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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 Form 10-K
 þ
    
    Annual Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
 for the fiscal year ended December 31, 2007
 or
 o
    
    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.
  Connecticut
(State or other jurisdiction of 
incorporation or organization)
    
    06-0739839
(I.R.S. Employer
Identification No.)93 West Main Street, Clinton, CT
(Address of principal executive office)
    
    06413
(Zip Code)
 (860) 669-8636
  Title of each ClassCommon Stock, without par value
    
    Name of each exchange on which registeredThe Nasdaq Stock Market, Inc.
 None
 o þ
 o þ
 Yes þ o
 þ
  o þ o o
  o þ
   DOCUMENTS INCORPORATED BY REFERENCE
 Part of Form 10-K Into WhichDocument
    
    Document is IncorporatedDefinitive Proxy Statement, dated
    
    Part IIIMarch 18, 2008, for Annual Meeting
of Shareholders to be held on
May 15, 2008.




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##### 



INDEX TO ANNUAL REPORT ON FORM 10-K
Year Ended December 31, 2007
 PageNumberPart IItem 1.
    
    Business
    
    
    4Item 1A.
    
    Risk Factors
    
    
    9Item 1B.
    
    Unresolved Staff Comments
    
    
    13Item 2.
    
    Properties
    
    
    13Item 3.
    
    Legal Proceedings
    
    
    15Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    15Part IIItem 5.
    
    Market for the Companys Common Stock, Related Stockholder
Matters and Issuer Purchases of Equity Securities
    
    
    16Item 6.
    
    Selected Financial Data
    
    
    18Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    19Item 7A.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    33Item 8.
    
    Financial Statements and Supplementary Data
    
    
    34Item 9.
    
    Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    34Item 9A.
    
    Controls and Procedures
    
    
    34Item 9B.
    
    Other Information
    
    
    35Part IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    36Item 11.
    
    Executive Compensation
    
    
    36Item 12.
    
    Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    36Item 13.
    
    Certain Relationships and Related Transactions, and Director
Independence
    
    
    37Item 14.
    
    Principal Accountant Fees and Services
    
    
    37Part IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    38Signatures
    
    
    40EX-4.33: BOND PURCHASE AGREEMENTEX-4.34: LOAN AGREEMENTEX-4.35: INDENTURE OF TRUSTEX-10.5.h: 8TH AMENDMENT TO A/R EMPLOYEES' RETIREMENT PLANEX-10.5.i: 9TH AMENDMENT TO A/R EMPLOYEES' RETIREMENT PLANEX-21: SUBSIDIARIESEX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS, LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION




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PART I
 
 ITEM 1. BUSINESS
 The Company
     www.ctwater.com




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
    
    Code of Conduct  Board of Directors
    
    Code of Conduct  Employees
    
    Audit Committee Charter
    
    Compensation Committee Charter
    
    Corporate Governance Committee Charter
  Our Regulated Business




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Our Water Systems
    2007
    
    
    2006
    
    
    2005Customers:Residential
    
    
    75,579
    
    
    
    74,253
    
    
    
    72,968Commercial
    
    
    5,532
    
    
    
    5,485
    
    
    
    5,333Industrial
    
    
    426
    
    
    
    429
    
    
    
    428Public Authority
    
    
    602
    
    
    
    587
    
    
    
    580Fire Protection
    
    
    1,599
    
    
    
    1,562
    
    
    
    1,526Other
(including non-metered accounts)
    
    
    680
    
    
    
    931
    
    
    
    928Total
    
    
    84,418
    
    
    
    83,247
    
    
    
    81,763Water Revenues ($000s)Residential(1)
    
    $
    38,354
    
    
    $
    29,067
    
    
    $
    29,980Commercial
    
    
    6,762
    
    
    
    5,652
    
    
    
    5,619Industrial
    
    
    1,764
    
    
    
    1,589
    
    
    
    1,538Public Authority
    
    
    1,924
    
    
    
    1,507
    
    
    
    1,625Fire Protection
    
    
    9,482
    
    
    
    8,708
    
    
    
    8,267Other
(including non-metered accounts)
    
    
    740
    
    
    
    422
    
    
    
    424Total
    
    $
    59,026
    
    
    $
    46,945
    
    
    $
    47,453Customer Water Consumption(millions of gallons)Residential
    
    
    5,186
    
    
    
    4,933
    
    
    
    5,260Commercial
    
    
    1,259
    
    
    
    1,198
    
    
    
    1,188Industrial
    
    
    423
    
    
    
    424
    
    
    
    423Public Authority
    
    
    389
    
    
    
    363
    
    
    
    405Total
    
    
    7,257
    
    
    
    6,918
    
    
    
    7,276
 (1) Includes $3.8 million of deferred revenues in 2007 as allowed under the 2007 Rate Decision.




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Segments of Our Business .
  Competition
  Employees
  Segments of Our Business
  Water Activities 
 Real Estate Transactions 




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Income (Loss) from Real Estate Transactions fromContinuing OperationsRegulated
    
    
    Unregulated
    
    
    Total2005
    
    $
    (69,000
    )
    
    $
    8,000
    
    
    $
    (61,000
    )2006
    
    $
    1,083,000
    
    
    $
    980,000
    
    
    $
    2,063,0002007
    
    $
    199,000
    
    
    $
    (32,000
    )
    
    $
    167,000
 Services and Rentals  Linebacker ®
  
 ITEM 1A. RISK FACTORS
  Because we incur significant capital expenditures annually, we depend on the rates we charge our
customers.




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Our operating costs could be significantly increased because of state and federal environmental and
health and safety laws and regulations.
   Our business is subject to seasonal fluctuations which could affect demand for our water services
and our revenues.




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Declining per customer residential water usage may reduce our revenues, financial condition and
results of operations in future years.
  Potential drought conditions may impact our ability to serve our current and future customers
demand for water and our financial results.
  The failure of, or the requirement to repair, upgrade or dismantle, any of our dams may adversely
affect our financial condition and results of operations.
  Any failure of our reservoirs, storage tanks, mains or distribution networks could result in losses
and damages that may affect our financial condition and reputation.




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Any future acquisitions we may undertake may involve risks and uncertainties.
  
    
    dilutive issuances of our equity securities;
    
    incurrence of debt and contingent liabilities;
    
    failure to have effective internal control over financial reporting;
    
    fluctuations in quarterly results; and
    
    other acquisition-related expenses.
  Water supply contamination may adversely affect our business.




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The need to increase security may continue to increase our operating costs.
  Key employee turnover may adversely affect our operating results.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES




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ESTIMATEDAVAILABLE SUPPLY(MILLION GALLONS PER DAY)Chester System
    
    
    1.69Collinsville System
    
    
    0.65Danielson System
    
    
    3.76Gallup System
    
    
    0.60Guilford System
    
    
    9.31Naugatuck System
    
    
    6.91Northern Western System
    
    
    16.16Plainfield System
    
    
    1.01Somers System
    
    
    0.28Stafford System
    
    
    1.00Terryville System
    
    
    0.94Thomaston System
    
    
    0.73Thompson System
    
    
    0.29Unionville System
    
    
    3.88Total
    
    
    47.21




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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




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PART II
 
 ITEM 5. MARKET FOR THE COMPANYS COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
  Price
    
    DividendsPeriod
    
    High
    
    Low
    
    Paid2007First Quarter
    
    $
    25.09
    
    
    $
    22.52
    
    
    $
    .2150Second Quarter
    
    
    25.00
    
    
    
    23.62
    
    
    
    .2150Third Quarter
    
    
    25.61
    
    
    
    23.10
    
    
    
    .2175Fourth Quarter
    
    
    25.15
    
    
    
    22.40
    
    
    
    .21752006First Quarter
    
    $
    26.43
    
    
    $
    23.81
    
    
    $
    .2125Second Quarter
    
    
    27.71
    
    
    
    20.29
    
    
    
    .2125Third Quarter
    
    
    24.39
    
    
    
    21.90
    
    
    
    .2150Fourth Quarter
    
    
    23.18
    
    
    
    21.35
    
    
    
    .2150
   Purchases of Equity Securities by the Company
 Performance Graph




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17 
 2002
    
    2003
    
    2004
    
    2005
    
    2006
    
    2007Connecticut Water Service, Inc.
    
    
    100.00
    
    
    
    112.95
    
    
    
    111.62
    
    
    
    106.76
    
    
    
    102.83
    
    
    
    110.43Standard & Poors 500 Index
    
    
    100.00
    
    
    
    128.68
    
    
    
    142.69
    
    
    
    149.70
    
    
    
    173.34
    
    
    
    182.86Standard
& Poors 500 Utilities Index
    
    
    100.00
    
    
    
    126.26
    
    
    
    156.91
    
    
    
    183.34
    
    
    
    221.82
    
    
    
    264.87




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18 
 ITEM
6. SELECTED FINANCIAL  INFORMATION
 SELECTED FINANCIAL DATA
 Years Ended December 31, (thousands of dollars except per shareamounts and where otherwise indicated)
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003CONSOLIDATED STATEMENTS OF INCOMEContinuing OperationsOperating Revenues
    
    $
    59,026
    
    
    $
    46,945
    
    
    $
    47,453
    
    
    $
    46,008
    
    
    $
    44,598Operating Expenses
    
    $
    46,324
    
    
    $
    39,962
    
    
    $
    37,486
    
    
    $
    35,487
    
    
    $
    33,380Other Utility Income, Net of Taxes
    
    $
    552
    
    
    $
    542
    
    
    $
    571
    
    
    $
    520
    
    
    $
    465Total Utility Operating Income
    
    $
    13,254
    
    
    $
    7,525
    
    
    $
    10,538
    
    
    $
    11,041
    
    
    $
    11,683Interest and Debt Expense
    
    $
    4,411
    
    
    $
    4,461
    
    
    $
    3,583
    
    
    $
    3,451
    
    
    $
    4,369Income from Continuing Operations
    
    $
    8,781
    
    
    $
    6,708
    
    
    $
    7,166
    
    
    $
    9,163
    
    
    $
    8,890Cash Common Stock Dividends Paid
    
    $
    7,146
    
    
    $
    7,014
    
    
    $
    6,773
    
    
    $
    6,641
    
    
    $
    6,529Dividend Payout Ratio from Continuing Operations
    
    
    81
    %
    
    
    105
    %
    
    
    95
    %
    
    
    72
    %
    
    
    73
    %Weighted Average Common Shares Outstanding
    
    
    8,270,494
    
    
    
    8,227,953
    
    
    
    8,094,346
    
    
    
    7,999,318
    
    
    
    7,956,426Basic Earnings Per Common Share from Continuing Operations
    
    $
    1.06
    
    
    $
    0.81
    
    
    $
    0.89
    
    
    $
    1.15
    
    
    $
    1.12Number of Shares Outstanding at Year End
    
    
    8,376,842
    
    
    
    8,270,394
    
    
    
    8,169,627
    
    
    
    8,035,199
    
    
    
    7,967,379ROE on Year End Common Equity
    
    
    8.8
    %
    
    
    7.0
    %
    
    
    7.6
    %
    
    
    10.4
    %
    
    
    10.7
    %Declared Common Dividends Per Share
    
    $
    0.865
    
    
    $
    0.855
    
    
    $
    0.845
    
    
    $
    0.835
    
    
    $
    0.825CONSOLIDATED BALANCE SHEETCommon Stockholders Equity
    
    $
    100,098
    
    
    $
    95,938
    
    
    $
    94,076
    
    
    $
    87,865
    
    
    $
    83,315Long-Term Debt (Consolidated, Excluding Current Maturities)
    
    
    92,285
    
    
    
    77,347
    
    
    
    77,404
    
    
    
    66,399
    
    
    
    64,754Preferred Stock
    
    
    772
    
    
    
    772
    
    
    
    847
    
    
    
    847
    
    
    
    847Total Capitalization
    
    $
    193,155
    
    
    $
    174,057
    
    
    $
    172,327
    
    
    $
    155,111
    
    
    $
    148,916Stockholders Equity (Includes Preferred Stock)
    
    
    52
    %
    
    
    56
    %
    
    
    55
    %
    
    
    57
    %
    
    
    57
    %Long-Term Debt
    
    
    48
    %
    
    
    44
    %
    
    
    45
    %
    
    
    43
    %
    
    
    43
    %Net Utility Plant
    
    $
    277,662
    
    
    $
    263,187
    
    
    $
    247,703
    
    
    $
    241,776
    
    
    $
    235,098Total Assets
    
    $
    360,813
    
    
    $
    328,140
    
    
    $
    306,035
    
    
    $
    290,940
    
    
    $
    281,345Book Value  Per Common Share
    
    $
    11.95
    
    
    $
    11.60
    
    
    $
    11.52
    
    
    $
    10.94
    
    
    $
    10.46OPERATING REVENUES BY
REVENUE CLASSResidential
    
    $
    38,354
    
    
    $
    29,067
    
    
    $
    29,980
    
    
    $
    28,974
    
    
    $
    27,831Commercial
    
    
    6,762
    
    
    
    5,652
    
    
    
    5,619
    
    
    
    5,479
    
    
    
    5,327Industrial
    
    
    1,764
    
    
    
    1,589
    
    
    
    1,538
    
    
    
    1,635
    
    
    
    1,616Public Authority
    
    
    1,924
    
    
    
    1,507
    
    
    
    1,625
    
    
    
    1,430
    
    
    
    1,302Fire Protection
    
    
    9,482
    
    
    
    8,708
    
    
    
    8,267
    
    
    
    8,087
    
    
    
    8,026Other (Including Non-Metered Accounts)
    
    
    740
    
    
    
    422
    
    
    
    424
    
    
    
    403
    
    
    
    496Total Operating Revenues
    
    $
    59,026
    
    
    $
    46,945
    
    
    $
    47,453
    
    
    $
    46,008
    
    
    $
    44,598Number of Customers (Average)
    
    
    84,023
    
    
    
    82,552
    
    
    
    81,211
    
    
    
    87,259
    
    
    
    86,145Billed Consumption (Millions of Gallons)
    
    
    7,257
    
    
    
    6,918
    
    
    
    7,276
    
    
    
    7,801
    
    
    
    7,640Number of Employees
    
    
    206
    
    
    
    200
    
    
    
    191
    
    
    
    193
    
    
    
    195




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19 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 FINANCIAL CONDITION
 Executive Overview
    Our Regulated Business,




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20  Linebacker ®
 Regulatory Matters and Inflation
    Critical Accounting Policies and Estimates




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21  Public Utility Regulation
 Revenue Recognition
 Water Activities
 Real Estate Transactions
 Services and Rentals
 Benefit Plan Accounting




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22 Increase
    
    Increase(Decrease) in
    
    (Decrease) inpension expense
    
    postretirement expense1% Increase in the discount rate
    
    $
    (327,000
    )
    
    $
    (208,000
    )1% Decrease in the discount rate
    
    $
    380,000
    
    
    $
    252,000
 Outlook
    FINANCIAL CONDITION
 Liquidity and Capital Resources




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23  ConstructionGross
    
    Funded by
    
    ConstructionConstruction
    
    Developers &
    
    Funded byExpenditures
    
    Others
    
    Company2005
    
    $
    16,957,000
    
    
    $
    2,701,000
    
    
    $
    14,256,0002006
    
    $
    17,792,000
    
    
    $
    1,593,000
    
    
    $
    16,199,0002007
    
    $
    19,841,000
    
    
    $
    1,092,000
    
    
    $
    18,749,0002008 (Projected)
    
    $
    23,400,000
    
    
    $
    5,000,000
    
    
    $
    18,400,000




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24




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25 Off-Balance Sheet Arrangements and Contractual Obligations
   
 Less
    
    
    
    
    
    
    
    
    
    Morethan 1
    
    Years
    
    Years
    
    than 5Contractual Obligations
    
    Total
    
    year
    
    2 and 3
    
    4 and 5
    
    yearsLong-Term Debt (LTD)
    
    $
    92,292
    
    
    $
    7
    
    
    $
    16
    
    
    $
    17
    
    
    $
    92,252Interest on LTD
    
    
    96,687
    
    
    
    4,184
    
    
    
    8,366
    
    
    
    8,365
    
    
    
    75,772Operating Lease Obligations
    
    
    996
    
    
    
    302
    
    
    
    458
    
    
    
    236
    
    
    
    Purchase Obligations (1) (2)
    
    
    101,572
    
    
    
    999
    
    
    
    1,881
    
    
    
    1,977
    
    
    
    96,715Long-Term Compensation
Agreement(3)
    
    
    48,525
    
    
    
    5,341
    
    
    
    6,649
    
    
    
    6,654
    
    
    
    29,881Total (4) (5)
    
    $
    340,072
    
    
    $
    10,833
    
    
    $
    17,370
    
    
    $
    17,249
    
    
    $
    294,620
 
 (1)
    
    Connecticut Water has an agreement with the South Central Connecticut Regional Water Authority
(RWA) to purchase water from RWA. The agreement was signed on May 13, 2005 and will remain in
effect for a minimum of ten (10) years from that date. Connecticut Water has agreed to purchase at
least three million (3,000,000) gallons of water per calendar year from RWA. Water sales to
Connecticut Water are billed monthly at the most current RWA retail rate.(2)
    
    Connecticut Water has an agreement with The Metropolitan District (MDC) to purchase water from
MDC. The agreement became effective on October 6, 2000 for a term of fifty (50) years beginning
May 19, 2003, the date the water supply facilities related to the agreement were placed in service.(3)
    
    Pension and post retirement contributions cannot be reasonably estimated beyond 2008 and may be
impacted by such factors as return on pension assets, changes in the number of plan participants
and future salary increases. The amounts included for pension and post retirement contributions
are managements best estimate.(4)
    
    We pay refunds on Advances for Construction over a specific period of time based on operating
revenues related to developer-installed water mains or as new customers are connected to and take
service from such mains. After all refunds are paid, any remaining balance is transferred to
Contributions in Aid of Construction. The refund amounts are not included in the above table
because the refund amounts and timing are dependent upon several variables, including new customer
connections, customer consumption levels and future rate increases, which cannot be accurately
estimated. Portions of these refund amounts are payable annually through 2020 and amounts not paid
by the contract expiration dates become non-refundable.(5)
    
    We intend to fund these contractual obligations with cash flows from operations and liquidity
sources held by or available to us.




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26 RESULTS OF OPERATIONS
 Overview of 2007 Results from Continuing Operations
  2007 Net
    
    
    2006 Net
    
    
    IncreaseBusiness Segment
    
    Income
    
    
    Income
    
    
    (Decrease)Water Activities
    
    $
    7,963,000
    
    
    $
    4,130,000
    
    
    $
    3,833,000Real Estate
    
    
    167,000
    
    
    
    2,063,000
    
    
    
    (1,896,000
    )Services and Rentals Transactions
    
    
    651,000
    
    
    
    515,000
    
    
    
    136,000Total
    
    $
    8,781,000
    
    
    $
    6,708,000
    
    
    $
    2,073,000
 Water Activities
  Increase2007
    
    
    2006
    
    
    (Decrease)Operating Revenues
    
    $
    59,026,000
    
    
    $
    46,945,000
    
    
    $
    12,081,000Operation and Maintenance
    
    
    29,864,000
    
    
    
    26,451,000
    
    
    
    3,413,000Depreciation
    
    
    6,525,000
    
    
    
    5,881,000
    
    
    
    644,000Income Taxes
    
    
    4,195,000
    
    
    
    2,055,000
    
    
    
    2,140,000Taxes Other than Income Taxes
    
    
    5,740,000
    
    
    
    5,575,000
    
    
    
    165,000Other Utility Income
    
    
    552,000
    
    
    
    542,000
    
    
    
    10,000Other (Deductions) Income
    
    
    (972,000
    )
    
    
    608,000
    
    
    
    (1,580,000
    )Interest and
Debt Expense (net of AFUDC)
    
    
    4,319,000
    
    
    
    4,003,000
    
    
    
    316,000Total Income from Water Activities
    
    $
    7,963,000
    
    
    $
    4,130,000
    
    
    $
    3,833,000
  -
    
    an increase of $9,287,000, or 32.0%, in revenues from residential customers in 2007,
including $3,823,000 in deferred revenues;
 -
    
    a $1,701,000, or 19.4%, increase in all other metered customers, including commercial,
industrial and public authority customers; and
 -
    
    a $1,092,000, or 12.0%, increase in non-metered revenues which was primarily due to increased
fire protection charges related to the expansion of our water system which increased the
number of fire hydrants and revenue generating mains upon which these charges are based.




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##### Table of Contents



27 Increase2007
    
    
    2006
    
    
    (Decrease)Post-retirement medical expense
    
    $
    1,759,000
    
    
    $
    473,000
    
    
    $
    1,286,000Labor
    
    
    10,842,000
    
    
    
    10,240,000
    
    
    
    602,000Outside services
    
    
    1,480,000
    
    
    
    998,000
    
    
    
    482,000Purchased water
    
    
    1,291,000
    
    
    
    866,000
    
    
    
    425,000Utility costs
    
    
    3,282,000
    
    
    
    2,947,000
    
    
    
    335,000Vehicle
    
    
    1,214,000
    
    
    
    942,000
    
    
    
    272,000Rate case cost amortization
    
    
    270,000
    
    
    
    35,000
    
    
    
    235,000Maintenance
    
    
    1,632,000
    
    
    
    1,526,000
    
    
    
    106,000Customer
    
    
    709,000
    
    
    
    606,000
    
    
    
    103,000Other employee benefit costs
    
    
    2,768,000
    
    
    
    3,697,000
    
    
    
    (929,000
    )Other
    
    
    4,617,000
    
    
    
    4,121,000
    
    
    
    496,000Total Operation and Maintenance Expense
    
    $
    29,864,000
    
    
    $
    26,451,000
    
    
    $
    3,413,000




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##### Table of Contents



28    Real Estate Transactions
     Services and Rentals




---



##### Table of Contents



29  Overview of 2006 Results from Continuing Operations
  Increase(Decrease)Business Segment
    
    In Net IncomeWater Activities
    
    $
    (2,634,000
    )Real Estate
    
    
    2,124,000Services and Rentals
    
    
    52,000Net (Decrease)
    
    $
    (458,000
    )
 Water Activities
  Increase(Decrease)Operating Revenues
    
    $
    (508,000
    )Operation and Maintenance
    
    
    2,591,000Depreciation
    
    
    157,000Income Taxes
    
    
    (462,000
    )Taxes Other than Income Taxes
    
    
    190,000Other Utility Income
    
    
    (29,000
    )Other Income
    
    
    1,320,000Interest and Debt Expense (net of AFUDC)
    
    
    941,000Total (Decrease)
    
    $
    (2,634,000
    )
  -
    
    a $947,000, or 2.4%, decrease in revenues from metered customers in 2006 due to decreased
customer water consumption of approximately 4.9%, due to unfavorable weather conditions,
despite an increase in the number of customers served of 1.8%;
 -
    
    off setting the decrease from metered revenues was a $439,000, or 5.1%, increase in
non-metered revenues which was primarily due to increased fire protection charges related to
the expansion of our water system which increased the number of fire hydrants and revenue
generating mains upon which these charges are based.




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##### Table of Contents



30 
  Increase(Decrease)Labor
    
    $
    1,464,000Other employee benefit costs
    
    
    1,142,000Utility costs
    
    
    412,000Pension expense
    
    
    254,000Other outside services
    
    
    (486,000
    )Legal services
    
    
    (185,000
    )Maintenance
    
    
    (112,000
    )Other
    
    
    102,000Total Increase
    
    $
    2,591,000
       -
    
    Higher interest expense on long-term debt primarily due to the issuance of $15.0
million in new bonds in November 2005, resulting in a full years worth of expense in
2006 compared to a partial year in 2005;-
    
    Higher other interest charges on interim bank loans with higher interest rates; and-
    
    Amortization of the debt issuance costs of the bonds issued in 2005.




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##### Table of Contents



31 
 Real Estate Transactions
    Services and Rentals
  COMMITMENTS AND CONTINGENCIES
 Security
  Reverse Privatization
 Environmental and Water Quality Regulation




---



##### Table of Contents



32  Rate Relief




---



##### Table of Contents



33 Land Dispositions
  Capital Expenditures
 FORWARD LOOKING INFORMATION
   
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK




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##### Table of Contents



34     
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
 Managements Report on Internal Control Over Financial Reporting




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##### Table of Contents



35  Internal Control  Integrated
Framework
  Changes in Internal Control Over Financial Reporting
 
 ITEM 9B. OTHER INFORMATION
  
 PART III




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##### Table of Contents



ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Age in

    
    
    
    
    
    Period Held or

    
    Term of OfficeName
    
    2008*

    
    Office

    
    Prior Position

    
    ExpiresE. W. Thornburg
    
    
    47
    
    
    President, Chief
    
    Held position since
    
    2008 Annual MeetingExecutive Officer
    
    March  2006D. C. Benoit
    
    
    51
    
    
    Vice President -
    
    Held current
    
    2008 Annual MeetingFinance, Chief
    
    position or otherFinancial Officer
    
    executive positionand Treasurer
    
    with the Companysince April 1996T. P. ONeill
    
    
    53
    
    
    Vice President -
    
    Held current
    
    2008 Annual MeetingOperations &
    
    position or otherEngineering
    
    engineeringposition with theCompany sinceFebruary 1980M. P. Westbrook
    
    
    49
    
    
    Vice President -
    
    Held current
    
    2008 Annual MeetingAdministration and
    
    position or otherGovernment Affairs
    
    management positionwith the Companysince September1988T. R. Marston
    
    
    55
    
    
    Vice President -
    
    Held current
    
    2008 Annual MeetingBusiness
    
    position or otherDevelopment
    
    position with theCompany since June1974D. J. Meaney
    
    
    47
    
    
    Corporate Secretary
    
    Held current
    
    2008 Annual Meetingposition or othercommunicationsposition with theCompany sinceAugust 1994K. A. Johnson
    
    
    41
    
    
    Vice President -
    
    Held current
    
    2008 Annual MeetingHuman Resources
    
    position or otherhuman resourcesposition with the Companysince May 2007
 
 *
    
    - Age shown is as of filing date of March 17, 2008.  
 ITEM 11. EXECUTIVE COMPENSATION
 
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS




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##### Table of Contents



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES




---



##### Table of Contents



38 
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    1.
    
    Financial Statements:The report of independent registered public accounting firm 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.
 PageIndex to Consolidated Financial Statements and Schedule
    
    F-1Report of Independent Registered Public
Accounting Firm
    
    F-2Consolidated Statements of Income for the years
Ended December 31, 2007, 2006, and 2005
    
    F-3Consolidated Statements of Comprehensive Income
for the years ended December 31, 2007, 2006, and 2005
    
    F-3Consolidated Balance Sheets at December 31, 2007
and 2006
    
    F-4Consolidated Statements of Cash Flows for the
years ended December 31, 2007, 2006, and 2005
    
    F-5Notes to Consolidated Financial Statements
    
    F-62.
    
    Financial Statement Schedule:The following schedule of the Company is included on the
attached page as indicated:Schedule II Valuation and Qualifying Accounts
and Reserves for the years ended December 31,
2007, 2006, and 2005
    
    S-1All other schedules provided for in the applicable
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.




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##### Table of Contents



39 (b)
    
    Exhibits:
 Exhibits for Connecticut Water Service, Inc. are in the
Index to Exhibits
    
    E-1Exhibits 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.




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##### Table of Contents



F-1 
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
 PageIndex to Consolidated Financial Statements and Schedule
    
    
    F-1Report of Independent Registered Public Accounting
Firm
    
    
    F-2Consolidated Statements of Income for the years ended
December 31, 2007, 2006, and 2005
    
    
    F-3Consolidated Statements of Comprehensive Income for the
years ended December 31, 2007, 2006, and 2005
    
    
    F-3Consolidated Balance Sheets at December 31, 2007 and 2006
    
    
    F-4Consolidated Statements of Cash Flows for the years ended
December 31, 2007, 2006, and 2005
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-6Schedule II  Valuation and Qualifying Accounts
    
    
    S-1




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##### Table of Contents



F-2 
 Report of Independent Registered Public Accounting Firm
  Internal Control  Integrated Framework




---



##### Table of Contents



F-3  
 CONSOLIDATED STATEMENTS OF INCOME
 For the Years Ended December 31, (in thousands, except per share data)
    
    2007
    
    
    2006
    
    
    2005Operating Revenues
    
    $
    59,026
    
    
    $
    46,945
    
    
    $
    47,453Operating ExpensesOperation and Maintenance
    
    
    29,864
    
    
    
    26,451
    
    
    
    23,860Depreciation
    
    
    6,525
    
    
    
    5,881
    
    
    
    5,724Income Taxes
    
    
    4,195
    
    
    
    2,055
    
    
    
    2,517Taxes Other Than Income Taxes
    
    
    5,740
    
    
    
    5,575
    
    
    
    5,385Total Operating Expenses
    
    
    46,324
    
    
    
    39,962
    
    
    
    37,486Net Operating Revenues
    
    
    12,702
    
    
    
    6,983
    
    
    
    9,967Other Utility Income, Net of Taxes
    
    
    552
    
    
    
    542
    
    
    
    571Total Utility Operating Income
    
    
    13,254
    
    
    
    7,525
    
    
    
    10,538Other Income (Deductions), Net of TaxesGain (Loss) on Real Estate Transactions
    
    
    167
    
    
    
    2,063
    
    
    
    (61
    )Non-Water Sales Earnings
    
    
    651
    
    
    
    515
    
    
    
    463Allowance for Funds Used During Construction
    
    
    92
    
    
    
    458
    
    
    
    521Other
    
    
    (972
    )
    
    
    608
    
    
    
    (712
    )Total Other (Deductions) Income, Net of Taxes
    
    
    (62
    )
    
    
    3,644
    
    
    
    211Interest and Debt ExpensesInterest on Long-Term Debt
    
    
    3,500
    
    
    
    3,526
    
    
    
    2,929Other Interest Charges
    
    
    537
    
    
    
    514
    
    
    
    294Amortization of Debt Expense
    
    
    374
    
    
    
    421
    
    
    
    360Total Interest and Debt Expenses
    
    
    4,411
    
    
    
    4,461
    
    
    
    3,583Income from Continuing Operations
    
    
    8,781
    
    
    
    6,708
    
    
    
    7,166Discontinued Operations, Net of Tax of $(244) and $1,720
in 2006 and 2005, respectively
    
    
    
    
    
    
    243
    
    
    
    3,158Net Income
    
    
    8,781
    
    
    
    6,951
    
    
    
    10,324Preferred Stock Dividend Requirement
    
    
    38
    
    
    
    38
    
    
    
    38Total Net Income Applicable to Common Stock
    
    $
    8,743
    
    
    $
    6,913
    
    
    $
    10,286Weighted Average Common Shares Outstanding:Basic
    
    
    8,270
    
    
    
    8,188
    
    
    
    8,094Diluted
    
    
    8,333
    
    
    
    8,237
    
    
    
    8,143Earnings Per Common Share:Basic  Continuing Operations
    
    $
    1.06
    
    
    $
    0.81
    
    
    $
    0.89Basic  Discontinued Operations
    
    
    
    
    
    
    0.03
    
    
    
    0.38Basic  Net Income Applicable to Common Stock
    
    $
    1.06
    
    
    $
    0.84
    
    
    $
    1.27Diluted  Continuing Operations
    
    $
    1.05
    
    
    $
    0.81
    
    
    $
    0.88Diluted  Discontinued Operations
    
    
    
    
    
    
    0.03
    
    
    
    0.38Diluted  Net Income Applicable to Common Stock
    
    $
    1.05
    
    
    $
    0.84
    
    
    $
    1.26
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 For the Years Ended December 31, (in thousands)
    
    2007
    
    
    2006
    
    
    2005Net Income Applicable to Common Stock
    
    $
    8,743
    
    
    $
    6,913
    
    
    $
    10,286Other Comprehensive Income, net of taxQualified cash flow hedging instrument net of tax of $(148), $(22),
and $129
in 2007, 2006, and 2005, respectively
    
    
    (222
    )
    
    
    (45
    )
    
    
    207Adjustment to pension and post-retirement benefits other than pension, net of tax of $56 in 2007
    
    
    143
    
    
    
    
    
    
    
    Comprehensive Income
    
    $
    8,664
    
    
    $
    6,868
    
    
    $
    10,493
 The accompanying notes are an integral part of these consolidated financial statements.




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##### Table of Contents



F-4  
 CONSOLIDATED BALANCE SHEETS
 December 31, (in thousands, except share amounts)
    
    2007
    
    
    2006ASSETSUtility Plant
    
    $
    384,421
    
    
    $
    362,837Construction Work in Progress
    
    
    1,407
    
    
    
    2,755385,828
    
    
    
    365,592Accumulated Provision for Depreciation
    
    
    (108,166
    )
    
    
    (102,405
    )Net Utility Plant
    
    
    277,662
    
    
    
    263,187Other Property and Investments
    
    
    6,652
    
    
    
    4,905Cash and Cash Equivalents
    
    
    337
    
    
    
    1,377Restricted Cash
    
    
    8,220
    
    
    
    Accounts Receivable (Less Allowance, 2007 - $352; 2006 - $285)
    
    
    6,507
    
    
    
    5,305Accrued Unbilled Revenues
    
    
    4,545
    
    
    
    4,233Materials and Supplies, at Average Cost
    
    
    987
    
    
    
    900Prepayments and Other Current Assets
    
    
    2,375
    
    
    
    2,335Total Current Assets
    
    
    22,971
    
    
    
    14,150Unamortized Debt Issuance Expense
    
    
    7,685
    
    
    
    7,398Unrecovered Income Taxes
    
    
    30,278
    
    
    
    24,372Post-Retirement Benefits Other Than Pension
    
    
    6,410
    
    
    
    6,023Goodwill
    
    
    3,608
    
    
    
    3,608Deferred Charges and Other Costs
    
    
    5,547
    
    
    
    4,497Total Regulatory and Other Long-Term Assets
    
    
    53,528
    
    
    
    45,898Total Assets
    
    $
    360,813
    
    
    $
    328,140CAPITALIZATION AND LIABILITIESCommon Stockholders Equity:Common Stock Without Par Value:Authorized - 25,000,000 Shares  Issued and Outstanding: 2007    8,376,842; 2006    8,270,394
    
    $
    62,808
    
    
    $
    60,165Retained Earnings
    
    
    37,272
    
    
    
    35,676Accumulated Other Comprehensive Income
    
    
    18
    
    
    
    97Common Stockholders Equity
    
    
    100,098
    
    
    
    95,938Preferred Stock
    
    
    772
    
    
    
    772Long-Term Debt
    
    
    92,285
    
    
    
    77,347Total Capitalization
    
    
    193,155
    
    
    
    174,057Interim Bank Loans Payable
    
    
    6,459
    
    
    
    5,250Current Portion of Long-Term Debt
    
    
    7
    
    
    
    7Accounts Payable and Accrued Expenses
    
    
    5,984
    
    
    
    6,048Accrued Taxes
    
    
    1,316
    
    
    
    464Accrued Interest
    
    
    810
    
    
    
    887Other Current Liabilities
    
    
    337
    
    
    
    314Total Current Liabilities
    
    
    14,913
    
    
    
    12,970Advances for Construction
    
    
    34,583
    
    
    
    32,183Contributions in Aid of Construction
    
    
    47,865
    
    
    
    47,217Deferred Federal and State Income Taxes
    
    
    28,616
    
    
    
    26,002Unfunded Future Income Taxes
    
    
    25,404
    
    
    
    20,155Long-Term Compensation Arrangements
    
    
    14,717
    
    
    
    13,933Unamortized Investment Tax Credits
    
    
    1,560
    
    
    
    1,623Commitments and ContingenciesTotal Capitalization and Liabilities
    
    $
    360,813
    
    
    $
    328,140
 The accompanying notes are an integral part of these consolidated financial statements.




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##### Table of Contents



F-5  
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Years Ended December 31, (in thousands)
    
    2007
    
    
    2006
    
    
    2005Operating Activities:Net Income
    
    $
    8,781
    
    
    $
    6,951
    
    
    $
    10,324Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:Deferred Revenues
    
    
    (3,823
    )
    
    
    
    
    
    
    Gain on Sale of BARLACO Assets Sold
    
    
    
    
    
    
    (980
    )
    
    
    Earnings from Discontinued Operations
    
    
    
    
    
    
    (243
    )
    
    
    (3,158
    )Allowance for Funds Used During Construction
    
    
    (131
    )
    
    
    (491
    )
    
    
    (575
    )Depreciation (including $338 in 2007, $396 in 2006,
and $188 in 2005 charged to other accounts)
    
    
    7,173
    
    
    
    6,277
    
    
    
    5,912Change in Assets and Liabilities:(Increase) Decrease in Accounts Receivable and Accrued Unbilled Revenues
    
    
    (1,513
    )
    
    
    268
    
    
    
    (342
    )(Increase) Decrease in Other Current Assets
    
    
    (129
    )
    
    
    (805
    )
    
    
    2,600Decrease (Increase) in Other Non-Current Items
    
    
    2,072
    
    
    
    (549
    )
    
    
    (556
    )Increase (Decrease) in Accounts Payable, Accrued
Expenses and Other Current Liabilities
    
    
    1,258
    
    
    
    690
    
    
    
    (3,603
    )Increase (Decrease) in Deferred Income Taxes and
Investment Tax Credits, Net
    
    
    1,893
    
    
    
    (1,492
    )
    
    
    2,332Total Adjustments
    
    
    6,800
    
    
    
    2,675
    
    
    
    2,610Net Cash and Cash Equivalents Provided by Continuing Operations
    
    
    15,581
    
    
    
    9,626
    
    
    
    12,934Net Cash and Cash Equivalents Provided by (Used In) Discontinued Operations
    
    
    
    
    
    
    243
    
    
    
    (185
    )Net Cash and Cash Equivalents Provided by Operating Activities
    
    
    15,581
    
    
    
    9,869
    
    
    
    12,749Investing Activities:Company Financed Additions to Utility Plant
    
    
    (18,749
    )
    
    
    (16,199
    )
    
    
    (14,256
    )Advances from Others for Construction
    
    
    (961
    )
    
    
    (1,102
    )
    
    
    (1,955
    )Net Additions to Utility Plant Used in Continuing Operations
    
    
    (19,710
    )
    
    
    (17,301
    )
    
    
    (16,211
    )Release of Restricted Cash
    
    
    
    
    
    
    2,686
    
    
    
    Proceeds from Sale of BARLACO Assets Sold (Net of $35 in Transaction Costs)
    
    
    
    
    
    
    965
    
    
    
    Proceeds from Sale of Barnstable Water Company Assets (Net of $114 in Transaction Costs)
    
    
    
    
    
    
    
    
    
    
    9,885Sale (Purchase) of Short Term Investments
    
    
    
    
    
    
    6,922
    
    
    
    (6,713
    )Net Cash and Cash Equivalents Used in Investing Activities in Continuing Operations
    
    
    (19,710
    )
    
    
    (6,728
    )
    
    
    (13,039
    )Net Cash and Cash Equivalents Used in Investing Activities in Discontinued Operations
    
    
    
    
    
    
    
    
    
    
    (171
    )Net Cash Used in Investing Activities
    
    
    (19,710
    )
    
    
    (6,728
    )
    
    
    (13,210
    )Financing Activities:Net Proceeds from Interim Bank Loans
    
    
    6,459
    
    
    
    5,250
    
    
    
    4,750Net Repayment of Interim Bank Loans
    
    
    (5,250
    )
    
    
    (4,750
    )
    
    
    (5,650
    )Repayment of Long-Term Debt Including Current Portion
    
    
    (62
    )
    
    
    (2,381
    )
    
    
    (665
    )Proceeds from Issuance of Long-Term Debt
    
    
    6,482
    
    
    
    
    
    
    
    12,282Proceeds from Issuance of Common Stock
    
    
    1,238
    
    
    
    1,401
    
    
    
    2,038Proceeds from Exercise of Stock Options
    
    
    809
    
    
    
    284
    
    
    
    455Redemption of Preferred Stock
    
    
    
    
    
    
    (75
    )
    
    
    Costs Incurred to Issue Long-Term Debt and Common Stock
    
    
    (367
    )
    
    
    (4
    )
    
    
    (934
    )Advances from Others for Construction
    
    
    961
    
    
    
    1,102
    
    
    
    1,955Cash Dividends Paid
    
    
    (7,181
    )
    
    
    (7,030
    )
    
    
    (6,838
    )Net Cash and Cash Equivalents Provided by (Used in)
Financing Activities in Continuing Operations
    
    
    3,089
    
    
    
    (6,203
    )
    
    
    7,393Net Cash and Cash Equivalents Used in Financing Activities in Discontinued Operations
    
    
    
    
    
    
    
    
    
    
    (3,200
    )Net Cash and Cash Equivalents Provided by (Used in) Financing Activites
    
    
    3,089
    
    
    
    (6,203
    )
    
    
    4,193Net (Decrease) Increase in Cash and Cash Equivalents
    
    
    (1,040
    )
    
    
    (3,062
    )
    
    
    3,732Cash and Cash Equivalents at Beginning of Year
    
    
    1,377
    
    
    
    4,439
    
    
    
    707Cash and Cash Equivalents at End of Year
    
    $
    337
    
    
    $
    1,377
    
    
    $
    4,439Non-Cash Investing and Financing Activities:Non-Cash Contributed Utility Plant (see Note 1 for details)
    
    $
    2,116
    
    
    $
    3,295
    
    
    $
    1,231Short-term Investment of Bond Proceeds Held in Trust
    
    $
    8,220
    
    
    $
    
    
    
    $
    2,628Supplemental Disclosures of Cash Flow Information:Cash Paid for Continuing Operations During the Year for:Interest
    
    $
    4,398
    
    
    $
    4,159
    
    
    $
    3,511State and Federal Income Taxes
    
    $
    2,096
    
    
    $
    1,176
    
    
    $
    3,515Cash Paid for Discontinued Operations During the Year for:Interest
    
    $
    
    
    
    $
    
    
    
    $
    106State and Federal Income Taxes
    
    $
    
    
    
    $
    73
    
    
    $
    410
 The accompanying notes are an integral part of these consolidated financial statements.




---



##### Table of Contents



F-6 
 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 BASIS OF PRESENTATION 
 The Connecticut Water Company (Connecticut Water)
Chester Realty, Inc. (Chester Realty)
New England Water Utility Services, Inc. (NEWUS)
Barnstable Holding Company (Barnstable Holding)
   Linebackerâ
   PUBLIC UTILITY REGULATION
  December 31,(in thousands)
    
    2007
    
    
    2006AssetsPostretirement benefits
    
    $
    6,136
    
    
    $
    8,317Unrecovered
income taxes and other
    
    
    25,404
    
    
    
    20,155Deferred
revenue (included in deferred charges)
    
    
    3,823
    
    
    
    Other
(included in deferred charges)
    
    
    1,806
    
    
    
    1,819$
    37,169
    
    
    $
    30,291LiabilitiesInvestment Tax Credits
    
    $
    1,560
    
    
    $
    1,623Unfunded
future income taxes and other
    
    
    25,404
    
    
    
    20,155$
    26,964
    
    
    $
    21,778




---



##### Table of Contents



F-7     USE OF ESTIMATES
 REVENUES
 Water Activities
 Real Estate Transactions
 Services and Rentals
 UTILITY PLANT
 Allowance For Funds Used During Construction 
   Customers Advances For Construction, Contributed Plant and Contributions In Aid Of Construction




---



##### Table of Contents



F-8    in thousands
    
    2007
    
    
    2006
    
    
    2005Additions to Utility Plant:Company Financed
    
    $
    18,749
    
    
    $
    16,199
    
    
    $
    14,256Allowance for Funds Used During Construction
    
    
    131
    
    
    
    491
    
    
    
    575Subtotal  Utility Plant Increase to Rate Base
    
    
    18,880
    
    
    
    16,690
    
    
    
    14,831Advances from Others for Construction
    
    
    961
    
    
    
    1,102
    
    
    
    1,955Net Additions to Utility Plant  Continuing
Operations
    
    
    19,841
    
    
    
    17,792
    
    
    
    16,786Plus: Discontinued Operations
    
    
    
    
    
    
    
    
    
    
    171Net Additions to Utility Plant
    
    $
    19,841
    
    
    $
    17,792
    
    
    $
    16,957
 Depreciation
 INCOME TAXES
     MUNICIPAL TAXES
 STOCK OPTIONS
 UNAMORTIZED DEBT ISSUANCE EXPENSE
 GOODWILL




---



##### Table of Contents



F-9  EARNINGS PER SHARE 
 Years ended December 31,
    
    2007
    
    
    2006
    
    
    2005Basic Earnings per Share from Continuing
Operations
    
    $
    1.06
    
    
    $
    0.81
    
    
    $
    0.89Dilutive Effect of Stock Awards
    
    
    0.01
    
    
    
    
    
    
    
    0.01Diluted Earnings per Share
    
    $
    1.05
    
    
    $
    0.81
    
    
    $
    0.88Numerator (in thousands)Basic Income from Continuing Operations
    
    $
    8,781
    
    
    $
    6,708
    
    
    $
    7,166Diluted Income from Continuing Operations
    
    $
    8,781
    
    
    $
    6,708
    
    
    $
    7,166Denominator (in thousands)Basic Weighted Average Shares Outstanding
    
    
    8,270
    
    
    
    8,188
    
    
    
    8,094Dilutive Effect of Stock Awards
    
    
    63
    
    
    
    49
    
    
    
    49Diluted Weighted Average Shares Outstanding
    
    
    8,333
    
    
    
    8,237
    
    
    
    8,143
 RECLASSIFICATIONS AND REVISIONS 
 NEW ACCOUNTING PRONOUNCEMENTS
    




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##### Table of Contents



F-10  NOTE 2: SALE OF BARNSTABLE WATER COMPANY ASSETS  DISCONTINUED OPERATIONS
     Year ended December 31,(in thousands)
    
    2006
    
    
    2005Water Activities:Operating Revenues
    
    $
    
    
    
    $
    802Income Taxes
    
    
    (244
    )
    
    
    ( 9
    )Net Income from Water Activites
    
    
    243
    
    
    
    (11
    )Services and Rentals:Revenues
    
    $
    
    
    
    $
    1,067Income Taxes
    
    
    (12
    )
    
    
    132Net Income from Services and Rentals
    
    
    
    
    
    
    213Gain on Sale of Assets:Income Taxes
    
    $
    
    
    
    $
    1,597Gain on Sale of Assets
    
    
    
    
    
    
    2,956Total Net Income from Discontinued Operations
    
    $
    243
    
    
    $
    3,158
 NOTE 3: SALE OF BARLACO ASSETS
  NOTE 4: INCOME TAX EXPENSE




---



##### Table of Contents



F-11   (in thousands)
    
    2007
    
    
    2006
    
    
    2005Federal Classified as Operating Expense from Continuing Operations
    
    $
    3,834
    
    
    $
    2,080
    
    
    $
    2,400Federal Classified as Other Utility Income from Continuing Operations
    
    
    238
    
    
    
    232
    
    
    
    251Federal Classified as Other Income from Continuing OperationsLand Sales
    
    
    61
    
    
    
    287
    
    
    
    132Land Donations
    
    
    83
    
    
    
    (892
    )
    
    
    87Non-Water Sales
    
    
    332
    
    
    
    264
    
    
    
    216Other
    
    
    (529
    )
    
    
    (981
    )
    
    
    179Total Federal Income Tax Expense from Continuing Operations
    
    
    4,019
    
    
    
    990
    
    
    
    3,265State Classified as Operating Expense from Continuing Operations
    
    
    361
    
    
    
    (26
    )
    
    
    (62
    )State Classified as Other Utility Income from Continuing Operations
    
    
    57
    
    
    
    68
    
    
    
    60State Classified as Other Income from Continuing OperationsLand Sales
    
    
    14
    
    
    
    89
    
    
    
    31Land Donations
    
    
    (199
    )
    
    
    (902
    )
    
    
    225Non-Water Sales
    
    
    79
    
    
    
    79
    
    
    
    59Other
    
    
    (101
    )
    
    
    (191
    )
    
    
    34Total State Income Tax Expense from Continuing Operations
    
    
    211
    
    
    
    (883
    )
    
    
    347Total Income Tax Expense from Continuing Operations
    
    $
    4,230
    
    
    $
    107
    
    
    $
    3,612
  (in thousands)
    
    2007
    
    
    2006
    
    
    2005Current from Continuing OperationsFederal
    
    $
    1,938
    
    
    $
    1,165
    
    
    $
    1,758State
    
    
    158
    
    
    
    221
    
    
    
    (377
    )Total Current from Continuing Operations
    
    
    2,096
    
    
    
    1,386
    
    
    
    1,381Deferred Income Taxes from Continuing Operations, NetFederalInvestment Tax Credit
    
    
    (63
    )
    
    
    (63
    )
    
    
    (62
    )Deferred Revenue
    
    
    1,202
    
    
    
    
    
    
    
    Land Donations
    
    
    260
    
    
    
    (501
    )
    
    
    388Depreciation
    
    
    1,206
    
    
    
    1,173
    
    
    
    721Other
    
    
    (524
    )
    
    
    (784
    )
    
    
    459Total Federal from Continuing Operations
    
    
    2,081
    
    
    
    (175
    )
    
    
    1,506StateLand Donations
    
    
    (108
    )
    
    
    (134
    )
    
    
    (25
    )Other
    
    
    161
    
    
    
    (970
    )
    
    
    750Total State from Continuing Operations
    
    
    53
    
    
    
    (1,104
    )
    
    
    725Total
Deferred Income Taxes from Continuing Operations
    
    
    2,134
    
    
    
    (1,279
    )
    
    
    2,231Total from Continuing Operations
    
    $
    4,230
    
    
    $
    107
    
    
    $
    3,612




---



##### Table of Contents



F-12  (in thousands)
    
    2007
    
    
    2006Unrecovered Income Taxes
    
    $
    (30,278
    )
    
    $
    (24,372
    )Deferred Federal and State Income Taxes
    
    
    28,616
    
    
    
    26,002Unfunded Future Income Taxes
    
    
    25,404
    
    
    
    20,155Unamortized Investment Tax Credit
    
    
    1,560
    
    
    
    1,623Other
    
    
    (80
    )
    
    
    (80
    )Net Deferred Income Tax Liability
    
    $
    25,222
    
    
    $
    23,328
  (in thousands)
    
    2007
    
    
    2006Charitable Contribution Carryforward (1)
    
    $
    (2,977
    )
    
    $
    (3,048
    )Valuation Allowance
    
    
    1,888
    
    
    
    1,722Tax Credit Carryforward (2)
    
    
    (1,436
    )
    
    
    (1,349
    )Alternative Minimum Tax Carryforward
    
    
    
    
    
    
    (4
    )Prepaid Income Taxes on CIAC
    
    
    (209
    )
    
    
    (72
    )Prepaid FIT on Services
    
    
    (174
    )
    
    
    (171
    )Other Comprehensive Income
    
    
    (29
    )
    
    
    63Accelerated Depreciation
    
    
    26,975
    
    
    
    25,822Net of AFUDC and Capitalized Interest
    
    
    211
    
    
    
    186Unamortized Investment Tax Credit
    
    
    1,560
    
    
    
    1,623Other
    
    
    (587
    )
    
    
    (1,444
    )Net Deferred Income Tax Liability
    
    $
    25,222
    
    
    $
    23,328
 
 (1)
    
    2007 charitable contribution carryover expires beginning in 2008 and ending in 2011.(2)
    
    State tax credit carry-forwards expire beginning 2016 and ending in 2019.  (in thousands)
    
    2007
    
    
    2006
    
    
    2005Pre-Tax IncomeIncome From Continuing Operations
    
    $
    8,781
    
    
    $
    6,708
    
    
    $
    7,166Income Taxes
    
    
    4,230
    
    
    
    107
    
    
    
    3,612Total Pre-Tax Income From Continuing Operations
    
    $
    13,011
    
    
    $
    6,815
    
    
    $
    10,778
  2007
    
    2006
    
    2005Federal Statutory Tax Rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %Tax Effect Differences:State Income Taxes Net of Federal Benefit
    
    
    1.1
    %
    
    
    (0.1
    %)
    
    
    2.1
    %Reversal of Regulatory Liability
    
    
    
    
    
    
    (14.4
    %)
    
    
    Adjustment to Taxes Due to Closed IRS Examination
    
    
    
    
    
    
    (14.3
    %)
    
    
    Depreciation
    
    
    1.7
    %
    
    
    2.6
    %
    
    
    1.6
    %Charitable Contributions  Land Donation (Net of
Valuation Allowance)
    
    
    0.4
    %
    
    
    (7.7
    %)
    
    
    0.8
    %Pension Costs
    
    
    (5.3
    %)
    
    
    7.7
    %
    
    
    (3.3
    %)Allowance for Funds Used During Construction
    
    
    (0.3
    %)
    
    
    (2.9
    %)
    
    
    (1.4
    %)Change in Estimate of Prior Year Income Tax
Expense
    
    
    0.2
    %
    
    
    0.6
    %
    
    
    (2.5
    %)Rate Case Expense
    
    
    0.6
    %
    
    
    (3.6
    %)
    
    
    Other
    
    
    0.1
    %
    
    
    (0.3
    %)
    
    
    2.2
    %Effective Income Tax Rate for Continuing
Operations
    
    
    32.5
    %
    
    
    1.6
    %
    
    
    33.5
    %




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##### Table of Contents



F-13 NOTE 5: COMMON STOCK
  Issuance(in thousands, except share data)
    
    Shares
    
    
    Amount
    
    
    Expense
    
    
    TotalBalance, January 1, 2005
    
    
    8,035,199
    
    
    $
    57,111
    
    
    $
    (1,597
    )
    
    $
    55,514Stock and equivalents issued through
Performance Stock
Program
    
    
    29,379
    
    
    
    99
    
    
    
    
    
    
    
    99Dividend Reinvestment Plan
    
    
    60,486
    
    
    
    1,529
    
    
    
    
    
    
    
    1,529Stock Options Exercised and Expensed
    
    
    44,563
    
    
    
    865
    
    
    
    (2
    )
    
    
    863Balance, December 31, 2005
    
    
    8,169,627
    
    
    $
    59,604
    
    
    $
    (1,599
    )
    
    $
    58,005Stock and equivalents issued through
Performance Stock
Program
    
    
    23,058
    
    
    
    323
    
    
    
    
    
    
    
    323Dividend Reinvestment Plan
    
    
    60,747
    
    
    
    1,401
    
    
    
    
    
    
    
    1,401Stock Options Exercised and Expensed
    
    
    16,962
    
    
    
    441
    
    
    
    (2
    )
    
    
    439Other Paid in Capital
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Balance, December 31, 2006
    
    
    8,270,394
    
    
    $
    61,766
    
    
    $
    (1,601
    )
    
    $
    60,165Stock and equivalents issued through
Performance Stock
Program, Net of Forfeitures
    
    
    13,975
    
    
    
    420
    
    
    
    
    
    
    
    420Dividend Reinvestment Plan
    
    
    54,567
    
    
    
    1,326
    
    
    
    
    
    
    
    1,326Stock Options Exercised and Expensed
    
    
    37,906
    
    
    
    902
    
    
    
    (5
    )
    
    
    897Balance, December 31, 2007 1
    
    
    8,376,842
    
    
    $
    64,414
    
    
    $
    (1,606
    )
    
    $
    62,808
 
 1
    
    Includes 36,279 restricted shares and 68,425 common stock equivalent shares issued
through the Performance Stock Programs through December 31, 2007.




---



##### Table of Contents



F-14 NOTE 6: RETAINED EARNINGS
  (in thousands, except per share data)
    
    2007
    
    
    2006
    
    
    2005Balance, beginning of year
    
    $
    35,676
    
    
    $
    35,777
    
    
    $
    32,264Net Income
    
    
    8,781
    
    
    
    6,951
    
    
    
    10,324Sub-total
    
    
    44,457
    
    
    

    42,728
    
    
    
    42,588Dividends declared:Cumulative Preferred Stock, Series A, $0.80 per share
    
    
    12
    
    
    
    12
    
    
    
    12Cumulative Preferred Stock, Series $0.90, $0.90 per share
    
    
    26
    
    
    
    26
    
    
    
    26Common Stock:2007 $0.865 per Common Share
    
    
    7,147
    
    
    
    
    
    
    
    2006 $0.855 per Common Share
    
    
    
    
    
    
    7,014
    
    
    
    2005 $.0845 per Common Share
    
    
    
    
    
    
    
    
    
    
    6,773Total Dividends Declared
    
    
    7,185
    
    
    
    7,052
    
    
    
    6,811Balance, end of year
    
    $
    37,272
    
    
    $
    35,676
    
    
    $
    35,777
 NOTE 7: FAIR VALUE OF FINANCIAL INSTRUMENTS
  CASH AND CASH EQUIVALENTS 
 RESTRICTED CASH
 LONG-TERM DEBT
  INTEREST RATE SWAP 




---



##### Table of Contents



F-15 NOTE 8: LONG-TERM DEBT
  (in thousands)
    
    
    
    
    2007
    
    
    2006Connecticut Water CompanyUnsecured Water Facilities Revenue Bonds5.05
    %
    
    1998 Series A, Due 2028
    
    $
    9,640
    
    
    $
    9,6405.125
    %
    
    1998 Series B, Due 2028
    
    
    7,635
    
    
    
    7,6354.40
    %
    
    2003A Series, Due 2020
    
    
    8,000
    
    
    
    8,0005.00
    %
    
    2003C Series, Due 2022
    
    
    14,915
    
    
    
    14,930Var.
    
    
    2004 Series Variable Rate, Due 2029
    
    
    12,500
    
    
    
    12,500Var.
    
    
    2004 Series A, Due 2028
    
    
    5,000
    
    
    
    5,000Var.
    
    
    2004 Series B, Due 2028
    
    
    4,550
    
    
    
    4,5505.00
    %
    
    2005 A Series, Due 2040
    
    
    14,960
    
    
    
    15,0005.00
    %
    
    2007 A Series, Due 2037
    
    
    15,000
    
    
    
    Total Connecticut Water Company
    
    
    92,200
    
    
    
    77,255Chester RealtyRegulated Secured5.45
    %
    
    Westbank, Due 2017
    
    
    92
    
    
    
    99Total Chester Realty
    
    
    92
    
    
    
    99Total Connecticut Water Service, Inc.
    
    
    92,292
    
    
    
    77,354Less Current Portion
    
    
    (7
    )
    
    
    (7
    )Total Long-Term Debt
    
    
    $92,285
    
    
    
    $77,347
  (in thousands)2008
    
    $
    72009
    
    $
    82010
    
    $
    82011
    
    $
    82012
    
    $
    9




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##### Table of Contents



F-16   Financial
Covenants
 NOTE 9: PREFERRED STOCK
  (in thousands, except share data)
    
    2007
    
    
    2006Connecticut Water Service, Inc.Cumulative Series A Voting, $20 Par Value; Authorized, Issued and Outstanding 15,000
Shares
    
    $
    300
    
    
    $
    300Cumulative Series $0.90 Non-Voting, $16 Par Value; Authorized 50,000 Shares, Issued
and
Outstanding 29,999
    
    
    472
    
    
    
    472Total Preferred Stock
    
    $
    772
    
    
    $
    772
   NOTE 10: BANK LINES OF CREDIT
   NOTE 11: UTILITY PLANT AND CONSTRUCTION PROGRAM
  (in thousands)
    
    2007
    
    
    2006Land
    
    $
    9,507
    
    
    $
    9,443Source of supply
    
    
    25,876
    
    
    
    25,132Pumping
    
    
    24,999
    
    
    
    24,531Water treatment
    
    
    52,919
    
    
    
    52,785Transmission and distribution
    
    
    246,676
    
    
    
    230,252General
    
    
    25,235
    
    
    
    21,486Held for future use
    
    
    429
    
    
    
    428Acquisition Adjustment
    
    
    (1,220
    )
    
    
    (1,220
    )Total
    
    $
    384,421
    
    
    $
    362,837




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##### Table of Contents



F-17 NOTE 12: TAXES OTHER THAN INCOME TAXES
  (in thousands)
    
    2007
    
    
    2006
    
    
    2005Municipal Property Taxes
    
    $
    4,903
    
    
    $
    4,743
    
    
    $
    4,708Payroll Taxes
    
    
    837
    
    
    
    832
    
    
    
    677Total Taxes Other than Income Taxes
    
    $
    5,740
    
    
    $
    5,575
    
    
    $
    5,385
 NOTE 13: LONG-TERM COMPENSATION ARRANGEMENTS
  (in thousands)
    
    2007
    
    
    2006Defined Benefit Pension Plan
    
$
    2,199
    
    
    $
    3,524Post Retirement Benefit Other than Pension
    
    
    6,464
    
    
    
    6,107Supplemental Executive Retirement
    
    
    4,055
    
    

    2,414Deferred
Officers Wages
    
    
    1,325
    
    
    
    1,239Other Long-Term Compensation
    
    
    674
    
    
    
    649Long-Term Compensation Arrangements
    
    $
    14,717
    
    
    $
    13,933
   Investment Strategy
  2007
    
    2006Equity
    
    
    65
    %
    
    
    65
    %Fixed Income
    
    
    35
    %
    
    
    35
    %Total
    
    
    100
    %
    
    
    100
    %
   PENSION
 Defined Benefit Plans




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##### Table of Contents



F-18  Pension Benefits
 (in thousands)
    
    2007
    
    
    2006Change in benefit obligation:Benefit obligation, beginning of year
    
    $
    31,539
    
    
    $
    30,509Service cost
    
    
    1,277
    
    
    
    1,228Interest cost
    
    
    1,789
    
    
    
    1,681Actuarial gain
    
    
    (2,415
    )
    
    
    (208
    )Benefits paid
    
    
    (1,825
    )
    
    
    (1,671
    )Benefit obligation, end of year
    
    $
    30,365
    
    
    $
    31,539Change in plan assets:Fair value, beginning of year
    
    $
    28,015
    
    
    $
    24,846Actual return on plan assets
    
    
    1,931
    
    
    
    2,390Employer contributions
    
    
    45
    
    
    
    2,450Benefits paid
    
    
    (1,825
    )
    
    
    (1,671
    )Fair value, end of year
    
    $
    28,166
    
    
    $
    28,015Funded Status
    
    $
    (2,199
    )
    
    $
    (3,524
    )Amount Recognized in Consolidated Balance Sheets Consisted of:Non-current asset
    
    $
    
    
    
    $
    Current liability
    
    
    
    
    
    
    Non-current liability
    
    
    (2,199
    )
    
    
    (3,524
    )Net amount recognized
    
    $
    (2,199
    )
    
    $
    (3,524
    )
  2007
    
    2006Weighted-average assumptions used to determine
benefit obligations at December 31:Discount rate
    
    
    6.30
    %
    
    
    5.75
    %Rate of compensation increase
    
    
    4.50
    %
    
    
    4.50
    %Weighted-average assumptions used to determine
net periodic cost for years ended December 31:Discount rate
    
    
    5.75
    %
    
    
    5.50
    %Expected long-term return on plan assets
    
    
    8.00
    %
    
    
    8.00
    %Rate of compensation increase
    
    
    4.50
    %
    
    
    4.50
    %
   Pension Benefits
 (in thousands)
    
    2007
    
    
    2006
    
    
    2005Components of net periodic benefit costsService cost
    
    $
    1,277
    
    
    $
    1,228
    
    
    $
    1,050Interest cost
    
    
    1,789
    
    
    
    1,681
    
    
    
    1,552Expected return on plan assets
    
    
    (2,017
    )
    
    
    (1,836
    )
    
    
    (1,645
    )Amortization of:Net transition obligation
    
    
    2
    
    
    
    2
    
    
    
    10Net loss
    
    
    69
    
    
    
    75
    
    
    
    322Prior service cost
    
    
    345
    
    
    
    491
    
    
    
    98Net Periodic Pension Benefit Costs
    
    $
    1,465
    
    
    $
    1,641
    
    
    $
    1,387




---



##### Table of Contents





F-19



Pension Benefits


(in thousands)
    
    2007
    
    
    2006Change in net (gain)
    
    $
    (2,329
    )
    
    
    Amortization of transition obligation
    
    
    (2
    )
    
    
    Amortization of prior service cost
    
    
    (69
    )
    
    
    Amortization of net loss (gain)
    
    
    (345
    )
    
    
    2,585Total
changes recognized to Regulatory Asset (Liability)
    
    
    (2,745
    )
    
    
    2,585


2007
    
    
    2006Amounts Recognized as a Regulatory
Asset (Liability) at December 31:Transition obligation
    
    $
    9
    
    
    $
    11Prior service cost
    
    
    585
    
    
    
    655Net (gain) loss
    
    
    (754
    )
    
    
    1,919Total
Recognized as a Regulatory Asset (Liability)
    
    $
    (160
    )
    
    $
    2,585


2008Estimated Net Periodic Benefit Cost Amortizations for the periods January 1
- December 31,:Amortization of transition obligation
    
    
    
    
    
    $
    2Amortization of prior service cost
    
    
    
    
    
    
    69Amortization of net loss (gain)
    
    
    
    
    
    
    101Total
Estimated Net Periodic Benefit Cost Amortizations
    
    
    
    
    
    $
    172


Plan Assets




2007
    
    2006Equity
    
    
    64
    %
    
    
    66
    %Fixed Income
    
    
    36
    %
    
    
    34
    %Total
    
    
    100
    %
    
    
    100
    %




(in thousands)2008
    
    $
    1,6512009
    
    $
    1,6212010
    
    $
    1,8532011
    
    $
    1,6422012
    
    $
    2,592Years 2013 - 2017
    
    $
    14,745


POST-RETIREMENT BENEFITS OTHER THAN PENSION (PBOP)














---



##### Table of Contents



F-20  PBOP Benefits
 (in thousands)
    
    2007
    
    
    2006Change in benefit obligation:Benefit obligation, beginning of year
    
    $
    10,283
    
    
    $
    8,253Service cost
    
    
    651
    
    
    
    599Interest cost
    
    
    610
    
    
    
    485Plan participant contributions
    
    
    138
    
    
    
    99Actuarial loss
    
    
    1,083
    
    
    
    1,343Benefits paid
    
    
    (449
    )
    
    
    (496
    )Benefit obligation, end of year
    
    $
    12,316
    
    
    $
    10,283Change in plan assets:Fair value, beginning of year
    
    $
    4,260
    
    
    $
    3,845Actual return on plan assets
    
    
    198
    
    
    
    339Employer contributions
    
    
    1,759
    
    
    
    473Participants contributions
    
    
    138
    
    
    
    99Benefits paid
    
    
    (449
    )
    
    
    (496
    )Fair value, end of year
    
    $
    5,906
    
    
    $
    4,260Funded Status
    
    $
    6,410
    
    
    $
    6,023Amount Recognized in Consolidated Balance Sheets Consisted of:Non-current asset
    
    $
    
    
    
    $
    Current liability
    
    
    
    
    
    
    Non-current liability
    
    
    6,410
    
    
    
    6,023Net amount recognized
    
    
    6,410
    
    
    $
    6,023
 2007
    
    2006Weighted-average assumptions used to determine
benefit obligations at December 31:Discount rate
    
    
    6.30
    %
    
    
    5.75
    %Weighted-average assumptions used to determine
net periodic cost for years ended December 31:Discount rate
    
    
    5.75
    %
    
    
    5.50
    %Expected long-term return on plan assets
    
    
    5.00
    %
    
    
    5.00
    %
   PBOP Benefits
 (in thousands)
    
    2007
    
    
    2006
    
    
    2005Components of net periodic benefit costsService cost
    
    $
    651
    
    
    $
    599
    
    
    $
    460Interest cost
    
    
    610
    
    
    
    485
    
    
    
    405Expected return on plan assets
    
    
    (189
    )
    
    
    (178
    )
    
    
    (168
    )Other
    
    
    225
    
    
    
    
    
    
    
    Amortization of:Net transition obligation
    
    
    120
    
    
    
    120
    
    
    
    120Recognized net loss
    
    
    342
    
    
    
    273
    
    
    
    164Net Periodic Post Retirement Benefit Costs
    
    $
    1,759
    
    
    $
    1,299
    
    
    $
    981




---



##### Table of Contents



F-21 2007
    
    
    2006Amounts Recognized as a Regulatory Asset at
December 31:Transition obligation
    
    $
    602
    
    
    $
    723Prior service cost
    
    
    
    
    
    
    Net (gain) loss
    
    
    3,611
    
    
    
    2,878Total Recognized as a Regulatory Asset
    
    $
    4,213
    
    
    $
    3,601
  2008Estimated
Benefit Cost Amortizations for the periods January 1 -
December 31,:Amortization of transition obligation
    
    $
    121Amortization of prior service cost
    
    
    Amortization of net loss (gain)
    
    
    360Total
Estimated Net Periodic Benefit Cost Amortizations
    
    $
    481
  2007
    
    2006Medical
    
    Dental
    
    Medical
    
    DentalHealth care cost trend rate assumed for next year
    
    
    10.0
    %
    
    
    10.0
    %
    
    
    9.0
    %
    
    
    9.0
    %Rate to which the cost trend rate is assumed to
decline
    
    
    5.0
    %
    
    
    5.0
    %
    
    
    4.5
    %
    
    
    4.5
    %Year that the rate reaches the ultimate trend rate
    
    
    2017
    
    
    
    2017
    
    
    
    2016
    
    
    
    2016
  1 Percentage-Point(in thousands)
    
    Increase
    
    DecreaseEffect on total of service and interest cost
components
    
    $
    216
    
    
    $
    (176
    )Effect on post-retirement benefit obligation
    
    $
    1,648
    
    
    $
    (1,380
    )
 Plan Assets
  2007
    
    2006Equity
    
    
    44
    %
    
    
    63
    %Fixed Income
    
    
    56
    %
    
    
    37
    %Total
    
    
    100
    %
    
    
    100
    %
  Cash Flows
   (in thousands)2008
    


    
 $
 4462009
    


    
 $
  5052010
    

    
 $
    5472011
    

    
    $
    5992012
    

    
    $
    669Years 2013 - 2017
    

    
    $
    4,513
 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP)
  SAVINGS PLAN (401(k))




---



##### Table of Contents



F-22 NOTE 14: STOCK BASED COMPENSATION PLANS
      STOCK OPTIONS




---



##### Table of Contents



F-23  2007
    
    2006
    
    2005Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceFor the Years Ended December 31:Options:Outstanding, beginning of year
    
    
    180,853
    
    
    $
    24.62
    
    
    
    202,271
    
    
    $
    24.04
    
    
    
    251,835
    
    
    $
    22.85Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Terminated
    
    
    (36,286
    )
    
    
    27.71
    
    
    
    (4,456
    )
    
    
    27.95
    
    
    
    (5,001
    )
    
    
    25.78Exercised
    
    
    (37,906
    )
    
    
    21.33
    
    
    
    (16,962
    )
    
    
    16.76
    
    
    
    (44,563
    )
    
    
    17.11Outstanding, end of year
    
    
    106,661
    
    
    $
    24.74
    
    
    
    180,853
    
    
    $
    24.62
    
    
    
    202,271
    
    
    $
    24.04Exercisable, end of year
    
    
    106,661
    
    
    $
    24.74
    
    
    
    171,840
    
    
    $
    24.39
    
    
    
    175,685
    
    
    $
    23.44
  Options Outstanding and ExercisableWeightedAverage
    
    WeightedRemaining
    
    AverageContractual
    
    ExerciseShares
    
    Life (years)
    
    PriceRange of prices:$12.00 - $14.99
    
    
    6,059
    
    
    
    1.3
    
    
    $
    14.83$15.00 - $17.99
    
    
    
    
    
    
    
    
    
    
    $18.00 - $20.99
    
    
    14,074
    
    
    
    2.9
    
    
    
    20.42$21.00 - $23.99
    
    
    23,214
    
    
    
    1.9
    
    
    
    22.33$24.00 - $26.99
    
    
    22,535
    
    
    
    4.9
    
    
    
    25.78$27.00 - $29.99
    
    
    40,779
    
    
    
    4.9
    
    
    
    28.51106,661
    
    
    
    3.8
    
    
    $
    24.74
  RESTRICTED STOCK AND COMMON STOCK EQUIVALENTS
 RESTRICTED STOCK (Non-Performance-Based Awards)
 2007
    
    
    2006Grant Date
    
    
    
    
    
    
    Grant DateWeighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    Average Fair
    
    
    Number of
    
    
    AverageFor the years ended December 31,
    
    Shares
    
    
    Value
    
    
    Shares
    
    
    Fair ValueNon-vested at beginning of year
    
    
    26,495
    
    
    $
    25.20
    
    
    
    21,988
    
    
    $
    25.24Granted
    
    
    
    
    
    
    
    
    
    
    4,507
    
    
    
    25.00Vested
    
    
    (9,359
    )
    
    
    25.24
    
    
    
    
    
    
    
    Forfeited
    
    
    (2,044
    )
    
    
    25.24
    
    
    
    
    
    
    
    Non-vested at end of year
    
    
    15,092
    
    
    $
    25.17
    
    
    
    26,495
    
    
    $
    25.20




---



##### Table of Contents



F-24    RESTRICTED STOCK AND COMMON STOCK EQUIVALENTS (Performance-Based)
 2007
    
    
    2006Grant Date
    
    
    
    
    
    
    Grant DateWeighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    Average
    
    
    Number of
    
    
    AverageFor the years ended December 31,
    
    Shares
    
    
    Fair Value
    
    
    Shares
    
    
    Fair ValueNon-vested at beginning of year
    
    
    18,059
    
    
    $
    25.90
    
    
    
    7,667
    
    
    $
    26.73Granted
    
    
    13,186
    
    
    $
    22.38
    
    
    
    18,059
    
    
    $
    24.93Vested
    
    
    (7,666
    )
    
    $
    24.26
    
    
    
    (6,087
    )
    
    $
    24.51Forfeited
    
    
    (4,780
    )
    
    $
    24.93
    
    
    
    (1,580
    )
    
    $
    24.51Non-vested at end of year
    
    
    18,799
    
    
    $
    25.11
    
    
    
    18,059
    
    
    $
    25.90
    NOTE 15: SEGMENT REPORTING




---



##### Table of Contents



F-25  Interest
    
    
    
    
    
    IncomeOther
    
    
    
    
    
    Expense
    
    
    
    
    
    (Loss) fromOperating
    
    Other Income
    
    (net of
    
    Income
    
    Continuing(in thousands)
    
    Revenues
    
    Depreciation
    
    Expenses
    
    (Deductions)
    
    AFUDC)
    
    Taxes
    
    OperationsFor the year ended
December 31, 2007Water Activities
    
    $
    60,025
    
    
    $
    6,525
    
    
    $
    35,755
    
    
    $
    (1,641
    )
    
    $
    4,281
    
    
    $
    3,860
    
    
    $
    7,963Real Estate Transactions
    
    
    227
    
    
    
    
    
    
    
    101
    
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    167Services and Rentals
    
    
    4,411
    
    
    
    25
    
    
    
    3,304
    
    
    
    
    
    
    
    20
    
    
    
    411
    
    
    
    651Total
    
    $
    64,663
    
    
    $
    6,550
    
    
    $
    39,160
    
    
    $
    (1,641
    )
    
    $
    4,301
    
    
    $
    4,230
    
    
    $
    8,781For the year ended
December 31, 2006Water Activities
    
    $
    47,927
    
    
    $
    5,881
    
    
    $
    32,166
    
    
    $
    (598
    )
    
    $
    3,969
    
    
    $
    1,183
    
    
    $
    4,130Real Estate Transactions
    
    
    1,002
    
    
    
    
    
    
    
    359
    
    
    
    
    
    
    
    
    
    
    
    (1,420
    )
    
    
    2,063Services and Rentals
    
    
    4,092
    
    
    
    36
    
    
    
    3,189
    
    
    
    
    
    
    
    8
    
    
    
    344
    
    
    
    515Total
    
    $
    53,021
    
    
    $
    5,917
    
    
    $
    35,714
    
    
    $
    (598
    )
    
    $
    3,977
    
    
    $
    107
    
    
    $
    6,708For the year ended
December 31, 2005Water Activities
    
    $
    48,441
    
    
    $
    5,724
    
    
    $
    29,351
    
    
    $
    (481
    )
    
    $
    3,266
    
    
    $
    2,855
    
    
    $
    6,764Real Estate Transactions
    
    
    495
    
    
    
    
    
    
    
    81
    
    
    
    
    
    
    
    
    
    
    
    475
    
    
    
    (61
    )Services and Rentals
    
    
    3,244
    
    
    
    36
    
    
    
    2,463
    
    
    
    
    
    
    
    
    
    
    
    282
    
    
    
    463Total
    
    $
    52,180
    
    
    $
    5,760
    
    
    $
    31,895
    
    
    $
    (481
    )
    
    $
    3,266
    
    
    $
    3,612
    
    
    $
    7,166
  At December 31 (in thousands):
    
    2007
    
    
    2006Total Plant and Other Investments:Water
    
    $
    283,641
    
    
    $
    267,395Non-Water
    
    
    673
    
    
    
    697Total Plant and Other Investments
    
    
    284,314
    
    
    
    268,092Other Assets:Water
    
    
    75,441
    
    
    
    56,663Non-Water
    
    
    1,058
    
    
    
    3,385Total Other Assets
    
    
    76,499
    
    
    
    60,048Total Assets
    
    $
    360,813
    
    
    $
    328,140
 NOTE 16: COMMITMENTS AND CONTINGENCIES
 Security
  Reverse Privatization
 Environmental and Water Quality Regulation




---



##### Table of Contents



F-26  Rate Relief
      Land Dispositions
  Capital Expenditures
 NOTE 17: SUBSEQUENT EVENTS
 ACQUISITIONS




---



##### Table of Contents



F-27  NOTE 18: QUARTERLY FINANCIAL DATA (Unaudited)
  in thousands, except for per share data
 First Quarter
    
    
    Second Quarter
    
    
    Third Quarter
    
    
    Fourth Quarter2007
    
    2006
    
    
    2007
    
    2006
    
    
    2007
    
    2006
    
    
    2007
    
    2006Operating Revenues
    
    $
    13,162
    
    
    $
    10,458
    
    
    
    $
    14,446
    
    
    $
    11,428
    
    
    
    $
    16,951
    
    
    $
    13,346
    
    
    
    $
    14,467
    
    
    $
    11,713Total Utility
Operating Income
    
    
    2,412
    
    
    
    1,581
    
    
    
    
    2,969
    
    
    
    2,092
    
    
    
    
    5,021
    
    
    
    3,513
    
    
    
    
    2,852
    
    
    
    339Income from Continuing
Operations
    
    
    1,475
    
    
    
    1,697
    
    
    
    
    1,862
    
    
    
    977
    
    
    
    
    3,899
    
    
    
    3,503
    
    
    
    
    1,545
    
    
    
    531Discontinued Operations
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    215
    
    
    
    
    
    
    
    
    3Net Income
    
    
    1,475
    
    
    
    1,716
    
    
    
    
    1,862
    
    
    
    983
    
    
    
    
    3,899
    
    
    
    3,718
    
    
    
    
    1,545
    
    
    
    534Basic Earnings per
Common Share -
Continuing Operations
    
    
    0.18
    
    
    
    0.21
    
    
    
    
    0.22
    
    
    
    0.12
    
    
    
    
    0.47
    
    
    
    0.42
    
    
    
    
    0.19
    
    
    
    0.06Basic Earnings per
Common Share -
Discontinued
Operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.03
    
    
    
    
    
    
    
    
    Basic Earnings per
Common Share
    
    
    0.18
    
    
    
    0.21
    
    
    
    
    0.22
    
    
    
    0.12
    
    
    
    
    0.47
    
    
    
    0.45
    
    
    
    
    0.19
    
    
    
    0.06




---



##### Table of Contents



E-1 ExhibitNumber
    
    Description3.1
    
    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 17, 2007. (Exhibit 3.1 to Form 8-K filed on August 21, 2007).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. (Exhibit 3.4 to Form 10-K for the year ended 12/31/01).3.5
    
    Certificate of Amendment to the Amended and Restated Certificate of Incorporation of
Connecticut Water Service, Inc. dated April 23, 2004. (Exhibit 3.5 to Form 10-Q for the
quarter ended 3/31/03).4.1
    
    Loan Agreement dated as of October 1, 2003 between the Connecticut Development Authority and
The Connecticut Water Company. (Exhibit 4.12 to Form 10-K for the year ended 12/31/03).4.2
    
    Indenture of Trust dated as of October 1, 2003 between the Connecticut Development Authority
and The Connecticut Water Company. (Exhibit 4.13 to Form 10-K for the year ended 12/31/03).4.3
    
    Loan Agreement dated as of October 1, 2003 between the Connecticut Development Authority and
The Connecticut Water Company. (Exhibit 4.14 to Form 10-K for the year ended 12/31/03).4.4
    
    Indenture of Trust dated as of October 1, 2003 between the Connecticut Development Authority
and The Connecticut Water Company. (Exhibit 4.15 to Form 10-K for the year ended 12/31/03).4.5
    
    Bond Purchase Agreement dated as of October 10, 2003 among Connecticut Development Authority,
The Connecticut Water Company and A.G. Edwards and Sons, Inc. (Exhibit 4.16 to Form 10-K for
the year ended 12/31/03).4.6
    
    Line of Credit Agreement dated as of March 12, 2004 between Webster Bank and Connecticut
Water Service, Inc. (Exhibit 4.17 to Form 10-Q for the quarter ended 3/31/04).4.7
    
    Bond Purchase Agreement dated as of March 12, 2004, among The Connecticut
Water Company and A.G. Edwards & Sons, Inc. (Exhibit 4.18 to Form 10-Q for the
quarter ended 3/31/04).




---



##### Table of Contents



E-2 ExhibitNumber
    
    Description4.8
    
    Indenture of Trust, dated as of March 1, 2004, between The Connecticut Water Company and U.S.
Bank National Association, as Trustee. (Exhibit 4.19 to Form 10-Q for the quarter ended
3/31/04).4.9
    
    Reimbursement and Credit Agreement, dated as of March 1, 2004, between The Connecticut Water
Company and Citizens Bank of Rhode Island. (Exhibit 4.20 to Form 10-Q for the quarter ended
3/31/04).4.10
    
    Letter of Credit issued by Citizens Bank of Rhode Island, dated as of March 4, 2004.
(Exhibit 4.21 to Form 10-Q for the quarter ended 3/31/04).4.11
    
    Agreement No. DWSRF 200103-C Project Loan Agreement between the State of Connecticut and
Unionville Water Company under the Drinking Water State Revolving Fund (DWSRF) Program, dated
as of April 19, 2004. (Exhibit 4.22 to Form 10-Q for the quarter ended 6/30/04).4.12
    
    Collateral Assignment of Water Service Charges and Right to Receive Water Service Expense
Assessments and Security Agreement between Unionville Water Company and the State of
Connecticut, dated as of June 3, 2004. (Exhibit 4.23 to Form 10-Q for the quarter ended
6/30/04).4.13
    
    Bond Purchase Agreement, dated September 1, 2004, among The Connecticut Water Company,
Connecticut Development Authority, and A.G. Edwards & Sons, Inc. (Exhibit 4.24 to Form 10-Q
for the quarter ended 9/30/04).4.14
    
    Indenture of Trust, dated August 1, 2004, between The Connecticut Water Company and U.S. Bank
National Association, as Trustee, 2004A Series. (Exhibit 4.25 to Form 10-Q for the quarter
ended 9/30/04).4.15
    
    Indenture of Trust, dated August 1, 2004, between The Connecticut Water Company and U.S. Bank
National Association, as Trustee, 2004B Series. (Exhibit 4.26 to Form 10-Q for the quarter
ended 9/30/04).4.16
    
    Loan Agreement, dated August 1, 2004, between The Connecticut Water Company and Connecticut
Development Authority for 2004 Series. (Exhibit 4.27 to Form 10-Q for the quarter ended
9/30/04).4.17
    
    Loan Agreement, dated August 1, 2004, between The Connecticut Water Company and Connecticut
Development Authority for 2004B Series. (Exhibit 4.28 to Form 10-Q for the quarter ended
9/30/04).4.18
    
    Reimbursement and Credit Agreement, dated as of August 1, 2004, between The Connecticut Water
Company and Citizens Bank of Rhode Island, 2004A Series. (Exhibit 4.29 to Form 10-Q for the
quarter ended 9/30/04).4.19
    
    Reimbursement and Credit Agreement, dated as of August 1, 2004, between The Connecticut Water
Company and Citizens Bank of Rhode Island, 2004B Series. (Exhibit 4.30 to Form 10-Q for the
quarter ended 9/30/04).




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##### Table of Contents



E-3 ExhibitNumber
    
    Description4.20
    
    Letters of Credit, each dated September 2, 2004, between The Connecticut Water Company and
Citizens Bank of Rhode Island, with respect to each of the 2004A and 2004B Series Bonds.
(Exhibit 4.31 to Form 10-Q for the quarter ended 9/30/04).4.21
    
    Bond Purchase Agreement, dated October 28, 2005, among The Connecticut Water Company,
Connecticut Development Authority and A.G. Edwards & Sons, Inc., Connecticut Water 2005A
Series. (Exhibit 4.24 to Form 10-K for the year ended 12/31/05).4.22
    
    Loan Agreement, dated October 1, 2005, between The Connecticut Water Company and Connecticut
Development Authority, Connecticut Water 2005A Series. (Exhibit 4.25 to Form 10-K for the year
ended 12/31/05).4.23
    
    Indenture of Trust, dated October 1, 2005, between Connecticut Development Authority and U.S.
Bank National Association, as Trustee, Connecticut Water 2005A Series. (Exhibit 4.26 to Form
10-K for the year ended 12/31/05).4.24
    
    Insurance Agreement, dated November 30, 2005, between The Connecticut Water Company and
Financial Guaranty Insurance Company, as Insurer for The Connecticut Water 2005A Series.
(Exhibit 4.27 to Form 10-K for the year ended 12/31/05).4.25
    
    Bond Purchase Agreement, dated November 16, 2005, among The Crystal Water Company of
Danielson, Connecticut Water Service, Inc., Connecticut Development Authority and A.G. Edwards
& Sons, Inc., Crystal Water 2005A Series. (Exhibit 4.28 to Form 10-K for the year ended
12/31/05).4.26
    
    Guaranty dated as of October 1, 2005 from Connecticut Water Service, Inc. to U.S. Bank
National Association, as Trustee, Crystal Water 2005A Series. (Exhibit 4.29 to Form 10-K for
the year ended 12/31/05).4.27
    
    Loan Agreement, dated October 1, 2005, between The Crystal Water Company of Danielson and
Connecticut Development Authority, Crystal Water 2005A Series. (Exhibit 4.30 to Form 10-K for
the year ended 12/31/05).4.28
    
    Indenture of Trust, dated October 1, 2005, between Connecticut Development Authority and U.S.
Bank National Association, as Trustee, Crystal Water 2005A Series. (Exhibit 4.31 to Form 10-K
for the year ended 12/31/05).4.29
    
    Insurance Agreement, dated November 30, 2005, between The Crystal Water Company of Danielson
and Financial Guaranty Insurance Company, as Insurer for the Crystal Water 2005A Series.
(Exhibit 4.32 to Form 10-K for the year ended 12/31/05).4.30
    
    First Amendment to Reimbursement and Credit Agreement, dated as of April 28, 2006, between
The Connecticut Water Company and Citizens Bank of Rhode Island, 2004A Series. (Exhibit 10.1
to Form 10-Q for the period ending 3/31/06).




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##### Table of Contents



E-4 ExhibitNumber
    
    Description4.31
    
    First Amendment to Reimbursement and Credit Agreement, dated as of April 28, 2006, between
The Connecticut Water Company and Citizens Bank of Rhode Island, 2004B Series. (Exhibit 10.2
to Form 10-Q for the period ending 3/31/06).4.32
    
    First Amendment to Reimbursement and Credit Agreement, dated as of April 28, 2006, between
The Connecticut Water Company and Citizens Bank of Rhode Island, 2004 Series Variable Rate,
due 2029. (Exhibit 10.3 to Form 10-Q for the period ending 3/31/06).4.33*
    
    Bond Purchase Agreement, dated December 5, 2007, among The Connecticut Water Company,
Connecticut Development Authority, and Edward Jones and Company, L.P. water facilities Revenue
Bonds  2007A Series (AMT).4.34*
    
    Loan Agreement dated as of December 5, 2007, among The Connecticut Water Company, and
Connecticut Development Authority, Water Facilities Revenue Bonds  2007A Series (AMT).4.35*
    
    Indenture of Trust dated as of December 5, 2007, among The Connecticut Water Company, and
Connecticut Development Authority, Water Facilities Revenue Bonds  2007A Series (AMT).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
January 1, 2008. (Exhibit 10.7 to Form 8-K filed on January 30, 2008).10.4
    
    Savings Plan of The Connecticut Water Company, amended and restated effective
as of October 1, 2000. (Exhibit 10.12 to Form 10-K for the year ended 12/31/01).10.4a
    
    Trust Agreement between Connecticut Water Company and Riggs Bank N.A.,
Trustee, dated as of June 1, 2002. (Exhibit 10.12.1 to Form 10-K for the year ended
12/31/03).10.4b
    
    Post-EGTRRA Amendment to the Savings Plan of The Connecticut Water Company, effective
January 1, 2002. (Exhibit 10.12.2 to Form 10-K for the year
ended 12/31/03).10.4c
    
    Supplemental Participation Agreement to the Savings Plan of The Connecticut Water Company
between The Unionville Water Company and Connecticut Water Company, dated December 30, 2003.
(Exhibit 10.12.3 to Form 10-K for the year ended 12/31/03).




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##### Table of Contents



E-5 ExhibitNumber
    
    Description10.4d
    
    Supplemental Participation Agreement to the Savings Plan of The Connecticut Water Company
between The Crystal Water Company of Danielson and Connecticut Water Company, dated December
30, 2003. (Exhibit 10.12.4 to Form 10-K for the year ended 12/31/03).10.4e
    
    Supplemental Participation Agreement to the Savings Plan of The Connecticut Water Company
between Unionville Water Company and Connecticut Water Company, dated February 23, 2004.
(Exhibit 10.12.5 to Form 10-K for the year ended 12/31/04).10.5
    
    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).10.5a
    
    First Amendment, dated August 16, 2000 to the amended and restated Connecticut Water Company
Employees Retirement Plan effective January 1, 1997. (Exhibit 10.13.1 to Form 10-K for the
year ended 12/31/02).10.5b
    
    Second Amendment, dated November 14, 2000 to the amended and restated Connecticut Water
Company Employees Retirement Plan effective January 1, 1997. (Exhibit 10.13.2 to Form 10-K
for the year ended 12/31/02).10.5c
    
    Third Amendment, dated November 14, 2001 to the amended and restated Connecticut Water
Company Employees Retirement Plan effective January 1, 1997. (Exhibit 10.13.3 to Form 10-K
for the year ended 12/31/02).10.5d
    
    Fourth Amendment, dated August 14, 2002 to the amended and restated Connecticut Water
Company Employees Retirement Plan effective January 1, 1997. (Exhibit 10.13.4 to Form 10-K
for the year ended 12/31/02).10.5e
    
    Fifth Amendment, dated August 14, 2002 to the amended and restated Connecticut Water Company
Employees Retirement Plan effective January 1, 1997. (Exhibit 10.13.5 to Form 10-K for the
year ended 12/31/02).10.5f
    
    Sixth Amendment, dated November 10, 2003 to the amended and restated Connecticut Water
Company Employees Retirement Plan effective November 12, 2003. (Exhibit 10.13.6 to Form 10-K
for the year ended 12/31/03).10.5g
    
    Seventh Amendment, dated May 12, 2004 to the amended and restated Connecticut Water
Employees Retirement Plan effective January 1, 1997. (Exhibit 10.13.7 to Form 10-K for the
year ended 12/31/04).10.5h*
    
    Eighth Amendment, effective March 28, 2005, to the amended and restated Connecticut Water
Company Employees Retirement Plan effective January 1, 1997.




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##### Table of Contents



E-6 ExhibitNumber
    
    Description10.5i*
    
    Ninth Amendment, effective August 9, 2006, to the amended and restated Connecticut Water
Company Employees Retirement Plan effective January 1, 1997.10.6
    
    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 12/31/94).10.7
    
    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 12/31/86).10.8
    
    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).10.9
    
    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 12/31/78).10.10
    
    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).10.11
    
    Contract for Supplying Bradley International Airport. (Exhibit 10.21 to Form 10-K for the
year ended 12/31/84).10.12
    
    Report of South Windsor Task Force. (Exhibit 10.23 to Form 10-K for the year ended
12/31/87).10.13
    
    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 12/31/89).10.14
    
    1994 Performance Stock Program, as amended and restated as of April 26, 2002.
(Exhibit A to Proxy Statement dated 3/19/02).10.14a
    
    First Amendment to The Connecticut Water Service, Inc. Performance Stock Program Amended and
Restated as of April 26, 2002 (the Plan) dated December 1, 2005. (Exhibit 10.22a to Form
10-K for the year ended 12/31/05).10.14b
    
    Second Amendment to The Connecticut Water Service, Inc. Performance Stock Program Amended
and Restated as of April 26, 2002 (the Plan) dated January 1, 2008. (Exhibit 10.5 to 8-K
filed on 1/30/08).




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##### Table of Contents



E-7 ExhibitNumber
    
    Description10.15
    
    2004 Performance Stock Program, as of April 23, 2004. (Appendix A to Proxy Statement dated
3/12/04).10.15a
    
    First Amendment to The Connecticut Water Service, Inc. 2004 Performance Stock Program, dated
January 7, 2004. (Exhibit 10.23f to Form 10-K for the year ended 12/31/05).10.15b
    
    Second Amendment to The Connecticut Water Service, Inc. 2004 Performance Stock Program,
dated January 1, 2008. (Exhibit 10.6 to Form 8-K filed on 1/30/08).10.15c
    
    Connecticut Water Service, Inc. Performance Stock Program Incentive Stock Option Grant Form.
(Exhibit 10.1 to Form 10-Q for the quarter ended 9/30/04).10.15d
    
    Connecticut Water Service, Inc. Performance Stock Program Non-Qualified Stock Option Grant
Form. (Exhibit 10.2 to Form 10-Q for the quarter ended 9/30/04).10.15e
    
    Restricted Stock Agreement, standard form for officers, dated December 1, 2005
(Exhibit 10.1 to Form 8-K dated 1/13/06).10.15f
    
    Long-Term Performance Award Agreement, standard form for officers, dated January 11, 2006
(Exhibit 10.2 to Form 8-K dated 1/13/06).10.15g
    
    Performance Award Agreement, standard form for officers, dated January 11, 2006 (Exhibit
10.3 to Form 8-K dated 1/13/06).10.16
    
    Settlement Agreement between Connecticut Water Company, Mary J. Healey, Office of Consumer
Counsel of the State of Connecticut, and the Prosecutorial Staff of the DPUC, dated December
4, 2006. (Exhibit 10.1 to Form 8-K dated 12/6/06).10.16a
    
    Revised Settlement Agreement between Connecticut Water Company, Mary J. Healey, Office of
Consumer Counsel of the State of Connecticut, and the Prosecutorial Staff of the DPUC, dated
December 20, 2006. (Exhibit 99.1 to Form 8-K dated 1/18/07).10.16b
    
    Final Decision of the Connecticut DPUC, Docket No. 06-07-08, dated January 16, 2007.
(Exhibit 99.2 to Form 8-K dated 1/18/07).10.17
    
    Connecticut Water Service, Inc. and Subsidiaries Employee Code of Conduct, January 1, 2007.10.18
    
    Asset Purchase Agreement between The Connecticut Water Company and the Eastern Connecticut
Regional Water Company, Inc., dated as of June 29, 2007 (Exhibit 99.1 to Form 8-K filed on
July 3, 2007).10.19
    
    Asset Purchase Agreement between New England Water Utility Services, Inc. and Birmingham H2O
Services Inc., dated as of June 29, 2007 (Exhibit 99.2 to Form 8-K filed on July 3, 2007).




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##### Table of Contents



E-8 ExhibitNumber
    
    Description10.20
    
    Employment agreement between The Connecticut Water Company and Connecticut Water Service,
Inc. with Nicholas A. Rinaldi amended and restated as of November 5, 2007 (Exhibit 10.1 to
Form 8-K dated on November 9, 2007).10.21
    
    Form of Amended Restated Employment Agreement with the Companys executive officers (Exhibit
10.1 to Form 8-K filed on January 30, 2008, including:a) Peter J. Bancroftb) David C. Benoitc) Kristen A. Johnsond) Thomas R. Marstone) Daniel J. Meaneyf) Terrance P. ONeillg) Nicholas A. Rinaldih) Eric W. Thornburgi) Maureen P. Westbrook10.22
    
    Form of Amended and Restated Supplemental Executive Retirement Agreement with the Companys
executive officers (Exhibit 10.2 to Form 8-K filed on January 30, 2008), including:a) Peter J. Bancroftb) David C. Benoitc) Kristen A. Johnsond) Thomas R. Marstone) Daniel J. Meaneyf) Terrance P. ONeillg) Nicholas A. Rinaldih) Eric W. Thornburgi) Maureen P. Westbrook10.23
    
    Form of Amended and Restated Deferred Compensation Agreement with the Companys executive
officer (Exhibit 10.3 to Form 8-K filed on January 30, 2008), including:a) Peter J. Bancroftb) David C. Benoitc) Kristen A. Johnsond) Thomas R. Marstone) Daniel J. Meaneyf) Terrance P. ONeillg) Nicholas A. Rinaldih) Eric W. Thornburgi) Maureen P. Westbrook




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##### Table of Contents



E-9 ExhibitNumber
    
    Description10.24
    
    Employment agreement between The Connecticut Water Company and Connecticut Water Service,
Inc. with Kristen A. Johnson amended and restated as of January 24, 2008 (Exhibit 10.1 and
10.2 to Form 8-K dated on January 30, 2008).10.25
    
    Employment agreement between The Connecticut Water Company and Connecticut Water Service,
Inc. with Thomas R. Marston amended and restated as of January 24, 2008 (Exhibit 10.1 and 10.2
to Form 8-K dated on January 30, 2008).21*
    
    Connecticut Water Service, Inc. Subsidiaries Listing23.1*
    
    Consent of Independent Registered Public Accounting Firm31.1*
    
    Rule 13a-14 Certification of Eric W. Thornburg, Chief Executive Officer.31.2*
    
    Rule 13a-14 Certification of David C. Benoit, Chief Financial Officer.32.1*
    
    Certification of Eric W. Thornburg, Chief Executive Officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of David C. Benoit, Chief Financial Officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 * = filed herewithNote:
    
    Exhibits 10.1 through 10.5i, 10.13 through 10.15g, and 10.20 through 10.25 set forth each
management contract or compensatory plan or arrangement required to be filed as an exhibit to
this Form 10-K.




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##### Table of Contents



CONNECTICUT WATER SERVICE, INC.
RegistrantBy
    /s/   Eric W. ThornburgMarch 17, 2008
    
    Eric W. ThornburgPresident and Chief Executive Officer  Signature
    
    Title
    
    Date/s/ Eric W. ThornburgEric W. Thornburg(Principal Executive Officer)
    
    President, Director, and Chief Executive Officer
    
    March 17, 2008/s/ David C. BenoitDavid C. Benoit
    
    Vice President  Finance,
    
    March 17, 2008(Principal Financial
and Accounting Officer)
    
    Chief Financial Officer and Treasurer




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##### Table of Contents



Signature
    
    Title
    
    Date/s/ Mary Ann Hanley
    
    Director
    
    March 10, 2008Mary Ann Hanley/s/ Heather Hunt
    
    Director
    
    March 12, 2008Heather Hunt/s/ Mark G. Kachur
    
    Director
    
    March 7, 2008Mark G. Kachur/s/ Ronald D. Lengyel
    
    Director
    
    March 10, 2008Ronald D. Lengyel/s/ David A. Lentini
    
    Director
    
    March 10, 2008David A. Lentini/s/ Arthur C. Reeds
    
    Director
    
    March 8, 2008Arthur C. Reeds/s/ Lisa J. Thibdaue
    
    Director
    
    March 10, 2008Lisa J. Thibdaue/s/ Carol P. Wallace
    
    Director
    
    March 12, 2008Carol P. Wallace/s/ Donald B. Wilbur
    
    Director
    
    March 7, 2008Donald B. Wilbur




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##### Table of Contents



CONNECTICUT WATER SERVICE, INC. and SUBSIDIARIES
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 Balance
    
    
    Additions
    
    
    Deductions
    
    
    Balance(in thousands)
    
    Beginning
    
    
    Charged to
    
    
    From
    
    
    End ofDescription
    
    of Year
    
    
    Income
    
    
    Reserves(1)
    
    
    YearAllowance for Uncollectible
AccountsYear Ended December 31, 2007
    
    $
    285
    
    
    $
    265
    
    
    $
    198
    
    
    $
    352Year Ended December 31, 2006
    
    $
    256
    
    
    $
    225
    
    
    $
    196
    
    
    $
    285Year Ended December 31, 2005
    
    $
    212
    
    
    $
    156
    
    
    $
    112
    
    
    $
    256
 
 (1)
    
    Amounts charged off as uncollectible after deducting recoveries.