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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)



|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[X]   |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|     
|      |  | For the quarterly period ended June 30, 2002                                            
|     
|      |  | OR                                                                                      
|     
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
|     
|      |  | For the transaction period from __________ to __________                                

Commission File Number: 0-25248

CONSOLIDATED WATER CO. LTD.

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(Exact name of Registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|CAYMAN ISLANDS                                                 |  | N/A                                 
|                                                               |  |                                     
|(State or other jurisdiction of incorporation or
organization) |  | (I.R.S. Employer Identification No.)

|                                                                     |  |           
|-------------------------------------------------------------------- |  | ----------
|Trafalgar
Place, West Bay Road,P.O. Box 1114 GT, Grand Cayman, B.W.I |  | N/A       
|                                                                     |  |           
|(Address of principal executive offices)                             |  | (Zip Code)

Registrants Telephone number, including area code: (345) 945-4277

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [X]      No [   ]



As at August 2, 2002, there were 3,981,464 of the registrants ordinary shares
of common stock, with CI$ 1.00 par value, outstanding.



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EXCHANGE RATES

Unless otherwise indicated, all dollar amounts are in United States Dollars and
references to $, U.S., or U.S. $ are to United States Dollars.

The official fixed exchange rate for conversion of CI$ into U.S.$, as determined
by the Cayman Islands Monetary Authority, has been fixed since April 1974 at
U.S. $1.20 per CI$1.00.

The official fixed exchange rate for conversion of BZE$ into U.S.$, as
determined by the Central Bank of Belize, has been fixed since 1976 at U.S.$
0.50 per BZE$ 1.00.

The official fixed exchange rate for conversion of BAH$ into U.S.$, as
determined by the Central Bank of The Bahamas, has been fixed since 1973 at U.S.
$1.00 per BAH $1.00.





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TABLE OF CONTENTS



|                                                         |                                                                                                                                            |  |  |  |  |  |  | 
|-------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                          
|                                                         | Item 1. Financial Statements                                                                                                              
|CONDENSED CONSOLIDATED BALANCE SHEETS                   
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME             
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS         
|NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                                         | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                                             
|                                                         | Item 3. Quantitative and Qualitative Disclosures about Market Risk                                                                        
|                                                         | All of our foreign currencies have fixed exchanged rates to the U.S. dollar as detailed under the exchange rate section described earlier.
|PART II  OTHER INFORMATION                             
|                                                         | Item 2. Changes in Securities and Use of Proceeds                                                                                         
|                                                         | Item 6. Exhibits and Reports on Form 8-K                                                                                                  
|SIGNATURE                                               



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TABLE OF CONTENTS

|          |  |                                                                                        |  |                                                                                                               |    |  |   | 
|--------- |  | -------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------- | -- |  | - | 
|Section   |  | Description                                                                            |  | Page                                                                                                         
|          |  |                                                                                        |  |                                                                                                              
|PART I    |  | FINANCIAL INFORMATION                                                                  |  |                                                                                                               |    | 
|         
|Item 1.   |  | Financial Statements                                                                   |  |                                                                                                               |    | 
|         
|          |  |                                                                                        |  | Condensed Consolidated Balance Sheets as at June 30, 2002 and
December 31, 2001                               |    |  | 1 | 
|         
|          |  |                                                                                        |  | Condensed Consolidated Statements of Income for each of the Three and Six
Months ended June 30, 2002 and 2001 |    |  | 2 | 
|         
|          |  |                                                                                        |  | Condensed Consolidated Statements of Cash Flows for each of the
Six Months ended June 30, 2002 and 2001       |    |  | 3 | 
|         
|          |  |                                                                                        |  | Notes to Condensed Consolidated Financial Statements                                                          |    |  | 4 | 
|         
|Item 2.   |  | Managements Discussions and Analysis of Financial Condition and Results
of Operations |  |                                                                                                               | 8  | 
|         
|Item 3.   |  | Quantitative and Qualitative Disclosures about Market Risk                             |  |                                                                                                               | 14 | 
|         
|         
|PART II   |  | OTHER INFORMATION                                                                      |  |                                                                                                               |    | 
|         
|Item 2.   |  | Changes in Securities and Use of Proceeds                                              |  |                                                                                                               | 15 | 
|         
|Item 4.   |  | Submission of Matters to a Vote of Security Holders                                    |  |                                                                                                               | 16 | 
|         
|Item 6.   |  | Exhibits and Reports on Form 8-K                                                       |  |                                                                                                               | 16 | 
|         
|SIGNATURE |  |                                                                                        |  |                                                                                                               | 17 | 

Forward-Looking Statements

This Form 10-Q for Consolidated Water Co. Ltd. (the Company) includes
statements that may constitute forward-looking statements, usually containing
the words believe, estimate, project, intend, expect or similar
expressions. These statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
inherently involve risks and uncertainties that could cause actual results to
differ materially from the forward-looking statements. Factors that would cause
or contribute to such differences include, but are not limited to, continued
acceptance of the Companys products and services in the marketplace, changes in
its relationship with the governments of the jurisdictions in which it operates,
the ability to successfully secure contracts for water projects in other
countries, the ability to develop and operate such projects profitably, and
other risks detailed in the Companys other periodic report filings with the
Securities and Exchange Commission. By making these forward-looking statements,
the Company undertakes no obligation to update these statements for revisions or
changes after the date of this Form 10-Q.





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PART I  FINANCIAL INFORMATION




Item 1. Financial Statements

CONSOLIDATED WATER CO. LTD.




CONDENSED CONSOLIDATED BALANCE SHEETS


(Expressed in United States Dollars)


|                                           |                                        |   |             |           |              |   |            |           | 
|------------------------------------------ | -------------------------------------- | - | ----------- | --------- | ------------ | - | ---------- | --------- | 
|                                           |                                        |   | June 30,    |           | December 31,
|                                           |                                        |   | 2002        |           | 2001        
|                                           |                                        |   |             |           |             
|                                           |                                        |   | (Unaudited) |           |              |   |           
|ASSETS                                     |                                        |   |             |           |              |   |            |          
|Current assets                             |                                        |   |             |           |              |   |            |          
|                                           | Cash and cash equivalents              |   |             | 1,965,652 |              |   |            | 516,446   | 
|                                           | Accounts receivable                    |   |             | 1,309,474 |              |   |            | 1,323,156 | 
|                                           | Spares inventory                       |   |             | 350,076   |              |   |            | 271,134   | 
|                                           | Inventory of water                     |   |             | 50,043    |              |   |            | 48,377    | 
|                                           | Prepaid expenses and other assets      |   |             | 377,465   |              |   |            | 319,900   | 
|                                           |                                        |   |             |           |              |   |            |          
|Total current assets                       |                                        |   | 4,052,710   |           |              |   | 2,479,013  |          
|Property, plant and equipment              |                                        |   | 19,767,352  |           |              |   | 18,414,935 |          
|Intangible asset                           |                                        |   | 1,717,326   |           |              |   | 1,814,780  |          
|Investments                                |                                        |   | 12,450      |           |              |   | 12,450     |          
|                                           |                                        |   |             |           |              |   |            |          
|Total assets                               |                                        | $ | 25,549,838  |           |              | $ | 22,721,178 |          
|                                           |                                        |   |             |           |              |   |            |          
|LIABILITIES AND STOCKHOLDERS EQUITY       |                                        |   |             |           |              |   |            |          
|Current liabilities                        |                                        |   |             |           |              |   |            |          
|                                           | Bank indebtedness                      |   |             | 500,000   |              |   |            |          | 
|                                           | Dividends payable                      |   |             | 473,626   |              |   |            | 499,383   | 
|                                           | Accounts payable and other liabilities |   |             | 815,743   |              |   |            | 1,087,470 | 
|                                           | Stock compensation liability           |   |             | 106,112   |              |   |            | 210,324   | 
|                                           | Current portion of long term debt      |   |             | 511,670   |              |   |            | 355,840   | 
|                                           |                                        |   |             |           |              |   |            |          
|Total current liabilities                  |                                        |   | 2,407,151   |           |              |   | 2,153,017  |          
|Long term debt                             |                                        |   | 2,331,504   |           |              |   | 1,213,804  |          
|Security deposit                           |                                        |   | 102,763     |           |              |   | 52,763     |          
|Advances in aid of construction            |                                        |   | 35,387      |           |              |   | 37,494     |          
|                                           |                                        |   |             |           |              |   |            |          
|Total liabilities                          |                                        |   | 4,876,805   |           |              |   | 3,457,078  |          
|                                           |                                        |   |             |           |              |   |            |          
|Stockholders equity                       |                                        |   |             |           |              |   |            |          
|                                           | Common stock                           |   |             | 4,777,759 |              |   |            | 4,704,077 | 
|                                           | Additional paid-in capital             |   |             | 7,327,112 |              |   |            | 6,896,753 | 
|                                           | Vested redeemable preferred stock      |   |             | 13,051    |              |   |            | 2,841     | 
|                                           | Non-vested redeemable preferred stock  |   |             | 20,337    |              |   |            | 27,393    | 
|                                           | Retained earnings                      |   |             | 8,534,774 |              |   |            | 7,633,036 | 
|                                           |                                        |   |             |           |              |   |            |          
|Total stockholders equity                 |                                        |   | 20,673,033  |           |              |   | 19,264,100 |          
|                                           |                                        |   |             |           |              |   |            |          
|Total liabilities and stockholders equity |                                        | $ | 25,549,838  |           |              | $ | 22,721,178 |          
|                                           |                                        |   |             |           |              |   |            |          

The accompanying information and notes are an
integral part of these condensed consolidated financial statements

1



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CONSOLIDATED WATER CO. LTD.




CONDENSED CONSOLIDATED STATEMENTS OF INCOME


(Unaudited)


(Expressed in United States Dollars)

|                                                                       |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |         | 
|---------------------------------------------------------------------- | --------------- | - | ------------------ | ------ | ---------------- | - | ---------- | ------- | ---- | - | ---------- | ------- |  | - | ---------- | ------- | 
|                                                                       |                 |   | Three Months Ended |        | Six Months Ended
|                                                                       |                 |   | June 30,           |        | June 30,        
|                                                                       |                 |   |                    |        |                 
|                                                                       |                 |   | 2002               |        | 2001             |   | 2002       |         | 2001
|                                                                       |                 |   |                    |        |                  |   |            |         |     
|Water sales                                                            |                 |   | 3,234,023          |        |                  |   | 3,000,866  |         |      |   | 6,341,520  |         |  |   | 5,858,071  |        
|Cost of water sales                                                    |                 |   | (1,797,134         | )      |                  |   | (1,614,969 | )       |      |   | (3,463,586 | )       |  |   | (3,098,358 | )      
|                                                                       |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        
|Gross profit                                                           |                 |   | 1,436,889          |        |                  |   | 1,385,897  |         |      |   | 2,877,934  |         |  |   | 2,759,713  |        
|                                                                       |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        
|Indirect expenses                                                      |                 |   | (689,034           | )      |                  |   | (614,468   | )       |      |   | (1,289,257 | )       |  |   | (1,261,828 | )      
|                                                                       |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        
|Income from operations                                                 |                 |   | 747,855            |        |                  |   | 771,429    |         |      |   | 1,588,677  |         |  |   | 1,497,885  |        
|                                                                       |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        
|Other income:                                                          |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        
|                                                                       | Interest income |   |                    |       |                  |   |            | 782     |      |   |            | 6,040   |  |   |            | 812     | 
|                                                                       | Other income    |   |                    | 63,404 |                  |   |            | 103,121 |      |   |            | 143,043 |  |   |            | 207,525 | 
|                                                                       |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        
|                                                                       |                 |   | 63,404             |        |                  |   | 103,903    |         |      |   | 149,083    |         |  |   | 208,337    |        
|                                                                       |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        
|Net income                                                             |                 | $ | 811,259            |        |                  | $ | 875,332    |         |      | $ | 1,737,760  |         |  | $ | 1,706,222  |        
|                                                                       |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        
|Basic earnings per share (Note 6)                                      |                 | $ | 0.20               |        |                  | $ | 0.22       |         |      | $ | 0.44       |         |  | $ | 0.44       |        
|                                                                       |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        
|Diluted earnings per common share
(Note 6)                             |                 | $ | 0.20               |        |                  | $ | 0.22       |         |      | $ | 0.43       |         |  | $ | 0.43       |        
|                                                                       |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        
|Dividends declared per share                                           |                 | $ | 0.105              |        |                  | $ | 0.10       |         |      | $ | 0.21       |         |  | $ | 0.20       |        
|                                                                       |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        
|Weighted average number of common shares
used in the determination of: |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        
|Basic earnings per share (Note 6)                                      |                 |   | 3,978,827          |        |                  |   | 3,879,646  |         |      |   | 3,951,172  |         |  |   | 3,871,343  |        
|                                                                       |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        
|Diluted earnings per share (Note 6)                                    |                 |   | 4,097,902          |        |                  |   | 3,993,668  |         |      |   | 4,077,390  |         |  |   | 3,978,420  |        
|                                                                       |                 |   |                    |        |                  |   |            |         |      |   |            |         |  |   |            |        

The accompanying information and notes are an
integral part of these condensed consolidated financial statements.

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CONSOLIDATED WATER CO. LTD.




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


(Expressed in United States Dollars)

|                                                      |                                            |   |                |            |                |   |            |            |  
|----------------------------------------------------- | ------------------------------------------ | - | -------------- | ---------- | -------------- | - | ---------- | ---------- | -
|                                                      |                                            |   | Six Months     |            | Six Months    
|                                                      |                                            |   | Ended June 30, |            | Ended June 30,
|                                                      |                                            |   | 2002           |            | 2001          
|                                                      |                                            |   |                |            |               
|Net cash flows provided by operating activities       |                                            |   | 2,145,823      |            |                |   | 2,081,449  |           
|                                                      |                                            |   |                |            |                |   |            |           
|Cash flows provided by (used in) investing activities |                                            |   |                |            |                |   |            |           
|                                                      | Purchase of property, plant and equipment  |   |                | (1,978,141 | )              |   |            | (1,167,588 | )
|                                                      | Purchase of investments                    |   |                |           |                |   |            | (12,450    | )
|                                                      | Proceeds from sale of equipment            |   |                |           |                |   |            | 4,200      |  
|                                                      |                                            |   |                |            |                |   |            |           
|Net cash used in investing activities                 |                                            |   | (1,978,141     | )          |                |   | (1,175,838 | )         
|                                                      |                                            |   |                |            |                |   |            |           
|Cash flows provided by (used in) financing activities |                                            |   |                |            |                |   |            |           
|                                                      | Net proceeds from issuance of common stock |   |                | 347,855    |                |   |            | 50,000     |  
|                                                      | Repurchase of redeemable preferred stock   |   |                | (3,841     | )              |   |            |           |  
|                                                      | Drawdown of new credit facility            |   |                | 1,500,000  |                |   |            | 500,000    |  
|                                                      | Principal payments of long term debt       |   |                | (226,470   | )              |   |            | (108,213   | )
|                                                      | Dividends paid                             |   |                | (836,020   | )              |   |            | (781,352   | )
|                                                      | Drawdown (repayment) of bank indebtedness  |   |                | 500,000    |                |   |            | (263,945   | )
|                                                      |                                            |   |                |            |                |   |            |           
|Net cash provided by (used in) financing activities   |                                            |   | 1,281,524      |            |                |   | (603,510   | )         
|                                                      |                                            |   |                |            |                |   |            |           
|Net increase in cash and cash equivalents             |                                            |   | 1,449,206      |            |                |   | 302,101    |           
|Cash and cash equivalents at beginning of period      |                                            |   | 516,446        |            |                |   | 250,837    |           
|                                                      |                                            |   |                |            |                |   |            |           
|Cash and cash equivalents at end of period            |                                            | $ | 1,965,652      |            |                | $ | 552,938    |           
|                                                      |                                            |   |                |            |                |   |            |           

The accompanying information and notes are
an integral part of these condensed consolidated financial statements.

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CONSOLIDATED WATER CO. LTD.




NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)


The accompanying financial statements should be read in conjunction with the
2001 Annual Report for the Company on Form 10-K. The interim condensed
consolidated financial statements are unaudited, but in the opinion of
management, reflect all adjustments necessary for a fair presentation of results
for such periods. All adjustments are of a normal recurring nature.

1. Principal Activity and Status

Consolidated Water Co. Ltd. (the Company) and its wholly-owned subsidiaries
(together the Group) use reverse osmosis technology to produce fresh water
from seawater. The Group processes and supplies water to its customers in Grand
Cayman, Cayman Islands; Ambergris Caye, Belize; and South Bimini, Bahamas. The
Companys exclusive license in Grand Cayman allows it to process and supply
water in certain areas of Grand Cayman for a period of twenty years from July
11, 1990 in addition to having a right of first refusal on the extension or
renewal thereof. The Group also has a contract with Belize Water Services Ltd.
(BWSL) of Belize, formally known as Water and Sewerage Authority of Belize, to
supply water to BWSL in Ambergris Caye expiring in 2011. At the expiry of the
contract, BWSL may at its option extend the term of the agreement or purchase
the plant outright. In addition, on July 11, 2001 the Company commenced
supplying water under a ten year agreement to South Bimini International Ltd., a
Bahamian company that owns and operates resort properties on South Bimini
Island, Bahamas. The base price of water supplied by the Group, and adjustments
thereto, are determined by the terms of the license and contracts, which
provides for adjustments based upon the movement in the government price indices
specified in the license and contracts respectively, as well as monthly
adjustments for changes in the cost of energy.

2. Purchase of Assets

On February 1, 2002, the Company acquired the reverse osmosis plant that was
previously owned and operated by Cayman Hotel and Golf Inc., a company which
owns and operates the Hyatt Hotel and Britannia Golf Course and developed the
Britannia condominiums and villas. The acquisition has been accounted for by the
purchase method. The total purchase price of $1,500,000 was paid in cash. The
fair value of assets acquired was $1,500,000 which comprised solely of property,
plant and equipment representing the reverse osmosis plant.

3. Segment Information

Under FAS 131 `Disclosure about Segments of an Enterprise and Related
Information the supply of water to Cayman Islands, Belize and Bahamas are
considered by management as separate business segments. The basis of measurement
of segment information is the same as that adopted for the condensed financial
statements.

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CONSOLIDATED WATER CO. LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

3. Segment Information (Continued)

As at June 30 and for the three months then ended

|                              |  |                |            |        |  |             |            |       |  |      |           |      |  |      |           |      |  |  |           |   |  |  |           |  |  |  |            |  |  |  |            | 
|----------------------------- |  | -------------- | ---------- | ------ |  | ----------- | ---------- | ----- |  | ---- | --------- | ---- |  | ---- | --------- | ---- |  |  | --------- | - |  |  | --------- |  |  |  | ---------- |  |  |  | ---------- | 
|                              |  | Cayman Islands |            | Belize |  | Bahamas (*) |            | Total
|                              |  |                |            |        |  |             |            |      
|                              |  | 2002           |            | 2001   |  | 2002        |            | 2001  |  | 2002 |           | 2001 |  | 2002 |           | 2001
|                              |  |                |            |        |  |             |            |       |  |      |           |      |  |      |           |     
|Water sales                   |  |                | 2,810,369  |        |  |             | 2,653,148  |       |  |      | 394,801   |      |  |      | 347,718   |      |  |  | 28,853    |   |  |  |          |  |  |  | 3,234,023  |  |  |  | 3,000,866  | 
|Other income
(expenses)       |  |                | 66,029     |        |  |             | 103,121    |       |  |      | (2,625    | )    |  |      | 782       |      |  |  |          |   |  |  |          |  |  |  | 63,404     |  |  |  | 103,903    | 
|Cost of water sales           |  |                | 1,550,201  |        |  |             | 1,429,646  |       |  |      | 205,265   |      |  |      | 185,323   |      |  |  | 41,668    |   |  |  |          |  |  |  | 1,797,134  |  |  |  | 1,614,969  | 
|Indirect expenses             |  |                | 634,088    |        |  |             | 574,558    |       |  |      | 50,465    |      |  |      | 39,910    |      |  |  | 4,481     |   |  |  |          |  |  |  | 689,034    |  |  |  | 614,468    | 
|Net income (loss)             |  |                | 692,108    |        |  |             | 752,066    |       |  |      | 136,447   |      |  |      | 123,266   |      |  |  | (17,296   | ) |  |  |          |  |  |  | 811,259    |  |  |  | 875,332    | 
|Property, plant
and equipment |  |                | 17,184,613 |        |  |             | 15,509,221 |       |  |      | 1,467,726 |      |  |      | 1,593,680 |      |  |  | 1,115,013 |   |  |  | 1,173,849 |  |  |  | 19,767,352 |  |  |  | 18,276,750 | 

As at June 30 and for the six months then ended

|                              |  |                |            |        |  |             |            |       |  |      |           |      |  |      |           |      |  |  |           |   |  |  |           |  |  |  |            |  |  |  |            | 
|----------------------------- |  | -------------- | ---------- | ------ |  | ----------- | ---------- | ----- |  | ---- | --------- | ---- |  | ---- | --------- | ---- |  |  | --------- | - |  |  | --------- |  |  |  | ---------- |  |  |  | ---------- | 
|                              |  | Cayman Islands |            | Belize |  | Bahamas (*) |            | Total
|                              |  |                |            |        |  |             |            |      
|                              |  | 2002           |            | 2001   |  | 2002        |            | 2001  |  | 2002 |           | 2001 |  | 2002 |           | 2001
|                              |  |                |            |        |  |             |            |       |  |      |           |      |  |      |           |     
|Water sales                   |  |                | 5,572,190  |        |  |             | 5,190,441  |       |  |      | 720,708   |      |  |      | 667,630   |      |  |  | 48,622    |   |  |  |          |  |  |  | 6,341,520  |  |  |  | 5,858,071  | 
|Other income                  |  |                | 145,664    |        |  |             | 207,555    |       |  |      | 3,415     |      |  |      | 782       |      |  |  | 4         |   |  |  |          |  |  |  | 149,083    |  |  |  | 208,337    | 
|Cost of water sales           |  |                | 2,990,202  |        |  |             | 2,741,030  |       |  |      | 401,316   |      |  |      | 357,328   |      |  |  | 72,068    |   |  |  |          |  |  |  | 3,463,586  |  |  |  | 3,098,358  | 
|Indirect expenses             |  |                | 1,191,495  |        |  |             | 1,182,743  |       |  |      | 91,839    |      |  |      | 79,085    |      |  |  | 5,923     |   |  |  |          |  |  |  | 1,289,257  |  |  |  | 1,261,828  | 
|Net income (loss)             |  |                | 1,536,157  |        |  |             | 1,474,223  |       |  |      | 230,967   |      |  |      | 231,999   |      |  |  | (29,364   | ) |  |  |          |  |  |  | 1,737,760  |  |  |  | 1,706,222  | 
|Property, plant
and equipment |  |                | 17,184,613 |        |  |             | 15,509,221 |       |  |      | 1,467,726 |      |  |      | 1,593,680 |      |  |  | 1,115,013 |   |  |  | 1,173,849 |  |  |  | 19,767,352 |  |  |  | 18,276,750 | 



---

| |  | (*) On December 18, 2000, the Company entered into the agreement with South
Bimini International Ltd., and began operations in the Bahamas on July
11, 2001.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

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CONSOLIDATED WATER CO. LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

4. Contingencies

The license that the Company has with the government of the Cayman Islands (the
Government) requires it to obtain approval from the Government for an issuance
or transfer of shares which (a) exceeds 5% of the issued shares of our company,
or (b) would, upon registration, result in any shareholder owning more than 5%
of the issued share capital of the Company.

By letter dated May 3, 2002, the Government of the Cayman Islands advised the
Company that the 5% ownership and transfer restrictions imposed in the Licence
will be removed.

Under the provisions of the Land Holding Companies Share Transfer Tax Law of the
Cayman Islands, tax is payable on the transfer of shares in the Company. Prior
to becoming quoted on Nasdaq, the Company paid this tax on private share
transfers. The Company has never paid tax on transfers of its publicly traded
shares. Management believes that the likelihood that Government will seek to
collect this tax on transfers of the Companys publicly traded shares is remote.
Management, therefore, has not provided for a share transfer tax liability in
these financial statements.

5. Impact of Recent Accounting Pronouncements

During the three months ended June 30, 2002, the Financial Accounting Standards
Board issued two standards. A summary of these standards is given below:

Statement of Financial Accounting Standard No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB No. 14, and Technical
Corrections (FAS 145) rescinds FASB Statement No. 4, Reporting Gains and Losses
from Extinguishment of Debt, and amends FASB Statement No. 64, Extinguishments
of Debt Made to Satisfy Sinking-Fund Requirements. This Statement also rescinds
FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers and
amends FASB Statement No. 13, Accounting for Leases, to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. It requires that gains
and losses from extinguishments of debt should be classified as extraordinary
items only if they meet the criteria in Option 30 and under Statement 13 those
lease modifications are accounted for in the same manner as sale-leaseback
transactions. At this time, the Company does not believe the adoption of the
Standard will have an impact on its financial position or results of operations.

Statement of Financial Accounting Standard No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (FAS 146) addresses financial
accounting and reporting for costs associated with exit or disposal activities.
It requires that a liability for a cost associated with an exit or disposal
activity be recognized and measured initially at fair value only when the
liability is incurred. FAS 146 is effective for exit or disposal activities that
are initiated after December 31, 2002. Although the Company has no pending exit
or disposal activities that would be affected by this statement, the
requirements of this statement will be considered in any exit or disposal
activities contemplated in the future.

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##### Table of Contents



CONSOLIDATED WATER CO. LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

6. Earnings Per Share

Basic earnings per share is calculated by dividing the net profit attributable
to stockholders by the weighted average number of ordinary shares of common
stock in issue during the relevant period.

The net income and weighted average number of ordinary shares of common stock
and potential ordinary shares figures used in the determination of the basic and
diluted earnings per ordinary share of common stock are summarized as follows:

|                                                                                                                                             |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --------- | ---------------- |  | ---- | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                                                                                                             |  | Three Months Ended |           | Six Months Ended
|                                                                                                                                             |  | June 30,           |           | June 30,        
|                                                                                                                                             |  |                    |           |                 
|                                                                                                                                             |  | 2002               |           | 2001             |  | 2002 |           | 2001
|                                                                                                                                             |  |                    |           |                  |  |      |           |     
|Net income used in determination of diluted
earnings per ordinary share of common stock                                                      |  | $                  | 811,259   |                  |  | $    | 875,332   |      |  | $ | 1,737,760 |   |  | $ | 1,706,222 |  
|Less:                                                                                                                                        |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|Dividends paid on non-vested
redeemable preferred stock                                                                                      |  |                    | (1,780    | )                |  |      | (2,365    | )    |  |   | (3,559    | ) |  |   | (4,730    | )
|Earnings attributable to vested
redeemable preferred stock                                                                                   |  |                    | (2,205    | )                |  |      | (2,239    | )    |  |   | (4,724    | ) |  |   | (4,365    | )
|                                                                                                                                             |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|Net income available to holders of ordinary
shares of common stock in the
determination of basic earnings
per ordinary share of common stock |  | $                  | 807,274   |                  |  | $    | 870,728   |      |  | $ | 1,729,477 |   |  | $ | 1,697,127 |  
|                                                                                                                                             |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|Weighted average number of ordinary shares of
common stock in the determination
of basic earnings per ordinary share
of common stock         |  |                    | 3,978,827 |                  |  |      | 3,879,646 |      |  |   | 3,951,172 |   |  |   | 3,871,343 |  
|Plus:                                                                                                                                        |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|Weighted average number of redeemable preferred
stock outstanding during the year                                                            |  |                    | 25,195    |                  |  |      | 33,634    |      |  |   | 25,195    |   |  |   | 33,634    |  
|Potential dilutive effect of unexercised
options                                                                                             |  |                    | 93,880    |                  |  |      | 80,388    |      |  |   | 101,023   |   |  |   | 73,443    |  
|                                                                                                                                             |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  
|Weighted average number of shares
used for determining diluted earnings
per ordinary share of common stock                                   |  |                    | 4,097,902 |                  |  |      | 3,993,668 |      |  |   | 4,077,390 |   |  |   | 3,978,420 |  
|                                                                                                                                             |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   |           |  

7



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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Three and Six Months Ended June 30, 2002 Compared to Three and Six Months Ended June 30, 2001

Water Sales and Other Income (Total Income)

Total Income increased by 6.2% from $3,104,769 to $3,297,427 for the three
months ended June 30, 2001 and 2002, respectively, and by 7.0% from $6,066,408
to $6,490,603 for the six months ended June 30, 2001 and 2002, respectively.
Total Income is comprised of water sales and other income.

The Cayman operations increased Total Income by $120,129 for the three months
ended June 30, 2002, representing 62.4% of the increase, and by $319,858 for the
six months ended June 30, 2002, representing 75.4% of the increase.

The Belize operations increased Total Income by $43,676 for the three months
ended June 30, 2002, representing 22.7% of the increase, and by $55,711 for the
six months ended June 30, 2002, representing 13.1% of the increase.

Finally, the addition of the Bahamas operations as of July 11, 2001 increased
Total Income by $28,853 for the three months ended June 30, 2002 representing
14.9% of the increase, and by $48,626 for the six months ended June 30, 2002,
representing 11.5% of the increase.

Sales in Cayman are made within our license area to approximately 3,300
customers. All sales in Belize are to one customer, Belize Water Services Ltd.,
a private company that acquired the assets of Belize Water and Sewerage
Authority, which was previously a government statutory corporation. The terms of
our contract have not changed as a result of the privatization of Belize Water
and Sewerage Authority. Currently in the Bahamas, all sales are to one customer,
South Bimini International Ltd. known as Bimini Sands Resort and Marina, which
uses water at their hotel, condominiums and full service marina.

The largest change to income occurred in the Cayman operations and resulted from
the purchase of the Britannia reverse osmosis seawater conversion plant on
February 1, 2002. This plant was previously owned and operated by Cayman Hotel
and Golf Inc., a company which owns and operates the Hyatt Hotel and Britannia
Golf Course and developed the Britannia condominiums and villas. In conjunction
with our purchase of the Britannia plant, the Hyatt Hotel and Britannia Golf
Course entered into a 25 year water supply agreement, and we also began to
supply water to the Britannia condominiums and villas under our standard
customer contracts. When we began supplying water to the hotel, condominiums and
villas, the existing dispute settlement agreement with Cayman Hotel and Golf
Inc. was terminated.

Total water sales increased by 7.8% from $3,000,866 to $3,234,023 for the three
months ended June 30, 2001 and 2002, respectively, and by 8.3% from $5,858,071
to $6,341,520 for the six months ended June 30, 2001 and 2002, respectively.
Total water sales increased as a result of several factors detailed below.

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Our Cayman operation added $157,221 to water sales for the three months ended
June 30, 2002, which is 67.4% of the total increase, and $381,749 for the six
months ended June 30, 2002, which is 79.0% of the total increase for that
period. In January 2002, the automatic inflation adjustment decreased our Cayman
Islands water rates for most of our customers by an average of 0.4%. This was
offset by a 12.4% and 15.2% increase in the number of US gallons sold for the
three months ended June 30, 2002 and the six months ended June 30, 2002,
respectively, over the same periods in the prior year. In spite of a 25%
reduction in tourist air arrivals to the Cayman Islands during the three month
period ending June 30, 2002 when compared to the same period in 2001, because
the Cayman Islands tourist industry has not yet fully recovered from the tragic
events in New York last year, our water sales to customers other than the Hyatt
Hotel and Britannia Golf Course were essentially flat. Therefore the increase in
our Cayman operations water sales was the result of supplying water to the Hyatt
Hotel and the Britannia condominiums and villas.

Our Belize operation added $47,083 to water sales for the three months ended
June 30, 2002, which is 20.2% of the total increase, and $53,078 for the six
months ended June 30, 2002, which is 11.0% of the total increase for that
period. In June 2002, the automatic inflation adjustment decreased our Belize
water rates by an average of 0.08%. This was offset by a 13.9% and 7.5% increase
in the number of US gallons sold for the three months ended June 30, 2002 and
the six months ended June 30, 2002, respectively, over the same periods in the
prior year.

Finally, the addition of the Bahamas operations as of July 11, 2001 increased
water sales by $28,853 for the three months ended June 30, 2002, which is 12.4%
of the total increase, and $48,622 for the six months ended June 30, 2002,
representing 10.0% of the total increase for the period.

Other income decreased by 39.0% from $103,903 to $63,404 for the three months
ended June 30, 2001 and 2002, respectively, and decreased 28.4% from $208,337 to
$149,083 for the six months ended June 30, 2001 and 2002, respectively. These
decreases were a result of the February 1, 2002 termination of the dispute
settlement agreement with Cayman Hotel and Golf Inc. as discussed above. These
decreases were partially offset by small increases in meter rental fees, due to
additional customers, and reconnection fees, and interest income on receivables
in our Belize operations. Although we had experienced delays in receipt of
invoice payments from Belize Water Services Ltd., their account is now current,
and they are not now accruing interest on any unpaid balance.

Expenses

Cost of water sales increased by 11.3% from $1,614,969 to $1,797,134 for the
three months ended June 30, 2001 and 2002, respectively, and by 11.8% from
$3,098,358 to $3,463,586 for the six months ended June 30, 2001 and 2002,
respectively.

Our Cayman operations increased cost of water sales by $120,555 for the three
months ended June 30, 2002, representing 66.2% of the increase, and by $249,172
for the six months ended June 30, 2002, representing 68.2% of the increase. The
cost of water sales for the Britannia plant for the three and six months ended
June 30, 2002 increased our Cayman operation cost of water sales by $216,515 and
$325,556, respectively. This was a result of costs incurred to operate the
Britannia plant, which we acquired on February 1, 2002. These costs included
salaries and benefits for additional staff, equipment maintenance costs,
electricity and chemicals, which will continue forward now that we operate the
Britannia plant. Higher insurance costs also increased cost of water sales. For
the three months ended June 30, 2002 insurance costs were $13,891 higher than in
the same period in the prior year, and for the six months ending June 30, 2002
were $22,554 higher than the same period in the prior year. This was due to
higher premiums from our insurance provider, and additional insurance which we
purchased for the Britannia plant and to insure the full replacement value of
all our reverse osmosis desalination plants. Some of this increase was offset by
a three and six months ended June 30, 2002 decrease of $64,898 and $108,893,
respectively in water purchase costs, which decreased because we took less water
from Ocean Conversion (Cayman) Ltd. after the Britannia plant was purchased. Our
cost of water sales increased at a higher rate than our water sales because we
sell water to the Hyatt Hotel and Britannia Golf Course at a lower rate than our
standard commercial rate to customers in the Cayman Islands, which decreased our
profit margin on our Cayman sales as discussed below. Our energy recovery
charges to our customers
decreased $42,939 or 11.1% when comparing the six
months ended June 30, 2001 and 2002 because the cost of electricity for our
Cayman operations decreased by 6.38% over the same periods.

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Our Belize operation increased cost of water sales by $19,942 for the three
months ended June 30, 2002 representing 10.9% of the increase, and by $43,988
for the six months ended June 30, 2002 representing 12.0% of the increase. For
the three months ended June 30, 2002 our Belize operation was more efficient
than during the same period in 2001 in respect of our cost of sales per unit of
water produced. For the three and six months ended June 30, 2002, our combined
electricity and diesel fuel costs in Belize were, respectively $24,933 and
$45,754 lower than in the same periods in the prior year. This resulted because
in 2002 we were able to utilize a more efficient diesel engine instead of an
electric motor to power one of our production trains. In early 2001 we
experienced a mechanical failure of one of our diesel engines, which caused us
to incur additional repair and operational costs. This failure was rectified in
late 2001. In June 2002 we were also in the process of rebuilding one of our
diesel engines which resulted in costs of approximately $18,000 and we expect to
rebuild a second engine by the end of August 2002, both in accordance to the
engine manufacturers preventative maintenance recommendations. As of this date
we have completed work on one engine, which is back in service, and expect to
complete work on the second engine before the end of August. For the six months
ended June 30, 2002 our Belize cost of water sales increased, in part, because
in March 2002 we settled various claims for compensation made by our customer in
Belize. These claims were the result of our equipment failures that occurred in
August and September 2001, and a minor miscalculation in the annual inflation
adjustment formula in our contract. This miscalculation dates back to November
1995, which was prior to our acquisition of Belize Water Limited, and upon
correction reduced our unit rate for water to our customer by $0.09 per 1,000 US
gallons. The total cost of the settlement with BWSL is $41,597, of which $12,209
was already accrued at December 31, 2001, and the balance of $29,388 expensed in
2002. These settlement costs were partially offset by late payment interest
accrued on receivables, which amounted to $33,812 of which $27,772 was already
accrued at December 31, 2001, and the balance of $6,040 accrued in 2002. The
remaining $7,785 due to BWSL after offsetting the interest was credited against
their April 2002 invoice.

Finally, the addition of the Bahamas operations as of July 11, 2001 increased
cost of water sales by $41,668 for the three month period ended June 30, 2002,
which is 22.9% of the increase and by $72,068 for the six month period ended
June 30, 2002, representing 19.8% of the increase.

Gross profit margins decreased from 46.2% to 44.4% for the three months ended
June 30, 2001 and 2002, respectively, and decreased from 47.1% to 45.4% for the
six months ended June 30, 2001 and 2002, respectively.

Gross profit margins for our Cayman operations decreased from 46.1% to 44.8% for
the three months ended June 30, 2001 and 2002, respectively, and decreased from
47.2% to 46.3% for the six months ended June 30, 2001 and 2002 respectively. The
primary reasons for these decreases are (i) that approximately two thirds of the
water produced by our Britannia plant was sold to the Hyatt Hotel and Britannia
Golf Course at $8.50 per 1,000 US gallons, which is lower than our standard
commercial water rate of $22.38 per 1,000 US gallons for our Cayman service
area, and (ii) although our cost of producing water at our Britannia plant is
lower than our cost of purchasing water from Ocean Conversion (Cayman) Ltd.,
because of our essentially flat demand growth for water from our customers other
than the Hyatt Hotel and Britannia Golf Course, and the necessity to maintain
the purchase of minimum water quantities of water from Ocean Conversion (Cayman)
Ltd., we were not able to produce higher volumes of water at the Britannia plant
for sale at higher gross margins.

Gross profit margins for our Belize operations increased from 46.7% to 48.0% for
the three months ended June 30, 2001 and 2002, respectively, and decreased from
46.5% to 44.3% for the six months ended June 30, 2001 and 2002 respectively. The
reason for this 1.3% increase and 2.2% decrease is related to the increased
efficiencies with the diesel engines and the settlement costs with Belize Water
Services Ltd. as discussed above.

Gross profit margin for our Bahamas operations was a negative 44.4% for the
three months ended June 30, 2002 and a negative 48.2% for the six months ended
June 30, 2002. This was due to low water sales and a relatively higher
proportion of fixed costs such as depreciation, which we expected in the early
phases of the Bimini Sands Resort development project. Both of these are
temporary factors and are not expected to continue in the future. We forecast
that the Bahamas operation will generate net income during the first quarter of
2003.

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Indirect expenses increased by 12.1% from $614,468 to $689,034 for the three
months ended June 30, 2001 and 2002, respectively, and by 2.2% from $1,261,828
to $1,289,257 for the six months ended June 30, 2001 and 2002, respectively.

Our Cayman operations increased indirect expenses by $59,530 for the three
months ended June 30, 2002, representing 79.8% of the increase and by $8,752 for
the six months ended June 30, 2002, representing 31.9% of the increase. The
reason for this difference between the two periods is that during the three
months ended March 31, 2002 we had a decrease in indirect expenses resulting
from a decrease in expenses related to our banking and loan facilities. We are
still benefiting from those reduced expenses. However in the three months ended
June 30, 2002 we accrued $49,304 for unbudgeted professional fees relating to
our 2001 financial audit and Form 10-K review, which were paid in July 2002, and
we had increases in insurance costs of $13,866 due to increased premiums on both
our commercial and directors and officers insurance. Also during the three
months ended June 30, 2002, we had additional fees relating to the printing and
mailing of our financial information, including our annual report and proxy
statement, as a result of increased demand for these documents.

Our Belize operations increased indirect expenses by $10,555 for the three
months ended June 30, 2002, representing 12.2% of the increase and by $12,754
for the six months ended June 30, 2002, representing 32.4% of the increase.
During the three months ended June 30, 2002 we repatriated $300,000 to the
Cayman Islands. This resulted in an exchange loss of $2,625, a government fee of
$3,750 and bank charges of $3,026. During the six months ended June 30, 2002
increased insurance costs due to increased premiums of $5,587 make up 43.8% of
this increase.

Finally, the addition of the Bahamas operations as of July 11, 2001 increased
indirect expenses by $4,481 for the three months ended June 30, 2002,
representing 5.2% of the increase and by $5,923 for the six month ended June 30,
2002, representing 15.0% of the increase. These costs relate to the
administration of the Bahamas operations.

As a percentage of the Total Income, indirect expenses were at 19.8% and 20.9%
for the three months ended June 30, 2001 and 2002, respectively, and at 20.8%
and 19.9% for the six months ended June 30, 2001 and 2002, respectively.

11



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##### Table of Contents



Net Income

Net income decreased by 7.3% from $875,332 to $811,259 for the three months
ended June 30, 2001 and 2002, respectively, and increased by 1.8% from
$1,706,222 to $1,737,760 for the six months ended June 30, 2001 and 2002,
respectively. These changes were due to higher insurance costs, lower margins on
our water sales to the Hyatt Hotel and Britannia Golf Course, and higher
indirect expenses due to increased audit fees as discussed in the preceding
sections.

Dividends

In December 2001, we increased our per share dividend from $0.40 to $0.42 per
year, payable on a quarterly basis. On April 30, 2002 we paid a dividend of
$0.105 to shareholders of record on March 31, 2002 and on July 31, 2002 we paid
a dividend of $0.105 to shareholders of record on June 30, 2002. We have
consistently paid dividends to record owners of our ordinary shares of common
stock and redeemable preferred stock since we began declaring dividends in 1985.
Our board of directors has established a policy that we will maintain a dividend
pay-out ratio in the range of 50% to 60% of net income. This policy is subject
to modification by our board of directors, however, we expect to continue
increasing our dividend as our earnings grow.

Liquidity and Capital Resources

Overview

We generate cash primarily from our operations in the Cayman Islands, Belize and
Bahamas, and to a lesser extent from the sale of our shares, and through our
loans and facilities obtained from two banks. Cash flow is impacted by operating
and maintenance expenses, the timeliness and adequacy of rate increases
(excluding automatic adjustments to our rates for inflation and electricity
costs), and various factors affecting tourism in the Cayman Islands, Belize and
Bahamas, such as weather conditions and the economy. We use cash to fund our
operations in the Cayman Islands, Belize and Bahamas, fund capital projects, to
make payments under our operating agreement with Ocean Conversion (Cayman) Ltd.,
a Cayman Islands company which operates our Governors Harbour plant, to expand
our infrastructure, to pay dividends, to repay principal on our loans, to
repurchase our shares when appropriate and to take advantage of new investment
opportunities which expand our operations.

Operating Activities

Cash from operating activities for the six months ended June 30, 2001 and 2002
was $2,081,499 and $2,145,823, respectively. We generated cash through the
utilization of our existing plants, equipment and resources in all three
segments of the business, minimization of water losses and efficiencies created
by a strong management team. The loss in the Bahamas operation for the six
months ended June 30, 2002 was $29,364. During May 2002 our Bahamas operation
generated positive cash flow for the first time. However, in June 2002, we were
again below breakeven cash flow due to legal costs associated with general
advice given during the year. This investment is long-term and we expect to
produce consistent positive cash flows starting in the third quarter 2002.
Currently, we provide water to 54 condominiums, half of a developing 150-slip
marina and a 40 room hotel. By the end of 2002, we anticipate that we will be
providing water to 18 additional condominiums.

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Working Capital

At June 30, 2002, we had a working capital surplus of $1,645,559. This surplus
relates to the cash we received from our operating activities, drawdown of bank
indebtedness and the collection of our receivables. Currently, 26.2% of our cash
is denominated in Belize dollars. We are in the process of repatriating
additional United States dollars to the Cayman Islands, and in June we
repatriated $300,000 from Belize.

Investing Activities

Cash used in investing activities during the six months ended June 30, 2001 and
2002 was $1,175,838 and $1,978,141, respectively. Cash was used in investing
activities for expenditures for new property, plant and equipment with the
majority associated with the purchase of the RO seawater conversion plant on
February 1, 2002. We also continued to expand our water distribution system in
the Cayman Islands by constructing pipelines to service new developments within
our franchise area. During the same period in 2001, our investing activities
consisted of construction costs relating to our new water production and
distribution system in Bimini, Bahamas. It also includes expansion costs
relating to our water distribution system in the Cayman Islands by constructing
pipelines to service several new developments within our franchise area.

Financing Activities

Cash used in financing activities for the six months ended June 30, 2001 was
$603,510, compared to cash provided by financing activities of $1,281,524 for
the six months ended June 30, 2002. During the six months ended June 30, 2002,
our primary financing activity was a draw down of our credit facility for an
additional $1,500,000 in order to finance the investment in the Britannia RO
seawater conversion plant, plus an increase in our short-term bank overdraft to
assist with US dollar denominated payments of our dividends and supplier
invoices. We also had proceeds from an issuance of ordinary shares of common
stock due to certain directors and officers exercising stock options. These were
offset by the payment of our December 31, 2001 interim quarterly dividend
totaling $0.10 per share and our March 31, 2002 interim quarterly dividend
totaling $0.105 per share and principal payments on our term loans. During the
same period in 2001, the primary financing activity was the payment of our
December 31, 2000 interim quarterly dividend totaling $0.10 per share and our
March 31, 2001 interim quarterly dividend totaling $0.10 per share. This was
offset by proceeds from an issuance of ordinary shares of common stock due to a
director exercising certain options and a net increase in our short-term bank
overdraft to cover some of the construction costs of our new water production
facilities in Bimini, Bahamas.

On September 21, 2001, the Company reactivated its stock repurchase program,
which was originally approved by the Board of Directors in October 1998, and may
repurchase up to 10% of the outstanding ordinary shares of common stock in the
open market and in private negotiated transactions. Depending upon market
conditions and other factors, purchases under this program may be commenced or
suspended at any time. No shares were repurchased during both the three months
ended June 30, 2002 and the three months ended June 30, 2001.

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Material Commitments for Capital Expenditures

As at June 30, 2002, we had approximately $50,000 committed for capital
expenditures for the completion of water distribution pipeline to connect the
Britannia plant facility to our distribution network. We intend to finance our
pipeline construction project using cash from operations.




Item 3. Quantitative and Qualitative Disclosures about Market Risk

Credit Risk:

Our exposure to credit risk is mainly from our Belize customer whom is billed on
a monthly basis approximately $120,000 and as at June 30, 2002 had a receivable
balance of $130,618 which has been subsequently paid.

Interest Rate Risk:

The interest rates and terms of the Companys loans are presented in Note 8 of
the financial statements filed in our 2001 Form 10-K. Since that filing we have
drawn down our Royal Bank of Canada term loan by $1,500,000 to finance the
purchase of the Britannia plant, bearing interest at LIBOR plus 1.5%, repayable
monthly.

Foreign Exchange Risk:




All of our foreign currencies have fixed exchanged rates to the U.S. dollar as
detailed under the exchange rate section described earlier.

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PART II  OTHER INFORMATION




Item 2. Changes in Securities and Use of Proceeds

In April 2002, the Company issued 30,000 ordinary shares of its common stock to
one of its directors who is also an executive officer, pursuant to the exercise
of a stock option. The aggregate exercise price of the option was $180,000. The
issuance of the shares was exempt from registration under Section 4(2) of the
Securities Act of 1933 because the executive officer is a sophisticated investor
who has knowledge of all material information about the Company.

As consideration for their services to the Company, on June 6, 2002, the Company
granted to 14 of its employees located in the Cayman Islands an aggregate of
2,713 shares of redeemable preferred stock (Preferred Stock) of which 2 of
these employees purchased an additional 617 shares at $8.14 per share. In
addition, the Company issued to 9 of its employees options to purchase an
additional 13,695 ordinary shares of common stock having an exercise price of
$14.69 per share. The securities issued to the employees were exempt from
registration under Regulation S promulgated under the Securities Act of 1933
because the shares were offered and sold outside of the United States to non-US
persons, as defined in Regulation S.

If an employee remains employed by the Company for at least four years, or a
person or affiliated group of persons acquires 30% or more of the Companys
ordinary shares of common stock, the Company is obligated to exchange the
Preferred Stock (whether or not the Preferred Stock has been held for four
years) for the same number of ordinary shares of common stock. The Company is
also obligated to exchange the Preferred Stock for an equal number of ordinary
shares of common stock if an employees employment with the Company or any of
its affiliates terminates by reason of the employees death, permanent
disability or the employee reaches the age of 65 years. However, if an
employees employment with the Company or any of its affiliates terminates for
any other reason, the Company may at any time up to and including the first
anniversary of such termination, redeem the employees Preferred Stock for cash
equal to 75% of the average of the closing market price for the Companys
ordinary shares of common stock on each of the first seven trading days in the
month of October of the year in which such Preferred Stock was issued to the
employee.

The options to purchase ordinary shares of common stock which were issued to the
employees as discussed above vest on June 30, 2006 and expire one month
thereafter. However, an option may be exercised by an employee at any time
during the period commencing on the earliest of the date of death of the
employee, the date on which the employment of the employee is terminated as a
result of permanent disability, the date on which the employee retires having
reached the age of 65 years or the fourth anniversary of the grant date.

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

(a)  The Annual Meeting of the Companys shareholders was held on May 22,
2002. Of the 3,976,464 shares of common stock outstanding on the record
date of March 31, 2002 a total of 3,354,975 shares were represented in
person or by proxy.

(b)  (i) The following Directors were re-elected effective May 22, 2002

|                         |  |            |           |                    |  |  |        | 
|------------------------ |  | ---------- | --------- | ------------------ |  |  | ------ | 
|                         |  | Votes Cast
|                         |  |           
|                         |  | For        |           | Withheld Authority
|                         |  |            |           |                   
|Carson K. Ebanks, JP     |  |            | 3,317,742 |                    |  |  | 37,233 | 
|Richard L. Finlay        |  |            | 3,317,742 |                    |  |  | 37,233 | 
|Clarence B. Flowers, Jr. |  |            | 3,317,742 |                    |  |  | 37,233 | 
|Frederick W. McTaggart   |  |            | 3,317,742 |                    |  |  | 37,233 | 
|Jeffrey M. Parker        |  |            | 3,317,742 |                    |  |  | 37,233 | 

(ii)  The following Directors were not up for reelection at the Annual
Meeting and their terms of office as a Director continued after the
Annual Meeting:

Wilmer Pergande
Peter D. Ribbins
Raymond Whittaker
J. Bruce Bugg, Jr.
Brian E. Butler
Steven A. Carr

(c)  The vote to approve grant of option to J. Bruce Bugg, Jr. in
consideration for the services he provided to the Company in connection
with the negotiation and purchase of the Britannia reverse osmosis
seawater conversion plant was 2,933,039 for, 387,978 against and 33,958
abstain.

(d)  The vote to approve PricewaterhouseCoopers as Independent Accountants
for the year 2002 at a fee to be agreed by the Directors was 3,328,553
for, 21,421 against and 5,001 abstain.




Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits



| |     
| | ----
| | None

(b)  Reports on Form 8-K

On July 5, 2002, the Company filed a Form 8-K with respect to Item 4
thereof, Changes in Registrants Certifying Accountant, concerning the
dismissal of PricewaterhouseCoopers effective June 27, 2002.

On July 10, 2002, the Company filed a Form 8-K with respect to Item 4
thereof, Changes in Registrants Certifying Accountant, concerning the
appointment of KPMG as the Companys auditors effective
July 9, 2002.

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SIGNATURE

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

|                       |  |                                                                                 
|---------------------- |  | --------------------------------------------------------------------------------
|                       |  | CONSOLIDATED WATER CO. LTD                                                      
|                      
|                      
|                      
|                       |  | By: /s/ Jeffrey M. Parker                                                       
|                       |  |                                                                                 
|                       |  | Jeffrey M. Parker
Chairman of the Board of Directors and
Chief Executive Officer
|Dated: August 13, 2002 |  |                                                                                 

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