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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, 2005
 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
    
    06-0739839(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)93 West Main Street, Clinton, CT
    
    06413(Address of principal executive office)
    
    (Zip Code)
 (860) 669-8636
  Title of each Class
    
    Name of each exchange on which registeredNone
    
    Not applicable
  Common Stock, without par value
 o þ
 o þ
 þ o
 o
  o þ o
   DOCUMENTS INCORPORATED BY REFERENCE
 Part of Form 10-K Into WhichDocument
    
    Document is IncorporatedDefinitive Proxy Statement, dated
on or about April 7, 2006, for
Annual Meeting of Shareholders to be held on May 11, 2006.
    
    Part III




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##### 



INDEX TO ANNUAL REPORT ON FORM 10-K
Year Ended December 31, 2005
 PageNumberPart IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    8Item 1B.
    
    Unresolved Staff Comments
    
    
    11Item 2.
    
    Properties
    
    
    11Item 3.
    
    Legal Proceedings
    
    
    13Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    13Part IIItem 5.
    
    Market for the Companys Common Stock, Related Stockholder
Matters, and Issuer Purchases of Equity Securities
    
    
    14Item 6.
    
    Selected Financial Data
    
    
    15Item 7.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    16Item 7A.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    30Item 8.
    
    Financial Statements and Supplementary Data
    
    
    30Item 9.
    
    Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures
    
    
    30Item 9A.
    
    Controls and Procedures
    
    
    31Item 9B.
    
    Other Information
    
    
    32Part IIIItem 10.
    
    Directors and Executive Officers of the Company
    
    
    33Item 11.
    
    Executive Compensation
    
    
    34Item 12.
    
    Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    
    34Item 13.
    
    Certain Relationships and Related Transactions
    
    
    34Item 14.
    
    Principal Accountant Fees and Services
    
    
    34Part IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    35Signatures
    
    
    37EX-4.24: BOND PURCHASE AGREEMENTEX-4.25: LOAN AGREEMENTEX-4.26: INDENTURE OF TRUSTEX-4.27: INSURANCE AGREEMENTEX-4.28: BOND PURCHASE AGREEMENTEX-4.29: GUARANTYEX-4.30: LOAN AGREEMENTEX-4.31: INDENTURE OF TRUSTEX-4.32: INSURANCE AGREEMENTEX-10.22.A: FIRST AMENDMENT TO PERFORMANCE STOCK PROGRAMEX-10.23.F: FIRST AMENDMENT TO 2004 PERFORMANCE STOCK PROGRAMEX-10.26: LETTER AGREEMENTEX-10.27: EMPLOYMENT AGREEMENTEX-10.28: EMPLOYMENT AGREEMENTEX-23.1: CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION




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3  
 PART I
 
 ITEM 1. BUSINESS
 The Company




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4   
    
    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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5   Year of Last
    
    Allowed
    
    AllowedRate
    
    Return on
    
    Return onDecision
    
    Equity
    
    Rate BaseConnecticut Water
    
    
    1991
    
    
    
    12.7
    %
    
    
    10.74
    %Crystal
    
    
    2005
    
    
    
    10.0
    %
    
    
    7.55
    %Unionville
    
    
    1999
    **
    
    
    12.35
    %
    
    
    N/A
    *
 
 *
    
    Unionvilles rates were based on a return on equity methodology, not a rate base
methodology.**
    
    Beginning mid-2003, Unionville began imposing a 30% surcharge on its customers water bills to
recover financing and operating costs related to the construction and use of a water
interconnection with a neighboring water supplier. Annually the surcharge is subject to a
retroactive refund to ratepayers if total revenue for Unionville exceeds certain stipulated
amounts. To date, we have not been required to provide any such refunds. Our Water Systems
   Number
    
    
    Water
    
    
    Customer Waterof
    
    
    Revenues
    
    
    ConsumptionWater Company
    
    customers
    
    
    ($000s)
    
    
    (millions of gallons)Connecticut Water
    
    
    70,714
    
    
    $
    41,537
    
    
    
    6,042Crystal
    
    
    5,050
    
    
    
    2,778
    
    
    
    542Unionville
    
    
    5,999
    
    
    
    3,138
    
    
    
    692Total
    
    
    81,763
    
    
    $
    47,453
    
    
    
    7,276




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6  Water
    
    
    Customer WaterNumber of
    
    
    Revenues
    
    
    ConsumptionCustomer Class
    
    customers
    
    
    ($000s)
    
    
    (millions of gallons)Residential
    
    
    72,968
    
    
    $
    29,980
    
    
    
    5,260Commercial
    
    
    5,333
    
    
    
    5,619
    
    
    
    1,188Industrial
    
    
    428
    
    
    
    1,538
    
    
    
    423Public Authority
    
    
    580
    
    
    
    1,625
    
    
    
    405Fire Protection
    
    
    1,526
    
    
    
    8,267
    
    
    
    0Other (including
non-metered accounts)
    
    
    928
    
    
    
    424
    
    
    
    0Total
    
    
    81,763
    
    
    $
    47,453
    
    
    
    7,276
  Year
    
    Acres
    
    After-tax Profit2002
    
    
    54
    
    
    $
    293,0002003
    
    
    178
    
    
    $
    942,0002004
    
    
    133
    
    
    $
    707,000




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7   Competition
  Employees
   Segments of Our Business




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8 Gain (Loss) from Real Estate TransactionsNet
of Taxes from Continuing OperationsRegulated
    
    Unregulated
    
    Total2003
    
    $
    942,000
    
    
    $
    87,000
    
    
    $
    1,029,0002004
    
    $
    1,206,000
    
    
    $
    
    
    
    $
    1,206,0002005
    
    $
    (69,000
    )
    
    $
    8,000
    
    
    $
    (61,000
    )
 Linebacker ®
  Income from Services and Rentals fromContinuing OperationsRegulated
    
    Unregulated
    
    Total2003
    
    $
    370,000
    
    
    $
    322,000
    
    
    $
    692,0002004
    
    $
    436,000
    
    
    $
    393,000
    
    
    $
    829,0002005
    
    $
    490,000
    
    
    $
    455,000
    
    
    $
    945,000
 
 ITEM 1A. RISK FACTORS
 Because we incur annually significant capital expenditures, we depend on the rates we charge our
customers.




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9  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.
  Potential drought conditions may impact our ability to serve our current and future customers uses
of water and our financial results.




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10  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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11  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
   Net Utility PlantConnecticut Water
    
    $
    209,670,000Crystal
    
    
    19,078,000Unionville
    
    
    18,955,000Total
    
    $
    247,703,000




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12    ESTIMATEDAVAILABLE SUPPLY(MILLION GALLONS PERDAY)Connecticut WaterGuilford System
    
    
    9.31Chester System
    
    
    1.69Naugatuck System
    
    
    6.91Terryville System
    
    
    0.94Thomaston System
    
    
    0.73Collinsville System
    
    
    0.65Northern Western System
    
    
    15.99Somers System
    
    
    0.28Stafford System
    
    
    1.00CrystalDanielson System
    
    
    3.69Plainfield System
    
    
    1.01Thompson System
    
    
    0.29KIP System
    
    
    0.50Gallup System
    
    
    0.60Unionville
    
    
    3.88Total
    
    
    47.47




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13  Miles ofTransmission andDistribution WaterMainsConnecticut Water
    
    
    1,100Crystal
    
    
    90Unionville
    
    
    110Total
    
    
    1,300
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




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14 
 PART II
 
 ITEM 5. MARKET FOR THE COMPANYS COMMON STOCK, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES
OF EQUITY SECURITIES
  Price
    
    DividendsPeriod
    
    High
    
    Low
    
    Paid2005First Quarter
    
    $
    27.53
    
    
    $
    24.75
    
    
    $
    .2100Second Quarter
    
    
    25.87
    
    
    
    21.91
    
    
    $
    .2100Third Quarter
    
    
    28.17
    
    
    
    24.27
    
    
    $
    .2125Fourth Quarter
    
    
    26.32
    
    
    
    22.69
    
    
    $
    .21252004First Quarter
    
    $
    29.76
    
    
    $
    27.57
    
    
    $
    .2075Second Quarter
    
    
    29.00
    
    
    
    24.29
    
    
    $
    .2075Third Quarter
    
    
    27.55
    
    
    
    23.83
    
    
    $
    .2100Fourth Quarter
    
    
    28.98
    
    
    
    24.17
    
    
    $
    .2100
   Purchases of Equity
Securities by the Company




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15 
 ITEM 6. SELECTED FINANCIAL DATA
 SUPPLEMENTAL INFORMATION (Unaudited)
 SELECTED FINANCIAL DATA
 Years Ended December 31, (thousands of dollars except per shareamounts and where otherwise indicated)
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001CONSOLIDATED STATEMENTS OF INCOMEContinuing OperationsOperating Revenues
    
    $
    47,453
    
    
    $
    46,008
    
    
    $
    44,598
    
    
    $
    43,278
    
    
    $
    42,885Operating Expenses
    
    $
    37,961
    
    
    $
    35,679
    
    
    $
    33,503
    
    
    $
    32,011
    
    
    $
    31,737Operating Income
    
    $
    9,492
    
    
    $
    10,329
    
    
    $
    11,095
    
    
    $
    11,267
    
    
    $
    11,148Interest and Debt Expense
    
    $
    4,017
    
    
    $
    3,742
    
    
    $
    4,482
    
    
    $
    4,348
    
    
    $
    4,422Income from Continuing Operations
    
    $
    7,166
    
    
    $
    9,163
    
    
    $
    8,890
    
    
    $
    8,318
    
    
    $
    8,637Cash Common Stock Dividends Paid
    
    $
    6,773
    
    
    $
    6,641
    
    
    $
    6,529
    
    
    $
    6,277
    
    
    $
    6,105Dividend Payout Ratio from Continuing Operations
    
    
    95
    %
    
    
    72
    %
    
    
    73
    %
    
    
    75
    %
    
    
    71
    %Weighted Average Common Shares Outstanding
    
    
    8,094,346
    
    
    
    7,999,318
    
    
    
    7,956,426
    
    
    
    7,717,608
    
    
    
    7,619,031Basic Earnings Per Common Share from Continuing Operations
    
    $
    0.89
    
    
    $
    1.15
    
    
    $
    1.11
    
    
    $
    1.08
    
    
    $
    1.13Number of Shares Outstanding at Year End
    
    
    8,169,627
    
    
    
    8,035,199
    
    
    
    7,967,379
    
    
    
    7,939,713
    
    
    
    7,649,362ROE on Year End Common Equity
    
    
    7.6
    %
    
    
    10.4
    %
    
    
    10.7
    %
    
    
    10.4
    %
    
    
    12.2
    %Declared Common Dividends Per Share
    
    $
    0.845
    
    
    $
    0.835
    
    
    $
    0.825
    
    
    $
    0.814
    
    
    $
    0.804CONSOLIDATED BALANCE SHEETCommon Stockholders Equity
    
    $
    94,076
    
    
    $
    87,865
    
    
    $
    83,315
    
    
    $
    79,975
    
    
    $
    70,783Long-Term Debt
    
    $
    77,404
    
    
    $
    66,399
    
    
    $
    64,754
    
    
    $
    64,734
    
    
    $
    63,953Preferred Stock (Consolidated, Excluding Current Maturities)
    
    $
    847
    
    
    $
    847
    
    
    $
    847
    
    
    $
    847
    
    
    $
    847Total Capitalization
    
    $
    172,327
    
    
    $
    155,111
    
    
    $
    148,916
    
    
    $
    145,556
    
    
    $
    135,583Stockholders Equity (Includes Preferred Stock)
    
    
    55
    %
    
    
    57
    %
    
    
    57
    %
    
    
    56
    %
    
    
    53
    %Long-Term Debt
    
    
    45
    %
    
    
    43
    %
    
    
    43
    %
    
    
    44
    %
    
    
    47
    %Net Utility Plant
    
    $
    247,703
    
    
    $
    241,776
    
    
    $
    235,098
    
    
    $
    229,097
    
    
    $
    202,330Total Assets
    
    $
    306,035
    
    
    $
    290,940
    
    
    $
    281,345
    
    
    $
    264,799
    
    
    $
    231,714Book Value  Per Common Share
    
    $
    11.52
    
    
    $
    10.94
    
    
    $
    10.46
    
    
    $
    10.07
    
    
    $
    9.25OPERATING REVENUES BY
REVENUE CLASSResidential
    
    $
    29,980
    
    
    $
    28,951
    
    
    $
    27,831
    
    
    $
    27,310
    
    
    $
    27,318Commercial
    
    
    5,619
    
    
    
    5,444
    
    
    
    5,327
    
    
    
    5,141
    
    
    
    5,024Industrial
    
    
    1,538
    
    
    
    1,633
    
    
    
    1,616
    
    
    
    1,709
    
    
    
    1,687Public Authority
    
    
    1,625
    
    
    
    1,236
    
    
    
    1,302
    
    
    
    1,245
    
    
    
    1,272Fire Protection
    
    
    8,267
    
    
    
    8,231
    
    
    
    8,026
    
    
    
    7,355
    
    
    
    7,110Other (including non-metered accounts)
    
    
    424
    
    
    
    513
    
    
    
    496
    
    
    
    518
    
    
    
    474Total Operating Revenues
    
    $
    47,453
    
    
    $
    46,008
    
    
    $
    44,598
    
    
    $
    43,278
    
    
    $
    42,885Number of Customers (Average)
    
    
    81,763
    
    
    
    87,259
    
    
    
    86,145
    
    
    
    82,119
    
    
    
    78,156Billed Consumption (Millions of Gallons)
    
    
    7,276
    
    
    
    7,801
    
    
    
    7,640
    
    
    
    7,418
    
    
    
    7,259Number of Employees
    
    
    191
    
    
    
    193
    
    
    
    195
    
    
    
    191
    
    
    
    181




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16 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 FINANCIAL CONDITION
 Overview
  -
    
    until 2005, increased our consolidated earnings each year since 1991 without
increasing water rates, and;-
    
    continued increasing our common dividend payments per share during this period.
  -
    
    Increases in infrastructure investment necessary to insure a safe, reliable
water system remains in place,-
    
    Modest historical and projected annual growth in regulated water sales of
approximately 1.5%, and;-
    
    Increases in operating costs such as utilities, wage, pension, medical, audit
and insurance costs.




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17 Regulatory Matters and Inflation
     Critical Accounting Policies and Estimates
  Public Utility Regulation




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18 Revenue Recognition
 Pension Plan Accounting
  Increase(Decrease)in expenseA 1% increase in the discount rate
    
    
    ($316,000
    )A 1% decrease in the discount rate
    
    
    $ 328,000
 Outlook




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FINANCIAL CONDITION
Liquidity and Capital Resources
  ConstructionGross
    
    Funded by
    
    ConstructionConstruction
    
    Developers &
    
    Funded byExpenditures
    
    Others
    
    Company2003
    
    $
    9,747,000
    
    
    $
    1,261,000
    
    
    $
    8,486,0002004
    
    $
    11,045,000
    
    
    $
    2,665,000
    
    
    $
    8,380,0002005
    
    $
    16,957,000
    
    
    $
    2,869,000
    
    
    $
    14,088,0002006 (Projected)
    
    $
    18,387,000
    
    
    $
    3,000,000
    
    
    $
    15,387,000




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2003 A Series: $8,000,000 (Non-AMT)
    
    4.40% Maturing 12/15/20202003 C Series: $14,930,000 (AMT)
    
    5.00% Maturing 9/1/2022
      2004 A Series: $5,000,000 Variable Interest Maturing 7/1/2028
2004 B Series: $4,550,000 Variable Interest Maturing 9/1/2028




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Off-Balance Sheet Arrangements and Contractual Obligations
   Payments due by Periods(in thousands of dollars)Less
    
    
    
    
    
    
    
    
    
    Morethan 1
    
    Years
    
    Years
    
    than 5Contractual Obligations
    
    Total
    
    year
    
    2 and 3
    
    4 and 5
    
    yearsLong-Term Debt (LTD)
    
    $
    79,735
    
    
    $
    2,331
    
    
    $
    14
    
    
    $
    16
    
    
    $
    77,374Interest on LTD
    
    
    83,513
    
    
    
    3,474
    
    
    
    6,886
    
    
    
    6,886
    
    
    
    66,267Operating Lease Obligations
    
    
    498
    
    
    
    269
    
    
    
    226
    
    
    
    2
    
    
    
    Purchase Obligations
(2)(3)
    
    
    30,396
    
    
    
    876
    
    
    
    1,464
    
    
    
    1,416
    
    
    
    26,641Long-Term Compensation
Agreement (1)
    
    
    33,061
    
    
    
    2,204
    
    
    
    4,408
    
    
    
    4,408
    
    
    
    22,041Total (4)(5)(6)
    
    $
    227,203
    
    
    $
    9,154
    
    
    $
    12,998
    
    
    $
    12,728
    
    
    $
    192,323
 
 (1)
    
    Pension and post retirement contributions cannot be reasonably estimated beyond 2006 and
may be impacted by such factors as return on pension assets, changes in the number of plan
participants and future salary increases.(2)
    
    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.(3)
    
    Unionville 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.(4)
    
    Advances for Construction are non-interest bearing.(5)
    
    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.(6)
    
    We will fund these contractual obligations with cash flows from operations and liquidity
sources held by or available to us.




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RESULTS OF OPERATIONS
  Overview of 2005 Results from Continuing Operations
  Increase(Decrease)Business segment
    
    In Net IncomeWater Activities
    
    $
    (846,000
    )Real Estate
    
    
    (1,267,000
    )Services and Rentals
    
    
    116,000Net Decrease
    
    $
    (1,997,000
    )
 Water Activities




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Increase(Decrease)IncreaseOperating Revenues
    
    $
    1,445,000Operation and Maintenance expense
    
    
    2,178,000Depreciation expense
    
    
    154,000Income Taxes
    
    
    (256,000
    )Taxes Other than Income Taxes
    
    
    206,000Other Income
    
    
    49,000Interest and Debt Expense (net of AFUDC)
    
    
    58,000Net
(Decrease)
    
    
    ($846,000
    )
  
    
    a $1,220,000, or 3.3%, increase in metered revenues in 2005 which was due to increased
customer water consumption attributable to a hotter summer and a 1.5% increase in the number
of customers served; and
    
    a $225,000, or 2.5%, 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.
  IncreaseUtility Costs
    
    $
    491,000Pension expense
    
    
    317,000Other employee benefit costs
    
    
    468,000Legal services
    
    
    260,000Other outside services
    
    
    133,000Maintenance
    
    
    185,000Labor
    
    
    148,000Other
    
    
    176,000Total
    
    $
    2,178,000




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##### Table of Contents




    
    Higher interest expense on long-term debt primarily due to the issuance of $15.0
million in new bonds in 2005;
    
    Higher other interest charges due primarily to increased commitment fees on the letters of credit associated with bonds
issued in 2004 plus higher interest expense on interim bank loans with higher interest rates; and
    
    Amortization of the debt issuance costs of the bonds issued in 2004 and 2005.
 Real Estate
   Services and Rentals
  2005
    
    
    2004
    
    
    IncreaseService line contracts
    
    $
    377,000
    
    
    $
    328,000
    
    
    $49,000 or 15%Antenna leases
    
    $
    462,000
    
    
    $
    401,000
    
    
    $61,000 or 15%
 Overview
of 2004 Results from Continuing Operations




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##### Table of Contents



Increase(Decrease)Business segment
    
    In Net IncomeWater Activities
    
    $
    (41,000
    )Real Estate
    
    
    177,000Services and Rentals
    
    
    137,000Net Increase
    
    $
    273,000
 Water Activities
  IncreaseBusiness segment
    
    (Decrease)Operating Revenues
    
    $
    1,410,000Operation and Maintenance expense
    
    
    1,250,000Depreciation expense
    
    
    87,000Income Taxes
    
    
    682,000Taxes Other than Income Taxes
    
    
    157,000Other Income
    
    
    40,000Interest and Debt Expense (net of AFUDC)
    
    
    (685,000
    )Net
(Decrease)
    
    $
    (41,000
    )
  
    
    a 1.9% increase in metered consumption in 2004 due to a hotter and drier summer and a 1.2%
increase in the number of customers served;
    
    a $288,000 increase in revenues from Unionvilles 30% rate surcharge that went into effect
mid-2003; and
    
    a $205,000 increase in fire protection revenues due to system expansion which increased the
number of fire hydrants and revenue generating mains upon which these charges are based.
  IncreaseSarbanes-Oxley Act Section 404 compliance
    
    $
    738,000Purchased Water
    
    
    261,000Property and Liability Insurance
    
    
    223,000Total
    
    $
    1,222,000




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##### Table of Contents



Real Estate
  2004
    
    
    2003Donation of land to Town of Killingly, CT
    
    $
    707,000
    
    
    $
    942,000Donation of land to Town of Plymouth, CT
    
    
    498,000
    
    
    
    Miscellaneous sales of real estate
    
    
    1,000
    
    
    
    87,000Net Income
    
    $
    1,206,000
    
    
    $
    1,029,000
 Services and Rentals
  2004
    
    
    2003
    
    
    IncreaseService line contracts
    
    $
    328,000
    
    
    $
    240,000
    
    
    $88,000 or 37%Antenna leases
    
    $
    401,000
    
    
    $
    330,000
    
    
    $71,000 or 22%




---



##### Table of Contents



COMMITMENTS AND CONTINGENCIES
 Security
  Reverse Privatization
 Environmental and Water Quality Regulation




---



##### Table of Contents



Rate Relief 
   Land Dispositions




---



##### Table of Contents



Taxes
  FORWARD LOOKING INFORMATION




---



##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
     
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES




---



##### Table of Contents



ITEM 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures 
 Managements Report on Internal Control Over Financial Reporting 
 Internal Control  Integrated
Framework
  Changes in Internal Control Over Financial Reporting




---



##### Table of Contents



ITEM 9B. OTHER INFORMATION
  th




---



##### Table of Contents



PART III
  
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
  Agein
    
    
    
    Period Held or
    
    Term of OfficeName
    
    2006
    
    Office
    
    Prior Position
    
    ExpiresM. T. Chiaraluce
    
    
    63
    
    
    Chairman of the
Board and Executive
Officer
    
    Held position of
President since
January 1992 and
position of Chief
Executive Officer
since July 1992
until his
retirement as of
March 1, 2006
    
    2006 Annual MeetingE. W. Thornburg
    
    
    46
    
    
    President, Chief
Executive Officer
    
    Held position since
March 1, 2006
    
    2006 Annual MeetingD. C. Benoit
    
    
    48
    
    
    Vice President  Finance, Chief
Financial Officer
and Treasurer
    
    Held current
position or other
executive position
with the company
since April 1996
    
    2006 Annual MeetingT. P. ONeill
    
    
    52
    
    
    Vice President 
Operations &
Engineering
    
    Held current
position or other
engineering
position with the
Company since
February 1980
    
    2006 Annual MeetingM. P. Westbrook
    
    
    46
    
    
    Vice President 
Administration and
Government Affairs
    
    Held current position or other management position
with the Company since September
1988
    
    2006 Annual Meeting




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##### Table of Contents



Agein
    
    
    
    Period Held or
    
    Term of OfficeName
    
    2006
    
    Office
    
    Prior Position
    
    ExpiresT. R. Marston
    
    
    53
    
    
    Vice President  Planning &
Treatment
    
    Held current
position or other
management position
with the Company
since June 1974.
    
    2006 Annual MeetingP. J. Bancroft
    
    
    56
    
    
    Assistant Treasurer
and Controller
    
    Held current
position or other
accounting position
with the Company
since October 1979
    
    2006 Annual MeetingM. G. DiAcri
    
    
    60
    
    
    Corporate Secretary
    
    Held administrative
position with the
Company since
February 1990
    
    2006 Annual Meeting
  
 ITEM 11. EXECUTIVE COMPENSATION
 
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCHOLDER
MATTERS
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
 (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, 2005, 2004, and 2003
    
    
    F-4Consolidated Statements of Comprehensive Income
for the years ended December 31, 2005, 2004, and 2003
    
    
    F-4Consolidated Balance Sheets at December 31, 2005
and 2004
    
    
    F-5Consolidated Statements of Cash Flows for the
years ended December 31, 2005, 2004, and 2003
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
 2.
    
    
    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,
2005, 2004, and 2003
    
    S-1
 All 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.




---



##### Table of Contents



(b)
    
    Exhibits:
 Exhibits for Connecticut Water Service, Inc. are in the
Index to Exhibits
    
    E-1
 Exhibits heretofore filed with the Securities and
Exchange Commission as indicated below are
incorporated herein by reference and made a part
hereof as if filed herewith. Exhibits marked by
asterisk (*) are being filed herewith.




---



##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
 PageIndex to Consolidated Financial Statements and Schedule
    
    
    F-1Reports of Independent Registered Public Accounting
Firm
    
    
    F-2Consolidated Statements of Income for the years ended
December 31, 2005, 2004, and 2003
    
    
    F-4Consolidated Statements of Comprehensive Income for the
years ended December 31, 2005, 2004, and 2003
    
    
    F-4Consolidated Balance Sheets at December 31, 2005 and 2004
    
    
    F-5Consolidated Statements of Cash Flows for the years ended
December 31, 2005, 2004, and 2003
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7Schedule II  Valuation and Qualifying Accounts
    
    
    S-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   Consolidated financial statements and financial statement schedule
  Internal control over financial reporting
 Internal
Control  Integrated Framework Internal
Control  Integrated Framework




---



##### Table of Contents








---



##### Table of Contents



CONSOLIDATED STATEMENTS OF INCOME
 For the Years Ended December 31, (in thousands, except per share data)
    
    2005
    
    
    2004
    
    
    2003Operating Revenues
    
    $
    47,453
    
    
    $
    46,008
    
    
    $
    44,598Operating ExpensesOperation and Maintenance
    
    
    24,514
    
    
    
    22,336
    
    
    
    21,086Depreciation
    
    
    5,724
    
    
    
    5,570
    
    
    
    5,483Income Taxes
    
    
    2,338
    
    
    
    2,594
    
    
    
    1,912Taxes Other Than Income Taxes
    
    
    5,385
    
    
    
    5,179
    
    
    
    5,022Total Operating Expenses
    
    
    37,961
    
    
    
    35,679
    
    
    
    33,503Utility Operating Income
    
    
    9,492
    
    
    
    10,329
    
    
    
    11,095Other Income (Deductions), Net of TaxesGain (Loss) on Property Transactions
    
    
    (61
    )
    
    
    1,206
    
    
    
    1,029Non-Water Sales Earnings
    
    
    945
    
    
    
    829
    
    
    
    692Allowance for Funds Used During Construction
    
    
    638
    
    
    
    421
    
    
    
    476Other
    
    
    169
    
    
    
    120
    
    
    
    80Total Other Income (Deductions), Net of Taxes
    
    
    1,691
    
    
    
    2,576
    
    
    
    2,277Interest and Debt ExpensesInterest on Long-Term Debt
    
    
    2,937
    
    
    
    2,918
    
    
    
    3,878Other Interest Charges
    
    
    720
    
    
    
    486
    
    
    
    373Amortization of Debt Expense
    
    
    360
    
    
    
    338
    
    
    
    231Total Interest and Debt Expenses
    
    
    4,017
    
    
    
    3,742
    
    
    
    4,482Income from Continuing Operations
    
    
    7,166
    
    
    
    9,163
    
    
    
    8,890Discontinued Operations, Net of Tax of $1,720, $238 and $123
in 2005, 2004 and 2003, respectively
    
    
    3,158
    
    
    
    231
    
    
    
    320Net Income
    
    
    10,324
    
    
    
    9,394
    
    
    
    9,210Preferred Stock Dividend Requirement
    
    
    38
    
    
    
    38
    
    
    
    38Total Net Income Applicable to Common Stock
    
    $
    10,286
    
    
    $
    9,356
    
    
    $
    9,172Weighted Average Common Shares Outstanding:Basic
    
    
    8,094
    
    
    
    7,999
    
    
    
    7,956Diluted
    
    
    8,143
    
    
    
    8,039
    
    
    
    8,002Earnings Per Common Share:Basic  Continuing Operations
    
    $
    0.89
    
    
    $
    1.15
    
    
    $
    1.11Basic  Discontinued Operations
    
    
    0.38
    
    
    
    0.02
    
    
    
    0.04Basic
    
    $
    1.27
    
    
    $
    1.17
    
    
    $
    1.15Diluted  Continuing Operations
    
    $
    0.88
    
    
    $
    1.14
    
    
    $
    1.11Diluted  Discontinued Operations
    
    
    0.38
    
    
    $
    0.02
    
    
    $
    0.04Diluted
    
    $
    1.26
    
    
    $
    1.16
    
    
    $
    1.15
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 For the Years Ended December 31, (in thousands)
    
    2005
    
    
    2004
    
    
    2003Net Income
    
    $
    10,286
    
    
    $
    9,356
    
    
    $
    9,172Other Comprehensive Income, net of taxQualified
cash flow hedging instrument net of tax of $188 and $58
in 2005 and 2004, respectively
    
    
    294
    
    
    
    87
    
    
    
    Comprehensive Income
    
    $
    10,580
    
    
    $
    9,443
    
    
    $
    9,172
 The accompanying notes are an integral part of these consolidated financial statements.




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##### Table of Contents



CONSOLIDATED BALANCE SHEETS
 December 31, (in thousands, except share amounts)
    
    2005
    
    
    2004ASSETSUtility Plant
    
    $
    340,755
    
    
    $
    333,985Construction Work in Progress
    
    
    5,505
    
    
    
    7,463Utility Plant Acquisition Adjustments
    
    
    (1,273
    )
    
    
    (1,273
    )344,987
    
    
    
    340,175Accumulated Provision for Depreciation
    
    
    (97,284
    )
    
    
    (98,399
    )Net Utility Plant
    
    
    247,703
    
    
    
    241,776Other Property and Investments
    
    
    4,542
    
    
    
    4,298Cash and Cash Equivalents
    
    
    4,439
    
    
    
    707Restricted Cash
    
    
    2,628
    
    
    
    Accounts Receivable (Less Allowance, 2005 - $256;
2004 - $212)
    
    
    5,888
    
    
    
    5,702Accrued Unbilled Revenues
    
    
    3,918
    
    
    
    4,064Materials and Supplies, at Average Cost
    
    
    860
    
    
    
    869Prepayments and Other Current Assets
    
    
    1,274
    
    
    
    3,923Short-Term Investment
    
    
    6,815
    
    
    
    Barlaco Assets Held for Sale
    
    
    324
    
    
    
    Total Current Assets
    
    
    26,146
    
    
    
    15,265Unamortized Debt Issuance Expense
    
    
    7,823
    
    
    
    7,169Unrecovered Income Taxes
    
    
    12,986
    
    
    
    16,173Post-Retirement Benefits Other Than Pension
    
    
    1,595
    
    
    
    1,088Goodwill
    
    
    3,608
    
    
    
    3,608Deferred Charges and Other Costs
    
    
    1,632
    
    
    
    1,563Total Regulatory and Other Long-Term Assets
    
    
    27,644
    
    
    
    29,601Total Assets
    
    $
    306,035
    
    
    $
    290,940CAPITALIZATION AND LIABILITIESCommon Stockholders Equity:Common Stock Without Par Value:Authorized - 15,000,000 Shares  Issued
and Outstanding:2005 - 8,169,627; 2004 - 8,035,199
    
    $
    58,005
    
    
    $
    55,514Retained Earnings
    
    
    35,777
    
    
    
    32,264Accumulated Other Comprehensive Income
    
    
    294
    
    
    
    87Common Stockholders Equity
    
    
    94,076
    
    
    
    87,865Preferred Stock
    
    
    847
    
    
    
    847Long-Term Debt
    
    
    77,404
    
    
    
    66,399Total Capitalization
    
    
    172,327
    
    
    
    155,111Interim Bank Loans Payable
    
    
    4,750
    
    
    
    5,650Current Portion of Long-Term Debt
    
    
    2,331
    
    
    
    326Accounts Payable and Accrued Expenses
    
    
    4,776
    
    
    
    5,512Accrued Taxes
    
    
    154
    
    
    
    3,300Accrued Interest
    
    
    699
    
    
    
    601Other Current Liabilities
    
    
    519
    
    
    
    559Total Current Liabilities
    
    
    13,229
    
    
    
    15,948Advances for Construction
    
    
    29,355
    
    
    
    27,157Contributions in Aid of Construction
    
    
    45,709
    
    
    
    46,111Deferred Federal and State Income Taxes
    
    
    24,915
    
    
    
    24,249Unfunded Future Income Taxes
    
    
    11,273
    
    
    
    13,096Long-Term Compensation Arrangements
    
    
    7,541
    
    
    
    7,445Unamortized Investment Tax Credits
    
    
    1,686
    
    
    
    1,823Commitments and ContingenciesTotal Capitalization and Liabilities
    
    $
    306,035
    
    
    $
    290,940
 The accompanying notes are an integral part of these consolidated financial statements.




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Years Ended December 31, (in thousands)
    
    2005
    
    
    2004
    
    
    2003Operating Activities:Net Income
    
    $
    10,324
    
    
    $
    9,394
    
    
    $
    9,210Discontinued Operations
    
    
    3,158
    
    
    
    235
    
    
    
    324Income from Continuing Operations
    
    
    7,166
    
    
    
    9,159
    
    
    
    8,886Adjustments to Reconcile Net Income to Net CashProvided by Operating Activities:Allowance for Funds Used During Construction
    
    
    (743
    )
    
    
    (436
    )
    
    
    (476
    )Depreciation (including $188 in 2005 and $253 in 2004,
and $165 in 2003 charged to other accounts)
    
    
    5,912
    
    
    
    5,763
    
    
    
    5,648Change in Assets and Liabilities:(Increase) in Accounts Receivable and
Accrued Unbilled Revenues
    
    
    (342
    )
    
    
    (769
    )
    
    
    (49
    )(Increase) Decrease in Other Current Assets
    
    
    2,600
    
    
    
    288
    
    
    
    (51
    )(Increase) in Other Non-Current Items
    
    
    (556
    )
    
    
    (469
    )
    
    
    (690
    )Increase (Decrease) in Accounts Payable, Accrued
Expenses and Other Current Liabilities
    
    
    (3,603
    )
    
    
    1,678
    
    
    
    (2,069
    )Increase in Deferred Income Taxes and
Investment Tax Credits, Net
    
    
    2,332
    
    
    
    996
    
    
    
    2,400Total Adjustments
    
    
    5,600
    
    
    
    7,051
    
    
    
    4,713Net Cash and Cash Equivalents Provided by (Used In) Continuing Operations
    
    
    12,766
    
    
    
    16,210
    
    
    
    13,599Net Cash and Cash Equivalents Provided by (Used In) Discontinued Operations
    
    
    (185
    )
    
    
    497
    
    
    
    184Net Cash and Cash Equivalents Provided by (Used In) Operating Activities
    
    
    12,581
    
    
    
    16,707
    
    
    
    13,783Investing Activities:Company Financed Additions to Utility Plant
    
    
    (14,088
    )
    
    
    (8,380
    )
    
    
    (8,486
    )Advances from Others for Construction
    
    
    (1,955
    )
    
    
    (2,057
    )
    
    
    (592
    )Net Additions to Utility Plant Used in Continuing Operations
    
    
    (16,043
    )
    
    
    (10,437
    )
    
    
    (9,078
    )Net Additions to Utility Plant Used in Discontinued Operations
    
    
    (171
    )
    
    
    (172
    )
    
    
    (193
    )Proceeds from Sale of Barnstable Water Company Assets (Net of $114 in Transaction Costs)
    
    9,885
    
    
    
    
    
    
    Purchase of Short Term Investments
    
    
    (6,713
    )
    
    
    
    
    
    
    Net Cash and Cash Equivalents Used inInvesting Activities in Continuing Operations
    
    
    (12,871
    )
    
    
    (10,437
    )
    
    
    (9,078
    )Net Cash and Cash Equivalents Used inInvesting Activities in Discontinued Operations
    
    
    (171
    )
    
    
    (172
    )
    
    
    (193
    )Net Cash Used in Investing Activities
    
    
    (13,042
    )
    
    
    (10,609
    )
    
    
    (9,271
    )Financing Activities:Net Proceeds from Interim Bank Loans
    
    
    4,750
    
    
    
    5,650
    
    
    
    9,700Net Repayment of Interim Bank Loans
    
    
    (5,650
    )
    
    
    (9,700
    )
    
    
    (6,950
    )Proceeds from Issuance of Common Stock
    
    
    2,038
    
    
    
    1,751
    
    
    
    699Proceeds from Issuance of Long-Term Debt
    
    
    12,282
    
    
    
    23,581
    
    
    
    22,930Repayment of Long-Term Debt Including Current Portion
    
    
    (665
    )
    
    
    (21,764
    )
    
    
    (22,798
    )Costs Incurred to Issue Long-Term Debt and Common Stock
    
    
    (934
    )
    
    
    (1,309
    )
    
    
    (1,359
    )Advances from Others for Construction
    
    
    1,955
    
    
    
    2,057
    
    
    
    592Proceeds from Exercise of Stock Options
    
    
    455
    
    
    
    
    
    
    
    Cash Dividends Paid
    
    
    (6,838
    )
    
    
    (6,525
    )
    
    
    (6,393
    )Net Cash and Cash Equivalents Provided by (Used in)Financing Activities in Continuing Operations
    
    
    7,393
    
    
    
    (6,259
    )
    
    
    (3,579
    )Net Cash and Cash Equivalents Provided by (Used in)Financing Activities in Discontinued Operations
    
    
    (3,200
    )
    
    
    (254
    )
    
    
    (275
    )Net Cash and Cash Equivalents Provided by (Used in) Financing Activites
    
    
    4,193
    
    
    
    (6,513
    )
    
    
    (3,854
    )Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    3,732
    
    
    
    (415
    )
    
    
    658Cash and Cash Equivalents at Beginning of Year
    
    
    707
    
    
    
    1,122
    
    
    
    464Cash and Cash Equivalents at End of Year
    
    $
    4,439
    
    
    $
    707
    
    
    $
    1,122Non-Cash Investing and Financing Activities:Non-Cash Contributed Utility Plant (see Note 1 for details)
    
    $
    1,231
    
    
    $
    2,337
    
    
    $
    2,930Short-term Investment of
Bond Proceeds Held in Restricted Cash
    
    $
    2,628
    
    
    
    
    
    
    
    Supplemental Disclosures of Cash Flow Information:Cash Paid for Continuing Operations During the Year for:Interest
    
    $
    3,511
    
    
    $
    3,440
    
    
    $
    4,372State and Federal Income Taxes
    
    $
    3,515
    
    
    $
    1,383
    
    
    $
    2,355Cash Paid for Discontinued Operations During the Year for:Interest
    
    $
    106
    
    
    $
    141
    
    
    $
    150State and Federal Income Taxes
    
    $
    410
    
    
    $
    31
    
    
    $
    52
 The accompanying notes are an integral part of these consolidated financial statements.




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##### Table of Contents



NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 BASIS OF PRESENTATION
 The Connecticut Water Company (Connecticut Water)
Crystal Water Utilities Corporation
The Crystal Water Company of Danielson (Crystal Water)
Chester Realty, Inc.
New England Water Utility Services, Inc.
Connecticut Water Emergency Services, Inc.
The Barnstable Holding Company
The Barnstable Water Company (Barnstable Water)
BARLACO, Inc.
The Unionville Water Company (Unionville)
    Linebackerâ
    PUBLIC UTILITY REGULATION
 USE OF ESTIMATES




---



##### Table of Contents



REVENUES
 UTILITY PLANT
 Allowance For Funds Used During Construction
   Customers Advances For Construction, Contributed Plant And Contributions In Aid Of
Construction
   in thousands2005
    
    
    2004
    
    
    2003Additions to Utility Plant:Company Financed
    
    $
    14,088
    
    
    $
    8,380
    
    
    $
    8,486Allowance for Funds Used During Construction
    
    
    743
    
    
    
    436
    
    
    
    476Subtotal  Utility Plant Increase to Rate Base
    
    
    14,831
    
    
    
    8,816
    
    
    
    8,962Non-Cash Contributed Plant
    
    
    1,231
    
    
    
    2,337
    
    
    
    2,930Advances from Others for Construction
    
    
    1,955
    
    
    
    2,057
    
    
    
    592Subtotal  Gross Additions to Utility Plant
    
    
    18,017
    
    
    
    13,210
    
    
    
    12,484Less: Non-Cash Contributed Plant
    
    
    1,231
    
    
    
    2,337
    
    
    
    2,930Net Additions to Utility Plant  Continuing Operations
    
    
    16,786
    
    
    
    10,873
    
    
    
    9,554Plus: Discontinued Operations
    
    
    171
    
    
    
    172
    
    
    
    193Net Additions to Utility Plant
    
    $
    16,957
    
    
    $
    11,045
    
    
    $
    9,747
 Depreciation




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##### Table of Contents



F-9 INCOME TAXES
    MUNICIPAL TAXES
 STOCK OPTIONS
  Year Ended December 312005
    
    
    2004
    
    
    2003(in thousands, except for per share data)Net income, applicable to common stockholders
as reported
    
    $
    10,286
    
    
    $
    9,356
    
    
    $
    9,172Add: Total stock-based employee
compensation expense determined under
intrinsic value based method for all awards,
net of related tax effects
    
    
    233
    
    
    
    137
    
    
    
    151Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards, net
of related tax effects
    
    
    (232
    )
    
    
    (408
    )
    
    
    (425
    )Pro forma net income, applicable to common
stockholders
    
    $
    10,287
    
    
    $
    9,085
    
    
    $
    8,898Earnings per share:Basic  as reported
    
    $
    1.27
    
    
    $
    1.17
    
    
    $
    1.15Basic  pro forma
    
    $
    1.27
    
    
    $
    1.14
    
    
    $
    1.12Diluted  as reported
    
    $
    1.26
    
    
    $
    1.16
    
    
    $
    1.15Diluted  pro forma
    
    $
    1.26
    
    
    $
    1.13
    
    
    $
    1.11




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##### Table of Contents



F-10 UNAMORTIZED DEBT ISSUANCE EXPENSE 
 GOODWILL
 EARNINGS PER SHARE 
 Years ended December 31,
    
    2005
    
    
    2004
    
    
    2003Basic earnings per share from Continuing Operations
    
    $
    0.89
    
    
    $
    1.15
    
    
    $
    1.12Dilutive effect of unexercised stock options
    
    
    0.01
    
    
    
    .01
    
    
    
    0.01Diluted earnings per share
    
    $
    0.88
    
    
    $
    1.14
    
    
    
    1.11Numerator (in thousands):Basic income from Continuing Operations
    
    $
    7,166
    
    
    $
    9,163
    
    
    $
    8,890Diluted income from Continuing Operations
    
    $
    7,166
    
    
    $
    9,163
    
    
    $
    8,890Denominator (in thousands):Basic weighted average shares outstanding
    
    
    8,094
    
    
    
    7,999
    
    
    
    7,956Dilutive effect of unexercised stock options
    
    
    19
    
    
    
    40
    
    
    
    46Diluted weighted average shares outstanding
    
    
    8,113
    
    
    
    8,039
    
    
    
    8,002
 RECLASSIFICATIONS AND REVISIONS 
 Investing Activities Financing
Activities Operating Activities Investing Activities Net Increase (Decrease) in
Cash and Cash Equivalents
 NEW ACCOUNTING PRONOUNCEMENTS




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##### Table of Contents



F-11     NOTE 2: SALE OF BARNSTABLE WATER COMPANY ASSETS  DISCONTINUED OPERATIONS




---



##### Table of Contents



F-12  (in thousands)
    
    Year ended December 31,2005
    
    2004
    
    2003Water Activities:Operating Revenues
    
    $
    802
    
    
    $
    2,485
    
    
    $
    2,517Income Taxes
    
    $
    (9
    )
    
    $
    191
    
    
    $
    96Utility Operating Income
    
    $
    (11
    )
    
    $
    155
    
    
    $
    279Services and Rentals:Revenues
    
    $
    1,067
    
    
    $
    163
    
    
    $
    115Income Taxes
    
    $
    132
    
    
    $
    47
    
    
    $
    27Income from Services and Rentals
    
    $
    213
    
    
    $
    76
    
    
    $
    41Gain on Sale of Assets:Gross Proceeds
    
    $
    10,000
    
    
    $
    
    
    
    $
    Income Taxes
    
    $
    1,597
    
    
    $
    
    
    
    $
    Gain on Sale of Assets
    
    $
    2,956
    
    
    $
    
    
    
    $
    Total Net Income from Discontinued
Operations
    
    $
    3,158
    
    
    $
    231
    
    
    $
    320




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##### Table of Contents



F-13 NOTE 3: INCOME TAX EXPENSE
  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Federal Classified as Operating Expense from Continuing Operations
    
    $
    2,400
    
    
    $
    2,401
    
    
    $
    1,666Federal Classified as Other Income from Continuing Operation:Land Sales
    
    
    132
    
    
    
    
    
    
    
    (11
    )Land Donation
    
    
    87
    
    
    
    (280
    )
    
    
    (246
    )Non-Water Sales
    
    
    467
    
    
    
    411
    
    
    
    330Other
    
    
    179
    
    
    
    (74
    )
    
    
    (66
    )Total Federal Income Tax Expense from Continuing Operations
    
    
    3,265
    
    
    
    2,458
    
    
    
    1,673State Classified as Operating Expense from Continuing Operations
    
    
    (62
    )
    
    
    193
    
    
    
    246State Classified as Other Income from Continuing Operations:Land Sales
    
    
    31
    
    
    
    
    
    
    
    (3
    )Land Donation
    
    
    225
    
    
    
    (965
    )
    
    
    (733
    )Non-Water Sales
    
    
    119
    
    
    
    118
    
    
    
    86Other
    
    
    34
    
    
    
    31
    
    
    
    22Total State Income Tax Expense (Benefit) from Continuing Operations
    
    
    347
    
    
    
    (623
    )
    
    
    (382
    )Total Income Tax Expense from Continuing Operations
    
    $
    3,612
    
    
    $
    1,835
    
    
    $
    1,291
  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Current from Continuing Operations:Federal
    
    $
    1,758
    
    
    $
    1,817
    
    
    $
    (181
    )State
    
    
    (377
    )
    
    
    240
    
    
    
    460Total Current from Continuing Operations
    
    
    1,381
    
    
    
    2,057
    
    
    
    279Deferred Income Taxes from Continuing Operations, Net:FederalInvestment Tax Credit
    
    
    (62
    )
    
    
    (64
    )
    
    
    (62
    )Capitalized Interest and AFUDC
    
    
    37
    
    
    
    3
    
    
    
    25Depreciation
    
    
    721
    
    
    
    868
    
    
    
    2,187Other
    
    
    810
    
    
    
    (167
    )
    
    
    (296
    )Total Federal from Continuing Operations
    
    
    1,506
    
    
    
    640
    
    
    
    1,854State from Continuing OperationsDepreciation
    
    
    
    
    
    
    1
    
    
    
    8Other
    
    
    725
    
    
    
    (863
    )
    
    
    (850
    )Total State from Continuing Operations
    
    
    725
    
    
    
    (862
    )
    
    
    (842
    )Total Deferred Income Taxes from Continuing Operations, Net
    
    
    2,231
    
    
    
    (222
    )
    
    
    1,012Total from Continuing Operations
    
    
    3,612
    
    
    $
    1,835
    
    
    $
    1,291
  (in thousands)
    
    2005
    
    
    2004Unrecovered Income Taxes
    
    $
    (12,986
    )
    
    $
    (16,173
    )Deferred Federal and State Income Taxes
    
    
    24,915
    
    
    
    24,249Unfunded Future Income Taxes
    
    
    11,273
    
    
    
    13,096Unamortized Investment Tax Credit
    
    
    1,686
    
    
    
    1,823Other
    
    
    (68
    )
    
    
    (9
    )Net Deferred Income Tax Liability
    
    $
    24,820
    
    
    $
    22,986




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##### Table of Contents



F-14  (in thousands)
    
    2005
    
    
    2004Charitable Contribution Carryforward (1)
    
    $
    290
    
    
    $
    (1,108
    )Tax Credit Carryforward (2)
    
    
    (1,335
    )
    
    
    (1,292
    )Alternative Minimum Tax Carryforward
    
    
    (225
    )
    
    
    (285
    )Prepaid Income Taxes on CIAC
    
    
    (128
    )
    
    
    (179
    )Prepaid FIT on Services
    
    
    (126
    )
    
    
    (107
    )Other Comprehensive Income
    
    
    188
    
    
    
    58Accelerated Depreciation
    
    
    24,628
    
    
    
    24,247Net of AFUDC and Capitalized Interest
    
    
    225
    
    
    
    161Unamortized Investment Tax Credit
    
    
    1,686
    
    
    
    1,823Other
    
    
    (383
    )
    
    
    (332
    )Net Deferred Income Tax Liability
    
    $
    24,820
    
    
    $
    22,986
 
 (1)
    
    2005 charitable contribution carryover expires beginning in 2006 and ending in 2009.(2)
    
    State tax credit carry-forwards expire beginning 2016 and ending in 2019.  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Pre-Tax IncomeIncome from Continuing Operations
    
    $
    7,166
    
    
    $
    9,163
    
    
    $
    8,890Income Taxes
    
    
    3,612
    
    
    
    1,835
    
    
    
    1,291Total Pre-Tax Income from Continuing Operations
    
    $
    10,778
    
    
    $
    10,998
    
    
    $
    10,181
  2005
    
    
    2004
    
    
    2003Federal Statutory Income Tax Rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %Tax Effect of Differences:State Income Taxes Net of Federal Benefit:State Income Tax Excluding Land Donation Credit
    
    
    0.7
    %
    
    
    2.1
    %
    
    
    2.3
    %Land Donation Credit
    
    
    1.4
    %
    
    
    (5.8
    %)
    
    
    (4.8
    %)Depreciation
    
    
    1.6
    %
    
    
    1.7
    %
    
    
    0.3
    %Charitable Contribution  Land Donation
    
    
    0.8
    %
    
    
    (5.5
    %)
    
    
    (4.9
    %)Pension Costs
    
    
    (3.3
    %)
    
    
    (2.7
    %)
    
    
    (0.3
    %)Debt Refinancing Costs
    
    
    0.7
    %
    
    
    (3.7
    %)
    
    
    (4.6
    %)Allowance for Funds Used During Construction
    
    
    (1.4
    %)
    
    
    (1.2
    %)
    
    
    (1.3
    %)Change in Estimate of Prior Year Income Tax Expense
    
    
    (2.5
    %)
    
    
    (1.4
    %)
    
    
    (12.1
    %)Common Stock Equivalents
    
    
    (0.4
    %)
    
    
    0.4
    %
    
    
    1.0
    %Other
    
    
    1.9
    %
    
    
    (1.2
    %)
    
    
    3.1
    %Effective Income Tax Rate for Continuing Operations
    
    
    33.5
    %
    
    
    16.7
    %
    
    
    12.7
    %




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##### Table of Contents



F-15 NOTE 4: COMMON STOCK
  Issuance(in thousands, except share data)
    
    Shares
    
    
    Amount
    
    
    Expense
    
    
    TotalBalance, January 1, 2003
    
    
    7,939,713
    
    
    $
    54,661
    
    
    $
    (1,592
    )
    
    $
    53,069Stock and equivalents issued through
Performance Stock Program
    
    
    8,347
    
    
    
    305
    
    
    
    
    
    
    
    305Stock Options Exercised
    
    
    19,319
    
    
    
    394
    
    
    
    (2
    )
    
    
    392Balance, December 31, 2003
    
    
    7,967,379
    
    
    $
    55,360
    
    
    $
    (1,594
    )
    
    $
    53,766Stock and equivalents issued through
Performance Stock Program
    
    
    6,893
    
    
    
    138
    
    
    
    
    
    
    
    138Dividend Reinvestment Plan
    
    
    60,927
    
    
    
    1,622
    
    
    
    (3
    )
    
    
    1,619Tax adjustment on prior year stock
options exercised
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    (9
    )Balance, December 31, 2004
    
    
    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
    
    
    44,563
    
    
    
    865
    
    
    
    (2
    )
    
    
    863Balance, December 31, 2005(1)
    
    
    8,169,627
    
    
    $
    59,604
    
    
    $
    (1,599
    )
    
    $
    58,005
 
 (1)
    
    Includes 22,376 restricted shares and 49,931 common stock equivalent shares issued through
the Performance Stock Programs through December 31, 2005.




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##### Table of Contents



F-16 NOTE 5: ANALYSIS OF RETAINED EARNINGS
  (in thousands, except per share data)
    
    2005
    
    
    2004
    
    
    2003Balance, Beginning of Year
    
    $
    32,264
    
    
    $
    29,549
    
    
    $
    26,906Net Income
    
    
    10,324
    
    
    
    9,394
    
    
    
    9,21042,588
    
    
    
    38,943
    
    
    
    36,116Dividends Declared:Cumulative Preferred Stock, Series A, $.80 Per Share
    
    
    12
    
    
    
    12
    
    
    
    12Cumulative Preferred Stock, Series $.90, $.90 Per Share
    
    
    26
    
    
    
    26
    
    
    
    26Common Stock:2005 $0.845 Per Share
    
    
    6,773
    
    
    
    
    
    
    
    2004 $0.835 Per Share
    
    
    
    
    
    
    6,641
    
    
    
    2003 $0.825 Per Share
    
    
    
    
    
    
    
    
    
    
    6,5296,811
    
    
    
    6,679
    
    
    
    6,567Balance, End of Year
    
    $
    35,777
    
    
    $
    32,264
    
    
    $
    29,549
 NOTE 6: FAIR VALUE OF FINANCIAL INSTRUMENTS
  CASH AND CASH EQUIVALENTS
 LONG-TERM DEBT
  INTEREST RATE SWAP




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##### Table of Contents



F-17 NOTE 7: LONG-TERM DEBT
  (in thousands)
    
    
    
    
    2005
    
    
    2004Unsecured Water Facilities Revenue Bonds5.05
    %
    
    1998 Series A, Due 2028
    
    $
    9,640
    
    
    $
    9,6405.125
    %
    
    1998 Series B, Due 2028
    
    
    7,685
    
    
    
    7,6854.40
    %
    
    2003A Series, Due 2020
    
    
    8,000
    
    
    
    8,0005.00
    %
    
    2003C Series, Due 2022
    
    
    14,930
    
    
    
    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
    
    
    10,000
    
    
    
    Total Connecticut Water Company
    
    
    72,305
    
    
    
    62,305Crystal Water Utilities Corporation8.0
    %
    
    Westbank, Due 2017
    
    
    105
    
    
    
    111Crystal Water Company of Danielson7.82
    %
    
    Connecticut Development Authority, Due 2020
    
    
    
    
    
    
    4555.00
    %
    
    Unsecured Water Facilities Revenue Bonds 2005 A Series, Due 2040
    
    
    5,000
    
    
    
    Total Crystal Water Company of Danielson
    
    
    5,000
    
    
    
    455Chester Realty6
    %
    
    Note Payable, Due 2006
    
    
    12
    
    
    
    35Barnstable Water Company10.2
    %
    
    Indianapolis Life Insurance, Due 2011
    
    
    
    
    
    
    1,325Unionville Water Company8.125
    %
    
    Farmington Savings Bank, Due 2011
    
    
    842
    
    
    
    9633.56
    %
    
    State of Connecticut, Due 2023
    
    
    1,471
    
    
    
    1,531Total Unionville Water Company
    
    
    2,313
    
    
    
    2,494Total Connecticut Water Service, Inc.
    
    
    79,735
    
    
    
    66,725Less Current Portion
    
    
    (2,331
    )
    
    
    (326
    )Total Long-Term Debt
    
    $
    77,404
    
    
    $
    66,399
  (In thousands)2006
    
    
    
    
    
    $
    2,3312007
    
    
    
    
    
    $
    72008
    
    
    
    
    
    $
    72009
    
    
    
    
    
    $
    82010
    
    
    
    
    
    $
    8




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##### Table of Contents



F-18




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##### Table of Contents



F-19  NOTE 8: PREFERRED STOCK
  (in thousands, except share data)
    
    2005
    
    
    2004Connecticut Water Service, Inc.Cumulative Series A Voting, $20 Par Value; Authorized, Issued and
Outstanding 15,000 Shares
    
    $
    300
    
    
    $
    300Cumulative Series $.90 Non-Voting, $16 Par Value; Authorized 50,000
Shares, Issued and Outstanding 29,499 Shares
    
    
    472
    
    
    
    472772
    
    
    
    772Barnstable Water Company6% Cumulative, $100 Par Value; Authorized, Issued and
Outstanding 750 Shares
    
    
    75
    
    
    
    75Total Preferred Stock
    
    $
    847
    
    
    $
    847
     NOTE 9: BANK LINES OF CREDIT




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##### Table of Contents



F-20 NOTE 10: UTILITY PLANT AND CONSTRUCTION PROGRAM
  (in thousands)
    
    2005
    
    
    2004Land
    
    $
    9,139
    
    
    $
    9,652Source of Supply
    
    
    24,423
    
    
    
    20,724Pumping
    
    
    23,650
    
    
    
    25,348Water Treatment
    
    
    46,812
    
    
    
    47,726Transmission and Distribution
    
    
    216,513
    
    
    
    209,887General
    
    
    19,800
    
    
    
    20,228Held for Future Use
    
    
    418
    
    
    
    420Total
    
    $
    340,755
    
    
    $
    333,985
   NOTE 11: TAXES OTHER THAN INCOME TAXES
  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Municipal Property Taxes
    
    $
    4,708
    
    
    $
    4,527
    
    
    $
    4,374Payroll Taxes
    
    
    677
    
    
    
    652
    
    
    
    648Total
    
    $
    5,385
    
    
    $
    5,179
    
    
    $
    5,022
 NOTE 12: PENSION AND OTHER POST-RETIREMENT EMPLOYEE BENEFITS
 GENERAL
 Investment Strategy
  2005
    
    2004Equity
    
    
    65
    %
    
    
    65
    %Fixed Income
    
    
    35
    %
    
    
    35
    %Total
    
    
    100
    %
    
    
    100
    %
   PENSION
Defined Contribution Plan




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##### Table of Contents



F-21 Defined Benefit Plans
  Pension Benefits(in thousands)
    
    2005
    
    
    2004Change in Benefit Obligation:Benefit obligation, beginning of year
    
    $
    27,049
    
    
    $
    23,812Service Cost
    
    
    1,050
    
    
    
    951Interest Cost
    
    
    1,552
    
    
    
    1,458Actuarial loss/(gain)
    
    
    2,008
    
    
    
    1,807Benefits paid
    
    
    (1,150
    )
    
    
    (979
    )Benefit obligation, end of year
    
    $
    30,509
    
    
    $
    27,049Change in Plan Assets:Fair Value, beginning of year
    
    $
    22,250
    
    
    $
    20,311Actual return on plan assets
    
    
    1,737
    
    
    
    2,004Employer contribution
    
    
    2,009
    
    
    
    914Benefits paid
    
    
    (1,150
    )
    
    
    (979
    )Fair Value, end of year
    
    $
    24,846
    
    
    $
    22,250Funded Status
    
    $
    (5,663
    )
    
    $
    (4,799
    )Unrecognized net actuarial (gain) loss
    
    
    3,171
    
    
    
    1,577Unrecognized transition obligation
    
    
    13
    
    
    
    24Unrecognized prior service cost
    
    
    730
    
    
    
    827Accrued Cost
    
    $
    (1,749
    )
    
    $
    (2,371
    )
  2005
    
    
    2004Weighted-average assumptions used to determine benefit obligations at December 31:Discount rate
    
    
    5.50
    %
    
    
    5.75
    %Rate of compensation increase
    
    
    4.50
    %
    
    
    4.50
    %
 2005
    
    
    2004Weighted-average assumptions used to determine net periodic cost for years ended December 31:Discount rate
    
    
    5.75
    %
    
    
    6.25
    %Expected long-term return on plan assets
    
    
    8.00
    %
    
    
    8.00
    %Rate of compensation increase
    
    
    4.50
    %
    
    
    4.50
    %




---



##### Table of Contents



Pension Benefits(in thousands)
    
    2005
    
    2004
    
    2003Components of net periodic benefit costsService cost
    
    $
    1,050
    
    
    $
    951
    
    
    $
    843Interest cost
    
    
    1,552
    
    
    
    1,458
    
    
    
    1,390Expected return on plan assets
    
    
    (1,645
    )
    
    
    (1,572
    )
    
    
    (1,544
    )Amortization of:Unrecognized net transition asset
    
    
    10
    
    
    
    12
    
    
    
    12Unrecognized net (gain)/loss
    
    
    322
    
    
    
    95
    
    
    
    (2
    )Unrecognized prior service cost
    
    
    98
    
    
    
    108
    
    
    
    108Net Periodic Pension Benefit Costs
    
    $
    1,387
    
    
    $
    1,052
    
    
    $
    807
 Plan Assets
  2005
    
    2004Equity Securities
    
    
    65
    %
    
    
    67
    %Fixed Income
    
    
    35
    
    
    
    33Total
    
    
    100
    %
    
    
    100
    %
  Year
    
    Amount2006
    
    $
    1,137,0002007
    
    
    1,238,0002008
    
    
    1,566,0002009
    
    
    1,593,0002010
    
    
    1,847,000Years 2011-2015
    
    
    12,337,000
 POST-RETIREMENT BENEFITS OTHER THAN PENSION (PBOP)




---



##### Table of Contents



F-23    Connecticut Water
    
    Barnstable Water(in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Change in Benefit Obligation:Benefit obligation, beginning of year
    
    $
    6,605
    
    
    $
    5,234
    
    
    $
    100
    
    
    $
    94Service Cost
    
    
    460
    
    
    
    311
    
    
    
    2
    
    
    
    2Interest Cost
    
    
    405
    
    
    
    323
    
    
    
    5
    
    
    
    6Plan Participant Contributions
    
    
    83
    
    
    
    75
    
    
    
    
    
    
    
    Actuarial loss/(gain)
    
    
    1,186
    
    
    
    1,067
    
    
    
    (3
    )
    
    
    2Benefits paid
    
    
    (486
    )
    
    
    (405
    )
    
    
    (5
    )
    
    
    (4
    )Benefit obligation, end of year
    
    $
    8,253
    
    
    $
    6,605
    
    
    $
    99
    
    
    $
    100Change in Plan Assets:Fair Value, beginning of year
    
    $
    3,566
    
    
    $
    3,179
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    209
    
    
    
    244
    
    
    
    
    
    
    
    Employer contribution
    
    
    473
    
    
    
    473
    
    
    
    5
    
    
    
    4Participants contributions
    
    
    83
    
    
    
    75
    
    
    
    
    
    
    
    Benefits paid
    
    
    (486
    )
    
    
    (405
    )
    
    
    (5
    )
    
    
    (4
    )Fair Value, end of year
    
    $
    3,845
    
    
    $
    3,566
    
    
    $
    
    
    
    $
    Funded Status
    
    $
    (4,408
    )
    
    $
    (3,039
    )
    
    $
    (99
    )
    
    $
    (100
    )Unrecognized net actuarial (gain) loss
    
    
    1,969
    
    
    
    988
    
    
    
    (42
    )
    
    
    (40
    )Unrecognized transition obligation
    
    
    843
    
    
    
    963
    
    
    
    53
    
    
    
    58Accrued Cost
    
    $
    (1,596
    )
    
    $
    (1,088
    )
    
    $
    (88
    )
    
    $
    (82
    )Weighted-average assumptions used to determine
benefit obligations at December 31:Discount rate
    
    
    5.50
    %
    
    
    5.75
    %
    
    
    5.50
    %
    
    
    5.75
    %Weighted-average assumptions used to determine net
periodic benefit cost for years ended December 31:Discount rate
    
    
    5.75
    %
    
    
    6.25
    %
    
    
    5.75
    %
    
    
    6.25
    %Expected long-term return on plan assets
    
    
    5.00
    %
    
    
    5.00
    %
    
    
    
    
    
    
    Rate of compensation increase
    
    
    4.50
    %
    
    
    4.50
    %
    
    
    
    
    
    
    




---



##### Table of Contents



F-24  Connecticut Water
    
    Barnstable Water(in thousands)
    
    2005
    
    2004
    
    2003
    
    2005
    
    2004
    
    2003Components of net periodic benefit costsService cost
    
    $
    460
    
    
    $
    311
    
    
    $
    270
    
    
    $
    2
    
    
    $
    2
    
    
    $
    2Interest cost
    
    
    405
    
    
    
    323
    
    
    
    314
    
    
    
    5
    
    
    
    6
    
    
    
    6Expected return on plan assets
    
    
    (168
    )
    
    
    (158
    )
    
    
    (145
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of:Unrecognized net transition asset
    
    
    120
    
    
    
    121
    
    
    
    165
    
    
    
    6
    
    
    
    6
    
    
    
    6Recognized net (gain)/loss
    
    
    164
    
    
    
    18
    
    
    
    (31
    )
    
    
    (2
    )
    
    
    (3
    )
    
    
    (4
    )Net Periodic Pension and Post
Retirement Benefit Costs
    
    $
    981
    
    
    $
    615
    
    
    $
    573
    
    
    $
    11
    
    
    $
    11
    
    
    $
    10
  2005
    
    2004Medical
    
    Dental
    
    Medical
    
    DentalHealth care cost
trend rate assumed
for next year
    
    
    8.5
    %
    
    
    8.5
    %
    
    
    8.5
    %
    
    
    8.5
    %Rate to which the
cost trend rate is
assumed to decline
    
    
    4.0
    %
    
    
    4.0
    %
    
    
    4.0
    %
    
    
    4.0
    %Year that the rate
reaches the
ultimate trend rate
    
    
    2015
    
    
    
    2015
    
    
    
    2014
    
    
    
    2014
  1-Percentage-Point
    
    1-Percentage-Point(in thousands)
    
    Increase
    
    DecreaseEffect on total of service and interest cost components
    
    $
    139
    
    
    $
    (113
    )Effect on post-retirement benefit obligation
    
    $
    1,078
    
    
    $
    (901
    )
 Plan Assets
  2005
    
    2004Equity Securities
    
    
    63
    %
    
    
    57
    %Fixed Income
    
    
    37
    
    
    
    43Total
    
    
    100
    %
    
    
    100
    %




---



##### Table of Contents



F-25 Cash Flows
   Year
    
    Connecticut Water
    
    Barnstable2006
    
    $
    310,000
    
    
    $
    8,0002007
    
    
    338,000
    
    
    
    8,0002008
    
    
    354,000
    
    
    
    7,0002009
    
    
    390,000
    
    
    
    7,0002010
    
    
    416,000
    
    
    
    7,000Years 2011  2015
    
    
    2,750,000
    
    
    
    38,000
 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
 SAVINGS PLAN 
  NOTE 13: STOCK-BASED COMPENSATION PLANS
  STOCK OPTIONS 
  2005
    
    2004
    
    2003Expected life (years)
    
    
    
    
    
    
    
    
    
    
    5.00Risk-free interest rate (percentage)
    
    
    
    
    
    
    
    
    
    
    2.79Volatility (percentage)
    
    
    
    
    
    
    
    
    
    
    30.00Dividend yield
    
    
    
    
    
    
    
    
    
    
    2.91




---



##### Table of Contents



F-26 For the Years Ended December 31,2005
    
    
    2004
    
    
    2003Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOptions:Outstanding, beginning of year
    
    
    251,835
    
    
    $
    22.85
    
    
    
    251,835
    
    
    $
    22.85
    
    
    
    235,101
    
    
    $
    21.41Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,053
    
    
    
    29.05Terminated
    
    
    (5,001
    )
    
    
    25.78
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (44,563
    )
    
    
    17.11
    
    
    
    
    
    
    
    
    
    
    
    (19,319
    )
    
    
    16.91Outstanding, end of year
    
    
    202,271
    
    
    
    24.04
    
    
    
    251,835
    
    
    
    22.85
    
    
    
    251,835
    
    
    
    22.85Exercisable, end of year
    
    
    175,685
    
    
    $
    23.44
    
    
    
    196,731
    
    
    $
    21.48
    
    
    
    119,992
    
    
    $
    21.35
  Options Outstanding
    
    
    Options ExercisableWeighted Average
    
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    AverageContractual Life
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    (years)
    
    
    Price
    
    
    Shares
    
    
    PriceRange of prices:$12.00 - $14.99
    
    
    19,305
    
    
    
    3.3
    
    
    $
    14.83
    
    
    
    19,305
    
    
    $
    14.83$15.00 - $17.99
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $18.00 - $20.99
    
    
    31,314
    
    
    
    4.9
    
    
    
    20.42
    
    
    
    31,314
    
    
    
    20.42$21.00 - $23.99
    
    
    47,596
    
    
    
    3.9
    
    
    
    22.33
    
    
    
    47,596
    
    
    
    22.33$24.00 - $26.99
    
    
    34,253
    
    
    
    6.9
    
    
    
    25.78
    
    
    
    25,690
    
    
    
    25.78$27.00 - $29.99
    
    
    69,803
    
    
    
    6.6
    
    
    
    28.52
    
    
    
    51,780
    
    
    
    28.33202,271
    
    
    
    5.5
    
    
    $
    24.04
    
    
    
    175,685
    
    
    $
    23.44
 NOTE 14: SEGMENT REPORTING




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##### Table of Contents



F-27 Interest
    
    
    
    
    
    IncomeOther
    
    
    
    
    
    Expense
    
    
    
    
    
    fromOperating
    
    Other Income
    
    (net of
    
    Income
    
    Continuing(in thousands)
    
    Revenues
    
    Depreciation
    
    Expenses
    
    (Deductions)
    
    AFUDC)
    
    Taxes
    
    OperationsFor the year ended
December 31, 2005Water Activities
    
    $
    47,453
    
    
    $
    5,724
    
    
    $
    29,899
    
    
    $
    276
    
    
    $
    3,274
    
    
    $
    2,550
    
    
    $
    6,282Real Estate Transactions
    
    
    495
    
    
    
    
    
    
    
    81
    
    
    
    
    
    
    
    
    
    
    
    475
    
    
    
    (61
    )Services and Rentals
    
    
    4,123
    
    
    
    36
    
    
    
    2,555
    
    
    
    
    
    
    
    
    
    
    
    587
    
    
    
    945Total
    
    $
    52,071
    
    
    $
    5,760
    
    
    $
    32,535
    
    
    $
    276
    
    
    $
    3,274
    
    
    $
    3,612
    
    
    $
    7,166For the year ended
December 31, 2004Water Activities
    
    $
    46,008
    
    
    $
    5,570
    
    
    $
    27,549
    
    
    $
    111
    
    
    $
    3,321
    
    
    $
    2,551
    
    
    $
    7,128Real Estate Transactions
    
    
    (12
    )
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    (1,245
    )
    
    
    1,206Services and Rentals
    
    
    4,655
    
    
    
    33
    
    
    
    3,264
    
    
    
    
    
    
    
    
    
    
    
    529
    
    
    
    829Total
    
    $
    50,651
    
    
    $
    5,603
    
    
    $
    30,840
    
    
    $
    111
    
    
    $
    3,321
    
    
    $
    1,835
    
    
    $
    9,163For the year ended
December 31, 2003Water Activities
    
    $
    44,598
    
    
    $
    5,483
    
    
    $
    26,108
    
    
    $
    26
    
    
    $
    4,030
    
    
    $
    1,868
    
    
    $
    7,169Real Estate Transactions
    
    
    170
    
    
    
    
    
    
    
    133
    
    
    
    (1
    )
    
    
    
    
    
    
    (993
    )
    
    
    1,029Services and Rentals
    
    
    3,717
    
    
    
    23
    
    
    
    2,583
    
    
    
    
    
    
    
    
    
    
    
    416
    
    
    
    692Total
    
    $
    48,485
    
    
    $
    5,506
    
    
    $
    28,824
    
    
    $
    25
    
    
    $
    4,030
    
    
    $
    1,291
    
    
    $
    8,890
 At December 31 (in thousands)
    
    2005
    
    
    2004Total Plant and Other Investments:Water
    
    $
    251,511
    
    
    $
    245,085Non-Water
    
    
    733
    
    
    
    989252,244
    
    
    
    246,074Other Assets:Water
    
    
    46,746
    
    
    
    39,897Non-Water
    
    
    7,045
    
    
    
    4,96953,791
    
    
    
    44,866Total Assets
    
    $
    306,035
    
    
    $
    290,940




---



##### Table of Contents



F-28 NOTE 15: COMMITMENTS AND CONTINGENCIES
 SECURITY
  REVERSE PRIVATIZATION
 ENVIRONMENTAL AND WATER QUALITY REGULATION
 RATE RELIEF 
   LAND DISPOSITIONS




---



##### Table of Contents



F-29    TAXES




---



##### Table of Contents



F-30 NOTE 16: QUARTERLY FINANCIAL DATA (Unaudited)
  in thousands, except for per share data
 First Quarter
    
    Second Quarter
    
    Third Quarter
    
    Fourth Quarter2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004Operating Revenues
    
    $
    10,924
    
    
    $
    10,389
    
    
    $
    10,986
    
    
    $
    11,368
    
    
    $
    14,088
    
    
    $
    13,148
    
    
    $
    11,455
    
    
    $
    11,103Utility Operating
Income
    
    
    2,231
    
    
    
    1,851
    
    
    
    1,712
    
    
    
    2,699
    
    
    
    3,793
    
    
    
    4,185
    
    
    
    1,756
    
    
    
    1,594Income from
Continuing
Operations
    
    
    1,998
    
    
    
    1,948
    
    
    
    1,184
    
    
    
    2,100
    
    
    
    3,279
    
    
    
    3,568
    
    
    
    705
    
    
    
    1,547Discontinued
Operations
    
    
    (13
    )
    
    
    33
    
    
    
    2,904
    
    
    
    33
    
    
    
    48
    
    
    
    172
    
    
    
    219
    
    
    
    (7
    )Net Income
    
    
    1,985
    
    
    
    1,981
    
    
    
    4,088
    
    
    
    2,133
    
    
    
    3,327
    
    
    
    3,740
    
    
    
    924
    
    
    
    1,540Basic Earnings per
Common Share 
Continuing
Operations
    
    
    0.25
    
    
    
    0.24
    
    
    
    0.15
    
    
    
    0.26
    
    
    
    0.40
    
    
    
    0.45
    
    
    
    0.09
    
    
    
    0.20Basic Earnings per
Common Share 
Discontinued
Operations
    
    
    
    
    
    
    
    
    
    
    0.35
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.02
    
    
    
    Basic
Earnings per Common
Share
    
    
    0.25
    
    
    
    0.24
    
    
    
    0.50
    
    
    
    0.27
    
    
    
    0.41
    
    
    
    0.47
    
    
    
    0.11
    
    
    
    0.20




---



##### Table of Contents



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 12, 1999. (Exhibit 3.2 to Form 10-K for the year
ended 12/31/99).3.3
    
    Certification of Incorporation of The Connecticut Water Company effective
April, 1998. (Exhibit 3.3 to Form 10-K for the year ended 12/31/98).3.4
    
    Certificate of Amendment to the Certificate of Incorporation of
Connecticut Water Service, Inc. dated August 6, 2001. (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 3/31/04).4.1
    
    Loan Agreement dated as of February 9, 1996 between New London Trust,
F.S.B. and The Crystal Water Company of Danielson. (Exhibit 4.10 to Form
10-K for the year ended 12/31/99).4.2
    
    Loan Agreement dated as of April 11, 1991 between Farmington Savings Bank
and The Unionville Water Company. (Exhibit 4.11 to Form 10-K for the year
ended 12/31/02).4.3
    
    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).4.4
    
    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).4.5
    
    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).4.6
    
    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).4.7
    
    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).




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##### Table of Contents



ExhibitNumber
    
    Description4.8
    
    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).4.9
    
    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).4.10
    
    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).4.11
    
    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).4.12
    
    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).4.13
    
    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).4.14
    
    Collateral Assignment of Water Service Charges and Right to Receive Water
ervice Expense Assessments and Security Agreement between Unionville
ater 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).4.15
    
    Bond Purchase Agreement, dated September 1, 2004, among The Connecticut
ater Company, Connecticut Development Authority, and A.G. Edwards & Sons,
nc. (Exhibit 4.24 to Form 10-Q for the quarter ended 9/30/04).4.16
    
    Indenture of Trust, dated August 1, 2004, between The Connecticut Water
ompany and U.S. Bank National Association, as Trustee, 2004A Series.
Exhibit 4.25 to Form 10-Q for the quarter ended 9/30/04).4.17
    
    Indenture of Trust, dated August 1, 2004, between The Connecticut Water
ompany and U.S. Bank National Association, as Trustee, 2004B Series.
Exhibit 4.26 to Form 10-Q for the quarter ended 9/30/04).4.18
    
    Loan Agreement, dated August 1, 2004, between The Connecticut Water
ompany and Connecticut Development Authority for 2004 Series. (Exhibit .27 to Form 10-Q for the quarter ended 9/30/04).4.19
    
    Loan Agreement, dated August 1, 2004, between The Connecticut Water
ompany and Connecticut Development Authority for 2004B Series. (Exhibit .28 to Form 10-Q for the quarter ended 9/30/04).




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##### Table of Contents



ExhibitNumber
    
    Description4.20
    
    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).4.21
    
    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).4.22
    
    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).4.24*
    
    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.4.25*
    
    Loan Agreement, dated October 1, 2005, between The Connecticut Water
Company and Connecticut Development Authority, Connecticut Water 2005A
Series.4.26*
    
    Indenture of Trust, dated October 1, 2005, between Connecticut Development
Authority and U.S. Bank National Association, as Trustee, Connecticut
Water 2005A Series.4.27*
    
    Insurance Agreement, dated November 30, 2005, between The Connecticut
Water Company and Financial Guaranty Insurance Company, as Insurer for the
Connecticut Water 2005A Series.4.28*
    
    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.4.29*
    
    Guaranty dated as of October 1, 2005 from Connecticut Water Service, Inc.
to U.S. Bank National Association, as Trustee, Crystal Water 2005A Series.4.30*
    
    Loan Agreement, dated October 1, 2005, between The Crystal Water Company
of Danielson and Connecticut Development Authority, Crystal Water 2005A
Series.4.31*
    
    Indenture of Trust, dated October 1, 2005, between Connecticut Development
Authority and U.S. Bank National Association, as Trustee, Crystal Water
2005A Series.4.32*
    
    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.




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##### Table of Contents



ExhibitNumber
    
    Description10.1
    
    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 April 22, 1994. (Exhibit 10.3 to Form 10-K for the year
ended 12/31/02).10.4
    
    The Connecticut Water Company Amended and Restated Deferred Compensation
Agreement dated May 14, 1999. (Exhibit 10.5 to Form 10-K for the year
ended 12/31/99).
 a.
    
    Marshall T. Chiaraluceb.
    
    David C. Benoitc.
    
    James R. McQueend.
    
    Kenneth W. Kells
 10.5a
    
    The Connecticut Water Company Amended and Restated Deferred Compensation
Agreement with Thomas R. Marston, dated December 2, 2004. (Exhibit 10.5.a
to Form 10-K for the year ended 12/31/04).10.6
    
    The Connecticut Water Company Supplemental Executive Retirement Agreement
with William C. Stewart. (Exhibit 10.6a to Form 10-K for year ended
12/31/91).10.7
    
    The Connecticut Water Company Supplemental Executive Retirement Agreement
with Marshall T. Chiaraluce dated December 16, 1991. (Exhibit 10.6b to the
Form 10-K for year ended 12/31/91).10.7.1
    
    The Connecticut Water Company First Amended Supplemental Executive
Retirement Agreement with Marshall T. Chiaraluce dated August 1, 1999.
(Exhibit 10.7.2 to Form 10-K for the year ended 12/31/99).10.7.1a
    
    The Connecticut Water Company Second Amended Supplemental Executive
Retirement Agreement with Marshall T. Chiaraluce dated December 17, 2003.
(Exhibit 10.7.1a to Form 10-K for the year ended 12/31/03).10.7.2
    
    The Connecticut Water Company Supplemental Executive Retirement Agreement
with Michele G. DiAcri dated February 28, 2000. (Exhibit 10.7.2 to Form
10-K for the year ended 12/31/01).10.7.2a
    
    The Connecticut Water Company Second Amended Supplemental Executive
Retirement Agreement with Michele G. DiAcri dated December 17, 2003.
(Exhibit 10.7.2a to Form 10-K for the year ended 12/31/03).




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##### Table of Contents



ExhibitNumber
    
    Description10.8
    
    The Connecticut Water Company Supplemental Executive Retirement Agreement
 standard form for other officers, dated December 4, 1991. (Exhibit 10.6b
to Form 10-K for the year ended 12/31/91).10.8a
    
    The Connecticut Water Company Supplemental Executive Retirement Agreement
with Thomas R. Marston dated December 2, 2004. (Exhibit 10.8.a to Form
10-K for the year ended 12/31/04).10.8.1
    
    The Connecticut Water Company First Amended Supplemental Executive
Retirement Agreement  standard form for other officers, dated August 1,
1999. (Exhibit 10.8.2 to Form 10-K for the year ended 12/31/99).10.8.2
    
    The Connecticut Water Company Second Amended Supplemental Executive
Retirement Agreement  standard form for other officers, dated December
17, 2003. (Exhibit 10.8.2 to Form 10-K for the year ended 12/31/03).
 a)
    
    David C. Benoitb)
    
    Peter J. Bancroftc)
    
    James R. McQueend)
    
    Terrance P. ONeille)
    
    Maureen P. Westbrook
 10.9
    
    Amended and restated employment agreement between The Connecticut Water
Company and Connecticut Water Service, Inc. with officers, amended and
restated as of May 9, 2001. (Exhibit 10.9 to Form 10-K for the year ended
12/31/01).
 a)
    
    Marshall T. Chiaraluceb)
    
    Michele G. DiAcric)
    
    James R. McQueend)
    
    David C. Benoite)
    
    Peter J. Bancroftf)
    
    Maureen P. Westbrookg)
    
    Terrance P. ONeill
 10.9.1
    
    Employment agreement between The Connecticut Water Company and
Connecticut Water Service, Inc. with Kevin T. Walsh, amended and restated
as of January 9, 2002. (Exhibit 10.9.1 to Form 10-K for the year ended
12/31/02).10.9.2
    
    Employment agreement between The Connecticut Water Company and
Connecticut Water Service, Inc. with Thomas R. Marston, amended and
restated as of December 2, 2004. (Exhibit 10.9.2 to Form 10-K for the year
ended 12/31/04).10.10
    
    Employment and Consulting Agreement between Richard L. Mercier and Gallup
Water Service, Inc. dated April 15, 1999. (Exhibit 10.10 to Form 10-K for
the year ended 12/31/99).




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##### Table of Contents



ExhibitNumber
    
    Description10.11
    
    Employment and Consulting Agreement between Roger Engle and Crystal Water
Company of Danielson dated September 29, 1999. (Exhibit 10.11 to Form 10-K
for the year ended 12/31/99).10.11.1
    
    Employment and Consulting Agreement between James R. McQueen and The
Connecticut Water Company dated December 10, 2004. (Exhibit 10.11.1 to
Form 10-K for the year ended 12/31/04).10.12
    
    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).10.12.1
    
    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).10.12.2
    
    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).10.12.3
    
    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).10.12.4
    
    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).10.12.5
    
    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).10.13
    
    The Connecticut Water Company Employees Retirement Plan as amended and
restated as of January 1, 1997. (Exhibit 10.11 to Form 10-K for the year
ended 12/31/98).10.13.1
    
    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).10.13.2
    
    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).




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##### Table of Contents



ExhibitNumber
    
    Description10.13.3
    
    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).10.13.4
    
    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).10.13.5
    
    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).10.13.6
    
    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).10.13.7
    
    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).10.14
    
    November 4, 1994 Amendment to Agreement dated December 11, 1957 between
he Connecticut Water Company (successor to the Thomaston Water Company)
nd the City of Waterbury. (Exhibit 10.16 to Form 10-K for year ended
2/31/94).10.15
    
    Agreement dated August 13, 1986 between The Connecticut Water Company and
he Metropolitan District. (Exhibit 10.14 to Form 10-K for the year ended
2/31/86).10.16
    
    Report of the Commission to Study the Feasibility of Expanding the Water
upply Services of the Metropolitan District. (Exhibit 14 to Registration
tatement No. 2-61843).10.17
    
    Bond Exchange Agreements between Connecticut Water Service, Inc., The
onnecticut Water Company Bankers Life Company and Connecticut Mutual Life
nsurance Company dated October 23, 1978. (Exhibit 14 to Form 10-K for the
ear ended 12/31/78).10.18
    
    Dividend Reinvestment and Common Stock Purchase Plan, amended and restated
s of November 15, 2001. (Exhibit 99.1 to post-effective amendment filed
n December 5, 2001 to Form S-3, Registration Statement No. 33-53211).10.19
    
    Contract for Supplying Bradley International Airport. (Exhibit 10.21 to
orm 10-K for the year ended 12/31/84).10.20
    
    Report of South Windsor Task Force. (Exhibit 10.23 to Form 10-K for the
ear ended 12/31/87).




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##### Table of Contents



ExhibitNumber
    
    Description10.21
    
    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).10.22
    
    1994 Performance Stock Program, as amended and restated as of April 26,
2002. (Exhibit A to Proxy Statement dated 3/19/02).10.22a*
    
    First Amendment to the Connecticut Water Service, Inc. Performance Stock
Program Amended and Restated as of April 26, 2002 (the Plan) dated
December 1, 2005.10.23
    
    2004 Performance Stock Program, as of April 23, 2004. (Appendix A to Proxy
Statement dated 3/12/04).10.23a
    
    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).10.23b
    
    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).10.23c
    
    Restricted Stock Agreement, standard form for officers, dated December 1,
2005 (Exhibit 10.1 to Form 8-K dated 1/13/06).10.23d
    
    Long-Term Performance Award Agreement, standard form for officers, dated
January 11, 2006 (Exhibit 10.2 to Form 8-K dated 1/13/06).10.23e
    
    Performance Award Agreement, standard form for officers, dated January
11, 2006 (Exhibit 10.3 to Form 8-K dated 1/13/06).10.23f*
    
    First Amendment to the Connecticut Water Service, Inc. 2004 Performance
Stock Program, dated January 7, 2004.10.24
    
    Loan Agreement dated as of February 15, 1991 between Indianapolis Life
Insurance Company and The Barnstable Water Company. (Exhibit 10.26 to Form
10-K for the year ended 12/31/01).10.25
    
    Guaranty Agreement by Connecticut Water Service, Inc. and Second Amendment
to Note Agreement of Barnstable Water Company dated as of February 23,
2001. (Exhibit 10.27 to Form 10-K for the year ended 12/31/01).10.26*
    
    Letter Agreement and Terms between Eric Thornburg and The Connecticut
Water Company dated January 6, 2006.10.27*
    
    Employment Agreement between The Connecticut Water Company and
Connecticut Water Service, Inc. with Thomas R. Roberts, amended and
restated as of November 9, 2005.




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##### Table of Contents



ExhibitNumber
    
    Description10.28*
    
    Employment Agreement between The Connecticut Water Company and
Connecticut Water Service, Inc. with Daniel J. Meaney, amended and
restated as of January 12, 2006.10.29
    
    Employment Agreement dated March 20,
2006 between Connecticut Water Service, Inc., The
Connecticut Water Company and Eric W. Thornburg (Exhibit 10.1 to
Form 8-K dated 3/24/06).10.30
    
    Deferred Compensation Agreement
dated March 20, 2006 between Connecticut Water Service, Inc., The
Connecticut Water Company and Eric W. Thornburg (Exhibit 10.2 to
Form 8-K dated 3/24/06).10.31
    
    Supplemental Executive Retirement
Agreement dated March 20, 2006 between Connecticut Water Service, Inc., The
Connecticut Water Company and Eric W. Thornburg (Exhibit 10.3 to
Form 8-K dated 3/24/06).23.1*
    
    Consent of Independent Registered Public Accounting Firm31.1*
    
    Rule 13a-14 Certification of Marshall T. Chiaraluce, Chief Executive
Officer.31.2*
    
    Rule 13a-14 Certification of David C. Benoit, Chief Financial Officer.32.1*
    
    Certification of Marshall T. Chiaraluce, Chief Executive Officer, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
S
    
    Certification of David C. Benoit, Chief Financial Officer, pursuant to
ection 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    = filed herewith Note:
    
    Exhibits 10.1 through 10.13.7, 10.22, 10.23, 10.26 through
10.31 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 31, 2006
    
    
    
    Eric W. ThornburgPresident and Chief Executive Officer
  Signature
    
    Title
    
    Date/s/ Eric W. ThornburgEric W. Thornburg
    
    President, Director,
    
    March 31, 2006(Principal Executive Officer)
    
    and Chief Executive Officer/s/ David C. BenoitDavid C. Benoit
    
    Vice President  Finance,
    
    March 31, 2006(Principal Financial and Accounting Officer)
    
    Chief Financial Officer and
Treasurer




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##### Table of Contents



Signature
    
    Title
    
    Date/s/ Marshall T. Chiaraluce
    
    Director and Chairman
    
    March 14, 2006Marshall T. Chiaraluce
    
    of the Board/s/ Roger Engle
    
    Director
    
    March 11, 2006Roger Engle/s/ Mary Ann Hanley
    
    Director
    
    March 10, 2006Mary Ann Hanley/s/ Marcia Hincks
    
    Director
    
    March 14, 2006Marcia Hincks/s/ Mark G. Kachur
    
    Director
    
    March 8, 2006Mark G. Kachur/s/ David A. Lentini
    
    Director
    
    March 14, 2006David A. Lentini/s/ Ronald D. Lengyel
    
    Director
    
    March 14, 2006Ronald D. Lengyel/s/ Robert F. Neal
    
    Director
    
    March 10, 2006Robert F. Neal/s/ Arthur C. Reeds
    
    Director
    
    March 10, 2006Arthur C. Reeds/s/ Lisa J. Thibdaue
    
    Director
    
    March 12, 2006Lisa J. Thibdaue/s/ Carol P. Wallace
    
    Director
    
    March 10, 2006Carol P. Wallace/s/ Donald B. Wilbur
    
    Director
    
    March 15, 2006Donald 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, 2005
    
    $
    212
    
    
    $
    156
    
    
    $
    112
    
    
    $
    256Year Ended December 31, 2004
    
    $
    271
    
    
    $
    61
    
    
    $
    120
    
    
    $
    212Year Ended December 31, 2003
    
    $
    240
    
    
    $
    186
    
    
    $
    155
    
    
    $
    271
 
 (1) Amounts charged off as uncollectible after deducting recoveries.