EXHIBIT 13
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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 (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.

Birmingham 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.

FINANCIAL HIGHLIGHTS
<TABLE><CAPTION>
(000's omitted except for per share data)  2003     2002     2001     2000     1999
<S>                                       <C>      <C>      <C>      <C>      <C>
Operating Revenues                        $6,408   $4,836   $4,852   $4,496   $4,624
Income before Interest Expense             1,253      978    1,033    1,126    1,368
Income from Land Dispositions                 --      261    5,133      133       --
Net Income                                   820      817    5,655      726      920
Earnings Per Share-Basic                     .50      .50     3.48      .45      .59
Earnings Per Share-Diluted                   .49      .49     3.41      .44      .56
Cash Dividends Declared (per share)          .60      .60      .58      .50      .40
Total Assets                              28,399   22,321   22,681   19,958   18,281
Long-Term Debt                             3,948    4,042    4,136    4,230    4,324
Short-Term Debt                            4,799       94       94    2,330      454
Shareholders' Equity                      12,723   12,889   13,057    8,277    8,147
</TABLE>

Expanding our business through growth and acquisitions, we have an opportunity
to look back to last year's progress and forward to future expansion.

o    Birmingham Utilities acquires 30 regulated satellite water systems.
o    Birmingham H2O Services acquires water service operations business and
     Rhodes Pump Service.
o    Birmingham Utilities receives a 28% water service rate increase.
o    Birmingham Utilities expects to acquire five small water companies in
     eastern New York in 2004.

TO OUR SHAREHOLDERS
The year 2003 was a year of growth and change for your Company. Growth and
change, however, did not begin in 2003. Our strategy to sell excess Company
lands, developed over six years ago, gave your Company financial security, which
allowed us to significantly improve your Company's infrastructure during those
six years. The establishment of the holding company, BIW Limited in 2002, along
with the formation of a non-regulated subsidiary, Birmingham H2O Services, Inc.,
can be considered as building blocks that have become a foundation for forward
progress. That progress was accentuated in 2003 with the acquisition of a
Connecticut-based water utility and a water related service business and the
successful adjudication of Birmingham Utilities', rate case. These two
significant events will leave us well positioned to increase future value for
all shareholders.

In October 2003, Birmingham Utilities purchased the Connecticut regulated and
non-regulated operations of AquaSource, Inc. from Aqua America, Inc. (formerly
the Philadelphia Suburban Corporation). Aqua America purchased those operations
from DQE, Inc. in 2003. Birmingham Utilities also has an agreement with Aqua
America to purchase the New York regulated
<PAGE>
operations of AquaSource, which consist of five small water systems in eastern
New York. We are currently awaiting New York regulatory approval for this
purchase. In total over 3,300 new regulated customers will or have been added to
your Company. The Connecticut regulated operations are functioning as a
subsidiary of Birmingham Utilities as its Eastern Division, while the New York
operations will also become a subsidiary of Birmingham Utilities forming the New
York Division.

The operations purchased from Aqua America also include non-regulated businesses
in Connecticut relating to water system contract operations, water system design
and construction, and residential and commercial pump and filter services. These
operations will be combined with Birmingham H2O Services, which will now provide
a wider array of water related services throughout Connecticut.

The other significant event, that occurred in August 2003, was the granting of a
28% water service rate increase to Birmingham Utilities by the Department of
Public Utility Control (DPUC). The increase, which amounted to $1,264,178 in
annual revenues, should allow utility operating income of Birmingham Utilities
to approach $1,300,000 on an annual basis. Utility operating income is a measure
of profitability before interest expense but after income taxes. The rate
increase, in large part, was based on Birmingham Utilities' extensive capital
improvement program that has been ongoing for the past six years. During that
period Birmingham Utilities expended $9,600,000, of which the majority was for
water main and treatment plant improvements, which now are included in our rate
base. Without the land sale program, which funded these expenditures, it would
have taken almost a twenty-year period to complete construction of this
magnitude. Shareholders have benefited, as they now will earn a return on that
investment. Customers have benefited as significant utility plant has been
replaced or upgraded in current dollars, which will ensure the safe and
efficient delivery of water for many years to come. Rate increases were also
delayed during the construction period and customer rates were reduced due to
the sharing mechanism for gains on land sales established by the DPUC. Customer
rates remain affordable, with the average water bill for a family under $400 per
year. Our program to continue to upgrade the Company's infrastructure will
continue, as new investment will be supported by the increased internal
generation of funds due to the rate increase.

The 2003 financial results began to show the effects of the events that
transpired in 2003, especially during the second half of the year. Net income in
2003 was $820,374 compared with $817,103 in 2002. Net income in 2002, however,
included the gain from a land sale of $261,317. There were no land sales in
2003. Earnings per share, basic, were $0.50 per share in 2003, $0.50 per share
in 2002, and $3.48 in 2001. Earnings in 2001 included land sale income of
$5,133,379. Net income for the second half of 2003 was $622,217 compared with
$246,586, net of the land sale gain, for the same period in 2002. Operating
income of $1,154,496 in 2003 was significantly higher than operating income of
$812,962 recorded in 2002. For the second half of 2003, operating income was
$899,140 versus $342,357 for the same period in 2002. The increased earnings
principally in the second half of 2003 are due to the water service rate
increase granted Birmingham Utilities, which became effective in August 2003,
increased business activities for Birmingham H2O Services and the acquisition of
the new entities. We would expect net income in 2004 to recognize the full
effects of the water service rate increase, increased growth from the
contracting arm of Birmingham H2O Services and the continued assimilation of the
new entities, both regulated and non-regulated, in eastern Connecticut.

The acquisition of the Connecticut regulated and non-regulated operations of
AquaSource from Aqua America has created both opportunities and challenges for
your Company. In 2004 we will concentrate our efforts to operate the Eastern
Division companies efficiently and with professionalism. To date we have
re-organized these operations by hiring key employees who are seasoned water
professionals who understand the goals of increasing shareholder value while
providing excellent customer service. We feel the profitability of these
companies should be directed toward assisting various towns and developers in
eastern Connecticut in solving their
<PAGE>
need to supply water service to areas that do not have water service. This will
create opportunities to expand the regulated side of our operations as well as
to increase our contract operations business. We also feel strongly that we have
the opportunity to expand the activities of our Rhodes Pump Service business
through additional advertising in the shoreline region and the eastern portion
of Connecticut. We intend to move our Eastern Division office, currently located
in Stafford Springs, to Glastonbury, Connecticut, which will allow those
operations to be more centrally located to our businesses in eastern Connecticut
and to assist in the expansion of the Rhodes Pump Service business.

In our 2003 annual report we noted that the Company expected to begin to seek
permits to commence an expansion program at our Beaver Brook Reservoir. As a
result of the significant amount of management time devoted to the Company's
rate application and the purchase and operation of the Company's new businesses,
this project was put on hold in 2003. We expect that in 2004 we will begin this
process once again. The Company believes that the expansion of this reservoir,
which will increase its current capacity to 800,000,000 gallons from 450,000,000
gallons, will ensure the region additional safe water supply while creating an
expanded environmental habitat on protected Company lands.

Also noted in our 2003 annual report was the memorandum of understanding, signed
late in 2002 with the State of Connecticut, Department of Environmental
Protection (DEP), that 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, passive outdoor
recreation, or natural resource conservation and preservation. The Company was
contacted by the DEP in 2003 and has supplied the DEP with maps and other
information. We expect this process to be ongoing and await further word from
the DEP. Birmingham Utilities owns approximately 1,400 acres of Class I and II
properties.

In continuation of our strategy to expand, Birmingham Utilities expects to
acquire five small water systems in Westchester, Ulster and Washington Counties
in New York with approximately 1,100 new customers. We are currently seeking
regulatory approval in New York. These systems, all of which operate
independently, have potential for customer growth. The Company looks forward to
entering into the New York regulated water market and will explore that market
for other potential acquisition candidates.

The contracting business of Birmingham H2O Services, which operates from our
Ansonia office, has shown excellent growth in 2003 and excellent potential for
2004. In 2001, revenues from this operation totaled $237,000. In 2002 revenues
totaled $346,000 and in 2003 revenues of $541,000 were achieved. The Company
expects this business to grow in 2004 as business opportunities continue to be
presented to us and our reputation for providing quality workmanship in an
efficient manner is becoming known in Connecticut.

The steps and actions your Company has taken over the last six years and
particularly in 2003 were designed to enhance shareholder value. This strategy
has enabled the market capitalization of your Company to increase to $33,700,000
on March 1, 2004 from $9,900,000 on March 1, 1998. We are excited about the
future prospects of the Company. We will continue to evaluate acquisition
opportunities while expanding on the businesses we currently own, always
concentrating on our core water supply business. We believe we are well
positioned to take advantage of the opportunities and challenges we will
encounter in the future.

The strides taken and the progress made could not have happened without a
dedicated workforce. We would like to thank Mr. Jack Keefe, Vice President of
Operations, who has worked tirelessly on the integration of the new companies.
We also would like to thank the employees who have been with the Company for
many years, who have welcomed this change and growth, and to thank the new
employees for supporting our commitment to work as a team providing excellent
customer service. Finally, we would like to thank the Board of Directors for its
support and guidance through this process. We look forward to continued growth.
<PAGE>
Sincerely,

Betsy Henley-Cohn
Chairwoman

John S. Tomac
President and Treasurer

THE BOARD OF DIRECTORS DEDICATES THE 2003 ANNUAL REPORT
IN THE MEMORY OF MR. ALDORE J. RIVERS 1933-2003
It is with deep sadness that we announce the untimely death of Mr. Aldore J.
Rivers, Jr. in October 2003. "Al" was the Company's President from 1985 until
his retirement in 1998. He remained as a member of the Board of Directors until
his passing. Al's engineering and operational guidance during his years as
President, and his ability to position the Company to sell excess Company lands,
allowed the Company to embark on a path of stability and growth. Al's
career-long dedication to the water business as recognized by his receipt of the
George Fuller Award, his wit and straightforwardness, will be dearly missed by
the Company and the Board of Directors.

BIW CONTRIBUTORS
BOARD OF DIRECTORS
Betsy Henley-Cohn (2)*
Chairwoman of the Board of
Directors of the Company

Chairman and Treasurer,
Joseph Cohn & Sons, Inc.

Director, UIL Holdings Corp.

Director, Aristotle Corp.
(1995-2002);

Director Citizens Bank of Connecticut (1997-1999);

John S. Tomac (2)
President and Treasurer of the Company

Aldore J. Rivers (2,4)**
Retired; President of the Company from 1985 to October 1998

Michael J. Adanti (1,4)
President & CEO, Monetary
Funding Group

President Emeritus, Southern Connecticut State University

Mary Jane Burt (1,4)
Realtor, H. Pearce Co.

Principal, The Laurel Group

Previously, President Burt Medical Lab 1984-1998

James E. Cohen (2,3)
Lawyer in Practice in Derby
<PAGE>
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)

Themis Klarides (2,4)
Associate Attorney, Law Offices of Shawn K. Splan, Shelton;

State Representative, 114th District, Connecticut General Assembly

B. Lance Sauerteig (2,4)
Principal and President of BLS Strategic Capital, Inc. (financial
and investment advisory company)

Principal and Manager of Tortoise Capital Partners, LLC (real estate
investment company)
Director of Chemwerth, Inc.
Director of United Aluminum Corporation

Kenneth E. Schaible (1,3)
Real Estate Developer

Previously, Senior Vice President, Webster Bank (1995-1996)

President, Shelton Savings Bank and Shelton Bancorp., Inc. (1972-1995)

Charles T. Seccombe
Director Emeritus

OFFICERS
Betsy Henley-Cohn
Chairwoman and CEO

John S. Tomac
President and Treasurer

John J. Keefe, Jr.
Vice President, Operations

Linda Batten
Controller

Henrietta Vitale
Secretary

Diane G. DeBiase
Assistant Treasurer

*        Ex-Officio on all other committees
**       Deceased October, 2003
<PAGE>
COMMITTEES

(1)  Audit Committee meets quarterly with management and independent accountants
     to review accounting, auditing, internal control and financial reporting
     and discuss the scope and results of the annual audit and quarterly reviews
     of the Company's financial statements.
(2)  Executive Committee reviews strategic planning alternatives, recommends to
     and advises the Board of Directors on financial policy, issuance of
     securities and other high priority issues.
(3)  Committee on Directors makes recommendations to the Board of Directors for
     Board replacements when they become available and for compensation levels
     for the Board of Directors.
(4)  Personnel and Pension Committee makes recommendations to the Board of
     Directors regarding officers' compensation including the promotion and
     hiring of officers; reviews Company fringe benefit plans other than
     retirement plans; reviews the Pension Trust Fund of the Birmingham
     Utilities, Inc. Defined Benefit Plan and the Retired Employee Welfare
     Benefit Trust for retiree medical benefits; reviews and determines
     actuarial policies, investment guidelines and selects the investment
     manager.

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

RESULTS OF OPERATIONS

OVERVIEW
The Company recorded net income of $820,374 in 2003 as compared to $817,103 in
2002 and $5,655,150 in 2001. Earnings per share, basic for 2003, 2002 and 2001
were $.50, $.50 and $3.48, respectively. There was no land sale income in 2003
as compared to $261,317 in 2002, and amortization of deferred income on
dispositions of land was $179,172 in 2003 as compared to $394,775 in 2002.
Although both these sources of income were lower in 2003, the decrease was more
than offset by increased utility operating income and service operations income.
These increases were primarily a result of the water service rate increase,
which went into effect on August 7, 2003, and increased activity of Birmingham
H2O Services. The decrease in net income from $5,655,150 in 2001 to $817,103 in
2002 is principally a result of a decline in income derived from land sales.
Approximately 900 acres of land were sold in 2001 versus 27 acres sold in 2002.

REVENUES
Total operating revenues of the Company were $6,408,483 in 2003 versus
$4,836,323 in 2002. The increase is, in part, a result of $417,486 in utility
revenues from the newly acquired regulated operations. Also contributing to this
increase is $520,286 in additional revenues for BUI as a result of the water
service rate increase. In addition, H2O Services revenues reflect increased
activity of $194,600 as well as an additional $441,874 from the newly acquired
non-regulated operations. Total operating revenues of the Company were
$4,836,323 in 2002 compared to $4,852,281 recorded in 2001. Water sales were
$126,010 lower than recorded water sales in 2001. Decreased consumption from all
classes of customers accounts for this decline, as the weather patterns in 2002
were not as hot and dry as the weather patterns in 2001. Increased revenues of
$110,052 from service operations almost offset the decline in water sales.

OPERATING EXPENSES
Operating expenses of $3,799,935 for 2003 are $751,506 higher that operating
expenses of $3,048,429 for 2002. Operating expenses for the newly acquired
regulated operations totaled $353,083 while H2O Services expenses increased by
$491,563 due to both increased activity and expenses related to the acquired
non-regulated operations. These increases were partially offset by a decrease in
supplemental pension expense as well as lower expenses associated with the
formation of BIW Limited in 2002. Operating expenses of $3,048,429 in 2002 are
$310,698
<PAGE>
higher than operating expenses of $2,737,731 that occurred in 2001. Costs for
the formation of the holding company, a non-recurring expense, accounts for
approximately $150,000 of the variance. Property and liability insurance,
professional fees, pension expense and workers compensation costs also increased
in 2002. Increased operating costs relating to Birmingham H2O Services also
contributed to this variance.

MAINTENANCE EXPENSES
Maintenance expenses of $312,134 are $46,935 higher than maintenance expenses of
$265,199 for 2002. The additional maintenance expenses related to the newly
acquired operations, both regulated and non-regulated, accounts for the
variance. Maintenance expenses of $265,199 in 2002 are $54,782 higher than
maintenance expenses of $210,417 for 2001. Increased costs relating to main and
service line repairs and increased maintenance of general plant accounts for
this variance.

DEPRECIATION
Depreciation of $630,462 in 2003 exceeds depreciation of $577,620 in 2002 by
$52,842. Additional depreciation due to continued plant additions along with
depreciation of assets of the newly acquired operations accounts for this
increase. Depreciation of $577,620 in 2002 exceeds depreciation of $548,119 in
2001 by $29,501, also as a result of utility plant additions.

TAXES OTHER THAN INCOME TAXES
Taxes other than income taxes of $438,126 for 2003 are $48,042 higher than taxes
other than income taxes of $390,084 in 2002. Increased payroll taxes and
property taxes due to the acquisition of the new operations as well as property
taxes related to utility plant additions throughout the Company's service area
account for this increase. Taxes other than income taxes of $390,084 for 2002
are $61,836 higher than taxes other than income taxes of $328,248 from 2001.
Increases in personal property taxes as a result of the Company's capital
improvement program principally account for this increase.

INCOME TAXES
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. Income
taxes on operations of $136,804 recorded in 2002 are $55,023 lower than the 2001
expense of $191,827 due to a decrease 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 DPUC's 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 $75,769, $322,521, and $2,064,807 in
2003, 2002 and 2001, respectively. The Company's total income tax expense,
including both the tax on operating income and on land sale gains, was $328,271
in 2003, $459,325 in 2002, and $2,256,634 in 2001.

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, and $5,133,379 in 2001, which represent the
shareholders' immediate share of income from land dispositions occurring in each
year. There were no land sales in 2003.

Land disposition income is also recognized in the financial statements 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 $179,172,
$394,775, and $64,524 for the years 2003, 2002 and 2001, respectively.
<PAGE>
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 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.
AFUDC in 2002 of $91,644 is $45,269 higher than the recorded amount of $46,375
for 2001. AFUDC relating to the construction of Birmingham Utilities' new
treatment facilities accounts for this increase.

OTHER INCOME
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 income
of $73,335 in 2002 is $12,605 lower than other income of $85,940 recorded in
2001. Lower interest income from Birmingham Utilities cash and investments from
the 2001 land sales accounts for this variance.

INTEREST EXPENSE
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. Interest expense of $422,155
for 2002 is $88,852 lower than interest expense of $511,007 in 2001. There was
no short-term borrowing in 2002 as Birmingham Utilities short-term borrowing was
fully repaid at the end of the second quarter of 2001 with the proceeds from the
Quillinan land sale.

REGULATORY MATTERS AND INFLATION
Inflation, as measured by the Consumer Price Index, increased 1.9 percent, 2.4
percent and 1.6 percent in 2003, 2002 and 2001, 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 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
<PAGE>
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.

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.

Birmingham 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
<PAGE>
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.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In April 2003, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 149, "Amendment of Statement No. 133 on
Derivative Instruments and Hedging Activities" (SFAS 149), which amends SFAS 133
to provide clarification on the financial accounting and reporting of derivative
instruments and hedging activities and requires that contracts with similar
characteristics be accounted for on a comparable basis.

In May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity", which
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity and
requires that such instruments be classified as liabilities.

Adoption of these statements did not have a material impact on the Company's
financial position or results of operations.

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 Birmingham H2O Services,
and the acquisition of the Connecticut operations of Aqua Source, both regulated
and non-regulated, and the proposed acquisition of five small water utilities in
New York are expected to bring additional financial gains to the Company. In
addition, Birmingham Utilities recent rate decision will now 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 2003, 2002 and 2001, the Company's operations generated (utilized) funds
available for investment in utility plant and for use in financing activities,
including payment of dividends on common stock, of $1,437,014, $926,880, and
($1,683,876), respectively (See Statement of Cash Flows).

Net cash provided by operating activities increased $510,134 in 2003 as a result
of the 28% rate increase granted Birmingham Utilities in August 2003 and cash
flows from the newly acquired operations and increased $2,610,756 from 2001 to
2002. Income taxes were paid in 2001 as a result of land sales that took place
in that year.

During the 3-year period 2003, 2002 and 2001, 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 2003, 2002 and 2001, the
Company's additions to utility plant, net of customer advances, were $1,526,423,
$1,932,100 and $1,267,812, respectively (see Statement of Cash Flows and Note
16). These additions were financed primarily from proceeds of land sales.
<PAGE>
Birmingham Utilities has outstanding $4,042,000 principal amount of Mortgage
Bonds, due September 1, 2011, issued under its Mortgage Indenture. The Mortgage
Indenture limits the issuing of additional First Mortgage Bonds and the payment
of dividends. 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 2-year $5,000,000
unsecured, revolving line of credit to a 1-year $7,000,000 unsecured revolving
line of credit. 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. The
Company is required to pay interest only during the revolving period. The loan
is payable in full at maturity. Borrowings of $4,705,000 were outstanding on the
line of credit at December 31, 2003.

In January 2004, the Company filed an application with the DPUC for approval of
the issuance of First Mortgage Bonds in the principal amount of $9,000,000. The
bonds, which have not yet been issued, will carry an interest rate of 5.21%. The
proceeds from the bond issue will be used to repay the existing Mortgage Bonds,
which carry an interest rate of 9.64%, and to repay short-term debt used to fund
the purchase of the Connecticut regulated and non-regulated operations from PSC
and the eventual purchase of the New York operations from PSC. In March 2004,
the DPUC approved the Company's request to issue new bonds.

Birmingham Utilities' 2004 Capital Budget of $1,319,000 is two-tiered. The first
tier, consisting of typical capital improvements made each year for services,
hydrants and meters is budgeted for $410,000 and is expected to be financed
primarily with internally generated funds.

The second tier of the 2004 Capital Budget consists of replacements and
betterments, which are part of Birmingham Utilities' Long-Term Capital
Improvement Program and includes $909,000 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 $5,919,000. 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 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.

On August 17, 2001, Birmingham Utilities sold 322 acres of unimproved land in
Seymour, Connecticut to the DEP for $4,338,000. The DEP exercised its right to
purchase this property in accordance with Section 16-50d of the Connecticut
General Statutes. Notification for this purchase was given to BUI by the DEP on
February 13, 2001, subsequent to the DPUC decision approving a sale to Toll
Brothers, Inc. (Toll Bros.) for the same price. The funds from this sale were
held in escrow until September 25, 2001 when Toll Bros. agreed to remove all
legal actions it had filed in regard to its contractual rights and
administrative appeals for this sale. The total gain on this sale amounted to
$2,288,297 of which $206,176 was deferred and will be recognized over a 3-year
period as approved by the DPUC.
<PAGE>
On June 28, 2001, Birmingham Utilities sold 570 acres of unimproved land in
Ansonia and Seymour, Connecticut, to the DEP for $5,250,000. An additional
$250,000 was contributed by the City of Ansonia for a total selling price of
$5,500,000. This land was sold below market value, and therefore, the
transaction was classified as a bargain sale for income tax purposes. The net
gain from the sale amounted to $3,350,000 of which $315,698 was deferred and
will be recognized over a 3-year period as approved by the DPUC. As a result of
the bargain sale, the net gain includes tax deductions of $571,300 of which
$407,400 will be carried forward to reduce the Company's tax liability in
subsequent years. The $571,300 tax deduction is comprised of contribution
deductions and state tax credits of $2,316,600 offset by a valuation allowance
of $1,745,300.

On April 18, 2001, Birmingham Utilities sold a small parcel of property,
approximately one quarter of an acre in Ansonia, Connecticut to Giaimo
Associates for $30,000. The net gain on this transaction amounted to $16,956.
The DPUC was not required to approve this transaction, as the sales price was
less than the required threshold of $50,000.

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 thepurchase 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 during 2003 totaled $69,487 and $67,383 in 2002. In December 2001,
the Company began purchasing 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,
2003:
<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 E Mortgage Bonds        $ 4,042,000(1)  $    94,000     $   282,000     $   188,000     $ 3,478,000
  Line of Credit                   4,705,000(1)    4,705,000
Purchase Obligations
  Regional Water Authority         8,352,000         696,000       2,088,000       1,392,000       4,176,000
Other Obligations
  Capital Budget                   1,410,000(2)      410,000         600,000         400,000
  Defined Benefit Pension             75,000          75,000
Total                            $18,584,000     $ 5,980,000     $ 2,970,000     $ 1,980,000     $ 7,654,000
</TABLE>
(1) See Note 20
(2) Includes only Tier 1 additions

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 $4,705,000 at December 31, 2003. The Company, however,
expects to repay $4,000,000 of this borrowing in 2004 through the issuance of
new first mortgage bonds. See Note 20. 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.
<PAGE>
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.


INDEPENDENT AUDITORS' REPORT

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, 2003 and 2002, 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, 2003. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of BIW Limited and
subsidiaries as of December 31, 2003 and 2002 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2003 in conformity with accounting principles generally accepted in
the United States of America.

February 29, 2004
Shelton, Connecticut
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION>
                                                                       December 31,
                                                               ------------------------------
                                                                   2003              2002
---------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>
Assets
Utility plant                                                  $ 33,213,665      $ 27,049,864
Accumulated depreciation                                         (8,578,855)       (8,013,941)
---------------------------------------------------------------------------------------------
                                                                 24,634,810        19,035,923
Other property                                                      388,678                --

Current assets:
  Cash and cash equivalents                                         148,618           663,060
  Investments                                                            --           737,141
  Accounts receivable, net of allowance for doubtful
  accounts (2003, $87,000; 2002, $40,000)                           916,985           457,932
  Accrued utility and other revenue                                 561,560           434,312
  Materials and supplies                                            280,319           115,568
  Prepayments and other current assets                              302,482            16,106
---------------------------------------------------------------------------------------------
Total current assets                                              2,209,964         2,424,119
---------------------------------------------------------------------------------------------
Deferred charges                                                    226,034           120,050
Unamortized debt expense                                             89,242           105,491
Regulatory asset - income taxes recoverable                         439,050           342,257
Other assets                                                        411,691           293,449
---------------------------------------------------------------------------------------------
                                                                  1,166,017           861,247
---------------------------------------------------------------------------------------------
                                                               $ 28,399,469      $ 22,321,289
=============================================================================================

SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity:
  Common stock, no par value; authorized 5,000,000 shares;
    issued and outstanding 1,637,076 shares                    $  2,900,913      $  2,905,190
    Retained earnings                                             9,822,197         9,984,068
---------------------------------------------------------------------------------------------
                                                                 12,723,110        12,889,258
Long-term debt                                                    3,948,000         4,042,000
---------------------------------------------------------------------------------------------
Current liabilities:
  Current portion of long-term debt                                  94,000            94,000
  Note payable                                                    4,705,000                --
  Accounts payable and accrued liabilities                        1,411,227           631,340
---------------------------------------------------------------------------------------------
  Total current liabilities                                       6,210,227           725,340
---------------------------------------------------------------------------------------------
Customers' advances for construction                                503,897           428,684
Contributions in aid of construction                              2,454,304         2,013,522
Regulatory liability - income taxes refundable                      134,486           142,059
Deferred income taxes                                             2,397,034         1,797,075
Deferred income on dispositions of land                              28,411           283,351
Commitments and contingent liabilities (Note 14)
                                                                  5,518,132         4,664,691
---------------------------------------------------------------------------------------------
                                                               $ 28,399,469      $ 22,321,289
=============================================================================================
</TABLE>

See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE><CAPTION>
                                                                      Years Ended December 31,
                                                           ----------------------------------------------
                                                               2003             2002             2001
---------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>              <C>
Operating revenues:
  Residential and commercial                               $  4,154,641     $  3,399,808     $  3,478,678
  Industrial                                                    134,290          101,088          135,701
  Fire protection                                               799,079          691,024          687,934
  Public authorities                                             91,674           91,022           97,839
  Other                                                         245,828          206,884          215,684
  Service operations                                            982,971          346,497          236,445
---------------------------------------------------------------------------------------------------------
                                                              6,408,483        4,836,323        4,852,281
---------------------------------------------------------------------------------------------------------
  Operating expenses                                          3,799,935        3,048,429        2,737,731
  Maintenance expenses                                          312,134          265,199          210,417
    Depreciation                                                630,462          577,620          548,119
    Taxes other than income taxes                               438,126          390,084          328,248
    Taxes on income                                             252,502          136,804          191,827
---------------------------------------------------------------------------------------------------------
                                                              5,433,159        4,418,136        4,016,342
---------------------------------------------------------------------------------------------------------
                                                                975,324          418,187          835,939
Amortization of deferred income on dispositions
    of land (net of income taxes of $75,769 in
    2003, $162,262 in 2002, and $38,424 in 2001)                179,172          394,775           64,524
---------------------------------------------------------------------------------------------------------
Operating income                                              1,154,496          812,962          900,463
Allowance for funds used during construction                     80,807           91,644           46,375
Other income, net                                                17,749           73,335           85,940
---------------------------------------------------------------------------------------------------------
Income before interest expense                                1,253,052          977,941        1,032,778
Interest expense                                                432,678          422,155          511,007
Income from dispositions of land (net of income
    taxes of $160,259 in 2002, and $2,026,383 in 2001)               --          261,317        5,133,379
---------------------------------------------------------------------------------------------------------
Net income                                                      820,374          817,103        5,655,150
Retained earnings, beginning of year                          9,984,068       10,146,829        5,435,602
=========================================================================================================
Dividends                                                       982,245          979,864          943,923
---------------------------------------------------------------------------------------------------------
Retained earnings, end of year                             $  9,822,197     $  9,984,068     $ 10,146,829
Earnings per share, basic                                  $        .50     $        .50     $       3.48
---------------------------------------------------------------------------------------------------------
Earnings per share, diluted                                $        .49     $        .49     $       3.41
---------------------------------------------------------------------------------------------------------
Dividends per share                                        $        .60     $        .60     $        .58
---------------------------------------------------------------------------------------------------------
</TABLE>
                 See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
                                                                               Years Ended December 31,
                                                                   ------------------------------------------------
                                                                       2003              2002              2001
-------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>               <C>
Cash flows from operating activities:
Net income                                                         $    820,374      $    817,103      $  5,655,150
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
  Income from land dispositions                                              --          (421,576)       (7,355,449)
  Depreciation and amortization                                         700,011           631,364           621,080
  Amortization of deferred income                                      (179,172)         (394,775)         (102,951)
  Deferred income taxes                                                 435,525           317,548          (398,739)
  Allowance for funds used during construction                          (80,807)          (91,644)          (46,375)
Change in assets and liabilities:
   (Increase) decrease in accounts receivable
    and accrued revenues                                               (172,078)           47,601           (46,759)
   (Increase) in materials and supplies                                 (45,292)           (6,535)          (24,951)
   (Increase) decrease in prepayments and
    other current assets                                               (286,376)           28,837           (17,971)
    Increase (decrease) in accounts payable
    and accrued liabilities                                             244,829            (1,043)           33,089
-------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities                   1,437,014           926,880        (1,683,876)
-------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
Capital expenditures - utility plant                                 (1,689,324)       (1,944,760)       (1,279,517)
Capital expenditures - other property                                    (7,178)               --                --
Sales of utility plant                                                   54,000                --            14,245
Cash paid for acquisition                                            (4,315,856)               --                --
Proceeds from land disposition                                               --           537,500         9,868,000
Sale (purchase) of investments                                          737,141          (737,141)               --
Increase in deferred charges and other assets                          (521,895)         (133,269)         (733,313)
Customer advances                                                       162,901            12,660            11,705
-------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities                  (5,580,211)       (2,265,010)        7,881,120
-------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
Borrowings under line of credit                                       4,705,000                --           545,000
Repayment of long-term debt                                             (94,000)          (94,000)          (94,000)
Repayments on line of credit                                                 --                --        (2,781,714)
Dividends paid, net                                                    (982,245)         (944,450)         (868,367)
-------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities                   3,628,755        (1,038,450)       (3,199,081)
-------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                   (514,442)       (2,376,580)        2,998,163
-------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year                            663,060         3,039,640            41,477
Cash and cash equivalents, end of year                             $    148,618      $    663,060      $  3,039,640
===================================================================================================================
</TABLE>
                 See notes to consolidated financial statements.
<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. (BHS or 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 Birmingham 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
<PAGE>
the cost of depreciable properties over their estimated service lives. For
income tax purposes, the Company provides for depreciation utilizing
straight-line and accelerated methods. The overall depreciation rates were 2.3%
for 2003, 2.2% for 2002, and 2.3% for 2001.

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 which 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.

INVESTMENTS
Investments, which consist of state and municipal securities, are classified as
available for sale and, accordingly, are stated at fair market value which
approximates amortized cost. For the purpose of determining realized gains and
losses, the cost of investments sold is based on specific identification.

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.

Birmingham 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, investments, 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,
<PAGE>
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.

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 $304,500 at December 31, 2003 and $200,200 at
December 31, 2002. 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.

EMPLOYEE BENEFITS
The Company has a noncontributory defined benefit plan which 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 Company has a 401(k) Plan. Employees are allowed to contribute a percentage
of salary, based on certain parameters. The Company matched 100% of employee
contributions up to 6% of total compensation for 2003 and 2002.

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 the
Company'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.

STOCK BASED COMPENSATION
he 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:

                                                2003       2002        2001
                                              --------   --------   ----------
Net income:                    As reported    $820,374   $817,103   $5,655,150
                               Pro forma      $774,834   $790,967   $5,634,277

Earnings per share, basic:     As reported        $.50       $.50        $3.48
                               Pro forma          $.47       $.48        $3.46

Earnings per share, diluted:   As reported        $.49       $.49        $3.41
                               Pro forma          $.46       $.47        $3.40
<PAGE>
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 Aqua America, 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 Birmingham 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 funded
through borrowings on BUI's existing line of credit.

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.
<PAGE>
The following unaudited pro forma financial information reflects the
consolidated results of operations of BIW Limited as if the acquisition had
taken place on January 1, 2002, after giving effect to certain pro forma
adjustments. The unaudited pro forma results are not necessarily indicative of
the results of operations had the acquisition actually occurred at the beginning
of 2002, nor is it necessarily indicative of future results.

                                                         2003           2002
                                                      ----------     ----------
Operating revenues                                    $8,465,000     $5,908,300
Net income                                            $1,145,000     $  922,000
Earnings per share, diluted                           $      .69     $      .55


NOTE 3

UTILITY PLANT
                                                             December 31,
                                                    ----------------------------
                                                        2003            2002
                                                    ------------   -------------
Pumping, treatment and distribution                 $ 25,240,521   $  20,661,157
Source of supply                                       3,321,928       3,096,489
General plant                                          2,700,786       1,963,359
Organization                                              30,219          30,219
                                                      31,293,454      25,751,224
Construction in process                                1,920,211       1,298,640
                                                    $ 33,213,665    $ 27,049,864

NOTE 4

OTHER ASSETS
                                                                   December 31,
                                                                   Regulatory
                                          2003          2002     Recovery Period
                                        --------      --------   ---------------
Regulatory assets:
  Deferred post retirement benefits     $161,300      $143,300        10 Years
  Various deferred costs and charges     214,180       107,364      3-15 Years
Non-regulatory assets:
  Various deferred costs and charges      36,211        42,785
                                        $411,691      $293,449

NOTE 5

NOTE PAYABLE
Note Payable consists of a $7,000,000 1-year, unsecured line of credit expiring
in December 2004. This note replaces the $5,000,000 1-year 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 $4,705,000 were outstanding on the line of credit at December 31,
2003. See Note 20.
<PAGE>
NOTE 6

LONG-TERM DEBT
                                                             December 31,
                                                      -------------------------
                                                         2003           2002
                                                      ----------     ----------
First mortgage bonds, Series E. 9.64%,
  due September 1, 2011                               $4,042,000     $4,136,000

Pursuant to its Mortgage Bond Indenture, Birmingham Utilities has outstanding a
series of first mortgage bonds in the amount of $4,042,000 due on September 1,
2011. The terms of the indenture provide, among other things, annual sinking
fund requirements and limitations on (a) payment of cash dividends; and (b)
incurrence of additional bonded indebtedness. Under the dividend limitation,
approximately $8,750,000 was available to pay dividends at December 31, 2003
after the quarterly dividend payment made on that date. Interest is payable
semi-annually on the first day of March and September. The indenture is secured
by a lien on utility property, excluding Eastern Division property.

Birmingham Utilities is required to pay $94,000 each September 1 until the bonds
are paid in full. See Note 20.

NOTE 7

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
                                                              December 31,
                                                      -------------------------
                                                         2003           2002
                                                      ----------     ----------
Accounts payable                                      $  627,720     $  238,053
Accrued liabilities:
  Interest                                               129,882        132,903
  Taxes                                                  120,690          6,080
  Pension                                                168,961        253,721
  Other                                                  363,974            583
                                                      $1,411,227     $  631,340

NOTE 8

TAXES, OTHER THAN INCOME TAXES
                                                     December 31,
                                       ----------------------------------------
                                          2003           2002           2001
                                       ----------     ----------     ----------
Municipal                              $  302,972     $  296,092     $  246,201
Payroll                                   135,154         93,992         82,047
                                       $  438,126     $  390,084     $  328,248

NOTE 9

INCOME TAXES
The provisions for taxes on income for the years ended December 31, 2003, 2002
and 2001 consist of:

                                          2003           2002           2001
                                       ----------     ----------     ----------
Current:
  Federal                              $ (220,000)    $   69,901     $2,665,314
  State                                    52,677          8,441             --
Deferred:
  Federal:
     Accelerated depreciation             434,525        223,221         80,378
     Income on land dispositions           72,019        162,430       (201,937)
     Investment tax credit                (14,700)       (14,700)       (14,700)
     Other                                     --             --          7,909
     State                                  3,750         10,032       (280,330)
                                       $  328,271     $  459,325     $2,256,634
<PAGE>
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:
<TABLE><CAPTION>
                                                  2003           2002            2001
                                             ------------    ------------    ------------
<S>                                          <C>             <C>             <C>
Federal income tax at statutory rates        $    390,542    $    433,986    $  2,690,044
Increase (decrease) resulting from:
   State income tax, net of federal benefit        37,242          12,192        (185,018)
   Bargain sale portion of land dispositions           --          (8,712)       (298,350)
   Rate case expense                              (28,610)          1,627           2,308
   Pension expense                                (34,159)         13,362            (511)
   Other, net                                     (22,044)         21,570          62,861
   Investment tax credit                          (14,700)        (14,700)        (14,700)
Total provision for income taxes                  328,271         459,325       2,256,634
Taxes related to land dispositions                (75,769)       (322,521)     (2,064,807)
Operating provision for taxes                $    252,502    $    136,804    $    191,827
</TABLE>

Deferred tax liabilities (assets) were comprised of the following:

                                                  2003            2002
                                             ------------    ------------
Depreciation                                 $  2,608,391    $  2,158,355
Investment tax credits                            261,061         275,761
Other                                             243,412         161,104
Gross deferred tax liabilities                  3,112,864       2,595,220
Land sales                                     (2,459,566)     (2,505,636)
Other                                            (202,345)       (208,892)
Gross deferred tax assets                      (2,661,911)     (2,714,528)
Valuation allowance                             1,946,081       1,916,383
Net deferred tax assets                          (715,830)       (798,145)
Total deferred income taxes                  $  2,397,034    $  1,797,075

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.
<PAGE>
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,
2003, 2002 and 2001, fees paid amounted to $8,445, $6,112, and $10,447,
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.

Allowance for doubtful accounts includes the following components:

                                                        December 31,
                                            ----------------------------------
                                              2003         2002         2001
                                            --------     --------     --------
Allowance for doubtful accounts, beginning  $ 40,000     $ 40,000     $ 45,000
Provision                                     71,420       17,458       11,070
Recoveries                                     2,268        1,365        7,927
Charge-offs                                  (26,688)     (18,823)     (23,997)
Allowance for doubtful accounts, ending     $ 87,000     $ 40,000     $ 40,000


NOTE 12

PENSION AND OTHER POSTRETIREMENT BENEFITS
The following provides a reconciliation of benefit obligations, plan assets and
funded status of the plans.
<TABLE><CAPTION>
                                                                                          Other
                                                  Pension Benefits                 Postretirement Benefits
                                               2003              2002              2003              2002
                                           ------------      ------------      ------------      ------------
<S>                                        <C>               <C>               <C>               <C>
Change in Benefit Obligation:
 Benefit obligation, beginning of year     $  1,260,738      $  1,080,148      $    527,850      $    494,219
 Service cost                                    59,517            54,994            27,818            26,914
  Interest cost                                  92,630            90,750            35,947            33,740
  Actuarial loss (gain)                         (84,053)          (50,376)            1,564             2,599
  Amendment                                          --           123,988                --                --
  Benefits paid                                 (37,633)          (38,766)          (31,757)          (29,622)
  Benefit obligation, end of year          $  1,291,199      $  1,260,738      $    561,422      $    527,850
Change in Plan Assets:
  Fair value, beginning of year                 613,486           688,738           362,316           393,405
  Actual return on plan assets                  130,232           (96,486)           73,415           (56,089)
  Employer contribution                         100,000            60,000            25,000            25,000
  Benefits paid                                 (37,633)          (38,766)               --                --
  Fair value, end of year                       806,085           613,486           460,731           362,316
Funded Status                                  (485,114)         (647,252)         (100,691)         (165,534)
Unrecognized net actuarial gain (loss)          269,594           425,831           (72,839)          (30,084)
Unrecognized transition obligation               46,973            52,845           228,402           253,780
Unrecognized prior service cost                  80,736            85,906                --                --
Prepaid (accrued) benefit cost             $    (87,811)     $    (82,670)     $     54,872      $     58,162
</TABLE>


<TABLE><CAPTION>
                                                                                          Other
                                                  Pension Benefits                 Postretirement Benefits
                                               2003              2002              2003              2002
                                           ------------      ------------      ------------      ------------
<S>                                        <C>               <C>               <C>               <C>
Weighted-average assumptions as
of December 31:
  Discount rate                                      8%                8%                7%                7%
  Expected return on plan assets                     8%                8%                8%                8%
  Rate of compensation increase                      5%                5%                --                --
</TABLE>

For measurement purposes, a 7.0% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 2003. The rate was assumed to
decrease gradually to 6% for 2005 and remain at that level thereafter.

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.

Net periodic pension and other postretirement benefit costs include the
following components:
<TABLE><CAPTION>
                                                                                                  Other
                                                   Pension Benefits                      Postretirement Benefits
                                       --------------------------------------    --------------------------------------
                                          2003          2002          2001          2003          2002          2001
                                       ----------    ----------    ----------    ----------    ----------    ----------
<S>                                    <C>           <C>           <C>           <C>           <C>           <C>
Components of Net Periodic
Benefit Cost:
  Service cost                         $   59,517    $   54,994    $   53,172    $   27,818    $   26,914    $   26,123
  Interest cost                            92,630        90,750        71,379        35,947        33,740        31,311
  Expected return on plan assets          (63,291)      (61,680)      (63,423)      (29,096)      (31,556)      (31,404)
       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        (2,254)           --            --            --
Recognized net actuarial loss (gain)        5,243         5,455         6,140            --        (4,334)       (9,136)
Net periodic benefit cost              $  105,141    $  100,561    $   70,886    $   60,047    $   50,142    $   42,272
</TABLE>


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 components                   $10,613         $ (9,214)
Effect on postretirement benefit
  obligation                                 $78,016         $(71,618)

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 2003, 2002, and 2001.

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, 2003 and
2002 was $116,476, and $209,644, respectively. At December 31, 2003, an amount
of $161,300 has been included in other assets relating to a regulatory asset for
costs which were included in the Company's rate case.

Employer matching contributions to the 401(k) Plan were $ 66,213, $61,673, and
$55,232 in 2003, 2002 and 2001, respectively.

Birmingham Utilities defined benefit plan weighted average asset allocations at
December 31, 2003 and 2002 by asset category were as follows:
<PAGE>
                                                             Plan Assets
                                                            at December 31,
                                                        -----------------------
                                                         2003             2002
                                                        ------           ------
Assets Category
  Equity Securities                                       67%              64%
  Debt Securities                                         32%              36%
  Cash                                                     1%               --
                                                         100%             100%

Birmingham Utilities retirement employee welfare benefit trust weighted average
asset allocations at December 31, 2003 and 2002 by asset category were as
follows:
                                                             Plan Assets
                                                            at December 31,
                                                        -----------------------
                                                         2003             2002
                                                        ------           ------
Assets Category
  Equity Securities                                       68%              64%
  Debt Securities                                         31%              36%
  Cash                                                     1%               --
                                                         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. The expected pension
contribution for 2004, based on 2003 market performance and current conditions,
is estimated by management to be $75,000.

NOTE 13

EARNINGS PER SHARE SUPPLEMENTAL INFORMATION
The following table summarizes the number of common shares used in the
calculation of earnings per share:

                                              2003          2002           2001
Weighted average shares outstanding
  for earnings per share, basic          1,637,076     1,637,076      1,626,613
Incremental shares from assumed
  conversion of stock options               31,822        31,972         32,540
Weighted average shares outstanding
  for earnings per share, diluted        1,668,898     1,669,048      1,659,153

NOTE 14

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 $1,319,000 for capital expenditures in 2003, $410,000 of
which is expected to be necessary to meet its service obligations for the coming
year.
<PAGE>
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 $699,952, $699,106, and $711,583, for the years 2003, 2002 and 2001,
respectively. The purchase price is based on the Authority's wholesale rate. At
December 31, 2003, this rate was $1,160 per million gallons. This agreement
expires December 31, 2015 but provides for two ten-year extensions at BUI's
option.

ACQUISITION
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 is $1,000,000 subject to certain adjustments based on
changes in rate base and working capital. These adjustments may not increase the
purchase price by more than $450,000. Applications for regulatory approval were
filed with the New York State Public Service Commission in July 2003. A decision
is expected in 2004. See Note 20.

NOTE 15

EQUITY

COMMON STOCK
                                                     Number
                                                    of Shares         Amount
                                                    ---------       ----------
Balance, January 1, 2002                            1,632,880       $2,910,562
Stock issued through Key Employee and
  Non-Employee Director Stock Option Plans              4,196                7
Amortization of stock plan costs                           --           (5,379)
Balance, December 31, 2002                          1,637,076        2,905,190
Amortization of stock plan costs                           --           (4,277)
Balance, December 31, 2003                          1,637,076       $2,900,913

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, 2003:

         Granted  Exercisable
                                                Weighted              Weighted
                                                 Average               Average
                                      Number    Exercise     Number   Exercise
                                    of Shares     Price    of Shares    Price
                                    ---------     -----    ---------    -----
Outstanding at December 31, 2000      68,158     $ 8.04      58,958    $ 6.98
  Granted                             12,500      14.93
  Exercised                           (7,646)      5.78
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
<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:

                                           2003            2002           2001
Expected option term                   10 years        10 years       10 years
Risk-free interest rate                    4.4%            4.5%           5.0%
Expected dividend yield                    3.3%            3.3%           3.6%
Expected volatility factor                35.5%           37.3%          39.2%
Fair value per option                     $5.98           $5.65          $5.06

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. In December 2001, the Company began purchasing shares in the open market
to satisfy its dividend reinvestment obligations.

NOTE 16

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NON-CASH FINANCING
ACTIVITIES
Cash paid for interest for the years ended 2003, 2002, and 2001 was $415,453,
$407,772, and $495,799, respectively.

Cash paid for income taxes for the years ended 2003, 2002 and 2001 was $40,926,
$125,500, and $2,603,343, 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 constructionexpenditures to
determine cash expenditures by BUI.
                                      December 31,
                                             2003           2002           2001
                                       ----------     ----------     ----------
Gross plant additions                  $1,689,324     $1,944,760     $1,279,517
Customers' advances for construction     (162,901)       (12,660)       (11,705)
                                       $1,526,423     $1,932,100     $1,267,812

NOTE 17

SEGMENT INFORMATION
The Company has identified regulated water operations (Birmingham Utilities) and
unregulated service operations (Birmingham December 31, 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. Birmingham December 31, 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.
<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, 2003
Birmingham Utilities      $5,425,512   $3,071,088  $    630,462  $162,902   $  670,946   $26,873,658
Birmingham 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
Birmingham 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
For the year ended
December 31, 2001
Birmingham Utilities      $4,615,836   $2,558,261  $    548,119  $179,379   $5,610,623*  $22,680,587
Birmingham H2O Services      236,445      179,470            --    12,448       44,527            --
  Total Consolidated      $4,852,281   $2,737,731  $    548,119  $191,827   $5,655,150   $22,680,587
</TABLE>

* Includes land sale income of $261,317 in 2002 and $5,133,379 in 2001.


NOTE 18

QUARTERLY FINANCIAL DATA
(Unaudited)
<TABLE><CAPTION>
                                                   Income from
                         Operating    Operating    Dispositions    Net      Earnings  Per Share
                         Revenues       Income       of Land      Income      Basic    Diluted
<S>                     <C>           <C>          <C>           <C>        <C>       <C>
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
2002 First Quarter      $1,079,494    $  191,069           --    $114,812      $.07      $.07
     Second Quarter      1,245,975       279,536           --     194,388      $.12      $.12
     Third Quarter       1,384,686       287,464     $261,317     474,910      $.29      $.28
     Fourth Quarter      1,126,168        54,893           --      32,993      $.02      $.02
     Total              $4,836,323    $  812,962     $261,317    $817,103      $.50      $.49
</TABLE>

NOTE 19

WATER SERVICE RATE INCREASE
On August 7, 2003, the DPUC granted the Company 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
newly acquired Eastern Division.
NOTE 20

SUBSEQUENT EVENT
In January 2004, the Company filed an application with the DPUC for approval of
the issuance of First Mortgage Bonds in the principal amount of $9,000,000. The
bonds, which have not yet been issued, will carry an interest rate of 5.21%. The
proceeds from the bond issue will be used to repay the existing Mortgage Bonds,
which carry an interest rate of 9.64%, and to repay short-term debt used to fund
the purchase of the Connecticut regulated and non-regulated operations from
<PAGE>
PSC and the eventual purchase of the New York operations from PSC. In March
2004, the DPUC approved the Company's request to issue the new bonds.


SOURCES OF SUPPLY

WELLS
Located in Derby and Seymour with a safe daily yield of 3.0 million gallons per
day (MGD) and 79 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
11,270 customers, 97% residential and commercial Water delivered in 2003 - 1.23
Billion Gallons Average daily demand - 3.18 MGD.
Maximum daily demand in 2003 - 4.18 MGD. Total safe daily yield - 8.0 MGD.

WORKFORCE
On March 1, 2004, the Company maintained a workforce of 40 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

AUDITORS
Dworken, Hillman, LaMorte
& Sterczala, P.C.
Shelton, Connecticut
<PAGE>
GENERAL COUNSEL
Wiggin & 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, 2003, there were approximately 429 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.
                              Dividend
                                High               Low              Paid
                               ------            ------             ----
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

2002    First Quarter          $19.05            $17.56             $.15
       Second Quarter           20.75             17.55              .15
        Third Quarter           18.93             16.08              .15
       Fourth Quarter           18.45             17.70              .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.