<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                   FORM 10-K


(X)      Annual Report pursuant to section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the fiscal year ended DECEMBER 31, 2001 or

( )      Transition report pursuant to section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the transition period from
                  to

Commission File Number 0-8084

                         CONNECTICUT WATER SERVICE, INC.
             (Exact name of registrant as specified in its charter)

               CONNECTICUT                               06-0739839
       (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                    Identification No.)

       93 WEST MAIN STREET, CLINTON, CT                  06413
       (Address of principal executive office)           (Zip Code)

Registrant's telephone number, including area code (860) 669-8636
Securities registered pursuant to Section 12 (b) of the Act:

       Title of each Class             Name of each exchange on which registered
             NONE                                   NOT APPLICABLE


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

                                  COMMON STOCK
                                (Title of Class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.  Yes [X]   No

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229,405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ( )
<PAGE>
                                                                               2


     The aggregate market value of the registrant's voting Common Stock,
computed on the price of such stock at the close of business on March 1, 2002 is
$215,006,092.

                                    7,618,926

     Number of shares of Common Stock outstanding, March 1, 2002 (excluding
36,037 common stock equivalent shares)



DOCUMENTS INCORPORATED BY REFERENCE

<TABLE>
<CAPTION>
                                                    Part of Form 10-K Into Which
          Document                                     Document is Incorporated
<S>                                                 <C>
Definitive Proxy Statement, dated                            Part III
March 19, 2002, for Annual Meeting
of Shareholders to be held on
April 26, 2002.
</TABLE>
<PAGE>
                                                                               3


                                     PART I

ITEM 1. BUSINESS

The Company

The Registrant, Connecticut Water Service, Inc. (referred to as "the Company",
"we" or "our") was organized in 1956 and is the parent company of four regulated
water utility companies, which generate approximately 99% of our consolidated
net income. We supply water to over 78,000 customers, or 276,000 people, in 40
towns throughout Connecticut and Massachusetts. The Company and its subsidiaries
collectively represent the largest domestic investor-owned water system in
Connecticut measured by operating revenues and utility plant investment. In
addition to our core regulated water business we offer related services on a
contract basis to other water utilities, communities, businesses and homeowner
associations through a number of unregulated subsidiary companies and through a
joint venture formed in 1999 with a well pump service provider. These services
range from one-time contracts for a particular service to long-term arrangements
for water and wastewater system operation and management. We are also engaged in
selling and/or donating our limited excess real estate holdings that are not
necessary for our business or to protect our water sources.

Our mission is to provide high quality water service to our customers at a fair
return to our stockholders while maintaining a work environment that attracts,
retains and motivates our employees to achieve a high level of performance.

Our corporate headquarters are located at 93 West Main Street, Clinton,
Connecticut 06413. Our telephone number is 860.669.8636, and our Internet
address is www.ctwater.com.


Our Regulated Business

Our business is subject to seasonal fluctuations and weather variations. The
demand for water is generally greater during the warmer months than the cooler
months due to customers' high water consumption related to cooling systems and
various outdoor uses such as private and public swimming pools and lawn
sprinklers. Demand will vary with rainfall and temperature levels from year to
year and season to season, particularly during the warmer months.

In general, the profitability of the water utility industry is largely dependent
on the timeliness and adequacy of rates allowed by utility regulatory
commissions. In addition, profitability is affected by numerous factors over
which we have little or no control, such as costs to comply with environmental
and water quality regulations. Inflation and other factors also impact costs for
construction, materials and personnel related expenses.

Costs to comply with environmental and water quality regulations are
substantial. Since the 1974 enactment of the Safe Drinking Water Act we have
spent approximately $50,000,000 in constructing facilities and conducting
aquifer mapping necessary to comply with the requirements of the Safe Drinking
Water Act, and other federal and state regulations, of which $7,771,000 was
expended in the last five years. We are currently in compliance with current
regulations, but the regulations are subject to change. The costs to comply with
future changes
<PAGE>
                                                                               4


in state or federal regulations, which could require us to modify current
filtration facilities and/or construct new ones, or to replace any reduction of
the safe yield from any of our current sources of supply, could be substantial.

Our water companies derive their rights and franchises to operate from special
state acts that are subject to alteration, amendment or repeal and do not grant
us exclusive rights to our service areas. Our franchises are free from
burdensome restrictions, are unlimited as to time, and authorize us to sell
potable water in all the towns we now serve. There is the possibility that the
state could revoke our franchises and allow a governmental entity to take over
some or all of our systems. From time to time such legislation is contemplated.

The rates we charge our water customers are established under the jurisdiction
of and are approved by a state regulatory agency. It is our policy to seek rate
relief as necessary to enable us to achieve an adequate rate of return. The
following table shows information related to each of our water companies' most
recent general rate filing.

<TABLE>
<CAPTION>
                        Date of Last     Allowed         Allowed
                            Rate        Return on       Return on
                          Decision       Equity         Rate Base
<S>                     <C>             <C>             <C>
Barnstable                  1998           12.5%          11.31%
Connecticut Water           1991           12.7%          10.74%
Crystal                     1995          12.35%          10.16%
Gallup                      1994          N/A(*)          N/A(*)
</TABLE>

(*) Gallup's rates were based on its net income requirement, not on a rate of
return methodology.

Our Water System(s)

Our water infrastructure consists of 27 noncontiguous water systems in the State
of Connecticut and one water system in Massachusetts. Our system, in total,
consists of 1,237 miles of water main and reservoir storage capacity of 7.0
billion gallons. The safe, dependable yield from our 122 active wells and 20
reservoirs is approximately 48 million gallons per day. Water sources vary among
the individual systems, but overall approximately 45% of the total dependable
yield comes from reservoirs and 55% from wells. Our water companies are
currently under a "Water Supply Watch" due to unusually dry weather conditions
in the fall of 2001 and this winter. As a result of these unusually dry
conditions, water levels in many of the companies' reservoirs and groundwater
wells remain below their normal levels for this time of year. While this is not
a problem now, an extended dry period could lead to increased concerns and
restricted water use this spring or summer.

We supply water, and in most cases, fire protection to all or portions of 40
towns in Connecticut and Massachusetts. The following table lists the customer
count, operating revenues and customer water consumption for each of our water
companies as of December 31, 2001.
<PAGE>
                                                                               5

<TABLE>
<CAPTION>
                                Number          Water        Customer Water
Water Company                    of           Revenues          Consumption
                               customers       ($000's)    (millions of gallons)
<S>                            <C>            <C>          <C>
Barnstable Water Company         7,116         $ 2,507              833
Connecticut Water Company       66,800          40,220            5,920
Crystal Water Company            3,616           2,038              422
Gallup Water Service             1,160             627               84
     Total                      78,692         $45,392            7,259
</TABLE>

The following table breaks down the above total figures by customer class:

<TABLE>
<CAPTION>
                                    Number     Water        Customer Water
Customer Class                       of       Revenues        Consumption
                                   customers  ($000's)  (millions of gallons)
<S>                                <C>        <C>       <C>
Residential                         69,643    $28,621            5,030
Commercial                           5,759      5,941            1,471
Industrial                             389      1,687              430
Public Authority                       515      1,460              328
Fire Protection                      1,467      7,187                0
Other (including
  non-metered accounts)                919        496                0
     Total                          78,692    $45,392            7,259
</TABLE>

Disposition of Property

We have established a policy of disposing of various small, discrete parcels of
land over the next several years. This excess land, which is no longer required
for water supply purposes, totals less than 400 acres as of December 31, 2001.
We must comply with many regulatory restrictions before we can dispose of public
water company property. Connecticut is continuing to encourage the protection of
open space land. Legislation was passed in 2000 creating a new Connecticut
corporate tax credit, which makes the donation of our excess land for protected
open space purposes potentially more economically beneficial than a sale of the
land. We have taken advantage of the new tax credit again in 2001 by donating
134 acres of land to the Town of Middlebury and expect to donate approximately
65 acres to two towns in 2002. The new tax credit, in combination with federal
and state charitable contribution deductions, resulted in after-tax gains from
these transactions of approximately $1,121,000 in 2001.

Competition

Our water companies face competition, presently not material, from a few private
water systems operating within, or adjacent to, their franchise areas and from
municipal and public authority systems whose service areas in some cases overlap
portions of our water companies' franchise areas.
<PAGE>
                                                                               6

Employees

As of December 31, 2001, we employed a total of 181 persons. Our employees are
not covered by collective bargaining agreements. We believe that our relations
with our employees are good.

Expansion

In February 2001 we acquired the Barnstable Holding Company ("Barnstable") which
is the parent company of the 7,200 customer Barnstable Water Company located in
Barnstable, Massachusetts and BARLACO, a real estate company owning
approximately 100 acres of residential and commercial land in Hyannis and
Barnstable, Massachusetts. The transaction was accounted for using the `pooling
of interests' accounting method, and all financial statements have been restated
to include the results of the acquired company for all periods presented.

During 2001, we acquired the Killingly Industrial Park Municipal Water System
for approximately $1.1 million. This system serves 51 residential and industrial
customers in close proximity to Crystal Water's own water system, and has
significant growth potential. In addition, we agreed to acquire a small
municipal water system in Middlebury, Connecticut. The system serves 180
residential, commercial and industrial customers in a high-growth area. Our cost
to acquire the system is estimated at $900,000, which includes the cost of
constructing a 7,700-foot main extension to connect into our existing system and
the cost of a booster pump station. The improvements are scheduled to be
completed in 2002. With a more reliable supply of quality water soon to be
available to Middlebury, we expect to see higher revenues from this system as
its customer base grows.

On February 22, 2002, the Company entered into a definitive agreement to
purchase 100% of the outstanding common stock of Unionville Water Company for
$6.3 million in our Company's common stock. The Unionville Water Company is
located in Farmington, Connecticut. It has over 5,400 customers and annual
revenues of approximately $2.4 million.

In 1999, we formed a three-year joint venture with Hungerfords, Inc., a pump
service provider with annual revenues of approximately $1.3 million, which has
been in business in Connecticut for over 75 years. If specific financial targets
are met, the Company will purchase Hungerfords in 2002.
<PAGE>
                                                                               7


ITEM 2. PROPERTIES

The properties of our water companies consist of land, easements, rights
(including water rights), buildings, reservoirs, standpipes, dams, wells, supply
lines, treatment plants, pumping plants, transmission and distribution mains and
conduits, mains and other facilities and equipment used for the collection,
purification, storage and distribution of water. Substantially all of the
properties owned by our Barnstable Water, Connecticut Water and Crystal Water
companies are subject to liens as security for debt. The net utility plant
balances of the water companies at December 31, 2001 are as follows:

<TABLE>
<CAPTION>
                                                    Net Utility Plant
                                                        (000's)
<S>                                                 <C>
Barnstable                                             $  6,407
Connecticut Water                                       183,604
Crystal                                                   9,351
Gallup                                                    2,968
      Total                                            $202,330
</TABLE>

The size of each company's system(s) in terms of miles of mains is as follows:

<TABLE>
<CAPTION>
                                                  Miles of Transmission
                                                  and Distribution Water
                                                          Mains
<S>                                               <C>
Barnstable Water                                            101
Connecticut Water                                         1,052
Crystal                                                      66
Gallup                                                       18
      Total                                               1,237
</TABLE>

We believe that our properties are maintained in good condition and in
accordance with current standards of good waterworks industry practice.

ITEM 3. LEGAL PROCEEDINGS

We are involved in various legal proceedings. Although the results of legal
proceedings cannot be predicted with certainty, there are no pending legal
proceedings to which we or any of our subsidiaries are a party or to which any
of our properties is the subject that presents a reasonable likelihood of a
material adverse impact on the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None.
<PAGE>
                                                                               8


                                     PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Our Common Stock is traded on the NASDAQ exchange under the symbol "CTWS". Our
quarterly high and low stock prices as reported by NASDAQ and the cash dividends
we paid during 2001 and 2000 are listed as follows:

<TABLE>
<CAPTION>
                                      PRICE                    DIVIDENDS
Period                       HIGH                LOW             PAID*
<S>                         <C>                 <C>            <C>
2001
    First Quarter           $22.66              $19.50           $.2000
    Second Quarter           27.16               20.16           $.2000
    Third Quarter            28.10               22.90           $.2022
    Fourth Quarter           32.21               25.75           $.2022
2000
    First Quarter           $22.67              $18.00           $.1977
    Second Quarter           20.67               17.00           $.1977
    Third Quarter            23.50               17.83           $.2000
    Fourth Quarter           21.83               18.67           $.2000
</TABLE>

* Historic (Excludes the subsequent effect of the 2001 Barnstable merger
accounted for under the "pooling-of-interests" accounting method.)

As of March 1, 2002 there were approximately 5,000 holders of record of our
common stock.

We presently intend to pay quarterly cash dividends in 2002 on March 15, June
17, September 17 and December 16 subject to our earnings and financial
condition, regulatory requirements and other factors our Board of Directors may
deem relevant.


<PAGE>


ITEM 6. SELECTED FINANCIAL DATA

SUPPLEMENTAL INFORMATION (UNAUDITED)
(2001 - 1991 Restated)

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
Years Ended December 31, (thousands of dollars except per share
amounts and where otherwise indicated)                              2001            2000            1999
---------------------------------------------------------------------------------------------------------------
<S>                                                              <C>             <C>             <C>
CONSOLIDATED STATEMENTS OF INCOME
Operating Revenues                                               $   45,392      $   43,997      $   45,171
Operating Expenses                                               $   34,078      $   32,335      $   33,382
Operating Income                                                 $   11,314      $   11,662      $   11,789
Interest and Debt Expense                                        $    4,632      $    4,782      $    4,720
Net Income Applicable to Common Stock                            $    8,401      $    7,858      $    7,780
Cash Common Stock Dividends Paid                                 $    6,105      $    5,890      $    5,688
Dividend Payout Ratio                                                    73%             75%             73%
Weighted Average Common Shares Outstanding*                       7,619,031       7,604,546       7,593,376
Basic Earnings Per Average Common Share*                         $     1.10      $     1.03      $     1.02
Number of Shares Outstanding at Year End*                         7,649,362       7,604,594       7,596,141
ROE on Year End Common Equity                                          11.9%           11.7%           12.0%
Declared Common Dividends Per Share* **                          $    0.804      $    0.795      $    0.787


CONSOLIDATED BALANCE SHEET
Common Stockholders' Equity                                      $   70,783      $   67,110      $   64,915
Long-Term Debt                                                   $   63,953      $   66,283      $   67,099
Minority Interest                                                $       --      $      117      $      142
Preferred Stock (Consolidated, Excluding Current Maturities)     $      847      $      847      $      847
---------------------------------------------------------------------------------------------------------------
Total Capitalization                                             $  135,583      $  134,357      $  133,003
Stockholders' Equity (Includes Preferred Stock)                          53%             51%             49%
Long-Term Debt                                                           47%             49%             51%
Net Utility Plant                                                $  202,330      $  193,169      $  187,613
Book Value - Per Common Share*                                   $     9.25      $     8.82      $     8.55

OPERATING REVENUES BY
REVENUE CLASS
Residential                                                      $   28,621      $   27,364      $   28,422
Commercial                                                            5,941           5,817           6,093
Industrial                                                            1,687           1,905           1,850
Public Authority                                                      1,460           1,481           1,561
Fire Protection                                                       7,187           6,960           6,861
Other (including non-metered accounts)                                  496             470             384
---------------------------------------------------------------------------------------------------------------
Total Operating Revenues                                         $   45,392      $   43,997      $   45,171
---------------------------------------------------------------------------------------------------------------

Number of Customers (Average)                                        78,156          77,183          76,061
Billed Consumption (Millions of Gallons)                              7,259           6,911           7,330
Number of Employees                                                     181             184             180
</TABLE>

<TABLE>
<CAPTION>
Years Ended December 31, (thousands of dollars except per share
amounts and where otherwise indicated)                                1998            1997
---------------------------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>
CONSOLIDATED STATEMENTS OF INCOME
Operating Revenues                                                 $   42,623      $   43,080
Operating Expenses                                                 $   31,302      $   31,728
Operating Income                                                   $   11,321      $   11,352
Interest and Debt Expense                                          $    4,787      $    4,799
Net Income Applicable to Common Stock                              $    7,388      $    7,325
Cash Common Stock Dividends Paid                                   $    5,519      $    5,419
Dividend Payout Ratio                                                      75%             74%
Weighted Average Common Shares Outstanding*                         7,579,176       7,563,080
Basic Earnings Per Average Common Share*                           $     0.97      $     0.97
Number of Shares Outstanding at Year End*                           7,580,879       7,567,905
ROE on Year End Common Equity                                            11.8%           12.1%
Declared Common Dividends Per Share* **                            $    0.778      $    0.769


CONSOLIDATED BALANCE SHEET
Common Stockholders' Equity                                        $   62,572      $   60,458
Long-Term Debt                                                     $   67,386      $   59,906
Minority Interest                                                  $      136      $      129
Preferred Stock (Consolidated, Excluding Current Maturities)       $      847      $      847
---------------------------------------------------------------------------------------------
Total Capitalization                                               $  130,941      $  121,340
Stockholders' Equity (Includes Preferred Stock)                            48%             51%
Long-Term Debt                                                             52%             49%
Net Utility Plant                                                  $  182,202      $  178,168
Book Value - Per Common Share*                                     $     8.25      $     7.99

OPERATING REVENUES BY
REVENUE CLASS
Residential                                                        $   26,694      $   26,949
Commercial                                                              5,678           5,661
Industrial                                                              1,747           1,962
Public Authority                                                        1,394           1,402
Fire Protection                                                         6,728           6,764
Other (including non-metered accounts)                                    382             342
---------------------------------------------------------------------------------------------
Total Operating Revenues                                           $   42,623      $   43,080
---------------------------------------------------------------------------------------------

Number of Customers (Average)                                          74,971          73,903
Billed Consumption (Millions of Gallons)                                6,949           6,882
Number of Employees                                                       189             190
</TABLE>

*  Reflects three-for-two common stock split as described in Note 3 in the
   accompanying Notes to Consolidated Financial Statements

** Not restated for subsequent acquisitions accounted for under the
   pooling-of-interests accounting method.
<PAGE>
                                                                              10


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FINANCIAL CONDITION

OVERVIEW

Connecticut Water Service, Inc. (the Company) is a non-operating holding
company, whose income is derived from the earnings of its ten wholly owned
subsidiary companies. Approximately 99% of the Company's earnings, excluding one
time acquisition costs, are attributable to the Company's regulated water
companies: The Connecticut Water Company, The Gallup Water Service,
Incorporated, The Crystal Water Company of Danielson and The Barnstable Water
Company. These four companies supply water to 78,692 customers in 40 towns
throughout Connecticut and Massachusetts. Each of these companies is subject to
state regulation regarding financial issues, rates, and operating issues, and to
various other state and federal regulatory agencies concerning water quality and
environmental standards. In addition to its regulated utilities, the Company
owns six unregulated companies: Chester Realty, Inc., a real estate company in
Connecticut, Connecticut Water Utility Services, Inc., which provides contract
water and sewer operations and other water related services, Connecticut Water
Emergency Services, Inc., a provider of drinking and pool water by tanker truck,
Crystal Water Utilities Corporation, a holding company which owns The Crystal
Water Company of Danielson and three small rental properties, BARLACO, a real
estate company in Massachusetts, and Barnstable Holding Company, a holding
company which owns The Barnstable Water Company and BARLACO. These unregulated
companies currently generate 1% of the Company's total earnings.

2001 was the Company's 11th consecutive year of increased earnings and its 32nd
consecutive year of increased dividend payments, excluding dividends paid by
companies subsequently acquired and accounted for under the
"pooling-of-interests" method.
<PAGE>
                                                                              11


REGULATORY MATTERS AND INFLATION

The Connecticut Water Company is the Company's largest subsidiary serving over
66,800 of the Company's 78,692 utility customers. Connecticut Water Company's
revenues, like the Company's other three regulated water companies, are based on
regulated rates that are determined in a regulatory rate proceeding. Connecticut
Water's last general rate proceeding was in 1991. The resulting rate decision
granted Connecticut Water a 12.7% allowed return on common equity and a 10.74%
allowed return on rate base.

The Company, like all other businesses, is affected by inflation, most notably
by the continually increasing costs required to maintain, improve and expand its
service capability. The cumulative effect of inflation results in significantly
higher facility replacement costs, which must be recovered from future cash
flows.

The ability of the Company's water utility subsidiaries to recover this
increased investment in facilities is primarily dependent upon future rate
increases, which are subject to state regulatory approval.

We do not presently plan to request rate relief for any of our regulated
companies. Future economic and financial market conditions, coupled with
governmental regulations and fiscal policy, plus other factors that are
unpredictable and often beyond our control, will influence when we request
revisions to rates charged to our customers.

The Company is also subject to environmental and water quality regulations.
Costs to comply with environmental and water quality regulations are
substantial. We are currently in compliance with current regulations, but the
regulations are subject to change. The costs to comply with future changes in
state or federal regulations, which could require us to modify current
filtration facilities and/or construct new ones, or to replace any reduction of
the safe yield from any of our current sources of supply, could be substantial.

OUTLOOK

The Company's profitability is primarily attributable to the sale and
distribution of water, the amount of which is dependent on seasonal weather
fluctuations, particularly during the summer months when water demand will vary
with rainfall and temperature levels.

Our water companies are currently under a "Water Supply Watch" due to the
unusually dry weather conditions in the fall of 2001 and this winter. As a
result of these unusually dry conditions, water levels in many of the companies'
reservoirs and groundwater wells remain below their normal levels for this time
of year. While this is not a problem now, an extended dry period could lead to
increased concerns and restricted water use this spring or summer.

After the terrorist strikes on September 11, 2001, water companies have had to
increase security on their water supplies and facilities. This is resulting in
increases in operating and capital costs. These costs are typically recoverable
in a rate proceeding.
<PAGE>
                                                                              12


The Company has received regulatory approval to donate certain parcels of its
land in the period 2002 to 2004. Over the three-year period these donations are
expected to increase net earnings by approximately $2,000,000 as a result of
favorable tax treatment under Federal and Connecticut tax laws.

In February 2002, the Company entered into a definitive agreement to purchase
100% of the outstanding common stock of Unionville Water Company in exchange for
$6.3 million of our Company's common stock. The Unionville Water Company is
located in Farmington, Connecticut. It has over 5,400 customers and annual
revenues of approximately $2.4 million. The completion of the transaction is
subject to approvals by the Connecticut Department of Public Utility Control and
Unionville's shareholders and the satisfaction of other conditions.


RESULTS OF OPERATIONS

     2001 COMPARED WITH 2000

          On February 23, 2001, the Company acquired Barnstable Holding Company
          and accounted for the acquisition as a "pooling-of-interests".
          Financial statements have been restated to include the results of the
          acquired company for all periods presented.

          On September 7, 2001, the Company effected a three-for-two stock
          split. The distribution of these shares increased the number of shares
          outstanding by 2,562,052 shares. All outstanding common shares and per
          share amounts in this report have been restated to reflect this stock
          split. Appropriate adjustments to reflect this stock split were made
          to the Company's Performance Stock Program, the Savings Plan of the
          Connecticut Water Company, and the Company's Dividend Reinvestment and
          Common Stock Purchase Plan.

          Net income applicable to common stock for 2001 increased from that of
          2000 by $543,000, or $.07 per average basic share. The increase is
          primarily due to the following:

          -   Net Other Income (Deductions) increased $741,000:

              -   The increase in Other Income is primarily due to The
                  Connecticut Water Company's 2001 donation of 134.1 acres of
                  land to the Town of Middlebury, Connecticut.  This donation
                  resulted in a net after tax gain of $1,121,000 resulting from
                  a 50% Connecticut state income tax credit in addition to state
                  and federal charitable contribution tax deductions.

              -   Net Non-Water Sales Earnings increased $106,000 or 39.8%
                  primarily as a result of increased earnings from our
                  unregulated activities. A substantial amount of the increase
                  is due to our Linebacker(R) maintenance service program.
                  Initiated in 2000, for a small annual cost to our customers,
                  the Linebacker(R) program protects participants from
                  incurring large expenses when their service lines break. As of
                  December 31, 2001 approximately 9,600 of the Company's
                  customers are protected by Linebacker(R).
<PAGE>
                                                                              13


          -   Interest and Debt Expense decreased $150,000:

              -  The decrease in Interest and Debt Expense is due both to
                 declines in average balances of interim debt outstanding and
                 lower interest rates. The weighted cost of the Company's
                 interim debt at December 31, 2001 was 2.31% as compared with
                 7.25% at December 31, 2000.

          -   Utility Operating Income decreased $348,000:

              -  Operating Expenses increased $1,743,000 or 5.4% primarily due
                 to increased Operation and Maintenance expenses related to
                 increases in wages, employee benefits and maintenance costs,
                 an increase in Depreciation Expense due to increased
                 investment in utility plant, increases in Income Tax Expense
                 primarily due to higher taxable income, partially offset by a
                 decrease in other taxes primarily due to property tax rebates
                 and lower property tax revaluations. Higher Operating Revenues
                 partially offset the increase in Operating Expenses.

              -  Operating revenues increased $1,395,000 or 3.2% in 2001 as
                 compared to 2000.  This increase was due to increased water
                 consumption brought on by a drier 2001 summer and fall plus
                 utility customer growth.

2000 COMPARED WITH 1999

          Net income applicable to common stock for 2000 increased from that of
          1999 by $78,000, or $.01 per average basic share. The increase in
          earnings was primarily due to tax benefits of a 2000 land donation and
          higher earnings on non-water sales and services.

          The following are the components of the 2000 earnings increase:

          -   Net Other Income (Deductions) increased $267,000:

              -  The increase in other income was primarily due to The
                 Connecticut Water Company's 2000 donation of 104.6 acres of
                 land to the Town of Naugatuck, Connecticut. This donation
                 resulted in a net after tax gain of $474,000.

              -  Net Non-Water Sales Earnings increased $111,000, or 72%
                 primarily as a result of increased earnings from our
                 unregulated activities.

          -   Utility Operating Income decreased $127,000:

              -  Operating Revenues decreased $1,174,000, or 2.6% in 2000 as
                 compared to 1999. This decrease was due to fluctuations in the
                 summer weather, which directly affects our customers' water
                 usage. The 1999 summer was unusually hot and dry while the 2000
                 summer was cool and rainy. Lower Operation and Maintenance
                 expense partially offset the decrease in Operating Revenues.

              -  Operation and Maintenance expenses were reduced $856,000, or
                 4.4% from 1999 levels due to cost containment efforts. Income
                 Taxes classified as Operating Expenses decreased $578,000
                 partially due to the decreased Operating Income. Depreciation
                 and Taxes other than Income Taxes (primarily property taxes)
                 increased in total by $387,000 primarily as a result of the
                 increased investment in Utility Plant.
<PAGE>
                                                                              14

          -   Interest and Debt Expense increased $62,000:

              -  The increase in Interest and Debt Expense was primarily due to
                 higher interest rates on interim debt. The average weighted
                 cost of this debt was 7.25% in 2000 as compared with 7.01% in
                 1999.

LIQUIDITY AND CAPITAL RESOURCES

Interim Bank Loans Payable at year end 2001 was $1,825,000, $25,000 higher than
at the end of 2000.

We consider the current $9,000,000 line of credit with two banks adequate to
finance any expected short-term borrowing requirements that may arise from
operations during 2002. The lines of credit expire in April and May of 2002. We
expect both lines of credit to be renewed. Interest expense charged on interim
bank loans will fluctuate based on financial market conditions.

The Board of Directors has approved a $10,155,000 construction budget for 2002,
net of amounts to be financed by customer advances and contributions in aid of
construction. Funds provided by operating activities are expected to finance
this entire construction program given normal weather patterns and related
operating revenue billings. Refer to Note 11, Utility Plant and Construction
Program, in Notes to Consolidated Financial Statements for an additional
discussion of the Company's future construction program.

FORWARD LOOKING INFORMATION

This report, including management's discussion and analysis, contains certain
forward looking statements regarding the Company's results of operations and
financial position. These forward looking statements are based on current
information and expectations, and are subject to risks and uncertainties, which
could cause the Company's actual results to differ materially from expected
results.

Our water companies are subject to various federal and state regulatory agencies
concerning water quality and environmental standards. Generally, the water
industry is materially dependent on the adequacy of approved rates to allow for
a fair rate of return on the investment in utility plant. The ability to
maintain our operating costs at the lowest possible level while providing good
quality water service is beneficial to customers and stockholders. Profitability
is also dependent on the timeliness of rate relief, when necessary, and numerous
factors over which we have little or no control, such as the quantity of
rainfall and temperature, industrial demand, financing costs, energy rates, and
compliance with environmental and water quality regulations.
<PAGE>
                                                                              15

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements of Connecticut Water Service, Inc., and
the Notes to Consolidated Financial Statements together with the reports of
Arthur Andersen LLP are included herein on pages F-2 through F-22.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None
<PAGE>
                                                                              16


                                    PART III

ITEM 10. EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
                                                                         Period Held or Prior                Term of Office Expires
      Name             Age              Office                              Position

<S>                    <C>     <C>                                   <C>                                     <C>
M. T. Chiaraluce       59          President, Chief                      Held position of                     2002 Annual Meeting
                                 Executive Officer and               President since January,
                                 Chairman of the Board                  1992 and position of
                                                                     Chief Executive Officer
                                                                        since July, 1992

D. C. Benoit           44       Vice President - Finance,            Held current position or                 2002 Annual Meeting
                               Chief Financial Officer and           other executive position
                                       Treasurer                      with the company since
                                                                           April, 1996

J. R. McQueen          59            Vice President -                Held current position or
                                     Engineering and                    other management or                   2002 Annual Meeting
                                       Planning                      engineering position with
                                                                        the Company since
                                                                          October, 1965

T. P. O'Neill          48            Vice President -                Held current position or
                                       Operations                       other engineering                     2002 Annual Meeting
                                                                        position with the
                                                                      Company since February,
                                                                             1980

M. P. Westbrook        42           Vice President -                 Held current position or
                                    Administration and                  other management                      2002 Annual Meeting
                                    Government Affairs                  position with the
                                                                          Company since
                                                                        September, 1988

P. J. Bancroft         52        Assistant Treasurer and             Held current position or
                                      Controller                     other accounting position                2002 Annual Meeting
                                                                     with the Company since
                                                                         October, 1979


M. G. DiAcri           56          Corporate Secretary                  Held administrative                   2002 Annual Meeting
                                                                         position with the
                                                                      Company since February,
                                                                               1990
</TABLE>

There are no family relationships between any of the Directors and Executive
Officers of the Company.
<PAGE>
                                                                              17

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to General Instruction G(3), the information called for by Items 10,
(except for information concerning the executive officers of the Company) 11, 12
and 13 is hereby incorporated by reference to the Company's definitive proxy
statement filed on EDGAR on or about March 19, 2002. Information concerning the
executive officers of the Company is included as Item 10 of this report.

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)    1.    Financial Statements:

             The report of the Company's management, the report of
             independent public accountants and the Company's Consolidated
             Financial Statements listed in the Index to Consolidated
             Financial Statements on page F-1 hereof are filed as part of
             this report, commencing on page F-2.

<TABLE>
<CAPTION>
                                                                               Page
<S>                                                                            <C>
             Index to Consolidated Financial Statements and Schedule            F-1

             Report of Independent Public Accountants                           F-2

             Consolidated Statements of Income for the years
             Ended December 31, 2001, 2000, and 1999                            F-3

             Consolidated Balance Sheets at December 31, 2001
             and 2000                                                           F-4

             Consolidated Statements of Cash Flows for the
             years ended December 31, 2001, 2000 and 1999                       F-5

             Notes to Consolidated Financial Statements                         F-6
</TABLE>
<PAGE>
                                                                              18


       2.    Financial Statement Schedules:

             The following schedules of the Company are included on the pages as
             indicated:
<TABLE>
<CAPTION>
                                                                               Page
<S>                                                                            <C>
             Report of Independent Public Accountants
             on Schedule                                                        S-1

             Schedule II Valuation and Qualifying Accounts
             and Reserves for the years ended December 31,
             2001, 2000 and 1999                                                S-2

             All other schedules provided for in the applicable accounting
             regulations of the Securities and Exchange Commission have
             been omitted because of the absence of conditions under which
             they are required or because the required information is set
             forth in the financial statements or notes thereto.

       3.    Exhibits:

             Exhibits for Connecticut Water Service, Inc. are in the
             Index to Exhibits                                                  E-1

             Exhibits heretofore filed with the Securities and Exchange
             Commission as indicated below are incorporated herein by
             reference and made a part hereof as if filed herewith.
             Exhibits marked by asterisk (*) are being filed herewith.
</TABLE>

             (b)  Reports on Form 8-K:

                  On September 10, 2001, the Company filed a Form 8-K dated
                  September 10, 2001, reporting in Item 5, Other Events, that
                  the Company had completed a three-for-two stock split on its
                  common shares.

                  On December 3, 2001, the Company filed a Form 8-K dated
                  December 3, 2001, reporting in Item 5, Other Events, that the
                  Company had reached an preliminary agreement to acquire
                  Unionville Water Company in a common stock exchange
                  transaction.

                  On February 14, 2002, the Company filed a Form 8-K dated
                  February 13, 2002, reporting in Item 5, Other Events, that the
                  Company announced its earnings for the year ended December 31,
                  2001.
<PAGE>
                                                                              19


                  On February 26, 2002, the Company filed a Form 8-K dated
                  February 26, 2002, reporting in Item 5, Other Events, that the
                  Company executed a definitive merger agreement with The
                  Unionville Water Company to combine their respective water
                  utility operations in a stock-for-stock transaction valued at
                  approximately $6.3 million.
<PAGE>
                                                                             F-1


             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

<TABLE>
<CAPTION>
                                                                         Page
<S>                                                                      <C>
Index to Consolidated Financial Statements and Schedule                   F-1

Report of Independent Public Accountants                                  F-2

Consolidated Statements of Income for the years ended
         December 31, 2001, 2000 and 1999                                 F-3

Consolidated Balance Sheets at December 31, 2001, and 2000                F-4

Consolidated Statements of Cash Flows for the years ended
         December 31, 2001, 2000 and 1999                                 F-5

Notes to Consolidated Financial Statements                                F-6

Report of Independent Public Accountants on Schedule                      S-1

Valuation and Qualifying Accounts                                         S-2
</TABLE>
<PAGE>
                                                                             F-2

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Connecticut Water Service, Inc.:

We have audited the accompanying consolidated balance sheets of Connecticut
Water Service, Inc., and Subsidiaries (a Connecticut corporation) as of December
31, 2001 and 2000, and the related consolidated statements of income and cash
flows for each of the three years in the period ended December 31, 2001. 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. Those standards require that we plan and perform the
audits 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 Connecticut Water
Service, Inc. and Subsidiaries as of December 31, 2001 and 2000, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States.

/s/  Arthur Andersen LLP
------------------------
Hartford, Connecticut
February 8, 2002
<PAGE>
                Connecticut Water Service, Inc. and Subsidiaries


CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                                  (Restated)       (Restated)
For the Years Ended December 31, (in thousands, except per share data)                2001             2000             1999
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>              <C>               <C>
Operating Revenues                                                                 $45,392          $43,997          $45,171
                                                                            ---------------  ---------------   --------------

Operating Expenses

   Operation and Maintenance                                                        20,076           18,380           19,236
   Depreciation                                                                      4,837            4,718            4,593
   Income Taxes                                                                      4,777            4,579            5,157
   Taxes Other Than Income Taxes                                                     4,388            4,658            4,396
                                                                            ---------------  ---------------   --------------

       Total Operating Expenses                                                     34,078           32,335           33,382
                                                                            ---------------  ---------------   --------------

Utility Operating Income                                                            11,314           11,662           11,789
                                                                            ---------------  ---------------   --------------

Other Income (Deductions), Net of Taxes

   Gain on Property Transactions                                                     1,121              532               97
   Non-Water Sales Earnings                                                            372              266              155
   Allowance for Funds Used During Construction                                        439              416              435
   Merger Costs                                                                       (352)            (408)             (95)
   Other                                                                               177              210              157
                                                                            ---------------  ---------------   --------------

       Total Other Income (Deductions), Net of Taxes                                 1,757            1,016              749
                                                                            ---------------  ---------------   --------------

Interest and Debt Expenses

   Interest on Long-Term Debt                                                        4,057            4,100            4,077
   Other Interest Charges                                                              353              460              395
   Amortization of Debt Expense                                                        222              222              248
                                                                            ---------------  ---------------   --------------

       Total Interest and Debt Expenses                                              4,632            4,782            4,720
                                                                            ---------------  ---------------   --------------

Net Income Before Preferred Dividends                                                8,439            7,896            7,818

Preferred Stock Dividend Requirement                                                    38               38               38
                                                                            ---------------  ---------------   --------------

Net Income Applicable to Common Stock                                               $8,401           $7,858           $7,780
                                                                            ===============  ===============   ==============

Weighted Average Common Shares Outstanding:
   Basic                                                                             7,619            7,605            7,593
   Diluted                                                                           7,662            7,633            7,609

Earnings Per Common Share:
   Basic                                                                             $1.10            $1.03            $1.02
   Diluted                                                                           $1.10            $1.03            $1.02
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
                Connecticut Water Service, Inc. and Subsidiaries


CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                                   (Restated)
December 31, (in thousands, except share amounts)                                     2001              2000
-------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>              <C>
ASSETS

  Utility Plant                                                                   $267,575          $257,634
  Construction Work in Progress                                                     12,761             8,359
  Utility Plant Acquisition Adjustments                                             (1,309)           (1,256)
                                                                             --------------   ---------------
                                                                                   279,027           264,737
  Accumulated Provision for Depreciation                                           (76,697)          (71,568)
                                                                             --------------   ---------------
    Net Utility Plant                                                              202,330           193,169
                                                                             --------------   ---------------
  Other Property and Investments                                                     3,334             3,039
                                                                             --------------   ---------------
  Cash                                                                                 102               314
  Accounts Receivable (Less Allowance, 2001 - $234; 2000 - $218)                     4,811             4,831
  Accrued Unbilled Revenues                                                          3,402             3,229
  Materials and Supplies, at Average Cost                                              869               795
  Prepayments and Other Current Assets                                                 239               122
                                                                             --------------   ---------------
    Total Current Assets                                                             9,423             9,291
                                                                             --------------   ---------------
  Unamortized Debt Issuance Expense                                                  5,308             5,530
  Unrecovered Income Taxes                                                           8,963             9,040
  Post-Retirement Benefits Other Than Pension                                          849               953
  Other Costs                                                                        1,507             1,524
                                                                             --------------   ---------------
    Total Deferred Charges and Regulatory Assets                                    16,627            17,047
                                                                             --------------   ---------------
         Total Assets                                                             $231,714          $222,546
                                                                             ==============   ===============

CAPITALIZATION AND LIABILITIES

      Common Stockholders' Equity:

      Common Stock without Par Value:
         Authorized - 15,000,000 Shares - Issued and Outstanding:

             2001  -  7,649,362;    2000  -  7,604,594                             $46,342           $44,965
       Retained Earnings                                                            24,441            22,145
                                                                             --------------   ---------------
          Common Stockholders' Equity                                               70,783            67,110
      Preferred Stock                                                                  847               847
      Minority Interest                                                                - -               117
      Long-Term Debt                                                                63,953            66,283
                                                                             --------------   ---------------

         Total Capitalization                                                      135,583           134,357
                                                                             --------------   ---------------
Interim Bank Loans Payable                                                           1,825             1,800
Current Portion of Long-Term Debt                                                    2,205               280
Accounts Payable                                                                     6,079             5,973
Accrued Taxes                                                                        1,099               753
Accrued Interest                                                                     1,284               710
Other Current Liabilities                                                              164               101
                                                                             --------------   ---------------
         Total Current Liabilities                                                  12,656             9,617
                                                                             --------------   ---------------
Advances for Construction                                                           16,075            17,062
                                                                             --------------   ---------------
Contributions in Aid of Construction                                                32,277            27,009
                                                                             --------------   ---------------
Deferred Federal and State Income Taxes                                             18,902            18,165
                                                                             --------------   ---------------
Unfunded Future Income Taxes                                                         8,223             8,546
                                                                             --------------   ---------------
Long-Term Compensation Arrangements                                                  6,028             5,758
                                                                             --------------   ---------------
Unamortized Investment Tax Credits                                                   1,970             2,032
                                                                             --------------   ---------------
Commitments and Contingencies

                                                                             --------------   ---------------
         Total Capitalization and Liabilities                                     $231,714          $222,546
                                                                             ==============   ===============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
                Connecticut Water Service, Inc. and Subsidiaries


CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                 (Restated)        (Restated)
For the Years Ended December 31,  (in thousands)                                     2001             2000              1999
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>              <C>              <C>
Operating Activities:
  Net Income Before Preferred Dividends                                            $8,439           $7,896            $7,818
                                                                            --------------   --------------   ---------------

  Adjustments to Reconcile Net Income to Net Cash
    Provided by Operating Activities:
        Depreciation (including $169 in 2001, $166 in 2000,
            and $140 in 1999 charged to other accounts)                             5,006            4,884             4,733
        Change in Assets and Liabilities:
             (Increase) Decrease in Accounts Receivable and

                  Accrued Unbilled Revenues                                          (153)             541               (66)
            (Increase) Decrease in Other Current Assets                              (191)             123               (24)
            (Increase) Decrease in Other Non-Current Items                            (45)              43               343
            Increase (Decrease) in Accounts Payable, Accrued
                 Expenses and Other Current Liabilities                             1,089              531               548
            Increase in Deferred Income Taxes and
                 Investment Tax Credits, Net                                          675            1,168             1,067
                                                                            --------------   --------------   ---------------
                    Total Adjustments                                               6,381            7,290             6,601
                                                                            --------------   --------------   ---------------

               Net Cash Provided by Operating Activities                           14,820           15,186            14,419
                                                                            --------------   --------------   ---------------

Investing Activities:
  Gross Additions to Utility Plant (including
     Allowance For Funds Used During Construction of

      $439 in 2001, $428 in 2000 and $454 in 1999)                                (14,218)         (10,542)          (10,373)
                                                                            --------------   --------------   ---------------

Financing Activities:
  Proceeds from Interim Bank Loans                                                  1,825            1,800             3,061
  Repayment of Interim Bank Loans                                                  (1,800)          (3,061)           (2,490)
  Reduction of Long-Term Debt Including Current Portion                              (405)            (805)             (517)
  Proceeds from Issuance of Common Stock                                            1,392              227               251
  Advances, Contributions and Funds from
    Others for Construction, Net                                                    4,332            2,310             2,097
  Costs Incurred to Issue Long-Term Debt and Common Stock                             (15)             - -               - -
  Cash Dividends Paid                                                              (6,143)          (5,928)           (5,726)
                                                                            --------------   --------------   ---------------

          Net Cash Provided by (Used in) Financing Activities                        (814)          (5,457)           (3,324)
                                                                            --------------   --------------   ---------------

Net Increase (Decrease) in Cash                                                      (212)            (813)              722
Cash at Beginning of Year                                                             314            1,127               405
                                                                            --------------   --------------   ---------------

Cash at End of Year                                                                  $102             $314            $1,127
                                                                            ==============   ==============   ===============

Supplemental Disclosures of Cash Flow Information:
  Cash Paid During the Year for:
    Interest (Net of Amounts Capitalized)                                          $3,836           $4,176            $4,678
    State and Federal Income Taxes                                                 $3,260           $3,580            $3,764
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
                                                                             F-6

NOTE 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION -The consolidated financial statements include the
operations of Connecticut Water Service, Inc., (the Company) an investor-owned
holding company and its ten wholly owned subsidiaries, listed below:

   The Connecticut Water Company (Connecticut Water)
   The Gallup Water Service, Incorporated (Gallup)
   Crystal Water Utilities Corporation
   The Crystal Water Company of Danielson (Crystal Water)
   Chester Realty, Inc.
   Connecticut Water Utility Services, Inc.
   Connecticut Water Emergency Services, Inc.
   Barnstable Holding Company
   The Barnstable Water Company (Barnstable Water)
   BARLACO

During 2001 the Company acquired Barnstable Holding Company which owns The
Barnstable Water Company and BARLACO. This acquisition was accounted for as a
"pooling-of-interests." Accordingly, the Company's financial statements have
been restated to include the results of the acquired companies for all periods
presented.

Connecticut Water, Gallup, Crystal, and Barnstable Water (our "water companies")
are public water utility companies serving 78,692 customers in 40 towns
throughout Connecticut and Massachusetts.

Crystal Water Utilities Corporation is a holding company, owning the stock of
Crystal Water Company of Danielson and three small rental properties.

Chester Realty, Inc. is a real estate company whose net profits from land sales
are included in the "Gain on Property Transactions" category in the "Other
Income (Deductions)" section of the Consolidated Statements of Income. Chester's
net profits from rental of property are included in the "Other Income
(Deductions)" section of the Consolidated Statements of Income in the "Non-Water
Sales Earnings" category.

Connecticut Water Utility Services, Inc. is engaged in water-related services,
including the Linebacker (R) program, and contract operations. Its earnings
are included in the "Non-Water Sales Earnings" category in the "Other Income
(Deductions)" section of the Consolidated Statements of Income.

Connecticut Water Emergency Services, Inc. is a provider of emergency drinking
water and pool water via tanker trucks. Its net earnings are included in the
"Non-Water Sales Earnings" category in the "Other Income (Deductions)" section
of the Consolidated Statements of Income.

Barnstable Holding Company is a holding company, owning the stock of Barnstable
Water Company and BARLACO. BARLACO is a real estate company whose net profits
from land sales are included in "Gain on Property Transactions" category in the
"Other Income (Deductions)" section of the Consolidated Statements of Income.

Intercompany accounts and transactions have been eliminated, except those
allocating costs for regulatory purposes between our regulated and non-regulated
companies.

PUBLIC UTILITY REGULATION - Three of our water companies are subject to
regulation for rates and other matters by the Connecticut Department of Public
Utility Control (DPUC) and follow accounting policies prescribed by the DPUC.
The Barnstable Water Company is subject to the regulation of the Massachusetts
Department of Telecommunications and Energy (DTE) and follows accounting
policies prescribed by the DTE. The Company prepares its financial statements in
accordance with accounting principles generally accepted in the United States
which include the provisions of Statement of Financial Accounting Standards No.
71, "Accounting for the Effects of Certain Types of Regulation," (FAS 71). FAS
71 requires cost-based, rate-regulated enterprises such as our water companies
to reflect the impact of regulatory decisions in their financial statements. The
state regulators, 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 benefits 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 FAS 71. Material regulatory assets are earning
a return.

USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States 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 revenue and
expenses during the reporting period. Actual results could differ from these
estimates.


CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                             F-7

REVENUES - Most of our water customers are billed quarterly, with the exception
of larger commercial and industrial customers, as well as public fire protection
customers, who are billed monthly. Most customers, except fire protection
customers, are metered. Revenues from metered customers are based on their usage
multiplied by approved, regulated rates. Public fire protection charges are
based on the length and diameter of the water main and number of hydrants in
service. Private fire protection charges are based on the diameter of the
connection to the water main. Our water companies accrue an estimate for the
amount of revenues relating to sales earned but unbilled at the end of each
quarter.

UTILITY PLANT - Utility plant is stated at the original cost of such property
when first devoted to public service. The difference between the original cost
and the cost to our water companies is charged or credited to utility plant
acquisition adjustments. Utility plant accounts are charged with the cost of
improvements and replacements of property including an allowance for funds used
during construction. Retired or disposed of depreciable plant is charged to
accumulated provision for depreciation together with any costs applicable to
retirement, less any salvage received. Maintenance of utility plant is charged
to expense.

ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION - Allowance for Funds Used During
Construction (AFUDC) is the cost of debt and equity funds used to finance the
construction of our water companies' utility plant. Generally, utility plant
under construction is not recognized as part of rate base for ratemaking
purposes until facilities are placed into service, and accordingly, AFUDC is
charged to the construction cost of utility plant. Capitalized AFUDC, which does
not represent current cash income, is recovered through rates over the service
lives of the facilities.

In order for certain water system acquisitions made in and after 1995 not to
degrade earnings, The Connecticut Water Company has received DPUC approval to
record AFUDC on certain of its investments in these systems. Through December
31, 2001, Connecticut Water has capitalized approximately $1,937,000 of AFUDC
relating to financing these acquisitions. This amount is expected to be
recovered in Connecticut Water's next rate case.

Each Company's allowed rate of return on rate base is used to calculate its
AFUDC.

DEPRECIATION - Over 99% of the Company's depreciable plant is owned by its four
water companies. Depreciation is computed on a straight-line basis at various
rates as approved by the state regulators on a company by company basis.
Depreciation allows the utility to recover the investment in utility plant over
its useful life. The overall consolidated company depreciation rates, based on
the average balances of depreciable property, were 2.0% for 2001, 2.1% for 2000
and 2.1% for 1999.

CUSTOMERS' ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF CONSTRUCTION
Under the terms of construction contracts with real estate developers and
others, our water companies receive advances for the costs of new main
installations. Refunds are made, without interest, as services are connected to
the main, over periods not exceeding fifteen years and not in excess of the
original advance. Unrefunded balances, at the end of the contract period, are
credited to contributions in aid of construction (CIAC) and are no longer
refundable.

INCOME TAXES - The Company provided deferred taxes for all temporary book-tax
differences using the liability method. Under the liability method, deferred
income taxes are recognized at currently enacted income tax rates to reflect the
tax effect of temporary differences between the financial reporting and tax
bases of assets and liabilities. Such temporary differences are the result of
provisions in the income tax law that either require or permit certain items to
be reported on the income tax return in a different period than they are
reported in the financial statements. To the extent such income taxes increase
or decrease future rates, an offsetting regulatory asset or liability has been
recorded in the accompanying consolidated balance sheets.

The Company believes that all deferred income tax assets will be realized in the
future. Approximately $700,000 of the December 31, 2001 and $1,250,000 of the
December 31, 2000 unfunded future income taxes are related to deferred Federal
income taxes. The remaining balance of the unfunded future income taxes is
related to deferred State income taxes.

Deferred Federal income taxes consist primarily of amounts that have been
provided for accelerated depreciation subsequent to 1981, as required by Federal
income tax regulations. Deferred taxes have also been provided for temporary
differences in the recognition of certain expenses for tax and financial
statement purposes as allowed by DPUC ratemaking policies.

Connecticut Corporation Business Taxes have been reflected primarily using the
flow-through method of accounting for temporary differences in accordance with
required DPUC ratemaking policies.

MUNICIPAL TAXES - Municipal taxes are expensed over the twelve-month period
beginning on July 1 following the lien date, corresponding with the period in
which the municipal services are provided.

OTHER DEFERRED COSTS - In accordance with ratemaking procedures, costs which
benefit future periods, such as tank painting, are expensed over the periods
they benefit.

UNAMORTIZED DEBT ISSUANCE EXPENSE - The issuance costs of long-term debt,
including the remaining balance of issuance costs on long-term debt issues that
have been refinanced prior to maturity and related call premiums, are amortized
over the respective lives of the outstanding debt, as approved by the state
regulators.


CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                             F-8

EARNINGS PER SHARE - The following is a reconciliation of the numerators and
denominators of the basic and diluted earnings per share for the twelve months
ended December 31, 2001, 2000, and 1999.
<TABLE>
<CAPTION>
Years  Ended                                                                 2001             2000            1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>              <C>            <C>
Basic earnings per share                                                    $1.10            $1.03           $1.02
Dilutive effect of unexercised stock options                                   --               --              --
------------------------------------------------------------------------------------------------------------------

Diluted earnings per share                                                  $1.10            $1.03           $1.02
==================================================================================================================

Numerator (in thousands):
------------------------------------------------------------------------------------------------------------------

Basic net income                                                            $8,401           $7,858         $7,780
Diluted net income                                                          $8,401           $7,858         $7,780


Denominator (in thousands):
------------------------------------------------------------------------------------------------------------------

Basic weighted average shares outstanding                                    7,619            7,605          7,593
Dilutive effect of unexercised stock options                                    43               28             16
------------------------------------------------------------------------------------------------------------------

Diluted weighted average shares outstanding                                  7,662            7,633          7,609
==================================================================================================================
</TABLE>

RECLASSIFICATION - Certain reclassifications have been made to conform
previously reported data to the current presentation.

NEW ACCOUNTING PRONOUNCEMENTS - In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards (FAS) No. 141,
Business Combinations, which requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001 and eliminates
the pooling-of-interests method. The Company adopted this standard for business
combinations after June 30, 2001.

In June 2001, the FASB issued FAS No. 142, Goodwill and Other Intangible Assets,
effective for the Company's 2002 fiscal year. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be amortized
but will be subject to at least annual impairment tests. Other identifiable
intangible assets will continue to be amortized over their useful lives and
reviewed for impairment in accordance with existing impairment standards. The
Company does not believe that the adoption of this statement will have a
material impact on the financial statements.

In October 2001, the FASB issued FAS No. 144, Accounting for Impairment or
Disposal of Long-Lived Assets, which replaces FAS 121. FAS 144 retaines
substantially all of the requirements of FAS 121 while resolving certain
implementation issues. FAS 144 also changes accounting for discontinued
operations. FAS No. 144 is effective for fiscal year 2002. The Company does not
believe that the adoption of this statement will have a material impact on the
financial statements.

NOTE 2: 2001 POOLING OF INTERESTS ACQUISITION

On February 23, 2001 the Company issued 216,656 shares of its common stock in
exchange for all outstanding common stock of Barnstable Holding Company. The
minority interests in the Barnstable Water Company and BARLACO were also
acquired in this transaction.

The combined and separate results of Connecticut Water Service and Barnstable
Holding Company during the period preceding and after the merger were as
follows:
<TABLE>
<CAPTION>
(In thousands)                                                               2001             2000            1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>              <C>            <C>
Net Income (Loss) Applicable to Common Stock
   Connecticut Water Service                                                $8,641           $7,925         $7,489
   Barnstable Holding Company                                                (240)             (67)            291
------------------------------------------------------------------------------------------------------------------
      Combined Net Income                                                   $8,401           $7,858         $7,780
==================================================================================================================
</TABLE>


CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                             F-9

NOTE 3: COMMON STOCK SPLIT

In September 2001 the Company effected a three-for-two common stock split. The
distribution of these shares increased the number of shares outstanding by
2,562,052 shares. In conjunction with the stock split, a cash payment was issued
to shareholders in lieu of issuance of any fractional shares. The fractional
share adjustment amounted to a reduction of shares outstanding of 752 shares,
after the split. All outstanding common shares and per share amounts in this
report have been restated to reflect the stock split. Appropriate adjustments to
reflect the stock split were made to the Company's Performance Stock Program.

NOTE 4:  INCOME TAX EXPENSE

Income Tax Expense is comprised of the following:
<TABLE>
<CAPTION>
(In thousands)                                                                 2001            2000           1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>            <C>            <C>
Federal Classified as Operating Expense                                      $4,225          $4,002         $4,448
Federal Classified as Other Income:
   Land Sales                                                                    --              32             52
   Land Donation                                                               (254)           (132)            --
   Non-Water Sales                                                              164             127             68
   Other                                                                        (42)            (21)           (65)
------------------------------------------------------------------------------------------------------------------
   Total Federal Income Tax Expense                                           4,093           4,008          4,503
------------------------------------------------------------------------------------------------------------------

State Classified as Operating Expense                                           552             577            709
State Classified as Other Income:
   Land Sales                                                                    --               7             12
   Land Donation                                                             (1,012)           (526)            --
   Non-Water Sales                                                               41              29             19
   Other                                                                          6               6              5
------------------------------------------------------------------------------------------------------------------

   Total State Income Tax Expense (Benefit)                                    (413)             93            745
==================================================================================================================
              Total Income Tax Expense                                       $3,680          $4,101         $5,248
==================================================================================================================
</TABLE>

The components of the Federal and State income tax provisions are:
<TABLE>
<CAPTION>
                                                                               2001            2000           1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>             <C>            <C>
Current:
   Federal                                                                   $3,062          $2,853         $3,434
   State                                                                        (48)             80            747
------------------------------------------------------------------------------------------------------------------
       Total Current                                                          3,014           2,933          4,181
------------------------------------------------------------------------------------------------------------------

Deferred Income Taxes, Net:
   Federal
       Investment Tax Credit                                                    (63)            (61)           (63)
       Capitalized Interest                                                      23              42             36
       Depreciation                                                             910           1,119          1,115
       Other                                                                    161              55            (19)
------------------------------------------------------------------------------------------------------------------
           Total Federal                                                      1,031           1,155          1,069
------------------------------------------------------------------------------------------------------------------

   State

       Depreciation                                                              (1)              2              2
       Other                                                                   (364)             11             (4)
------------------------------------------------------------------------------------------------------------------
           Total State                                                         (365)            13              (2)
==================================================================================================================
              Total Deferred Income Taxes, Net                                   666          1,168          1,067
------------------------------------------------------------------------------------------------------------------
              Total                                                           $3,680         $4,101         $5,248
==================================================================================================================
</TABLE>

Deferred income tax liabilities are categorized as follows on the Consolidated
Balance Sheet:

<TABLE>
<CAPTION>
                                                                               2001            2000
---------------------------------------------------------------------------------------------------
<S>                                                                         <C>             <C>
   Deferred Federal and State Income Taxes                                  $18,902         $18,165
   Unfunded Future Income Taxes                                               8,223           8,546
---------------------------------------------------------------------------------------------------
                                                                            $27,125         $26,711
===================================================================================================
</TABLE>


CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                            F-10

Deferred income tax liabilities are comprised of the following:
<TABLE>
<CAPTION>
                                                                               2001            2000
---------------------------------------------------------------------------------------------------
<S>                                                                         <C>             <C>
   Depreciation                                                             $24,057         $23,147
   Other                                                                      3,068           3,564
---------------------------------------------------------------------------------------------------
           Net deferred income tax liability                                $27,125         $26,711
---------------------------------------------------------------------------------------------------
</TABLE>

The calculation of Pre-Tax Income is as follows:
<TABLE>
<CAPTION>
                                                                                2001           2000           1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>            <C>            <C>
Pre-Tax Income
   Net Income Before Preferred Dividends                                      $8,439         $7,896         $7,818
   Minority Interest Included (Deducted) Above                                    --            (19)            18
   Income Taxes                                                                3,680          4,101          5,248
------------------------------------------------------------------------------------------------------------------
              Total Pre-Tax Income                                           $12,119        $11,978        $13,084
------------------------------------------------------------------------------------------------------------------
</TABLE>

In accordance with required regulatory treatment, deferred income taxes are not
provided for certain timing differences. This treatment, along with other items,
causes differences between the statutory income tax rate and the effective
income tax rate. The differences between the effective income tax rate recorded
by the Company and the statutory Federal tax rate are as follows:

<TABLE>
<CAPTION>
                                                                               2001            2000           1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>            <C>            <C>
Federal Statutory Income Tax Rate                                             34.0%           34.0%         34.0%
   Tax Effect of Differences:
       State Income Taxes Net of Federal Benefit:
           State Income Tax Excluding Land Donation Credit                     3.3%            3.4%          4.0%
           Land Donation Credit                                               (5.5%)         (2.9%)             --
       Depreciation                                                            1.2%            1.8%          1.2%
       Charitable Contribution - Land Donation                                (4.5%)         (2.1%)             --
       Pension Costs                                                            .6%             .3%           .2%
       Debt Refinancing Costs                                                   .2%             .2%           .2%
       Non-deductible Merger Costs                                             1.0%            1.5%            .4%
       Bad Debt                                                                   --          (.9%)            .6%
       Other                                                                    .1%          (1.1%)         (.5%)
------------------------------------------------------------------------------------------------------------------
              Effective Income Tax Rate                                       30.4%           34.2%         40.1%
------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE 5:  COMMON STOCK

On August 6, 2001, at a Special Meeting of the Company's shareholders, the
shareholders approved an amendment to the Company's Amended and Restated
Certificate of Incorporation increasing the number of authorized shares of no
par value common stock to 15,000,000 from 7,500,000 shares. A summary of the
changes in the common stock accounts for the period of January 1, 1999 through
December 31, 2001, appears below:

<TABLE>
<CAPTION>
                                                                            Issuance
(In thousands, except share data)                                Shares       Amount        Expense          Total
------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>            <C>            <C>
Balance, January 1, 1999 (restated)                           7,580,880      $45,872       $(1,385)        $44,487

   Stock and equivalents issued through
       Performance Stock Program                                 15,261          251             --            251
------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 (restated)                         7,596,141       46,123        (1,385)         44,738

   Stock and equivalents issued through
       Performance Stock Program                                  8,453          227             --            227
------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 (restated)                         7,604,594       46,350        (1,385)         44,965

   Purchase Minority Interest of Barnstable

       Holding Company                                               --          125             --            125
   Stock Split - fractional shares                                (752)           --           (11)           (11)
   Stock and equivalents issued through
       Performance Stock Program                                  5,353          457             --            457
   Stock Options Exercised                                       40,167          810            (4)            806
------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001 (1)                                7,649,362      $47,742       $(1,400)        $46,342
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
                                                                            F-11

(1)      Includes 999 restricted and 31,170 common stock equivalent shares
         issued through the Performance Stock Program through December 31, 2001.

The Company's Shareholder Rights Plan was authorized by the Board of Directors
on August 12, 1998. Pursuant to the Plan, the Board authorized a dividend
distribution of one Right to purchase one one-hundredth of a share of Series A
Junior Participating Preference Stock of the Company for each outstanding share
of the Company's common stock. The distribution was effected October 11, 1998.

Upon the terms of the Shareholder Rights Plan, each Right will entitle
shareholders to buy one one-hundredth of a share of Series A Junior
Participating Preference Stock at a purchase price of $90, and the Rights will
expire October 11, 2008. The Rights will be exercisable only if a person or
group acquires 15% or more of the Company's common stock or announces a tender
or exchange offer for 15% or more of the Company's common stock. The Board will
be entitled to redeem the Rights at $0.01 per Right at any time before such
acquisition occurs and upon certain conditions after such a position has been
acquired.

Upon the acquisition of 15% or more of the Company's common stock by any person
or group, each Right will entitle its holder to purchase, at the Right's
purchase price, a number of shares of the Company's common stock having a market
value equal to twice the Right's purchase price. In such event, Rights held by
the acquiring person will not be allowed to purchase any of the Company's common
stock or other securities of the Company. If, after the acquisition of 15% or
more of the Company's common stock by any person or group, the Company should
consolidate with or merge with and into any person and the Company should not be
the surviving company, or, if the Company should be the surviving company and
all or part of its common stock should be exchanged for the securities of any
other person, or if more than 50% of the assets or earning power of the Company
were sold, each Right (other than Rights held by the acquiring person, which
will become void) will entitle its holder to purchase, at the Right's purchase
price, a number of shares of the acquiring Company's common stock having a
market value at that time equal to twice the Right's purchase price.

The Company may not pay any dividends on its common stock unless full cumulative
dividends to the preceding dividend date for all outstanding shares of Preferred
Stock of the Company have been paid or set aside for payment. All such Preferred
Stock dividends have been paid.

NOTE 6:  ANALYSIS OF RETAINED EARNINGS

The summary of the changes in Retained Earnings for the period of January 1,
1999 through December 31, 2001, appears below:

<TABLE>
<CAPTION>
(In thousands)                                                                 2001            2000           1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>             <C>            <C>
Balance, Beginning of Year (restated)                                       $22,145         $20,177        $18,085
Income Before Preferred Stock Dividends                                       8,439           7,896          7,818
------------------------------------------------------------------------------------------------------------------
                                                                             30,574          28,073         25,903
------------------------------------------------------------------------------------------------------------------


Dividends Declared:
   Cumulative Preferred Stock, Series A, $.80 Per Share                          12              12             12
   Cumulative Preferred Stock, Series $.90, $.90 Per Share                       26              26             26


   Common Stock:
       2001 $0.80 Per Share                                                   6,105              --             --
       2000 $0.77 Per Share                                                      --           5,890             --
       1999 $0.75 Per Share                                                      --              --          5,688
------------------------------------------------------------------------------------------------------------------
                                                                              6,143           5,928          5,726
------------------------------------------------------------------------------------------------------------------
Balance, End of Year                                                        $24,441         $22,145        $20,177
------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE 7:  FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of
each of the following financial instruments.

CASH - The carrying amount approximates fair value.

LONG-TERM DEBT - The fair value of the Company's fixed rate long-term debt is
based upon borrowing rates currently available to the Company. As of December
31, 2001 and 2000, the estimated fair value of the Company's long-term debt was
$62,726,000 and $64,268,000, respectively, as compared to the carrying amounts
of $63,953,000 and $66,283,000, respectively.

CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                            F-12

The fair values shown above have been reported to meet the disclosure
requirements of Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Values of Financial Instruments" and do not purport to
represent the amounts at which those obligations would be settled.

NOTE 8:  LONG-TERM DEBT

Long-Term Debt at December 31, consisted of the following:

<TABLE>
<CAPTION>
(In thousands)                                                                                 2001           2000
------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>            <C>

The Connecticut Water Company
   First Mortgage Bonds:
       5.875%     Series R, Due 2022                                                        $14,670        $14,670
       6.65%      Series S, Due 2020                                                          8,000          8,000
       5.75%      Series T, Due 2028                                                          5,000          5,000
       5.3%       Series U, Due 2028                                                          4,550          4,550
       6.94%      Series V, Due 2029                                                         12,050         12,050
------------------------------------------------------------------------------------------------------------------
                                                                                             44,270         44,270

   Unsecured Water Facilities Revenue Refinancing Bonds
       5.05%      1998 Series A, Due 2028                                                     9,705          9,770
       5.125%     1998 Series B, Due 2028                                                     7,770          7,830
------------------------------------------------------------------------------------------------------------------
                                                                                             17,475         17,600

   Other
       5.5%       Unsecured Promissory Note, Due 2002                                            37             71
------------------------------------------------------------------------------------------------------------------

       Total Connecticut Water Company                                                       61,782         61,941


Crystal Water Utilities Corporation
       8.0%       Westbank (formerly Cargill Bank), Due 2017                                    126            130
------------------------------------------------------------------------------------------------------------------

Crystal Water Company of Danielson
       7.82%      Connecticut Development Authority, Due 2020                                   495            507
       8.0%       Westbank (formerly Cargill Bank), Due 2011                                  2,033          2,170
------------------------------------------------------------------------------------------------------------------
       Total Crystal Water Company of Danielson                                               2,528          2,677


Chester Realty
       6%         Note Payable, Due 2006                                                         97            115
------------------------------------------------------------------------------------------------------------------

Barnstable Water Company
       10.2%      Indianapolis Life Insurance, Due 2011                                       1,625          1,700
------------------------------------------------------------------------------------------------------------------

       Total Connecticut Water Service, Inc.                                                 66,158         66,563

           Less Current Portion                                                              (2,205)          (280)
------------------------------------------------------------------------------------------------------------------

                 Total Long-Term Debt                                                       $63,953        $66,283
------------------------------------------------------------------------------------------------------------------
</TABLE>

The Company's principal payments required for years 2002 - 2006 are as follows:

(In thousands)
<TABLE>
 <S>       <C>
 2002  -   $ 2,205
 2003  -   $   139
 2004  -   $   142
 2005  -   $   156
 2006  -   $   123
</TABLE>

Substantially all utility plant is pledged as collateral for long-term debt.


CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                            F-13

There are no mandatory sinking fund payments required on Connecticut Water
Company's outstanding First Mortgage Bonds or the Unsecured Water Facilities
Revenue Refinancing Bonds. However, the Series R First Mortgage Bonds and the
1998 Series A and B Unsecured Water Facilities Revenue Refinancing Bonds provide
for an estate redemption right whereby the estate of deceased bondholders or
surviving joint owners may submit bonds to the Trustee for redemption at par
subject to a $25,000 per individual holder and a 3% annual aggregate limitation.

The call price of the Series R bonds will reduce annually until the year 2003,
when the call price becomes 100%. Series R bonds are callable for redemption at
101.0% from September 1, 2001 through August 31, 2002.

The other outstanding bonds may be initially called for redemption by the
Company at the following dates and prices - Series S, December 15, 2003 at 102%;
Series T, July 1, 2003 and Series U, September 1, 2003 at 100% plus accrued
interest to the date of redemption; Series V, January 1, 2004 at 103.5%, 1998
Series A and B Unsecured Water Facilities Revenue Refinancing Bonds, March 1,
2008 at 100% plus accrued interest.

The Crystal Water Company of Danielson's loan with Westbank (formerly Cargill
Bank), with a final maturity date of February 2011; contains a prepayment
premium of 1% of the outstanding balance during the fifth year (February 2001)
through and including the seventh year (February 2003) of the Loan. As of
December 31, 2001 the Company intends to prepay this note in 2002.

Barnstable Water Company's note payable has been unconditionally guaranteed by
the Company. The note agreement with Indianapolis Life Insurance Company
requires the Company to meet certain financial covenants, restricts the
Company's ability to incur additional debt unless certain financial tests are
met, restricts liens to secure additional long-term borrowings, restricts the
type of investments that the Company can purchase and contains a significant
prepayment premium. The Company was in compliance with the restrictive covenants
at December 31, 2001.

NOTE 9:  PREFERRED STOCK

The Company's Preferred Stock at December 31, consisted of the following:

<TABLE>
<CAPTION>
(In thousands, except share data)                                                              2001           2000
------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>            <C>
Connecticut Water Service, Inc.
   Cumulative Series A Voting, $20 Par Value; Authorized, Issued and
       Outstanding 15,000 Shares                                                               $300           $300
   Cumulative Series $.90 Non-Voting, $16 Par Value; Authorized 50,000
       Shares, Issued and Outstanding 29,499 Shares                                             472            472
------------------------------------------------------------------------------------------------------------------
                                                                                                772            772
Barnstable Water Company
   6% Cumulative, $100 Par Value; Authorized, Issued and
       Outstanding 750 Shares                                                                    75             75
------------------------------------------------------------------------------------------------------------------
           Total  Preferred Stock                                                              $847           $847
==================================================================================================================
</TABLE>

All or any part of any series of either class of the Company's issued Preferred
Stock may be called for redemption by the Company at any time. The per share
redemption prices of the Series A and Series $.90 Preferred Stock, if called by
the Company, are $21.00 and $16.00, respectively.

The Company is authorized to issue 400,000 shares of an additional class of
Preferred Stock, $25 par value, the general preferences, voting powers,
restrictions and qualifications of which are similar to the Company's existing
Preferred Stock. No shares of the $25 par value Preferred Stock have been
issued.

The Company is also authorized to issue 1,000,000 shares of $1 par value
Preference Stock, junior to the Company's existing Preferred Stock in rights to
dividends and upon liquidation of the Company. 150,000 of such shares have been
designated as "Series A Junior Participating Preference Stock". Pursuant to the
Shareholder Rights Plan, described in Note 5, the Company keeps reserved and
available for issuance one one-hundredth of a share of Series A Junior
Participating Preference Stock for each outstanding share of the Company's
common stock.

Barnstable Water Company paid Preferred Dividends of $4,500 in 2001, 2000 and
1999. These Dividends are included in the Other category of the Other Income
(Deductions) section of the Income Statement. These preferred shareholders have
1/10 of a common vote for matters related to Barnstable Water Company.

NOTE 10:  BANK LINES OF CREDIT

The Company has a total of $9,000,000 in lines of credit provided by two banks.
The lines of credit expire in April and May of 2002. We expect both lines of
credit to be renewed. The total available on the lines of credit as of December
31, 2001 was $7,175,000. Bank commitment fees associated with the lines of
credit were approximately $22,500, $24,750, and $25,000 in 2001, 2000, and 1999
respectively.

At December 31, 2001 and 2000, the weighted average interest rates on short-term
borrowings outstanding were 2.31% and 7.25%, respectively.


CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                            F-14


NOTE 11:  UTILITY PLANT AND CONSTRUCTION PROGRAM

The components of utility plant and equipment at December 31, are as follows:

<TABLE>
<CAPTION>
(In thousands)                                                               2001              2000
---------------------------------------------------------------------------------------------------
<S>                                                                        <C>             <C>
Land                                                                       $  9,404        $  9,340
Source of Supply                                                             17,087          16,090
Pumping                                                                      20,331          19,134
Water Treatment                                                              44,585          44,173
Transmission and Distribution                                               159,924         153,370
General (including intangible)                                               15,784          15,046
Held for Future Use                                                             460             481
---------------------------------------------------------------------------------------------------
       Total                                                               $267,575        $257,634
---------------------------------------------------------------------------------------------------
</TABLE>

The amounts of depreciable utility plant at December 31, 2001 and 2000 included
in total utility plant were $249,775,000 and $237,149,000, respectively.

Our water companies are engaged in continuous construction programs. Estimated
annual capital expenditures, net of amounts financed by customer advances and
contributions in aid of construction, are expected to be approximately
$10,155,000 during 2002, $9,124,000 during 2003, and $9,403,000 in 2004. During
the period 2005 to 2006, construction expenditures for routine improvements to
the water distribution system are expected to be approximately $8,000,000 each
year.

NOTE 12:  TAXES OTHER THAN INCOME TAXES

Taxes Other than Income Taxes consist of the following:

<TABLE>
<CAPTION>
(In thousands)                                                                 2001            2000           1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>            <C>            <C>

Municipal Property Taxes                                                      $3,788         $4,070         $3,817
Payroll Taxes                                                                    600            588            579
------------------------------------------------------------------------------------------------------------------

         Total                                                                $4,388         $4,658         $4,396
------------------------------------------------------------------------------------------------------------------
</TABLE>


NOTE 13:  PENSION AND OTHER POST-RETIREMENT EMPLOYEE BENEFITS

GENERAL - As of December 31, 2001, Connecticut Water Company had 161 employees,
Gallup 4, Crystal 6, Connecticut Water Emergency Services 1, and Barnstable
Water Company 9, for a total of 181 employees. The Company's officers are
employees of The Connecticut Water Company. Employee expenses are charged
between companies as appropriate.

ALL COMPANIES EXCLUDING BARNSTABLE:

PENSION - The Company and certain of its subsidiaries have noncontributory
defined benefit pension plans covering qualified employees. In general, the
Company's policy is to fund accrued pension costs as permitted by Federal income
tax and ERISA regulations. No funding was made for 2001. In 2000, a funding of
$105,000 was made.

POST-RETIREMENT BENEFITS OTHER THAN PENSION (PBOP) - In addition to providing
pension benefits, the subsidiary company, The Connecticut Water Company provides
certain medical, dental and life insurance benefits to retired employees
partially funded by a 501(c)(9) Voluntary Employee Beneficiary Association Trust
that has been approved by the DPUC. Substantially all of The Connecticut Water
Company's employees may become eligible for these benefits if they retire on or
after age 55 with 10 years of service. The contributions for calendar years
2001, 2000, and 1999, were $473,100 for each year.

A deferred regulatory asset has been recorded to reflect the amount which
represents the future operating revenues expected to be recovered in customer
rates under FAS 106. In 1997, The Connecticut Water Company requested and
received approval from the DPUC to include FAS 106 costs in customer rates. The
DPUC's 1997 limited reopener of The Connecticut Water Company's general rate
proceeding allowed it to increase customer rates $208,000 annually for FAS 106
costs. The Connecticut Water Company's current rates now allow for recovery of
$473,100 annually for post-retirement benefit costs other than pension.

The Connecticut Water Company has elected to recognize the transition obligation
on a delayed basis over a period equal to the plan participants' 21.6 years of
average future service.


CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                            F-15


The following tables set forth the funded status of the Company's retirement
plans and post-retirement health care benefits at December 31, the latest
valuation date:

<TABLE>
<CAPTION>
                                                            PENSION BENEFITS                   OTHER BENEFITS
(In thousands)                                           2001             2000             2001             2000
-----------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>              <C>              <C>
Change in Benefit Obligation:

Benefit obligation, beginning of year                 $ 16,119         $ 13,505         $  4,037         $  3,863
Service Cost                                               582              528              190              141
Interest Cost                                            1,163            1,060              276              283
Plan Participant Contributions                             N/A              N/A               40               37
Plan Amendments                                             16               --               --               --
Actuarial loss/(gain)                                      387            1,723              (43)               2
Benefits paid                                             (928)            (697)            (329)            (289)
-----------------------------------------------------------------------------------------------------------------
Benefit obligation, end of year                       $ 17,339         $ 16,119         $  4,171         $  4,037
-----------------------------------------------------------------------------------------------------------------
Change in Plan Assets:

Fair Value, beginning of year                         $ 19,218         $ 19,367         $  2,545         $  2,459
Actual return on plan assets                              (120)             443              (45)            (134)
Employer contribution                                       --              105              473              473
Participants' contributions                                N/A              N/A               40               36
Benefits paid                                             (928)            (697)            (329)            (289)
-----------------------------------------------------------------------------------------------------------------
Fair Value, end of year                               $ 18,170         $ 19,218         $  2,684         $  2,545
-----------------------------------------------------------------------------------------------------------------
Funded Status                                         $    831         $  3,099         $ (1,487)        $ (1,492)
Unrecognized net actuarial gain                         (3,780)          (6,039)          (1,175)          (1,440)
Unrecognized transition obligation                          22               (8)           1,814            1,979
Unrecognized prior service cost                          1,122            1,207              N/A              N/A
-----------------------------------------------------------------------------------------------------------------
Accrued Cost                                          $ (1,805)        $ (1,741)        $   (848)        $   (953)
-----------------------------------------------------------------------------------------------------------------
Weighted-average assumptions as of December 31:
         Discount rate                                    7.25%             7.5%            7.25%             7.5%
         Expected return on plan assets                    8.0%             8.0%             5.0%             5.0%
         Rate of compensation increase                     4.5%             4.5%             N/A              N/A
</TABLE>


CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                            F-16

<TABLE>
<CAPTION>
                                                              PENSION BENEFITS                    OTHER BENEFITS

(IN THOUSANDS)                                          2001        2000        1999        2001       2000        1999
-----------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>         <C>         <C>           <C>        <C>         <C>
Components of net periodic benefit costs
Service cost                                            $582        $528        $552        $190       $141        $173
Interest cost                                          1,163       1,060       1,018         276        283         268
Expected return on plan assets                        (1,397)     (1,306)     (1,210)       (128)      (110)        (94)

Amortization of:
    Unrecognized net transition asset                    (30)        (30)        (30)        165        165         165
    Unrecognized net (gain)/loss                        (356)       (269)       (144)       (135)      (135)       (106)
    Unrecognized prior service cost                      101          48          47          --         --          --
Settlement (gain)/loss                                    --          --        (185)         --         --          --
-----------------------------------------------------------------------------------------------------------------------
Net Periodic Pension Costs                               $63         $31         $48        $368       $344        $406
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

In determining the 2001 accumulated post-retirement benefit obligation, health
care cost trends were assumed to be 8.5% grading 0.5% per year to 4%. In
comparison, the 2000 health care cost trends were assumed to be 5.5%.

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


<TABLE>
<CAPTION>
                                                                       1-PERCENTAGE-POINT              1-PERCENTAGE-POINT
(In thousands)                                                              INCREASE                       DECREASE
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>                             <C>
Effect on total of service and interest cost components                      $   72                        $    (59)
Effect on post-retirement benefit obligation                                 $  468                        $   (396)
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN - Connecticut Water provides additional
pension benefits to senior management through a supplemental executive
retirement plan. At December 31, 2001 the actuarial present value of the
projected benefit obligation was $729,000. Expense associated with this plan was
$93,000 for 2001, $102,000 for 2000, and $76,000 for 1999.

SAVINGS PLAN - The Company and certain of its subsidiaries maintains an employee
savings plan which allows participants to contribute from 1% to 15% of pre-tax
compensation. The Company matches 50 cents for each dollar contributed by the
employee up to 4% of the employee's compensation. The contribution charged to
expense in 2001, 2000 and 1999 was $150,000, $139,000, and $127,000,
respectively.

Effective for 1999 the Plan was modified to create the possibility for an
"incentive bonus" contribution to the 401(k) plan tied to the attainment of a
specific goal or goals to be identified each year. If the specific goal or goals
are attained by the end of the year, all employees, except officers and certain
key employees, will receive up to an additional 1% of their annual base salary
as a direct contribution to their 401(k) account. In 1999 the goal was not met
and therefore no incentive contribution was made. An incentive bonus of .6% of
base pay, or $41,000 and $37,000, was awarded in 2001 and 2000, respectively.

BARNSTABLE WATER:

PENSION - Barnstable Water Company has a trusteed, non-contributory defined
benefit retirement plan (the Pension Plan) which covers all employees who have
completed one year of service. Benefits under the Pension Plan are based on
credited years of service and "average earnings", as defined in the Pension
Plan. Contributions of $55,000 were made in both 2001 for the 2000 plan year and
in 2000 for the 1999 plan year. The Company expects to make a contribution of
approximately $45,000 for the 2001 plan year in 2002.

POST-RETIREMENT  BENEFITS  OTHER THAN PENSION  (PBOP) - In addition to providing
pension  benefits,  Barnstable  Water  provides  certain health care benefits to
eligible retired employees. The Company has incurred annual expenses for PBOP of
$12,000,  $11,000  and  $14,000  for  2001,  2000 and  1999,  respectively.  The
Company's PBOP currently is not funded.


CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                            F-17


BARNSTABLE WATER:
<TABLE>
<CAPTION>
                                                          PENSION BENEFITS                   OTHER BENEFITS
(In thousands)                                          2001           2000                2001            2000
----------------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>                <C>             <C>
Change in Benefit Obligation:

Benefit obligation, beginning of year                 $ 1,347         $ 1,305            $    86         $    78
Service Cost                                               32              32                  4               3
Interest Cost                                              98             102                  6               6
Actuarial loss/(gain)                                     (12)            (16)               (10)              2
Benefits paid                                             (84)            (76)                (3)             (3)
----------------------------------------------------------------------------------------------------------------

Benefit obligation, end of year                       $ 1,381         $ 1,347            $    83         $    86
----------------------------------------------------------------------------------------------------------------

Change in Plan Assets:

Fair Value, beginning of year                         $ 1,301         $ 1,422            $    --         $    --
Actual return on plan assets                              (99)           (100)                 3              --
Employer contribution                                      55              55                 --              --
Participants' contributions                               N/A             N/A                 --              --
Benefits paid                                             (84)            (76)                (3)             --
----------------------------------------------------------------------------------------------------------------

Fair Value, end of year                               $ 1,173         $ 1,301            $    --         $    --
----------------------------------------------------------------------------------------------------------------

Funded Status                                         $  (208)        $   (46)           $   (83)        $   (86)
Unrecognized net actuarial (gain)/loss                    152             (41)                54             (48)
Unrecognized transition obligation                         39              49                 76              --
Unrecognized prior service cost                            31              37                 --              82
----------------------------------------------------------------------------------------------------------------

Prepaid/(Accrued) Cost                                $    14         $    (1)           $   (61)        $   (52)
----------------------------------------------------------------------------------------------------------------

Weighted-average assumptions as of December 31:
         Discount rate                                   7.25%            7.5%              7.25%            7.5%
         Expected return on plan assets                   8.0%            8.0%               N/A             N/A
         Rate of compensation increase                    4.5%            4.5%               N/A             N/A
</TABLE>
<TABLE>
<CAPTION>
                                                        PENSION BENEFITS                       OTHER BENEFITS

(IN THOUSANDS)                                  2001         2000         1999         2001         2000         1999
---------------------------------------------------------------------------------------------------------------------
<S>                                            <C>          <C>          <C>          <C>          <C>          <C>
Components of net periodic benefit costs
Service cost                                   $  32        $  32        $  27        $   4        $   3        $   4
Interest cost                                     98          102           97            6            6            7
Expected return on plan assets                  (105)        (116)        (100)          --           --           --

Amortization of:
    Unrecognized net transition asset             10           10           10            6            6            6
    Unrecognized net (gain) loss                  --           (8)          (4)          (4)          (4)          (3)
    Unrecognized prior service cost                6            6            6           --           --           --
---------------------------------------------------------------------------------------------------------------------
Net Periodic Pension Costs (Income)            $  41        $  26        $  36        $  12        $  11        $  14
---------------------------------------------------------------------------------------------------------------------
</TABLE>

In determining the 2001 accumulated post-retirement benefit obligation, health
care cost trends were assumed to be 8.5% grading 0.5% per year to 4%. In
comparison, the 2000 health care cost trends were assumed to be 5.5%.


CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                            F-18

NOTE 14: STOCK-BASED COMPENSATION PLAN

The Company has two components to its Stock-Based Compensation Plan (the Plan):
The Stock Option Program (SOP) and the Performance Stock Program (PSP). In total
under the Plan there are 450,000 shares authorized and 85,060 shares available
at December 31, 2001.

STOCK OPTION PROGRAM - In 1999 the Company's shareholders approved an amendment
to its PSP to permit the issuance of stock options to officers and key
employees. The Company accounts for this plan under APB Opinion No. 25, under
which no compensation cost has been recognized in the Consolidated Statements of
Income. On a pro forma basis, the Company's net income and earnings per share
would have been the following amounts had compensation cost for the SOP been
determined consistent with SFAS No. 123, "Accounting for Stock-Based
Compensation FAS 123." Under FAS 123, the Company would have been required to
value such options at fair value and record such amounts in the financial
statements as compensation expense.

<TABLE>
<CAPTION>
                                                                               2001           2000
                                                                               ----           ----
<S>                                                                           <C>            <C>
Net income (in thousands):
         As reported                                                          $8,401         $7,858
         Pro forma                                                            $8,137         $7,676

Earnings Per Share:
         As reported                                                          $1.10          $ 1.03
         Pro forma                                                            $1.07          $ 1.01
</TABLE>

For purposes of this calculation, the Company arrived at the fair value of each
stock grant at the date of grant by using the Black Scholes Option Pricing model
with the following weighted average assumptions used for grants for the years
ended December 31, 2001 and 2000.

<TABLE>
<CAPTION>
                                                                                2001           2000
                                                                                ----           ----
<S>                                                                            <C>            <C>
Expected life (years)                                                           9.40           9.85
Risk-free interest rate (percentage)                                            5.07           5.12
Volatility (percentage)                                                        27.36          32.01
Dividend yield                                                                  2.70           3.90
</TABLE>

Options begin to become exercisable one year from the date of grant. Vesting
period range between one to five years.

The per share weighted average fair value for stock options granted during 2001
and 2000 were $8.67 and $5.87 respectively.

<TABLE>
<CAPTION>
                                                                 For the Years Ended December 31,
                                         ---------------------        ---------------------       ----------------------
                                                 2001                         2000                       1999
                                         ---------------------        ---------------------       ----------------------
                                                       WEIGHTED                    Weighted                    Weighted
                                                       AVERAGE                      Average                     Average
                                                      EXERCISE                     Exercise                     Exercise
                                         SHARES         PRICE         Shares        Price          Shares        Price
                                         ---------------------        ---------------------       ----------------------
<S>                                      <C>          <C>             <C>          <C>            <C>          <C>
Options:
   Outstanding, beginning of year        236,228        $18.39        191,586       $17.92             --       $   --
   Granted                                33,750         22.99         44,642        21.64        191,586        17.92
   Terminated                                 --            --             --           --             --           --
   Exercised                             (40,167)        16.22             --           --             --           --
                                         ---------------------        ---------------------       ----------------------
   Outstanding, end of year              229,811         20.18        236,228        18.39        191,586        17.92
                                         ---------------------        ---------------------       ----------------------
   Exercisable, end of year               47,630        $19.94         38,319       $17.92             --       $   --
                                         ---------------------        ---------------------       ----------------------
</TABLE>


CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                            F-19


Options exercised during 2001 ranged in price from $14.83 per share to $27.95
per share. The following table summarizes the price ranges of the options
outstanding and options exercisable as of December 31, 2001:

<TABLE>
<CAPTION>
                                                      OPTIONS OUTSTANDING                   OPTIONS EXERCISABLE
                                             -------------------------------------        ----------------------
                                                            WEIGHTED      WEIGHTED                      WEIGHTED
                                                            AVERAGE       AVERAGE                       AVERAGE
                                                           REMAINING      EXERCISE                      EXERCISE
                                             SHARES        LIFE (YEARS)    PRICE             SHARES       PRICE
                                             -------------------------------------        ----------------------
<S>                                          <C>           <C>            <C>             <C>           <C>
RANGE OF PRICES:

$ 14.00 - $ 19.99                             80,217            7.3        $ 14.83           12,583      $ 14.83
$ 20.00 - $ 25.99                            115,844            8.3          21.61           35,047        21.78
$ 26.00 - $ 31.99                             33,750            9.9          27.95               --           --
                                             -------------------------------------        ----------------------
                                             229,811            8.2        $ 20.18           47,630      $ 19.94
                                             =====================================        ======================
</TABLE>

PERFORMANCE STOCK PROGRAM - Under the Company's PSP, restricted shares of Common
Stock may be awarded annually to officers and key employees. To the extent that
the goals established by the Compensation Committee have been attained, the
restrictions on the stock are removed. Amounts charged to expense pursuant to
the PSP were $349,000, $227,000 and $216,000, for 2001, 2000 and 1999,
respectively.

NOTE 15: SEGMENT REPORTING

Our Company operates principally in three segments: water activities, real
estate transactions and services and rentals. The water segment is comprised of
our core regulated water activities to supply water to our customers. Our real
estate transactions segment involves selling or donating for income tax benefits
our limited excess real estate holdings. Our services and rentals segment
provides services on a contract basis and leases certain of our properties to
others. The accounting policies of each reportable segment are the same as those
described in the summary of significant accounting policies. Financial data for
reportable segments is as follows:

CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                            F-20


<TABLE>
<CAPTION>
                                                                                         Interest
                                                                                          Expense
                                                                                            and
                                                                                         Preferred
                                                                Other                     Dividend
                                                               Operating    Other Income   (net of    Income     Net
(In thousands)                     Revenues      Depreciation  Expenses    (Deductions)     AFUDC)    Taxes     Income
----------------------------------------------------------------------------------------------------------------------
<S>                                <C>           <C>           <C>         <C>           <C>        <C>       <C>
For the year ended
       December 31, 2001
Water Activities                   $45,392         $ 4,837     $24,402         $(273)      $ 4,231   $ 4,741   $ 6,908
Real Estate Transactions                --              --         145             --           --   (1,266)     1,121
Services and Rentals                 2,431              15       1,839             --           --       205       372
----------------------------------------------------------------------------------------------------------------------
      Total                        $47,823         $ 4,852     $26,386         $(273)      $ 4,231   $ 3,680   $ 8,401
======================================================================================================================
For the year ended
       December 31, 2000
Water Activities                   $43,997          $4,718     $23,058         $(228)       $4,369    $4,564    $7,060
Real Estate Transactions               166              --         253             --           --     (619)       532
Services and Rentals                 2,394              13       1,936             --           23       156       266
----------------------------------------------------------------------------------------------------------------------
      Total                        $46,557          $4,731     $25,247         $(228)       $4,392    $4,101    $7,858
======================================================================================================================
For the year ended
       December 31, 1999
Water Activities                   $45,171          $4,593     $23,627          $(48)       $4,278    $5,097    $7,528
Real Estate Transactions               447              --         286             --           --        64        97
Services and Rentals                 1,969              32       1,669             --           26        87       155
----------------------------------------------------------------------------------------------------------------------
      Total                        $47,587          $4,625     $25,582          $(48)       $4,304    $5,248    $7,780
======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
At December 31 (in thousands)                                                                2001            2000
                                                                                           -----------------------
<S>                                                                                        <C>            <C>
Total Plant and Other Investments:
Water                                                                                      $204,750       $195,379
Non-water                                                                                       914            829
                                                                                           -----------------------
                                                                                            205,664        196,208
                                                                                           =======================
Other Assets:
Water                                                                                        25,630         25,901
Non-water                                                                                       420            437
                                                                                           -----------------------
                                                                                             26,050         26,338
                                                                                           -----------------------

Total Assets                                                                               $231,714       $222,546
                                                                                           =======================
</TABLE>


CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                            F-21


NOTE 16:  COMMITMENTS AND CONTINGENCIES

POTENTIAL FUTURE LAND DONATIONS, 2002 - 2004 - On January 31, 2001 we signed an
agreement to donate to the Town of Killingly, Connecticut approximately 365
acres of unimproved land for protected open space purposes. This land donation
will be broken down into three different parcels with one of the parcels being
donated each year from 2002 through 2004. Under current tax law, these donations
in total will result in reduced federal and state income taxes of approximately
$2,000,000. On March 1, 2001 we signed an agreement to donate to the Town of
Avon, Connecticut approximately 10 acres in 2002 of unimproved land for
protected open space purposes. The necessary town and state approvals have been
obtained. Under current tax law, the donation will result in reduced federal and
state income taxes of approximately $162,000.

PREPAYMENT OF NOTE - On January 30, 2002 Crystal Water Company paid off its
long-term 8% fixed rate note to Westbank with short-term 2.205% variable rate
borrowing on the Company's line of credit. The payment of approximately
$2,063,000 included a prepayment penalty of approximately $20,000. The note was
paid off to release the lien on the land scheduled to be donated to the Town of
Killingly in the years 2002 through 2004.

HUNGERFORDS - In 1999, we formed a three-year joint venture with Hungerfords,
Inc., a pump service provider, which has been in business in Connecticut for
over 75 years. If specific financial targets are met, the Company will purchase
Hungerfords in the second half of 2002.

UNIONVILLE - In late 2001, we signed a letter of intent with Unionville Water
Company, located in Farmington, Connecticut to purchase Unionville by exchanging
Company stock with a value of approximately $6.3 million for all outstanding
Unionville stock. In February 2002 the Company entered into a definitive
agreement with Unionville that is subject to approval by shareholders of
Unionville and regulatory agencies.

REVERSE PRIVATIZATION - Our water companies derive their rights and franchises
to operate from State law that are subject to alteration, amendment or repeal
and do not grant permanent exclusive rights to our service areas. Our franchises
are free from burdensome restrictions, are unlimited as to time, and authorize
us to sell potable water in all towns we now serve. There is the possibility
that states could revoke our franchises and allow a governmental entity to take
over some or all of our systems. From time to time such legislation is
contemplated.

ENVIRONMENTAL AND WATER QUALITY REGULATION - The Company is subject to
environmental and water quality regulations. Costs to comply with environmental
and water quality regulations are substantial. We are currently in compliance
with current regulations, but the regulations are subject to change. The costs
to comply with future changes in state or federal regulations, which could
require us to modify current filtration facilities and/or construct new ones, or
to replace any reduction of the safe yield from any of our current sources of
supply, could be substantial.

CONSTRUCTION - Our water companies' estimated capital expenditures for 2002 are
$10,155,000. These capital expenditures are net of amounts financed by customer
advances and contributions in aid of construction. These expenditures are
expected to be financed primarily with internally generated funds.


CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                            F-22

NOTE 17:  QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected quarterly financial data for the years ended December 31, 2001 and 2000
appears below:

(In thousands, except for per share data)
<TABLE>
<CAPTION>
                                                                                     Net Income         Basic Earnings Per
                                                              Utility               Applicable to            Average
                                 Operating Revenues       Operating Income          Common Stock            Common Share




                                  2001        2000        2001        2000        2001        2000       2001       2000
--------------------------------------------------------------------------------------------------------------------------
<S>                             <C>         <C>         <C>         <C>          <C>         <C>          <C>       <C>
First Quarter                   $ 10,228    $ 10,225    $  2,465    $  2,549     $ 2,275     $ 1,542      $0.30     $ 0.20
Second Quarter                    10,974      10,834       2,851       2,867       1,914       1,876       0.25       0.25
Third Quarter                     13,538      12,353       3,887       3,775       2,945       2,678       0.39       0.35
Fourth Quarter                    10,652      10,585       2,111       2,471       1,267       1,762       0.16       0.23
                                ------------------------------------------------------------------------------------------

     Year                       $ 45,392    $ 43,997    $ 11,314    $ 11,662     $ 8,401     $ 7,858      $1.10     $ 1.03
                                ==========================================================================================
</TABLE>



CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
<PAGE>
                                                                             E-1

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                              DESCRIPTION
<S>                 <C>
3.1                 Certificate of Incorporation of Connecticut Water Service,
                    Inc. amended and restated as of April, 1998. (Exhibit 3.1 to
                    Form 10-K for the year ended 12/31/98).

3.2                 By-Laws, as amended, of Connecticut Water Service, Inc. as
                    amended and restated as of August 12, 1999. (Exhibit 3.2 to
                    Form 10-K for the year ended 12/31/99).

3.3                 Certification of Incorporation of The Connecticut Water
                    Company effective April, 1998. (Exhibit 3.3 to Form 10-K for
                    the year ended 12/31/98).

3.4*                Certificate of Amendment to the Certificate of Incorporation
                    of Connecticut Water Service, Inc. dated August 6, 2001.

4.1                 Indenture of Mortgage and Deed of Trust from The Connecticut
                    Water Company to The Connecticut Bank and Trust Company,
                    Trustee, dated as of June 1, 1956. (Exhibit 4.3(a) to
                    Registration Statement No. 2-61843)

4.2                 Supplemental Indentures thereto dated as of

                    (i)       February 1, 1958 (Exhibit 4.3(b) (i) to
                              Registration Statement No. 2-61843)

                              (ii)      September 1, 1962 (Exhibit 4.3(b) (ii)
                                        to Registration Statement No. 2-61843)

                              (iii)     January 1, 1966 (Exhibit 4.3(b) (iii) to
                                        Registration Statement No. 2-61843)

                              (iv)      July 1, 1966 (Exhibit 4.3(b) (iv) to
                                        Registration Statement No. 2-61843)

                              (v)       January 1, 1971 (Exhibit 4.3(b) (v) to
                                        Registration Statement No. 2-61843)

                              (vi)      September 1, 1974 (Exhibit 4.3(b) (vi)
                                        to Registration Statement No. 2-61843)

                              (vii)     December 1, 1974 (Exhibit 4.3(b) (vii)
                                        to Registration Statement No. 2-61843)

                              (viii)    January 1, 1976 (Exhibit 4(b) to Form
                                        10-K for the year ended 12/31/76)

                              (ix)      January 1, 1977 (Exhibit 4(b) to Form
                                        10-K for the year ended 12/31/76)

                              (x)       September 1, 1978 (Exhibit 2.12(b) (x)
                                        to Registration Statement No. 2-66855)

                              (xi)      December 1, 1978 (Exhibit 2.12(b) (xi)
                                        to Registration Statement No. 2-66855)

                              (xii)     June 1, 1979 (Exhibit 2.12(b) (xii) to
                                        Registration Statement No. 2-66855)

                              (xiii)    December 1, 1983 (Exhibit 4.2 (xiii) to
                                        Form 10-K for the year ended 12/31/83)
</TABLE>
<PAGE>
                                                                             E-2

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

                              (xiv)     January 1, 1987 (Exhibit 4.2 (xiv) to
                                        Form 10-K for the year ended 12/31/86)

                              (xv)      May 1, 1989 (Exhibit 4.2 (xv) to Form
                                        10-K for year ended 12/31/89)

                              (xvi)     June 1, 1991 (Exhibit 4.2 (xvi) to Form
                                        10-K for year ended 12/31/91)

                              (xvii)    August 1, 1992 (Exhibit 4.2 (xvii) to
                                        Form 10-K for year ended 12/31/92)

                              (xviii)   October 1, 1993 (Exhibit 4.2 (xviii) to
                                        Form 10-K for year ended 12/31/93)

                              (xix)     June 1, 1993 (Exhibit 4.2 (xix) to Form
                                        10-K for year ended 12/31/93)

                              (xx)      September 1, 1993 (Exhibit 4.2 (xx) to
                                        Form 10-K for year ended 12/31/93)

                              (xxi)     December 1, 1993 (Exhibit 4.2 (xxi) to
                                        Form 10-K for year ended 12/31/93)

                              (xxii)    March 1, 1994 (Exhibit 4.2 (xxii) to
                                        Form 10-K for year ended 12/31/94)

4.3                 Loan Agreement dated as of October 1, 1993, between the
                    Connecticut Development Authority and The Connecticut Water
                    Company. (Exhibit 4.3 to Form 10-K for year ended December
                    31, 1993)

4.4                 Loan Agreement dated as of June 1, 1993, between the
                    Connecticut Development Authority and The Connecticut Water
                    Company. (Exhibit 4.4 to Form 10-K for year ended December
                    31, 1993)

4.5                 Loan Agreement dated as of September 1, 1993, between the
                    Connecticut Development Authority and The Connecticut Water
                    Company. (Exhibit 4.5 to Form 10-K for year ended December
                    31, 1993)

4.6                 Loan Agreement dated as of August 1, 1992 between the
                    Connecticut Development Authority and The Connecticut Water
                    Company. (Exhibit 4.10 to Form 10-K for the year ended
                    December 31, 1992)

4.7                 Bond Purchase Agreement dated as of December 1, 1993.
                    (Exhibit 4.8 to Form 10-K for year ended December 31, 1993)

4.8                 Loan Agreement dated as of March 9, 1998 between the
                    Connecticut Development Authority and The Connecticut Water
                    Company. (Exhibit 4.8 to Form 10-K for the year ended
                    12/21/98).

4.9                 Loan Agreement dated as of April 19, 1990 between the
                    Connecticut Development Authority and The Crystal Water
                    Company of Danielson. (Exhibit 4.9 to Form 10.K for the year
                    ended 12/31/99).

4.10                Loan Agreement dated as of February 9, 1996 between New
                    London Trust, F.S.B. and The Crystal Water Company of
                    Danielson. (Exhibit 4.10 to Form 10-K for the year ended
                    12/31/99).
</Table>
<PAGE>
                                                                             E-3

<TABLE>
<CAPTION>
<S>     <C>
10.1                Pension Plan Fiduciary Liability Insurance for The
                    Connecticut Water Company Employees' Retirement Plan and
                    Trust, The Connecticut Water Company Tax Credit Employee
                    Stock Ownership Plan, as Amended and Restated, Savings Plan
                    of The Connecticut Water Company and The Connecticut Water
                    Company VEBA Trust Fund. (Exhibit 10.1 to Registration
                    Statement No. 2-74938)

10.2                Directors and Officers Liability and Corporation
                    Reimbursement Insurance. (Exhibit 10.2 to Registration
                    Statement No. 2-74938)

10.3                Directors Deferred Compensation Plan, effective as of
                    January 1, 1980, as amended as of March 20, 1981. (Exhibit
                    10.3 to Registration Statement No. 2-74938)

10.4                The Connecticut Water Company Deferred Compensation
                    Agreement dated December 1, 1984. (Exhibit 10.4 to Form 10-K
                    for the year ended December 31, 1984)

10.5                The Connecticut Water Company Amended and Restated Deferred
                    Compensation Agreement dated May 14, 1999. (Exhibit 10.5 to
                    Form 10-K for the year ended 12/31/99).

                    a.     Marshall T. Chiaraluce

                    b.     David C. Benoit

                    c.     James R. McQueen

                    d.     Kenneth W. Kells

10.6                The Connecticut Water Company Supplemental Executive
                    Retirement Agreement with William C. Stewart. (Exhibit 10.6a
                    to Form 10-K for year ended December 31, 1991)

10.7.1              The Connecticut Water Company Amended Supplemental Executive
                    Retirement Agreement with Marshall T. Chiaraluce dated
                    August 1, 1999. (Exhibit 10.7.2 to Form 10-K for the year
                    ended 12/31/99).

10.7.2*             The Connecticut Water Company Supplemental Executive
                    Retirement Agreement with Michele G. DiAcri dated February
                    28, 2000.

10.8                The Connecticut Water Company Amended Supplemental Executive
                    Retirement Agreement - standard form for other officers,
                    dated August 1, 1999. (Exhibit 10.8.2 to Form 10-K for the
                    year ended 12/31/99).
</Table>
<PAGE>
                                                                             E-4

<TABLE>
<CAPTION>
<S>                 <C>
10.9*               Amended and restated employment agreement between The
                    Connecticut Water Company and Connecticut Water Service,
                    Inc. with Officers, amended and restated as of May 9, 2001:

                    a)         Marshall T. Chiaraluce

                    b)         Michele G. DiAcri

                    c)         James R. McQueen

                    d)         David C. Benoit

                    e)         Peter J. Bancroft

                    f)         Maureen P. Westbrook

                    g)         Terrance P. O'Neill

10.10               Employment and Consulting Agreement between Richard L.
                    Mercier and Gallup Water Service, Inc. dated April 15, 1999.
                    (Exhibit 10.10 to Form 10-K for the year ended 12/31/99).

10.11               Employment and Consulting Agreement between Roger Engle and
                    Crystal Water Company of Danielson dated September 29, 1999.
                    (Exhibit 10.11 to Form 10-K for the year ended 12/31/99).

10.12*              Savings Plan of The Connecticut Water Company, amended and
                    restated effective as of October 1, 2000.

10.13               The Connecticut Water Company Employees' Retirement Plan as
                    amended and restated as of January 1, 1997. (Exhibit 10.11
                    to Form 10-K for the year ended 12/31/98).

10.14               Water Supply Agreement dated June 13, 1994, between The
                    Connecticut Water Company and the Hazardville Water Company.
                    (Exhibit 10.15 to Form 10-K for year ended December 31,
                    1994)

10.15               November 4, 1994 Amendment to Agreement dated December 11,
                    1957 between The Connecticut Water Company (successor to the
                    Thomaston Water Company) and the City of Waterbury. (Exhibit
                    10.16 to Form 10-K for year ended December 31, 1994)

10.16               Contract between The Connecticut Water Company and The
                    Rockville Water and Aqueduct Company dated as of January 1,
                    1976. (Exhibit 9(b) to Form 10-K for the year ended December
                    31, 1975)

10.17               Agreement dated August 13, 1986 between The Connecticut
                    Water Company and the Metropolitan District. (Exhibit 10.14
                    to Form 10-K for the year ended December 31, 1986)


10.18               Report of the Commission to Study the Feasibility of
                    Expanding the Water Supply Services of the Metropolitan
                    District. (Exhibit 14 to Registration Statement No. 2-61843)
</Table>
<PAGE>
                                                                             E-5

<TABLE>
<CAPTION>
<S>     <C>
10.19               Plan of Merger dated December 18, 1978 of Broad Brook Water
                    Company, The Collinsville Water Company, The Rockville Water
                    and Aqueduct Company, The Terryville Water Company and The
                    Thomaston Water Company with and into The Connecticut Water
                    Company. (Exhibit 13 to Form 10-K for the year ended
                    December 31, 1978)

10.20               Bond Exchange Agreements between Connecticut Water Service,
                    Inc., The Connecticut Water Company Bankers Life Company and
                    Connecticut Mutual Life Insurance Company dated October 23,
                    1978. (Exhibit 14 to Form 10-K for the year ended December
                    31, 1978)

10.21               Dividend Reinvestment and Common Stock Purchase Plan,
                    amended and restated as of November 15, 2001. (Exhibit 99.1
                    to post-effective amendment filed on December 5, 2001 to
                    Form S-3, Registration Statement No. 33-53211).

10.22               Contract for Supplying Bradley International Airport.
                    (Exhibit 10.21 to Form 10-K for the year ended December 31,
                    1984)

10.23               Report of South Windsor Task Force. (Exhibit 10.23 to Form
                    10-K for the year ended December 31, 1987)

10.24               Trust Agreement for The Connecticut Water Company Welfare
                    Benefits Plan (VEBA) dated January 1, 1989. (Exhibit 10.21
                    to Form 10-K for year ended December 31, 1989)

10.25               Performance Stock Program, as amended and restated as of
                    April 23, 1999. (Exhibit A to CTWS Proxy Statement dated
                    March 17, 1999)

10.26*              Loan Agreement dated as of February 15, 1991 between
                    Indianapolis Life Insurance Company and The Barnstable Water
                    Company.

10.27*              Guaranty Agreement by Connecticut Water Service, Inc. and
                    Second Amendment to Note Agreement of Barnstable Water
                    Company dated as of February 23, 2001.

10.28*              Employment Agreement between George Wadsworth and The
                    Barnstable Water Company dated February 23, 2001.

10.29*              Separation Agreement between George Wadsworth, The
                    Connecticut Water Service, Inc. and The Barnstable Water
                    Company dated December 14, 2001.

24.1*               Consent of Arthur Andersen LLP

99*                 Temporary Note 3T to Article 3 of Regulation S-X

----------

Note:               Exhibits 10.1 through 10.13, 10.24 and 10.25 set forth each
                    management contract or compensatory plan or arrangement
                    required to be filed as an exhibit to this Form-10K.
</Table>
<PAGE>
                                                                              16

                                   SIGNATURES

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

                             CONNECTICUT WATER SERVICE, INC.
                             Registrant

                             By       /s/   Marshall T. Chiaraluce
                                      ------------------------------------------
                                      Marshall T. Chiaraluce
                                      President, Chairman of the Board and Chief
                                      Executive Officer

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

<TABLE>
<CAPTION>
        Signature                                                     Title                              Date
        ---------                                                     -----                              ----
<S>                                                       <C>                                       <C>
/s/   Marshall T. Chiaraluce
----------------------------
Marshall T. Chiaraluce                                    Director, President Chairman              March 22, 2002
(Principal Executive Officer)                             of the Board, and Chief
                                                          Executive Officer

/s/ David C. Benoit
----------------------------
David C. Benoit                                           Vice President - Finance,                 March 22, 2002
(Principal Financial and Accounting Officer)              Chief Financial Officer and
                                                          Treasurer
</TABLE>
<PAGE>
                                                                              17
<TABLE>
<S>                                                       <C>                                       <C>
/s/  Harold E. Bigler, Jr.                                Director                                  March 6, 2002
----------------------------
Harold E. Bigler, Jr.


/s/  Roger Engle                                          Director                                  March 8, 2002
----------------------------
Roger Engle

/s/  Mary Ann Hanley                                      Director                                  March 10, 2002
----------------------------
Mary Ann Hanley

/s/  Marcia Hincks                                        Director                                  March 12, 2002
----------------------------
Marcia Hincks

/s/  David A. Lentini                                     Director                                  March 8, 2002
----------------------------
David A. Lentini


/s/  Ronald D. Lengyel                                    Director                                  March 14, 2002
----------------------------
Ronald D. Lengyel


/s/  Robert F. Neal                                       Director                                  March 7, 2002
----------------------------
Robert F. Neal


/s/  Arthur C. Reeds                                      Director                                  March 6, 2002
----------------------------
Arthur C. Reeds


/s/  Lisa J. Tibdaue                                      Director                                  March 7, 2002
----------------------------
Lisa J. Thibdaue


/s/  Donald B. Wilbur                                     Director                                  March 8, 2002
----------------------------
Donald B. Wilbur
</TABLE>
<PAGE>
                                                                             S-1

              REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE

We have audited, in accordance with accounting principles generally accepted in
the United States, the financial statements of Connecticut Water Service, Inc.
included in this Form 10-K, and have issued our report thereon dated February 8,
2002. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed in the accompanying index to
consolidated financial statements and schedule is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.


/s/ Arthur Andersen LLP



Hartford, Connecticut
February 8, 2002
<PAGE>
                                                                             S-2

                CONNECTICUT WATER SERVICE, INC. AND SUBSIDIARIES
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
                                              BALANCE          ADDITIONS        DEDUCTIONS       BALANCE
                                             BEGINNING        CHARGED TO         FROM             END OF
DESCRIPTION                                   OF YEAR            INCOME         RESERVES (1)       YEAR
-----------                                 ---------            ------         ------------     -------
<S>                                         <C>               <C>               <C>              <C>
Allowance for Uncollectible
  Accounts
  Year Ended December 31, 2001                $218               $171              $155           $234
                                              ====               ====              ====           ====

  Year Ended December 31, 2000                $476               $216              $474           $218
                                              ====               ====              ====           ====

  Year Ended December 31, 1999                $336               $171              $ 31           $476
                                              ====               ====              ====           ====
</TABLE>


(1) Amounts charged off as uncollectible after deducting recoveries.
<PAGE>


                                    EXHIBITS

                          TO ANNUAL REPORT ON FORM 10-K

                                  FOR THE YEAR

                             ENDED DECEMBER 31, 2001