability to meet the present and future demands of our
customers.

Our northern New Castle County system is interconnected. During the first half
of 2004, we will complete the installation of water main beneath the
Chesapeake and Delaware Canal, joining our northern New Castle County system
to a portion of our southern New Castle County system. In the remainder of the
State, we have several satellite systems that have not yet been connected by
transmission and distribution facilities. We intend to join these systems into
larger integrated regional systems through the construction of a transmission
and distribution network as development continues and our expansion efforts
provide us with contiguous exclusive service territories.

We have 17 interconnections with three neighboring water utilities and five
municipalities that provide us with the ability to purchase or sell water.
Interconnection agreements with the Chester Water Authority and the City of
Wilmington have "take or pay" clauses requiring us to take, as of December 31,
2003, minimum draws totaling 1.295 billion gallons annually. We presently use
the minimum draws under these agreements. The Chester Water Authority
agreement, which expires in 2021, provides for a renewal period of an
additional 25 years at our option, subject to the approval of the Susquehanna
River Basin Commission. Our remaining take or pay agreement with the City of
Wilmington was renewed in December 2001 for a period of five years. All of the
interconnections provide Artesian Water the ability to sell water to
neighboring water utilities or municipalities.

As of December 31, 2003, we were serving customers through approximately 938
miles of transmission and distribution mains. Mains range in diameter from two
inches to twenty-four inches, and most of the mains are made of ductile iron,
cast iron or transite pipe. Ductile iron is more durable than plastic and we
install ductile iron pipes wherever possible. We are installing a more durable
type of plastic pipe only near ocean front property in southern Delaware where
corrosive conditions of the surrounding ground affect the longevity of ductile
iron pipe. We also supply public fire protection service through approximately
3,800 hydrants installed throughout our service territories.


                                       3

<PAGE>
We have 30 storage tanks, most of which are elevated, providing total system
storage of 38.0 million gallons. We have developed and are using an aquifer
storage and recovery system. At some locations, we rely on hydropneumatic
tanks to maintain adequate system pressures. Where possible, we will combine
our smaller satellite systems with systems having elevated storage facilities.

We pump all of our water with electric power purchased from major electric
utilities. We also have diesel and propane powered generating equipment at
most treatment and elevated storage facilities for the provision of basic
water service during possible electrical outages.

We derive about 95% of our self-supplied groundwater from wells located in the
Atlantic Coastal Plain. The remaining 5% comes from wells in the Piedmont
Province. We use a variety of treatment methods, including aeration, pH
adjustment, chlorination, fluoridation and iron removal, to meet federal,
state and local water quality standards. Additionally, a corrosion inhibitor
is added to all of our self-supplied groundwater and most of the supply from
interconnections. We have 48 different water treatment facilities. All water
supplies that we purchase from neighboring utilities are potable. We believe,
based on our experience, the costs of treating groundwater are significantly
lower than those of treating surface water.

The United States Environmental Protection Agency (the "EPA"), DNREC, and the
Delaware Division of Public Health ("DPH") regulate the water quality of our
treatment and distribution systems. We believe that we are in material
compliance with all current federal, state and local water quality standards,
including regulations under the federal Safe Drinking Water Act. However, if
new water quality regulations are too costly, or if we fail to comply with
such regulations, it could have a material adverse effect on our financial
condition and results of operations. Chester Water Authority, which supplies
water to Artesian Water through interconnections in northern New Castle
County, is regulated by the Pennsylvania Department of Environmental
Protection as well as the EPA.

As required by the Safe Drinking Water Act, the EPA has established maximum
contaminant levels for various substances found in drinking water. DPH has set
maximum contaminant levels for certain substances that are more restrictive
than the maximum contaminant levels set by the EPA. The DPH is the EPA's agent
for enforcing the Safe Drinking Water Act in Delaware and, in that capacity,
monitors the activities of Artesian Water and reviews the results of water
quality tests performed by Artesian Water for adherence to applicable
regulations. Artesian Water is also subject to other laws regulating
substances and contaminants in water, including the Lead and Copper Rule,
rules for volatile organic compounds and the Total Coliform Rule. Because we
have no surface water sources of supply that we treat for consumption, the
Surface Water Treatment Rule generally does not apply to us.

Delaware enacted legislation in 1998 requiring water utilities to meet
secondary water quality standards that include limitations on iron content,
odor and other water quality-related issues that are not proven health risks
but may be objectionable for consumption. We believe our current treatment
systems and facilities meet or exceed these secondary standards.

As a normal by-product of iron removal, our treatment facility at Old County
Road in New Castle County and our treatment facilities in South Bethany and
Bayville in Sussex County generate iron removed from untreated groundwater
plus residue from chemicals used in the treatment process. We have contracted
with a licensed third party vendor to dispose of the solids produced at these
facilities. Our other iron removal facilities rely on disposal through county-
approved wastewater facilities. Management believes that compliance with
existing federal, state or local laws and regulations regulating the discharge
of materials into the environment, or otherwise relating to the protection of
the environment, has no material effect upon the business and affairs of
Artesian Resources, but there is no assurance that such compliance will
continue to not have a material effect in the future.

Artesian Water, as a public utility, is regulated by the PSC with respect to
rates and charges for service, the sale and issuance of securities, mergers
and other matters. We periodically seek rate increases to cover the cost of
increased operating expenses, increased financing expenses due to additional
investments in utility plant and other costs of doing business. The timing of
our rate increase requests are therefore dependent upon the estimated cost of
the administrative process in relation to the investments and expenses that we
hope to recover through the rate increase. We can provide no assurances that
rate increase requests will be approved by applicable regulatory agencies;
and, if approved, we cannot guarantee that these rate increases will be
granted in a timely or sufficient manner to cover the investments and expenses
for which we initially sought the rate increase.

We filed a request for a rate increase in February 2004 for an $8.8 million
increase in our annual revenue requirement, but we cannot predict whether the
PSC will approve the requested increase, approve a smaller increase or deny
the request altogether. We currently derive our water service revenues from
water consumption, upon which base rates are applied, which were last
increased by 9.68% as of May 1, 2003. This reflected an authorized return on
equity rate of 10.5%, and an overall rate of return on rate base of 8.75%.


                                       4

<PAGE>
On December 19, 1996, Artesian Wastewater Management, Inc. ("Artesian
Wastewater") was created as a non-regulated subsidiary of Artesian Resources.
Artesian Wastewater provides wastewater treatment services in Delaware.
Artesian Wastewater is a one-third participant, along with heavy-construction
contractor George and Lynch and engineering firm D. Preston Lee, Jr., P.E.,
Inc., in a limited liability company called AquaStructure Delaware, L.L.C.
("AquaStructure"). The purpose of AquaStructure is to develop and market
proposals for design, construction and operation of wastewater facilities. In
1999, Artesian Wastewater began operating a 250,000 gallon per day wastewater
facility for the town of Middletown in southern New Castle County. In 2002,
AquaStructure substantially completed construction of a 2.5 million gallon per
day wastewater facility for Middletown and Artesian Wastewater, under contract
with AquaStructure, began operating the facility for Middletown under a 20
year contract.

The Company has no collective bargaining agreements with any of its employees,
and its work force is not union organized or union represented. As of
December 31, 2003, we employed 174 full-time and 10 part-time employees, all
of whom were non-unionized. Of these full-time employees, 24 were officers and
managers; 99 were employed as operations personnel, including engineers,
technicians, draftsman, maintenance and repair persons, meter readers and
utility personnel; and 45 were employed in the accounting, budgeting,
information systems, human resources, customer relations, public relations and
conservation departments. The remaining six employees were administrative
personnel. We believe that our employee relations are good.

We are a Delaware corporation with our principal executive offices located at
664 Churchmans Road, Newark, Delaware, 19702. Our telephone number is (302)
453-6900 and our website address is www.artesianwater.com. We make available
free of charge through the Investor Information section of our website our
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports
on Form 8-K and all amendments to those reports as soon as reasonably
practicable after such material is electronically filed with or furnished to
the Securities and Exchange Commission. We include our website address in this
Annual Report on Form 10-K only as an inactive textual reference and do not
intend it to be an active link to our website.

Item 2. -- Properties.

The corporate headquarters of Artesian Resources, Artesian Water and its other
non-regulated subsidiaries are located at 664 Churchmans Road, Newark,
Delaware. As of October 20, 2003, the property is owned by Artesian Water.
Prior to that date, the property was leased from White Clay Realty by Artesian
Water. For a discussion on the manner by which Artesian Water acquired this
property, see Item 3 (Legal Proceedings) below.

Artesian Resources and Artesian Development Company, Inc. ("Artesian
Development"), a wholly owned subsidiary of Artesian Resources, own various
parcels of land in New Castle County, Delaware. Artesian Water owns land,
transmission and distribution mains, pump facilities, treatment plants,
storage tanks and related facilities within New Castle, Kent and Sussex
Counties, Delaware. Artesian Water Pennsylvania, Inc. owns transmission and
distribution mains as well. In the aggregate, we own rights-of-way and
easements totaling approximately 706 acres. Substantially all of Artesian
Water's utility plant, except utility plant within the town of Townsend,
Delaware, is pledged as security for First Mortgage Securities.

Of the 706 acres we own, Artesian Development owns approximately eleven acres
zoned for office buildings located immediately adjacent to our corporate
headquarters. Artesian Development has no present plans to purchase new land
or develop the acreage it owns.

All of our existing facilities adequately meet current necessary production
capacities and current levels of utilization.

Item 3. -- Legal Proceedings.

On February 5, 2004, Artesian Water Company, Inc. filed a petition with the
Delaware Public Service Commission (PSC) to implement new rates to meet a
requested increase in revenue of 24%, or approximately $8.8 million, on an
annualized basis. Artesian Water anticipates placing temporary rates into
effect, 60 days from the filing date, up to the statutory limit of $2.5 million
on an annual basis, under bond until the level of permanent rates is decided
by the Delaware Public Service Commission.

On April 2, 2002, Artesian Water filed a petition with the PSC seeking to
raise rates for water service by 23.12%, or $7.5 million on an annual basis.
As is permitted by law, we placed a 7.71% rate increase into effect under bond
beginning June 1, 2002. On June 17, 2002, we filed a supplemental application
reducing the requested increase to 19%, or $6.4 million on an annual basis.
Hearings regarding the rate increase were held on October 30 and 31, 2002.
During these hearings, we reduced our requested rate increase to 14.2%, or
$4.8 million on an annual basis. Beginning December 3, 2002, as is permitted
by law, we placed an additional 3.69% of the proposed rates into effect. These
rates represented an increase in water consumption charges, customer


                                       5

<PAGE>
charges and fire hydrant ready to serve charges necessary to generate an
increase in operating revenues of approximately $3.9 million on an annual
basis. On March 18, 2003, the PSC approved an increase in rates for Artesian
Water. Based on the decisions made during the Commission hearings, the Company
calculated the increase to be approximately $3.3 million on an annual basis.
This calculation was reviewed by PSC staff. Since temporary rates were in
excess of the final rate increase, in June 2003 we refunded approximately
$201,000 plus interest to our customers. Since the Company had reserved
revenue related to the second temporary increase of approximately $234,000,
$33,000 was recorded to revenue in the second quarter of 2003.

Until October 20, 2003, the office building and shop complex utilized by
Artesian Water were leased at an average annual rental of $173,000 from the
former partners of White Clay Realty who owned the property jointly as tenants
in common. Dian C. Taylor, Chair and Chief Executive Officer of Artesian
Resources, was a tenant in common and John R. Eisenbrey, Jr., a director of
Artesian Resources, was a beneficiary of a tenant in common. The rental of
$173,000 was below market rates. In December 2002, Artesian Water filed a
condemnation action in the Delaware Superior Court, seeking to acquire title
to the office and shop complex leased by Artesian Water, known as 664
Churchmans Road, Newark, Delaware (the "Property"). Artesian Water filed this
action under its statutory power of eminent domain against the owner of the
Property, White Clay Realty, a Delaware Limited Partnership, and each of the
limited partners. The Superior Court ruled that since White Clay Realty had no
general partner, the partnership was dissolved and all of the former partners
owned the Property jointly as tenants in common. A special committee of the
Board of Directors of Artesian Water, composed entirely of outside directors
who had no ownership interest in the Property, made the determination to
purchase the Property through the condemnation procedures. Under this
procedure, if the acquisition of the Property is approved by the court, the
fair market value of the Property will be determined by a panel of
commissioners after an evidentiary hearing. Artesian Water's independent
appraiser valued the Property to be worth $3,800,000. In December 2002,
Artesian Water issued a payment to the Prothonotary for the State of Delaware
for $3,800,000. As the court delayed payment until the matter was decided, the
amount was refunded to Artesian Water in June 2003. Until a final
determination of the condemnation, the parties agreed that Artesian Water
could continue to occupy the Property under the terms of the lease with a
quarterly rental payment of $43,361. Pursuant to a deadline set by the
Superior Court, the owners of the Property submitted an independent appraisal
that valued the Property to be worth $4,800,000. The condemnation case was
scheduled for trial on October 20, 2003, wherein the fair market value of the
Property would have been determined by a panel of three Commissioners after an
evidentiary hearing. Prior to the commencement of the trial, all parties
agreed to settle the case for a purchase price of $4,500,000 paid by Artesian
Water on October 20, 2003. The decision to settle on the part of Artesian
Water was made by the Special Committee of independent directors and with the
recommendation of special counsel to the Special Committee. The settlement was
approved by order of the Superior Court on October 20, 2003. The Court also
approved applications of two of the tenants in common (neither of whom is an
officer or director of Artesian) for their expenses, totaling $50,000, to be
paid by Artesian Water, to which applications Artesian Water did not object.

There are no other material legal proceedings pending at this time.

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

There were no matters submitted to a vote of security holders during the
fourth quarter of 2003.


                                       6

<PAGE>
                                    PART II


Item 5. -- Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchase of Equity Securities.

Artesian Resources' Class A Non-Voting Common Stock ("Class A Stock") is
listed on the Nasdaq National Market and trades under the symbol "ARTNA." On
January 30, 2004, there were 795 holders of record of the Class A Stock. The
following table sets forth, for the periods indicated, the high and low
closing sale prices for the Class A Stock on the Nasdaq National Market and
the cash dividends declared per share:

                        CLASS A NON-VOTING COMMON STOCK

<TABLE>
<CAPTION>

                                                                                                                           Dividend
                                                                                                       High       Low     Per Share
<S>                                                                                                  <C>        <C>       <C>
2002
   First Quarter                                                                                     $21.000    $19.067    $0.1933
   Second Quarter                                                                                     22.666     19.267     0.1933
   Third Quarter                                                                                      19.653     16.761     0.1933
   Fourth Quarter                                                                                     19.927     18.013     0.1933
2003
   First Quarter                                                                                     $21.733    $19.713    $0.1984
   Second Quarter                                                                                     24.667     19.900     0.1984
   Third Quarter                                                                                      25.860     23.200     0.1984
   Fourth Quarter                                                                                     29.330     25.680     0.2025
</TABLE>


The closing sale prices shown above reflect prices between dealers and do not
include retail markups or markdowns or commissions and may not necessarily
represent actual transactions.

Our Class B Voting Stock ("Class B Stock") is quoted on the OTC Bulletin Board
under the symbol "ARTNB." There has been a limited and sporadic public trading
market for the Class B Stock. As of January 30, 2004, the last reported trade
of the Class B Stock on the OTC Bulletin Board was at a price of $27.90 per
share on December 10, 2003. As of January 30, 2004, we had 216 holders of
record of the Class B Stock.

Per SEC Regulation S-K, Item 701, the following table represents recent sales
of unregistered securities.

<TABLE>
<CAPTION>
                                                                                                Use of            Exemption from
Securities Sold                          Underwriters/Purchasers       Consideration           Proceeds        Registration Claimed
<S>                                     <C>                         <C>                   <C>                 <C>
First Mortgage Bonds, Series Q,         Underwriter --              Offering Price --     Financing of        Private Placement
4.75%                                   Janney Montgomery Scott     $15,400,000           specific            pursuant to Rule
Date of Sale -- December 1, 2003        Purchaser --                Cost of Issuance      construction        144A of the
                                        Delaware Economic           $1,181,574            projects            Securities Exchange
                                        Development Authority       Net Proceeds                              Act of 1934
                                                                    $14,218,426

First Mortgage Bonds, Series P,         Purchaser --                Offering Price --     Repayment of        Private Placement
6.58%                                   Co-Bank                     $25,000,000           $10 million         pursuant to Rule
Date of Sale -- January 31, 2003                                    Cost of Issuance      First Mortgage      144A of the
                                                                    $57,030               Bonds, Series L,    Securities Exchange
                                                                    Net Proceeds          8.03% to CoBank.    Act of 1934
                                                                    $24,942,970           Balance to pay
                                                                                          down the
                                                                                          Company's line
                                                                                          of credit.
</TABLE>



                                       7

<PAGE>
Item 6. -- Selected Financial Data.

The selected consolidated financial data for each of the years in the 5-year
period ended December 31, 2003 are derived from the audited financial
statements of the Company. The following data should be read in conjunction
with the financial statements and related notes and also with Management's
Discussion and Analysis of Financial Condition and Results of Operations,
which are included elsewhere in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>

In thousands, except per share and operating data                              2003       2002        2001        2000       1999
<S>                                                                          <C>        <C>         <C>         <C>        <C>
STATEMENT OF OPERATIONS DATA
Operating revenues
 Water sales                                                                 $ 35,164   $ 33,644    $ 31,362    $ 27,090   $ 26,310
 Other revenue                                                                  1,131        953         625         461        467
Total operating revenues                                                     $ 36,295   $ 34,597    $ 31,987    $ 27,551   $ 26,777
 Operating expenses
 Operating and maintenance                                                   $ 19,629   $ 18,334    $ 17,619    $ 15,399   $ 14,690
 Depreciation and amortization                                                  3,635      3,392       3,001       2,706      2,417
 State and federal income taxes                                                 2,387      2,825       2,184       1,619      1,960
 Property and other taxes                                                       2,115      1,871       1,782       1,616      1,620
Total operating expenses                                                     $ 27,766   $ 26,422    $ 24,586    $ 21,340   $ 20,687

Operating income                                                             $  8,529   $  8,175    $  7,401    $  6,211   $  6,090
Other income, net                                                                 277        380         457         295        188
Total income before interest charges                                         $  8,806   $  8,555    $  7,858    $  6,506   $  6,278

Interest charges                                                             $  4,889   $  4,388    $  4,537    $  4,055   $  3,298

Net income                                                                   $  3,917   $  4,167    $  3,321    $  2,451   $  2,980
Dividends on preferred stock                                                       71         42          51          61         71
Net income applicable to common stock                                        $  3,846   $  4,125    $  3,270    $  2,390   $  2,909

Net income per share of common stock:
 Basic                                                                       $   0.99   $   1.17    $   1.07    $   0.79   $   0.99
 Diluted                                                                     $   0.96   $   1.14    $   1.05    $   0.78   $   0.97
Avg. shares of common stock outstanding
Basic                                                                           3,880      3,534       3,039       3,011      2,942
Diluted                                                                         3,993      3,612       3,108       3,066      2,994
Cash dividends per share of common stock                                     $ 0.7975   $   0.77    $   0.74    $   0.73   $   0.71

BALANCE SHEET DATA
Utility plant, at original cost less accumulated depreciation                $187,893   $167,338    $152,356    $134,038   $122,481
Total assets                                                                 $216,324   $183,072    $163,534    $144,407   $132,482
Notes payable                                                                $ 12,499   $  3,163    $ 16,118    $  2,000   $  7,617
Long-term obligations and redeemable preferred stock, including current
  portions                                                                   $ 80,846   $ 64,591    $ 50,998    $ 52,236   $ 36,165
Stockholders' equity                                                         $ 52,691   $ 51,176    $ 34,445    $ 32,829   $ 32,356
Total capitalization                                                         $133,249   $115,246    $ 84,015    $ 83,846   $ 67,285

OPERATING DATA
Average water sales per customer                                             $    505   $    495    $    474    $    417   $    420
Water pumped (millions of gallons)                                              7,199      7,198       7,321       6,886      6,758
Number of metered customers                                                    69,687     68,049      66,173      64,902     62,621
Miles of water main                                                               938        917         888         872        842
</TABLE>



                                       8

<PAGE>
Item 7 -- Management's Discussion & Analysis of Operations & Financial
Condition.

OVERVIEW

Our earnings per share applicable to our common stock shareholders were lower
than we anticipated for 2003 as a result of the weather conditions experienced
in 2003. Our regulated water utility's earnings, which comprise 98.9% of the
total earnings, are directly affected by the amount and duration of
precipitation during periods when water is used for purposes outside the home
or office such as irrigation. In 2003, our service area experienced an unusual
amount of precipitation throughout the year, especially affecting the need for
irrigation for our customers. By comparison, in 2002, our service area was
impacted by drought conditions that, because of the duration of the drought
period, resulted in mandatory restrictions for non-essential water use. These
restrictions had the effect of reducing consumption through voluntary and
mandatory restricted usage. We do not expect this trend to continue although
we can not reasonably predict the amount, timing and duration of precipitation
nor the effect it might have on our customers' water consumption.

Our gross water sales revenues were also affected in 2003 by the completion of
a rate application which resulted in an increase in rates to customers of
9.68%. However, that rate increase request, filed in April 2002, did not
include recovery of capital expense associated with the investment in utility
plant made during 2003. To recognize these investments and increases in other
expenses incurred during 2003 and expected through June 30, 2004, we filed for
an additional increase in rates of 24% with the Delaware Public Service
Commission on February 5, 2004. We expect to complete this application before
December 31, 2004, however, as permitted by state law, we plan to collect
revenues reflecting a temporary increase of $2.5 million on an annual basis
beginning April 2004.

Artesian Water Pennsylvania, Inc., our wholly owned Pennsylvania water utility
subsidiary, began operations in 2002, providing water service to a residential
community, consisting of 41 homes, in Chester County. Our other subsidiaries,
neither of which is regulated, are Artesian Wastewater Management, Inc., which
provides wastewater services in Delaware, and Artesian Development
Corporation, whose sole activity is the ownership of an eleven-acre parcel of
land. On October 14, 2003, we filed an application with the Pennsylvania
Public Utilities Commission to increase our service area in Pennsylvania. The
application concerns four specific developments that are expected to add 350
customers over 10 years.

While water sales revenues are our primary source of gross revenues,
generating nearly 96.9% of total gross revenues, we continue to explore and
develop relationships with developers and municipalities in order to increase
revenues from contract water operations and from wastewater management
services provided by Artesian Wastewater Management, Inc. In 2003, our efforts
led to an increase in those revenues of $100,000, or 34.8% over 2002. Our
contract operations and wastewater management services provide a revenue
stream which is not affected by changes in weather patterns. We plan to
continue developing and expanding our contract operations and wastewater
services in a manner that complements our growth in water service to new
customers. Our anticipated growth in these areas is subject to changes in
residential and commercial construction in Delaware which may be affected by
interest rates, inflation and general housing and economic market conditions.

Water Industry

In the United States, the water industry is comprised of more than 50,000
systems, 84% of which serve less than 3,300 customers. Only 15% of all water
systems are currently run by investor-owned utilities. There are currently 12
publicly traded water utilities. The rest are privately or municipally owned
systems. The water industry is capital intensive, with the highest capital
investment in plant and equipment per dollar of revenue among all utilities.
Increasingly stringent drinking water regulations have required the water
industry to invest in more advanced treatment systems and processes which
require a heightened level of expertise. In February 2001, the EPA estimated
that the nation's water systems must invest a minimum of $141.6 billion
through 2018 to meet the requirements of the Safe Drinking Water Act of 1974.
We are currently in full compliance with the requirements of the Safe Drinking
Water Act. Even though our water utility was founded in 1905, over 90% of our
investment in infrastructure has occurred through growth over the last 30
years.

We believe that Delaware's generally lower cost of living in the region,
availability of development sites in relatively close proximity to the
Atlantic Ocean in Sussex County, and attractive financing rates for
construction and mortgages have resulted, and will continue to result, in
increases to our customer base. Based on U.S. Census Bureau reports, Delaware
has recorded a 17% growth in residents since 1990 with Sussex County providing
a


                                       9

<PAGE>
population growth of 38% during the same period. Substantial portions of
Delaware are not served by a public water system. Interest rates for mortgages
have fallen from 6.84% on average in December 2001 to 5.81% through December
2003. Long-term interest rates for our recent First Mortgage Bond issuance
(see Note 6) reflect a similar trend as we were able to reduce our overall
weighted cost of debt from 7.93% in 2001 to 6.88% at the end of 2003.

Strategic Direction

We believe the effects of weather are short term and do not materially affect
the execution of our strategic initiatives. In 2003, we met our customer
growth objective, increasing our customer base by 2.5%. We exceeded our
expectations concerning growth in service territory during 2003, adding 7.8
square miles, a 6.0% increase. We continued to increase our sources of supply,
adding 4.0 million gallons to our daily production capacity, to assure we have
adequate high quality water supply to meet our customer growth expectations.

Our continued focus on these objectives has permitted us to increase net
income available to common shareholders by 32.2% over the last five years. Our
strategy is to focus on total resource management covering a wide spectrum of
activities, which include identifying new and dependable sources of supply;
developing the wells, treatment plants and delivery systems to get water to
the customers; educating customers on the wise use of water; and providing
responsible wastewater management to assist with recharge of the aquifers. Our
strategy includes focusing our efforts to expand in new regions added to our
service territory over the last 10 years, where growth is strong and demand is
increasing. These regions have provided over half of our growth in customers
in 2003 and we expect growth to remain strong in these regions. We also
foresee significant growth opportunities in our wastewater subsidiary and will
continue to seek strategic partnerships and relationships with developers and
municipalities to complement existing agreements for the provision of
wastewater service in Delaware.

Regulatory Matters and Inflation

As of December 31, 2003, we had approximately 70,000 metered customers and
served a population of approximately 230,000, representing approximately 29%
of Delaware's total population. Increases in the number of customers served by
Artesian Water contribute to increases in our operating revenues. The Delaware
PSC regulates Artesian Water's rates charged for water service, the sale and
issuance of securities and other matters. We periodically seek rate increases
to cover the cost of increased operating expenses, increased financing
expenses due to additional investments in utility plant and other costs of
doing business. In Delaware, utilities are permitted by law to place rates
into effect, under bond, on a temporary basis pending completion of a rate
increase proceeding. The first temporary increase may be up to the lesser of
$2.5 million on an annual basis or 15% of gross water sales. Should the rate
case not be completed within seven months, by law, the utility may put the
entire requested rate relief in effect under bond until a final resolution is
ordered and placed into effect. If any such rates are found to be in excess of
rates the PSC finds to be appropriate, the utility must refund the portion
found to be in excess to customers with interest.

We currently derive our water service revenues from water consumption, upon
which base rates are applied, which were last increased and placed into effect
May 1, 2003. We filed for a rate increase in April 2002. Temporary rates
generating an additional $2.5 million on an annual basis, or a 7.71% increase,
were placed into effect on June 1, 2002. On December 3, 2002 we placed into
effect an additional $1.4 million in temporary rates as permitted by law. A
final rate increase award of $3.3 million on an annual basis, or a 9.68%
increase, was approved and placed into effect on May 1, 2003. On February 5,
2004, we again filed with the Delaware Public Service Commission (PSC) a rate
application requesting an increase in rates sufficient to generate an
additional $8.8 million on an annual basis, or an approximate 24.22% increase,
in gross water sales revenue to recognize the significant increase in utility
plant and equipment placed in service and increases in operating expenses. We
expect to place temporary rates into effect on April 5, 2004 that will
generate an additional $2.5 million on an annual basis in water sales revenue
as permitted by law. We cannot predict whether the Public Service Commission
will approve the requested increase, approve a smaller increase or deny the
request altogether.

Delaware statute permits water utilities to put into effect, on a semi-annual
basis, increases related to specific types of distribution system improvements
through a Distribution System Improvement Charge (DSIC). This charge is
available to water utilities to be implemented between general rate increase
applications that normally recognize changes in a water utility's overall
financial position. The DSIC process significantly reduces expenses when
compared to those typically associated with general rate increase requests. We
requested on May 30, 2003 and subsequently implemented a 0.39% overall
surcharge for bills rendered subsequent to July 1, 2003. Through this


                                       10

<PAGE>
charge, we generated approximately $80,000 in revenues during 2003.
Furthermore, we requested on November 30, 2003, and subsequently implemented,
a 1.13% DSIC surcharge for bills rendered subsequent to January 1, 2004. This
surcharge was designed and is expected to generate approximately $204,000 in
revenues between January and June of 2004.

We are affected by inflation, most notably by the continually increasing costs
required to maintain, improve and expand our service capability. The
cumulative effect of inflation results in significantly higher facility costs
compared to investments made 20 to 40 years ago, which must be recovered from
future cash flows.

CRITICAL ACCOUNTING ESTIMATES

We record water service revenue, including amounts billed to customers on a
cycle basis and unbilled amounts, based upon estimated usage from the date of
the last meter reading to the end of the accounting period. These estimates
are made on an individual customer basis, based on the previous year's
consumption in the same period, and are adjusted to reflect current changes in
water demand on a system-wide basis. While actual usage for individual
customers may differ materially from the estimate, we believe the overall
total estimate of consumption and revenue for the fiscal period will not
differ materially from actual billed consumption, as the overall estimate has
been adjusted to reflect any change in overall demand on the system for the
period.

Our regulated water utility records deferred regulatory assets under Statement
of Financial Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation," which are expenses that may be recovered over
various lengths of time as prescribed by the PSC. As the utility incurs
certain expenses, such as expenses related to rate case applications, a
deferred regulatory asset is created. Adjustments to these deferred regulatory
assets are made when the PSC determines whether the expense is recoverable in
rates, the length of time over which an expense is recoverable, or, because of
changes in circumstances, whether a remaining balance of deferred expense is
no longer recoverable in rates charged to customers. Adjustments to reflect
changes in recoverability of certain deferred regulatory assets may have a
material effect on our financial results.

RESULTS OF OPERATIONS

2003 Compared to 2002

Operating Revenues

Revenues totaled $36.3 million in 2003 and were 4.9% above revenues in 2002 of
$34.6 million, reflecting an increase in water sales of 4.5% due to customer
growth and rate increases approved by the PSC in 2003. We realized 96.9% of
our total revenue in 2003 from the sale of water.

On April 2, 2002, Artesian Water filed a petition with the Delaware PSC
seeking to raise rates for water service by 23.12% or $7.5 million. The
Delaware PSC, on April 16, 2002, suspended the implementation of the proposed
new rates pending further investigation and public evidentiary hearings.
Pending these hearings and a final ruling by the Delaware PSC, Artesian Water,
as is permitted by law, placed 7.71% of the proposed rates into effect under
bond beginning June 1, 2002. Beginning December 3, 2002, Artesian Water placed
an additional 3.69% of the proposed rates into effect. On April 15, 2003, the
Delaware PSC issued PSC Order No. 6147 approving an increase in Artesian
Water's revenue requirement of 9.68% effective May 1, 2003. These rates
represent an increase in water consumption charges, customer charges, and fire
hydrant ready-to-serve charges necessary to generate an increase in annual
operating revenues of approximately $3.3 million. Since temporary rates were
in excess of the final rate increase, in June 2003 we refunded approximately
$201,000 plus interest to our customers. Since Artesian Water had reserved
revenue related to the second temporary increase of $234,000, an additional
$33,000 was recorded to revenue for the second quarter.


                                       11

<PAGE>
Percentage of Revenues by Customer Class

<TABLE>
<CAPTION>

                                                                                                         2003      2002       2001
                                                                                                       -------    -------   -------
<S>                                                                                                    <C>        <C>       <C>
Residential                                                                                             59.83%     59.57%    60.28%
Commercial                                                                                              24.00%     23.83%    24.80%
Industrial                                                                                               0.88%      1.31%     1.25%
Government and Other                                                                                    12.17%     12.54%    11.71%
Other utility operating revenues                                                                         2.05%      1.92%     1.60%
Non-utility operating revenues                                                                           1.07%      0.83%     0.36%
                                                                                                       -------    -------   -------
 Total                                                                                                 100.00%    100.00%   100.00%
</TABLE>


Residential

Residential water service revenues in 2003 amounted to $21.7 million, an
increase of 5.3% over the $20.6 million recorded in 2002. The increase in 2003
follows an increase of 6.9% in 2002. The volume of water sold to residential
customers increased from 3,627 million gallons in 2002 to 3,650 million
gallons in 2003. Although the number of residential customers served increased
2.6% in 2003, unusually wet weather during the summer of 2003 suppressed water
demand.

Commercial

Revenues from commercial customers in 2003 increased by 6.1% to $8.7 million,
from $8.2 million in 2002 due to rate increases in 2003. The number of
commercial customers served increased 0.9% in 2003 and the 2,166 million
gallons of water sold to commercial customers in 2003 was nearly the same as
the 2,167 million gallons sold in 2002, as unusually wet weather in 2003 and
restrictions on water use imposed during the drought of 2002 both suppressed
demand by these customers.

Industrial

Revenues from industrial customers decreased by 29.8% from $453,000 in 2002 to
$318,000 in 2003. The volume of water sold to industrial customers decreased
47.1% from 221 million gallons in 2002 to 117 million gallons in 2003
primarily as a result of decreased usage by three of our industrial customers
and it is currently unknown whether it will return to its former level.

Government and Other

Government and other revenues in 2003 increased by 2.3% to $4.4 million from
$4.3 million in 2002. Revenues derived from fire protection services totaled
$2.3 million in 2003 and 2002. The increase in revenue resulted from increases
in rates, offset by decreased resale customer consumption.

Other Utility Operating Revenue

Other utility operating revenue, derived from contract operations, antenna
leases on water tanks and finance charges increased 11.7% in 2003 to $744,000
from $666,000 in 2002. This is primarily a result of an increase in revenues
from contract operation services as a result of the operation of the
Middletown Wastewater Treatment Plant for a full year in 2003 versus a partial
year in 2002.

Operating Expenses

Operating expenses, excluding depreciation and taxes, increased approximately
$1.3 million, or 7.1%, to $19.6 million in 2003. The increase in operating
expenses resulted primarily from increases in payroll and related expenses,
purchased water and administrative expenses. Payroll and related expenses
increased by $386,000, or 4.0%, due to increases in annual merit compensation
and medical insurance premiums. Purchased water expense increased $491,000
from 2002 levels due to the Chester Water Authority removing minimum purchase
requirements


                                       12

<PAGE>
due to the drought conditions in the summer and fall of 2002 and our ability
to rely on our less costly groundwater supply in 2002. Administrative expenses
increased by $272,000 due to increased power expense due to additional pumping
and treatment stations, and due to increased property and liability insurance.
The ratio of operating expense, excluding depreciation and taxes, to total
revenue was 54.1% for the year ended December 31, 2003, compared to 53.0% for
the year ended December 31, 2002.

Operating and Maintenance Expenses

<TABLE>
<CAPTION>

                                                                                                         2003      2002       2001
                                                                                                       -------    -------   -------
<S>                                                                                                    <C>        <C>       <C>
Payroll and Associated Expenses                                                                         50.98%     52.47%    50.46%
Purchased Water                                                                                         15.16%     13.55%    15.62%
Repair and Maintenance                                                                                   5.57%      5.48%     5.11%
Water Treatment                                                                                          3.28%      3.47%     3.50%
Administrative                                                                                          23.76%     23.96%    24.90%
Non-utility Operating                                                                                    1.25%      1.07%     0.41%
                                                                                                       -------    -------   -------
 Total operating and maintenance expenses                                                              100.00%    100.00%   100.00%
</TABLE>


Depreciation and amortization expense increased $243,000, or 7.2%, due to
increases in our utility plant in service during 2003. Income tax expense
decreased $438,000, or 15.5%, due to decreased profitability in 2003. Our
total effective income tax rate for 2003 and 2002 was 37.9% and 40.4%,
respectively.

Interest Charges

Interest charges increased $501,000, or 11.4%, primarily due to a $777,000
increase associated with the net issuance of $15 million in First Mortgage
Bonds financing additions to utility plant. This was partially offset by lower
interest expense associated with short term debt. Average outstanding lines of
credit during 2003 of $8.6 million decreased by $7.9 million, compared to the
average outstanding lines of credit during 2002 of $16.5 million as a result
of the issuance of First Mortgage Bonds. The average interest rate applied to
these balances decreased from 2.7% in 2002 to 2.2% in 2003 due to a decreasing
interest rate environment in 2003.

Net Income

For the year ended December 31, 2003, our net income applicable to common
stock decreased $279,000, or 6.8%, compared to 2002. The decrease in net
income was primarily due to unusually wet weather conditions during the summer
of 2003 that reduced customer water usage, an increase in purchased water
expense compared to 2002 when minimum purchase requirements were waived during
drought conditions, and increased interest expense associated with the
issuance of debt to finance additions to utility plant.

2002 Compared to 2001

Operating Revenues

Revenues totaled $34.6 million in 2002 and were 8.2% above revenues in 2001 of
$32.0 million, reflecting an increase in water sales of 7.3% due to customer
growth and rate increases approved by the PSC in 2002. We realized 97.2% of
our total revenue in 2002 from the sale of water.

We filed an application with the PSC on April 2, 2002, to increase rates for
water service for all of Artesian Water's customers. A temporary rate
increase, calculated to increase annualized revenues $2.5 million, was
approved by the PSC and placed into effect on June 1, 2002. Beginning
December 3, 2002, as is permitted by law, the Company placed an additional
rate increase into effect, to generate an additional increase in annualized
revenues of $1.4 million. The increase in revenues for the various customer
classes will not consistently match changes in consumption levels for the
class primarily due to our use of a multiple rate block structure. This
structure charges different rates for different levels of consumption. In
addition, rate increases are distributed among the rate blocks and service
charges through a cost of service analysis and may not reflect, on an
individual class or charge basis, the overall increase in rates approved by
the PSC.


                                       13

<PAGE>
Residential

Residential water service revenues in 2002 amounted to $20.6 million, an
increase of 6.9% over the $19.3 million recorded in 2001. The increase in 2002
follows an increase of 17.4% in 2001. The volume of water sold to residential
customers, however, decreased by 5.0% from 3,809 million gallons in 2001 to
3,627 million gallons in 2002, primarily as a result of drought water use
restrictions in 2002. The number of residential customers served increased
2.8% in 2002.

Commercial

Revenues from commercial customers in 2002 increased by 3.9% to $8.2 million,
from $7.9 million in 2001. The volume of water sold to commercial customers
decreased by 9.1% from 2,384 million gallons in 2001 to 2,167 million gallons
in 2002, primarily as a result of drought water use restrictions in 2002. The
number of commercial customers served increased 1.2% in 2002.

Industrial

Revenues from industrial customers in 2002 increased by 13.1% to $453,000,
from $400,000 in 2001. The volume of water sold to industrial customers
increased 33.8% from 165 million gallons in 2001 to 221 million gallons in
2002 primarily as a result of the addition of one new customer.

Government and Other

Government and other revenues in 2002 increased by 15.8% to $4.3 million, from
$3.7 million in 2001. Revenues derived from fire protection services totaled
$2.3 million in 2002, exceeding 2001 revenue by 22.9%. The remaining revenue
increase was derived from the sale of water to neighboring utilities,
government agencies, pools and other temporary and seasonal customers.

Other Utility Operating Revenue

Other utility operating revenue, derived from contract operations, antenna
leases on water tanks and finance charges increased 30.6% in 2002 to $666,000,
from $509,000 in 2001. This is primarily a result of an increase in revenues
for contract operation services.

Operating Expenses

Operating expenses, excluding depreciation and taxes, increased approximately
$715,000, or 4.1%, to $18.3 million in 2002. The increase in operating
expenses resulted primarily from an increase in payroll and related expense of
$731,000, or 8.2%, due to the addition of new employees and increases in
annual merit compensation. Purchased water expenditure decreased $267,000 from
2001 levels due to the Chester Water Authority removing minimum purchase
requirements due to the drought conditions in the summer and fall of 2002 and
our ability to rely on our less costly groundwater supply in 2002. Water
treatment expense increased $68,000 primarily due to expanded testing of our
sources of supply. Finally, our administrative expenses remained flat. This
reflects the one-time $280,000 expense recognition in 2001 for legal costs
associated with the suspended negotiations for the purchase of Tidewater
Utilities, a subsidiary of Middlesex Water Company, offset by an increase in
2002 in consulting and temporary services of $323,000, which reflects the use
of these services prior to filling positions with full-time employees. The
ratio of operating expense, excluding depreciation and taxes, to total revenue
was 53.0% for the year ended December 31, 2002, compared to 55.1% for the year
ended December 31, 2001.

Depreciation and amortization expense increased $391,000, or 13.0%, due to
increases in our utility plant in service in 2002. Income tax expense
increased $641,000, or 29.3%, due to increased profitability in 2002. Our
total effective income tax rate for 2002 and 2001 was 40.4% and 39.7%,
respectively.


                                       14

<PAGE>
Interest Charges

Interest charges decreased $149,000, or 3.3%, primarily due to a $208,000
decrease in interest associated with our short-term debt. Average outstanding
lines of credit during 2002 of $16.5 million increased by $2.3 million,
compared to the average outstanding lines of credit during 2001 of
$14.2 million. The average interest rate applied to these balances decreased
from 4.8% in 2001 to 2.7% in 2002 due to a decreasing interest rate
environment in 2002.

Net Income

For the year ended December 31, 2002, our net income applicable to common
stock increased $855,000, or 26.1%, compared to 2001. The increase in net
income was primarily due to decreases in purchased water and legal expenses,
lower interest rates on short-term lines of credit, continued customer growth,
and rate increases authorized in 2001 and 2002.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our primary sources of liquidity for 2003 were $14.1 million provided by cash
flow from operating activities and $10.7 million from financing activities,
which includes $2.0 million in contributions and advances. Cash flow from
operating activities is primarily provided by our utility operations, and is
impacted by the timeliness and adequacy of rate increases and changes in water
consumption as a result of year to year variations in weather conditions,
particularly during the summer.

We rely on our sources of liquidity for investments in our utility plant and
to meet our various payment obligations. We expect that our aggregate
investments in our utility plant and systems in 2004 will be approximately
$25.4 million. Our total obligations related to dividend and sinking fund
payments on preferred stock, interest and principal payments on indebtedness,
rental payments and water service interconnection agreements for 2004 are
anticipated to be approximately $8.7 million. We expect that our available
cash balances, our projected cash generated from operations and available bank
credit lines will be sufficient to fund our activities for the next two years.

Investment in Utility Plant and Systems

Capital expenditures increased by approximately $6.2 million for the year
ended December 31, 2003, or approximately 33.7%, from $18.4 million in 2002 to
$24.6 million in 2003. Investment in utility plant, excluding advances and
contributions in aid of construction received from real estate developers,
increased by $7.1 million, or 44.1%, from $15.9 million in 2002 to
$23.2 million in 2003. Developers financed $1.4 million for the installation
of water mains and hydrants serving their developments in 2003, compared to
$2.3 million financed by developers in 2002.

We invested approximately $10.7 million in new transmission and distribution
facilities, including refunds of advances for developer-financed
infrastructure. Of the $10.7 million invested, we invested $6.0 million in new
infrastructure to serve 1,677 new customers and $4.7 million in our
rehabilitation program for transmission and distribution facilities, replacing
aging or deteriorating mains. An investment of $6.7 million was made to
enhance or improve existing treatment facilities, rehabilitation of pumping
equipment and installation of new wells to increase supply capabilities.

The remaining $5.8 million of capital investment in 2003 was made for general
plant, including the purchase of our corporate office, fleet vehicles and
computer equipment. We completed the purchase of the land and our principal
corporate office at 664 Churchmans Road, Newark, Delaware for $5.0 million,
including expenses, on October 20, 2003. This facility had been previously
leased from the former partners of White Clay Realty who owned the property
jointly as tenants in common. For a discussion of the events leading up to our
purchase of this property and for additional disclosures regarding this
transaction, see Item 3 (Legal Proceedings).


                                       15

<PAGE>
Investment in Utility Plant and Systems
<TABLE>
<CAPTION>

In thousands                                                                                             2003      2002       2001
                                                                                                       -------    -------   -------
<S>                                                                                                    <C>        <C>       <C>
Source of supply                                                                                       $ 6,113    $ 1,491   $ 1,217
Treatment and pumping                                                                                      569      5,686     5,935
Transmission and distribution                                                                           10,699      7,451    10,657
General plant and equipment                                                                              5,806      1,429     1,428
Developer financed utility plant                                                                         1,375      2,345     2,108
                                                                                                       -------    -------   -------
Total Investment in utility plant and systems                                                          $24,562    $18,402   $21,345
</TABLE>


We have planned to invest approximately $25.4 million in utility plant in
2004. Developers are expected to finance an additional $3.2 million in utility
plant construction. The largest portion of projected investment is primarily a
result of our efforts to identify, develop, treat and protect sources of water
supply to assure uninterrupted service to our customers. We expect to invest
approximately $7.7 million in new treatment facilities, equipment and wells
throughout Delaware.

As part of our total utility plant investment, we expect to invest over
$14.6 million in transmission and distribution facilities. We project
approximately $4.1 million will be invested in the relocations of facilities
as a result of government mandates and renewals associated with the
rehabilitation of aging infrastructure. We also project investing
approximately $9.5 million in new transmission and distribution facilities to
improve our system hydraulics and address service needs in growth areas of our
service territory.

Financing

We have several sources of liquidity to finance our investment in utility
plant and other fixed assets. We estimate that the projected investment of
approximately $25.4 million will be financed by our operations and external
sources, including a combination of capital investment and borrowings from the
Delaware Drinking Water State Revolving Fund and short-term borrowings under
our revolving credit agreements discussed below. Developers are expected to
finance, through advances and contributions in aid of construction, an
additional $3.2 million of capital expenditures, which includes the
installation of mains and hydrants in new developments.

Our cash flows from operations are primarily derived from water sales revenues
and may be materially affected by changes in water sales due to weather and
the timing and extent of increases in rates approved by the Delaware Public
Service Commission.

At December 31, 2003, Artesian Water had lines of credit with three separate
financial institutions totaling $35.0 million to meet temporary cash
requirements. These revolving credit facilities are unsecured. As of
December 31, 2003, we had $22.5 million of available funds under these lines.
The interest rate for borrowings under each of these lines is the London
Interbank Offering Rate plus 1.0% or the banks' federal funds rate plus 1.0%,
at our discretion. All the facilities are reviewed annually by each bank for
renewal.

We may, from time to time, sell our securities to meet capital requirements.
The amount and timing of future sales of our securities will depend upon
market conditions and our specific needs. Our trust indentures, which set
certain criteria for the issuance of new long-term debt, limit long-term debt,
including the short-term portion thereof, to 66 2/3% of total capitalization.
Our debt to total capitalization, including the short-term portion thereof,
was 60.46% at December 31, 2003.

In order to meet the expected level of investment in utility plant and retain
future financing flexibility, we issued a $25 million Series P 6.58% First
Mortgage Bond on January 31, 2003. With the proceeds, we refinanced our Series
L 8.03% First Mortgage Bond, which was due on February 1, 2003, along with
$14.9 million of outstanding short-term debt under our lines of credit.

On February 25, 2003, Artesian Water Company, Inc. (the "Company") entered
into an agreement to borrow funds from the Delaware Drinking Water State
Revolving Fund (the "Fund"). The Company previously received a binding
commitment offer from the Fund for a loan in the amount of $2,900,285 for a
term of twenty years at an interest rate of 3.57%. The loan will be used for
costs associated with the installation of new public water systems


                                       16

<PAGE>
for Keen-wick West/Keen-wick South and Route 54, Phase II projects in Sussex
County, Delaware. The funds will be disbursed as construction is completed. We
have requested and received disbursements of $1,745,646 through February 26,
2004, of which $1,318,750 was received at December 31, 2003.

On November 7, 2003, Artesian Water Company, Inc. entered into an agreement to
borrow $5,456,495 from the Fund for a term of twenty years at an interest rate
of 3.64%. The loan will be used for costs associated with the replacement and
rehabilitation of transmission and distribution mains within several
developments in our northern New Castle County service territory. The funds
will be disbursed as construction is completed. We have not requested any
disbursements as of December 31, 2003.

In order to meet certain expected investments in 2004, we issued Series Q
4.75% First Mortgage Bonds in December 2003 (the "Series Q Bonds") in the
amount of $15 million. The interest paid to investors for the Series Q Bonds
is considered tax free as these bonds were issued through an agreement with
the Delaware Economic Development Authority. The Series Q Bonds were issued to
pay for specific projects previously approved to assure the Series Q Bonds tax
free status. The proceeds from these bonds are held on our behalf by the First
Mortgage Bond Trustee, Wilmington Trust and will be disbursed to us as
construction is completed. Interest which accrues to our benefit is added to
the fund for use in completing construction of the various approved projects.
None of the proceeds had been disbursed to us at December 31, 2003.

Our 7% Preferred Stock was called for redemption on February 21, 2003. The
total amount paid to stockholders was $30.00 per share or $326,040. On
February 1, 2004, the 9.96% Preferred Stock was retired as provided under the
terms of our Restated Certificate of Incorporation.

Contractual Obligations

<TABLE>
<CAPTION>

                                                                                              Payments Due by Period
                                                                              Less than                 4-5      After 5
In thousands                                                                   1 Year     1-3Years     Years      Years      Total
                                                                              ---------   --------    -------    -------   --------
<S>                                                                           <C>         <C>         <C>        <C>       <C>
First Mortgage Bonds                                                           $   --      $   --     $15,000    $60,400   $ 75,400
State revolving fund loans                                                        188         452         481      4,225      5,346
Operating leases                                                                   80          99          10         --        189
Unconditional purchase obligations                                              2,973       5,932       5,351     34,755     49,011
Tank painting contractual obligation                                              249         249          --         --        498
                                                                               ------      ------     -------    -------   --------
 Total contractual cash obligations                                            $3,490      $6,732     $20,842    $99,380   $130,444
                                                                               ======      ======     =======    =======   ========
</TABLE>


Long-term debt obligations reflect the maturities of certain series of our
first mortgage bonds, which we intend to refinance when due. The state
revolving fund loan obligation has an amortizing mortgage payment, payable
over a 20-year period, and will be refinanced as future securities are issued.
Both the long-term debt and the state revolving fund loan have certain
financial covenant provisions, which could result in default and require the
obligation to be repaid, however, there are also specific cure provisions
which allow us to avoid default of the obligation. We have not experienced
conditions which would result in our default under these agreements, and we do
not anticipate any such occurrence. Payments for unconditional purchase
obligations reflect minimum water purchase obligations based on rates that are
subject to change under our interconnection agreements with neighboring
utilities.

<TABLE>
<CAPTION>

                                                                                 Less than
Commitments                                                          Committed     1 Year     1-3 Years    4-5 Years   Over 5 Years
-------------------------------------------                          ---------   ---------    ---------    ---------   ------------
<S>                                                                  <C>         <C>          <C>          <C>         <C>
Lines of Credit                                                       $12,499     $12,499
</TABLE>


IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In December 2003, the FASB issued revised Statement No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits-an amendment of
FASB Statements No. 87, 88, and 106." This statement requires additional
disclosures to those in the original Statement No. 132 about the assets,
obligations, cash flows, and net periodic benefit cost of defined pension
plans and other defined benefit postretirement plans. Disclosures for earlier


                                       17

<PAGE>
annual periods presented for comparative purposes are restated. This statement
is effective for financial statements with fiscal years ending after
December 15, 2003. The additional disclosures required for our postretirement
benefit obligation are presented in Note 10.

In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
This statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. The statement is effective for financial instruments entered into or
modified after May 31, 2003 and effective for other instruments beginning at
the first interim period beginning after June 15, 2003. The adoption of this
statement did not have a material impact on our financial condition or results
of operation.

In April 2003, the FASB issued Statement No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities." This statement amends and
clarifies financial accounting and reporting related to derivatives and
hedging activities under FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement is effective for contracts
entered into or modified, and hedging relationships designated, after June 30,
2003. The adoption of this statement did not have a material impact on our
financial condition or results of operation.

In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-
Based Compensation-Transition and Disclosure." Statement No. 148 amends
Statement No. 123, "Accounting for Stock-Based Compensation," by providing
alternate methods of transitioning to fair value based accounting for Stock-
Based compensation, for those who choose to change. It also amends disclosure
requirements of SFAS No. 123 for both annual and interim financial statements.
Certain of the disclosure modifications are required for fiscal years ending
after December 15, 2002, and are included in the notes to our consolidated
financial statements.

In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This statement nullifies EITF
94-3, which addressed this subject. The statement requires recognition of a
liability for a cost associated with an exit or disposal activity when the
liability is incurred. Our adoption of this statement did not have a material
impact on our financial condition or results of operation.

In April 2002, the FASB issued Statement No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections." Statement No. 145 eliminates accounting treatment described in
Statements No. 4 and 64 related to Extinguishment of Debt and amends Statement
No. 13 regarding the use of sale -- lease back accounting. Our adoption of
this statement did not have a material impact on our financial condition or
results of operation.

In August 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations." Statement No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-
lived assets and the associated asset retirement costs. Statement No. 143
requires recognition of a liability at fair value and an increase to the
carrying value of the related asset for any retirement obligation. This amount
would then be amortized over the life of the asset. The liability would be
adjusted at the end of each period to reflect the passage of time and changes
in the estimated future cash flows. This statement was effective January 2003.
Our adoption of this statement did not have a material impact on our financial
condition or results of operation

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others," an interpretation of FASB Statements
No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. This
Interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under guarantees
issued. The Interpretation also clarifies that a guarantor is required to
recognize, at inception of a guarantee, a liability for the fair value of the
obligation undertaken. The initial recognition and measurement provisions of
the Interpretation are applicable to guarantees issued or modified after
December 31, 2002 and did not have a material effect on the Company's
financial statements. The disclosure requirements were effective for financial
statements of interim and annual periods ending after December 31, 2002.

CAUTIONARY STATEMENT

Statements in this Annual Report which express our "belief," "anticipation,"
"projection" or "expectation," as well as other statements which are not
historical fact, are forward-looking statements within the meaning of the
Private


                                       18

<PAGE>
Securities Litigation Reform Act of 1995. These may include statements
regarding our goals, priorities and growth and expansion plans for our water
and wastewater subsidiaries, the timing and the amount of a final decision in
our pending rate case, exact amounts that may be collected under DSIC and the
temporary rate increase we plan to implement, our investment in utility plant
and systems in 2004, our sources of financing, and water quality standards.
Also included are our anticipated payments due in 2004 and satisfaction of our
debt covenants. Such statements involve risks and uncertainties that could
cause actual results to differ materially from those projected, including
material changes in demand from larger customers, changes in weather,
availability of labor, changes in government policies, levels of rate relief
granted and changes in economic conditions and the other risks described in
this document. All of the forward-looking statements made in this Annual
Report are based on our current beliefs and we undertake no obligation to
update any of these cautionary statements.


                                       19

<PAGE>
Item 8. -- Financial Statements and Supplementary Data.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                December 31,
In thousands                                                   2003       2002
<S>                                                          <C>        <C>
ASSETS
Utility plant, at original cost less accumulated
  depreciation                                               $187,893   $167,338
Current assets
 Cash and cash equivalents                                      1,128        874
 Accounts receivable, net                                       2,408      2,743
 Income tax receivable                                            841         --
 Receivable, other                                                 --      3,800
 Unbilled operating revenues                                    2,745      2,718
 Materials and supplies -- at cost on FIFO basis                  801        712
 Prepaid property taxes                                           711        651
 Prepaid expenses and other                                       577        422
                                                             --------   --------
                                                                9,211     11,920
                                                             --------   --------
Other assets
 Non-utility property (less accumulated depreciation
  2003-$75; 2002-$69)                                             334        308
 Restricted cash                                               14,219         --
 Other deferred assets                                          2,544      1,069
                                                             --------   --------
                                                               17,097      1,377
Regulatory assets, net                                          2,123      2,437
                                                             --------   --------
                                                             $216,324   $183,072
                                                             ========   ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
 Common stock                                                $  3,901   $  3,862
 Additional paid-in-capital                                    41,160     40,341
 Retained earnings                                              7,630      6,973
                                                             --------   --------
 Total stockholders' equity                                    52,691     51,176
                                                             --------   --------
Preferred stock-mandatory redeemable, net of current
  portion                                                          --        100
Long-term debt, net of current portion                         80,558     63,970
                                                             --------   --------
                                                              133,249    115,246
                                                             --------   --------
Current liabilities
 Notes payable                                                 12,499      3,163
 Current portion of long-term debt                                188        421
 Current portion of mandatorily redeemable preferred
  stock                                                           100        100
 Accounts payable                                               3,951      3,119
 Overdraft payable                                              1,337        709
 Income taxes payable                                              --        135
 Deferred income taxes                                            213         --
 Interest accrued                                                 267        569
 Customer deposits                                                422        410
 Other                                                            697        905
                                                             --------   --------
                                                               19,674      9,531
                                                             --------   --------
Deferred credits and other liabilities
 Net advances for construction                                 19,175     19,457
 Postretirement benefit obligation                              1,232      1,298
 Deferred investment tax credits                                  843        873
 Deferred income taxes                                         11,775      8,024
                                                             --------   --------
Commitments and contingencies (Note 11)
                                                               33,025     29,652
Net contributions in aid of construction                       30,376     28,643
                                                             $216,324   $183,072
                                                             ========   ========
</TABLE>


The notes are an integral part of the consolidated financial statements.


                                       20

<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                                            For the Year Ended
                                                                                                               December 31,
In thousands, except per share amounts                                                                   2003      2002       2001
<S>                                                                                                    <C>        <C>       <C>
Operating revenues
 Water sales                                                                                           $35,164    $33,644   $31,362
 Other utility operating revenue                                                                           744        666       509
 Non-utility operating revenue (Note 7)                                                                    387        287       116
                                                                                                       -------    -------   -------
                                                                                                        36,295     34,597    31,987
                                                                                                       -------    -------   -------
Operating expenses
 Utility operating expenses                                                                             19,245     17,963    17,368
 Non-utility operating expenses (Note 7)                                                                   245        196        73
 Related party expenses (Note 8)                                                                           139        175       178
 Depreciation and amortization                                                                           3,635      3,392     3,001
 Taxes
  State and federal income
   Currently payable (Note 3)                                                                           (1,543)       693       470
  Deferred (Note 3)                                                                                      3,930      2,132     1,714
  Property and other                                                                                     2,115      1,871     1,782
                                                                                                       -------    -------   -------
                                                                                                        27,766     26,422    24,586
                                                                                                       -------    -------   -------
Operating income                                                                                         8,529      8,175     7,401
Other income net
 Allowance for funds used during construction                                                              230        380       375
 Miscellaneous                                                                                              47         --        82
                                                                                                       -------    -------   -------
                                                                                                           277        380       457
                                                                                                       -------    -------   -------
Income before interest charges                                                                           8,806      8,555     7,858
                                                                                                       -------    -------   -------
Interest charges                                                                                         4,889      4,388     4,537
                                                                                                       -------    -------   -------
Net income                                                                                               3,917      4,167     3,321
Dividends on preferred stock and redemption premium                                                         71         42        51
                                                                                                       -------    -------   -------
Net income applicable to common stock                                                                  $ 3,846    $ 4,125   $ 3,270
Income per common share:
 Basic                                                                                                 $  0.99    $  1.17   $  1.07
 Diluted                                                                                               $  0.96    $  1.14   $  1.05

Weighted average common shares outstanding:
 Basic                                                                                                   3,880      3,534     3,039
 Diluted                                                                                                 3,993      3,612     3,108
Cash dividends per share of common stock                                                               $0.7975    $  0.77   $  0.74
</TABLE>

 The notes are an integral part of the consolidated financial statements.


                                       21

<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

In thousands                                                                                        For the Year Ended December 31,
                                                                                                     2003        2002        2001
<S>                                                                                                <C>         <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                                         $  3,917    $  4,167   $   3,321
Adjustments to reconcile net cash provided by operating activities:
 Depreciation and amortization                                                                        3,635       3,238       2,848
 Deferred income taxes, net                                                                           3,930       2,104       1,628
 Allowance for funds used during construction                                                          (230)       (380)      (375)
Changes in assets and liabilities:
 Accounts receivable, net                                                                               335        (133)      (643)
 Income tax receivable                                                                                (841)
 Receivable, other                                                                                    3,800      (3,800)         --
 Unbilled operating revenues                                                                            (27)       (559)       (57)
 Materials and supplies                                                                                 (89)        (96)        114
 Prepaid property taxes                                                                                 (60)        (62)          2
 Prepaid expenses and other                                                                            (155)         26         172
 Other deferred assets                                                                                 (557)        124         157
 Regulatory assets                                                                                      314        (209)        136
 Accounts payable                                                                                       832      (1,626)      1,577
 State and federal income taxes                                                                        (135)         97          38
Interest accrued                                                                                       (302)         14          25
Customer deposits and other, net                                                                       (196)        (89)         45
Postretirement benefit obligation                                                                       (66)        (62)       (95)
                                                                                                   --------    --------   ---------
Net cash provided by operating activities                                                            14,105       2,754       8,893
                                                                                                   --------    --------   ---------
CASH FLOWS USED IN INVESTING ACTIVITIES
 Capital expenditures (net of AFUDC)                                                                (24,562)    (18,402)   (21,345)
 Proceeds from sale of assets                                                                            13          13          11
 Investments in unconsolidated affiliates                                                                 9         (15)         --
                                                                                                   --------    --------   ---------
Net cash used in investing activities                                                               (24,540)    (18,404)   (21,334)
                                                                                                   --------    --------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES
 Net borrowings under line of credit agreements                                                       9,336       1,716       9,811
 Overdraft payable                                                                                      628        (274)      (241)
 Net advances and contributions in aid of construction                                                2,024       2,542       2,169
 Proceeds from issuance of long-term debt                                                            26,588          --       4,307
 Restricted funds from issuance of tax-free bonds                                                   (14,219)         --          --
 Deferred issuance costs                                                                               (927)         --          --
 Net proceeds from issuance of common stock                                                             769      15,560         590
 Dividends                                                                                           (3,177)     (2,724)    (2,296)
 Repayment of capital lease obligations                                                                  --          --        (26)
 Principal repayments of long-term debt                                                             (10,233)     (1,249)    (1,112)
 Redemption of preferred stock                                                                         (100)       (100)      (100)
                                                                                                   --------    --------   ---------
Net cash provided by financing activities                                                            10,689      15,471      13,102
                                                                                                   --------    --------   ---------
Net (decrease) increase in cash and cash equivalents                                                    254        (179)        661
Cash and cash equivalents at beginning of year                                                          874       1,053         392
                                                                                                   --------    --------   ---------
Cash and cash equivalents at end of year                                                           $  1,128    $    874   $   1,053
                                                                                                   --------    --------   ---------
Supplemental Disclosures of Cash Flow Information:
 Interest paid                                                                                     $  5,141    $  4,312   $   4,426
 Income taxes paid                                                                                 $    150    $    440   $     432
</TABLE>

See Note 1 (Stock Split) for a discussion of non-cash financing activity.



The notes are an integral part of the consolidated financial statements.


                                       22

<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                                     Common Shares
                                                                                 Preferred Shares     Outstanding     Common Shares
                                                                                  Outstanding 7%        Class A        Outstanding
>In thousands, except share amounts                                               Prior Preferred   Non-Voting(1)(6)  Class B(2)(6)
<S>                                                                              <C>                 <C>              <C>
Balance as of December 31, 2000                                                        10,868          2,432,001         587,680
Net income
Cash dividends declared
 Common stock
 Preferred stock
Stock repurchase
Issuance of common stock
 Officer bonus                                                                                             9,000
 Dividend reinvestment plan                                                                               14,859
 Employee stock options                                                                                    8,193
 Employee Retirement Plan(3)                                                                               8,178
Balance as of December 31, 2001                                                        10,868          2,472,231         587,680
Net income
Cash dividends declared
 Common stock
 Preferred stock
Stock repurchase                                                                     (10,868)
Issuance of common stock
 Public stock issuance(4)                                                                                750,000
 Officer bonus                                                                                             5,400
 Dividend reinvestment plan                                                                               16,160
 Employee stock options                                                                                   27,795
 Employee Retirement Plan(3)                                                                               2,179
Balance as of December 31, 2002                                                             0          3,273,765         587,680
Net income
Cash dividends declared
 Common stock
 Preferred stock (including redemption premium)(5)
Stock repurchase
Issuance of common stock
 Officer bonus                                                                                             3,000
 Dividend reinvestment plan                                                                               16,051
 Employee stock options                                                                                    9,635
 Employee Retirement Plan(3)                                                                              10,683
Balance as of December 31, 2003                                                             0          3,313,134         587,680
</TABLE>

(1) At December 31, 2003 and 2002, Class A Non-Voting Common Stock had
    15,000,000 shares authorized. At December 31, 2001 and 2000, Class A Non-
    Voting Common Stock had 3,500,000 shares authorized.
(2) At December 31, 2003, 2002, 2001 and 2000, Class B Common Stock had
    1,040,000 shares authorized.
(3) Artesian Resources registered 200,000 shares of Class A Non-Voting Common
    Stock available for purchase through the Artesian Retirement Plan and the
    Artesian Supplemental Retirement Plan.
(4) Artesian Resources Corporation issued 500,000 shares of Class A Non-Voting
    Common Stock on June 5, 2002.
(5) Includes redemption of 7% prior preferred shares on February 21, 2003.
(6) Artesian Resources Corporation approved a three for two stock split on
    April 30, 2003, effected in the form of a 50% stock distribution. Each
    shareholder of record on May 30, 2003 received one additional share for
    each two shares held. All share and per share data for all prior periods
    have been restated to give effect to this stock split. Additionally,
    Retained Earnings as of December 31, 2000 has been restated to give effect
    to this stock split.

The notes are an integral part of the consolidated financial statements.


                                       23

<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                  $25 Par Value
                                                                                    Preferred        $1 Par Value
                                                                                     7% Prior          Class A         $1 Par Value
In thousands, except share amounts                                                  Preferred      Non-Voting(1)(6)   Class B(2)(6)
<S>                                                                               <C>              <C>                <C>
Balance as of December 31, 2000                                                       $  272            $2,432             $588
Net income
Cash dividends declared
 Common stock
 Preferred stock
Stock repurchase
Issuance of common stock
 Officer bonus                                                                                               9
 Dividend reinvestment plan                                                                                 15
 Employee stock options                                                                                      8
 Employee Retirement Plan(3)                                                                                 8
Balance as of December 31, 2001                                                       $  272            $2,472             $588
Net income
Cash dividends declared
 Common stock
 Preferred stock
Stock repurchase                                                                      $(272)
Issuance of common stock
 Public stock issuance(4)                                                                                  750
 Officer bonus                                                                                               6
 Dividend reinvestment plan                                                                                 16
 Employee stock options                                                                                     28
 Employee Retirement Plan(3)                                                                                 2
Balance as of December 31, 2002                                                       $    0            $3,274             $588
Net income
Cash dividends declared
 Common stock
 Preferred stock (including redemption premium)(5)
Stock repurchase
Issuance of common stock
 Officer bonus                                                                                               3
 Dividend reinvestment plan                                                                                 16
 Employee stock options                                                                                     10
 Employee Retirement Plan(3)                                                                                10
Balance as of December 31, 2003                                                       $    0            $3,313             $588
</TABLE>

(1) At December 31, 2003 and 2002, Class A Non-Voting Common Stock had
    15,000,000 shares authorized. At December 31, 2001 and 2000, Class A Non-
    Voting Common Stock had 3,500,000 shares authorized.
(2) At December 31, 2003, 2002, 2001 and 2000, Class B Common Stock had
    1,040,000 shares authorized.
(3) Artesian Resources registered 200,000 shares of Class A Non-Voting Common
    Stock available for purchase through the Artesian Retirement Plan and the
    Artesian Supplemental Retirement Plan.
(4) Artesian Resources Corporation issued 500,000 shares of Class A Non-Voting
    Common Stock on June 5, 2002.
(5) Includes redemption of 7% prior preferred shares on February 21, 2003.
(6) Artesian Resources Corporation approved a three for two stock split on
    April 30, 2003, effected in the form of a 50% stock distribution. Each
    shareholder of record on May 30, 2003 received one additional share for
    each two shares held. All share and per share data for all prior periods
    have been restated to give effect to this stock split. Additionally,
    Retained Earnings as of December 31, 2000 has been restated to give effect
    to this stock split.

The notes are an integral part of the consolidated financial statements.


                                       24

<PAGE>
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>

                                                                                               Additional
                                                                                                 Paid-in      Retained
In thousands, except share amounts                                                               Capital     Earnings(4)   Total(4)
<S>                                                                                            <C>           <C>           <C>
Balance as of December 31, 2000                                                                  $24,474       $ 4,783     $ 32,549
Net income                                                                                                       3,321        3,321
Cash dividends declared
 Common stock                                                                                                   (2,245)     (2,245)
 Preferred stock                                                                                                   (51)        (51)
Stock repurchase                                                                                                   (69)        (69)
Issuance of common stock
 Officer bonus                                                                                       151                        160
 Dividend reinvestment plan                                                                          249                        264
 Employee stock options                                                                               97                        105
 Employee Retirement Plan(1)                                                                         136                        144
Balance as of December 31, 2001                                                                  $25,107       $ 5,739     $ 34,178
Net income                                                                                                       4,167        4,167
Cash dividends declared
 Common stock                                                                                                   (2,683)     (2,683)
 Preferred stock                                                                                                   (41)        (41)
Stock repurchase                                                                                                  (209)       (481)
Issuance of common stock
 Public stock issuance(2)                                                                         14,408                     15,158
 Officer bonus                                                                                       108                        114
 Dividend reinvestment plan                                                                          309                        325
 Employee stock options                                                                              370                        398
 Employee Retirement Plan(1)                                                                          39                         41
Balance as of December 31, 2002                                                                  $40,341       $ 6,973     $ 51,176
Net income                                                                                                       3,917        3,917
Cash dividends declared
 Common stock                                                                                                   (3,106)     (3,106)
 Preferred stock (including redemption premium)(3)                                                                 (71)        (71)
Stock repurchase                                                                                                   (83)        (83)
Issuance of common stock
 Officer bonus                                                                                        76                         79
 Dividend reinvestment plan                                                                          363                        379
 Employee stock options                                                                              142                        152
 Employee Retirement Plan(1)                                                                         238                        248
Balance as of December 31, 2003                                                                  $41,160       $ 7,630     $ 52,691
</TABLE>

(1) Artesian Resources registered 200,000 shares of Class A Non-Voting Common
    Stock available for purchase through the Artesian Retirement Plan and the
    Artesian Supplemental Retirement Plan.
(2) Artesian Resources Corporation issued 500,000 shares of Class A Non-Voting
    Common Stock on June 5, 2002.
(3) Includes redemption of 7% prior preferred shares on February 21, 2003.
(4) Artesian Resources Corporation approved a three for two stock split on
    April 30, 2003, effected in the form of a 50% stock distribution. Each
    shareholder of record on May 30, 2003 received one additional share for
    each two shares held. All share and per share data for all prior periods
    have been restated to give effect to this stock split. Additionally,
    Retained Earnings as of December 31, 2000 has been restated to give effect
    to this stock split.

The notes are an integral part of the consolidated financial statements.


                                       25

<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Artesian
Resources Corporation and its wholly owned subsidiaries ("Artesian Resources"
or the "Company"), including its principal operating company, Artesian Water
Company, Inc. ("Artesian Water"). Appropriate eliminations have been made for
all material inter-company transactions and account balances.

Utility Subsidiary Accounting

The accounting records of Artesian Water and Artesian Water Pennsylvania, Inc.
are maintained in accordance with the uniform system of accounts as prescribed
by the Delaware Public Service Commission ("PSC") and the Pennsylvania Public
Utility Commission ("PAPUC"), respectively. Artesian Water follows the
provisions of Statement of Financial Accounting Standards No. 71, "Accounting
for the Effects of Certain Types of Regulation," which provides guidance for
companies in regulated industries.

Utility Plant and Capitalized Leases

All additions to plant are recorded at cost. Cost includes direct labor,
materials, and indirect charges for such items as transportation, supervision,
pension, and other fringe benefits related to employees engaged in
construction activities. When depreciable units of utility plant are retired,
the cost of retired property, together with any cost associated with
retirement and less any salvage value or proceeds received, is charged to
accumulated depreciation. Maintenance, repairs, and replacement of minor items
of plant are charged to expense as incurred.

In accordance with a rate order issued by the PSC, Artesian Water accrues an
Allowance for Funds Used During Construction ("AFUDC"). AFUDC, which
represents the cost of funds devoted to construction projects through the date
the project is placed in service, is capitalized as part of construction work
in progress. The rate used for the AFUDC calculation is based on Artesian
Water's weighted average cost of debt and the rate of return on equity
authorized by the PSC. The rate used to capitalize AFUDC in 2003, 2002 and
2001 was 8.0%, 8.3%, and 8.5%, respectively.

<TABLE>
<CAPTION>

Utility plant comprises:
                                                                               Estimated
                                                                                 Useful
                                                                                  Life          December 31,
In thousands                                                                    In Years      2003       2002
<S>                                                                            <C>          <C>        <C>
Utility plant at original cost
 Utility plant in service
   Intangible plant                                                                 --      $    123   $    123
   Source of supply plant                                                        45-85        13,101     12,015
   Pumping and water treatment plant                                             35-62        31,514     27,187
   Transmission and distribution plant
    Mains                                                                           81       106,456     99,781
    Services                                                                        39        19,003     17,844
    Storage tanks                                                                   79        12,543     11,950
    Meters                                                                          26         8,605      8,347
    Hydrants                                                                        60         5,726      5,364
   General plant                                                                  5-31        19,694     14,637
 Property held for future use                                                       --         3,140      2,400
 Construction work in progress                                                      --         3,891      2,004
                                                                                            --------   --------
                                                                                             223,796    201,652
Less -- accumulated depreciation                                                              35,903     34,314
                                                                                            --------   --------
                                                                                            $187,893   $167,338
                                                                                            ========   ========
</TABLE>



                                       26

<PAGE>
Depreciation and Amortization

For financial reporting purposes, depreciation is provided using the straight-
line method at rates based on estimated economic useful lives, which range
from 5 to 85 years. Composite depreciation rates for utility plant were 2.20%,
2.19% and 2.15%, for the years ended December 31, 2003, 2002, and 2001,
respectively. In a rate order issued by the PSC, the Company was directed
effective January 1, 1998 to begin using revised depreciation rates for
utility plant. In rate orders issued by the PSC, Artesian Water was directed
effective May 28, 1991 and August 25, 1992 to offset depreciation on utility
property funded by Contributions in Aid of Construction ("CIAC") and Advances
for Construction ("Advances"), respectively, against CIAC and Advances. Other
deferred assets are amortized using the straight-line method over applicable
lives, which range from 2 to 20 years.

Regulatory Assets

Certain expenses are recoverable through rates, without a return on
investment, and are deferred and amortized during future periods using various
methods as permitted by the PSC. Expenses related to rate proceedings are
amortized on a straight-line basis over a period of 2 years. The
postretirement benefit obligation (see Note 10 for a description of the
Company's Postretirement Benefit Plan), which is being amortized over 20
years, is adjusted for the difference between the net periodic postretirement
benefit costs and the cash payments. The deferred income taxes will be
amortized over future years as the tax effects of temporary differences
previously flowed through to the customers reverse.

Regulatory assets at December 31, net of amortization, comprise:

<TABLE>
<CAPTION>

         In thousands                                             2003     2002
<S>                                                              <C>      <C>
         Postretirement benefit obligation                       $1,232   $1,298
         Deferred income taxes recoverable in future rates          627      642
         Expense of rate proceedings                                220      497
         Other                                                       44       --
                                                                 ------   ------
                                                                 $2,123   $2,437
</TABLE>


Other Deferred Assets

Debt issuance costs are amortized over the term of the related debt.

Other deferred assets at December 31, net of amortization, comprise:

<TABLE>
<CAPTION>

         In thousands                                             2003     2002
<S>                                                              <C>      <C>
         Debt issuance expense                                   $1,901   $  501
         Other                                                      643      568
                                                                 ------   ------
                                                                 $2,544   $1,069
</TABLE>


Advances for Construction

Water mains, services and hydrants, or cash advances to reimburse Artesian
Water, for its costs to construct water mains, services and hydrants, are
contributed to Artesian Water by customers, real estate developers and
builders in order to extend water service to their properties. The value of
these contributions is recorded as Advances for Construction. Artesian Water
makes refunds on these advances over a specific period of time based on
operating revenues generated by the specific plant or as new customers are
connected to the mains. After all refunds are made, any remaining balance is
transferred to CIAC.

Contributions in Aid of Construction

CIAC includes the non-refundable portion of advances for construction and
direct contributions of water mains, services and hydrants, or cash to
reimburse Artesian Water, for its costs to construct water mains, services and
hydrants by customers, real estate developers and builders in order to extend
water service to their properties.


                                       27

<PAGE>
Income Taxes

Deferred income taxes are provided in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" on all differences between the tax basis of assets and liabilities and
the amounts at which they are carried in the financial statements based on the
enacted tax rates to be in effect when such temporary differences are expected
to reverse.

The Tax Reform Act of 1986 mandated that Advances and CIAC received subsequent
to December 31, 1986, generally are taxable income to Artesian Water. For
Advances, Artesian Water was directed by the PSC to pay the related taxes and
collect amounts equal to the taxes paid from the developer. For CIAC, Artesian
Water was directed to pay the taxes instead of the developer contributing the
taxes. The 1996 Tax Act provided an exclusion from taxable income for CIAC and
Advances received after June 12, 1996 by Artesian Water that are not included
in the rate base for rate-making purposes.

Investment tax credits were deferred through 1986 and are recognized as a
reduction of deferred income tax expense over the estimated economic useful
lives of the related assets.

Stock Compensation Plans

At December 31, 2003, the Company had two stock-based compensation plans,
which are described in Note 9. The Company applies APB Opinion No. 25 and
related interpretations in accounting for compensation expense under its
plans. Accordingly, the aggregate compensation cost that has been charged
against income for the two plans was $56,000, $99,000 and $38,000 for 2003,
2002 and 2001, respectively. Had compensation cost for the Company's two plans
been determined based on the fair value at the grant dates for awards under
those plans consistent with the method required by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation," the
Company's net income and net income per common share would have been reduced
to the pro-forma amounts indicated below:
<TABLE>
<CAPTION>

      In thousands, except per share data                                                                  2003      2002     2001
      <S>                                                                                                 <C>       <C>      <C>
      Net income applicable to common stock
        As reported                                                                                       $3,846    $4,125   $3,270
        Add: compensation expense included in net income (net of tax)                                         33        59       23
        Deduct: compensation expense using fair value based method
        (net of tax)                                                                                       (170)     (161)    (153)
                                                                                                          ------    ------   ------
        Pro-forma                                                                                         $3,709    $4,023   $3,140
                                                                                                          ======    ======   ======
      Basic net income per common share
        As reported                                                                                       $ 0.99    $ 1.17   $ 1.07
        Pro-forma                                                                                         $ 0.96    $ 1.14   $ 1.03
      Diluted net income per common share
        As reported                                                                                       $ 0.96    $ 1.14   $ 1.05
        Pro-forma                                                                                         $ 0.93    $ 1.11   $ 1.01
</TABLE>


The fair value of each option grant is estimated using the Black-Scholes
option pricing model with the following weighted-average assumptions used for
grants in 2003, 2002, and 2001, respectively: dividend yield of 3.9%, 4.0% and
4.2%; expected volatility of 0.33, 0.34 and 0.34; risk free interest rates of
1.30%, 2.10% and 3.16% for the employee options under the 1992 Non-Qualified
Stock Option Plan (as defined in Note 9); 2.52%, 4.19% and 4.93% for the
director and officer options under the 1992 Plan for 2003, 2002 and 2001
respectively; 2.73% and 4.93% for options under the Incentive Stock Option
Plan (ISO) (as defined in Note 9) for 2003 and 2001 and expected lives of one
year for the employee options and five years for the director and officer
options under the 1992 Plan and five years for all options under the ISO Plan.
Shares of Class A Stock have been reserved for future issuance under the 1992
Plan and ISO Plan.


                                       28

<PAGE>
Revenue Recognition and Unbilled Revenues

Water service revenue for financial statement purposes includes amounts billed
to customers on a cycle basis and unbilled amounts based upon estimated usage
from the date of the last meter reading to the end of the accounting period.

Cash and Cash Equivalents

For purposes of the Consolidated Statement of Cash Flows, Artesian Resources
considers all temporary cash investments with a maturity of three months or
less to be cash equivalents. Artesian Water utilizes its bank's controlled
disbursement service to reduce the use of its line of credit by funding checks
as they are presented to the bank for payment rather than at issuance. If the
checks currently outstanding, but not yet funded, exceed the cash balance on
Artesian Water's books, the net liability is recorded as a current liability
on the balance sheet in the Overdraft Payable account.

Use of Estimates in the Preparation of Consolidated Financial Statements

The consolidated financial statements were prepared in conformity with
generally accepted accounting principles, which require management to make
estimates concerning unbilled revenues and regulatory asset recovery that
affect the reported amounts of assets and liabilities and contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from management's estimate.

Stock Split

On June 30, 2003, the Company completed a three for two stock split on its
Class A Non-Voting Common Stock and Class B Common Stock, which was effected
in the form of a 50% stock dividend. Shareholders of record on May 30, 2003
received one additional share of stock for each two shares held. All share and
per share data for all prior periods have been restated to give effect to this
stock split. Additionally, Retained Earnings as of December 31, 2000 has been
restated to give effect to this stock split.

NOTE 2

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value.

Current Assets and Liabilities

For those current assets and liabilities that are considered financial
instruments, the carrying amounts approximate fair value because of the short
maturity of those instruments.

Long-term Financial Liabilities

The fair value of Artesian Resources' long-term debt as of December 31, 2003
and 2002, determined by discounting their future cash flows using current
market interest rates on similar instruments with comparable maturities, are
approximately as shown below.

<TABLE>
<CAPTION>

Fair value of financial instruments at December 31,
  comprised:                                                                                 2003                     2002
                                                                                    Carrying     Estimated    Carrying    Estimated
                                                                                     Amount     Fair Value     Amount    Fair Value
<S>                                                                                 <C>         <C>           <C>        <C>
In thousands
 Long-term debt                                                                      $80,558      79,867      $63,970      $67,762
 Mandatorily redeemable preferred stock                                              $    --          --      $   100      $    92
</TABLE>



                                       29

<PAGE>
The fair value of Advances for Construction cannot be reasonably estimated due
to the inability to accurately estimate future refunds expected to be paid
over the life of the contracts. Refund payments are based on the water sales
to new customers in the particular development constructed. Future refunds
expected to be paid would have to be estimated on a per contract basis using
the past history of refund payments. The fair value of Advances for
Construction would be less than the carrying amount because these financial
instruments are non-interest bearing.

NOTE 3

INCOME TAXES

Deferred income taxes reflect temporary differences between the valuation of
assets and liabilities for financial and tax reporting.

As of December 31, 2003, Artesian Resources has net operating loss carry
forwards aggregating approximately $11,900,000 which will expire if unused by
2023. As of December 31, 2003, Artesian Resources has separate company net
operating loss carry forwards aggregating approximately $21,600,000. These net
operating loss carry forwards will expire if unused between 2004 and 2023.
Artesian Resources has recorded a valuation allowance to reflect the estimated
amount of deferred tax assets that may not be realized due to the expiration
of the state net operating loss carry forwards. The valuation allowance
increased from approximately $506,000 in 2002 to approximately $512,000 in
2003.

At December 31, 2003, for federal income tax purposes, there were alternative
minimum tax credit carry forwards aggregating $1,844,000 resulting from the
payment of alternative minimum tax in current and prior years. These
alternative minimum tax credit carry forwards may be carried forward
indefinitely to offset future regular federal income taxes.

Components of Income Tax Expense

<TABLE>
<CAPTION>

                                                                                                             For the Year Ended
                                                                                                                December 31,
In thousands                                                                                               2003      2002     2001
<S>                                                                                                      <C>        <C>      <C>
State income taxes
Current                                                                                                  $     4    $    1   $ (62)
Deferred                                                                                                     449       629      427
                                                                                                         -------    ------   ------
Total state income tax expense                                                                           $   553    $  630   $  365
                                                                                                         =======    ======   ======
 For the Year Ended December 31,
                                                                                                           2003      2002     2001
Federal income taxes
Current                                                                                                  $(1,547)   $  692   $  532
Deferred                                                                                                   3,380     1,503    1,287
                                                                                                         -------    ------   ------
Total federal income tax expense                                                                         $ 1,833    $2,195   $1,819
                                                                                                         =======    ======   ======
</TABLE>



                                       30

<PAGE>
Reconciliation of effective tax rate:

<TABLE>
<CAPTION>

                                                                                          For the Year Ended December 31,
In thousands                                                                     2003     2003     2002      2002     2001     2001
                                                                                Amount      %     Amount      %      Amount     %
<S>                                                                             <C>       <C>     <C>       <C>      <C>      <C>
Reconciliation of effective tax rate
 Income before federal and state income taxes                                   $6,303    100.0   $6,992    100.0    $5,505   100.0

Amount computed at statutory rate                                                2,143     34.0    2,377     34.0     1,872    34.0
Reconciling items
 State income tax-net of federal tax benefit                                       368      5.8      411      5.9       241     4.4
 Adjustment of prior year accruals                                                (155)    (2.4)      --       --        --      --
 Other                                                                              30     (0.5)      37      0.5        71     1.3
                                                                                ------    -----   ------    -----    ------   -----
Total income tax expense and effective rate                                     $2,386     37.9    2,825     40.4    $2,184    39.7
                                                                                ======    =====   ======    =====    ======   =====
</TABLE>


Deferred income taxes at December 31, 2003, 2002, and 2001 were comprised of
the following:

<TABLE>
<CAPTION>

                                                                                                     For the Year Ended December 31,
In thousands                                                                                           2003        2002       2001
<S>                                                                                                  <C>         <C>        <C>
Deferred tax assets related to:
Federal alternative minimum tax credit carry forwards                                                $  1,844    $  3,113   $ 2,464
Federal and state operating loss carry forwards                                                         5,323         669       775
Bad debt allowance                                                                                         54          47        38
Valuation allowance                                                                                      (512)       (506)     (590)
Stock options                                                                                             128         117        82
Other                                                                                                      60          --        --
                                                                                                     --------    --------   -------
Total deferred tax assets                                                                            $  6,897    $  3,440   $ 2,769
                                                                                                     ========    ========   =======
Deferred tax liabilities related to:
Property plant and equipment basis differences                                                       $(18,234)   $(10,754)  $(7,993)
Expenses of rate proceedings                                                                              (88)       (197)      (84)
Property taxes                                                                                           (283)       (259)     (234)
Other                                                                                                    (280)       (254)     (286)
                                                                                                     --------    --------   -------
 Total deferred tax liabilities                                                                      $(18,885)   $(11,464)  $(8,597)
                                                                                                     --------    --------   -------
 Net deferred tax liability                                                                          $(11,988)   $ (8,024)  $(5,828)
                                                                                                     ========    ========   =======
</TABLE>


Deferred taxes, which are classified into a net current and non-current
balance, are presented in the balance sheet as follows:

Deferred tax assets related to:

<TABLE>
<CAPTION>
<S>                                                                                                    <C>         <C>       <C>

Current deferred tax (liability) asset                                                                $   (213)   $    --   $  (229)
Non-current deferred tax liability                                                                     (11,775)    (8,024)   (5,660)
Deferred tax asset in other assets                                                                          --         --        61
                                                                                                      --------    -------   -------
 Net deferred tax liability                                                                           $(11,988)   $(8,024)  $(5,828)
                                                                                                      ========    =======   =======
</TABLE>



                                       31

<PAGE>
NOTE 4
PREFERRED STOCK

Artesian Resources had two classes of preferred stock outstanding. On
February 21, 2003, the Company redeemed all 10,868 outstanding shares of the
7% Prior Preferred stock for $30.00 per share. The 7% Prior Preferred stock
(on which dividends were cumulative) was redeemable at Artesian Resources'
option at $30.00 per share plus accrued dividends. Since notice of redemption
was in January 2003, $271,700 of preferred stock was reclassified to Notes
Payable as of December 31, 2002. The 9.96% Series Cumulative Prior Preferred
stock had an annual sinking fund provision (mandatory redemption
requirements). Under the mandatory sinking fund provisions, on February 1,
2004 the Company redeemed the remaining 4,000 shares of the 9.96% Series for
$100,000. The Company also has 100,000 shares of $1.00 par value Series
Preferred stock authorized but unissued. See the Consolidated Statements of
Stockholders' Equity.

There are 40,000 authorized shares of the 9.96% Series Cumulative Prior
Preferred stock with a par value of $25 per share, of which 4,000 and 8,000
shares were outstanding as of December 31, 2003 and 2002, respectively. Cash
dividends paid in 2003 and 2002 were $12,000 and $22,000, respectively.

NOTE 5
COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL

The Class A Non-Voting Common Stock ("Class A Stock") of Artesian Resources
trades on the NASDAQ National Market under the symbol ARTNA. The Class B
Common Stock of Artesian Resources trades on the NASDAQ's OTC Bulletin Board
under the symbol ARTNB.

Under Artesian Resources' dividend reinvestment plan, which allows for
reinvestment of cash dividends and optional cash payments, stockholders were
issued 13,442, 10,773 and 9,906 shares at fair market value for the investment
of $376,000, $320,000 and $259,000 of their monies in the years 2003, 2002 and
2001, respectively.

NOTE 6
DEBT

Artesian Water has available three unsecured lines of credit, with no
financial covenant restrictions, totaling $35.0 million at December 31, 2003,
which are renewable annually at each of the bank's discretion. Borrowings
under the lines of credit bear interest based on the London Interbank Offering
Rate ("LIBOR") plus 1.0% for 30, 60, 90, or 180 days or the banks' federal
funds rate plus 1.0%, at the option of Artesian Water.

At December 31, 2003, 2002 and 2001, Artesian Water had $12.5 million,
$17.8 million and $16.1 million outstanding under these lines at weighted
average interest rates of 2.0%, 2.3% and 2.6%, respectively. The maximum
amount outstanding was $18.2 million, $24.4 million and $16.7 million in 2003,
2002 and 2001, respectively. The twelve month average amount outstanding was
approximately $8.6 million, $16.5 million and $14.2 million, at weighted
average annual interest rates of 2.2%, 2.7% and 4.8% in 2003, 2002 and 2001,
respectively.

As of December 31, 2003 and 2002, substantially all of Artesian Water's
utility plant was pledged as security for the First Mortgage Bonds. In
addition, the trust indentures, relating to these First Mortgage Bonds contain
covenants which limit long-term debt, including the current portion thereof,
to 66 2/3% of total capitalization including the current portion of the long-
term debt, and which, in certain circumstances, could restrict the payment of
cash dividends. As of December 31, 2003, however, no dividend restrictions
were imposed under these covenants.

On January 31, 2001, Artesian Water entered into a financing agreement with
the Delaware Department of Health and Social Services to borrow funds totaling
not more than $4,307,144 from the State's Revolving Loan Fund under an
unsecured General Obligation Note. The note bears interest of 4.48% and is
payable ratably over twenty years. The effective rate of the loan, including
expenses related to the closing, is 4.53%. The funds of $4,307,144 were
received in August 2001. The Company used the proceeds of this revolving loan
to repay outstanding short-term debt.


                                       32

<PAGE>
On January 31, 2003, Artesian Water issued a $25.0 million, 6.58%, 15 year
Series P First Mortgage Bond to redeem the Series L $10.0 million First
Mortgage Bond due February 1, 2003 and to pay down the lines of credit. On
January 31, 2018, the Series P First Mortgage Bond matures. As such, the
Company reclassified $14,943,000 from Notes Payable to Long-term Debt on the
Balance Sheet as of December 31, 2002.

On February 25, 2003, Artesian Water entered into an agreement to borrow funds
from the Delaware Drinking Water State Revolving Fund (the "Fund"). The
Company previously received a binding commitment offer from the Fund for a
loan in the amount of $2,900,285 for a term of twenty years at an interest
rate of 3.57%. The loan will be used for costs associated with the
installation of new public water systems for Keen-wick West/Keen-wick South
and Route 54, Phase II projects in Sussex County, Delaware. The funds will be
disbursed as construction is completed. We have requested and received
disbursements of $1,745,646 through February 26, 2004, of which $1,318,750 was
received at December 31, 2003.

On December 23, 2003, Artesian Water issued $15.4 million, 4.75%, 40 year
Series Q First Mortgage Bonds. These bonds are tax free and were issued for
the Company through the Delaware Economic Development Authority to finance
utility construction projects. The proceeds of this issuance are held in trust
and restricted for the purpose of financing specific utility construction
projects and were recorded as restricted cash at December 31, 2003.

On May 4, 1999, Artesian Resources purchased 126,353 shares of Class B Common
Stock and 24,165 shares of Class A Non-Voting Common Stock from Helena C.
Taylor and Ellis D. Taylor in exchange for a promissory note (the "Note") in
the principal amount of $4,450,000 representing the purchase price of the
stock, with a discounted present value of $4,307,000. The Note was payable
quarterly, on a calendar basis, over a four-year period and in sixteen equal
principal installments of $278,125 commencing on June 30, 1999. The
outstanding balance on the Note bore interest in an amount computed based on
the quarterly dividend the Taylors would have received on the stock
transferred to Artesian Resources but not yet paid for by Artesian Resources.
In addition, the principal installment was adjusted on a quarterly basis to
reflect changes in the book value per common share of the Company as reported
in its most recent quarterly financial statement distributed to stockholders
prior to the quarterly payment. Such amounts represented contingent purchase
price of the stock and were charged to retained earnings. The note was paid in
full on March 25, 2003.

Long-term debt consists of:
<TABLE>
<CAPTION>

                                                                        December 31,
      In thousands                                                    2003       2002
                                                                     -------   -------
      <S>                                                            <C>       <C>
      First mortgage bonds
         Series L, 8.03%, due February 1, 2003                       $    --   $10,000
         Series M, 7.84%, due December 31, 2007                       10,000    10,000
         Series N, 7.56%, due December 31, 2007                        5,000     5,000
         Series O, 8.17%, due December 29, 2020                       20,000    20,000
         Series P, 6.58%, due December 31, 2018                       25,000        --
         Series Q, 4.75%, due December 1, 2043                        15,400        --
                                                                     -------   -------
                                                                      75,400    45,000
      Note payable to Ellis & Helena Taylor                               --       278
      State revolving fund loan                                        5,346     4,170
      Note payable                                                        --    14,943
                                                                     -------   -------
                                                                      80,746    64,391
      Less current maturities                                            188       421
                                                                     -------   -------
                                                                     $80,558   $63,970
                                                                     =======   =======
</TABLE>



                                       33

<PAGE>
Payments due during the next five years:
<TABLE>
<CAPTION>

      In thousands                                                                            2004   2005    2006     2007     2008
                                                                                              ----   ----    ----    -------   ----
      <S>                                                                                     <C>    <C>     <C>     <C>       <C>
      Long-term debt                                                                          $ --   $ --    $ --    $15,000   $ --
      State revolving fund loan                                                                188    222     229        237    244
                                                                                              ----   ----    ----    -------   ----
         Total payments                                                                       $188   $222    $229    $15,237   $244
                                                                                              ====   ====    ====    =======   ====
</TABLE>


NOTE 7

NON-UTILITY OPERATING REVENUE AND EXPENSES

Artesian Wastewater Management, Inc. (Artesian Wastewater) is a non-regulated
subsidiary of Artesian Resources, which provides wastewater treatment services
in Delaware. On March 12, 1997, Artesian Wastewater became a one-third owner
in AquaStructure Delaware, L.L.C., which markets proposals to design and
construct wastewater treatment facilities.

Non-utility operating revenue consisted of $387,000, $287,000 and $116,000
received by Artesian Wastewater in 2003, 2002 and 2001.

On July 17, 2002, Artesian Wastewater began contractual operations of a
wastewater treatment plant for which AquaStructure has a twenty-year agreement
with a Delaware municipality. This agreement shall be extended for an
additional twenty years unless advance notice is given. The current term for
the agreement is due to be completed on February 1, 2021.

Non-utility operating expenses are as follows:
<TABLE>
<CAPTION>

      In thousands                                                                                        2003   2002    2001
                                                                                                          ----   ----    ----
      <S>                                                                                                 <C>    <C>     <C>
      Artesian Wastewater                                                                                 $239   $194    $66
      Artesian Resources                                                                                     5      1      2
      Artesian Development                                                                                   1      1      5
                                                                                                          ----   ----    ---
         Total                                                                                            $245   $196    $73
                                                                                                          ====   ====    ===
</TABLE>


NOTE 8

RELATED PARTY TRANSACTIONS

The office building and shop complex utilized by Artesian Water were leased at
an average annual rental of $173,000 from the former partners of White Clay
Realty who owned the property jointly as tenants in common. Dian C. Taylor,
Chair and Chief Executive Officer of Artesian Resources, was a tenant in
common and John R. Eisenbrey, Jr., a director of Artesian Resources, was a
beneficiary of a tenant in common. The rental of $173,000 was below market
rates. In December 2002, Artesian Water filed a condemnation action in the
Delaware Superior Court, seeking to acquire title to the office and shop
complex leased by Artesian Water, known as 664 Churchmans Road, Newark,
Delaware (the "Property"). Artesian Water filed this action under its
statutory power of eminent domain against the owner of the Property, White
Clay Realty, a Delaware Limited Partnership, and each of the limited partners.
The Superior Court ruled that since White Clay Realty had no general partner,
the partnership was dissolved and all of the former partners owned the
Property jointly as tenants in common. A special committee of the Board of
Directors of Artesian Water, composed entirely of outside directors who had no
ownership interest in the Property, made the determination to purchase the
Property through the condemnation procedures. Under this procedure, if the
acquisition of the Property is approved by the court, the fair market value of
the Property will be determined by a panel of commissioners after an
evidentiary hearing. Artesian Water's independent appraiser valued the
Property to be worth $3,800,000. In December 2002, Artesian Water issued a
payment to the Prothonotary for the State of Delaware for $3,800,000. As the
court delayed payment until the matter was decided, the amount was refunded to
Artesian Water in June 2003. Until a final determination of the condemnation,
the parties agreed that Artesian Water could continue to occupy the Property
under the terms of the lease with a


                                       34

<PAGE>
quarterly rental payment of $43,361. Pursuant to a deadline set by the
Superior Court, the owners of the Property submitted an independent appraisal
that valued the Property to be worth $4,800,000. The condemnation case was
scheduled for trial on October 20, 2003, wherein the fair market value of the
Property would have been determined by a panel of three Commissioners after an
evidentiary hearing. Prior to the commencement of the trial, all parties
agreed to settle the case for a purchase price of $4,500,000 paid by Artesian
Water on October 20, 2003. The decision to settle on the part of Artesian
Water was made by the Special Committee of independent directors and with the
recommendation of special counsel to the Special Committee. The settlement was
approved by order of the Superior Court on October 20, 2003. The Court also
approved applications of two of the tenants in common (neither of whom is an
officer or director of Artesian) for their expenses, totaling $50,000, to be
paid by Artesian Water, to which applications Artesian Water did not object.

Rental expense associated with related party transactions are as follows:
<TABLE>
<CAPTION>

      In thousands                                                                                        2003   2002    2001
                                                                                                          ----   ----    ----
      <S>                                                                                                 <C>    <C>     <C>
      White Clay Realty                                                                                   $139   $175    $178
</TABLE>


NOTE 9

STOCK COMPENSATION PLANS

In 1992, the Company instituted the 1992 Non-Qualified Stock Option Plan (1992
Plan), which was subsequently amended in 1998. Under the 1992 Plan, options to
purchase shares of Class A Stock may be granted to employees at prices not
less than 85% of the fair market value on the date of grant. The number of
authorized shares is 375,000. Employees who participate and who are not
executive officers or directors of the Company may receive options to purchase
up to 1,000 shares. Each director or officer who participates in any year may
request an option to purchase 3,000 shares of Class A Stock. The option price
for directors and officers of the Company is 90% of the fair market value on
the date of grant. Options granted under this plan to employees who are not
executive officers or directors extend for a period of one year. Options
granted to officers and directors extend for a period of ten years. All
options are exercisable after six months of service from the date of initial
grant, and are adjusted for stock dividends and splits. Employees, officers
and directors become eligible to exercise options under the 1992 plan after
one year of service to the Company.

In 1996, the Company instituted the Incentive Stock Option Plan (the ISO
Plan), under which the Company is authorized to grant options up to 150,000
shares of Class A Stock to its key employees and officers. Options are granted
at the fair market value on the date of grant. The option exercise period
shall not exceed ten years from the date of grant and will be determined by
the Stock Option Committee of the Board of Directors for each stock option
granted. Options granted will vest in accordance with the terms and conditions
determined by the Stock Option Committee of the Board of Directors and are
adjusted for stock dividends and splits.


                                       35

<PAGE>
The following summary reflects changes in the shares of Class A Stock under
option:

<TABLE>
<CAPTION>

                                                                                 2003                  2002                  2001
                                                                               Weighted              Weighted              Weighted
                                                                               Average                Average               Average
                                                                      2003     Exercise     2002     Exercise     2001     Exercise
                                                                     Shares     Price      Shares      Price     Shares      Price
<S>                                                                 <C>        <C>        <C>        <C>         <C>       <C>
Plan options
 Outstanding at beginning of year                                   273,641    $14.085    258,907     $12.982    223,527    $12.093
 Granted                                                             54,704    $21.076     47,200     $18.516     60,542    $15.851
 Exercised                                                           (9,948)   $14.671    (27,799)    $10.973     (8,194)   $ 9.968
 Canceled                                                            (3,604)   $11.582     (4,667)    $16.255    (16,968)   $12.962
                                                                    -------    -------    -------     -------    -------    -------
 Outstanding at end of year                                         314,793    $15.310    273,641     $14.085    258,907    $12.982
Options exercisable at year end                                     248,623    $14.400    219,731     $13.693    181,811    $11.856
Weighted average fair value of options granted during the year                 $22.170                $20.786               $16.277
</TABLE>


The following tables summarize information about employee and director stock
options outstanding at December 31, 2003:

Options Outstanding

<TABLE>
<CAPTION>

                              Range of                                   Shares Outstanding     Weighted Average   Weighted Average
                           Exercise Price                               at December 31, 2003     Remaining Life     Exercise Price
<S>                                                                     <C>                     <C>                <C>
                           $8.473-$15.417                                      182,242             4.87 Years           $12.529
                           $16.267-$22.920                                     132,551             8.14 Years           $19.134
Options Exercisable
                              Range of                                   Shares Exercisable     Weighted Average
                           Exercise Price                               at December 31, 2003     Exercise Price
                           $8.473-$15.417                                      166,912                $12.316
                           $16.267-$22.920                                      81,711                $18.655
</TABLE>


NOTE 10

EMPLOYEE BENEFIT PLANS

401(k) Plan

Artesian Resources has a defined contribution 401(k) Salary Reduction Plan
(Plan) which covers substantially all employees. Under the terms of the Plan,
Artesian Resources contributes 2% of eligible salaries and wages and matches
employee contributions up to 6% of gross pay at a rate of 50%. Artesian
Resources may, at its option, make additional contributions of up to 3% of
eligible salaries and wages. No such additional contributions were made in
2003, 2002 and 2001. Plan expenses, which include Company contributions and
administrative fees, for the years 2003, 2002 and 2001, were approximately
$420,000, $374,000 and $310,000, respectively.

Postretirement Benefit Plan

Artesian Water has a Postretirement Benefit Plan (Benefit Plan), which provides
medical and life insurance benefits to certain retired employees. Prior to the
amendment of the Benefit Plan, substantially all employees could become eligible
for these benefits if they reach retirement age while still working for Artesian
Water.

Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions" ("SFAS 106"), requires
Artesian Water to accrue the expected cost of providing postretirement health
care and life insurance benefits as employees render the services necessary to
earn the benefits. Artesian


                                       36

<PAGE>
Resources elected to defer recognition and amortize its transition obligation
over twenty years.

Artesian Water recognized an offsetting regulatory asset with respect to the
SFAS 106 liability. This asset is recorded based on the PSC order, which
permits Artesian Water to continue recovery of postretirement health care and
life insurance expense on a pay-as-you-go basis for the remaining eligible
employees. Artesian Water anticipates liquidating its SFAS 106 obligation and
substantially recovering the expenses in rates over a period of approximately
20 years (based on the age and life expectancy of the remaining eligible
participants). Further, expense recovery as a percentage of rates is expected
to remain constant over the initial years, and then decline until the
obligation is liquidated. Amounts charged to expense were $66,000, $62,000 and
$95,000 for 2003, 2002 and 2001, respectively.

Supplemental Pension Plan

Effective October 1, 1994, Artesian Water established a Supplemental Pension
Plan (Supplemental Plan) to provide additional retirement benefits to full-
time employees hired prior to April 26, 1994. The purpose of the Supplemental
Plan is to help employees save for future retiree medical costs, which will be
paid by employees. The Supplemental Plan accomplishes this objective by
providing additional cash resources to employees upon a termination of
employment or retirement, to meet the cost of future medical expenses.
Artesian Water has established a contribution based upon each employee's years
of service ranging from 2% to 6% of eligible salaries and wages. Artesian
Water also provides additional benefits to individuals who were over age 50 as
of January 1, 1994. These individuals are referred to as the "Transition
Group." Effective November 1, 1994, individuals eligible for the Transition
Group had the opportunity to defer compensation to the Supplemental Plan, and
to receive a transition matching contribution for 5 years. Each one-dollar of
eligible salaries and wages deferred by the Transition Group was matched with
three, four, or five dollars by Artesian Water based on the employee's years
of service subject to certain limitations under the federal tax rules. Plan
expenses, which include Company contributions and administrative fees, for the
years 2003, 2002 and 2001 were approximately $240,000, $239,000 and $220,000,
respectively.

In December 2003, the FASB issued revised Statement No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits-an amendment of
FASB Statements No. 87, 88, and 106." This statement requires additional
disclosures to those in the original Statement No. 132 about the assets,
obligations, cash flows, and net periodic benefit cost of defined pension
plans and other postretirement benefit plans; it does not change the
measurement or recognition of those plans. Disclosures for earlier annual
periods presented for comparative purposes are restated. This statement is
effective for financial statements with fiscal years ending after December 15,
2003. The additional disclosures required for our postretirement benefit
obligation are presented below. The measurement date used to determine the
postretirement benefit obligation was December 31.


                                       37

<PAGE>
Benefit Obligations and Funded Status

<TABLE>
<CAPTION>

                                                           Fiscal Year Ending
In thousands                                             12/31/2003   12/31/2002
<S>                                                      <C>          <C>
Change in Accumulated Postretirement Benefit
  Obligation
 Accumulated Postretirement Benefit Obligation at
  the Beginning of the Year                               $   952       $ 1,008
 Service Cost                                                   0             0
 Interest Cost                                                 64            68
 Actuarial (Gain) or Loss                                      63           (45)
 Benefits Paid                                                (84)          (82)
 Plan Participant's Contributions                               3             3
                                                          -------       -------
 Accumulated Postretirement Benefit Obligation at
  the End of the Year                                         998           952
Change in Plan Assets
 Fair Value of Plan Assets at the Beginning of the
  Year                                                          0             0
 Benefits Paid                                                (84)          (82)
 Employer Contributions                                        81            79
 Plan Participant's Contributions                               3             3
 Fair Value of Assets at the End of the Year                    0             0
Net Amount Recognized
 Funded Status                                               (998)         (952)
 Unrecognized Transition Obligation (Asset)                    85            93
 Unrecognized Net (Gain) or Loss                             (319)         (439)
                                                          -------       -------
 Net Amount Recognized:                                    (1,232)       (1,298)
Amounts Recognized in the Statement of Financial
  Position
 Accrued Benefit Liability                                 (1,232)       (1,298)
                                                          -------       -------
 Net Amount Recognized                                    $(1,232)      $(1,298)
Weighted Average Assumptions at the End of the Year
 Discount Rate                                               6.00%        6.50%
 Rate of Compensation Increase                               0.00%        0.00%
Assumed Health Care Cost Trend Rates
 Health Care Cost Trend Rate Assumed for Next Year          11.00%       12.00%
 Ultimate Rate                                               5.00%        5.00%
 Year that the Ultimate Rate is Reached                      2010          2010
</TABLE>



                                       38

<PAGE>
Net Periodic Pension Cost

<TABLE>
<CAPTION>

                                                           Fiscal Year Ending
In thousands                                             12/31/2003   12/31/2002
<S>                                                      <C>          <C>
Interest Cost                                              $   64       $    68
Amortization of Net (Gain) or Loss                         $  (57)      $   (60)
Amortization of Transition Obligation/(Asset)              $    8       $     8
Total FAS 106 Net Periodic Benefit Cost                    $   15       $    16
Total Net Periodic Benefit Cost                            $   15       $    16
Weighted Average Assumptions
 Discount Rate                                               6.50%        7.00%
 Expected Return on Plan Assets                              0.00%        0.00%
 Rate of Compensation Increase                               0.00%        0.00%
Assumed Health Care Cost Trend Rates
 Health Care Cost Trend Rate Assumed for Current
  Year                                                      12.00%       12.00%
 Ultimate Rate                                               5.00%        5.00%
 Year that the Ultimate Rate is Reached                      2010          2009

Impact of One-Percentage-Point Change in Assumed          Increase     Decrease
  Health Care Cost Trend Rates                            --------     --------
Effect on Service Cost & Interest Cost                     $    4       $    (3)
Effect on Postretirement Benefit Obligation                $   58       $   (52)
</TABLE>


The Medicare Prescription Drug, Improvement and Modernization Act of 2003 was
signed into law on December 8, 2003. In accordance with FASB Staff Position
FAS 106-1, the Company has made a one-time election to defer recognition of
the effects of the law in the accounting for its plan under FAS 106 and in
providing disclosures related to the plan until authoritative guidance on the
accounting for the federal prescription drug subsidy is issued. Any measures
of the Accumulated Postretirement Benefit Obligation or Net Periodic
Postretirement Benefit Cost in this report do not reflect the effects of the
Act on the plan. Authoritative guidance is pending and, when issued, could
require the Company to change previously reported information.

Contributions
Artesian Water expects to contribute $84,000 to its postretirement benefit
plan in 2004.

<TABLE>
<CAPTION>
                                                              Other Benefits
         In thousands                                         --------------
<S>                                                         <C>                      <C>                      <C>
         2004                                                             $ 87
         2005                                                               90
         2006                                                               93
         2007                                                               96
         2008                                                               99
         2009-2013                                                        $549
</TABLE>


NOTE 11

COMMITMENTS

In 1997, Artesian Water entered into a 33-year operating lease for a parcel of
land with improvements located in South Bethany, a municipality in Sussex
County, Delaware. The annual lease payments increase each year by the most
recent increase in the Consumer Price Index for Urban Workers ("CPI-U") as
published by the U.S. Department of Labor, Bureau of Labor Statistics.

During 1996, Artesian Water entered into a 10-year lease commitment for office
space. Rent expense for 2003, 2002 and 2001 for the office space was $72,000,
$71,000, and $69,000, respectively.

Future minimum annual rental payments under these lease obligations for the
five years subsequent to 2003 are as follows:


                                       39

<PAGE>

<TABLE>
<CAPTION>

In thousands
<S>                                                                         <C>
2004                                                                        $ 80
2005                                                                          81
2006                                                                          18
2007                                                                           5
2008                                                                           5
                                                                            ----
                                                                            $189
                                                                            ====
</TABLE>


Artesian Water has two water service interconnection agreements with two
neighboring utilities which require minimum annual purchases. Rates charged
under all agreements are subject to change. Effective August 1, 1997, Artesian
Water renegotiated the contract with the Chester Water Authority to, among
other things, reduce the minimum purchase requirements from 1,459 million
gallons to 1,095 million gallons annually and to extend the contract through
the year 2021. The interconnection agreement with the City of Wilmington
expires in 2006. The minimum annual purchase commitments for all
interconnection agreements for 2004 through 2008 and the aggregate total for
the years 2009 through 2021, at current rates, are as follows:

<TABLE>
<CAPTION>

In thousands
<S>                                                                      <C>
2004                                                                     $ 2,973
2005                                                                       2,966
2006                                                                       2,966
2007                                                                       2,672
2008                                                                       2,679
2009 through 2021                                                         34,755
                                                                         -------
                                                                         $49,011
                                                                         =======
</TABLE>


Expenses for purchased water were $2,976,000, $2,485,000 and $2,752,000 for
the years ended December 31, 2003, 2002 and 2001, respectively.

In 2001, Artesian Water entered into a 5-year agreement with Allied Painting,
Inc. to paint all tanks that are scheduled to be painted in the following 5
years, including 2001. The expenditures committed to in the agreement for the
years 2004-2005 are as follows:

<TABLE>
<CAPTION>

In thousands
<S>                                                                         <C>
2004                                                                        $249
2005                                                                         249
                                                                            ----
                                                                            $498
                                                                            ====
</TABLE>


Budgeted mandatory utility plant expenditures, due to planned governmental
highway projects which require the relocation of Artesian Water's water
service mains, expected to be incurred in 2004 through 2008 are as follows:

<TABLE>
<CAPTION>

In thousands                                                         (unaudited)
<S>                                                                  <C>
2004                                                                    $1,546
2005                                                                     1,215
2006                                                                     1,100
2007                                                                       500
2008                                                                       600
                                                                        ------
                                                                        $4,961
                                                                        ======
</TABLE>



                                       40

<PAGE>
The exact timing and extent of these relocation projects is controlled
primarily by the Delaware Department of Transportation.

NOTE 12

GEOGRAPHIC CONCENTRATION OF CUSTOMERS

Artesian Water and Artesian Water Pennsylvania provide water utility service
to customers within their established service territory in all three counties
of Delaware and in portions of Pennsylvania, pursuant to rates filed with and
approved by the PSC and the PAPUC. As of December 31, 2003, Artesian Water was
serving 69,687 customers and Artesian Water Pennsylvania was serving 39
customers.

NOTE 13

RATE PROCEEDINGS

On February 5, 2004, Artesian Water filed a petition with the Delaware Public
Service Commission to implement new rates to meet a requested increase in
revenue of 24%, or approximately $8.8 million, on an annualized basis.
Artesian Water anticipates placing temporary rates into effect, 60 days from
the filing date, up to the statutory limit of $2.5 million on an annual basis,
under bond until the level of permanent rates is decided by the Delaware
Public Service Commission.

On April 2, 2002, Artesian Water filed a petition with the Delaware PSC
seeking to raise rates for water service by 23.12% or $7.5 million. The
Delaware PSC, on April 16, 2002, suspended the implementation of the proposed
new rates pending further investigation and public evidentiary hearings.
Pending these hearings and a final ruling by the Delaware PSC, Artesian Water,
as is permitted by law, placed 7.71% of the proposed rates into effect under
bond beginning June 1, 2002. Beginning December 3, 2002, Artesian Water placed
an additional 3.69% of the proposed rates into effect. On April 15, 2003, the
Delaware PSC issued PSC Order No. 6147 approving an increase in Artesian
Water's revenue requirement of 9.68% effective May 1, 2003. These rates
represent an increase in water consumption charges, customer charges, and fire
hydrant ready-to-serve charges necessary to generate an increase in annual
operating revenues of approximately $3.3 million. Since temporary rates were
in excess of the final rate increase, in June 2003 we refunded approximately
$201,000 plus interest to our customers. Since Artesian Water had reserved
revenue related to the second temporary increase of $234,000, an additional
$33,000 was recorded to revenue for the second quarter.

Delaware statute permits water utilities to put into effect, on a semi-annual
basis, increases related to specific types of distribution system improvements
through a Distribution System Improvement Charge (DSIC). This charge is
available to water utilities to be implemented between general rate increase
applications that normally recognize changes in a water utility's overall
financial position. The DSIC process significantly reduces expenses when
compared to those typically associated with general rate increase requests. We
requested on May 30, 2003 and subsequently implemented a 0.39% overall
surcharge for bills rendered subsequent to July 1, 2003. Through this charge,
we generated approximately $80,000 in revenues during 2003. Furthermore, we
requested on November 30, 2003, and subsequently implemented, a 1.13% DSIC
surcharge for bills rendered subsequent to January 1, 2004. This surcharge was
designed and is expected to generate approximately $204,000 in revenues
between January and June of 2004.

NOTE 14

NET INCOME PER COMMON SHARE AND EQUITY PER COMMON SHARE

Basic net income per common share is based on the weighted average number of
common shares outstanding. Diluted net income per common share is based on the
weighted average number of common shares outstanding and potentially dilutive
effect of employee stock options.


                                       41

<PAGE>
The following table summarizes the shares used in computing basic and diluted
net income per common share:

<TABLE>
<CAPTION>

                                                                                                                   Years Ended
                                                                                                                  December 31,
                                                                                                             ----------------------
In thousands                                                                                                  2003    2002     2001
                                                                                                             -----    -----   -----
<S>                                                                                                          <C>      <C>     <C>
Average common shares outstanding during the
  period for Basic computation                                                                               3,880    3,533   3,039
Dilutive effect of employee stock options                                                                      112       79      69
                                                                                                             -----    -----   -----
Average common shares outstanding during the
  period for Diluted computation                                                                             3,992    3,612   3,108
                                                                                                             =====    =====   =====
</TABLE>


Equity per common share was $13.51, $14.48 and $11.25 at December 31, 2003,
2002 and 2001, respectively. These amounts were computed by dividing
stockholders' equity excluding preferred stock by the number of basic weighted
average shares of common stock outstanding at the end of each year.

NOTE 15

SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents certain historical consolidated statements of
operations data for each quarter for the fiscal years ended December 31, 2003
and 2002:

<TABLE>
<CAPTION>

In thousands (except                                       First Quarter     Second Quarter      Third Quarter      Fourth Quarter
per share data)                                           2003      2002     2003      2002     2003      2002      2003      2002
<S>                                                      <C>       <C>      <C>       <C>      <C>       <C>       <C>      <C>
Operating revenues                                       $8,538    $7,744   $9,453    $8,644   $9,227    $9,460    $9,077   $ 8,749
Operating income                                         $1,865    $1,512   $2,376    $1,856   $2,205    $2,551    $2,082   $ 2,256
Net income applicable to common stock                    $  708    $  536   $1,217    $  898   $1,052    $1,518    $  868   $$1,173
Income per common share
   Basic                                                 $ 0.18    $ 0.17   $ 0.31    $ 0.27   $ 0.27    $ 0.39    $ 0.22   $  0.30
   Diluted                                               $ 0.18    $ 0.17   $ 0.31    $ 0.26   $ 0.26    $ 0.39    $ 0.22   $  0.30
</TABLE>


NOTE 16

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In December 2003, the FASB issued revised Statement No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits-an amendment of
FASB Statements No. 87, 88, and 106." This statement requires additional
disclosures to those in the original Statement No. 132 about the assets,
obligations, cash flows, and net periodic benefit cost of defined pension
plans and other defined benefit postretirement plans. Disclosures for earlier
annual periods presented for comparative purposes are restated. This statement
is effective for financial statements with fiscal years ending after
December 15, 2003. The additional disclosures required for our postretirement
benefit obligation are presented in Note 10.

In May 2003, the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
This statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. The statement is effective for financial instruments entered into or
modified after May 31, 2003 and effective for other instruments beginning at
the first interim period beginning after June 15, 2003. The adoption of this
statement did not have a material impact on our financial condition or results
of operation.

In April 2003, the FASB issued Statement No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities." This statement amends and
clarifies financial accounting and reporting related to derivatives


                                       42

<PAGE>
and hedging activities under FASB Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement is effective
for contracts entered into or modified, and hedging relationships designated,
after June 30, 2003. The adoption of this statement did not have a material
impact on our financial condition or results of operation.

In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-
Based Compensation-Transition and Disclosure." Statement No. 148 amends
Statement No. 123, "Accounting for Stock-Based Compensation," by providing an
alternate method of transitioning to fair value based accounting for stock-
based compensation for those who choose to change. It also amends disclosure
requirements for both annual and interim financial statements. Certain of the
disclosure modifications were required for fiscal years ending after
December 15, 2002 and are included in the notes to these consolidated
financial statements.

In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This statement nullifies EITF
94-3, which addressed this subject. The statement requires recognition of a
liability for a cost associated with an exit or disposal activity when the
liability is incurred. Our adoption of this statement did not have a material
impact on our financial condition or results of operation.

In April 2002, the FASB issued Statement No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections. " Statement No. 145 eliminates accounting treatment described in
Statements 4 and 64 related to Extinguishment of Debt and amends Statement 13
regarding the use of sale -- lease back accounting. Our adoption of this
statement did not have a material impact on our financial condition or results
of operation.

In August 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations." Statement No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-
lived assets and the associated asset retirement costs. Statement No. 143
requires recognition of a liability at fair value and an increase to the
carrying value of the related asset for any retirement obligation. This amount
would then be amortized over the life of the asset. The liability would be
adjusted at the end of each period to reflect the passage of time and changes
in the estimated future cash flows. This statement is effective January 2003.
Our adoption of this statement did not have a material impact on our financial
condition or results of operations.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others," an interpretation of FASB Statements
No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. This
Interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under guarantees
issued. The Interpretation also clarifies that a guarantor is required to
recognize, at inception of a guarantee, a liability for the fair value of the
obligation undertaken. The initial recognition and measurement provisions of
the Interpretation are applicable to guarantees issued or modified after
December 31, 2002 and did not have a material effect on the Company's
financial statements. The disclosure requirements are effective for financial
statements of interim and annual periods ending after December 31, 2002.


                                       43

<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of Artesian Resources Corporation:

We have audited the accompanying consolidated balance sheets of Artesian
Resources Corporation and subsidiaries as of December 31, 2003 and 2002, and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 2003. In connection with our audits of the consolidated financial
statements, we have also audited the financial statement schedule as listed in
Item 15 of this Form 10-K. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Artesian
Resources Corporation and subsidiaries as of December 31, 2003 and 2002, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2003 in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

Philadelphia, Pennsylvania

February 11, 2004


                                       44

<PAGE>
Item 9. -- Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.

None.

Item 9A -- Controls and Procedures.

An evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of February 3, 2004 was carried out by
us under the supervision and with the participation of our management,
including the Chief Executive Officer and Chief Financial Officer. Based on
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures have been designed and
are being operated in a manner that provides reasonable assurance that the
information required to be disclosed by us in reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms. A
controls system, no matter how well designed and operated, cannot provide
absolute assurance that the objectives of the controls system are met, and no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been detected.
Subsequent to the date of the most recent evaluation of our internal controls,
there were no significant changes in our internal controls or in other factors
that could significantly affect the internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.


                                    PART III


Item 10. -- Directors and Executive Officers.

Name                      Age                    Position

Dian C. Taylor            58     Director since 1991, Chair of the Board since
                                 July 1993, and Chief Executive Officer and
                                 President of Artesian Resources Corporation
                                 and its subsidiaries since September 1992.
                                 Ms. Taylor has been employed by the Company
                                 since August 1991. She was formerly a
                                 consultant to the Small Business Development
                                 Center at the University of Delaware from
                                 February 1991 to August 1991 and Owner and
                                 President of Achievement Resources Inc. from
                                 1977 to 1991. Achievement Resources, Inc.
                                 specialized in strategic planning, marketing,
                                 entrepreneurial and human resources
                                 development consulting. Ms. Taylor was a
                                 marketing director for SMI, Inc. from 1982 to
                                 1985. Ms. Taylor is the sister of Norman H.
                                 Taylor, Jr. and the aunt of John R.
                                 Eisenbrey, Jr. She serves on the Executive
                                 and Budget Committees.

Kenneth R. Biederman      60     Director since 1991, Professor of Finance at
                                 the College of Business and Economics of the
                                 University of Delaware since May 1996.
                                 Interim Dean of the College of Business and
                                 Economics of the University of Delaware from
                                 February 1999 to June 2000. Dean of the
                                 College of Business and Economics of the
                                 University of Delaware from 1990 to 1996.
                                 Director of Chase Manhattan Bank USA from
                                 1993 to 1996. Formerly a financial and
                                 banking consultant from 1989 to 1990 and
                                 President of Gibraltar Bank from 1987 to
                                 1989. Previously Chief Executive Officer and
                                 Chairman of the Board of West Chester Savings
                                 Bank; Economist and former Treasurer of the
                                 State of New Jersey and Staff Economist for
                                 the United States Senate Budget Committee. He
                                 serves on the Executive; Audit; Personnel,
                                 Compensation and Benefits; Budget; and Stock
                                 Option Committees.

John R. Eisenbrey, Jr.    48     Director since 1993, owner and President of
                                 Bear Industries, Inc., a privately held
                                 mechanical contracting firm specializing in
                                 fire protection, for more than seventeen
                                 years. Mr. Eisenbrey is the nephew of Dian C.
                                 Taylor and Norman H. Taylor, Jr. He serves on
                                 the Audit; Personnel, Compensation, and
                                 Benefits; and Stock Option Committees.


                                       45

<PAGE>
Norman H. Taylor, Jr.     64     Director since 2001, Manager of Construction,
                                 Facilities, and Transportation of Artesian
                                 Water Company, Inc. since July 1997.
                                 Mr. Taylor has been employed by Artesian
                                 Water Company, Inc. since 1965 and has held
                                 various operational and supervisory positions
                                 within the Company. Mr. Taylor is the brother
                                 of Dian C. Taylor and the uncle of John R.
                                 Eisenbrey, Jr. He serves on the Budget
                                 Committee.

William C. Wyer           57     Director since 1991, Managing Director of
                                 Wilmington Renaissance Corporation (formerly
                                 Wilmington 2000) since January 1998.
                                 Wilmington Renaissance Corporation is a
                                 private organization seeking to revitalize
                                 the City of Wilmington, Delaware. Mr. Wyer
                                 has served as a Director and member of the
                                 Audit Committee of GMAC Bank since August
                                 2001. President of All Nation Life Insurance
                                 and Senior Vice President of Blue Cross/Blue
                                 Shield of Delaware from September 1995 to
                                 January 1998. Managing Director of Wilmington
                                 2000 from May 1993 to September 1995.
                                 Formerly President of Wyer Group, Inc. from
                                 1991 to 1993 and Commerce Enterprise Group
                                 from 1989 to 1991, both of which are
                                 management-consulting firms specializing in
                                 operations reviews designed to increase
                                 productivity, cut overhead and increase
                                 competitiveness, and President of the
                                 Delaware State Chamber of Commerce from 1978
                                 to 1989. He serves on the Executive; Audit;
                                 Budget; Stock Option; and Personnel,
                                 Compensation and Benefits Committees.

Joseph A. DiNunzio        41     Senior Vice President and Corporate Secretary
                                 of Artesian Resources Corporation and its
                                 Subsidiaries since March 2000. Mr. DiNunzio
                                 previously served as Vice President and
                                 Secretary of Artesian Resources Corporation
                                 and its Subsidiaries since January 1995.
                                 Mr. DiNunzio has been employed by the Company
                                 since 1989 and has held various executive and
                                 management level positions within the
                                 Company. Prior to joining Artesian,
                                 Mr. DiNunzio was employed by
                                 PriceWaterhouseCoopers LLP from 1984 to 1989.

Bruce P. Kraeuter         54     Vice President of Engineering and Planning of
                                 Artesian Water Company, Inc. Mr. Kraeuter has
                                 served as an officer since March 1995.
                                 Mr. Kraeuter has been employed by the Company
                                 since July 1989 and has held various
                                 executive and operational positions within
                                 the Company. Mr. Kraeuter served as Senior
                                 Engineer with the Water Resources Agency for
                                 New Castle County, Delaware from 1974 to
                                 1989.

John J. Schreppler, II    47     Vice President, Assistant Secretary and
                                 General Counsel of Artesian Resources
                                 Corporation and Artesian Water Company, Inc.
                                 since July 2000. Prior to joining the Company
                                 he practiced law in Wilmington, Delaware as
                                 John J. Schreppler, II P.A. from February
                                 1999, and before that as a partner in The
                                 Bayard Firm from 1988 to 1999.

David B. Spacht           44     Vice President, Chief Financial Officer and
                                 Treasurer of Artesian Resources Corporation
                                 and its Subsidiaries since January 1995. The
                                 Company has employed Mr. Spacht since 1980
                                 and he has held various executive and
                                 management level positions within the
                                 Company.


                                       46

<PAGE>
John M. Thaeder           46     Vice President of Operations of Artesian
                                 Water Company, Inc. Mr. Thaeder has served as
                                 an officer since February 1998. Prior to
                                 joining the Company, Mr. Thaeder was employed
                                 by Hydro Group, Inc. from 1996 to 1998 as
                                 Southeastern District Manager of Sales and
                                 Operations from Maryland to Florida. During
                                 1995 and 1996, Mr. Thaeder was Hydro Group's
                                 Sales Manager of the Northeast Division with
                                 sales responsibilities from Maine to Florida.
                                 From 1988 to 1995, he served as District
                                 Manager of the Layne Well and Pump Division
                                 of Hydro Group.

In accordance with the provisions of the Company's By-laws, the Board is
divided into three classes. Members of each class serve for three years and
one class is elected each year to serve a term until his or her successor
shall have been elected and qualified or until earlier resignation or removal.
Norman H. Taylor, Jr. and William C. Wyer have been nominated for election to
the Board of Directors to be voted by the Class B shareholders at the Annual
Meeting to be held on April 28, 2004.

The executive officers are elected or approved by our Board or our appropriate
subsidiary to serve until his or her successor is appointed or shall have been
qualified or until earlier death, resignation or removal.

During fiscal year 2003, the Board of Directors had a standing audit
committee, consisting of Kenneth R. Biederman, John R. Eisenbrey, Jr. and
William C. Wyer. The Board of Directors has also determined that each member
of the audit committee meets the independence requirements prescribed by the
listing standards of the Nasdaq National Market and the rules and regulations
of the Securities and Exchange Commission. The Board of Directors has further
determined that Mr. Biederman, a member of the audit committee, is an "audit
committee financial expert" as such term is defined in Item 401(h) of
Regulation S-K promulgated by the SEC. Mr. Biederman meets the independence
criteria prescribed by applicable law and the rules of the SEC for audit
committee membership and is an "independent director" as defined in the NASD
Rule 4200(a)(15).

The Company adopted a code of ethics applicable to its chief executive
officer, chief financial officer, controller or principal accounting officer,
and any person who performs a similar function, which is a "code of ethics" as
defined by applicable rules of the Securities and Exchange Commission. This
code is publicly available on the Company's website at www.artesianwater.com.
If the Company makes any amendments to this code other than technical,
administrative, or other non-substantive amendments, or grants any waivers,
including implicit waivers, from a provision of this code to the Company's
chief executive officer, chief financial officer, controller or principal
accounting officer, and any person who performs a similar function, the
Company will disclose the nature of the amendment or waiver, its effective
date and to whom it applies on its website.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under Section 16(a) of the Securities Exchange Act of 1934, as amended,
directors, officers and certain beneficial owners of the Company's equity
securities are required to file reports of their transactions in the Company's
equity securities with the Securities and Exchange Commission on specified due
dates. With respect to the fiscal year 2003, reports of transactions by all
directors, officers and such beneficial holders were timely filed. In making
this statement, the Company has relied on the written representations of its
directors, officers and ten percent (10%) stockholders and copies of the
reports that they filed with the Securities and Exchange Commission.

Item 11. -- Executive Compensation.

The following table sets forth a summary of the compensation for the three
most recent fiscal years earned by the Chief Executive Officer and the next
five highest paid executive officers whose annual salaries and bonuses
exceeded $100,000 for the fiscal year 2003.


                                       47

<PAGE>
<TABLE>
<CAPTION>
                                                                                Summary Compensation Table

                                                                                                                 Long Term
                                                                     Annual Compensation                      Compensation(5)
                                                                                                        Number of
                                                                                                        Securities
                                                                                            Other       Underlying
                                                                                           Annual        Options        All Other
Name and Principal Position                              Year     Salary      Bonus     Compensation     Awarded     Compensation $

<S>                                                      <C>     <C>        <C>            <C>            <C>          <C>
Dian C. Taylor                                           2003    $271,401   $111,211(1)    $25,148(4)      4,500       $24,237(5)
 Director, Chair,                                        2002    $214,250   $ 86,480(2)    $47,512(4)      4,500       $17,605(5)
 CEO & President                                         2001    $204,615   $ 75,665(3)    $29,554(4)     12,000       $16,687(5)

Joseph A. DiNunzio                                       2003    $177,519   $ 32,210(1)    $ 1,296         4,500       $16,905(5)
 Senior Vice President &                                 2002    $162,000   $ 27,245(2)    $   780         4,500       $15,772(5)
 Corporate Secretary                                     2001    $142,692   $ 49,115(3)    $ 1,313         7,500       $13,211(5)

David B. Spacht                                          2003    $154,638   $ 24,515(1)    $   992         4,500       $16,397(5)
 Vice President,                                         2002    $142,294   $ 20,072(2)    $ 1,212         4,500       $10,962(5)
 Chief Financial Officer                                 2001    $131,250   $ 35,236(3)    $   959         4,500       $10,134(5)
 & Treasurer

Bruce P. Kraeuter                                        2003    $136,794   $ 24,687(1)    $ 1,583         4,500       $13,980(5)
 Vice President of                                       2002    $125,875   $ 21,333(2)    $ 1,391         4,500       $12,904(5)
 Engineering & Planning                                  2001    $116,106   $ 35,424(3)    $ 1,980         4,500       $12,393(5)

John J. Schreppler, II                                   2003    $136,794   $ 20,932(1)    $    --         4,500       $ 7,560(5)
 Vice President, Assistant                               2002    $128,500   $ 11,363(2)    $    --         4,500       $ 2,478(5)
 Secretary & General                                     2001    $121,154   $ 32,113(3)    $    --         4,500       $       --
 Counsel

John M. Thaeder                                          2003    $136,794   $ 33,562(1)    $ 1,809         4,500       $ 7,571(5)
 Vice President of                                       2002    $125,875   $ 18,715(2)    $ 1,999         4,500       $ 6,763(5)
 Operations                                              2001    $116,106   $ 33,735(3)    $ 1,807         4,500       $ 6,738(5)
</TABLE>

(1) Includes the realized value of the stock awards and cash bonuses approved
    by the Personnel, Compensation and Benefits Committee on October 29, 2003
    under the Company's Cash and Stock Bonus Compensation Plan to Ms. Taylor
    and Messrs. DiNunzio, Spacht, Kraeuter, Schreppler and Thaeder. Ms. Taylor
    received $110,000 in cash. Mr. DiNunzio received 750 shares of Class A
    Stock and $12,077 in cash. Mr. Spacht received 500 shares of Class A Stock
    and $7,614 in cash. Mr. Kraeuter received 500 shares of Class A Stock and
    $7,773 in cash. Mr. Schreppler received 500 shares of Class A Stock and
    $7,374 in cash. Mr. Thaeder received 750 shares of Class A Stock and
    $12,613 in cash. The cash portions of the bonuses for Messrs. DiNunzio,
    Spacht, Kraeuter, Schreppler and Thaeder were issued to cover the
    individual tax liability associated with the stock bonus issued. The fair
    market value of the Class A Stock issued (and included in the table above)
    was $26.30 per share based on the closing price on the Nasdaq National
    Market on the date of the award.

(2) Includes the realized value of the stock awards and cash bonuses approved
    by the Personnel, Compensation and Benefits Committee on June 19, 2002
    under the Company's Cash and Stock Bonus Compensation Plan to Ms. Taylor
    and Messrs. DiNunzio, Spacht, Kraeuter, Thaeder and Schreppler. Ms. Taylor
    received 1,500 shares of Class A Stock and $37,679 in cash. Mr. DiNunzio
    received 500 shares of Class A Stock and $11,245 in cash. Mr. Spacht
    received 300 shares of Class A Stock and $7,352 in cash. Mr. Kraeuter
    received 300 shares of Class A Stock and $7,669 in cash. Mr. Schreppler
    received 200 shares of Class A Stock and $3,926 in cash. Mr. Thaeder
    received 300 shares of Class A Stock and $7,669 in cash. The cash portions
    of the bonuses were issued to cover the individual tax liability associated
    with the stock bonuses issued. The fair market value of the Class A Stock
    issued (and included in the table above) was $31.25 per share based on the
    closing price on the Nasdaq National Market on the date of the award.


                                       48

<PAGE>
(3) Includes the realized value of stock awards and cash bonuses approved by
    the Personnel, Compensation and Benefits Committee on October 1, 2001 under
    the Company's Cash and Stock Bonus Compensation Plan to Ms. Taylor and
    Messrs. DiNunzio, Spacht, Kraeuter, Schreppler and Thaeder. Ms. Taylor
    received 1,200 shares of Class A Stock and $18,580 in cash. Mr. DiNunzio
    received 750 shares of Class A Stock and $14,005 in cash. Mr. Spacht
    received 500 shares of Class A Stock and $8,829 in cash. Mr. Kraeuter
    received 500 shares of Class A Stock and $9,004 in cash. Mr. Schreppler
    received 500 shares of Class A Stock and $8,566 in cash. Mr. Thaeder
    received 500 shares of Class A Stock and $9,004 in cash. The cash portions
    of the bonuses were issued to cover the individual tax liability associated
    with the stock bonuses issued. The fair market value of the Class A Stock
    issued (and included in the table above) was $26.25 per share based on the
    closing price on the Nasdaq National Market on the date of the award.

(4) Includes $22,400 in 2003, $22,750 in 2002 and $19,300 in 2001 received as
    compensation for attendance at meetings of the Board and its committees. In
    2002 and 2001, Ms. Taylor received $23,705 and $8,958 respectively, in
    medical expense reimbursements from the Company's Officer's Medical
    Reimbursement Plan.

(5) The Company contributes two percent of an eligible employee's gross
    earnings to the 401(k) Plan. In addition, the Company matches fifty percent
    of the first six percent of the employee's gross earnings that the employee
    contributes to the 401(k) Plan. The amounts disclosed in this column
    include our contributions under the 401(k) Plan for the fiscal year 2003 --
    Ms. Taylor $11,142, Mr. DiNunzio $8,345, Mr. Spacht $7,447, Mr. Kraeuter
    $7,380, Mr. Schreppler $7,560 and Mr. Thaeder $7,571; for the fiscal year
    2002 -- Ms. Taylor $8,493, Mr. DiNunzio $7,978, Mr. Spacht $2,740,
    Mr. Kraeuter $6,841, Mr. Schreppler $2,478 and Mr. Thaeder $6,763; and for
    the fiscal year 2001 -- Ms. Taylor $8,793, Mr. DiNunzio $6,325, Mr. Spacht
    $2,533, Mr. Kraeuter $6,788 and Mr. Thaeder $6,738. In addition, effective
    October 1, 1994, the Company established a Supplemental 401(k) Retirement
    Plan (the "Supplemental Plan"). All employees hired before April 26, 1994
    and under the age of sixty at that date are eligible for the Supplemental
    Plan. Employees over the age of sixty waived participation in the
    Supplemental Plan in order to receive Company paid medical, dental and life
    insurance benefits upon retirement. The Company will not provide such
    benefits to any other current or future employees. The amounts disclosed in
    this column also include our contributions under the Supplemental Plan for
    the fiscal year 2003 -- Ms. Taylor $13,095, Mr. DiNunzio $8,560, Mr. Spacht
    $8,951 and Mr. Kraeuter $6,601; for the fiscal year 2002 -- Ms. Taylor
    $9,112, Mr. DiNunzio $7,794, Mr. Spacht $8,221 and Mr. Kraeuter $6,063; and
    for the fiscal year 2001 -- Ms. Taylor $7,894, Mr. DiNunzio $6,886,
    Mr. Spacht $7,600 and Mr. Kraeuter $5,605.


                                       49

<PAGE>
Option Grants in Last Fiscal Year

The following table sets forth information regarding options granted in the
2003 fiscal year to the executive officers named in the Summary Compensation
Table.

<TABLE>
<CAPTION>

                                                                                                      Potential Realizable Value at
                                                                                                         Assumed Annual Rates of
                                                                                                       Stock Price Appreciation for
                                              Individual Grants                                               Option Term(1)
                                    ------------------------------------                              -----------------------------
Name                                 Number of     % of Total     Market    Exercise    Expiration     0% ($)    5% ($)     10% ($)
                                    Securities      Options       Price      Or Base       Date
                                    Underlying     Granted to       on      Price per
                                      Options     Employees in   Date of      Share
                                      Granted     Fiscal Year     Grant        ($)
<S>                                 <C>           <C>            <C>        <C>         <C>           <C>        <C>       <C>
Dian C. Taylor                       4,500(2)         10.9        $22.27     $19.95       5/21/13     $10,454    $73,487   $170,192

Joseph A. DiNunzio                   4,500(3)         10.9        $22.27     $22.27       5/21/13     $     0    $63,033   $159,738

David B. Spacht                      4,500(3)         10.9        $22.27     $22.27       5/21/13     $     0    $63,033   $159,738

Bruce P. Kraeuter                    4,500(3)         10.9        $22.27     $22.27       5/21/13     $     0    $63,033   $159,738

John J. Schreppler, II               4,500(3)         10.9        $22.27     $22.27       5/21/13     $     0    $63,033   $159,738

John M. Thaeder                      4,500(3)         10.9        $22.27     $22.27       5/21/13     $     0    $63,033   $159,738
</TABLE>

(1) Amounts represent the hypothetical gains that could be achieved from the
    respective options if exercised at the end of the option term. These gains
    are based on assumed rates of stock appreciation of zero percent (0%), five
    percent (5%) and ten percent (10%) compounded annually from the date the
    respective options were granted to their expiration date based upon the
    grant price.

(2) Option granted for Class A Stock under the NQSO Plan. The grant was made on
    May 21, 2003 and the shares underlying the option granted will become
    exercisable in six months following the date of grant.

(3) Option granted for Class A Stock under the ISO Plan. The grants were made
    on May 21, 2003 and the shares underlying the options granted will vest
    annually in five equal installments from the date of grant.


                                       50

<PAGE>
Option Exercises and Fiscal Year End Values

The following table provides certain information concerning option exercises
during 2003 by the executive officers named in the Summary Compensation Table
and year end option values:

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values

<TABLE>
<CAPTION>

                                                                            Number of Securities           Value of Unexercised
                                                                           Underlying Unexercised              In-the Money
                                               Shares                        Options at Fiscal               Options at Fiscal
                                             Acquired on      Value             Year End (#)                   Year End ($)
Name                                        Exercise (#)    Realized    Exercisable/Unexercisable(1)   Exercisable/Unexercisable(2)
<S>                                         <C>             <C>         <C>                            <C>
Dian C. Taylor                                  6,000        $70,800            42,000/6,000                 $588,473/$ 63,536
Joseph A. DiNunzio                                 --        $    --           29,700/11,550                 $446,945/$110,091
David B. Spacht                                   231        $ 3,319            21,897/9,750                 $308,064/$ 89,225
Bruce P. Kraeuter                                 250        $ 2,515            16,250/9,750                 $208,217/$ 89,225
John J. Schreppler, II                             --        $    --             6,300/7,200                 $ 62,531/$ 56,435
John M. Thaeder                                    78        $   815            14,922/9,750                 $185,941/$ 89,225
</TABLE>

(1) All securities represent options to purchase shares of the Class A Stock.

(2) Based on $27.86 per share, which was the last reported sale price of the
    Company's Class A Stock as reported by Nasdaq on December 31, 2003.

Outside directors receive an annual retainer fee of $8,000 paid in advance.
Each director receives $1,000 for each Board meeting attended, $500 for each
committee meeting attended on the day of a regular board meeting and $1,000
for each committee meeting attended on any other day. The chair of each
committee receives an annual retainer of $1,000.

The Company has an Officer's Medical Reimbursement Plan that reimburses
officers for certain medical expenses not covered under the Company's medical
insurance plan.

The Company has a Cash and Stock Bonus Compensation Plan for officers. The
purpose of this plan is to compensate the officers of the Company and Artesian
Water, as appointed by the Board of Directors, for their contributions to the
long-term growth and prosperity of the Company in the form of cash or shares
of the Class A Stock of the Company. Compensation in the form of a bonus of
the Class A Stock of the Company paid to such officers also serves to increase
such officers' proprietary interest in the Company.

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

The following table sets forth the beneficial ownership of the equity
securities of the Company, as of February 13, 2004, for each director and each
executive officer named in the Summary Compensation Table and each beneficial
owner of more than five percent (5%) of the outstanding shares of any class of
the Company's voting securities and all directors and executive officers as a
group, based in each case on information furnished to the Company. Addresses
are provided for each beneficial owner of more than five percent (5%) of the
Company's voting securities.


                                       51

<PAGE>

<TABLE>
<CAPTION>

                                                                                 Class A Non-Voting              Class B Common
                                                                                  Common Stock(1)                   Stock(1)
                                                                             Shares            Percent(2)      Shares    Percent(2)
                                                                       ------------------    --------------    -------   ----------
<S>                                                                    <C>                   <C>               <C>       <C>
Dian C. Taylor (3)
  664 Churchmans Road
  Newark, Delaware 19702                                                      93,390               2.8%        104,833      17.8%

Kenneth R. Biederman (3)                                                      47,250               1.4%             --         --

John R. Eisenbrey, Jr. (3)(4)
  15 Albe Drive
  Newark, Delaware 19702                                                      46,594               1.4%         30,472       5.2%

Norman H. Taylor, Jr. (3)(5)
  1597 Porter Road
  Bear, Delaware 19701                                                        38,580               1.2%        178,966      30.5%

William C. Wyer (3)                                                           45,000               1.3%             --         --

Joseph A. DiNunzio (3)(6)                                                     35,887                1.1%            69         --

Bruce P. Kraeuter (3)                                                         28,317                 --             --         --

David B. Spacht (3)                                                           20,744                 --            126         --

John J. Schreppler, II (3)                                                     7,850                 --             --         --

John M. Thaeder (3)                                                           21,038                 --            900         --

Louisa Taylor Welcher (7)
  219 Laurel Avenue
  Newark, DE 19711                                                            32,590               1.0%         89,023      15.1%

Directors and Executive Officers as a Group (10 Individuals) (3)             384,650              10.8%        315,366      53.7%
</TABLE>



                                       52

<PAGE>
(1) The nature of ownership consists of sole voting and investment power unless
    otherwise indicated. The amount also includes all shares issuable to such
    person or group upon the exercise of options held by such person or group
    to the extent such options areexercisable within 60 days after February 13,
    2004.

(2) The percentage of the total number of shares of the class outstanding is
    shown where that percentage is one percent or greater. Percentages for each
    person are based on the aggregate number of shares of the applicable class
    outstanding as of February 13, 2004, and all shares issuable to such person
    upon the exercise of options held by such person, to the extent such
    options are exercisable within 60 days of that date.

(3) Includes options to purchase shares of the Company's Class A Stock, as
    follows: Ms. Taylor (34,500 shares); Mr. Biederman (36,000 shares);
    Mr. Eisenbrey (16,093 shares); Mr. Taylor (15,300 shares); Mr. Wyer (36,000
    shares); Mr. DiNunzio (29,700 shares); Mr. Kraeuter (16,150 shares);
    Mr. Spacht (18,226 shares); Mr. Schreppler (6,300 shares); and Mr. Thaeder
    (14,870 shares).

(4) Includes 520 shares of the Class B Stock owned by a trust, of which
    Mr. Eisenbrey, Jr. is a trustee and has a beneficial ownership interest,
    and 1,037 shares of the Class B Stock held in custodial accounts for
    Mr. Eisenbrey, Jr.'s daughters.

(5) Includes 1,077 shares of the Class B Stock and 276 shares of the Class A
    Stock owned by Mr. Taylor's wife for which Mr. Taylor disclaims beneficial
    ownership.

(6) Includes 18 shares of the Class A Stock held in custodial accounts for
    Mr. DiNunzio's sons.

(7) Includes 96 shares of the Class B Stock held jointly by Ms. Welcher's
    husband and son, 1,094 shares of the Class B Stock held by Ms. Welcher's
    sons, 218 shares of the Class A Stock held by Ms. Welcher's husband and
    1,084 shares of the Class A Stock held by Ms. Welcher's sons, for which
    Ms. Welcher disclaims beneficial ownership.

<TABLE>
<CAPTION>

                                                                               Equity Compensation Plan Information
                                                                                                              Number of securities
                                                               Number of securities                            remaining available
                                                                 to be issued upon      Weighted-average       for future issuance
                                                                    exercise of         exercise price of         under equity
Plan category                                                   outstanding options    outstanding options   compensation plans (1)
<S>                                                            <C>                     <C>                   <C>
Equity compensation plans approved by security holders                303,333                $15.51                  91,324
Equity compensation plans not approved by security holders                 --                    --
                                                                      -------                                        ------
Total                                                                 303,333                                        91,324
</TABLE>

(1) Includes 13,650 shares available for issue under the stock and cash bonus
    plans for officers.


                                       53

<PAGE>
Item 13. -- Certain Relationships and Related Transactions.

The corporate headquarters of Artesian Resources, Artesian Water and its other
non-regulated subsidiaries are located at 664 Churchmans Road, Newark,
Delaware. As of October 20, 2003, the property is owned by Artesian Water.
Prior to that date, the property was leased from White Clay Realty by Artesian
Water. For a discussion on the manner by which Artesian Water acquired this
property, see Item 3 (Legal Proceedings).

On April 29, 1999, the Company entered into an agreement with Ellis D. Taylor,
who has since passed away, and his spouse, Helena C. Taylor (the "Taylors"),
to repurchase 126,353 shares of Class B Stock and 24,165 shares of Class A
Stock (the "Taylor Stock") owned by the Taylors. On May 4, 1999, the Company
executed a promissory note (the "Note") in the principal amount of $4,450,000
representing the purchase price of the Taylor Stock. Commencing on June 30,
1999, the Note was payable quarterly, on a calendar basis, over a four-year
period. The outstanding balance on the Note bore interest in an amount based
on the quarterly dividend the Taylors would have received on the Stock
transferred to the Company but not yet paid for by the Company. In addition,
the principal installment was adjusted on a quarterly basis to reflect changes
in the book value per common share of the Company as reported in its most
recent quarterly financial statement distributed to stockholders prior to the
quarterly payment. For the year ended December 31, 2003, principal payments
(including book value adjustments) totaled $361,000 and interest payments
totaled $3,000. The note was paid in full on March 25, 2003.

Item 14. -- Principal Accountant Fees and Services.

Fees Billed by Independent Auditors

The following table sets forth the aggregate fees billed to the Company for
fiscal years 2003 and 2002 by KPMG LLP:
<TABLE>
<CAPTION>

      In thousands                                                         2003       2002
      <S>                                                                  <C>        <C>
      Audit Fees                                                           $140       $150(1)
      Audit-Related Fees                                                      0          0
      Tax Fees                                                               26(2)      55(2)
      All Other Fees                                                          0          0
                                                                           ----       ----
      Total Fees                                                           $166       $205
                                                                           ====       ====
</TABLE>

(1) Includes $50,000 for work related to the Company's equity issuance in 2002.
(2) Includes $2,000 for a tax software license.

Audit Fees consist primarily of fees for year-end audit and the review of the
Company's Quarterly Reports on Form 10-Q.

Tax Fees consist of fees for professional services for tax compliance, tax
advice and tax planning. These services include assistance regarding federal
and state tax compliance, return preparation, tax audits and a tax software
license.

Pursuant to policy, the Audit Committee pre-approves audit and tax services
for the year as well as non-audit services to be provided by the independent
auditors. Any changes in the amounts quoted are also subject to pre-approval
by the committee. All of the tax fees paid in 2002 and 2003 were pre-approved
by the committee.


                                       54

<PAGE>
Item 15. -- Exhibits, Financial Statements Schedules, and Reports on Form 8-K.

                                                                       Page(s)*

(a)  The following documents are filed as part of this report:

     (1)  Financial Statements:

          Report of Independent Auditors                                     44

          Consolidated Balance Sheets at December 31, 2003 and 2002          20

          Consolidated Statements of Operations for the three years ended
          December 31, 2003                                                  21

          Consolidated Statements of Cash Flows for the three years ended
          December 31, 2003                                                  22

          Consolidated Statements of Changes in Stockholders' Equity for the
          three years ended December 31, 2003                             23-25

          Notes to Consolidated Financial Statements                      26-43

     (2)  Financial Statement Schedule:

          Schedule II: Valuation and Qualifying Accounts                     63

     (3) Exhibits: see (c) below

(b)  Reports on Form 8-K.

     A current report on Form 8-K dated December 23, 2003 was filed with the
     Securities and Exchange Commission on January 6, 2004 reporting the
     issuance of Series Q, 4.75%, 40-year First Mortgage Bonds.

(c)  Exhibits                                                             56-57

* Page number shown refers to page number in this Report on Form 10-K


                                       55

<PAGE>
                         ARTESIAN RESOURCES CORPORATION
                            FORM 10-K ANNUAL REPORT
                          YEAR ENDED DECEMBER 31, 2003

                               INDEX TO EXHIBITS

Exhibit
Number     Description

3.1        Restated Certificate of Incorporation of the Company effective
           May 26, 1995 incorporated by reference to Exhibit 3 filed with the
           Company Form 10-Q for the quarter ended June 30, 1995.

3.3        By-laws of the Company effective April 27, 1993 incorporated by
           reference filed with the Artesian Resources Corporation Form 8-K
           filed April 27, 1993.

4.1        Seventeenth supplemental Indenture dated as of December1 2003
           between Artesian Water Company, Inc., subsidiary of the Company,
           and the Wilmington Trust Company, as Trustee.*

4.2        Sixteenth supplemental Indenture dated as of January 31, 2003
           between Artesian Water Company, Inc., subsidiary of the Company,
           and the Wilmington Trust Company, as Trustee.*

4.3        Fifteenth supplemental Indenture dated as of December 1, 2000
           between Artesian Water Company, Inc., subsidiary of the Company,
           and the Wilmington Trust Company, as Trustee.
           Incorporated by reference to the exhibits filed with the Company's
           Form 10-Q for the quarter ended March 31, 2002.

4.4        Thirteenth and Fourteenth Indentures dated as of June 17, 1997
           between Artesian Water Company, Inc., subsidiary of the Company,
           and the Wilmington Trust Company, as Trustee.
           Incorporated by reference to the exhibits filed with the Company's
           Form 10-Q for the quarter ended June 30, 1997.

4.5        Twelfth Supplemental Indenture dated as of December 5, 1995 between
           Artesian Water Company, Inc. subsidiary of the Company and
           Wilmington Trust Company, as Trustee.
           Incorporated by reference to the exhibit filed with the Company's
           Annual Report on Form 10-K for the year ended December 31, 1995.

4.6        Eleventh Supplemental Indenture dated as of February 16, 1993
           between Artesian Water Company, Inc., subsidiary of the Company and
           Principal Mutual Life Insurance Company.
           Incorporated by reference to the exhibit filed with the Company's
           Annual Report on Form 10-K for the year ended December 31, 1992.

4.7        Tenth Supplemental Indenture dated as of April 1, 1989 between
           Artesian Water Company, Inc., subsidiary of the Company, and
           Wilmington Trust Company, as Trustee. Incorporated by reference to
           the exhibit filed with the Company's Registration Statement on Form
           10 filed April 30, 1990 and as amended by Form 8-K filed on June 19,
           1990.

10.4       Artesian Resources Corporation Incentive Stock Option Plan.
           Incorporated by reference to the exhibit filed with the Company's
           Annual Report on Form 10-K for the year ended December 31, 1995.

10.6       Officer's Medical Reimbursement Plan dated May 27, 1992.
           Incorporated by reference to the Exhibit filed with the Company's
           Form 10-K for the year ended December 31, 2001.**

11         Statement Re: Computation of Net Income per Class A and Class B
           Common Shares.*

21         Subsidiaries of the Company as of December 31, 2003.*

23.1       The consent of KPMG LLP.*


                                       56

<PAGE>
24.1       Power of Attorney (included on signature page).*

31.1       Certification of Chief Executive Officer pursuant to Section 302 of
           the Sarbanes-Oxley Act of 2002.*

31.2       Certification of Chief Financial Officer pursuant to Section 302 of
           the Sarbanes-Oxley Act of 2002.*

32         Certification of Chief Executive Officer and Chief Financial
           Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
---------------
*   Filed herewith.
**  Compensation plan or arrangement required to be filed or incorporated as an
    exhibit.


                                       57

<PAGE>
                                   SIGNATURES
                         ARTESIAN RESOURCES CORPORATION


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

Date: March 5, 2004              By: /s/ David B. Spacht
                     David B. Spacht, Vice President, Chief
                        Financial Officer and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Each person in so signing also makes, constitutes and appoints Dian C. Taylor,
Chairman, President, and Chief Executive Officer of Artesian Resources
Corporation, and David B. Spacht, Vice President, Chief Financial Officer and
Treasurer of Artesian Resources Corporation, and each of them acting alone, as
his or her true and lawful attorneys-in-fact, in his or her name, place and
stead, to execute and cause to be filed with the Securities and Exchange
Commission any or all amendments to this report.

<TABLE>
<CAPTION>
Signature                                   Title                                                                      Date
<S>                                         <C>                                                                        <C>
Principal Executive Officer:
/s/ Dian C. Taylor
Dian C. Taylor                              President and Chief Executive Officer                                      3/5/04

Principal Financial and Accounting Officer:
/s/ David B. Spacht
David B. Spacht                             Vice President, Chief Financial Officer and Treasurer                      3/5/04

Directors:
/s/ Dian C. Taylor
Dian C. Taylor                              Director                                                                   3/5/04

/s/ Norman H. Taylor, Jr.
Norman H. Taylor, Jr.                       Director                                                                   3/5/04

/s/ Kenneth R. Biederman
Kenneth R. Biederman                        Director                                                                   3/5/04

/s/ William C. Wyer
William C. Wyer                             Director                                                                   3/5/04

/s/ John R. Eisenbrey, Jr.
John R. Eisenbrey, Jr.                      Director                                                                   3/5/04
</TABLE>



                                       58

<PAGE>
                         ARTESIAN RESOURCES CORPORATION
                            FORM 10-K ANNUAL REPORT
                          YEAR ENDED DECEMBER 31, 2003

                               INDEX TO EXHIBITS

Exhibit
Number      Description

3.1         Restated Certificate of Incorporation of the Company effective
            May 26, 1995 incorporated by reference to Exhibit 3 filed with the
            Company Form 10-Q for the quarter ended June 30, 1995.

3.3         By-laws of the Company effective April 27, 1993 incorporated by
            reference filed with the Artesian Resources Corporation Form 8-K
            filed April 27, 1993.

4.1         Seventeenth supplemental Indenture dated as of December1 2003
            between Artesian Water Company, Inc., subsidiary of the Company,
            and the Wilmington Trust Company, as Trustee.*

4.2         Sixteenth supplemental Indenture dated as of January 31, 2003
            between Artesian Water Company, Inc., subsidiary of the Company,
            and the Wilmington Trust Company, as Trustee.*

4.3         Fifteenth supplemental Indenture dated as of December 1, 2000
            between Artesian Water Company, Inc., subsidiary of the Company,
            and the Wilmington Trust Company, as Trustee.
            Incorporated by reference to the exhibits filed with the Company's
            Form 10-Q for the quarter ended March 31, 2002.

4.4         Thirteenth and Fourteenth Indentures dated as of June 17, 1997
            between Artesian Water Company, Inc., subsidiary of the Company,
            and the Wilmington Trust Company, as Trustee.
            Incorporated by reference to the exhibits filed with the Company's
            Form 10-Q for the quarter ended June 30, 1997.

4.5         Twelfth Supplemental Indenture dated as of December 5, 1995
            between Artesian Water Company, Inc. subsidiary of the Company and
            Wilmington Trust Company, as Trustee.
            Incorporated by reference to the exhibit filed with the Company's
            Annual Report on Form 10-K for the year ended December 31, 1995.

4.6         Eleventh Supplemental Indenture dated as of February 16, 1993
            between Artesian Water Company, Inc., subsidiary of the Company
            and Principal Mutual Life Insurance Company.
            Incorporated by reference to the exhibit filed with the Company's
            Annual Report on Form 10-K for the year ended December 31, 1992.

4.7         Tenth Supplemental Indenture dated as of April 1, 1989 between
            Artesian Water Company, Inc., subsidiary of the Company, and
            Wilmington Trust Company, as Trustee. Incorporated by reference to
            the exhibit filed with the Company's Registration Statement on
            Form 10 filed April 30, 1990 and as amended by Form 8 filed on
            June 19, 1990.

10.4        Artesian Resources Corporation Incentive Stock Option Plan.
            Incorporated by reference to the exhibit filed with the Company's
            Annual Report on Form 10-K for the year ended December 31, 1995.

10.6        Officer's Medical Reimbursement Plan dated May 27, 1992.
            Incorporated by reference to the Exhibit filed with the Company's
            Form 10-K for the year ended December 31, 2001.**

11          Statement Re: Computation of Net Income per Class A and Class B
            Common Shares.*

21          Subsidiaries of the Company as of December 31, 2003.*

23.1        The consent of KPMG LLP.*

24.1        Power of Attorney (included on signature page).*


                                       59

<PAGE>
31.1        Certification of Chief Executive Officer pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002.*

31.2        Certification of Chief Financial Officer pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002.*

32          Certification of Chief Executive Officer and Chief Financial
            Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
            2002.*
---------------
*   Filed herewith.
**  Compensation plan or arrangement required to be filed or incorporated as an
    exhibit.


                                       60