EXHIBIT 13
                                                                      ----------














                                                2004 ANNUAL REPORT / BIW LIMITED



















                                    ACHIEVING LONG-TERM VALUE ONE STEP AT A TIME
<PAGE>
COMPANY PROFILE

BIW Limited (BIW or the Company), formed in 2002, is the parent company of
Birmingham Utilities, Inc. (BUI or Birmingham Utilities), founded in 1859, and
Birmingham H2O Services Inc. (H2O Services), established in 2002.

Birmingham Utilities, a regulated public water service company collects and
distributes water for domestic, commercial and industrial uses and fire
protection in the Naugatuck Valley towns of Ansonia, Derby and small parts of
Seymour, Connecticut. Water service is also provided for domestic and commercial
use in 30 satellite water operations in 16 towns in eastern Connecticut, which
form BUI's Eastern Division. This division, which was acquired in 2003, was the
former Eastern Connecticut Regional Water Company, Inc.

H2O Services, the Company's non-regulated subsidiary, offers a consumer
protection program for residential service lines and provides water related
services to other water utilities, municipalities, contractors and individuals
throughout Connecticut.








<TABLE><CAPTION>
FINANCIAL HIGHLIGHTS

(000's omitted except for per share data)    2004          2003          2002          2001          2000
------------------------------------------------------------------------------------------------------------
<S>                                       <C>           <C>           <C>           <C>           <C>
Operating Revenues                        $    9,866    $    6,408    $    4,836    $    4,852    $    4,496
Income before Interest Expense                 1,085         1,253           978         1,033         1,126
Income from Land Dispositions                     --            --           261         5,133           133
Net Income                                       511           820           817         5,655           726
Earnings Per Share - Basic                       .31           .50           .50          3.48           .45
Earnings Per Share - Diluted                     .30           .49           .49          3.41           .44
Cash Dividends Declared (per share)              .68           .60           .60           .58           .50
Total Assets                                  30,228        28,399        22,321        22,681        19,958
Long-Term Debt                                 9,000         3,948         4,042         4,136         4,230
Short-Term Debt                                2,255         4,799            94            94         2,330
Shareholders' Equity                          12,187        12,723        12,889        13,057         8,277
</TABLE>
<PAGE>

                 CORPORATE STRUCTURE 2004










                 BIW Limited Parent Company


                      Birmingham Utilities Regulated

                         Eastern Division
                          30 Systems in Eastern Connecticut

                         Naugatuck Valley Division
                          Ansonia, Derby, and Seymour, Connecticut




                 Birmingham H20 Services Non-regulated
                  Rhodes Pump Service
                  Contract Operations (Eastern)
                  Contract Operations (Valley)


<PAGE>
TO OUR SHAREHOLDERS

In 2004, BIW Limited faced adversity and disappointment, yet accomplished
significant achievements. Although our short-term earnings performance was down,
we believe that our decisions on several fronts will contribute in the longer
term to creating growth and value for your Company.

The public water supply segment of your utility business, Birmingham Utilities,
had mixed results in 2004. The Ansonia-based regulated division achieved
earnings that approximated the amount allowed in the 2003 rate case, while the
newly acquired regulated Eastern Division had unexpected operating losses. Your
water services company, H2O Services, achieved record earnings in 2004 through a
significant increase in operating revenues from both the Ansonia-based
operations as well as the Eastern-based operations. These earnings were somewhat
offset by expenses incurred in connection with exploring strategic
opportunities. In addition, in January 2005 the Company mutually agreed with
AquaAmerica, formerly Philadelphia Suburban Corporation (PSC), not to consummate
a proposed transaction whereby your Company would have purchased five small
water systems in New York as noted in last year's Annual Report. Regulatory
delays in approving the transaction as well as significant capital costs that
would have been required were significant obstacles in completing this
transaction. As a result, the Company wrote off expenses in 2004 that had been
associated with the proposed transaction and were deferred in 2003.

While these actions were not easy in the short-term, management is confident
they will result in a stronger, more competitive organization. We remain
committed to a plan of long-term growth and value. The market for our
non-regulated services remains strong, and we believe our regulated division in
Eastern Connecticut will grow.

Net income was $511,235 in 2004 as compared to $820,374 in 2003 and $817,103 in
2002. Net income in 2002 included a land sales gain of $261,317. There were no
land sales in either 2003 or 2004. Earnings per share, basic were $0.31 per
share in 2004 and $0.50 per share in 2003 and 2002, respectively. Earnings
declined in 2004 versus 2003 due to expenditures made in conjunction with the
Company's strategic efforts, the write-off of costs associated with the
potential acquisitions of the New York systems, and a loss from the Eastern
Division's regulated operations. The loss from the Eastern Division's regulated
operations is directly attributable to unexpected purchased water costs, a step
up of maintenance


2     2004 Annual Report / BIW LIMITED
<PAGE>
                                    ACHIEVING LONG-TERM VALUE ONE STEP AT A TIME


activities at many of the satellite water systems, costs associated with the
relocation of the Eastern Division office from Stafford Springs to Glastonbury,
CT, and additional staff reorganization costs. These expenses, which had a
negative effect on 2004 earnings, were necessary to ensure the Company is
positioned to operate efficiently in 2005, and are expected to be non-recurring.

On a positive note, pre-tax operating income of the Company was $1,463,093 in
2004 versus $1,227,826 in 2003, principally due to the full year's recognition
of the 2003 rate decision, which more than offset the operating losses from the
regulated Eastern Division. In addition, pre-tax operating income at H2O
Services was $554,704 in 2004 compared with $239,028 in 2003. Total consolidated
operating revenues were $9,865,576 in 2004 compared with $6,408,483 in 2003.
Management is confident that revenue levels in 2005 will be at least comparable
to the amounts achieved in 2004. That level, coupled with the elimination of
non-recurring costs at the Eastern Division's regulated systems and for
strategic matters should increase net income considerably in 2005.

Revenues for H2O Services were $2,997,351 in 2004 versus $982,971 in 2003,
comprised of a revenue increase of $464,209, to $1,005,306, for the Company's
non-regulated operations based in Ansonia, and an increase of $1,550,171, to
$1,992,045, for the Company's Eastern Division non-regulated operations in
Glastonbury and for the Rhodes Pump Service business in Guilford. The revenue
increases in the non-regulated Ansonia based operations were attributable to
increased business activities, while the increases at the Eastern Division and
Rhodes Pump Service were due to increased business activities and the
recognition of a full year's operations in 2004.

The decisions made in 2004, we believe, will enhance our ability to increase
investor value in 2005 and in the long-term. Birmingham Utilities' Ansonia-based
operations, both non-regulated and regulated, are performing well as are the
contract operations business in our Eastern Division and the Rhodes Pump Service
business. We are confident that the operational issues for the Eastern
Division's regulated systems have been identified and are being addressed, and
this operation should be brought back to profitability in the near term.

In 2005 we are planning to file a plan with the Connecticut Department of Public
Utility Control (DPUC) that will likely call for a future rate increase for the
Eastern Division. This will allow us to recover the capital costs expended on
regulated assets at the division since the acquisition, as well as operating
costs that are necessary to operate those systems in a manner that is expected
by the customer and is required by the Connecticut Department of Health.

The plan to expand our Beaver Brook Reservoir was put on hold in 2004, but the
Company expects to resume development of this project in 2005-2006, beginning to
seek approvals through the regulatory process, working with our regulators and
with the neighboring towns that will be affected by this important project. The
Company believes the expansion of this reservoir, which will almost double the
reservoir's current capacity of 450,000,000 gallons to 800,000,000 gallons, is
critical to providing a safe water supply for the long term, while creating an
expanded environmental habitat for future generations.

Birmingham Utilities owns approximately 1,400 acres of Class I and II
properties. A memorandum of understanding, signed late in 2002, with the State
of Connecticut, Department of Environmental Protection (DEP) allows the DEP to
conduct an evaluation of Birmingham Utilities' Class I and II lands to determine
the resource value and potential desirability of the lands for purchase as open
space or natural resource conservation. This memorandum of understanding is set
to expire at the end of 2005. The DEP has recently informed the Company that
this process is ongoing and will be completed shortly.


                                          2004 Annual Report / BIW LIMITED     3
<PAGE>
ACHIEVING LONG-TERM VALUE ONE STEP AT A TIME



We continue to be excited about the prospects of your Company. We believe the
growth of this Company will center on opportunities to expand the regulated side
of operations in eastern Connecticut, our contract operations business in
Ansonia and eastern Connecticut and the Rhodes Pump Service business. Dedicated,
qualified people at all levels within the organization represent the key
resource upon which our future will depend. We believe we now have the employees
in place that can increase the effectiveness and efficiency of operations. The
move of our Eastern Division office to Glastonbury, which took place in July of
2004, provides a central location to our businesses in the eastern part of the
state. We have become familiar with the business climate in eastern Connecticut
and with our customers, both regulated and non-regulated, as well as town
officials and developers who have begun to know and respect the operations of
Birmingham Utilities. We believe this knowledge and respect is critical for the
future growth of the Company.

We are now working with officials in three eastern Connecticut towns either to
expand their current water systems or to develop new systems. We have also
issued new contracts for all of our contract operation customers in eastern
Connecticut. This has allowed us to adjust our pricing schedule while
eliminating a few non-profitable contracts. We believe this part of our business
will expand as regulatory requirements increase and owners of these systems turn
to a professional water provider.

The expansion of the Rhodes Pump Service business to Glastonbury and other
eastern and shoreline communities was put on hold in 2004, as management's
resources were directed toward the assimilation of the Eastern Division's
operations into the Company as well as the relocation of the office. To support
our commitment to growth and efficiency, we appointed a new operations manager
at the Eastern Division and in January of 2005, hired a manager for the Rhodes
Pump Service business.

It is with sincere thanks and gratitude that we thank all employees for their
dedication and support in 2004. We believe we have a team in place that will
guide the future growth of this Company. We look forward to working with you so
we can all achieve our plan of long-term growth and value.


Sincerely,


/s/ Betsy Henley-Cohn

Betsy Henley-Cohn
Chairwoman




/s/ John S. Tomac

John S. Tomac
President and Treasurer




4     2004 Annual Report / BIW LIMITED
<PAGE>
BIW CONTRIBUTORS


<TABLE><CAPTION>

BOARD OF DIRECTORS                                                   OFFICERS                   COMMITTEES
------------------                                                   --------                   ----------
<S>                            <C>                                   <C>                        <C>
BETSY HENLEY-COHN (2)          JURI HENLEY-COHN (2)                  BETSY HENLEY-COHN          (1)  Audit Committee meets at least
Chairwoman of the Board of     President, Johnson Point              Chairwoman and CEO              quarterly with management and
Directors of the Company       Productions                                                           independent accountants to
                                                                                                     review accounting, auditing,
Chairman and Treasurer,                                              JOHN S. TOMAC                   internal control and financial
Joseph Cohn & Sons, Inc.                                             President and Treasurer         reporting and discuss the scope
                               THEMIS KLARIDES (1,4)                                                 and results of the annual audit
Director, UIL Holdings Corp.   Associate Attorney, Law Offices                                       and quarterly reviews of the
                               of Shawn K. Splan, Shelton;           JOHN J. KEEFE, JR.              Company's financial statements.
Director, Aristotle Corp.                                            Vice President, Operations
(1995-2002);                   State Representative, 114th                                      (2)  Executive Committee reviews
                               District, Connecticut General                                         strategic planning
Director, Citizens Bank of     Assembly                              LINDA BATTEN                    alternatives, recommends to and
Connecticut (1997-1999);                                             Controller                      advises the Board of Directors
                                                                                                     on financial policy, issuance
                                                                                                     of securities and other high
                               B. LANCE SAUERTEIG (2,4)              HENRIETTA VITALE                priority issues.
JOHN S. TOMAC (2)              Principal and President of BLS        Secretary
President and Treasurer        Strategic Capital, Inc. (financial                               (3)  Committee on Directors makes
of the Company                 and investment advisory company)                                      recommendations to the Board of
                                                                     DIANE G. DEBIASE                Directors for Board
                               Principal and Manager of Tortoise     Assistant Treasurer             replacements when they become
                               Capital Partners, LLC (real estate                                    available and for compensation
MICHAEL J. ADANTI (1,4)        investment company)                                                   levels for the Board of
President Emeritus, Southern                                                                         Directors.
Connecticut State University   Director, Chemwerth, Inc.
                                                                                                (4)  Personnel and Pension Committee
Director, Griffin Hospital     Director, United Aluminum                                             makes recommendations to the
                               Corporation                                                           Board of Directors regarding
                                                                                                     officers' compensation
                                                                                                     including the promotion and
MARY JANE BURT (2,4)                                                                                 hiring of officers; reviews
Realtor, H. Pearce Co.         KENNETH E. SCHAIBLE (1,3)                                             Company fringe benefit plans
                               Real Estate Developer                                                 other than retirement plans;
Principal, The Laurel Group                                                                          reviews the Pension Trust Fund
                               Previously, Senior Vice President,                                    of the Birmingham Utilities,
Previously, President, Burt    Webster Bank (1995-1996)                                              Inc. Defined Benefit Plan and
Medical Lab 1984-1998                                                                                the Retired Employee Welfare
                               President, Shelton Savings Bank                                       Benefit Trust for retiree
                               and Shelton Bancorp., Inc.                                            medical benefits; reviews and
                               (1972-1995)                                                           determines actuarial policies,
JAMES E. COHEN (2,3)                                                                                 investment guidelines and
Lawyer in Practice in Derby                                                                          selects the investment manager.

                               CHARLES T. SECCOMBE
                               Director Emeritus
ALVARO DA SILVA (1,3)
President, DSA Corp.

President, B.I.D., Inc.
(land development and home
building company)

Managing Partner, Connecticut
Commercial Investors, LLC
(a commercial real estate and
investment partnership)
</TABLE>

                                          2004 Annual Report / BIW LIMITED     5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS


RESULTS OF OPERATIONS

OVERVIEW
The Company recorded net income of $511,235 in 2004 as compared to $820,374 in
2003 and $817,103 in 2002. Earnings per share, basic for 2004, 2003 and 2002
were $.31, $.50 and $.50, respectively. There was no land sale income in 2004
and 2003 as compared to $261,317 in 2002, and amortization of deferred income on
dispositions of land was $11,342 in 2004 as compared to $179,172 in 2003 and
$394,775 in 2002. The decrease in net income for 2004 is partially a result of a
series of non-recurring items. These included strategic initiatives that were
not consummated. The Eastern Division, which Birmingham Utilities acquired in
2003, required reorganization of personnel at all levels, a substantial amount
of maintenance on some of the acquired water systems and unexpected purchased
water costs. The results also reflect expensing costs that were anticipated to
have been capitalized as part of the purchase price of the New York Systems. The
increase in net income from $817,103 in 2002 to $820,374 in 2003 was primarily a
result of the water service rate increase granted to Birmingham Utilities in
August 2003, which was partially offset by the reduction in income related to
land sales.

REVENUES
Total operating revenues of the Company were $9,865,576 in 2004 versus
$6,408,483 in 2003. The increase is, in part, a result of $1,442,713 in utility
revenues collected for the entire year of 2004 from the regulated operations
acquired in 2003 and the full year's effect of BUI's rate increase granted in
August 2003. In addition, H2O Services revenues reflect increased activity of
$2,014,380, which also includes increased revenues of $1,554,344 for the entire
twelve months of 2004 from the acquired non-regulated operations. Total
operating revenues of the Company were $6,408,483 in 2003 compared to $4,836,323
in 2002. This increase was a result of a partial year of activity from both the
regulated and non-regulated entities of the Eastern Division acquired in 2003,
the water service rate increase granted to BUI in August 2003 and also the
increased activity of H2O Services.

OPERATING EXPENSES
Operating expenses of $6,571,322 for 2004 are $2,771,387 higher than operating
expenses of $3,799,935 for 2003. Operating expenses related to the regulated
Eastern Division acquired in 2003 of $1,141,517 reflect an entire twelve months
of activity and are $789,138 higher than 2003. These expenses for the Eastern
Division are high due to the relocation of the office from Stafford Springs to
Glastonbury in July 2004 as well as the reorganization of personnel at all
levels done throughout 2004 and unexpected purchased water costs. Operating
expenses for the regulated Ansonia Division of $3,008,270 in 2004 exceeded
operating expenses of $2,718,709 for 2003 by $289,561. The increase is due to
increases in property and liability insurance, workers compensation, pension,
and power or fuel related expenses in 2004. H2O Services operating expenses
increased by $1,692,688 in 2004 versus 2003. The increase is in part due to both
increased activity as well as the inclusion of twelve months of activity and
expenses related to the non-regulated operations acquired in 2003. Operating
expenses of $3,799,935 for 2003 were $751,506 higher than operating expenses of
$3,048,429 for 2002. This increase was a result of activity from the entities
acquired in 2003 as well as increased activities for H2O Services. These
increases were partially offset by a decrease in the supplemental pension
expense as well as lower expenses associated with the formation of BIW Limited
in 2002.

MAINTENANCE EXPENSES
Maintenance expenses of $463,295 in 2004 are $151,161 higher than maintenance
expenses of $312,134 for 2003. The additional maintenance expenses related to
the operations acquired in 2003, both regulated and non-regulated, accounts for
the variance. Maintenance expenses of $312,134 in 2003 were $46,935 higher than
maintenance expenses of $265,199 for 2002. Increased costs relating to the newly
acquired operations also accounts for this variance.


6     2004 Annual Report / BIW LIMITED
<PAGE>
DEPRECIATION
Depreciation of $749,114 in 2004 exceeds depreciation of $630,462 in 2003 by
$118,652. Additional depreciation in the Eastern Division due to continued plant
additions along with the inclusion of a full twelve months of activity for these
operations accounts for this increase. Depreciation of $630,462 in 2003 exceeds
depreciation of $577,620 for 2002 by $52,842, also as a result of utility plant
additions related to improvements and acquisitions.

TAXES OTHER THAN INCOME TAXES
Taxes other than income taxes of $618,752 for 2004 are $180,626 higher than
taxes other than income taxes of $438,126 in 2003. Increased payroll taxes, real
estate taxes and property taxes due to the acquisition of the new operations as
well as property taxes related to utility plant additions throughout Birmingham
Utilities' service area account for this increase. Taxes other than income taxes
of $438,126 for 2003 are $48,042 higher than taxes other than income taxes of
$390,084 from 2002. Increases in personal property taxes as a result of BUI's
capital improvement program along with increased real estate and property taxes
associated with the newly acquired operations principally account for this
increase.

INCOME TAXES
Income taxes on operations of $246,527 recorded in 2004 are $5,975 lower than
the 2003 expense of $252,502 due to a decrease in operating earnings. Income
taxes on operations of $252,502 recorded in 2003 are $115,698 higher than the
2002 expense of $136,804 due to an increase in operating earnings. The Company
also incurs income tax liability for gains from land transactions, both in the
year in which they occur and in the later years in which income, previously
deferred in accordance with the Department of Public Utility Control's (DPUC)
orders concerning the sharing of the gains between the Company's shareholders
and ratepayers, is recognized by the Company. Taxes related to gains on land
transactions were $8,017, $75,769, and $322,521 in 2004, 2003 and 2002,
respectively. The Company's total income tax expense, including both the tax on
operating income and on land sale gains, was $254,544 in 2004, $328,271 in 2003,
and $459,325 in 2002.

LAND DISPOSITIONS
When Birmingham Utilities disposes of land, any gain recognized, net of taxes,
is shared between ratepayers and shareholders based upon a formula approved by
the DPUC. The impact of land dispositions is recognized in two places on the
statement of income.

The statement of income reflects income from the disposition of land (net of
taxes) of $261,317 in 2002, which represents the shareholders' immediate share
of income from land dispositions occurring in that year. There were no land
sales in 2003 and 2004.

Land disposition income is also recognized in the statement of income as a
component of operating income on the line entitled "Amortization of Deferred
Income on Dispositions of Land. These amounts represent the recognition of
income deferred on land dispositions which occurred in prior years. The
amortization of deferred income on land dispositions, net of tax, was $11,342,
$179,172, and $394,775 for the years 2004, 2003 and 2002, respectively.
Recognition of deferred income will continue over various time periods depending
upon the amortization period ordered by the DPUC for each particular
disposition.

ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
Allowance for funds used during construction (AFUDC) in 2004 of $120,279 is
$39,472 higher than the $80,807 recorded in 2003. Large ongoing projects
throughout 2004 in the Eastern Division account for this increase. AFUDC in 2003
of $80,807 is $10,837 lower than the $91,644 recorded in 2002. A reduction in
the allowable interest rate from 10.47% to 9.74% effective in August 2003 along
with a decrease in the duration of the construction projects accounts for the
decrease.

                                          2004 Annual Report / BIW LIMITED     7
<PAGE>
OTHER INCOME
Other income of $205,267 for 2004 is $187,518 higher than other income of
$17,749 in 2003. Wellpoint common stock, received as a result of the
demutualization of Blue Cross/Blue Shield, our healthcare insurance provider, in
the amount of $157,550, accounts for the majority of the increase. Other income
of $17,749 is $55,586 lower than other income of $73,335 in 2002. Lower
investment income from cash and investments and reduced operating income related
to BUI's managed system in Derby accounts for the decrease.

OTHER EXPENSE
Other expense for 2004 of $468,035 represents non-recurring expenses incurred
primarily in the fourth quarter of 2004. Expenses totaling $405,613 were related
to the exploration of strategic initiatives that were not consummated. The
remaining balance of $62,422 is expense associated with the proposed acquisition
of the NY operations from PSC that was terminated in January 2005.

INTEREST EXPENSE
Interest expense of $574,184 for 2004 is $141,506 higher than interest expense
of $432,678 for 2003. The increase in long-term borrowings from $4,042,000 in
2003 to $9,000,000 in 2004 accounts for some of the increase, although this is
somewhat offset by the 5.21% interest rate on the new $9,000,000 mortgage bonds
as compared to 9.64% on the $4,042,000 retired mortgage bonds. The balance of
the increase is related to short-term borrowings outstanding throughout 2004 as
compared to 2003 borrowings outstanding primarily in the fourth quarter only.
Interest expense of $432,678 for 2003 is $10,523 higher than interest expense of
$422,155 in 2002. The increase in short-term borrowings related to the 2003
acquisition accounts for the additional expense.

REGULATORY MATTERS AND INFLATION
Inflation, as measured by the Consumer Price Index, increased 2.7 percent, 1.9
percent, and 2.4 percent in 2004, 2003 and 2002, respectively. The regulatory
authorities allow the recovery of depreciation through revenues solely on the
basis of the historical cost of plant. The replacement cost of utility plant
would be significantly higher than the historical cost. While the regulatory
authorities give no recognition in the ratemaking process to the current cost of
replacing utility plant, the Company believes that, based on past practices,
Birmingham Utilities will continue to be allowed to earn a return on the
increased cost of their net investment when prudent replacement of facilities
actually occurs.


CRITICAL ACCOUNTING POLICIES

Preparation of the Company's financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Note 1 of the Notes to Financial Statements
includes a summary of the significant accounting policies and methods used in
the preparation of the Company's financial statements. The most significant
areas involving management's estimates and assumptions are described below.
Actual results could differ materially from management's estimates under
different assumptions or conditions.

PUBLIC UTILITY REGULATION
The Company's accounting policies conform to the Uniform System of Accounts and
ratemaking practices prescribed by the Connecticut Department of Public Utility
Control (DPUC), and accounting principles generally accepted in the United
States of America, which include the provisions of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation," (SFAS 71). SFAS 71 requires cost based, rate regulated enterprises
to reflect the impact of regulatory decisions in their financial statements. The
DPUC, through the rate regulation process, can create regulatory assets that
result when costs are allowed for ratemaking purposes in a period after the
period in


8     2004 Annual Report / BIW LIMITED
<PAGE>
which the costs would be charged to expense by an unregulated enterprise. The
balance sheets include regulatory assets and liabilities as appropriate,
primarily related to income taxes and post retirement benefit costs. The Company
believes, based on current regulatory circumstances, that the regulatory assets
recorded are likely to be recovered and that its use of regulatory accounting is
appropriate and in accordance with the provisions of SFAS 71.

REVENUE RECOGNITION
Birmingham Utilities recognizes revenue as customers are billed for water
consumed. Residential, commercial, and industrial customers are metered, and
revenues are based on their usage multiplied by rates approved by the DPUC. Fire
protection charges are based on the length and diameter of the water main and
the number of hydrants in service. The majority of customers are billed
quarterly, except for industrial, fire protection, and Eastern Division
customers who are billed monthly. In addition, Birmingham Utilities accrues
revenue for the estimated amount of water sold but not billed as of the balance
sheet date. Estimates are based on actual usage from the comparable period of
the previous year. Management believes that this methodology is preferable to
using the most recent quarterly billing due to the seasonality of water usage.

H2O Services recognizes revenue as services are provided.

LAND DISPOSITIONS
The net gain of each disposition, after deducting costs, expenses and taxes is
allocated between the shareholders and ratepayers by a method approved by the
DPUC based on legislation passed by the Connecticut General Assembly. The
portion of income applicable to shareholders is recognized in the year of
disposition. Income attributable to ratepayers is deferred and, for land
dispositions through 2001, amortized in a manner that reflects reduced water
revenue resulting from the sharing formula as determined by the DPUC. Income
attributable to ratepayers for land dispositions in 2002 was allocated by the
DPUC to an account stipulated as an offset to rate base for a period of 40
years.

INCOME TAXES
Except for accelerated depreciation since 1981 (federal only), the tax effect of
contributions in aid of construction for the period January 1, 1987 through June
12, 1996, and in 1998, 2000 and 2001, the tax effect of bargain sales of land,
for which deferred income taxes have been provided, the Company's policy is to
reflect as income tax expense the amount of tax currently payable. This method,
known as the flow-through method of accounting, is consistent with the
ratemaking policies of the DPUC, and is based on the expectation that tax
expense payments in future years will be allowed for ratemaking purposes.

The Company's deferred tax provision was determined under the liability method.
Deferred tax assets and liabilities were recognized based on differences between
the book and tax bases of assets and liabilities using presently enacted tax
rates. The provision for income taxes is the sum of the amount of income tax
paid or payable as determined by applying the provisions of enacted tax laws to
the taxable income for that year and the net change during the year in the
Company's deferred tax assets and liabilities.

The deferred tax asset related to land sales represents expected future tax
savings resulting from sales of land required to be maintained as open space at
less than market value. The Company received a charitable contribution deduction
for federal tax purposes and a tax credit for state tax purposes. Unused tax
benefits may be carried forward to reduce income taxes in future years; the
federal charitable deduction five years and the state tax credit ten years.
Utilization of these benefits is primarily subject to the extent of future
earnings of the Company, including an estimate for anticipated future rate
relief and changes to current tax rates. In addition, the federal charitable
contribution deduction is subject to an annual limitation of 10% of taxable
income and, as a result of legislation passed in 2002, the state tax credit is
now subject to an annual limitation of 70% of the amount of tax due. The Company
has established a valuation allowance for the portion of possible tax savings
not likely to be realized by the end of the carryforward periods.

                                          2004 Annual Report / BIW LIMITED     9
<PAGE>
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In November 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 151, "Inventory Costs - An
Amendment of Accounting Research Bulletin No. 43, Chapter 4" (SFAS 151). SFAS
151 clarifies that abnormal amounts of idle facility expense, freight, handling
costs and spoilage should be expensed as incurred and not included in overhead.
Further, SFAS 151 requires that allocation of fixed production overhead to
conversion costs be based on normal capacity of the production facilities. The
provisions in SFAS 151 must be applied prospectively to the Company's inventory
costs incurred after January 1, 2006. The adoption of SFAS 151 is not expected
to have material impact on the Company's consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment" (SFAS
123R), replacing SFAS 123 and superseding Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25). SFAS 123R requires
public companies to recognize compensation expense for the cost of awards of
equity compensation effective July 1, 2005. This compensation cost will be
measured as the fair value of the award estimated using an option-pricing model
on the grant date. The Company is currently evaluating the various transition
provisions under SFAS 123R and will adopt SFAS 123R effective July 1, 2005,
which is expected to result in increased compensation expense in future periods.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-monetary
Assets - an Amendment of APB No. 29" (SFAS 153). The amendments made by SFAS 153
are based on the principle that exchanges of non-monetary assets should be
measured based on the fair value of the assets exchanged. Further, the
amendments eliminate the narrow exception for non-monetary exchanges of similar
productive assets and replace it with a broader exception for exchanges of
non-monetary assets that do not have "commercial substance." This standard is
effective for non-monetary asset exchanges occurring after July 1, 2005. The
adoption of this standard is not expected to impact the Company's consolidated
financial statements.


OUTLOOK

The Company believes that as a result of health, transportation and supply
issues in regard to the physical movement of water, deregulation of the water
industry is unlikely in the foreseeable future. Although the Company believes
deregulation is not a viable option for this industry, consolidation of the
water industry continues to be fast paced over the last five years. The
consolidation strategy has allowed many small, non-viable water systems to be
purchased by larger purveyors and for larger systems to merge in an effort to
create economies of scale. Foreign entities have also been very active in the
purchase of investor owned American water systems.

The Company believes it is prudently monitoring the economic environment in
which it operates to best take advantage of market opportunities. The
establishment of a holding company, the formation of H2O Services, and the
acquisition of the Connecticut operations from PSC, both regulated and
non-regulated, has allowed the Company to enter a market in Connecticut that is
expanding. This should allow for the growth of both the regulated and
non-regulated businesses, principally in eastern Connecticut that would create
long-term value for the Company. In addition, Birmingham Utilities' 2003 rate
decision will allow the company to earn a rate of return on its increased rate
base as a result of its prudent and efficient capital improvement program.


FINANCIAL RESOURCES

During 2004, 2003 and 2002, the Company's operations generated funds available
for investment in utility plant and for use in financing activities, including
payment of dividends on common stock, of $790,965, $1,437,014 and $926,880,
respectively (See Statement of Cash Flows).


10    2004 Annual Report / BIW LIMITED
<PAGE>
Net cash provided by operating activities decreased $646,049 in 2004 as a result
of the increased operating expenses associated with the Eastern Division
acquired in 2003 and also increased expenses associated with strategic
initiatives that were not consummated. Net cash increased $510,134 from 2002 to
2003 as a result of the 28% rate increase granted Birmingham Utilities in August
2003 and cash flows from the newly acquired operations.

During the 3-year period 2004, 2003 and 2002, the Company has generated
sufficient funds to meet its day-to-day operational needs, including regular
expenses, payment of dividends, and investment in normal plant replacements,
such as new services, meters and hydrants. It expects to be able to continue to
do so for the foreseeable future.

Birmingham Utilities Long-Term Capital Improvement Program will be funded by the
internal generation of funds, including rate relief, as well as the Company's
ability to raise capital from external sources. During 2004, 2003 and 2002, the
Company's additions to utility plant, net of customer advances, were $1,773,718,
$1,526,423, and $1,932,100, respectively (see Statement of Cash Flows and Note
17). These additions were financed primarily from proceeds of land sales and
borrowings on the revolving line of credit.

In January 2004, Birmingham Utilities filed an application with the DPUC for
approval of the issuance of First Mortgage Bonds in the principal amount of
$9,000,000. In March 2004, the DPUC approved BUI's request to issue the new
bonds. In April 2004, BUI issued First Mortgage Bonds in the principal amount of
$9,000,000. The bonds carry an interest rate of 5.21%. Interest is payable
semi-annually on the fifteenth day of April and October. The bonds are secured
by a lien on all utility property. The proceeds from the bond issue were used to
repay the $4,042,000 outstanding principal of the existing Mortgage Bonds, which
carried an interest rate of 9.64%, and repay $4,280,000 of short-term debt used
to fund the purchase of the Connecticut regulated and non-regulated operations
from PSC.

The Mortgage Indenture limits the issuing of additional First Mortgage Bonds and
the payment of dividends. Under the dividend limitation, approximately
$7,600,000 was available to pay dividends at December 31, 2004 after the
quarterly dividend payment made on that date. It does not, however, restrict the
issuance of either long-term or short-term debt, which is either unsecured or
secured with liens subject to the lien of the Mortgage Indenture.

In December 2003, Birmingham Utilities converted its $5,000,000 unsecured,
revolving line of credit to a $7,000,000 unsecured revolving line of credit
expiring in April 2005. The interest rate on the unsecured line of credit is a
variable option of 30, 60, 90 or 180-day LIBOR plus 100 basis points or prime.
BUI is required to pay interest only during the revolving period. The loan is
payable in full at maturity. Borrowings of $2,255,000 were outstanding on the
line of credit at December 31, 2004.

Birmingham Utilities' 2005 Capital Budget of $1,976,000 is two-tiered. The first
tier, consisting of typical capital improvements made each year for services,
hydrants and meters is budgeted for $319,000 and is expected to be financed
primarily with internally generated funds.

The second tier of the 2005 Capital Budget consists of replacements and
betterments, which are part of Birmingham Utilities' Long-Term Capital
Improvement Program and includes $1,657,000 of budgeted plant additions. Plant
additions from this part of the capital budget will be financed with internally
generated funds and short-term borrowings. Second tier plant additions can be,
and portions of it are expected to be, deferred to future years if funds are not
available for their construction.

The Company believes that through the use of short-term borrowing and internally
generated funds, it can generate sufficient capital to support its 5-year
capital budget currently estimated at approximately $9,130,000. Internally
generated funds in part are dependent on the extent of future rate relief.
Future rate relief will be a necessary component in the process of funding this
5-year capital program.

On September 27, 2002, Birmingham Utilities sold 27 acres of unimproved land in
Seymour, Connecticut to the State of Connecticut, Department of Environmental
Protection (DEP) for $537,500. The after tax gain on this transaction

                                          2004 Annual Report / BIW LIMITED    11
<PAGE>
amounted to $311,092 of which 16% or $49,775 was allocated by the DPUC to an
account stipulated as an offset to rate base for a period of 40 years. The rate
base offset account does not represent a claim by ratepayers on any assets of
BUI. The rate base offset account was utilized in calculating rate base in
Birmingham Utilities' rate case in 2003.

The Company maintains a common stock Dividend Reinvestment Plan (the Plan)
pursuant to which shareholders are entitled to purchase up to 140,000 new shares
of the Company's common stock by applying to the purchase price of the new
shares cash dividends which otherwise would be issued by the Company with
respect to its existing common stock. The Plan provides that the purchase price
for the new shares will be their fair market value at the time of the purchase.
Dividends reinvested totaled $79,748 and $69,487 in 2004 and 2003, respectively.
The Company purchases shares in the open market to satisfy its dividend
reinvestment obligations.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
The Company does not utilize off-balance sheet arrangements and has no
contractual obligations with any unconsolidated entities. The following table
summarizes the Company's future contractual cash obligations as of December 31,
2004:
<TABLE><CAPTION>
                                                  Less than                                         More than
                                  Total            1 year          1-3 years        4-5 years        5 years
---------------------------------------------------------------------------------------------------------------
<S>                            <C>              <C>              <C>              <C>              <C>
Debt obligations
     Series F Mortgage Bonds   $  9,000,000                                                        $  9,000,000
     Note Payable                 2,255,000        2,255,000
Purchase Obligations
     Regional Water Authority     7,755,000          705,000        1,410,000        1,410,000        4,230,000
Other Obligations
     Capital Budget               2,059,000(1)       319,000          385,000          340,000        1,015,000
     Operating Lease                254,250           56,500          113,000           84,750
     Defined Benefit Pension        100,000          100,000
---------------------------------------------------------------------------------------------------------------
Total                          $ 21,423,250     $  3,435,500     $  1,908,000     $  1,834,750     $ 14,245,000
===============================================================================================================
</TABLE>
(1) Includes only Tier 1 additions

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides information regarding our equity compensation plans
as of December 31, 2004:
<TABLE><CAPTION>
                                                                                           Number of securities
                                                                                            remaining available
                       Number of securities                  Weighted-average               for future issuance
                 to be issued upon exercise                 exercise price of                      under equity
Plan Category        of outstanding options               outstanding options                compensation plans
---------------------------------------------------------------------------------------------------------------
<S>                      <C>                              <C>                               <C>
Equity compensation plans
  approved by security holders       67,240                      $      13.92                            75,500
Equity compensation plans not
  approved by security holders           --                                --                                --
---------------------------------------------------------------------------------------------------------------
Total                                67,240                      $      13.92                            75,500
===============================================================================================================
</TABLE>



12    2004 Annual Report / BIW LIMITED
<PAGE>

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has certain exposures to market risk related to changes in interest
rates. The Company has an outstanding revolving credit agreement, under which
there were borrowings of $2,255,000 at December 31, 2004. The revolving credit
agreement bears interest at variable rates based on current LIBOR indices. The
Company is not subject in any material respect to currency or other commodity
risk.


FORWARD LOOKING INFORMATION

Forward looking statements in this report, including, without limitation,
statements relating to the Company's plans, strategies, objectives, intentions,
and expectations, are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward looking statements are
based on current information and involve known and unknown risks and
uncertainties, which could cause the Company's actual results to differ
materially from expected results.

These factors include, among others, the adequacy of rates approved by the DPUC,
weather conditions, changes in governmental regulations affecting water quality,
success of operating initiatives, changes in business strategy, as well as
general economic and business conditions.



















                                          2004 Annual Report / BIW LIMITED    13
<PAGE>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


                                     [LOGO]
                                     DWORKEN, HILLMAN, LAMORTE & STERCZALA, P.C.


Board of Directors and Shareholders
BIW Limited
Ansonia, Connecticut

We have audited the accompanying consolidated balance sheets of BIW Limited and
subsidiaries as of December 31, 2004 and 2003, and the related consolidated
statements of income and retained earnings and cash flows for each of the three
years in the period ended December 31, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of BIW Limited and
subsidiaries as of December 31, 2004 and 2003 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2004 in conformity with accounting principles generally accepted in
the United States of America.

February 11, 2005
Shelton, Connecticut

                                 /S/ DWORKEN, HILLMAN, LAMORTE & STERCZALA, P.C.









14    2004 Annual Report / BIW LIMITED
<PAGE>
CONSOLIDATED BALANCE SHEETS

<TABLE><CAPTION>
                                                                          DECEMBER 31,
                                                                 -----------------------------
                                                                     2004             2003
----------------------------------------------------------------------------------------------
<S>                                                              <C>              <C>
ASSETS
Utility plant                                                    $ 35,261,167     $ 33,213,665
Accumulated depreciation                                           (9,213,681)      (8,578,855)
----------------------------------------------------------------------------------------------
                                                                   26,047,486       24,634,810
----------------------------------------------------------------------------------------------
Other property                                                        419,700          388,678
----------------------------------------------------------------------------------------------
Current assets:
     Cash and cash equivalents                                             --          148,618
     Accounts receivable, net of allowance for doubtful
        accounts (2004, $149,000; 2003, $87,000)                    1,338,362          916,985
     Accrued utility and other revenue                                560,563          561,560
     Materials and supplies                                           312,638          280,319
     Prepayments and other current assets                             195,329          302,482
----------------------------------------------------------------------------------------------
Total current assets                                                2,406,892        2,209,964
----------------------------------------------------------------------------------------------
Deferred charges                                                      137,007          226,034
Unamortized debt expense                                              391,932           89,242
Regulatory asset - income taxes recoverable                           437,501          439,050
Other assets                                                          387,725          411,691
----------------------------------------------------------------------------------------------
                                                                    1,354,165        1,166,017
----------------------------------------------------------------------------------------------
                                                                 $ 30,228,243     $ 28,399,469
==============================================================================================


SHAREHOLDERS' EQUITY AND LIABILITIES

Shareholders' equity:
     Common stock, no par value; authorized 5,000,000 shares;
        issued and outstanding (2004, 1,657,542 shares; 2003,
        1,637,076 shares)                                        $  2,975,972     $  2,900,913
     Retained earnings                                              9,211,403        9,822,197
----------------------------------------------------------------------------------------------
                                                                   12,187,375       12,723,110
----------------------------------------------------------------------------------------------
Long-term debt                                                      9,000,000        3,948,000
----------------------------------------------------------------------------------------------
Current liabilities:
     Current portion of long-term debt                                     --           94,000
     Note payable                                                   2,255,000        4,705,000
     Accounts payable and accrued liabilities                         799,382        1,411,227
----------------------------------------------------------------------------------------------
     Total current liabilities                                      3,054,382        6,210,227
----------------------------------------------------------------------------------------------
Customers' advances for construction                                  491,950          503,897
Contributions in aid of construction                                2,803,914        2,454,304
Regulatory liability - income taxes refundable                        126,913          134,486
Deferred income taxes                                               2,554,657        2,397,034
Deferred income on dispositions of land                                 9,052           28,411
Commitments and contingent liabilities (Note 15)
----------------------------------------------------------------------------------------------
                                                                    5,986,486        5,518,132
----------------------------------------------------------------------------------------------
                                                                 $ 30,228,243     $ 28,399,469
==============================================================================================
</TABLE>

See notes to consolidated financial statements.


                                          2004 Annual Report / BIW LIMITED    15
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

<TABLE><CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                ----------------------------------------------
                                                    2004             2003             2002
----------------------------------------------------------------------------------------------
<S>                                             <C>              <C>              <C>
Operating revenues:
     Residential and commercial                 $  5,330,329     $  4,154,641     $  3,399,808
     Industrial                                      201,687          134,290          101,088
     Fire protection                                 952,472          799,079          691,024
     Public authorities                              108,662           91,674           91,022
     Other                                           275,075          245,828          206,884
     Service operations                            2,997,351          982,971          346,497
----------------------------------------------------------------------------------------------
                                                   9,865,576        6,408,483        4,836,323
----------------------------------------------------------------------------------------------
     Operating expenses                            6,571,322        3,799,935        3,048,429
     Maintenance expenses                            463,295          312,134          265,199
     Depreciation                                    749,114          630,462          577,620
     Taxes other than income taxes                   618,752          438,126          390,084
     Taxes on income                                 246,527          252,502          136,804
----------------------------------------------------------------------------------------------
                                                   8,649,010        5,433,159        4,418,136
----------------------------------------------------------------------------------------------
                                                   1,216,566          975,324          418,187

Amortization of deferred income on dispositions
     of land (net of income taxes of $8,017 in
     2004, $75,769 in 2003, and $162,262 in 2002)     11,342          179,172          394,775
----------------------------------------------------------------------------------------------
Operating income                                   1,227,908        1,154,496          812,962
Allowance for funds used during construction         120,279           80,807           91,644
Other income                                         205,267           17,749           73,335
Other expense                                        468,035               --               --
----------------------------------------------------------------------------------------------
Income before interest expense                     1,085,419        1,253,052          977,941
Interest expense                                     574,184          432,678          422,155
Income from dispositions of land (net of income
     taxes of $160,259 in 2002)                           --               --          261,317
----------------------------------------------------------------------------------------------
Net income                                           511,235          820,374          817,103
Retained earnings, beginning of year               9,822,197        9,984,068       10,146,829
Dividends                                          1,122,029          982,245          979,864
----------------------------------------------------------------------------------------------
Retained earnings, end of year                  $  9,211,403     $  9,822,197     $  9,984,068
==============================================================================================

Earnings per share, basic                       $        .31     $        .50     $        .50
----------------------------------------------------------------------------------------------
Earnings per share, diluted                     $        .30     $        .49     $        .49
----------------------------------------------------------------------------------------------
Dividends per share                             $        .68     $        .60     $        .60
----------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.


16    2004 Annual Report / BIW LIMITED
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE><CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                ----------------------------------------------
                                                    2004             2003             2002
----------------------------------------------------------------------------------------------
<S>                                             <C>              <C>              <C>
Cash flows from operating activities:
     Net income                                 $    511,235     $    820,374     $    817,103
     Adjustments to reconcile net income to net
     cash provided by operating activities:
        Income from land dispositions                     --               --         (421,576)
        Depreciation and amortization                889,942          700,011          631,364
        Amortization of deferred income              (11,342)        (179,172)        (394,775)
        Deferred income taxes                        143,582          435,525          317,548
        Allowance for funds used during
          construction                              (120,279)         (80,807)         (91,644)
     Change in assets and liabilities:
        (Increase) decrease in accounts
          receivable and accrued revenues           (420,380)        (172,078)          47,601
        (Increase) in materials and supplies         (32,319)         (45,292)          (6,535)
        (Increase) decrease in prepayments
          and other current assets                   107,153         (286,376)          28,837
        Increase (decrease) in accounts
          payable and accrued liabilities           (276,627)         244,829           (1,043)
----------------------------------------------------------------------------------------------
Net cash provided by operating activities            790,965        1,437,014          926,880
----------------------------------------------------------------------------------------------
Cash flows from investing activities:
     Capital expenditures - utility plant         (2,111,381)      (1,689,324)      (1,944,760)
     Capital expenditures - other property           (31,022)          (7,178)              --
     Sales of utility plant                           69,869           54,000               --
     Cash paid for acquisition                      (335,217)      (4,315,856)              --
     Proceeds from land disposition                       --               --          537,500
     Sale (purchase) of investments                       --          737,141         (737,141)
     Increase in deferred charges and other
        assets                                      (334,231)        (521,895)        (133,269)
     Customer advances                               337,663          162,901           12,660
----------------------------------------------------------------------------------------------
Net cash used in investing activities             (2,404,319)      (5,580,211)      (2,265,010)
==============================================================================================

Cash flows from financing activities:
     Proceeds from long-term debt                  9,000,000               --               --
     Repayment of long-term debt                  (4,042,000)         (94,000)         (94,000)
     Borrowings under line of credit                      --        4,705,000               --
     Repayments on line of credit                 (2,450,000)              --               --
     Exercise of stock options                        78,765               --               --
     Dividends paid                               (1,122,029)        (982,245)        (944,450)
----------------------------------------------------------------------------------------------
Net cash provided by (used in) financing
  activities                                       1,464,736        3,628,755       (1,038,450)
----------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents           (148,618)        (514,442)      (2,376,580)
Cash and cash equivalents, beginning of year         148,618          663,060        3,039,640
----------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year          $         --     $    148,618     $    663,060
==============================================================================================
</TABLE>

See notes to consolidated financial statements.

                                          2004 Annual Report / BIW LIMITED    17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1

ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS
BIW Limited (BIW or the Company) is the parent company of Birmingham Utilities,
Inc. and its wholly-owned subsidiary Eastern Connecticut Regional Water Company,
Inc. (Eastern Division), (collectively BUI or Birmingham Utilities), a regulated
public water service company that provides water service to customers in various
cities and towns in Connecticut and Birmingham H2O Services Inc. (H2O Services),
which provides water related services to other water utilities, municipalities,
contractors and individuals throughout Connecticut.

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of BIW Limited and
its wholly-owned subsidiaries Birmingham Utilities and H2O Services. All
significant intercompany balances and transactions have been eliminated in
consolidation.

PUBLIC UTILITY REGULATION
Birmingham Utilities' accounting policies conform to the Uniform System of
Accounts and ratemaking practices prescribed by the Connecticut Department of
Public Utility Control (DPUC), and accounting principles generally accepted in
the United States of America, which include the provisions of Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation" (SFAS 71). SFAS 71 requires cost based, rate regulated
enterprises to reflect the impact of regulatory decisions in their financial
statements. The DPUC, through the rate regulation process, can create regulatory
assets that result when costs are allowed for ratemaking purposes in a period
after the period in which the costs would be charged to expense by an
unregulated enterprise. The balance sheets include regulatory assets and
liabilities as appropriate, primarily related to income taxes and post
retirement benefit costs. The Company believes, based on current regulatory
circumstances, that the regulatory assets recorded are likely to be recovered
and that its use of regulatory accounting is appropriate and in accordance with
the provisions of SFAS 71.

ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported revenues
and expenses during the reporting period. Actual results could vary from those
estimates.

UTILITY PLANT
Utility plant of Birmingham Utilities is stated at the original cost of the
property when placed in service. The costs of additions to utility plant and the
costs of renewals and betterments are capitalized. The cost of repairs and
maintenance is charged to income. Upon retirement of depreciable utility plant
in service, accumulated depreciation is charged with the book cost of the
property retired and the cost of removal, and is credited with the salvage value
and any other amounts recovered.

DEPRECIATION
For financial statement purposes, Birmingham Utilities provides for depreciation
using the straight-line method, at rates approved by the DPUC. The rates used
are intended to distribute the cost of depreciable properties over their
estimated service lives. For income tax purposes, BUI provides for depreciation
utilizing straight-line and accelerated methods. The overall depreciation rates
were 2.1% for 2004, 2.3% for 2003, and 2.2% for 2002.


18    2004 Annual Report / BIW LIMITED
<PAGE>
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash in banks and overnight investment
accounts in banks. From time to time, the Company has on deposit at financial
institutions cash balances that exceed federal deposit insurance limitations.
The Company has not experienced any losses in such accounts and believes it is
not exposed to any significant credit risk on cash and cash equivalents.

ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
An allowance for funds used during construction (AFUDC) is made by applying the
last allowed rate of return on rate base granted to Birmingham Utilities by the
DPUC to construction projects exceeding $10,000 and requiring more than one
month to complete. AFUDC represents the net cost, for the period of
construction, of borrowed funds used for construction purposes and a reasonable
rate on other funds used. AFUDC represents a non-cash credit to income. Utility
plant under construction is not recognized as part of BUI's rate base for
ratemaking purposes until facilities are placed into service. Accordingly, BUI
capitalizes AFUDC as a portion of the construction cost of utility plant until
it is completed. Capitalized AFUDC is recovered through water service rates over
the service lives of the facilities.

REVENUE RECOGNITION
Birmingham Utilities recognizes revenue as customers are billed for water
consumed. Residential, commercial, and industrial customers are metered, and
revenues are based on their usage multiplied by rates approved by the DPUC. Fire
protection charges are based on the length and diameter of the water main and
the number of hydrants in service. The majority of customers are billed
quarterly, except for industrial, fire protection, and Eastern Division
customers, who are billed monthly. In addition, Birmingham Utilities accrues
revenue for the estimated amount of water sold but not billed as of the balance
sheet date.

H2O Services recognizes revenue as services are provided.

ADVANCES FOR CONSTRUCTION/CONTRIBUTIONS IN AID OF CONSTRUCTION
Birmingham Utilities receives cash advances from developers and customers to
finance construction of new water main extensions. These advances are refunded
over a 10-year contract period as services are connected to the main. Any
unrefunded balances are reclassified to "Contributions in aid of Construction"
and are no longer refundable. Utility plant funded by advances and contributions
is excluded from rate base for regulatory purposes.

FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, trade accounts receivable, and
trade accounts payable approximates their fair values due to their short-term
nature. The carrying amount of note payable and long-term debt approximate fair
value based on market conditions for debt of similar terms and maturities.

INCOME TAXES
Except for accelerated depreciation since 1981 (federal only), the tax effect of
contributions in aid of construction for the period January 1, 1987 through June
12, 1996, and in 1998, 2000, and 2001, the tax effect of bargain sale of land,
for which deferred income taxes have been provided, the Company's policy is to
reflect as income tax expense the amount of tax currently payable. This method,
known as the flow-through method of accounting, is consistent with the
ratemaking policies of the DPUC, and is based on the expectation that tax
expense payments in future years will be allowed for ratemaking purposes.

The Company's deferred tax provision was determined under the liability method.
Deferred tax assets and liabilities are recognized based on differences between
the book and tax bases of assets and liabilities using presently enacted tax
rates. The provision for income taxes is the sum of the amount of income tax
paid or payable as determined by applying the provisions of enacted tax laws to
the taxable income for that year and the net change during the year in the
Company's deferred tax assets and liabilities.


                                          2004 Annual Report / BIW LIMITED    19
<PAGE>
In addition, the Company is required to record an additional deferred tax
liability for temporary differences not previously recognized. This additional
deferred tax liability totaled $310,600 at December 31, 2004 and $304,500 at
December 31, 2003. Management believes that these deferred taxes will be
recovered through the ratemaking process. Accordingly, the Company has recorded
an offsetting regulatory asset and regulatory liability.

STOCK BASED COMPENSATION
The Company applies Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" (SFAS 123) to account for its stock
option plans. As permitted by SFAS 123, the Company has chosen to continue to
apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" (APB 25) and, accordingly, no compensation cost has been
recognized for stock options in the financial statements.

The following table illustrates the effect on net income and earnings per share
if the Company had applied the fair value recognition provisions of SFAS 123:

                                                2004         2003        2002
--------------------------------------------------------------------------------
Net income:                   As reported    $ 511,235    $ 820,374    $ 817,103
                                Pro forma    $ 472,403    $ 774,834    $ 790,967

Earnings per share, basic:    As reported    $     .31    $     .50    $     .50
                                Pro forma    $     .29    $     .47    $     .48

Earnings per share, diluted:  As reported    $     .30    $     .49    $     .49
                                Pro forma    $     .28    $     .46    $     .47


COMPENSATED ABSENCES
Company policy and practice does not provide for any accumulated but unused
vacation, sick time or any other compensated absences to be carried over beyond
the year-end.

LAND DISPOSITIONS
Birmingham Utilities has essentially disposed of its surplus land not required
for utility operations. The net gain of each disposition, after deducting costs,
expenses and taxes is allocated between the shareholders and ratepayers by a
method approved by the DPUC based on legislation passed by the Connecticut
General Assembly. The portion of income applicable to shareholders is recognized
in the year of disposition. Income attributable to ratepayers is deferred and,
for land dispositions through 2001, amortized in a manner that reflects reduced
water revenue resulting from the sharing formula as determined by the DPUC.
Income attributable to ratepayers for land dispositions in 2002 was allocated by
the DPUC to an account stipulated as an offset to rate base for a period of 40
years.

UNAMORTIZED DEBT EXPENSE
Costs related to the issuance of debt are capitalized and amortized over the
term of the related indebtedness. Birmingham Utilities has received permission
from the DPUC to amortize the costs associated with debt previously outstanding
over the term of the new indebtedness.


NOTE 2

ACQUISITION

On October 31, 2003, Birmingham Utilities purchased from AquaAmerica, formerly
the Philadelphia Suburban Corporation (PSC) for $4,651,000 all of the issued and
outstanding shares of common stock of Eastern Connecticut Regional Water
Company, Inc., and H2O Services purchased certain non-regulated assets
consisting largely of operating maintenance agreements with various unregulated
water supply systems located in eastern Connecticut and Rhodes Pump Service,
Inc. located in Guilford, Connecticut. The purchase price was initially funded
through borrowings on BUI's existing line of credit and then refinanced through
the issuance of long-term debt in April 2004.


20    2004 Annual Report / BIW LIMITED
<PAGE>
The acquisition has been accounted for in accordance with Statement of Financial
Accounting Standards No. 141, "Business Combinations." Accordingly, the cost of
the acquisition was allocated to the assets acquired and liabilities assumed
based on estimates of their respective fair values at the date of acquisition.

The following table summarizes the final purchase price allocation:

Utility plant                                                      $  2,731,200
Construction in process                                               1,594,400
Other property                                                          385,000
Accounts receivable                                                     414,200
Materials and supplies                                                  119,500
-------------------------------------------------------------------------------
   Total assets acquired                                              5,244,300
-------------------------------------------------------------------------------
Accounts payable and accrued liabilities                               (240,200)
Contributions in aid of construction                                   (353,100)
-------------------------------------------------------------------------------
   Total liabilities assumed                                           (593,300)
-------------------------------------------------------------------------------
Fair value of net assets acquired                                  $  4,651,000
===============================================================================

The Company's consolidated income statement includes the operations of the
acquired entities from October 31, 2003, the date of acquisition.

NOTE 3

UTILITY PLANT
                                                          DECEMBER 31,
                                                  -----------------------------
                                                      2004             2003
-------------------------------------------------------------------------------
Pumping, treatment and distribution               $ 27,841,087     $ 25,240,521
Source of supply                                     3,805,160        3,321,928
General plant                                        3,293,588        2,700,786
Organization                                            30,219           30,219
-------------------------------------------------------------------------------
                                                    34,970,054       31,293,454
Construction in process                                291,113        1,920,211
-------------------------------------------------------------------------------
                                                  $ 35,261,167     $ 33,213,665
===============================================================================


NOTE 4

OTHER ASSETS
                                            DECEMBER 31,
                                       ----------------------      REGULATORY
                                          2004        2003      RECOVERY PERIOD
-------------------------------------------------------------------------------
Regulatory assets:
   Deferred post retirement benefits   $  144,725  $  161,300       10 Years
   Various deferred costs and charges     154,921     214,180      3-15 Years
Non-regulatory assets:
   Various deferred costs and charges      88,079      36,211
-------------------------------------------------------------------------------
                                       $  387,725  $  411,691
===============================================================================


                                          2004 Annual Report / BIW LIMITED    21
<PAGE>
NOTE 5

NOTE PAYABLE

Note Payable consists of a $7,000,000 unsecured line of credit expiring in April
2005. This note replaces the $5,000,000 unsecured line of credit that expired in
October 2003. During the revolving period, Birmingham Utilities can choose
between variable rate options of 30, 60, 90 or 180-day LIBOR plus 100 basis
points or prime. BUI is required to pay only interest during the revolving
period. The principal is payable in full at maturity. The line of credit
requires the maintenance of certain financial ratios and net worth of
$7,500,000.

Borrowings of $2,255,000 were outstanding on the line of credit at December 31,
2004.


NOTE 6

LONG-TERM DEBT
                                                           DECEMBER 31,
                                                  -----------------------------
                                                      2004             2003
-------------------------------------------------------------------------------
First mortgage bonds, Series F. 5.21%,            $  9,000,000               --
   due April 15, 2011
First mortgage bonds, Series E. 9.64%,
   due September 1, 2011                                    --     $  4,042,000
===============================================================================

In January 2004, Birmingham Utilities filed an application with the DPUC for
approval of the issuance of First Mortgage Bonds in the principal amount of
$9,000,000. In March 2004, the DPUC approved BUI's request to issue the new
bonds. In April 2004, BUI issued First Mortgage Bonds in the principal amount of
$9,000,000. The bonds carry an interest rate of 5.21%. Interest is payable
semi-annually on the fifteenth day of April and October. The bonds are secured
by a lien on all utility property. The proceeds from the bond issue were used to
repay the $4,042,000 outstanding principal of the existing Mortgage Bonds, which
carried an interest rate of 9.64%, and repay $4,280,000 of short-term debt used
to fund the purchase of the Connecticut regulated and non-regulated operations
from PSC.

The Mortgage Indenture limits the issuing of additional First Mortgage Bonds and
the payment of dividends. Under the dividend limitation, approximately
$7,600,000 was available to pay dividends at December 31, 2004 after the
quarterly dividend payment made on that date. It does not, however, restrict the
issuance of either long-term or short-term debt, which is either unsecured or
secured with liens subject to the lien of the Mortgage Indenture.


NOTE 7

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
                                                           DECEMBER 31,
                                                  -----------------------------
                                                      2004             2003
-------------------------------------------------------------------------------
Accounts payable                                  $    487,054     $    627,720
Accrued liabilities:
   Interest                                             79,453          129,882
   Taxes                                                 9,468          120,690
   Pension                                             165,468          168,961
   Other                                                57,939          363,974
-------------------------------------------------------------------------------
                                                  $    799,382     $  1,411,227
===============================================================================


22    2004 Annual Report / BIW LIMITED
<PAGE>
NOTE 8

TAXES OTHER THAN INCOME TAXES

                                                      DECEMBER 31,
                                          -------------------------------------
                                            2004          2003          2002
-------------------------------------------------------------------------------
Municipal                                 $441,373      $302,972      $296,092
Payroll                                    177,379       135,154        93,992
-------------------------------------------------------------------------------
                                          $618,752      $438,126      $390,084
===============================================================================


NOTE 9

INCOME TAXES

The provisions for taxes on income for the years ended December 31, 2004, 2003
and 2002 consist of:

                                            2004          2003          2002
--------------------------------------------------------------------------------
Current:
  Federal                                 $   --      $(220,000)     $ 69,901
  State                                    69,246        52,677         8,441
Deferred:
  Federal:
      Accelerated depreciation            723,981       434,525       223,221
      Operating loss carryforward        (532,000)          --            --
      Income on land dispositions           7,620        72,019       162,430
      Investment tax credit               (14,700)      (14,700)      (14,700)
  State                                       397         3,750        10,032
--------------------------------------------------------------------------------
                                         $254,544      $328,271      $459,325
================================================================================


State deferred income taxes relate solely to timing differences in the
recognition of income related to land dispositions.

A reconciliation of the income tax expense at the federal statutory tax rate of
34 percent to the effective rate follows:

                                            2004          2003          2002
--------------------------------------------------------------------------------
Federal income tax at statutory rates     $260,365      $390,542      $433,986
Increase (decrease) resulting from:
  State income tax, net of federal
   benefit                                  45,964        37,242        12,192
  Bargain sale portion of land
   dispositions                                --            --         (8,712)
  Rate case expense                         14,565       (28,610)        1,627
  Pension expense                            5,031       (34,159)       13,362
  Other, net                               (56,681)      (22,044)       21,570
  Investment tax credit                    (14,700)      (14,700)      (14,700)
--------------------------------------------------------------------------------
Total provision for income taxes           254,544       328,271       459,325
Taxes related to land dispositions          (8,017)      (75,769)     (322,521)
--------------------------------------------------------------------------------
Operating provision for taxes             $246,527      $252,502      $136,804
================================================================================


                                          2004 Annual Report / BIW LIMITED    23
<PAGE>
Deferred tax liabilities (assets) were comprised of the following:

                                                    2004               2003
-------------------------------------------------------------------------------
Depreciation                                     $ 3,352,772        $ 2,608,391
Investment tax credits                               246,361            261,061
Other                                                220,492            243,412
-------------------------------------------------------------------------------
Gross deferred tax liabilities                     3,819,625          3,112,864
-------------------------------------------------------------------------------
Land sales                                        (2,252,506)        (2,459,566)
Operating loss carryforward                         (565,700)              --
Other                                               (193,801)          (202,345)
-------------------------------------------------------------------------------
Gross deferred tax assets                         (3,012,007)        (2,661,911)
Valuation allowance                                1,747,039          1,946,081
-------------------------------------------------------------------------------
Net deferred tax assets                           (1,264,968)          (715,830)
-------------------------------------------------------------------------------
Total deferred income taxes                      $ 2,554,657        $ 2,397,034
===============================================================================


At December 31, 2004, the Company had approximately $1,660,000 of net operating
loss carryforwards to offset federal taxable income through 2024.

The deferred tax asset related to land sales represents expected future tax
savings resulting from sales of land required to be maintained as open space at
less than market value. The Company received a charitable contribution deduction
for federal tax purposes and a tax credit for state tax purposes. Unused tax
benefits may be carried forward to reduce income taxes in future years; the
federal charitable deduction five years and the state tax credit ten years.
Utilization of these benefits is primarily subject to the extent of future
earnings of the Company, including an estimate for anticipated future rate
relief and changes to current tax rates. In addition, the federal charitable
contribution deduction is subject to an annual limitation of 10% of taxable
income and, as a result of legislation passed in 2002, the state tax credit is
now subject to an annual limitation of 70% of the amount of tax due. The Company
has established a valuation allowance for the portion of possible tax savings
not likely to be realized by the end of the carryforward periods.


NOTE 10

RELATED PARTY TRANSACTIONS
The Company has paid legal and consulting fees to firms whose partners are
directors and shareholders of the Company. During the years ended December 31,
2004, 2003 and 2002, fees paid amounted to $4,663, $8,445, and $6,112,
respectively.


NOTE 11

ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company continuously monitors the creditworthiness of its customers and has
established an allowance for amounts that may be uncollectible in the future
based on current economic conditions, historical payment and bad debt write-off
experience, and any specific customer related collection issues.



24    2004 Annual Report / BIW LIMITED
<PAGE>
Allowance for doubtful accounts includes the following components:

                                                          DECEMBER 31,
                                             ----------------------------------
                                                2004        2003       2002
-------------------------------------------------------------------------------
Allowance for doubtful accounts, beginning   $   87,000  $   40,000  $   40,000
Provision                                        93,353      71,420      17,458
Recoveries                                        1,334       2,268       1,365
Charge-offs                                     (32,687)    (26,688)    (18,823)
-------------------------------------------------------------------------------
Allowance for doubtful accounts, ending      $  149,000  $   87,000  $   40,000
===============================================================================


NOTE 12

EMPLOYEE BENEFITS
The Company has a 401(k) Plan. Employees are allowed to contribute a percentage
of salary, based on certain parameters. The Company matches 100% of employee
contributions up to 6% of total compensation. Company matching contributions to
the 401(k) Plan were $114,140, $66,213, and $61,673, in 2004, 2003 and 2002,
respectively.

The employment contract of the Company's former President required accounting
for benefits payable in accordance with SFAS 106. The accumulated present value
of future benefits was recognized during his term of service to the Company,
which ended on October 1, 1998. The liability recorded at December 31, 2004 and
2003 was $106,165, and $116,476, respectively. At December 31, 2004, an amount
of $144,725 has been included in other assets relating to a regulatory asset for
costs that were approved in the Company's rate case. This amount will be paid
out to the former president's surviving spouse.

The Company has a noncontributory defined benefit plan that covers employees of
Birmingham Utilities, excluding Eastern Division and H2O Services employees. The
benefits are primarily based on years of service and the employee's
compensation. Pension expense includes the amortization of a net transition
obligation over a 23-year period. The Company's funding policy is to make annual
contributions in an amount that approximates what was allowed for ratemaking
purposes consistent with ERISA funding requirements. Contributions are intended
to provide not only for benefits attributed to service to date, but also for
those expected to be earned in the future. The expected pension contribution for
2005, based upon 2004 market performance and current conditions, is estimated by
management to be $100,000.

In addition, the Company provides certain health care and life insurance
benefits for retired employees of Birmingham Utilities and their spouses,
excluding Eastern Division and H2O Services employees. Generally, the plan
provides for Medicare wrap-around coverage plus life insurance based on a
percentage of each participant's final salary. Substantially all of BUI's
employees may become eligible for these benefits if they reach retirement age
while working for the Company. The Company's obligation for postretirement
benefits must be fully accrued by the date that the employee attains full
eligibility for benefits. The Company has elected to recognize the unfunded
accumulated postretirement benefit obligation over 20 years. The Company's
funding policy is to contribute amounts annually to a benefit trust and pay
directly all current retiree premiums. The Company has established tax effective
funding vehicles for such retirement benefits in the form of a qualified
Voluntary Employee Beneficiary Association (VEBA) trust. The Company funded the
VEBA trust with tax deductible contributions of $25,000 in 2004, 2003, and 2002.

The Company uses a January 1 measurement date for its defined benefit and
postretirement medical benefit plans.




                                          2004 Annual Report / BIW LIMITED    25
<PAGE>
BENEFIT OBLIGATIONS AND FUNDED STATUS

The following provides a reconciliation of benefit obligations, plan assets and
funded status of the plans.
<TABLE><CAPTION>
                                                                                          OTHER
                                                    PENSION BENEFITS             POSTRETIREMENT BENEFITS
                                               --------------------------      --------------------------
                                                  2004            2003            2004            2003
---------------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>               <C>             <C>
Change in Benefit Obligation:
  Benefit obligation, beginning of year        $1,291,199      $1,260,738        $561,422        $527,850
  Service cost                                     58,032          59,517          27,414          27,818
  Interest cost                                    97,145          92,630          37,833          35,947
  Actuarial loss (gain)                           (58,071)        (84,053)         (9,604)          1,564
  Benefits paid                                   (39,022)        (37,633)        (22,689)        (31,757)
---------------------------------------------------------------------------------------------------------
  Benefit obligation, end of year              $1,349,283      $1,291,199        $594,376        $561,422
---------------------------------------------------------------------------------------------------------
Change in Plan Assets:
  Fair value, beginning of year                   806,085         613,486         460,731         362,316
  Actual return on plan assets                     70,258         130,232          37,207          73,415
  Employer contribution                           100,000         100,000          25,000          25,000
---------------------------------------------------------------------------------------------------------
  Benefits paid                                   (39,022)        (37,633)            --              --
---------------------------------------------------------------------------------------------------------
  Fair value, end of year                         937,321         806,085         522,938         460,731
Funded Status                                    (411,962)       (485,114)        (71,438)       (100,691)
Unrecognized net actuarial gain (loss)            204,331         269,594         (79,871)        (72,839)
Unrecognized transition obligation                 41,101          46,973         203,024         228,402
Unrecognized prior service cost                    75,566          80,736             --              --
---------------------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost                 $  (90,964)     $  (87,811)       $ 51,715        $ 54,872
=========================================================================================================
</TABLE>

At December 31, 2004 the defined benefit pension plan had plan assets in excess
of the accumulated benefit obligation as summarized in the following table:

   Projected benefit obligation           $1,349,283
   Accumulated benefit obligation            931,053
   Fair value of plan assets                 937,321


NET PERIODIC BENEFIT COST

Net periodic pension and other postretirement benefit costs recognized in the
Consolidated Statements of Income include the following components:
<TABLE><CAPTION>
                                             PENSION BENEFITS             OTHER POSTRETIREMENT BENEFITS
                                     --------------------------------    --------------------------------
                                       2004        2003        2002        2004        2003        2002
---------------------------------------------------------------------------------------------------------
<S>                                  <C>         <C>         <C>         <C>         <C>         <C>
Service cost                         $ 58,032    $ 59,517    $ 54,994    $ 27,414    $ 27,818    $ 26,914
Interest cost                          97,145      92,630      90,750      37,833      35,947      33,740
Expected return on plan assets        (68,133)    (63,291)    (61,680)    (37,025)    (29,096)    (31,556)
Amortization of unrecognized
  transition obligation                 5,872       5,872       5,872      25,378      25,378      25,378
Amortization of unrecognized
  prior service cost                    5,170       5,170       5,170         --          --          --
Recognized net actuarial loss (gain)    5,122       5,243       5,455      (2,754)        --       (4,334)
---------------------------------------------------------------------------------------------------------
  Net periodic benefit cost          $103,208    $105,141    $100,561    $ 50,846    $ 60,047    $ 50,142
=========================================================================================================
</TABLE>

26    2004 Annual Report / BIW LIMITED
<PAGE>
ASSUMPTIONS
Weighted average assumptions used are as follows:
<TABLE><CAPTION>
                                                    PENSION BENEFITS       OTHER POSTRETIREMENT BENEFITS
                                              ---------------------------  ------------------------------
                                                2004      2003      2002      2004      2003      2002
---------------------------------------------------------------------------------------------------------
<S>                                              <C>       <C>       <C>       <C>       <C>       <C>
Discount rate                                    8%        8%        8%        7%        7%        7%
Expected return on plan assets                   8%        8%        8%        8%        8%        8%
Rate of compensation increase                    4%        5%        5%        --        --        --
</TABLE>

To determine the expected return on plan assets, the Company first examined
actual historical rates of return for the various asset classes. The Company
then determined a long-term projected return on plan assets based on expected
returns over the next five to 10 years.

Effective January 1, 2002, the Company amended its pension benefits by
increasing the plan benefit from 1.1% to 1.3% of average monthly compensation
multiplied by the number of years of service.

For measurement purposes, a 6.5% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 2004. The rate was assumed to
decrease to 6% for 2005 and remain at that level thereafter.

Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plan. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:

                                                 1-PERCENTAGE      1-PERCENTAGE
                                                POINT INCREASE    POINT DECREASE
--------------------------------------------------------------------------------
Effect on total of service and interest cost       $  10,991         $  (9,726)
Effect on postretirement benefit obligation        $  81,413         $ (75,027)

PLAN ASSETS
The following table sets forth the weighted average asset allocations for the
Company's pension plan assets:

                          DEFINED BENEFIT PLAN       WELFARE BENEFIT VEBA TRUST
                        ------------------------     ---------------------------
                           2004         2003            2004           2003
--------------------------------------------------------------------------------
Equity Securities           66%          67%             67%            68%
Debt Securities             30%          32%             32%            31%
Cash                         4%           1%              1%             1%
--------------------------------------------------------------------------------
                           100%         100%            100%           100%
================================================================================

The investments in the defined benefit plan and the retirement welfare benefit
trust have a target allocation of 65% equities and 35% fixed income and cash.
The equities portion is in established mutual funds that invest in large
capitalization companies. The fixed income portion is split between U.S.
Government bonds and investment grade corporate bonds. Any remaining cash is
invested in FDIC insured money market accounts.

ESTIMATED FUTURE BENEFITS PAYMENTS
The following benefit payments are expected to be paid:

                           PENSION BENEFITS
-------------------------------------------
2005                               $ 31,987
2006                                 31,987
2007                                 31,987
2008                                 31,987
2009                                 31,987
2010-2014                          $252,516

                                          2004 Annual Report / BIW LIMITED    27
<PAGE>
NOTE 13

OTHER EXPENSE

Other expense represents non-recurring expenses incurred primarily in the fourth
quarter of 2004. Expenses totaling $405,613 were related to the exploration of
strategic initiatives that were not consummated. The remaining balance of
$62,422 is expense associated with the proposed acquisition of the NY operations
from PSC that was terminated in January 2005 (See Note 21).

NOTE 14

EARNINGS PER SHARE SUPPLEMENTAL INFORMATION

The following table summarizes the number of common shares used in the
calculation of earnings per share:

                                                  2004        2003        2002
--------------------------------------------------------------------------------
Weighted average shares outstanding
  for earnings per share, basic                1,647,303   1,637,076   1,637,076
Incremental shares from assumed
  conversion of stock options                     26,894      31,822      31,972
--------------------------------------------------------------------------------
Weighted average shares outstanding
  for earnings per share, diluted              1,674,197   1,668,898   1,669,048
================================================================================

NOTE 15

COMMITMENTS AND CONTINGENT LIABILITIES

MANAGEMENT AGREEMENT
Birmingham Utilities maintains an agreement with the City of Derby (the City),
pursuant to which BUI manages the water system owned by the City. BUI is
responsible for costs of maintenance and improvements. Amounts collected from
customers, net of expenses, are retained by BUI.

CAPITAL BUDGET
Management has budgeted $1,976,000 for capital expenditures in 2005, $319,000 of
which is expected to be necessary to meet its service obligations for the coming
year.

PURCHASE COMMITMENT
Birmingham Utilities has an agreement with South Central Connecticut Regional
Water Authority (Authority) to purchase water. This agreement provides for a
minimum purchase of 600 million gallons of water annually. Charges to expense
were $699,138, $699,952, and $699,106, for the years 2004, 2003 and 2002,
respectively. The purchase price is based on the Authority's wholesale rate. At
December 31, 2004, this rate was $1,175 per million gallons. This agreement
expires December 31, 2015 but provides for two ten-year extensions at BUI's
option.

OPERATING LEASE
H2O Services leases its operating facility in Glastonbury under a non-cancelable
operating lease expiring in June 2009. The lease requires monthly rental
payments of $4,700. In addition, the lease provides for annual increases based
on the Consumer Price Index and H2O Services is obligated to pay its pro rata
share of operating costs, as defined.

28    2004 Annual Report / BIW LIMITED
<PAGE>
NOTE 16

EQUITY

COMMON STOCK
                                                    NUMBER
                                                  OF SHARES          AMOUNT
--------------------------------------------------------------------------------
Balance, January 1, 2003                          1,637,076        $2,905,190
--------------------------------------------------------------------------------
Amortization of stock plan costs                       --              (4,277)
--------------------------------------------------------------------------------
Balance, December 31, 2003                        1,637,076        $2,900,913
--------------------------------------------------------------------------------
Stock issued through Key Employee and
  Non-Employee Director Stock Option Plans           20,466            78,765
Amortization of stock plan costs                       --              (3,706)
--------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2004                        1,657,542        $2,975,972
================================================================================

STOCK OPTION PLANS

The Company has four stock option plans which include two non-employee director
stock option plans (director plans) and two key employee incentive stock option
plans (employee plans). The first director and employee plans were adopted in
1994 and subsequently approved by the Company's shareholders and the DPUC in
1995; 80,000 and 70,000 shares, respectively, were authorized under these two
plans. The second employee plan was adopted in 1998 and approved by the
Company's shareholders and the DPUC in 1999; 60,000 shares were authorized under
this plan. The second director plan was adopted in 2000 and approved by the
Company's shareholders and DPUC in 2001; 60,000 shares were authorized under
this plan.

The following table summarizes the transactions with respect to the Company's
stock option plans for the three years ended December 31, 2004:

                                         GRANTED                EXERCISABLE
                                  ----------------------------------------------
                                               WEIGHTED                 WEIGHTED
                                               AVERAGE                  AVERAGE
                                   NUMBER      EXERCISE     NUMBER      EXERCISE
                                  OF SHARES    PRICE       OF SHARES    PRICE
--------------------------------------------------------------------------------
Outstanding at December 31, 2001    73,012      $ 9.46       61,762      $ 8.47
         Granted                    12,500       17.16
         Exercised                  (6,594)       6.69
------------------------------------------------------
Outstanding at December 31, 2002    78,918      $10.91       62,668      $ 9.45
         Granted                     7,500       18.08
------------------------------------------------------
Outstanding at December 31, 2003    86,418      $11.53       72,668      $10.37
         Granted                     5,000       19.23
         Exercised                 (24,178)       6.50
------------------------------------------------------
OUTSTANDING AT DECEMBER 31, 2004    67,240      $13.92       58,490      $13.19
================================================================================


                                          2004 Annual Report / BIW LIMITED    29
<PAGE>
The fair value of each option grant is established on the date of grant using
the Black-Scholes option pricing model, consistent with the method stipulated by
SFAS 123. The fair value per option was estimated using the following
assumptions:
                                              2004        2003        2002
--------------------------------------------------------------------------------
Expected option term                        10 YEARS    10 years    10 years
Risk-free interest rate                         4.6%        4.4%        4.5%
Expected dividend yield                         3.5%        3.3%        3.3%
Expected volatility factor                     34.1%       35.5%       37.3%
Fair value per option                          $5.98       $5.98       $5.65

DIVIDEND REINVESTMENT PLAN
The Company has a dividend reinvestment plan, which provides for the issuance
and sale of up to 140,000 shares of the Company's authorized but un-issued
common stock to its shareholders who elect to reinvest cash dividends on the
Company's existing shares. Shares under the plan will be purchased at their fair
market value price on the date of the dividends to be invested in the new
shares. The Company purchases shares in the open market to satisfy its dividend
reinvestment obligations.

NOTE 17

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NON-CASH FINANCING
ACTIVITIES

Cash paid for interest for the years ended 2004, 2003, and 2002 was $569,786,
$415,453, and $407,772, respectively.

Cash paid for income taxes for the years ended 2004, 2003 and 2002 was $30,013,
$40,926, and $125,500, respectively.

Birmingham Utilities receives contributions of utility plant from developers.
These contributions are reported in utility plant and in customers' advances for
construction. The contributions are deducted from construction expenditures to
determine cash expenditures by BUI.

                                                       DECEMBER 31,
                                          -------------------------------------
                                             2004          2003         2002
-------------------------------------------------------------------------------
Gross plant additions                     $2,111,381    $1,689,324   $1,944,760
Customers' advances for construction        (337,663)     (162,901)     (12,660)
-------------------------------------------------------------------------------
                                          $1,773,718    $1,526,423   $1,932,100
===============================================================================

NOTE 18

SEGMENT INFORMATION

The Company has identified regulated water operations (Birmingham Utilities) and
unregulated service operations (H2O Services) as its two reportable segments for
the purposes of applying Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information".
Birmingham Utilities collects and distributes water to domestic, commercial and
industrial customers. H2O Services offers a consumer protection program for
residential service lines and provides water related services to other water
utilities, municipalities, contractors, and individuals including water system
design and construction, water main installation and repairs, hydrant
installation and repairs, leak surveys, service line piercing, pulling and
moling, backflow device testing, residential and commercial well pump
installations and repairs and filtration installations and repairs. The
accounting policies of each reportable segment are the same as those described
in Note 1.

30    2004 Annual Report / BIW LIMITED
<PAGE>

Financial data for reportable segments follows:
<TABLE><CAPTION>
                           Operating     Operating                    Taxes on      Net        Total
                           Revenues      Expenses     Depreciation     Income      Income      Assets
---------------------------------------------------------------------------------------------------------
<S>                       <C>           <C>             <C>           <C>         <C>         <C>
FOR THE YEAR ENDED
DECEMBER 31, 2004
Birmingham Utilities      $6,868,225    $4,149,787      $749,114      $ 58,940    $144,118    $26,422,560
H2O Services               2,997,351     2,421,535          --         187,587     367,117      3,805,683
---------------------------------------------------------------------------------------------------------
  Total Consolidated      $9,865,576    $6,571,322      $749,114      $246,527    $511,235    $30,228,243
=========================================================================================================

For the year ended
December 31, 2003
Birmingham Utilities      $5,425,512    $3,071,088      $630,462      $162,902    $670,946    $26,873,658
H2O Services                 982,971       728,847          --          89,600     149,428      1,525,811
---------------------------------------------------------------------------------------------------------
  Total Consolidated      $6,408,483    $3,799,935      $630,462      $252,502    $820,374    $28,399,469
=========================================================================================================

For the year ended
December 31, 2002
Birmingham Utilities      $4,489,826    $2,811,145      $577,620      $105,964    $738,730*   $22,242,916
H2O Services                 346,497       237,284          --          30,840      78,373         78,373
---------------------------------------------------------------------------------------------------------
  Total Consolidated      $4,836,323    $3,048,429      $577,620      $136,804    $817,103    $22,321,289
=========================================================================================================
*Includes land sale income of $261,317 in 2002.
</TABLE>


NOTE 19

QUARTERLY FINANCIAL DATA
(Unaudited)
<TABLE><CAPTION>
                                    Operating     Operating     Net           Earnings Per Share
                                    Revenues      Income        Income        Basic       Diluted
-------------------------------------------------------------------------------------------------
<S>    <C>                          <C>           <C>          <C>            <C>          <C>
2004   First Quarter                $2,111,457    $ 270,535    $201,885       $ .12        $ .12
       Second Quarter                2,426,300      324,626     238,742       $ .15        $ .14
       Third Quarter                 2,704,104      354,971     265,272       $ .16        $ .16
       Fourth Quarter                2,623,715      277,776    (194,664)*     $(.12)       $(.12)
-------------------------------------------------------------------------------------------------
       Total                        $9,865,576   $1,227,908    $511,235       $ .31        $ .30
=================================================================================================

2003   First Quarter                $1,116,192    $  60,562    $ 56,988       $ .03        $ .03
       Second Quarter                1,295,983      194,794     141,169       $ .09        $ .09
       Third Quarter                 1,835,209      394,885     349,298       $ .21        $ .20
       Fourth Quarter                2,161,099      504,255     272,919       $ .17        $ .17
-------------------------------------------------------------------------------------------------
       Total                        $6,408,483   $1,154,496    $820,374       $ .50        $ .49
=================================================================================================
* See Note 13
</TABLE>

                                          2004 Annual Report / BIW LIMITED    31
<PAGE>
NOTE 20

WATER SERVICE RATE INCREASE

On August 7, 2003, the DPUC granted Birmingham Utilities a 27.74 percent water
service rate increase designed to provide a $1,264,178 annual increase in
revenues and a 10.5 percent return on common equity. This rate increase does not
apply to the Eastern Division.



NOTE 21

SUBSEQUENT EVENT

In May 2003, Birmingham Utilities entered into a Purchase Agreement with PSC to
purchase all of the issued and outstanding shares of common stock of five small
regulated water companies located in eastern New York. The purchase price for
the New York operations was expected to be $1,000,000 subject to certain
adjustments based on changes in rate base and working capital. These adjustments
would not have increased the purchase price by more than $450,000. Applications
for regulatory approval were filed with the New York State Public Service
Commission (NY Commission) in July 2003. A decision was expected in 2004. During
the regulatory approval process, it became apparent that significant capital
costs would be required upon completion of the transaction. In January 2005,
Birmingham Utilities and PSC, citing continued delays on the part of the NY
Commission, mutually agreed that they no longer wished to pursue this
transaction.















32    2004 Annual Report / BIW LIMITED
<PAGE>

SOURCES OF SUPPLY

WELLS
Located in Derby and Seymour with a safe daily yield of 3.0 million gallons per
day (MGD) and 69 wells located in 16 towns in Eastern CT that service 30
satellite water systems.

INTERCONNECTIONS
Two interconnections with the South Central Regional Water Authority at the
border of Orange and Derby (the Grassy Hill Interconnection) and near the border
of Seymour and Ansonia (the Woodbridge Interconnection). Annual purchases of
water contracted at a minimum of 600 million gallons a year. Safe daily yield of
interconnection - 5.0 MGD.

EMERGENCY SUPPLY
Beaver Brook Reservoir System - 2.1 MGD surface water supply.

CUSTOMER BASE AND DEMAND
11,328 customers, 97% residential and commercial Water delivered in 2004 - 1.19
Billion Gallons Average daily demand - 3.25 MGD.
Maximum daily demand in 2004 - 4.21 MGD. Total safe daily yield - 8.0 MGD.

WORKFORCE
On March 1, 2005, the Company maintained a workforce of 42 full-time and 2
part-time employees, none of whom are affiliated with any union.

REGULATION
Birmingham Utilities is subject to the jurisdiction of the following agencies:

CONNECTICUT DEPARTMENT OF PUBLIC UTILITY CONTROL (DPUC)
Matters related to ratemaking, financing, accounting, disposal of property,
issuance of long-term debt and securities and other operational matters.

CONNECTICUT DEPARTMENT OF PUBLIC HEALTH (DPH)
Water quality, sources of supply and use of watershed land.

CONNECTICUT DEPARTMENT OF ENVIRONMENTAL PROTECTION (DEP)
Water quality, pollution abatement, diversion of water from streams and rivers,
safety of dams and location, construction and alteration of certain water
facilities.

Birmingham Utilities is also subject to regulation of its water quality under
the Federal Safe Drinking Water Act (SDWA). The United States Environmental
Protection Agency has granted to the DPH the primary enforcement responsibility
in Connecticut under the SDWA. The DPH has established regulations containing
maximum limits on contaminants, which have or may have an adverse effect on
health.



SHAREHOLDER INFORMATION

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Dworken, Hillman, LaMorte & Sterczala, P.C.
Shelton, Connecticut

GENERAL COUNSEL
Wiggin and Dana LLP
New Haven, Connecticut

REGISTRAR AND TRANSFER AGENT
American Stock Transfer
& Trust Company
59 Maiden Lane
New York, New York 10007

STOCK MARKET LISTING: AMEX
Under the Symbol: BIW
Website
www.buiweb.com



MARKET INFORMATION
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDING MATTERS

As of December 31, 2004, there were approximately 410 record holders of the
Company's common stock. Approximately 64% of the Company's stock is held in
"nominee" or "street" name. The Company's common stock trades on the American
Stock Exchange under the symbol "BIW". The following table sets forth the
dividend record for the Company's common stock and the range of bid prices for
the last two calendar years. The stock prices are based upon American Stock
Exchange records provided to the Company. The prices given are retail prices.
Birmingham Utilities' Mortgage Bond Indenture under which its First Mortgage
Bonds are issued contains provisions that limit the dividends BUI may pay under
certain circumstances.

                               High        Low         Dividend Paid
--------------------------------------------------------------------
2004
         First Quarter        $21.85       $18.90         $.17
         Second Quarter        20.25        18.75          .17
         Third Quarter         20.10        17.70          .17
         Fourth Quarter        19.65        18.43          .17

2003
         First Quarter        $18.79       $18.00         $.15
         Second Quarter        18.49        16.80          .15
         Third Quarter         18.23        17.25          .15
         Fourth Quarter        19.50        17.50          .15

On written request, the Company will furnish to any shareholder a copy of its
most recent annual report to the Securities and Exchange Commission on Form 10K,
without charge, including the financial statements and schedules thereto. Such
requests should be addressed to Henrietta Vitale, Secretary, BIW Limited, P.O.
Box 426, Ansonia, CT 06401-0426 or e-mail: hvitale@buwater.com. All Securities
and Exchange Commission filings are also available on our website
www.buiweb.com.


<PAGE>




BIW LIMITED
230 Beaver Street
PO Box 426
Ansonia, CT 06401-0426
203 735.1888